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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Financial Development and Economic Growth:
Time Series Evidence from Turkey
Burcu KIRAN
Faculty of Economics, Istanbul University, 34452, Beyazit, Istanbul, Turkey
kburcu@istanbul.edu.tr
Nilgün Çil YAVUZ
Faculty of Economics, Istanbul University, 34452, Beyazit, Istanbul, Turkey
yavuznc@istanbul.edu.tr
Burak GÜRĐŞ
Faculty of Economics, Istanbul University, 34452, Beyazit, Istanbul, Turkey
bguris@istanbul.edu.tr
Abstract: This paper attempts to explore the relationship between financial development and
economic growth for Turkey over the period 1968-2007. For this purpose, we used an
endogenous break unit root test as suggested by Zivot and Andrews (1992) and the GregoryHansen (1996) cointegration technique. The empirical results showed that there is a long-run
relationship between financial development and economic growth.
1. Introduction
The relationship between financial development and economic growth has been debated quite
extensively by economists and policymakers since the studies of Bagehot (1873), Schumpeter (1911) and, more
recently, Mckinnon (1973) and Shaw (1973). The debate has focused on whether financial development causes
economic growth or vice versa or whether a two-way relationship exists. Four different views on the theoretical
link between financial development and economic growth exist (see Apergis et al. 2007):
(i) supply-leading view
(ii) demand-following view
(iii) mutual impact of finance and growth
(iv) no relationship between finance and growth
The supply-leading view supports the belief that financial development has a positive impact on
economic growth (Schumpeter 1911, Gurley & Shaw 1955). Patrick (1966) explains this view as follows: “to
transfer resources from the traditional, low-growth sectors to the modern, high-growth sectors and stimulate an
entrepreneurial response in these modern sectors.” The demand-following view states that finance actually
responds to changes that happen in the real sector (see Friedman & Schwartz 1963, Jung 1986, Ireland 1994).
Economic growth creates a demand for developed financial institutions and services. The third view supports a
bidirectional relationship between financial development and economic growth (see Demetriades & Hussein
1996, Greenwood & Smith 1997). Finally, the last view rejects the existence of a finance-growth relationship
(see Lucas 1988).
The purpose of this paper is to investigate empirically the existence of a long-run relationship between
financial development and economic growth in Turkey by including savings as a third important variable that
affects both financial development and economic growth. For this analysis, we took into account structural
breaks because Turkey started to liberalize its financial system in 1980, opening a new path in terms of financial
liberalization applications and structural adjustment programs. Therefore, on the econometrics front, we applied
the Zivot and Andrews (1992) unit root test and the Gregory and Hansen (1996) cointegration test in the
presence of potential structural breaks.
The remainder of the paper is organized as follows. Section II describes the data and model
specification. Section III outlines the methodology used in this paper and reports on the empirical results.
Finally, Section IV gives the conclusion.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
2. Data and Model Specification
To investigate the relationship between economic growth, savings, and financial development in
Turkey, we used the following model specification:
Yit = β 0i + β1i Fit + β 2i Sit + uit
(1)
Yit is GDP per capita, Fit is the measure of financial development, Sit is the share of savings in GDP (a
third important variable affecting finance-growth relationship), and uit is the error term. We used the liquid
liabilities of the financial system ( LL ) , which is the broadest measure of financial development defined as
where
currency plus demand and interest-bearing liabilities of bank and non-bank financial intermediaries divided by
GDP (M3/GDP) as a measure of financial development.
The present study was based on annual data covering the period from 1968 through 2007. All the
variables used were in natural logarithms. The data on savings were obtained from Undersecretariat of State
Planning Organization and the data on other variables have been taken from the World Bank World
Development Indicators database.
3. Methodology and Empirical Results
The main objective of this paper is to investigate the long-run relationship between financial
development, savings, and economic growth in Turkey. First, we analyzed the time-series properties of the data
using Augmented Dickey Fuller ([ADF] 1981) and Philips Perron (1988) procedures. We also implemented the
endogenous break unit root test suggested by Zivot and Andrews (1992). Second, the Gregory-Hansen (1996)
cointegration technique, allowing for the presence of potential structural breaks in the data, was applied.
3.1. Unit Root Tests with and without Structural Break
The ADF test suggested by Dickey and Fuller (1981) is the most widely used unit root test. Perron’s
(1989) criticism of the ADF unit root test is related to a concern that the presence of structural change can
reduce the power of these tests. Assuming that the time of the breaks is an exogenous phenomenon, Perron
(1989) extended the ADF test to allow for a structural break in the time trend, showing that the ADF test is not
able to reject a null hypothesis of the presence of a unit root when the true model is trend-stationary and there is
structural change. A better test was proposed by Zivot and Andrews (ZA) (1992). This test allows for one
structural break and suggests determining the break point “endogenously.” To test for a unit root against the
alternative of a trend-stationary process with a structural break, we employed three versions of the ZA unit root
test. Model A allows for a structural break in the intercept, model B allows for a structural break in the slope of
the trend, and model C combines both structural breaks in the intercept and the slope of the trend. These models
are expressed as follows:
k
Model A:
yt = µˆ A + αˆ A yt −1 + βˆ At + θˆ A DU t (λ ) + ∑ dˆ jA ∆yt − j + eˆt
(2)
j =1
k
B
B
B
B
B
Model B: yt = µˆ + αˆ yt −1 + βˆ t + γˆ DTt (λ ) + ∑ d j ∆yt − j + eˆt
(3)
j =1
k
Model C:
yt = µˆ C + αˆ C yt −1 + βˆ C t + θˆC DU t (λ ) + γˆ C DTt (λ ) + ∑ d Cj ∆yt − j + eˆt
(4)
j =1
where
λ
operator,
is the break fraction calculated as
TB T , TB denotes the break date, ∆ is the first difference
et is a white noise disturbance term with variance σ 2 , k is the number of augmented lags, and
t = 1,....T is an index of time. The incorporated ∆yt − j terms on the right hand side of equations (2), (3) and
(4) aim to remove the serial correlation if any.
intercept and in the trend, respectively, where
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DU t and DTt are dummy variables for structural breaks in the
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
1 if t > T λ
DU t (λ ) =
0 otherwise
t − T λ if t > T λ
DTt (λ ) =
otherwise.
0
and
The break point in the ZA test was selected where the test statistic of the null of a unit root is the most negative
for the t-statistic of the coefficient of the autoregressive variable.
We first tested for the presence of unit roots in our variables by using ADF and PP unit root tests. The
test results are shown in Table 1.
Table 1: The results of ADF and PP unit root tests
ADF-test
Variable
Level
Y
-2.244 (0)
PP-test
First
Difference
-6.128 (0) a
-2.392 (1)
First
Difference
-6.129 (0) a
a
-1.831 (3)
-7.061 (2) a
-2.188 (6)
-7.536 (3) a
LL
-1.729 (0)
-7.099 (0)
S
-2.788 (1)
-5.249 (0) a
Level
The numbers in parentheses indicate the number of lags in the augmented term of the ADF
regression and are determined by using AIC information criteria. The number of truncation lags
for PP test is chosen based on the Newey-West method. The unit root tests include a constant
and time trend. a, represents the significance at 1% level.
The results suggest that the time series, including Y , LL and S were not stationary in their levels. They were
stationary at the 1% level of significance after first differencing. However, since the conventional unit root tests
favor the null of unit root when a structural break exists, this study implemented the ZA (1992) unit root test to
determine whether any possible break point in the series changes the stationarity results. The results of the ZA
unit root test are reported in Table 2.
Table 2: The results of ZA unit root test
Variable
TB
tαˆ
γ
θ
k
c
-0.044
1981
-4.475 (A)
3
Y
(-1.886)
b
b
0.259
0.038
1997
-4.382 (C)
3
LL
(2.470)
(2.284)
0.289 a
S
1985
-4.236 (A)
1
(4.398)
b
b
-0.066
0.013
1998
-6.936 (C) a
0
∆Y
(-2.046)
(2.497)
b
b
-7.693 (C)
-0.326
0.087
2002
0
∆LL
a
(-2.248)
(2.157)
b
-6.084 (A)
0.118
∆S
1980
1
a
(2.202)
a, b
c
and represent the significance at 1%, 5% and 10% levels respectively. The critical values
for (1% , 5% and 10%) levels are (-5.34, -4.80 and -4.58) for Model A, (-5.57, -5.08 and -4.82)
for Model C from Zivot and Andrews (1992). The numbers in parentheses are t-statistics
and the letters in parentheses indicate the appropriate model based on the results.
The results show that all the variables examined in this study were not stationary in their levels.
Nevertheless, they were stationary at the 1% level of significance after first differencing. The test identified the
break points as 1981 for Y , 1985 for S in years also marked by financial liberalization in Turkey, and 1997 for
LL in the year when a great financial crisis occurred. In all, the unit root tests indicated one order of integration
for the Y , LL and S variables.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Since the series has one order of integration and contains structural breaks, we also used the Gregory
and Hansen (1996) test to accommodate a single unknown structural break in the cointegration analysis.
3.2. Cointegration Analysis with a Structural Break
Gregory and Hansen (1996) proposed a cointegration procedure that allows for an endogenously
determined break in the cointegrating relationship. They provided three alternative forms of structural break:
level shift (model C), level shift with trend (model C/T), and regime shift (model C/S). Their specifications for
our application are as follows:
Model C: level shift
Yt = α 0 + α1 Dt + β1 Ft + λ1St + et
(5)
Model C/T: level shift with trend
Yt = α 0 + α1 Dt + γ t + β1 Ft + λ1St + et
(6)
Model C/S: regime shift
Yt = α 0 + α1 Dt + γ t + β1 Ft + β 2 ( Dt * Ft ) + λ1St + λ2 ( Dt * St ) + et
where
(7)
Dt is a dummy variable equal to 0 if t ≤ θ and 1 if t > θ . The unknown parameter θ
denotes the timing of the change,
α1
denotes the change in the intercept coefficient at the time of the shift, and
t is the time trend. β 2 and λ2 represent the change in slope of the cointegrating equation. Given that the
timing of structural break is unknown a priori, Gregory and Hansen (1996) computed the cointegration test
statistic, ADF*, for each possible break and took the minimum test statistic across all possible break points. We
selected a break date where the test statistic is the minimum�in other words, the absolute ADF test statistic is at
its maximum. The null hypothesis of no cointegration with structural breaks is tested against the alternative of
cointegration. Table 3 reports the results of the Gregory-Hansen cointegration procedure for a level shift, a level
shift with trend, and a regime shift.
Table 3: Tests for Gregory Hansen cointegration procedure
LL
Models
Break Date
ADF *
Model C
1986
-4.942 (0)b
Model C/T
1984
-4.432 (3)
Model C/S
1986
-4.947 (0)c
The numbers in parentheses show the number of lags in the augmented term.
ADF * = inf ADFt (τ ) .
τ ∈T
b
and c represent the significance at 5% and 10% levels respectively.
Gregory-Hansen (1996) ADF* critical values are as follows: Level shift; a (1%) -5.13,
b (5%) -4.61, and c (10%) -4.34, Level shift with trend; a (1%) -5.45, b (5%) -4.99,
and c (10%) -4.72, and Regime shift; a (1%) -5.47, b (5%) -4.95, and c (10%) -4.68.
The results of the Gregory-Hansen cointegration procedure show that the ADF* statistics for LL was
statistically significant in models C and C/S, thereby rejecting the null hypothesis of no cointegration with an
endogenous break date of 1986. The Gregory-Hansen cointegration tests point to the existence of a long-run
relationship between economic growth, savings, and financial development.
Conclusions
In this paper, we examine the long-run relationship between financial development and economic
growth in Turkey by including savings as a third important variable affecting both financial development and
economic growth. On the econometrics front, the endogenous break unit root test suggested by Zivot and
Andrews (1992) and the Gregory-Hansen (1996) cointegration technique, which allows for the presence of
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
potential structural breaks, are employed. The empirical results show a long-run relationship between financial
development, savings, and economic growth.
References
Apergis, N., Filippidis, I., & Economidou, C. (2007). Financial Deeping and Economic Growth Linkages: A Panel Data
Analysis. Review of World Economics, 143, 179-198.
Bagehot, W. (1873). Lombard Street, Homewood, IL: Richard D. Irwin.
Demetriades, P.O., & Hussein, K. (1996). Does Financial Development Cause Economic Growth? Time Series Evidence
from Sixteen Countries. Journal of Development Economics , 51, 387-411.
Dickey, D., & Fuller, W. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root.
Econometrica, 49, 1057-1072.
Friedman, M., & Schwartz, A.J. (1963). A Monetary History of the United States, Princeton, N.J.: Princeton University
Press.
Greenwood, J., & Smith, B. (1997). Financial Markets in Development and the Development of Financial Market. Journal
of Economic Dynamic and Control, 21, 145-181.
Gregory, A., & Hansen, B. (1996). Residual Based Tests for Cointegration in Models with Regime Shifts. Journal of
Econometrics , 70, 99-126.
Gurley, J.G., & Shaw, E.S. (1955). Financial Aspects of Economic Development. American Economic Review , 45, 515-538.
Ireland, P.N. (1994). Money and Growth: An Alternative Approach. American Economic Review , 84, 47-65.
Jung, W.S. (1986). Financial Development and Economic Growth: International Evidence. Economic Development and
Cultural Change , 34, 333-346.
Lucas, R.E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics , 22, 3-42.
McKinnon, R.I. (1973). Money and Capital in Economic Development. Brooking Institution, Washington, D.C.
Patrick, H.T. (1966). Financial Development and Economic Growth in Underdeveloped Countries. Economic Development
and Cultural Change, 14, 174-189.
Perron, P. (1989). The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis. Econometrica, 57, 1361-1401.
Philips, P.C.B., & Perron, P. (1988). Testing for a Unit Root in Time Series Regressions. Biometrica , 75, 335-346.
Schumpeter, J.A. (1911). The Theory of Economic Development. Cambridge, Mass: Harvard University Press.
Shaw, E.S. (1973). Financial Deeping in Economic Development. Oxford University Press, Newyork.
Zivot, E., & Andrews, D. (1992). Further Evidence on the Great Crash, the Oil Price Shock and the Unit Root Hypothesis.
Journal of Business Economic Statististics, 10, 251-270.
85
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Financial Development and Economic Growth: Time Series Evidence from Turkey
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KIRAN, Burcu
YAVUZ, Nilgün Çil
GÜRİS, Burak
Abstract
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This paper attempts to explore the relationship between financial development and economic growth for Turkey over the period 1968-2007. For this purpose, we used an endogenous break unit root test as suggested by Zivot and Andrews (1992) and the Gregory- Hansen (1996) cointegration technique. The empirical results showed that there is a long-run relationship between financial development and economic growth.
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2009
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1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Balanced Scorecard in the Healthcare Industry: A Case Study
Yigit Bora ŞENYĐĞĐT
Istanbul University, School of Business Administration, Turkey
senyigit@istanbul.edu.tr
Abstract: The performance measurement and management is an important process for
decision-makers in any type of organization. One of the performance measurement tools
available is the balanced scorecard, which provides a comprehensive set of financial and nonfinancial performance measures for the organizations to be strategy focused. This study
discusses the balanced scorecard generally from theoretical views, and why it should be used
by healthcare organizations. Moreover, the study is enhanced by performing a case study to
examine the implementation process of the balanced scorecard by healthcare (orthopedics)
company in the United States. This study suggests that though the balanced scorecard would
be the right choice for many, including companies in the healthcare industry, it may not be
the right choice for all. With the balanced scorecard being fairly young, it is the common
perception that this approach will continue to be explored and efficiency will be improved on
it in the future.
Keywords: Balanced scorecard, performance measurement, healthcare industry
1. Introduction
Without measuring results, there is no way of knowing whether the business is being managed
satisfactorily, nor is it possible to hold managers accountable for the business. Moreover, it is difficult to reward
success or avoid unintentionally rewarding failure. To date, there have been numerous tools developed for the
purpose of performance measurement. The balanced scorecard (BSC) puts the organization’s vision and
strategy into a framework that effectively and efficiently communicates strategic intent and monitors
performance.
Traditionally, management control stresses decentralized profit goals, which mean that it is mostly
focused on outcomes. In a BSC, outcome measures are combined with measures that describe resources spent or
activities performed. Good scorecards combine outcome measures, of which profit is only one, with
performance drivers.
The BSC assists companies in overcoming two important issues: effective organizational performance
measurement and implementing strategy (Niven, 2002). The first issue is an effective performance
measurement: “If you cannot measure it, you cannot manage it”. Historically, the measurement system for
business has been financial. A key problem with looking at financial measures alone is that it gives only one
particular perspective (Coskun, 2006). In fact, it may even lead to poor decision-making. For example, if one of
the main performance measures is cost per customer, managers may try to cut costs to such an extent that the
customers become unhappy with the products they are buying and will take their business to a competing
supplier. Moreover, financial measures are not consistent with today’s business environment, and are not
relevant to many levels of organization.
Successfully implementing strategy is another important issue facing organizations. A strategy is a set
of hypotheses about cause and effect. The measurement system makes the relationships (hypotheses) among
objectives in the various perspectives explicit so that they can be managed and validated (Niven, 2002). The
BSC is not merely a collection of financial and non-financial measurements. The BSC should be the translation
of the business unit’s strategy into a linked set of measures that define both the long-term strategic purposes, as
well as the mechanisms for achieving those purposes (Kaplan, 2000). In the nature of implementing strategies,
the organization may have some barriers. There are four barriers to strategy implementation that exist for most
companies: a vision barrier, a people barrier, a resource barrier, and a management barrier (Niven, 2002).
The purpose of this study is the increase understanding of how the BSC is used in the healthcare
industry, specifically in the orthopedics company operating in the United States. This paper is organized in the
following manner. Section 2 reviews the literature on performance measurement and management highlighting
the need for the healthcare industry to use both financial and non-financial performance indicators. In section 3,
a short background of the case company is presented followed by a case description. The implementation of the
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
BSC is described with respect to how it designed and implemented. Finally, in section 4 the findings from the
study are synthesized and the implementation process of the BSC discussed.
2. Literature Review
The BSC is a management tool that was developed by Dr. Robert Kaplan and Dr. David Norton in the
1990s (Kaplan & Norton, 1992). Drs. Kaplan and Norton recognized the need for businesses to have a more
“balanced” approach of assessing company performance than the traditional method of looking strictly at
financial data (Davis, 2005). While financial data is important, in large part it only gives an indication of
historical company performance. The BSC combines financial data along with non-financial performance
criteria, such as product quality and customer service, in a way that allows businesses to not only track their
performance, but also to align business activities in such a way that they support the organization’s stated
missions and goals (Davis, 2005).
The BSC provides superior financial performance when compared to a traditional performance
measurement system (Albright & Davis, 2004). In contrast to the financial based measurement systems, the
BSC reinforces the organization’s focus on future success by setting objectives and measuring performance
from different perspectives. These balanced perspectives are as follows: customer, internal business processes,
learning and growth, and financial (Kaplan & Norton, 1992). The BSC retains financial measurement, but it
focuses on a more general and integrated set of measurements that link customer, internal business processes,
employee learning and growth, and financial performance to long-term financial success. These four
perspectives are defined as (Hoque & James, 2000):
The financial perspective includes profitability measures such as operating income, return-on-capital
employed, sales growth, and generation of cash flow or economic value added.
The customer perspective encompasses such measures as customer satisfaction, customer retention,
new customer acquisition, customer response time, marked share, and customer profitability.
The internal process perspective includes product design, product development, post-sales service,
manufacturing efficiency, quality etc.
The learning and growth perspective measures the ability of employees, information system and
organizational procedures to manage the business and adapt to change.
The reasons for adopting the BSC in the healthcare industry are due to financial pressure, competition,
consumerism, industry consolidation, regulatory reporting, information management, and new technology
(Inamdar & Kaplan, 2002). Considering the healthcare industry, one can argue that a number of problems face
the healthcare industry, including cost structure, payor limitations and constraints, and performance and quality
issues that require changes in how healthcare organizations, both profit and nonprofit, manage operations
(Kocakulah & Austill, 2007). As these healthcare systems become more complex, so does the task of
developing a methodology and formula that can align the organizational strategies and main principles with
performance measurement and management indicators. The BSC is especially appropriate for organizations in
turbulent industries such as healthcare (Voelker et al., 2001).
A BSC is not only better in monitoring and evaluating performance of a healthcare organization but
also in improving that performance to its maximum best. For instance, by tracking value delivery and paying
incentives to staff based on how much value an organization delivers to customers, rather than the amount or
value received from customers, hospitals can motivate and redirect staff to look for better ways to improve
value of service. This can serve as counter to the possibility of staff motivation to promote short-term
importance on the revenue received from clients. Also by effectively tracking improvement made by patients,
clients and community, BSC can give internal stakeholders such as medical staff and employees a renewed
pride in what they do (MacStravic, 1999).
The BSC is one of the tools for better control and management of organizations in the healthcare
industry. However, the healthcare industry was a little slower to adopt the BSC approach than was
manufacturing and profit-oriented service industries. Although Kaplan and Norton’s first book in 1996 outlining
the BSC included examples, none were healthcare related (Kaplan & Norton, 1996). They simply had not found
any services (Kocakulah & Austill, 2007). In the next section, we perform a case study in an orthopedics
company in the healthcare industry.
3. The Implementation Process of the Balanced Scorecard in the Healthcare Industry
We have chosen to evaluate the unique aspects of a medical device manufacturer when considering the
implementation of a BSC system. As we discussed before, one of the most critical aspects of creating a BSC
system is making sure that it is tailored to the specific needs of the company and the industry in which it
competes. There are several distinctive aspects of the medical device market that will ultimately determine the
metrics used for our BSC implementation. The name of entity used herein is fictional to protect proprietary
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
interests and privacy. “Morgan” is the fictional name that represents the company. For this evaluation, we
choose Morgan Inc., a large-cap manufacturer of orthopedic implants used for joint reconstruction. In applying
the four main perspectives of the BSC to Morgan’s business it is also important to look at the medical device
market in general.
Morgan is one of the world’s largest pure-play orthopedics’ manufacturers with annual revenues in
2008 of $1.8 billion. The orthopedic market is mainly made up of total joint replacements (hips, knees,
shoulders, ankles, elbows, etc.) as well as trauma and spinal implants. This market is dominated by five key
players that together account for over 90% of the joint reconstruction market. Having an oligopoly market like
this creates stability, but also makes moving market share incredibly difficult. This market is set for increased
growth over the next few decades, since the average age that a patient will receive a total hip or total knee
replacement is 67, and the average baby boomer is currently 62 years old. Because Morgan manufacturers
implants for human use, quality is incredibly important.
This is also why the Food and Drug Administration (FDA) plays such a large role in the company’s
financial performance. The FDA must approve all new implants that Morgan makes. It is subject to continued
oversight of the FDA in the form of product surveillance, inspection checks, and even implant recalls. All of
this points to the need for a high level of quality in the products that Morgan makes.
In addition to a need for high quality, the medical device market in which Morgan does business is
incredibly lucrative. Morgan’s annual gross margin is consistently in the mid to upper 70 percent, and its main
customers are orthopedic surgeons, hospitals, and ultimately patients. Also, a total hip or total knee
replacement is an extremely technical operation. For this reason, Morgan has an array of sales associates
around the world that not only deliver the necessary implants and instruments to the hospital but also provide
critically important information about the product and surgical technique during a case. Therefore, the sales
associate-surgeon relationship is important for maintenance and growth of sales.
In applying the BSC approach to Morgan, it is important to walk through the four different
perspectives and discuss how they affect each other and also how each measure improves company. The first is
learning and growth. Learning and growth is important because it is Morgan employees that drive innovation
and creativity throughout the organization. Hiring, training, and retaining key employee talent is necessary for
improving the next stage: business processes.
By improving the way that Morgan operates internally, it has increase focus and can better serve the 3rd
perspective: customers. Customers that purchase products consistently and/or those that purchase premium
technology products lead to increased revenues and improvement in the 4th perspective: Financial performance.
The tracking of key financial metrics helps Morgan measure those areas that tie directly with corporate
strategies.
In exploring the first perspective, learning and growth, it is important to remember that key employee
talent is critical to the success of the organization. Some of the unique attributes of this perspective within
Morgan are a highly technical and creative workforce, employee interest in continued education, and high
attraction to the medical field. In order to be a highly motivated and capable organization, Morgan would
implement the following employee goals: 1) provide continued opportunities for employee learning and
training, 2) increase employee empowerment to make key decisions, 3) encourage innovation and creative
thinking and 4) have a highly satisfied and motivated workforce. Some of the metrics that would be measured
in order to judge performance would be the percentage of internal promotions, continued education tuition
reimbursement, retention rates, employee satisfaction surveys, and benchmarking evaluations.
In exploring the next perspective, internal business practices, it is important to remember that Morgan
produces high quality, high technology products. Also important is the fact that new propriety, premium-priced
implants are the main drivers of growth. Therefore some of the goals that Morgan would implement would be
to 1) minimize the potential for product recalls, 2) increase sales force focus on premium products, 3) become
the technology leader in new product development, and 4) minimize time from idea creation to launch. In order
to achieve these goals Morgan would measure 1) the percentage of “first run” products that are manufactured
without defect and incidence reports as measured by the FDA, 2) the percentage of new product sales from total
sales as determined by those systems launched in the past 18 months, 3) new, propriety technology product
launches and 4) product launch timelines.
In thinking about the next perspective, customers, it is important to remember that the Morgan’s main
customers are orthopedic surgeons. They are a highly educated and technical professional group. Second,
market share is extremely sticky, causing the relationship between sales associate and surgeon to be critical in
the selling process. Therefore the goals for the customer perspective are to 1) increase customer loyalty and
satisfaction, 2) better target the most profitable customers, and 3) increase new customer usage. Some of the
measures that Morgan would look at are 1) share of profitable customer’s business, 2) measurement of average
profit per account and 3) percentage of the business that is coming from new customers.
The final BSC perspective that Morgan would measure would be financial performance. Important
criteria to Morgan in this category are the need for profitable R&D and product development cycles, ready
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access to cash, and efficient return on investment throughout its various divisions. The measures that would be
considered for financial performance are IRR and NPV minimums, consistent growth in free cash flow, and
ROI and ROA assessments.
As we step back to assess the value of a BSC system for Morgan, it is important to remember that the
measures will only work if employees believe in their value. The biggest motivation for employee input and
support of a BSC system is to directly tie the performance evaluations to the BSC measures. It is also important
to make sure that these targets are aligned with the broader corporate strategy. By determining strategy first,
and then building your BSC measures on those tactics that directly support the plan for the organization, the
BSC approach is much more effective.
Another important part of implementing the BSC at Morgan is to incorporate lessons that other
organizations have learned when they developed their own BSC system. As more organizations implement
BSC, there are more opportunities to avoid the potential land mines and hit the ground running with an effective
measurement system. Some of these lessons are the need for flexibility, openness, efficiency, and
inclusiveness.
The need for flexibility stems from the fact that it takes time to develop the tools and measures that
will ultimately benefit Morgan the most. All of the correct measures will not be in place the first year, therefore
Morgan should be willing to change or drop those measures that are not working or are not aligned with the
broader corporate vision. The need for openness is also critically important because it keeps individuals at all
levels engaged and focused on the right measures. By having an open communication channel from the CEO to
the down, individual employees are empowered to make decisions that improve important measures. It is also
important to be efficient in the measures that the company decides are critical to its success. Efficient focus on
the key metrics for success is vitally important. Finally, including all departments in the planning and
development of the BSC approach helps to achieve employee buy-in and support the measurement system.
This is important not only at BSC creation, but also through continual feedback and refinement of the system
moving forward.
4. Conclusion
Many aspects were explored about the BSC and it can be claimed that there is much to be discovered
about it. First to be explored were the main concepts and ideas about the BSC. This helped to get a general
idea of what the BSC is all about. After understanding this, the reasons that industries need the BSC were
discussed. The industry focused on was the healthcare industry and the many reasons why this approach could
be used. More specifically we chose to go into more detail and chose a company in the healthcare industry that
actually uses the BSC in their operations. The findings of the study imply that the implementation cost of the
BSC is high. Therefore, it is important to make cost-benefit analysis rigorously. So it can be concluded on this
note that though the BSC would be the right choice for many, including firms in the healthcare industry, it may
not be the right choice for all. With the BSC being fairly young, it is the common perception that this approach
will continue to be explored and efficiency will be improved on it in the future. It is very well likely that more
and more companies, including the healthcare industry, will use the BSC in the future.
References
Albright, Tom & Davis, Stan (2004). An investigation of the effect of balanced scorecard implementation on financial
performance. Management Accounting Research, 135-153.
Coskun, Ali (2006). Stratejik performans yonetimi ve performans karnesi. Istanbul: Literatur.
Davis, Fred R. (2005). Strategic management: Concepts and cases. NJ: Prentice Hall.
Hoque, Z. & James, W. (2000). Linking balanced scorecard measures to size and market factors: Impact on organizational
performance. Journal of Management Accounting Research, 12, 1-17.
Inamdar, N. & Kaplan, R. (2002). Applying the balanced scorecard in healthcare provider organizations. Journal of
Healthcare Management, 47(3), 179-95.
Niven, P.R. (2002). Balanced scorecard step-by-step : maximizing performance and maintaining results. New York: John
Wiley
&
Sons,
Inc.
Kaplan, R. & Norton, D.P. (2000). The strategy-focused organization : how balanced scorecard companies thrive in the new
business environment. Boston: Harvard Business School Press.
Kaplan, R. & Norton, D.P. (1996). The balanced scorecard : translating strategy into action. Boston: Harvard Business
School Press.
Kaplan, R. & Norton, D.P. (1992). The balanced scorecard – Measures that drive performance. Harvard Business Review,
January-February, 71-79.
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Kocakulah, M.C. & Austill, D.A. (2007). Balanced scorecard application in the healthcare industry: a case study. Journal of
Health Care Finance, 34(1), 72–99.
MacStravic, S. (1999). A really balanced scorecard. Health Forum Journal, 42(3), 64-67.
Voelker, K. E., Rakich, J. S., and French, G. R. (2001).The balanced scorecard in healthcare organizations: A performance
measurement and strategic planning methodology. Hospital Topics, 79(3), 13-24.
143
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Title
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The Balanced Scorecard in the Healthcare Industry: A Case Study
Author
Author
ŞENYİĞİT, Yigit Bora
Abstract
A summary of the resource.
The performance measurement and management is an important process for decision-makers in any type of organization. One of the performance measurement tools available is the balanced scorecard, which provides a comprehensive set of financial and nonfinancial performance measures for the organizations to be strategy focused. This study discusses the balanced scorecard generally from theoretical views, and why it should be used by healthcare organizations. Moreover, the study is enhanced by performing a case study to examine the implementation process of the balanced scorecard by healthcare (orthopedics) company in the United States. This study suggests that though the balanced scorecard would be the right choice for many, including companies in the healthcare industry, it may not be the right choice for all. With the balanced scorecard being fairly young, it is the common perception that this approach will continue to be explored and efficiency will be improved on it in the future.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
-
https://eprints.ibu.edu.ba/files/original/99e291888fd3fea30a1fd52a2a0895ed.pdf
cb1d00e3ec4a22619028199c2b9ea55f
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Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Importance of Environmental Accounting for Sustainable
Development
Hasan ŞENOL
Lecturer, Isparta, Turkiye
hassenol@sdu.edu.tr
Ahmet AKTÜRK
Lecturer, Isparta, Turkiye
akturk@sdu.edu.tr
Abstract: It is not possible to say that, while meeting its endless demands and needs,
humankind has made use of the ecological environment economically which is one of the
sources of the community. The signs that have seen over the last ten years shows that, due to
this consumption desire, humankind will lead the world up to calamity faster than it is
estimated. This course of events has to be stopped urgently for the sake future generations. At
this point, the concept of sustainable development plan becomes important. For sustainable
development all sections of society has great roles. Enterprises are one of these sections. The
design of accounting information system concerning about environmental costs emerged
during the production period of the enterprises is a necessity of this exquisite approach.
Introduction
It is known that environmental problems have shown an increasing tendency by means of technological
developments and application of them. The fact of globalization being developed rapidly since 1990s not only
has led for environmental awareness to become widespread but also has been enabled for nations to act together
for matter of environmental protection. Accounting having universal general rules and double entry
bookkeeping used together by all nations and ensuring today universality of the accounting have constantly
been interested in environmental issues within its own logic. (Güvemli & Gökdeniz, 1996, p.23)
Fundamentally uniform chart of accounts and financial statements are always discussed in finance and
own interest of the corporation, interest of partners, third party interest because of liabilities and state interest as
natural stakeholder have been put forward. Actual “natural stakeholder” environmental issues within these
interest groups have not taken the place as necessary yet. Despite all, the concept of “environmental
accounting” has been widespread gradually due to effect of being emergent much more in very developed
countries. (Güvemli & Gökdeniz, 1996, p.23)
To ensure sustainable development, it is seen that environmental accounting is a promising approach in
terms of providing information to assist in ensuring the equilibrium between economy and environment. (Mutlu,
2007, p.169)
1. The Concept of Environmental Accounting
In consideration of rapid deterioration in environmental conditions and concern of closing to limits of
the world, it is required that business managers shall change their point of view to ecological environment as
soon as possible and shall evaluate the ecological environment as an crucial factor in the taking of decision
related to operating activities. (Nemli, 2009)
Nowadays environmental managers and business managers in the industry encounter ever increasing
demands of shareholders, consumers and law maker related to environmental performance. Moreover,
environmental performance of product and corporation during competition at the market is frequently stated.
(Anex & Englehardt, 2001, p.99
It is possible to describe the concept of “environmental accounting” having increasing importance with
such commercial reasons. (Güvemli & Gökdeniz, 1996, p.23-24)
“Environmental accounting: description of the environment by measuring its negative effects and
prediction of them in the accounting system applications.”
Corporation managers also have to pay attention to such demands into strategic decisions and develop
more sensitive management approach to environment in order to catch up aforesaid change. Environmental
management is an understanding adapting by enterprises that take into consideration ecological environment as
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an important matter in the decision procedures, aim to minimize or abolish entirely the damage to the
environment because of its activities, and change design and packaging of its products as well as its
manufacturing process in this perspective, make a endeavor for replacing of the philosophy of protection of
ecological environment into culture of the enterprise and fulfill its duties for society within the scope of social
responsibility. (Nemli, 2009)
In the Table 1, it is listed about comparison between traditional management and environmental
management.
Table 1. Traditional Management-environmental Management Comparison
In objectives
In products
In organization
In environment
In functions of
business
Traditional Management
Economic growth and profit
Return for partners
Products designed for function, style and price
Packaging causing unnecessary waste
Hierarchical structure
Decision-making from top to bottom
Centralization in decision-making
Having a good command of environment
Managing of the environment as a source
Evaluation of pollution and wastes as
externalities
The marketing aims to increase the consumption.
Financing asks for maximizing the profit in the
short term.
The accounting concentrates on traditional costs
Management of human resources targets to
increase efficiency of labor
Environmental Management
Sustainability and standard of living
Welfare of partners
Environment friendly products designed for
environment
Non- hierarchical structure
Participatory decision-making
Decentralization in decision-making
Being harmony with nature
Becoming aware of natural resources not being
unlimited.
Managing and minimizing pollution and wastes.
The marketing is for consumer training.
Financing aims the long term sustainable growth
The accounting concentrates on environmental
costs.
Management of human resources ensure health
and security at work.
Source: Nemli, 2009, www.sbf.istanbul.edu.tr
Everyone is responsible for protecting and developing the environment being subject to different
evaluations from different perspective and becoming one of today crucial problems. Because the common
interest in the protection of environment is available, everyone is affected from environmental problems,
environmental assets belong to all society, the precautions to be taken concern the common interest and the
effective implementation of these precautions depends on participation of everyone, the accounting also has
duties in this matter. (Erençin, 2001, p.69)
2. Environmental Accounting in the Context of Sustainable Development
The concept of sustainable development was stated at first in the report of Our Common Future
prepared by Commission on Environment And Development of United Nations in the year of 1987 and has
become prevalent. In this report, the sustainable development is described as satisfaction of today needs without
making concessions from satisfaction of needs of future generations. (Haftacı &Soylu, 2007, p.111)
In this report, it is stated that environmental problems has threatened the earth and all people of both
developed and developing countries, crisis over the world are interrelating and environmental problems could
not be differentiated from other problems and it is also declared that development in the current evaluation level
of the humanity would be ended after a while and this would be prevented by understanding of “sustainable
development” and development of countries would be ensured via common quest of people. (Haftacı &Soylu,
2007, p.112)
From the perspective of these developments, enterprises have taken important steps in the subject of
environment since beginning of 1990s. However, progresses related to this matter in the field of accounting and
finance was reluctant and superficial at the beginning. It is known that unless a realistic movement and change
in the economic structure is supported by accounting and finance practices, it would not be successful. For this
reason, contributions and achievements of corporations in this subject have been late. (Akün, 1999, p.152)
However, by the understanding of “better lose the saddle than horse”, enterprises designing their
accounting system organizations without taking environmental costs into consideration should fulfill this
requirement as soon as possible.
2. Categories of Environmental Costs
As a result of interaction between management strategies and environment responsibility of enterprises
in recent years, environmental accounting information system is required in order to evaluate the environmental
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impacts and obtain information being necessary in the various decisions of the enterprise. Considering
environmental convenience, business managers need the data of environmental costs while deciding some
matters like product diversity and pricing in the management strategies to be determined, choosing of
production input, evaluations of options of waste management and projects of pollution prevention.
Environmental costs are emerged in conjunction with many different activities and complex fields and within a
large time interval. (Akün, 1999, p.152-153)
It is possible for environmental costs to classify as direct costs, administrative costs, product design
costs, research-development costs, costs for supporting social projects out of enterprise and other costs. Certain
examples related to these costs are available in the Table 2. This table includes most of important environmental
cost categories. (Li, 2001, p.59)
Table 2. Environmental Cost Classification
Cost
classes
Direct Costs
Example
*costs of reduction of damages to environment and air because of production process.
Including Costs for air, water and soil pollution prevention,/ costs of prevention of noise,
vibration, smell and land subsidence.
*Costs of prevention of climate change, global environment protection activities resulted
from protection of energy and water sources as well as protection of ozone layer and costs
of protection of sources.
*Costs of reduction, recycling, incineration and recovery of industrial hazardous wastes and solid nonhazardous wastes
Administrative *Costs of environmental training of employees.
*costs of establishment and implementation of environmental management process for instance costs of
costs
external certification related to management system
*Costs of monitoring and measuring of environmental burdens and recovery works
*Additional costs for purchasing of products not damaging the environment
*additional costs for purchasing fuel and other raw materials, such as activities for making harmful fuels
and raw materials as environment friendly.
*Costs of labor for integration above five points.
Product design *costs of recycling/re-composition and collection of the product.
* Costs of recycling/re-composition and collection of the package and cases.
costs
*Additional costs for more environment friendly product design changes
* Additional costs for production of more environment friendly package and packets
* Association of above four points with other costs, and payments to trade cooperation.
*Labor costs for integration of above five points
Research and *costs of research and development for design of more environment friendly products.
developments *costs of research/development/, design/planning during process changes for development of
environmental performance
costs
* costs of research and development for making distribution and sale system of corporation as
environment friendly
* Labor costs for above mentioned activities
*costs of forestation, beautification, landscape and other development works inside and outside of
Costs for
enterprise assets.
supporting
social projects *supporting of local committee and environmental activities. Such as financial support, seminar and
informing.
out of
*Participating and supporting environmental groups
enterprise
*costs of preparation of reports to be represented to public
*costs for advertisements related to environment
* Labor costs for integration of above five points
*costs for soil improvement works and environmental compensations
Other costs
*costs for value and compensation related to settlement
*costs for environmental lawsuits
*Charity or new burden/taxes related to environment
*other environmental costs not mentioned above.
Source : Li, 2001, p.60
3. Application Terms and Process of Environmental Accounting
The most general condition for application of environmental accounting into an enterprise is to
harmonize enterprise and environment.
Minimum conditions that an enterprise must have for application of environmental accounting are
mentioned below; (Uğur, 2006, p.58)
• Ensuring of support of upper level management
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
•
•
•
•
•
Placing of environmental culture
Acceptance of the fact that corporation activities damage the environment,
Making evaluation of environmental impact at all projects,
Providing environmental training to all personnel,
Ensuring of integration in the meaning of description about what is measured and why it is required to
be measured for.
• Technology for being able to measure and keep necessary information,
• Reporting system to explain the performance measurement information required to interest groups.,
• Supervising system to ensure reliability of reported information.,
• In the cases of impossibility of all cost-sharing, demand of acceptance of estimations.,
• Comprehensive description of concepts like environmental assets, debt, contingent liability etc ,
• Other (demand, information and opportunity)
After fulfillment of application conditions of environmental accounting, application process is realized.
Application process consists of nine stages. These are; (Uğur, 2006, p.60)
• Development of modeling of input-output analysis for usage of material and energy,
• Description and understanding of environmental costs,
• Monitoring and reporting of non-financial data belonging to primary material and energy flow at the
enterprise.,
• Monitoring and reporting of environmental costs,
• Adoption of decision making models and approaches being predicated on environmental costs and
sensitivity,
• Usage of advanced technologies for distribution of environmental costs to organization units, process
and product costs,
• Extending of scope of environmental accounting and analysis via lifelong valuation and value chain
analysis,
• Reaching to environmental perfection via external reporting and reporting the evaluation in the given
undertaking to interest groups,
• Undertaking for reaching the target of sustainable development.
Understanding of “sustainability” should be together “environmental perfection” mentioned in 8th
stage. Because environmental perfection are focusing on reduction of wastes and pollution in addition to
effective usage of sources, while sustainable development predict on fair distribution of environmental costs
and benefits among people and especially surveillance of rights of both today and future generations in addition
to this understanding.
As a consequence, because nine steps predicted for environmental accounting are not certain, they
would be increased or decreased according to situation of the enterprise. However, steps mentioned here are
highly necessary and helpful for almost every enterprise. On the other hand, enterprise mush accept following
understanding for taking said steps: it should also participate to operation decisions like natural environment,
strategic planning, product development, budgeting of capital, in other words this should not be allocated to
only single and separate department and should be taken into consideration in all department of enterprise.
(Uğur, 2006, p.75)
4. Conclusion
Tangible applications and politics are required for going beyond saying of dependency to sustainable
development principles and significance of natural environment as empty words.
These politics should be determined as soon as possible and legal proceedings shall be realized for
fulfillment of accepted politics. In this context, using of tangible application tools is for implementation of
sustainable development. Environmental accounting is a tangible tool in the application of sustainable
development. Remember that applications of environmental accounting should be carried out in the base of
volunteering by demonstrating the emergency of environmental problems as justification and in the scope of
situation and interest special to individuals-societies-nations instead of methods based on discipline.
Environmental accounting to be called as “green accounting” is also requirement of social
responsibility of the enterprises. Considering in long term, it is anticipated that enterprises having the sense of
social responsibility would be accepted by society being more conscious rather than the past and this would
increase its market value.
References
Akün, L. (1999) Çevre Muhasebesi: Genel Bir Bakış, Muhasebe Bilim Dünyası Dergisi, Cilt:1 Sayı:1, 145-155
162
�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Anex, R.P. Englehardt, J.D. (2001) Application of a Predictive Bayesian Model to Environmental Accounting, Journal of
Hazardous Materials A82, 99-112
Erençin, A. (2001) Çevresel Yönetim Sürecine Katılım, Abant Đzzet Baysal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi,
Cilt:1, Sayı:2, 69-77
Güvemli, O. Gökdeniz, Ü. (1996) Çevre Muhasebesindeki Gelişmeler, Muhasebe Öğretim Üyeleri Bilim ve Dayanışma
Vakfı Bülteni, Sayı:4, 23-27
Haftacı, V. Soylu, K. (2007) Çevre Kirlenmesi ve Çevre Koruma Bağlamında Çevre Muhasebesinin Önemi, Muhasebe ve
Finansman Dergisi, Sayı:33, 102-120
Li, L. (2001) Encouraging Environmental Accounting Worldwide: A Survey of Government Policies and Instrument,
Corporate Environmental Strategy, Vol. 8, Iss. 1, 47-57
Mutlu, A. (2007) Sürdürülebilir Kalkınma ve Çevre Muhasebesi II, Muhasebe ve Finansman Dergisi, Sayı:34, 162-173
Nemli, E. (2009) Çevreye Duyarlı Yönetim Anlayışı, http://www.sbf.istanbul.edu.tr/dergi/sayi23-24/17.htm
Uğur, K. (2006) Đşletme-Doğal Çevre Đlişkilerinin Mali Tablolar Aracılığıyla Raporlanması ve Denetimi, Sermaye Piyasası
Kurulu Yayın No:201, Ankara
163
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The size or duration of the resource.
162
Title
A name given to the resource
The Importance of Environmental Accounting for Sustainable Development
Author
Author
ŞENOL, Hasan
AKTÜRK, Ahmet
Abstract
A summary of the resource.
It is not possible to say that, while meeting its endless demands and needs, humankind has made use of the ecological environment economically which is one of the sources of the community. The signs that have seen over the last ten years shows that, due to this consumption desire, humankind will lead the world up to calamity faster than it is estimated. This course of events has to be stopped urgently for the sake future generations. At this point, the concept of sustainable development plan becomes important. For sustainable development all sections of society has great roles. Enterprises are one of these sections. The design of accounting information system concerning about environmental costs emerged during the production period of the enterprises is a necessity of this exquisite approach
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
-
https://eprints.ibu.edu.ba/files/original/f9af7c2b99f96b2db79ef812231ec2dd.pdf
f5afc7dd2718650464eedcdd90f90139
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Turkey Forest with Respect to Sustainability
Đbrahim Fevzi ŞAHĐN
Atatürk University, Turkey
ifevzi@atauni.edu.tr
Ramazan SEVER
Atatürk University, Turkey
rsever@atauni.edu.tr
Halil KOCA
Atatürk University, Turkey
hkoca@atauni.edu.tr
Alperen KAYSERĐLĐ
Atatürk University, Turkey
alperenkayserili@atauni.edu.tr
Namık Tanfer ALTAŞ
Atatürk University, Turkey
ntanfer@atauni.edu.tr
Abstract: As a natural part of global ecosystem, forests have been destroyed continuously
despite sustainable principles. In Turkey, forestation has started as utility forestation and
production forestation just as everywhere in the world and later on the type of forestation
suiting nature as well as multifunctional forestation has been prefered. At present, according
to the decision taken at United Nations Environment and Development Conference (1992) the
principles of sustainability have come to the fore. The main objective here is to provide
means for those settling in rural areas to make their living without destroying forest and
within the limits of protecting nature and maintaining development. In the light of this, forest
in Turkey are to be sustained in spite of lack of application, destroying forest to make fields,
irregular grazing, unlawful cutting, improper use of land and biological threats. It is
inevitable to put in practice regular production techniques and to organize peasant-forest
relation in order to determine the reproductivity capacity and limitations of Turkey forest,
which have rare natural, old forests environment of our country.
Key Words: Turkey, Forest, Sustainability, Environment
Introduction
The total amount of forested areas in the world is approximately 4.3 billion hectares according to the
information about the forests of the world, published by the Food and Agriculture Organization of the United
Nations (FAO). The ratio of the forested areas to other areas is 32.3%. The distribution of the forests over the
world is unbalanced and only 20% of the forests are fertile. The forested areas, which shrank because of a
variety of reasons, are facing similar problems. According to the FAO and the United Nations Environment
Programme (UNEP), 17.5 million hectares of land is deforested every year beginning from 1990’s. However,
only 1 hectare of land is forested for each 10 hectares of land deforested.
This situation seen all over the world is also the case for Turkey. According to historical data, in the
last 4000 years Anatolia has been largely deforested because of excess and improper utilization of forests, land
clearing, wars, forest fires and improper grazing, and the quality of the forests has been partially impaired. What
causes people to behave so irresponsibly while it is known that lack of forest leads to economic constriction and
ecological imbalance? It is not difficult to answer this question. Forests are natural and they mostly grow on
their own without requiring any human labour. It is easy to access forests and trees are used in many fields.
Therefore, they are sometimes used as a source of revenue and demolished by illegal and excess cuts. At the
same time, grazing animals in forests and turning these areas into agricultural lands inconveniently also destroy
forests.
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Geographical Position and Forests of Turkey
Turkey is located in the Northern Hemisphere at the junction of Europe and Asia. The Europen side is
called Thrace and the Asian part is known as Anatolia. It shares boundaries with Greece, Bulgaria, Georgia,
Armenia, Azerbaijan, Iran, Iraq and Syria with a total lentgh of 2753 km. It holds a coastal lentgh of 8333 km.
This coastal zone includes the shores of Black Sea, The Sea of Marmara, Agean Sea, Mediterranean Sea and the
passages of Bosphorus and Dardanelles (Figure 1). It has a total area of 78 million hectares of which 20,8
million hectares are designated as forest land. The topography is very rough and steep.
Figure 1. Location map of Turkey
Turkey is a country which cannot be deemed as poor in plant diversity and forested lands. Total
forested area of our country covers 20.7 million hectares. 10 million hectares of these forests are highly fertile
(Table 1). In other words, 48% of our forests are fertile. Our fertile forests cover 12.7% of the area of our
country. This means 0.14 hectares of fertile forest per capita. Especially the Black Sea Region is in good
condition with regards to forests. However, the Central Anatolia and the South-eastern Anatolia Regions are
poor in forests. The forested areas in these two regions are equal to only 10% of all the other forests in the
country.
Table 1: Forest resources of Turkey ( Turkey General Directorate of Forest).
Forest Area
High Forest (ha) Coppice (ha)
Total (ha)
%
Productive
8 237 753
1 789 815
10 027 568
48,3
Degraded
6 180 587
4 555 093
10 735 680
51,7
TOTAL
14 418 340
6 344 908
20 763 248
100,0
In 1950’s, 25% of the world was covered with fertile forests. This ratio fell to 20% in 1970’s. Unless
effective measures are taken, the ratio of the fertile forests in the world will be only 14% towards 2020’s.
Forest with Respect to Sustainability
Forests, which are the capital of the global ecosystem, are rapidly destroyed despite the sustainable
forestry principles. As it is the case all over the world, forest management began in our country began as
exploitation forestry and production forestry; and then multifunction forestry and natural forestry began to be
applied. Today, they are trying to be applied according to the decisions taken at the United Nations Conference
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on Environment and Development (1992) adhering to sustainability. However, there is not much success in
practice because of different reasons.
Preserving, maintaining and improving the forest, making them fertile and cultivating, and using them without
preventing the future generations’ development created the concept of sustainable forestry. However, this
concept could not go beyond being a concept. In addition, this concept of sustainable forestry is the reason for
all of the forestry sciences, especially the Forest Management Sciences to emerge (Asan 1995:17). ASAN also
asserts that, this concept has been applied in all planning operations since 1700’s. In the forest management,
what the concept is or when it is used is not important. What is important is its purpose. The common purpose
should be developing the villagers [1] living in or next to forests with rational plans and projects which are
based on appropriate examinations, without exhausting the natural supplies in question and getting into the
dilemma of preserving the environment or developing. In other words, the evolution of economical system and
environmental system should be maintained together (Tekeli 2000:10).
Turkey’s situation is relatively good in the quantity of forests it has. However, we do not have enough
fertile forests. Although certain efforts are made to preserve and improve forests, forest management cannot be
efficient because of socio-economic problems. This reduces the quality and the quantity of our forests. For
example, usage of the forests in our country as pastures for animals, illegal cuts and land clearing are the major
reasons for hazards (Figure 1).
Figure 1: Turkey forests to be destroyed for various reasons.
The regulations that govern forestry should also be examined in order to correctly understand the
importance of sustainability in the sector of forestry in Turkey. Turkish Constitution is different from the
constitutions of many other countries in that, it includes provisions about forestry. In the process from 1937,
when regular forestry studies began, until 1960, when the provisions about forestry were first included in the
constitution, many political activities were held, which caused hazards to forests. That is why, Turkish
Constitution of 1961 included forestry.
Turkish Constitution of 1982 also included provisions about forestry. However, there are remarkable
expressions about the subject. One of the provisions of the article is a commentary about sustainability peculiar
to Turkey. Whereas this provision indicates that the borders of forests cannot be shrunk, it makes it possible to
exclude some forested lands from forest regime. This provision, which is included in the Article 2 of the
Constitution, is the base for the applications called 2-B and enforced according to the Provision B of Article 2
of the Law of the Jungle no: 6831. The sustainability of the parts of forests that are exposed to the 2-B
application becomes eternally impossible. This situation seems to be a ground for many problems in the future.
Hazards to forests by the enlargement of cities and tourism investments result from the 2-B application.
Firstly, a regional planning based on sustainability should be designed. It should be considered in every
stage of forestry that there is an organic link between forests and the villagers living in forested lands. That is
why, a public strategy should be followed which will enable social plan integration necessary for improving the
level of education and awareness of the villagers who live in the countryside and have the economic structure
principally based on natural sources. At the beginning, forests in the whole country should be divided into parts
of a certain size and they should be given to those villagers. Thus, passage to forest management should be
achieved and legal regulations should be issued for this purpose. Activities like maintenance, tree planting,
preserving and management should be carried out by the villagers under the supervision and control of experts
from Forest Managements. When such a legal regulation is applied, hazards to forests will decrease and the
[1] According to the results of the census in 2000, about 7.544.000 people live in 20.314 forest villages (7.302 in forests,
13.012 next to forests), and they form the 11% of the total population and nearly half of the rural population.
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villagers’ level of welfare will improve undoubtedly. However, this precaution should not be enough, and
solutions for different conditions of different regions should be provided.
The basic factor that draws the villagers living in forested areas to forests is their low standard of life in
socio-economic terms. That is why, the level of life standard of the villagers, whose economic problems
gradually increase, should be improved and it should be aimed that they will have high level of education,
natural and environmental consciousness. Social forestry should increase countrywide in order to decrease the
villagers’ pressure on the forests. The participation of the public should absolutely be ensured in this process.
While announcing the aims and studies of Forest Area Managements, General Directorate of A forestation, OrKöy (General Directorate of Forest-Village Relations), and Directorate of National Parks, Game and Wildlife
with various activities, participatory plans and projects that consider socio-cultural and economic standards of
villagers should be applied. Otherwise, the inclination towards forests will continue. On the one hand, minimum
benefits will be obtained like cutting trees in the forests and selling them, land clearing and illegal provision of
trees as fuel and raw material. On the other hand, this inclination will create problems which will obstruct
sustainability of forests and spoil ecological systems. Moreover, as a result of spoiling ecological systems,
irreparable problems will arise such as the extinction of endemic plants in the forest (Sever 2002:95-97).
In order to manage the forests of Turkey within the framework of sustainability, completing the
management studies is one of the works to be primarily done. Awareness of the socio-economic conditions of
the villagers in forested areas is possible by implementing improvements. The organic link between forests and
the villagers living in forested lands is the most important think that should be considered in every stage of
forestry. However, it is quite difficult to say that it is followed.
Turkey has acceded to some international conventions like Convention on Biological Diversity,
Ministerial Conference on the Protection of Forests in Europe, United Nations Forum on Forests. However, it
cannot always manage to meet the requirements of those conventions. This usually results from conflicts
between the authorities of local governments and national government, and inadequate representation of
communities of interest and decision-makers. This complexity of authority should absolutely be removed and
the exact limits of authorities should be determined.
Conclusion
Forests should be preserved according to the principle of sustainable forestry and should be improved.
Their fertility should be increased and be cultivated constantly. They should be used without preventing the
future generations’ development. Accordingly, the forests in our country should be managed including the
above suggestions, according to the principles of sustainable forestry.
References
Asan, Ü. (1995). Orman Kaynaklarının Rasyonel Kullanımı ve Ülkemizdeki Durumu. Đstanbul Üniv. Orman Fak. Dergisi,
45 (2), 68-92.
Çağlar, Y. (1990). Sürdürülebilir Kalkınma Đçin Ormanlar ve Ormancılığımız. Sürdürülebilir Kalkınma Konferansı, 1989,
VA:135-159.
Çağlar, Y. (1998). Sürdürülebilirlik ve Türkiye Ormancılığı. Sürdürülebilir Kalkınmanın Uygulanması-Tartışma
Toplantısı,1997, VA:61-75.
Erdem, R. (1982). Türkiye’de Orman Korumasının Ana Sorunları ve Çareleri. Đstanbul Üniv. Orman Fak. Dergisi, 32 (1),716.
Gülen, Đ. Özdönmez, M. (1981). Türkiye’de Orman ve Ormancılık. Đstanbul Üniv. Orman Fakültesi. Dergisi,31 (2), 1-13.
Odabaşı, T. Özalp, G. (1994). Ormanların Đşletilmesi Yöntemleri ve Doğaya Uygun Ormancılık Anlayışı. Đstanbul Üniv.
Orman Fak. Dergisi, 44 (1-2), 35-47.
Pamay, B. (1980). Türkiye Ormancılığının Ana Sorunları. Đstanbul Üniv. Orman Fak. Dergisi, 30 (2), 68-92.
Sever, R. (2002). Sürdürülebilirlik Bakımından Şavşat Ormanları. Doğu Coğrafya Dergisi, 8, 75- 99.
Tekeli, Đ. (2000). Türkiye Çevre Tarihçiliğine Açılırken. Türkiye’de Çevrenin ve Çevre Korumanın Tarihi Sempozyumu,
2000, VA:1-14.
194
�
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The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Extent
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174
Title
A name given to the resource
Turkey Forest with Respect to Sustainability
Author
Author
ŞAHİN, İbrahim Fevzi
SEVER, Ramazan
KOCA, Halil
KAYSERİLİ, Alperen
ALTAŞ, Namık Tanfer
Abstract
A summary of the resource.
As a natural part of global ecosystem, forests have been destroyed continuously despite sustainable principles. In Turkey, forestation has started as utility forestation and production forestation just as everywhere in the world and later on the type of forestation suiting nature as well as multifunctional forestation has been prefered. At present, according to the decision taken at United Nations Environment and Development Conference (1992) the principles of sustainability have come to the fore. The main objective here is to provide means for those settling in rural areas to make their living without destroying forest and within the limits of protecting nature and maintaining development. In the light of this, forest in Turkey are to be sustained in spite of lack of application, destroying forest to make fields, irregular grazing, unlawful cutting, improper use of land and biological threats. It is inevitable to put in practice regular production techniques and to organize peasant-forest relation in order to determine the reproductivity capacity and limitations of Turkey forest, which have rare natural, old forests environment of our country
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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https://eprints.ibu.edu.ba/files/original/d12c463f0b8c9d7fcb2492a883cdcdde.pdf
cef55fafd04e948eb3a292620cb8ab65
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Small -and Medium- Sized Enterprises (SMEs) Entering International
Market for Sustainable Growth
Fatma Nur ĐPLĐK
Cukurova University Karatas School of Tourism and Hotel Management, Turkey,
nuriplik@cu.edu.tr
Kemal Can KILIÇ
Cukurova University Faculty of Economics and Administrative Sciences, Turkey,
kcan@cu.edu.tr
Abstract: Increase in globalization and internationalization in markets has created a complex
business environment for all size firms. This has led to the transformation of the relationships
between firms and growing use of cooperation agreements by all firms especially small -and
medium- sized enterprises (SMEs) that are seeking opportunities in international markets. In
this direction, as SMEs recognize the need to utilize their limited resources more effectively
to compete with more powerful competitors in the global arena, owner/managers
internationalize their operations by cooperating at the strategic level. The aims of these
cooperations are to pursue growth opportunities, to access additional relationships, to reduce
uncertainty and to overcome their size barrier and to expand businesses in the new
geographic markets.
In the literature, internationalization processes have mainly been studied for multinational
corporations (MNCs) but less for SMEs, which tend to have been neglected in
internationalization research (Jansson & Sandberg 2008). But a better understanding of the
process of entering international markets will help small firms avoid potential obstacles to
success (Rowden 2001). In this context, the main purpose of this study is to enhance the
understanding of the cooperative internationalization strategy of SMEs. Our study focuses on
providing information on the SMEs business characteristics, the concept of
internationalization, motivations, processes, advantages and disadvantages of SMEs’
internationalization, cooperative internationalization of SMEs, network model such as
Sectoral Foreign Trade Companies (SFTC) used in Turkey, and making suggestions for
owner/managers of SMEs to develop successful foreign market entry process by cooperating
with other firms.
Keywords: Globalization, Cooperation, Internationalization Strategy, International Arena,
SMEs, Sectoral Foreign Trade Companies, Turkey.
Introduction
As the rate of economic globalization becomes faster and faster, small businesses can no longer afford
to ignore the challenge of international commerce. Thus small businesses that are playing an increasingly vital
role in today's business environment must develop a global culture, gain crucial international experience and
overcome their size barrier (Rowden 2001; Steensma et al. 2000) by cooperating with other firms. This requires
choosing the appropriate entry strategy and the right partner if they hope to have any chance of success in the
international arena. In this context, this study focuses on the cooperation of SMEs that have been built for the
purpose of international expansion.
Most of the early studies related to internationalization strategies have dealt with large firms, whereas
SMEs are only rarely investigated (Fink et al. 2008). So there is still insufficient knowledge about the
internationalization of these types of firms (Westhead et al. 2001). However, the development of
communication and transportation technologies has made international expansion possible for SMEs as well
(Saarenketo et al. 2008). In this direction many approaches have been developed for the understanding of the
internationalization process of SMEs. One of them is the cooperative international expansion is the main theme
of this article.
The facilitating role of globalization and outsourcing has expanded firms’ use of external resources to
reduce innovation time spans, costs and risks, and acquire greater flexibility in their operations. Indeed, the very
success of the SMEs vis-a`-vis their larger competitors may be due to their ability to utilize external
relationships more efficiently. So the growing use of networks by a broader cross-section of firms reflects a catchup by larger firms: it has long been recognized that one of the major competitive advantages SMEs have over
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large firms has been their flexibility (Narula 2004) that enables them to match quick changes in market demands
(Colley 2006).
To date, an entrepreneur’s human capital as well as business demographics promoting independent
owner-managed firms to sell their goods or services into foreign markets is not well understood. Nevertheless,
there is a growing awareness of a need for a greater understanding of this group of entrepreneurial ventures
(Westhead et al. 2001). In this direction, this paper seeks to enhance understanding of the international
expansion of SMEs. Notwithstanding, from a theoretical perspective, the primary focus of this paper is to
provide suggestions for how SMEs will use cooperative business strategy to carry out successful entry into
international markets.
SMEs Business Characteristics
SMEs are not simply smaller versions of traditional firms and have many differences in ownership,
resources, organizational structures and management systems (Pangarkar 2008). Compared with larger firms,
small (less than 50 employees) and medium (between 50 and 250 employees) sized firms (Gilmore et al. 2006)
have limited financial and managerial resources, personnel and capabilities. Further, SMEs are usually owned
and managed by founders, whereas large firms are managed by professionals. As a result of this, the decisionmaking in SMEs is highly centralized (Lu and Beamish 2006).
Previous literature recognizes that SMEs are heavily reliant on the attitudes, skills and expertise of
their personnel. Thus multiple roles being filled by staff and a lack of organizational slack make dealing with
anyone outside of the company much harder (Major & Cordey-Hayes 2000). Due to staffing limitations, small
firms often suffer from managerial inexperience with international markets and have limited global informationgathering capabilities (Rowden 2001) compared to large firms.
Small entrepreneurial firms are responsible for much of the growth and innovation in global economy
(Steensma et al. 2000). They promote private ownership and diversification of economic activities, stimulate
innovations, generate the majority of jobs, support sustainable development, make a significant contribution to
exports and trade and develop entrepreneurial skills (Colley 2006).
Compared to MNCs, smaller firms are unfettered by bureaucracy, hierarchical thinking, and expensive
existing information systems. But they are often more customer- oriented, and have quicker response times
when it comes to implementing new technologies and meeting specialized needs and tastes. So they are usually
more able to adapt their systems, routines, and the collective employee mindset to the imperatives of
international competition (Liesch & Knight 1999).
SMEs that are operating in demands a high level of customer-orientation as well as an emphasis on
new (technological) knowledge development (Gills 2005) are generally regarded as more easily influenced by
external forces than are larger firms (Cheng & Yu 2008). Further, SMEs are subject to the liability of smallness
which is reflected in this type of firms’ difficulties in obtaining and securing critical resources and their
vulnerability to environmental changes. Such disadvantages impose constraints on the expansion of SMEs
either in the domestic or international markets. So that SMEs usually have less international experience and are
subject to more severe local knowledge deficiencies when they expand their facilities across borders (Lu and
Beamish 2006). In this context, SMEs can carry out expansion of their operations into foreign markets
successfully by developing cooperative relationships with other firms.
The Concept of Internationalization
Internationalization is the process by which firms increase their awareness of the direct and indirect
influence of international transactions on their future, and begin to engage in transactions with firms in other
countries (Lu and Beamish 2001). In other words, it is the discovery, enactment, evaluation and exploitation of
opportunities across national borders to create future goods and services (McDougall & Oviatt 2005).
A number of explanations have been proposed to account for firms’ internationalization processes. For
example, the resource-based view of the firm has been shown to be important since the managers leverage
resource advantages and minimize transaction costs to obtain a competitive advantage overseas (Spence et al.
2008). In addition to this, several theories from the international business literature have been presented below
to explain why firms engage in international operations (Westhead et al. 2001):
• Transaction cost theory suggests that firms choose the least-cost international location for each
activity they perform and grow by internationalizing markets, bringing interdependent activities under
common ownership and control up to the point where the benefits of further internationalization are
outweighed by the costs.
• A network theory of internationalization suggests that firms achieve their competitive advantage by
developing mutually supportive interactions with other firms.
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•
Monopolistic advantage theory suggests that firms will internationalize when they can use their
established advantages in foreign countries at little or no additional cost.
• Internationalization theory suggests that firms internationalize to reduce costs by internationalizing the
transfer of goods and services across national borders where it is cheaper.
• Product cycle theory suggests that firms internationalize in an attempt to protect their existing markets
of mature products.
• The stage theory of internationalization suggests that a firm’s international operations will gradually
increase as it gains knowledge and experience in the international arena and as it develops
relationships that cross international boundaries.
• Oligopolistic reaction theory suggests that firms will try to reduce their risk by imitating competing
firms’ entrance into foreign operations.
• Strategic choice theory suggests that firms facing strategic complexities respond opportunistically to
changing market opportunities through a careful evaluation of risks with managers actively
determining many features of a firm’s internationalization.
Although there have been a number of attempts to synthesize the internationalization literature, a single,
commonly accepted interpretation of ‘‘internationalization’’ is yet to be found. According to this, the
internationalization patterns of individual firms seem to be rather unique and situation specific (Saarenketo et al.
2004).
International Expansion of SMEs
Internationalization is an issue that –until recently– was in most cases only relevant for large
companies. But increased pressure on the home market coming from international competitors is now, however,
being felt by SMEs as well, moving them to seek opportunities in international markets (Fink et al. 2008)
actively.
Many SMEs, especially high technology firms, are forced to internationalize early in their development
due to a focus on niche markets and the small size of their domestic markets relative to the potential that exists
abroad (Bradley et al. 2006). But although SMEs have been increasingly active in international markets,
existing theories of internationalization have tended to focus on large MNCs and argued that firms must have
strength either in resources or knowledge if they are to fully overcome the transaction costs in integrating across
borders (Cheng & Yu 2008).
There is an array of modes for entering international markets, such as exporting, licensing, non-equity
strategic alliances, joint ventures and wholly owned subsidiaries, each of which has its own advantages and
disadvantages (Lu & Beamish 2006). But exporting is still the primary foreign market entry mode used by small
firms in their internationalization efforts presumably because it offers an effective means of international
expansion without over-extending the capabilities or resources of the firm (Bradley et al. 2006).
For SMEs, internationalization is an entrepreneurial activity, and entering new geographic markets can
be regarded as, on a large scale, the act of adopting new practices (Cheng & Yu 2008). But SMEs attempting to
internationalize face a basic marketing dilemma—do they attempt to internationalize unaided or do they form a
partnership with stronger firms in their business system that can help them. One such way is to internationalize
as part of a supplier-customer network in partnership with established MNCs to respond to customer product
and service preferences in myriad international markets (Bradley et al. 2006).
Motivations for International Expansion of SMEs
SMEs are increasingly internationalizing their business activities. The drivers for increasing
involvement of them in the world markets, to name a few, have been the increasing competition in both
domestic and foreign markets and the fast development of information and communication technologies. As a
result of this rapid internationalization, managers of SMEs are facing challenges regarding how to enter
countries which are, in many ways, different from the home country (Ojala 2008). But they can overcome the
challenges and uncertainty of the complex internationalization process by cooperation.
Although SMEs are generally considered to be more risk-averse than their larger counterparts to adopt
the new practice, which makes them less willing to go abroad, they also tend to react to the quests from external
parties easily, which induces in them the need to go abroad. The environmental context that is a critical factor
for SMEs most likely pushes them to initiate internationalization. It may be said, then, that the way in which a
SMEs internationalizes is the result of the combination of its actual internal abilities and its leader’s cognition
of its external environment (Cheng & Yu 2008).
A major reason why the managers of SMEs internationalize is to pursue growth opportunities and they
often collaborate for that purpose. These collaborative ventures are creating a shift in business relationships
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from a conflict mode based on competition to a collaborative mode. Presently, the trend is for management
teams to concentrate on core competencies (Westhead et al. 2001) and potentially outsource those that do not
provide a competitive advantage in order to increase agility and flexibility (Spence et al., 2008) and cover the
uncertainty of the internationalization process (Fernández and Nieto 2005).
The International Expansion Process of SMEs
International expansion is an important growth strategy for SMEs when the scope of their business is
geographically restricted. Some researchers have asserted that when SMEs initiate internationalization, they will
tend, due to lack of resources and advantages, to export goods as their mode of foreign market entry. In
addition, researchers have asserted that such firms will typically increase their international involvement
through a series of carefully planned stages (Cheng & Yu 2008).
The operations in a foreign country are supposed to start by indirect entry modes, which do not require
extensive knowledge about the environment of the target country and more commitment to the market.
According to this, indirect entry modes increase a firm’s knowledge about the target country and allow it to
learn about how to deal with the customers in that country. Once the country has become more familiar for a
firm, direct operations can start there (Ojala 2008). In this context, the typical stages of internationalization
process for a small business include (Dollinger 1995):
1. Passive Exporting: The firm fills international orders but does not seek export business. At this
stage, many small business owners do not realize that they have an international market.
2. Export Management: The owner or a specific manager specifically seeks export sales. Because of
resource limitations, most small businesses at this stage rely on the indirect channel of exporting.
3. Export Department: The firm uses significant resources to seek increased sales from exporting. The
key for most small firms is finding a good local partner for distribution.
4. Sales Branches: When demand for the product is high in a country, it justifies setting up local sales
offices. Small firms must have the resources to transfer home managers to expatriate assignments or to hire and
train local managers and workers to run these operations.
5. Production Abroad: Production moves a firm beyond downstream value-chain activities and allows
them to gain local advantages. This is often a very difficult stage for small firms because the cost of a failed
direct investment can put the whole firm at risk for survival.
6. The Transnational: Small size does not preclude a small business from developing a globally
integrated network that characterizes the transnational corporation.
The movement through the stages of the entry process is intimately connected to the development of
institutional knowledge, making it easier to develop customer relationships. As a consequence, the more
relationships in a foreign country that have reached later stages, the more established and internationally experienced
the firm becomes and the higher the degree of internationalization of the SME. And also the more countries in
which the SME has established relationships, the more internationally experienced is the firm (Jansson &
Sandberg 2008).
Advantages and Disadvantages of SMEs’ International Expansion
Prior literature is in broad agreement that internationalization has a positive impact on firm
performance. Drawing from the literature on international and global strategies, firms can have greater cost
efficiencies primarily due to a greater volume of business and the ability to exploit economies of scale. An
international firm also benefits from the diversity of environments it operates in. Thus it enjoys tremendous
learning opportunities while satisfying the diverse customer needs and responding to different competitors in
international markets (Pangarkar 2008).
The literature on the international entrepreneurship emphasizes the use of formal and informal
relationships to penetrate and expand into foreign markets. According to this, the need to collaborate and to
achieve an international presence has become a necessity, especially for SMEs, but the challenges encountered
with such strategies are high as it is not uncommon to see high failure rates (Spence et al. 2008). In addition to
this, when SMEs make their initial entry into international markets, they are especially prone to problems
associated with the liabilities of foreignness and smallness, which may lead to poor financial performance and a
variety of other concerns for managers (Bell 1995; Lu & Beamish 2001).
Although internationalization can be regarded as an opportunity-seeking choice on the part of firms, it
may also represent a critical decision due to the costs and risks involved (Cheng & Yu 2008). Prior literature
has identified the numerous constraints faced by SMEs in international expansion. Typically SMEs do not
perform global scanning and hence might lack the information and managerial expertise necessary for
exploiting the international opportunities. Buckley (1999) argues that, due to constraints of management time,
smaller firms frequently take short-cuts in decision-making and information gathering, which can be disastrous.
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Further, internationalization increases the requirements for coordination and communication among different
units within the SME as well as other parties located in different geographic areas (Pangarkar 2008).
Many SMEs suffer scale and resource disadvantages compared to their global rivals, adversely
impacting the likelihood of success of their internationalization initiatives (Pangarkar 2008). Compared to large
firms, SMEs are less competitive; for instance, they may not be able to capture business opportunities due to
inferior products, shortages of finance and limited administrative capacity (Jansson & Sandberg 2008). In addition,
any foreign market initiative will take a larger proportion of resources of a SME than a large firm. In the event of
failure of the particular initiative, the impact on a SME may be greater, which increases the risk levels of them
(Lu & Beamish 2001).
Despite the constraints and challenges faced, SMEs are likely to enhance their performance through
greater internationalization. And by becoming international, SMEs may be able to provide better service to their
MNC clients and, in the case of foreign direct investment, avoid import tariffs (Pangarkar 2008). In this context,
many approaches have been developed for examining the internationalization of SMEs (Saarenketo et al. 2004).
One of them is the cooperative internationalization of small firms depends on an organization’s set of
relationships with partner firms rather than a firm specific advantage.
Cooperative International Expansion of SMEs
Organizations that seek to reduce costs, to respond rapidly to market demands and to build competitive
advantages around their core competencies can not execute strategies without drawing on the skills and
resources of other organizations (Lin & Zhang 2005). Thus in an environment characterized by globalization,
new expectations from customers and changing competitivity criteria, many dynamic SMEs have opted to
(Raymond & Blili 1997) cooperate with other firms to overcome these challenges, to avoid significant barriers
to long-term success, to enhance their competitivity in the market and to reduce their environmental uncertainty.
The traditional internationalization theories suggest that the firm’s international involvement increases
in stages as a result of incremental learning. However, due to the key characteristics of SMEs, cooperative
internationalization is becoming an increasingly important option for them. Thus for the small firms showing
very rapid and intensive international growth that they would otherwise not be able to take on by themselves
enabled (Saarenketo et al. 2004; Fink et al. 2008) by cooperation with other firms. Because partner firms
provide useful information about business opportunities, characteristics, obstacles or problems that they face in
the foreign market, the perceived risk for SMEs is lowered as a result.
In terms of research in this area, scholars have found that relationships are at the core of the
internationalization process (Jansson & Sandberg 2008). In light of the relatively lower transaction volume of
SMEs when compared to large companies, effective and efficient coordination mechanisms in the cooperative
internationalization of SMEs are accordingly of particular importance. Indeed, the characteristics of SMEs
create particular challenges in the internationalization process. But recently, cooperative arrangements have
received increased attention as a means to meet these challenges (Fink et al. 2008).
Collaborative ventures can be formed for the purpose of gaining a significant presence in a new
market, acquiring technology, enabling faster entry into the market and facilitating international expansion
(Spence et al. 2008). Further, in the early phase of internationalization, SMEs gather more information about
foreign markets through international strategic partners (Lee 2007). Thus in the environment that is
characterized by speed, flexibility and innovation, cooperative internationalization plays an important role in the
success of SMEs’ business strategy.
Researches have shown that a significantly greater percentage of small firms are using cooperative
strategies than are their larger counterparts (Steensma et al. 2000). Thus SMEs’ international expansion is often
dependent upon a myriad of agreements with firms from the same or unrelated industry sectors, suppliers,
customers, competitors and public organizations (Spence et al. 2008).
SMEs can compensate for their liabilities of smallness through the establishment of inter-firm
cooperations (Fink et al. 2008) that offer an effective means of internationalization for them in general
(Fernández & Nieto 2005). Thus a promising way for SMEs that have a smaller pool of internal resources and
knowledge to increase their global competitiveness is to form cooperative relationships with larger MNCs. Such
arrangements allow them to reach global markets and to achieve economies of scale, by integrating into the
value chains of the larger firms (Etemad et al. 2001). In addition to this, cooperative internationalization is a
useful way for SMEs to access new opportunities, to reduce costs and allows them to compete more effectively
with more powerful competitors in the foreign markets.
By joining competencies, cooperative international expansion requires a lower amount of
internationalization know-how on the part of the partners than would be needed (Fink et al. 2008). Moreover,
partnerships formed in order to ease entry into foreign markets are likely to increase the degree of
internationalization of the firm (Reuber & Fisher 1997). Thus due to the attractiveness and importance of
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cooperative international expansion for SMEs, this special form of internationalization will be focused upon in
this paper.
In this part of study, we focus on why and how the firms -which are located in different countriesengage in international operations? A network theory of internationalization suggests that firms achieve their
competitive advantage by developing mutually supportive interactions with other firms (Westhead et al. 2001).
So we will explain network organization theory shortly from the perspective of SMEs and then give an example
from Turkey.
Strategic Cooperation of SMEs and Organizing Model for Entering Foreign Market:
Network Organizations
SMEs give importance developing strategic cooperation and organizing model such as networking as a
result of the new competition thought. Most of small firms have not enough competence, knowledge and
sources to be alive. So they transfer the competence from the other firms and make strategic cooperative
agreements. After transferring some sources from other the firms specializing on their core area (Christensen
1994; Esener 1997; Hamel & Prahalad 1995; Sanchez & Heene 1997; Quinn 1994; Ozgen et al 2003). Large
organizations use size advantages although the small size ones use flexibility, lean and innovativeness. By
developing strategic cooperation SMEs use large size advantages as well as small size. Network structure emerged
as a result of strategic cooperation among different sized firms. There are some benefits of network form for
SMEs such as creating value, competitive advantage, improving exporting, finding and serving new markets
(Miles & Snow 1992).
The Structural Result of Being in Network Organization for SMEs: Sectoral Foreign
Trade Companies Case for Turkey
In Turkey, SMEs motivated to exporting by the model of Sectoral Foreign Trade Companies (SFTC).
SMEs take advantages of being in network type such as SFTC in Turkey after 1980s liberation period (Ozgen et
al. 2003). In SFTC structure, there are many SMEs at the same production field being together and part of the
same organizing model. The main aim of this model is to enter different world market. The most important
advantages of this model are economies of scale and professional marketing activities in exporting for SMEs
(Celik & Akgemici 1998). The role of SFTC is not only maintaining exporting activities but also developing
new competences, socializing new business ideas to partners, creating trust, transferring knowledge between
partners (Ozgen et al. 2003).
Conclusion
In today’s globalization era, complex business environment generates enormous challenges for all
firms especially for SMEs that seek opportunities in foreign countries. But SMEs that face several constraints
and risks in international expansion process can also benefit from internationalization in several different ways.
Since international expansion is based on the capability of the firm to exploit its local advantages in foreign
markets, the lack of strategic resources, the uncertainty and complexity of the process and smallness make
international expansion a difficult goal to achieve for SMEs. In this direction many small firms choose to
concentrate on their domestic market, neglecting opportunities of international markets. But in order to achieve
successful international expansion, they may choose to cooperate with other firms to overcome certain
traditional barriers, to facilitate demands of business environment of global markets and to gain and sustain the
global competitive advantage.
Small businesses often do not have the inhouse resources to identify or go directly to foreign markets.
Thus collaborative ventures may be attractive to the managers of SMEs who are interested in lowering costs,
expanding what they offer to the market, getting access to additional resources, managing uncertain
international environment, overcoming operational weaknesses, learning from partners and improving
effectiveness in the market.
An organization’s growth largely depends upon its relationships with other organizations. In this
context, to address competitive threats and concentrate on their core competences and strengths cooperative
internationalization increases the success chance of SMEs. Thus cooperative internationalization that is the
alternative choice for SMEs’ expansion in the new markets provides benefits for them to broad a product line or
to develop new products, to acquire new capabilities and to reduce the threat of competition.
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SME owner/managers cooperate with other firms for international expansion if they understand how to
use this strategy in a practical way by avoiding potential obstacles to success. In this study, an extensive review
of literature is made to identify the cooperative internationalization of SMEs. In this context, owner/managers
of SMEs should give much more attention to the following issues for cooperating with other firms to
internationalize their facilities and to compete successfully in the global arena:
• As they must be aware of the challenges of entering the international marketplace, SME
owner/managers should analyze some important issues such as cultural characteristics, business
environment and practices, politics and laws in the foreign country. And they should focus on a
country where they believe the benefits of international expansion to be the strongest.
• SMEs that expanding their facilities abroad should gather and interpret information from its external
environments and have strong ownership advantages if they are to successfully overcome the
disadvantages of operating in host countries. In this context, managers should pay more attention to
how and with whom cooperative relationships should be established and what management skills are
required over time.
• Without appropriate capabilities and knowledge international expansion may not lead to better
performance. Thus an important role of SME owner/managers is to build up their capabilities useful
for internationalization process.
• SME owner/managers should pay more attention to the integration of systems, cultures, and
individuals of the partner firms in the early phases of cooperative internationalization. In addition, they
should have multicultural competence, use specific coordination tools to link together activities
processed by different firms and to federate independent goals.
• SME owner/managers should be aware of mutual benefit is critical to maintaining the relationship at
an appropriate level, focus on creating synergy and achieve win-win situation for both sides and an
ongoing long-term relationship with partner firm.
• In order to cope with the complexity of internationalization process, partner firms should arrange
detailed negotiations for determining the level of strategic and operational fit, managerial rules, the
responsibilities of the partners and the management and term of the relationship.
• SME owner/managers should participate in goal setting and planning activities altogether for achieving
the aims of better performance outcomes for international expansion and review the performance of
relationship periodically.
• International expansion of SMEs by cooperating experienced partner reduces risk and uncertainty in
the market. But SMEs should be more careful about choosing the right and non-opportunistic partner
that has relevant resources and capabilities, because they have limited opportunities to fail.
• Cooperative international expansion requires building interpersonal relationships between the partner
firms. Because good relations between partners build trust, facilitate harmonious relationships and lead
to achieve strategic goals.
• SME owner/managers should be sensitive about the communication strategies employed in their
relationships and give attention to the accuracy, timeliness, adequacy and credibility of information
exchanged between firms. This behavior helps them to realize mutual benefits by reducing
misunderstandings.
• The business environment in which SMEs have to operate has become increasingly complex,
unpredictable and unstable. Thus they should be flexible enough to satisfy environmental needs and fit
the dynamic requirements of the economic, social, cultural and industrial conditions of the
international market.
• SFTC structure is an important advantage for SMEs for entering foreign markets (Ozgen et al. 2003).
Because strategic cooperations provide SMEs to develop projects that are not done alone and solve the
scale problems of small firms, owner/managers of these firms should choose the right expansion
strategy with the right partner in the right time.
Cooperative internationalization that is the way of rapid internationalization for SMEs improves the
competitiveness of firms by speeding up organizational learning, by providing access to external resources, by
reducing risk and production cost, and by fostering rapid learning and change. In this context, SMEs that are
characterized by limited resources may overcome their resource shortages, reduce strategic and environmental
uncertainty and increase their viability in the foreign markets by cooperating with other firms. So this study
suggests that despite the several constraints faced by them, for SMEs in a fiercely competitive environment, the
best way to enter international market is to build cooperative relationship with the right partner at the strategic
level.
The new developments in the world create an excellent opportunity to study the internationalization of
SMEs, which is an underdeveloped area in international business research (Jansson & Sandberg 2008). In this
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context, this study provides a greater contribution to the understanding of the phenomenon of SMEs’
international expansion by cooperating with other firms.
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133
Title
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Small -and Medium- Sized Enterprises (SMEs) Entering International Market for Sustainable Growth
Author
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İPLİK, Fatma Nur
KILIÇ, Kemal Can
Abstract
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Increase in globalization and internationalization in markets has created a complex business environment for all size firms. This has led to the transformation of the relationships between firms and growing use of cooperation agreements by all firms especially small -and medium- sized enterprises (SMEs) that are seeking opportunities in international markets. In this direction, as SMEs recognize the need to utilize their limited resources more effectively to compete with more powerful competitors in the global arena, owner/managers internationalize their operations by cooperating at the strategic level. The aims of these cooperations are to pursue growth opportunities, to access additional relationships, to reduce uncertainty and to overcome their size barrier and to expand businesses in the new geographic markets. In the literature, internationalization processes have mainly been studied for multinational corporations (MNCs) but less for SMEs, which tend to have been neglected in internationalization research (Jansson & Sandberg 2008). But a better understanding of the process of entering international markets will help small firms avoid potential obstacles to success (Rowden 2001). In this context, the main purpose of this study is to enhance the understanding of the cooperative internationalization strategy of SMEs. Our study focuses on providing information on the SMEs business characteristics, the concept of internationalization, motivations, processes, advantages and disadvantages of SMEs’ internationalization, cooperative internationalization of SMEs, network model such as Sectoral Foreign Trade Companies (SFTC) used in Turkey, and making suggestions for owner/managers of SMEs to develop successful foreign market entry process by cooperating with other firms.
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2009-06
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HB Economic Theory
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https://eprints.ibu.edu.ba/files/original/ed7937ca4bf9928300625d28d4c4222b.pdf
09752e15fd2013e76855353a828c2f27
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Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Symbolic Construction of Turkish National Identity as a Factor of
International Management
Hüsamettin ĐNAÇ
Associate Professor, Dumlupinar University,
Faculty of Economics and Administrative Sciences, Public Administration Department
Kutahya, Turkey
husamettininac@yahoo.com
Abstract: This presentation aims to explore the symbolic construction of Turkish
nationalism during the early Republican period in order to trace the origins of the anti-global
nationalism in today’s Turkey. It discusses the symbolic bases of Turkish nationalism by
going back to early years of modern Republic. We identified three main components of
Turkish nationalism in this period: history, geography, and language. They are symbolically
constructed within a nationalist perspective. The founders of the Republic and the ideologists
of Turkish nationalism hoped this to serve two purposes. One was to establish the bases of
realizing the unity of Turkish nations. The other, perhaps the most important, purpose was to
prove that the Turks were an advanced and civil nation during the course of history, and to
respond the western pressures of disruption, defeat, invasion and exclusion (e.g. the western
labels of barbarian Turks, backward Muslims). The main argument in this study is that the
Turkish national identity tried to co-exist with, and to join, the modern western civilization
by placing geography, history and language in a symbolic context and in accordance with the
idea that it determines national interests as a part of a Business of Corporations and key
factor of Managers within the international competitive environment. In this context, Turkish
history was interpreted as the source of human civilization and the geographies of the Central
Asia and Anatolia were the home of human civilization while the Turkish language was
viewed as the origin of human languages. By doing so, they aimed to repel the claims of
backwardness and barbarity and tried to introduce the national identity as an integral part of
national culture having great impact on a process of negotiations.
Keyword: Symbolic Construction, Turkish National Identity
Introduction
In this historical era of globalized world nation-states experience a great transformation. Some social
scientists interpreted this change as the end of nation-states. On the other hand, there are profound controversies
and conflicts due to micronationalisms in regional context. Therefore, it is necessary to revisit the early
construction of nationalism in Turkey. As a result of the social and political effects of globalization on nationstate and national identity, there emerge new ‘national front’ movements and new types of reactions to
globalization. These developments can also be observed in Turkish society. Especially Turkey’s membership
talks with the European Union caused a heated debates as to national identity and the transformation of nationstate leading to the emergence of “nationalist front” movements (Bozkurt 2004: 7; Perinçek 2005: 1-2). To
understand this new political situation and nationalism in Turkey it is necessary to analyze how Turkish national
identity was constructed during the early Republican period and what kind of symbolization is used in this
construction process.
The early construction of the Turkish national identity can shed a significant light on today’s
rejuvenated debates as its role in relation to globalization in particular and Turkey’s accession talks with the
European Union. While the globalization exposes the county’s culture, economy and social structure to global
factors such as economy and culture, the EU accession talks cause heightened debates as to the nature and
future of the Turkish national identity. In one extreme, there is a clear rejectionist trend toward both
globalization and European Union from both secular and religious camps that emphasize the uniqueness of
national culture. On the other end, there is a strong accommodationism. This accomodationism appears in the
form of incorporation of western and universal values with little attention to traditional Turkish culture, or in a
more cooperationist attitude with a strong confidence on traditional identity and culture. While the former
represents the traditional secular elites in Turkey, the latter is represented by the Justice and Development Party
in power. The fact that both globalization and EU talks began to highlight the need for recognizing the presence
of more local elements of national identity that were ignored in the original construction of national identity.
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Therefore, Kemalism as an ideology of national ideology began to gradually go away from the strict
imagination of national identity (Kramer 2000).
It is surprising that the arguments of today’s new nationalist outlook that emerging due to
globalization, micronationalism and EU integration is parallel to the nationalist arguments of the early years of
the Turkish Republic (Perinçek 2004). This paper elaborates on how nationalist identity was constructed during
these early years by arguing that this construction is made through us of geography, history and language. Our
main assumption is that nationalist symbolic construction in Turkey aimed to develop alternatives to the
western arguments that the Turks were backward and barbarians. This symbolization implies that the Turks are
equal to their counterpart in the West and that the Turks lead many great events in history and founded the first
civilization and, therefore, deserve to take its place in modern civilization. In this respect this article first
elaborates on the symbolization and nationalism. Secondly, it analyzes how and why nationalism was
symbolically constructed through the symbolization of homeland or geography, history and language.
Nationalist Identity and Symbolism
Nation-states that emerged as a result of modern political theorization focused on constructing national
identity as a social collectivity. Individuals attempted to find meaning around this new identity. In this context
national identity is constructed around a common land, myths, a historical memory, duties, rights and economy
(Smith 1994: 31-32). The two main criteria in defining national identity: continuity over time and differentiation
from others (Guibernau 1996: 73). The nation that is a basis formational identity refers to a group of people
organized as a community. This community is based on the assumptions of a common culture, land, history,
future and self-government. Nation gradually tends to define itself as a sentiment by differentiating from nationstate with its various forms of nationalisms. The members of the community define themselves as a whole of
sentiment with various symbols (Guibernau 1996: 47). These symbols try to construct a common meaning to
national identity.
Symbols are the stocks of meaning for a society and provide “a capacity to create meaning”. Therefore,
community members assign similar meanings to the world they live in by using the same symbols (Cohen 1999:
14). These meanings are a “social map” shared by society (Mardin 1982: 91). With this map individuals obtain
a common consciousness, values, views, behaviors and beliefs. At the same time, there emerge a culture with
consistent meanings around a system of symbols. This culture gain unity by means of meanings provided by
these symbols. For example, in Turkey there is a culture unified as around such as a land, flag and bravery
(Mardin 1982: 101).
Symbolization can transform a community into a symbol by emerging in the minds of community
members. Whey a community is transformed into a symbol, community members can easily perceive
themselves a part of the same collectivity (Cohen 1999: 83). Therefore, symbols function as an important
concept that constructs a sense of with in community. In this context the nation transforms itself to the status of
the similarities from the differences of realities. Therefore, people invest in the ideological integration of the
community. This explains the ability of nationalism to connect people from different cultural and social
positions. Symbols point to a difference and similarity to create a group feeling. People construct the
community and use it as an expression of their own identity (Guibernau 1996: 82). Yet through symbols people
speak the same language, act similarly, participate in the same rituals, pray the same God and wear similar
dresses (Cohen 1999: 20; Smith 1994: 123). The differences in society can also help to eliminate and reinforce
unity (Cohen 1999: 82). Symbols have the capacity to transform opposing messages into a single slogan or
image and to transform them into an action. Combined with conflict, symbols’ capacity to condense, unite and
narrow messages can mobilize meanings and political symbols (Brown-Roger,2003).
Also, symbols function to draw boundaries that are important in the construction of national identity.
The exclusionary and unifying role of symbols in drawing the boundaries are also critical to maintain group
identity and its solidarity. As Armstrong put it, like traffic lights, symbols can constitute the markers of
boundaries for entrance and exit. Each group, community or state can develop colors, flags or historical
references mobilized for certain goals as symbolic inventories (Brown-Roger, 2003: 83-108). As Cohen (1999:
19) mentioned, sharing the same symbols leads to distinguishing themselves from other communities by
perceiving themselves as separate.
Symbols define national boundaries. The nation attains a sense of unity through symbols by
differentiating themselves from others. A symbol can be an object, a sign or a word, to make it easy to
recognize each other. Therefore, members of the nation will have a sense of difference and the nation becomes
instrumental in differentiating the nation from others (Guibernau 1996: 81). National flags, names of the states,
geographies, and histories and languages contribute to the construction of national unity while they contribute to
the sense of their being different from other nations. Symbols may change their content in time. They express a
transfer to the future with continuity with the past. Symbols are not static; they passed from generation to
generation or can emerge with a new generation. Nationalism use this dynamic feature of symbols to maintain
the national unity and improve them the interpreting them in new ways (Guibernau 1996: 82). The rich
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associations provided by symbols and potential to create new meanings facilitate the construction of national
identity. Symbols' capacity to create meanings (Cohen 1999: 17), are instrumental in creating new meanings to
legitimize national identity. For example, religious symbols are strategically employed to reinterpret the concept
of modern national identity.
When the symbols are located within a national context they greatly contribute to the perception of a
nation by improving the meanings. In this context symbols try to create "single meanings" by constructing the
same language, geography, and history. Through symbols national identity is constructed and reality is
transferred to old ultra-reality. Nation states' land, languages, history, names, cities, etc. are carried to extrareality and gain new meanings through symbols.
Turkish national identity and symbolic construction
Turkish national identity is also constructed through various symbols and gained new meanings in the
keep nation-state and its relations to the West. Above all, Turkish national identity emphasizes the “integrity” of
the nation in contrast to local, regional, ethnic and religious differences in the Ottoman society (Mardin 1982:
135, 137). Singular meanings are constructed through symbols. Since Turkish nationalism perceived the
pluralist nature of the Ottoman society as fragmented, the nation was envisioned as national unity that tried to
avoid such fragmentation. The available symbols served as a stock of meanings in this envisioning as symbols
of history, geography, and language were reformulated in order to attribute new meanings to the nation.
While Turkish national identity seeks symbolization the meaning it involved against the West becomes
important. This meaning of westernizing against the West played a primary role in the symbolization of national
identity. As well-known, the fragmentation old empire and the invasion of Anatolia by the West always
frightened the intellectuals. Even before the war, the intellectuals said in ‘we either westernize or collapse … if
we don't westernize, the West will expel us not just from the West not from the whole world’ (Safa 1988: 20).
Against the Western accusations of retardation and the shocks experience by the intellectuals, the nation state
that was declared to be Republic simultaneously tried to response to West. The message here was simple: Turks
are not backward and have the right to join the West as a developed modern nation.
Symbolization of Geography/Space
In the graveyard tablets that reflects the 17th century Istanbul’ classical culture, the homeland is
defined as a place where someone was born and grew up (Yildirim 2005). Therefore, homeland carries a local
emphasis. Along with modernity, the notion of homeland keep is totally transformed within a new cultural and
political paradigm. In this paradigm homeland is placed in a national context and is identified with a national
geography and it is perceived as a soil where the sovereignty of nation-state is realized.
Homeland is certainly not solely territorial space where the national sovereignty is practiced. It rather
carries a symbolic dimension in relation to a set of more pervasive and deeper meanings. As Smith (1994)
pointed out, ‘homeland is a sacred place with historical memories, a sacred place with lakes, rivers, mountains,
cities... With these features, homeland is a main source of identity’ (p.25).
In Turkish nationalism related to modernity, homeland carries a significance as a symbolic geography
that involves various emotions, values and beliefs as a part of national identity. The notion of homeland (vatan)
was first used by Namik Kemal that deserved to the title of homeland’s poet due to his ability to artfully use
literature and poetry. In his play called “Homeland or Silistre” that was screened in 1873, Namik Kemal,
perhaps for the first time, draws a striking picture of homeland:
Homeland! Homeland! I said homeland is in danger. Don’t you hear? Allah created
me and homeland raised me. Allah is feeding me … Homeland filled my stomach. I
was naked and was dressed by homeland … My body is from homeland soil … My
breath is from homeland’s air. If I am not to die for the sake of homeland, why was
I born? (Kemal 1996: 8).
Believing that homeland’s under siege, Namik Kemal tried to establish a belief in saving the homeland
by identifying it with human breath, a feeder and a value to die for. After Namik Kemal, homeland continued to
be constructed by Turkish nationalists as under siege in order to promote a belief in saving and defending it. For
example, Turk Yurdu, a journal first published in 1911 as a forerunner of Turkish nationalism, keep similar
depictions. Many parallel stories, poems, and articles were published in this journal. A poem that describes
homeland as a cluster of feelings: In the poem, homeland is described by referring to various feelings and
actions such as seeing, sleeping, hearing and thinking. Individual is thought to be unified with its land both
symbolically and materially.
Somewhere else in the journal, land is conceptualized as a “symbolic land”, as a mother giving birth to
humans and is perceived as an entity that teach the individual humanity. Homeland is thought to be a source of
love, to involve belongingness to the birth place with an aspiration to maintain religion and race, to help to enter
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human community with a Turkish Muslim identity, and to provide sovereignty and future. Homeland is where
someone and his ancestors are buried. Homeland must be loved as a place where one obtains identity and where
nations obtain happiness. Homeland is beautiful and symbolizes loyalty to ancestors and the past and, therefore,
there is a sense of appreciation for the homeland (Tevfik 1912: 18-21).
Ziya Golalp, a sociologist of nationalism, provides one of the most interesting symbolizations of
homeland in the journal Turk Yurdu. For him homeland is a sacred country for which lives are sacrificed. While
other countries are not considered sacred, homeland is thought so. Those who consider homeland sacred can
sacrifice their families, lives and their most beloved ones. The value of homeland comes from its sacred
qualities rather than its material features (Gökalp 1914). Homeland is the place in whose mosque ezan is called
and in whose school the Qur’an is recited with one language and one religion, capital, science and knowledge,
shipyards, factories and trains belong to the Turkish nation (Gökalp 1976:1).
Mehmet Emin, one of the pioneers of Turkish nationalist activist-thinkers, was an important figure in
the symbolization of the homeland (vatan) concept. For him, homeland was the future place where one would
be free with his temple, school and everything, where no one would be persecuted, where there was no
oppressor or oppressed, the poor and the rich would be equal before justice, where everyone would have a land
and a farm living there happily and peacefully and where remote villages would come alive (Emin 1914). In this
respect, Mehmet Emin attempted to create a hopeful utopia about future in the face of despair due to disruptions
and fragmentations in the Ottoman society.
Homeland is named after the ‘pure soil where the Turks shed with their own blood and live’ (Sabir
1913). Therefore, the conception of the ‘pure and sacred’ soil is emphasized by many nationalist elite. For
example, Nihal Atsız found the prevalence of this approach in the journal Orhun, one of the most important
representatives of civil nationalism. In its most extreme form, Atsız (1934) said in the homeland ‘everything is
at war. Everyday is a holy war (gaza) against the nature, against the enemy, and even against God… This land
is a place of martyrs throughout’ . He named the enemies as “subversive communists”, “disgraceful Jews”,
“sneaky and hybrid traitors”. He even says that these enemies cannot dismantle the homeland, “let alone God
that established the world’s system” (p.1).
In the journal Ülkü, one of the most important source of official nationalist ideologies during the
Republican period, one can find many articles that emphasized the homeland’s sacred, metaphysical, emotional
features (Ülkü Mecmuası 1935). However, in real politics homeland is constructed in relation to Anatolia. In the
1930s the official textbooks of history and in the Turkish thesis of history, we notice a symbolic construction of
geography in a new way. In this construction the Central Asia is constructed as the motherland, Anatolia
represents the last phase of its continuum. In the case of Turkish humanity, the motherland first emerges in the
Central Asia and matures in Anatolia seen as a place the Turks adopted a homeland in their most civilized and
developed phase. Hittites and Sumerians were Turks as the most advanced structures of Anatolian geography.
With Hittites and Sumerians, Anatolia reached the highest level of civilization as a Turkish homeland (Tarih I
1931).
The conceptualization of Anatolia as a geography of a superior civilization aimed to disprove the
Western claims that the Turks are backward and, therefore, must be expelled from Anatolia. In this perspective
Anatolia becomes the Turkish homeland and represents an advanced civilization (Copeaux 1998: 15).
Accordingly, we can interpret Ataturk’s thesis transcribed by Afet Đnan that the earlier races that lived in
Anatolia were Turks in this line.
In 1918 Ziya Gökalp, a sociologist that advanced Turan symbol, tried to answers the question ‘where is
the homeland for the Turkish nation?’ as follows:
‘Homeland is neither Turkey nor Turkistan;
Homeland is a great and eternal land: Turan… ‘ (Gökalp 1950: 48).
For Gökalp, ‘Turan is an ideational land that includes its parts and excludes others. Turan is the sum of ‘the
countries where the Turks inhabit’ (Gökalp 1950: 48). The Great Turan represents a single land in the Turkish
spirit, a single ruler and a single language and reflects a general and comprehensive unity, excluding
individuality, lineage and tribal components (Gökalp 1989: 101).
Turan is where the Turks are buried and Turkish martyrs fell (Aktuğ 1913: 50-52). Turan is depicted as
a broad and great world where the knowledge of the era prevails and happiness and life are created (Ziya 1913:
197). In the years of decline when the Ottoman empire was under siege by the West it was said ‘Turan is crying
in the land of Islam’ (Gündüz 1913: 465).
According to Turkish nationalists the Turanis are the most ancient communities of Asia and they come
from the same race as the Turks. The picture of a double-headed eagle is a result of the experience of Turani
civilization. Just as today’s Europe, Byzantium, Rome and Russia attempted to destroy the Turanism in history.
Turks, Yakuts, Mongolians, Japanese and Korean people constitute the Turan that belong to the Ural-Altaic
race. Japan was founded by the Turanis that established the most powerful state. Mongolians, Seljukis,
Ottomans and the like are interpreted as the forces of Turanis that founded states. Asia, Far Asia, Central
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Anatolia and India are the geographies where several civilizations are founded by the Turanis (Marki Efendi
1912: 231-234).
The homeland symbolized as Turan covers the eastern geography of the world. This perception of
geography is a symbol of a ‘great east’ against the Western destruction and cultural pressure. Through this
symbol they try to substitute the real homeland that faced the danger of falling apart, invasion, shrinking and
extinction with a idea of imagined homeland. They try to provide the members of the nation with an idealist,
great, respected, valuable geographical meanings.
The Turan concept remained alive in the republican era’s nationalism and was advocated as a cultural
geography and a political construction. For example, in the Turkistan night organized in April 20, 1940 the
slogan was ‘The road from Anatolia to Caucasus goes to the Turan’. The representatives of Azerbaijan,
Turkistan, Anatolia, Caucasia, Idyl-Ural regions participated in the night (Bozkurt 1940: 78-79). The new
Turkish thesis of history and the Sun Language Theory also involved Turan in a cultural sense. We will focus
more on it in terms of the symbolization of history.
Symbolization of History: National Construction of Time
The symbolization of history reflects the spirit of the day since it is constructed selectively. The past is
symbolically remembered, creating simple historical labels to describe complex and ideological messages.
These views can be found especially in political rhetorics (Cohen 1999: 112,115). The expression of temporal
continuity through symbols means ‘the reconstruction of a cultural unity in the face of its disruption by the
forces of change’ (Cohen 1999: 118). Therefore, following the Ottoman decline, Turkish society experienced a
deep cultural and political crisis. In order to overcome the danger of “becoming meaningless”, Turkish nation
used historical symbolization to define its place in history or world.
In Turkey, the founders efficiently institutionalized a national history and their support for nationalist
narratives were well popularized and canonized by the new state apparatus (Canefe 2002). The nationalist
intellectuals advanced an image of a common nation with historical heroism and victories in community. For
them the Turks won all the victories for a great and honorable nation (Gökalp 1941: 13) and become a nation
through Mete, Bilge Han, Jangyz and Timurlenk’s raids that played a unifying role (Gökalp 1950: 44). As
Turks, Timurlenk made other people obey, to himself Bayazed distracted the enemy, the Sultan Selim rushed in
to Europe, Asia, Africa and found the world too small while making Istanbul a capital and bringing Caliphate to
Istanbul and defeating the United Europe in Mohach. The word ‘Turk’ became as dreadful and fascinating as
God. The Turk becomes the God’s elect in the world’ (Türkkan 1940: 1).
The Turks are claimed to be the first people that established a civilization. Cities like Samarkand,
Tashkent, Bukhara, Konya and Istanbul were the centers of this civilization. They thought that, as a result of
excavation the Central Asia as the motherland of the Turks was a home for the most ancient civilization and that
the first civilization started there as animals were domesticated and metals were shaped for the first time (Tarih
I 1931: 35). Similarly, many mines in the Altai Mountains are claimed to prove that the Turks were the first to
discover metals to extract copper, iron and gold from those mines (Tarih I 1931: 38). In the early historical era
when, in various regions of the world, people used to live in the holes of tree and rocks,
Poetry is a good example of the symbolization of Turkish history. The nationalist perspective of the
Republican era portrays the Turks’ historical role as the initiators related to discovering, and creating,
civilization and by using the symbolization potential of poetry. As can be seen in the poetry above, they, for
example, make distinctions between the Turks and other human societies with the words ‘us’ and ‘others’ as
well as between a ‘shepherd’ and a ‘herd’.
The theme that, with migrations, the Turks spread around the world and pioneered in developing
civilizations in other regions was an important example of historical symbolizations. This theme was first
advanced in the journal Turk Yurdu a main intellectual representative of Turkish nationalism. Here, the ‘Turani
race’ is said to have left their barren lands and steps, Atilla, Jangyz, Hulagu and Timurlank to spread from Spain
to China and from Yemen to India. It was claimed that they mixed with people when they went to Arabia and
Persia, they united with Germans and Russians when they arrived in Europe they became a shah in Iran, a sultan
in Yemen, a khan in China a king in Hungary. Therefore, the Turks revitalized the hearts and minds by
spreading around the world and this was due to a mission assigned by God (Hikmet 1912: 189-192). The same
perspective can be found in the journal Ülkü Mecmuası that was the most important documents of official
nationalism during the Republican era. In the journal the Turks are said to have gone to China, Japan, and the
Okan islands and then to Mexico, Peru and America, from above the Black Sea to Ural, Volga regions, then to
Thrace and Macedonia, to the Mansh Sea from there they went to France and named the Alps. Again, they
claim that the Turks founded a culture and civilization called Etrusks in Italy and that they influenced the native
peoples of America and Europe in growing animals (Muzaffer 1934: 249-254).
The Turkish Thesis of History claims that a major climate change in the Central Asia forced the Turks
to migrate from their homeland toward China, India, Africa, Levant and Europe. And, the Turks are said to
‘carry civil knowledge, high and noble morals, pure and simple faiths to these regions’ (Tarih I 1931: 28).
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According to this thesis, the Turks established a civilization wherever they went, for example keep in
Mesopotamia by drying out swamps and opening up water channels. When they reached Egypt, they settled in
the Nile delta and established the Egyptian civilization. The westward migrations found the Aegean basin as
suitable for settlement. Again, history shows that the brackicephal tribes founded Mediterranean civilizations in
the regions known with the names of Troy, Crete, Lidia and Ionia. The origin of the brackicephal tribes is the
Central Asia, the motherland of the Turks. This explains the similarities between the antique pieces in Crete and
Troy (Tarih I 1931: 30-31). Again, the Turks are said to have brought civilization to Europe in the shores of the
Caspian Sea and the Black Sea, reaching the Atlantic Ocean from Europe and invaded Britain and Ireland,
carrying the arts of the iron, age polished rocks, copper, rice. The Turks freed the natives peoples of Europe
from cave lifestyle by teaching them agriculture, farming, domesticating animals, pottery (Tarih I 1931: 33).
Conclusion
National identity plays an important role in the continuity of a state or a nation as it provides meaning
for the current state of affairs. In Turkey history is interpreted within a cultural perspective consistent with the
modern nationalist identity and it is ‘reinvented’ within a new set of meanings. These meanings aimed to refute
the charges of backwardness and they served to associate Turkish society with universal, developed and modern
Western civilization. The main theme in the attempts of symbolization of history, geography, culture and
language were that the Turkish society as a whole were a part of modern western civilization and that, as a great
nation, the Turks played an important role in history. It was claimed that the Turks founded the first civilization
and that they served as the forerunner of the Anatolian civilizations and they inspired the Greek civilization.
The main function of Turkish History Thesis was to create a meaning for that cause rather than being purely
scientific. This thesis claimed that the Turks were leading figures in the history of civilizations and contributed
to major civilizations of the world.
Probably due to their desire to distance themselves from the Islamic past represented by the Ottoman
Empire, the founders of the new-nation state focused on the pre-Islamic origins of Turkish culture and its
relations with the western civilization. For that purpose, the language was used as an important symbolic
mechanism in constructing the national identity. The Sun Language Theory claimed that all world languages
stemmed from Turkish language. Early nationalists criticized the Ottoman language for being under a heavy
influence of Arabic and Persian and emphasized the need for nationalize and purify the Turkish language,
thinking that a unified and purified language will help realize the national unity and integration.
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145
Title
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Symbolic Construction of Turkish National Identity as a Factor of International Management
Author
Author
İNAÇ, Hüsamettin
Abstract
A summary of the resource.
This presentation aims to explore the symbolic construction of Turkish nationalism during the early Republican period in order to trace the origins of the anti-global nationalism in today’s Turkey. It discusses the symbolic bases of Turkish nationalism by going back to early years of modern Republic. We identified three main components of Turkish nationalism in this period: history, geography, and language. They are symbolically constructed within a nationalist perspective. The founders of the Republic and the ideologists of Turkish nationalism hoped this to serve two purposes. One was to establish the bases of realizing the unity of Turkish nations. The other, perhaps the most important, purpose was to prove that the Turks were an advanced and civil nation during the course of history, and to respond the western pressures of disruption, defeat, invasion and exclusion (e.g. the western labels of barbarian Turks, backward Muslims). The main argument in this study is that the Turkish national identity tried to co-exist with, and to join, the modern western civilization by placing geography, history and language in a symbolic context and in accordance with the idea that it determines national interests as a part of a Business of Corporations and key factor of Managers within the international competitive environment. In this context, Turkish history was interpreted as the source of human civilization and the geographies of the Central Asia and Anatolia were the home of human civilization while the Turkish language was viewed as the origin of human languages. By doing so, they aimed to repel the claims of backwardness and barbarity and tried to introduce the national identity as an integral part of national culture having great impact on a process of negotiations
Date
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2009-06
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Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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https://eprints.ibu.edu.ba/files/original/527212c1cf261602672c6be89d312dcd.pdf
a2018946cbeb00a6c9a46b8b3054587c
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Investigating the Real but the Least Talked Reasons for the Global
Financial Crisis
Đsmail ÖZSOY
Prof. Dr., Fatih University, Department of Economics
E-mail: iozsoy@fatih.edu.tr
Birol GÖRMEZ
Research Asst., Fatih University, Department of Economics
E-mail: bgormez@fatih.edu.tr
Abstract: The Global Financial Crisis of September 2008 is triggered by a dramatic rise in
mortgage delinquencies and foreclosures in the United States. With its destructive
consequences for financial markets and institutions around the globe, it has exposed
pervasive weaknesses in the current global financial system. The US housing collapse is
often cited as having caused the crisis and the loose U.S. monetary policy is criticized for
making the cost of credit negligible, thus encouraging high levels of leverage and causing a
hypertrophy and bubbles in the financial sector. What is clear from the crisis is that the
current global financial system is vulnerable because of intricate and highly-leveraged
financial contracts and operations mainly based on derivatives and interest rates. Rating the
reasons for the crisis and dealing with the financialization process of the economy, this paper
argues that the main reason for the crisis is interest based transactions of derivatives; mostly
being a zero-sum game, thus not producing any economic value, rather than being a result of
win-win action. It then suggests that financial operations be based on real assets, producing
real values, not on illusory ones.
Key Words: Global Financial Crisis, US Mortgage Crisis, Mortgage Backed Securities
(MBS), interest rate, real assets, derivatives, financial bubble, financialization.
1. Introduction
The term financial crisis broadly refers to a variety of situations in which some financial institutions or
assets suddenly lose a large part of their value. Many financial crises were associated with banking panics, recessions,
stock market crashes, the bursting of other financial bubbles, currency crises, and sovereign defaults. The current
global financial crisis that began in July 2007 when a loss of confidence by investors in the value of securitized
mortgages in the United States resulted in a liquidity crisis that prompted a substantial injection of capital into
financial markets by the US Fed, Bank of England and the European Central Bank. In September 2008, the crisis
deepened, as stock markets worldwide crashed and entered a period of high volatility, and a considerable number of
banks, mortgage lenders and insurance companies failed in the following weeks. The crisis of real estate, banking and
credit in the United States had a global reach and affected a wide range of financial and economic activities and
institutions including the stock exchanges and derivative markets that experienced steep declines. Liquidity problems,
harder credit facilities, devaluated assets, increased public debt due to the provision of public funds to the financial
services industry and other affected industries, and the devaluated currencies have been the outstanding symptoms of
the crisis.1 Almost everybody agree on that the current crisis is the biggest in scale that the world has experienced
since then. Unlike at the time of the Great Depression, when governments were slow to take countermeasures, the
financial authorities of Japan, the United States, and Europe have been coordinating their response to provide
financial institutions with infusions of public funds. This seems to have worked for now, causing the situation to
become somewhat calmer. It is generally admitted that capitalism as a whole is speculative and inherently unstable.
John Maynard Keynes believed that the market economy was unstable and that it was necessary to use monetary and
fiscal policy to tame its instability (Katsuhito 2008).
The current financial system seems to be inherently plagued by persistent crises. According to one estimate,
there have been more than 100 crises over the last four decades (Stiglitz 2003). Not a single geographical area or
major country has been spared the effect of these crises. Even some of the countries that have generally followed
sound fiscal and monetary policies have become engulfed in these crises (Chapra 2008).
1
Wikipedia contributors, "Financial crisis of 2007–2009," Wikipedia, The Free Encyclopedia,
http://en.wikipedia.org/w/index.php?title=Financial_crisis_of_2007%E2%80%932009&oldid=289330105 (accessed May
12, 2009).
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Although US mortgage crisis is often cited as having caused the crisis, the financial system was vulnerable
because of intricate and highly-leveraged financial contracts and operations, a U.S. monetary policy making the cost
of credit negligible therefore encouraging such high levels of leverage, and generally a hypertrophy of the financial
sector. This paper first deals with the most touched reasons for the current crisis, taking the financialism, a new phase
of the capitalism, then discussing the role of interest rate policies in the inherently crisisful nature of capitalism.
Finally, it lists some suggestions with concluding remarks.
2. The Most Talked Causes of the Current Global Financial Crisis
As a matter of fact the present global financial did not take anybody by surprise. Few now doubt that the
housing bubble in US was bound to burst or that a general financial crisis and a global economic slowdown were to
be the unavoidable results. Warning signs were evident for years to all of those not taken in by the new financial
alchemy of high-risk debt management, and not blinded, as was much of the corporate world, by huge speculative
profits (Foster). Years ago, in August 2002, the analyst Dean Baker identified a housing bubble and wrote that from
1953 to 1995 house prices had simply tracked inflation, but that when house prices from 1995 onwards were adjusted
for inflation they showed a marked increase over and above inflation-based increases. Baker drew the conclusion that
a bubble in the US housing market existed and predicted an ensuing crisis (Baker). Baker's argument was confirmed
with the construction of a data series from 1895 to 1995 by the influential the economist Robert Shiller, which
showed that real house prices had been essentially unchanged over that 100 years (Shiller 2006). It later proved
impossible to convince responsible parties such as the Board of Governors of the Federal Reserve of the need for
action.
A common claim during the first weeks of the financial crisis was that the problem was simply caused by
reckless, sub-prime lending. However, the sub-prime mortgages were only part of a far more extensive problem
affecting the entire $20 trillion US housing market: the sub-prime sector was simply the first place that the collapse of
the bubble affecting the housing market showed up.
The ultimate point of origin of the great financial crisis of 2007-2009 can be traced back to an extremely
indebted US economy. The collapse of the real estate market in 2006 was the close point of origin of the crisis. The
failure rates of subprime mortgages were the first symptom of a credit boom tuned to bust and of a real estate shock.
But large default rates on subprime mortgages cannot account for the severity of the crisis. Rather, low-quality
mortgages acted as an accelerant to the fire that spread through the entire financial system. The latter had become
fragile as a result of several factors that are unique to this crisis: the transfer of assets from the balance sheets of banks
to the markets, the creation of complex and opaque (unclear) assets, the failure of ratings agencies to properly assess
the risk of such assets, and the application of fair value accounting. To these novel factors, one must add the now
standard failure of regulators and supervisors in spotting and correcting the emerging weaknesses (Fratianni and
Marchionne 2009).
Subprime lending is listed among the outstanding reasons. Subprime lending refers to financial institutions
lending in ways which do not meet prime standards to an extent which puts the loans into the riskiest category of
consumer loans typically sold in the secondary market. Proponents of subprime lending maintain that the practice
extends credit to people who would otherwise not have access to the credit market. Some, like American Enterprise
Institute fellow Peter J. Wallison, believe the roots of the crisis can be traced directly to sub-prime lending by Fannie
Mae and Freddie Mac, which are government sponsored entities. On 30 September 1999, The New York Times
reported that the Clinton Administration expanded mortgage loans among low and moderate income people.
Deregulation is cited as another reason for the crisis. In 1992, the US Congress weakened regulation of
government sponsored enterprises Fannie Mae and Freddie Mac with the goal of making available more money for
the issuance of home loans. More importantly, in 1999, the Congress passed the Gramm-Leach-Bliley Act, paving
way to the increase in the complex and opaque financial instruments which are at the heart of the crisis.
The housing bubble grew up alongside the stock bubble of the mid-1990s (Foster). People who had
increased their wealth substantially with the extraordinary run-up of stock prices were spending based on this
increased wealth. This led to the consumption boom of the late 1990s, with the savings rate out of disposable income
falling from five percent in the mid-90s to two percent by 2000. The stock-wealth induced consumption boom led
people to buy bigger and/or better homes, since they sought to spend some of their new stock wealth on housing.
The next phase of the housing bubble was the supply-side effect of the dramatic increase in house prices, as
housing starts rose substantially from the mid-1990s onwards. The collapse of the stock bubble helped to feed the US
housing bubble. After collectively losing faith in the stock market, millions of people turned to investments in
housing as a safe alternative. In addition, the 2001 recession led the Federal Reserve to continue to cut interest rates.
Fixed-rate mortgages and other interest rates hit 50-year lows. To further fuel the housing market, Federal Reserve
Board Chairman Alan Greenspan suggested that homebuyers were wasting money by buying fixed rate mortgages
instead of adjustable rate mortgages (ARMs). This was peculiar advice at a time when fixed rate mortgages were near
50-year lows, but even at the low rates of 2003 homebuyers could still afford larger mortgages with the adjustable
rates available at the time.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The bubble began to burst in 2007, as the building boom led to so much over-supply that prices could no
longer be supported. Prices nationwide began to head downward, with this process accelerating through the fall of
2007 and into 2008. As prices decline, more homeowners face foreclosure. In cases where a home is valued far lower
than the amount of the outstanding mortgage, homeowners may be able to simply walk away from their mortgage.
Another cause of the crisis was miscalculation of the level of risk inherent in the unregulated collateralized
debt obligation and Credit Default Swap markets. Under this theory, banks and investors systematized the risk by
taking advantage of low interest rates to borrow tremendous sums of money that they could only pay back if the
housing market continued to increase in value.
The risk was further systematized by the use of false pricing model, Gaussian copula model, which will go
down in history as instrumental in causing the unfathomable losses that brought the world financial system to its
knees.
Different from the mainstream explanation, another analysis is that the financial crisis is merely a symptom
of another, deeper crisis, which is a systemic crisis of capitalism itself. According to Samir Amin, an Egyptian
economist, the constant decrease in GDP growth rates in Western countries since the early 1970s created a growing
surplus of capital which did not have sufficient profitable investment outlets in the real economy. The alternative was
to place this surplus into the financial market, which became more profitable than productive capital investment,
especially with subsequent deregulation (Samir 1996). According to Samir Amin, this phenomenon has lead to
recurrent financial bubbles.
3. A Less Talked Cause: Financialization of the Economy
Foster argues that this crisis is not just another massive credit crunch but signals a new phase in the
development of the capitalistic system, which is labeled ‘monopoly-finance capital’. The bursting of two major
financial bubbles in seven years points to a crisis of financialization, a progressive shift from production to finance
that has characterized the economy over the last four decades (Foster). Paul Sweezy called it “the financialization of
the capital accumulation process” just over a decade ago. It has been the main force lifting economic growth since the
1970s (Sweezy 1997).
The financial system is supposed to serve a range of functions in the broader economy. Banks and other
financial institutions mop up savings, and then allocate that capital, according to mainstream theory, to where it can
most productively be used. For households and corporations, the credit markets facilitate greatly increased borrowing,
which should foster investment in capital goods like buildings and machinery, in turn leading to expanded production.
Finance, in other words, is supposed to facilitate the growth of the “real” economy—the part that produces useful
goods (like bicycles) and services (like medical care). In recent decades, finance has undergone massive changes in
both size and shape (Vasudevan 2008).
Financialization is a process whereby financial markets, financial institutions and financial elites gain greater
influence over economic policy and economic outcomes. Financialization transforms the functioning of economic
system at both the macro and micro levels. Its principal impacts are to (1) elevate the significance of the financial
sector relative to the real sector; (2) transfer income from the real sector to the financial sector; and (3) increase
income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization
may render the economy prone to risk of debt-deflation and prolonged recession (Palley 2007). The transformation in
the system is reflected in the rapid growth since the 1970s of financial profits as a percent of total profits (see chart 1).
The fact that such financialization of capital appears to be taking the form of bigger and bigger bubbles that burst
more frequently and with more devastating effect, threatening each time a deepening of stagnation -i.e., the condition,
endemic to mature capitalism, of slow growth, and rising excess capacity and unemployment/underemployment, is
thus a development of major significance.
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Chart 1. Financial profits as a percent of total profits (five-year moving average)
Source: Table B-91. Corporate Profits by Industry, 1959–2007, Economic Report of the President, 2008.
The term financialization is sometimes used in discussions of financial capitalism1 which developed over
several decades leading up to the 2007-2009 financial crisis, and in which financial leverage tended to override capital
(equity) and financial markets tended to dominate over the traditional industrial economy.
Greta Krippner defines financialization as a “pattern of accumulation in which profit making occurs
increasingly through financial channels rather than through trade and commodity production.” Another definition by
Dore is: “the increasing dominance of the finance industry in the sum total of economic activity, of financial
controllers in the management of corporations, of financial assets among total assets, of marketised securities and
particularly equities among financial assets, of the stock market as a market for corporate control in determining
corporate strategies, and of fluctuations in the stock market as a determinant of business cycles” (Dore 2000)).
The basic mechanism of financialization is the transformation of future streams of income (from profits,
dividends, or interest payments) into a tradable asset like a stock or a bond. For example, the future earnings of
corporations are transmuted into equity stocks that are bought and sold in the capital market. Likewise, a loan, which
involves certain fixed interest payments over its duration, gets a new life when it is converted into marketable bonds.
And multiple loans, bundled together then “sliced and diced” into novel kinds of bonds (“collateralized debt
obligations”), take on a new existence as investment vehicles that bear an extremely complex and opaque relationship
to the original loans (Vasudevan 2008).
In his 2006 book, American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed
Money in the 21st Century, An American writer Kevin Phillips presents financialization as a process whereby
financial services take over the dominant economic, cultural, and political role in a national economy.” (p. 268).
Philips considers that the financialization of the U.S. economy follows the same pattern that marked the beginning of
the decline of the American economy as Habsburg Spain in the 16th century, the Dutch trading empire in the 18th
century, and the British Empire in the 19th century.
Graph 1: Share in GDP of US financial sector since 1860.
Source: "Financialization." Wikipedia, The Free Encyclopedia. 2 May 2009, 00:32 UTC. 21 May 2009
<http://en.wikipedia.org/w/index.php?title=Financialization&oldid=287358015>.
The roots of financialization is traced to the rise of Neoliberalism and the free-market doctrines of Milton
Friedman and the Chicago School of Economics, of which the politico-economic philosophy has been summarized as
one in which “markets, private property and minimal government will achieve maximum welfare.” One of the most
important impetuses to the rise of financialization was the end of the post-World War Two Bretton Woods system of
fixed international exchange rates and the dollar peg to gold in August 1971. The demise of fixed exchange rates
initiated a rapid rise in the level of foreign exchange trading (forex), leaping in the United States from $110.8 billion
in 1970, 10.7 percent of U.S. GDP, to $5.449 trillion in 1980, 195.3 percent of U.S. GDP, meaning a 5 times increase.
An April 1977 study found there was $4.8 billion in daily forex trading, or around $1.2 trillion a year. However, this
study did not include all the trading in futures trading for various currencies. Currency futures were first created at the
Chicago Mercantile Exchange (CME) in 1972, the year after fixed exchange rates were abandoned.
1
Financial capital refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment
for producing goods/services. Real capital comprises physical goods that assist in the production of other goods and
services, eg. shovels for gravediggers, sewing machines for tailors, or machinery and tooling for factories. (Financial capital.
(2009, May 19). In Wikipedia, The Free Encyclopedia. Retrieved 09:28, May 19, 2009, from
http://en.wikipedia.org/w/index.php?title=Financial_capital&oldid=290884469)
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Other financial markets exhibited similarly explosive growth. While the volume of trade in US equity (stock)
markets was 13.1 percent of US GDP in 1970, it rose to 28.8 percent of U.S. GDP in 1990, and 144.9 percent of
GDP.
Thus, derivatives trading -mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc
had reached a level of $1,200 trillion, $1.2 quadrillion, a year. By comparison, U.S. GDP in 2006 was $12.456
trillion.
Table 1 provides data for the annual amount of financial trading in U.S. financial markets, compared to
GDP.
Table 1: Dollar value of trading in U.S. financial markets compared to GDP (Annual, in billions of dollars. Italics indicate
estimates)
1956
1960
1963
1966
1970
1980
1990
2000
2001
Equity Markets Trading
36
47
61
128
135
522
1,671
14,22
U.S. government securities trading
276
473
722
1,091
1,391
4,840 26,688
67,05
Futures Trading
150
165
203
250
330
5,584 152,717 343,13
Foreign Exchange Trading
41
47
55
74
111
5,449 36,000
60,960
Corporate Debt Trading
19
35
56
90
na
821
3,972
3,96
State and Municipal Bonds
12
23
37
60
112
542
2,622
2,11
Options trading, on exchange
na
na
na
na
na
46
81
330
Mortgage Derivatives
na
na
na
na
na
na
3,697
16,68
OTC swaps, forwards, options
na
na
na
na
na
TOTAL FINANCIAL TURNOVER
534
795
1,134
1,692
2,749 17,804 227,448 508,45
U.S. Gross Domestic Product
425
526
603
770
1,039
2,790
5,803
9,817
Turnover divided by GDP
1.256
1.511
1.331
2.198
2.647
6.383 39.194
51.79
GDP as % of financial turnover
79.6
66.2
53.2
45.5
37.8
15.7
2.6
1.9
Source: http://en.wikipedia.org/wiki/Financialization, May 19 2009
A dramatic shift is observed in types of futures contracts traded from 1970 to 2004. For a century after
organized futures exchanges were founded in the mid-1800s, all futures trading was solely based on agricultural
commodities. But after the end of dollar gold-backed fixed-exchange rate system in 1971, contracts based on foreign
currencies began to be traded. After the deregulation of interest rates by the Bank of England, then the U.S. Federal
Reserve, in the late 1970s, futures contracts based on various bonds / interest rates began to be traded. The result was
that financial futures contracts - based on such things as interest rates, currencies, or equity indices - came to
dominate the futures markets.
The average value for interest rate contracts is around ten times that of agricultural and other commodities,
while the average value of currency contracts is twice that of agricultural and other commodities.
As a result of the process of financialization, Financial services have become a key industry in developed
economies in which it represents a sizeable share of the GDP and an important source of employment. Those
activities also played a key facilitator role to foster economic globalization. ... “The Reagan-Thatcher model, which
favored finance over domestic manufacturing, has collapsed” (Meyerson 2009).
Emerging countries try also to develop their financial sector, as an engine of economic development. A typical
aspect is the growth of microfinance / microcredit. Microfinance refers to the provision of financial services to lowincome clients, including consumers and the self-employed (Joanna 2000). Microcredit is a part of microfinance, which
is the provision of a wider range of financial services to the very poor.
Microcredit is a financial innovation that is generally considered to have originated with the Grameen Bank
in Bangladesh (Cons and Paprocki 2008). In that country, it has successfully enabled extremely impoverished people
to engage in self-employment projects that allow them to generate an income and, in many cases, begin to build
wealth and exit poverty. Due to the success of microcredit, it is increasingly gaining credibility in the mainstream
finance industry, and many traditional large finance organizations are contemplating microcredit projects as a source
of future growth, even though almost everyone in larger development organizations discounted the likelihood of
success of microcredit when it was begun. The United Nations declared 2005 the International Year of Microcredit.1
This recognized success brought also some negative reactions. In the Introduction to the 2006 book
Financialization and the World Economy, editor Gerald A. Epstein writes:
“… in the mid- to late 1970s or early 1980s, structural shifts of dramatic proportions took place in a number
of countries that led to significant increases in financial transactions, real interest rates, the profitability of financial
firms, and the shares of national income accruing to the holders of financial assets. This set of phenomena reflects the
1
Microcredit. (2009, May 7). In Wikipedia, The Free Encyclopedia. Retrieved 12:14, May 19, 2009, from
http://en.wikipedia.org/w/index.php?title=Microcredit&oldid=288530976
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processes of financialization in the world economy… Finance benefits handsomely from the same processes that
create economic crises and injure so many others. Hence the costs of financial crises are paid by the bulk of the
population, while large benefits accrue to finance. …Using the case of the US economy, Crotty argues that
financialization has had a profound and largely negative impact on the operations of US nonfinancial corporations.
This is partly reflected in the increasing incomes extracted by financial markets from these corporations; trends
identified also by Duménil and Lévy and Epstein and Jayadev. For example, Crotty shows that the payments US
NFCs paid out to financial markets more than doubled as a share of their cash flow between the 1960s and the 1970s,
on one hand, and the 1980s and 1990s on the other... Financial markets’ demands for more income and more rapidly
growing stock prices occurred at the same time as stagnant economic growth and increased product market
competition made it increasingly difficult to earn profits. Crotty calls this the ‘neoliberal’ paradox. Non-financial
corporations responded to this pressure in three ways, none of them healthy for the average citizen: 1) they cut wages
and benefits to workers; 2) they engaged in fraud and deception to increase apparent profits and 3) they moved into
financial operations to increase profits. Hence, Crotty argues that financialization in conjunction with neoliberalism
and globalization has had a significantly negative impact on the prospects for economic prosperity (Epstein). One of
the most notable features of financialization has been the development of over-leverage (more borrowed capital and
less own capital) and, as a related tool, financial derivatives. Financial derivatives are the financial instruments, the
price or value of which is derived from the price or value of another, underlying financial instrument. Those
instruments, which initial purpose was hedging and risk management, have become widely traded financial assets in
their own. The most common types of derivatives are futures contracts, swaps, and options. In the past few years, the
number and types of financial derivatives have grown enormously.1
A major unknown regarding derivatives is the actual amount of cash behind a transaction. A derivatives
contract with a notional value of millions of dollars may actually only cost a few thousand dollars. For example, an
interest rate swap might be based on exchanging the interest payments on $100 million in U.S. Treasury bonds at a
fixed interest of 4.5 percent, for the floating interest rate of $100 million in credit card receivables. This contract
would involve at least $4.5 million in interest payments, though the notional value may be reported as $100 million.
However, the actual “cost” of the swap contract would be some small fraction of the minimal $4.5 million in interest
payments. The difficulty of determining exactly how much this swap contract is worth when accounted for on a
financial institution’s books, is typical of the worries many experts and regulators have over the explosive growth of
these types of instruments.
The root causes of the US financial crisis are now well known, but excessive leverage and derivative trade
featured prominently as one of the explanations. As the Figure 1 shows, global per capita derivative in 2008
outstripped global per capita GDP by a factor of 10, as opposed to a factor of less than 2 a decade ago. This trend
highlights not only the rapidity with which derivative trade grew over the years but also the dangers of undertaking
such colossal transactions without adequate underlying assets to back them.2
1998
2000
2001
2004
2007
2008
■ Global Per Capita GDP ■ Global Per Capita 'Derivative'
Figure 1: World Per Capita Derivative and Per Capita GDP 1000
Source: BIS, IMF, World Bank
1
In November 2007, commenting on the financial crisis sparked by the sub-prime mortgage collapse in the United States,
writes that according to the Bank of International Settlements, the OTC market for Credit default swaps (CDS) jumped from
$4.7 trillion (TN) at the end of 2004 to $22.6 TN to end 2006. From the International Swaps and Derivatives Association we
know that the total notional volume of credit derivatives jumped about 30% during the first half to $45.5 TN. And from the
Comptroller of the Currency, total U.S. commercial bank Credit derivative positions ballooned from $492bn to begin 2003
to $11.8 TN as of this past June. (Doug Noland “Credit Bubble Bulletin: Road to Ruin”, Asia Times Online, Nov. 6, 2007,
available at http://www.atimes.com/atimes/Global_Economy/IK06Dj01.html)
2
Gulf One Investment Bank Research Bulletin, Vol.. 2, No.1, January 2009.
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4. The Least Talked Cause: Interest Rate Policies
Economists of the Austrian School have proposed that the crisis is an excellent example of the Austrian
Business Cycle Theory, in which credit created through the policies of central banking gives rise to an artificial boom,
which is inevitably followed by a bust. Proponents of this theory have predicted the current financial crises, and argue
that central banks should not be involved in debt markets.
The history of the yield curve from 2000 through 2007 illustrates the role that credit creation through interest
rate policies by the Federal Reserve may have played in the on-set of the financial crisis in 2007 and 2008. Treasury
yield is one tool of monetary policy.
The yield curve (also known as the term structure of interest rates) is the shape formed by a graph showing
US Treasury Bill or Bond interest rates on the vertical axis and time to maturity on the horizontal axis (Figure 2).
When short-term interest rates are lower than long-term interest rates the yield curve is said to be “positively sloped”.
This in turn encourages an expansion in money supply and in turn favours debt induced bubbles. When long-term
interest rates are lower than short-term interest rates the yield curve is said to be “inverted”. This favours a
contraction in money supply. When long term and short term interest rates are equal the yield curve is said to be
“flat”. The yield curve is believed by some to be a strong predictor of recession (when inverted) and inflation (when
positively sloped).
Figure 2: Yield Curve
Source: Wikipedia contributors, "Yield curve," Wikipedia, The Free Encyclopedia,
http://en.wikipedia.org/w/index.php?title=Yield_curve&oldid=289286091 (accessed May 14, 2009).
A positively sloped yield curve allows primary dealers (such as large investment banks) in the Federal
Reserve System to fund themselves with cheap short term money while lending out at higher long-term interest rates.
This strategy is profitable so long as the yield curve remains positively sloped. However, it creates a liquidity risk if
the yield curve were to become inverted and banks would have to refund themselves at expensive short term interest
rates while losing money on longer term loans.
Following the bursting of the Dot-com bubble in 2000 and the Stock market downturn of 2002 the US
Federal Reserve reacted by sharply lowering short-term interest rates. The Fed lowered the Fed Funds target rate
beginning in January 2001 at 6.5% to a nadir of 1% in June 2003. The Fed also held rates at this low level for an
unusually long period of time (1yr) until June 2004. This prolonged period of stimulative Fed monetary policy created
a very positively sloped yield curve. The yield on the 3-month T-bill reached its lowest point (0.88%) for the cycle in
the late fall of 2003 while at the same time 30-year T-bond rates were in excess of 5%.
In June 2004 the Fed began to slowly increase Fed Funds rates and the yield curve slowly narrowed. Fed
Chairman Alan Greenspan notably described this narrowing of spreads between short term and long term rates as a
“conundrum” during testimony in February 2005. The chairman expected long term rates to rise in line with short
term rates. However, the tightening of monetary policy caused by rising short term rates was slowing the economy
and reducing demand for long-term borrowing.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
The Fed raised Fed Funds target rates to a peak of 5.25% in June 2006. By October 2006 the yield curve on
90-day T-bills vs 30-year T-bonds was essentially flat indicating neutral monetary policy (neither stimulative nor
contractionary). While the Fed maintained Fed Funds rates at this high level, long term rates began to fall causing the
yield curve to become more and more inverted. The yield curve was most strongly inverted in March 2007 when
concern about current inflation was reaching its peak.
The narrowing of the yield curve from 2004 and the inversion of the yield curve during 2007 indicated a
bursting of the housing bubble and a wild gyration of commodities prices as moneys flowed out of assets like housing
or stocks. A commodity bubble was created following the collapse in the housing bubble. The price of oil rose to over
$140 dollars per barrel in 2008 before plunging as the financial crisis began to take hold in late 2008. A similar
bubble in oil prices has preceded other historical economic contractions.
5. Vatican Offering Islamic Finance System to Western Banks
It should not take anybody by surprise that the Vatican offered Islamic finance principles to Western banks
as alternative to capitalism to solve the worldwide economic crisis, with Daily Vatican newspaper, 'L'Osservatore
Romano, reporting that Islamic banking system may help to overcome global crisis. Having resisted the interest for
1500 years in its 2000 years’ history, the Vatican suggested that the banks look at the ethical rules of Islamic finance
to restore confidence amongst their clients at a time of global economic crisis. The newspaper drew attention of the
banks to the ethical principles on which Islamic finance is based in order to bring them closer to their clients and to
the true spirit which should mark every financial service. Author Loretta Napoleoni and Abaxbank Spa fixed income
strategist, Claudia Segre, said in the article that Western banks could use tools such as the Islamic bonds, known as
sukuk, as collateral. To them, sukuk may be used to fund the car industry or the next Olympic Games in London.
They also said that profit share, gained from sukuk, may be an alternative to the interest. They underlined that sukuk
system could help automotive sector and support investments in infrastructure area. Islamic sukuk system is similar to
bonds of capitalist system. But in sukuk, money is invested in concrete projects and profit share is distributed to
clients instead of interest earned. Pope Benedict XVI in an Oct 7 speech reflected on crashing financial markets
saying that “Money vanishes, it is nothing” and concluded that “the only solid reality is the word of God.” The
Vatican has been paying attention to the global financial meltdown and ran articles in its official newspaper that
criticize the free-market model for having “grown too much and badly in the past two decades.” The Osservatore's
editor, Giovanni Maria Vian, said that “the great religions have always had a common attention to the human
dimension of the economy,” Corriere della Sera reported today.1
Although the term ‘interest’ is the most condemned notion throughout history, it has been the factor that
most affected the individual and social life of the humankind. Yet, it has been the foundation stone of capitalist liberal
economy. The current financial crisis is the result of the bursting of financial bubbles that grew in the recent decades,
and the most effective factor that has generated the bubbles is the interest, which is the backbone of modern finance.
Interest bearing negotiable instruments and securities change hands without any limit. Trillion dollars’ bonds’ markets
fluctuate upon any interest rate change and some earn billions of dollars in a few hours while others lose. One point
hike in the interest rates pulls upward the debt stocks of a state, while an opposite move causes losses to the creditor.
Interest has become the indispensable element of the modern economies, penetrating into their cells. Even the
financial transactions seemingly irrelevant to interest are somehow hand in hand with it. For example, in futures
contracts, what determines the spread, the difference, between spot and future prices is nothing other the interest. In
short, interest makes the financial world for some a door to happiness and for some a door to misfortune. Why to be
astonished by such a system producing crises? (Uslu 2008).
6. Conclusion
Though it is inherently the primary reason for business cycles, interest rates have not been criticized by the
mainstream economics since it is taken for granted in spite of the fact that it is a problematic policy tool. But the truth
is clear that the global financial system is quite volatile due to its being dependent on the mostly questionable interest
rates. Since it is impossible for mankind to foresee the future, any interest rate which is determined according to the
current supply and demand conditions should not be expected to be valid on the coming days ahead since these days
will have their own supply and demand conditions that determine another interest rate, which may be highly different
than the already fixed one, thus arising a deviation between the two. This deviation is one of the reasons for financial
1
“Vatican offers Islamic finance system to Western Banks”, March 6, 2009, available at
http://www.worldbulletin.net/news_detail.php?id=37814, May 20, 2009; “Vatican Paper Supports Islamic Finance. France
Wants Its Share of Sharia Banking”, available at http://www.brusselsjournal.com/node/3819, May 20, 2009; “Vatican backs
Islamic
finance”,
available
at
http://www.newhorizonislamicbanking.com/index.cfm?section=news&action=view&id=10751, May 20, 2009.
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
bubbles and imbalances. We should remember that the equivalent of the term interest in Islamic literature is ‘riba’
which means ‘growth’ and ‘bubble’. Since all the financial transactions as well as futures trading and currency futures
are carried out on the basis of interest rates, all these transactions cause some deviation thus a bubble growing by the
time. Giving an ear to the voice of the Vatican calling to the Islamic finance and ethics, we had better have a look at
this option in order to have a solid and sound financial system. By the way, Islamic finance helps raise substantially
the share of equity in businesses and of profit-and-loss sharing in projects and ventures through the mudarabah and
musharakah modes of financing. Greater reliance on equity does not necessarily mean that debt financing is ruled out.
Yet Islamic finance rather requires the creation of debt through the sale or lease of real assets through its sales- and
lease-based modes of financing (murabahah, ijarah, salam, istisna and sukuk). The purpose is to enable an individual
or firm to buy now the urgently needed real goods and services in conformity with his ability to make the payment
later. Islam has, however, laid down certain conditions that would help prevent excessive expansion of debt. Some of
these are: 1) The asset which is being sold or leased must be real, and not imaginary or notional; 2) The seller must
own and possess the goods being sold or leased; 3) The transaction must be a genuine trade transaction with full
intention of giving and taking delivery; and 4) The debt cannot be sold and thus the risk associate with it cannot be
transferred to someone else. It must be borne by the creditor himself (Chapra 2008). These basic principles no doubt
need detailed explanation, not possible for the time being due to lack of space, since it has already exceeded its limits.
References
Amin, Samir. (1996). “Economic, Social and Political
http://www.ismea.org/INESDEV/AMIN.eng.html, May 20, 2009.
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Is
the
It
Modern
Another
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available
at
Bubble?”,
available
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Chapra, M. Umer.(2008). The Global Financial Crisis: Can Islamic Finance Help Minimize the Severity and Frequency Of Such A
Crisis in the Future? A paper prepared for presentation at the Forum on the Global Financial Crisis to be held at the Islamic
Development Bank on 25 October 2008, avalable at http://www.isdbforum.org/presentationPapers/5-M_Umer_Chapra.pdf, 20 May,
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Cons, Jason and Paprocki, Kasia. (2008). "The Limits of Microcredit—A Bangladeshi Case", Food First Backgrounder (Institute for
Food and Development Policy), Winter 2008, volume 14, number 4.
Dore, R. (2000). Stock Market Capitalism: Welfare Capitalism: Japan and Germany vs. the Anglo-Saxons. Oxford: Oxford University
Press. ISBN 0-19-924061-2.
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pdf/programs/globalization/financialization/chapter1.pdf, May 19, 2009.
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�
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137
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Investigating the Real but the Least Talked Reasons for the Global Financial Crisis
Author
Author
ÖZSOY, İsmail
GÖRMEZ, Birol
Abstract
A summary of the resource.
The Global Financial Crisis of September 2008 is triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States. With its destructive consequences for financial markets and institutions around the globe, it has exposed pervasive weaknesses in the current global financial system. The US housing collapse is often cited as having caused the crisis and the loose U.S. monetary policy is criticized for making the cost of credit negligible, thus encouraging high levels of leverage and causing a hypertrophy and bubbles in the financial sector. What is clear from the crisis is that the current global financial system is vulnerable because of intricate and highly-leveraged financial contracts and operations mainly based on derivatives and interest rates. Rating the reasons for the crisis and dealing with the financialization process of the economy, this paper argues that the main reason for the crisis is interest based transactions of derivatives; mostly being a zero-sum game, thus not producing any economic value, rather than being a result of win-win action. It then suggests that financial operations be based on real assets, producing real values, not on illusory ones.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
-
https://eprints.ibu.edu.ba/files/original/a7c0f941174ac3516a6bd63513705177.pdf
8d9519afa034977c417019bf7b10cf50
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
An Empirical Analysis of Turkish Financial Crises in the Early 2000’s.
Đsmail ÖZSOY
Prof. Dr., Fatih University, Dept.of Economics, Turkey
iozsoy@fatih.edu.tr, ismailozsoy@yahoo.com
Birol GÖRMEZ
Research Asst., Fatih University, Dept.of Economics, Turkey
bgormez@fatih.edu.tr, bgormez@hotmail.com
Abstract: The financing scheme has a crucial function in an economy since it enables fundowners to transfer their funds to those in need. Unless the financing scheme operates
effectively, economic growth is hampered severely due to the inadequacy or immobility of
capital. The world finance history has experienced many financial crises, the case of
malfunction of the financing scheme, repeatedly so far. Many theories and models have been
developed to give an insight into the reasons and dissemination mechanisms of, and
precautions against the financial crises. This paper is intended to find out the explanatory
variables of the Turkish financial crises that took place in November 2000 and February 2001
with the help of the method of Artificial Neural Network (ANN) and within the framework of
the models of financial crises. To this effect, the models of financial crises are briefly dealt
with; the Turkish financial crises in the early 2000’s are analyzed subsequently by making use
of ANN.
Key Words: Turkish Financial Crisis, Financial Crisis Models, Artificial Neural Network
Introduction
Nearly all people would like to have an uninterrupted prosperous life. This demand can only be met as
long as some specific conditions are established. For instance, the efficient utilization of the existing scarce
resources in the production of goods and services and the fair and uninterrupted distribution of the produced
goods and services are two of the specific conditions that have to be established so as to ensure high and
sustainable personal welfare. However, it is impossible to state that these conditions can be met any time since
sometimes there may be such ups and downs in the economic activities as crisis, which may have drastic
economic, social and political effects.
Due to its devastating effects, foreseeing financial crises, a type of economic crisis, and taking
measures to minimize the length and impacts of them are of crucial importance. Many financial crises models
have been developed to guide the institutions that try to achieve these goals. Theoreticians have made different
comments on the reasons and eruption processes of the crises, thus, they have suggested different solutions to
this problem.
The aim of the this paper is to find out the explanatory variables of the financial crises that took place
in the early 2000’s in Turkey. To this end; after a short explanation about financial crisis, financial crisis models
are explained very briefly, then the financial crises in question are examined empirically by making use of the
method of Artificial Neural Network.
Financial Crisis
Theoreticians define financial crisis from their own perspective in different ways. To one of the
definitions, financial crisis is the nonlinear disruption in which asymmetric information problems of adverse
selection and moral hazard become much worse, so that financial markets are unable to channel funds to those
with the most productive investment opportunities. (Mishkin 2003) However, in its broadest meaning, financial
crises are the big problems suddenly arising in money, foreign debt and banking areas of the financial sector. In
the light of this definition, it is possible to classify financial crises into groups of “banking crisis”, “monetary
crisis” and “foreign debt crisis.” (Bastı 2006) The definitions of the concerned types of financial crises are as
follows:
“A banking crisis refers to a situation in which actual or potential bank runs or failures induce banks to
suspend the internal convertibility of their liabilities or which compels the government to intervene to prevent
this by extending assistance on a large scale.” (IMF 1998)
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A monetary crisis or a currency crisis erupts if the attacks on the national currency of a country end up
with devaluation or a sharp depreciation or if the Central Bank is forced to protect the value of the currency by
selling huge amount of reserves or increasing interest rates sharply. (Delice 2003)
Foreign debt crisis is the declaration by a country of the fact that it can not pay “capital+interest” of
the public or private foreign debt (that it can not pay debt service) due to the foreign payment problems it
encounters. (Seyidoğlu 2001)
Financial Crisis Models
Some models and theories have been developed to explain the nature of financial crises. The
classification of financial crisis models as First Generation Financial Crisis Models and Second Generation
Financial Crisis Models has been widely accepted. Some models have also been introduced into the literature,
which aim at explaining the financial crisis named as “Asian Financial Crisis”, which erupted on 2 July 1997
with the devaluation of Thailand’s national currency. These last group models are called Third Generation
Financial Crisis Models or the Models Explaining Asian Crisis.
First Generation Financial Crisis Models are named as Traditional Crisis Models, Canonical Crisis
Models or Speculative Attack Models as well. Main starting point of these models is the fact that foreign
currency can exhaust and its supply can not be increased easily. The first financial crisis modeling developed by
Paul Krugman in 1979 has been considerably improved, and today it is named as “First Generation Financial
Crisis Models”.
According to the first generation models, main reasons behind monetary crises are macroeconomic
structural imbalances and unsustainable policies. High and increasing budget deficits, high inflation, high
domestic interest rates, high rates of money supply increase, huge current deficits, extremely valuable exchange
rate and decreases in international reserves can be given as examples of macroeconomic structural imbalances.
(Kuran 2006) Issuing money to finance budget deficits in a country where fixed exchange rate system is
implemented can be given as an example for unsustainable and unstable policy. According to these models;
covering of financial deficits while implementing a fixed exchange rate policy or increasing money supply
drastically to balance a weak banking system causes financial crises. In other words, incompliance of economy
policies -which are divided into two groups of monetary and fiscal policy- with foreign currency target results
in financial crises.1
According to first generation models, financial crises erupt as follows: Assume that fixed exchange
rate policy is implemented in an economy; that the budget of the economy has a deficit and; that the units
implementing macroeconomic policies prefer issuing money to finance the budget deficit and the only tool they
have to fix the deficit is to intervene in the foreign exchange market. In such case, interest rates fall on one hand
and inflation rises on the other hand due to increase in money supply. The fall in interest rates and the rise in
inflation cause reduction of economic reserves and, thus, result in crisis. First of all, foreign investors demand
foreign currency (as the interest rates fall) and then export foreign currency. In addition, shadow price2 of the
foreign currency exceeds the official foreign exchange rate due to increasing foreign currency demand.
Secondly, national currency is valued due to fixed exchange rate policy. This has a decreasing effect on export
and increasing effect on import. The rise of inflation has negative impacts on export as well. As a result, foreign
trade deficit gradually increases. The increase in the foreign trade deficit means a reduction in economic
reserves. Moreover, these two developments bring along another development that reduces reserves more: In an
economy where foreign trade deficit increases (i.e., where balance of payment is deteriorating), speculators
foresee that fixed exchange rate policy will be abandoned and, thus, foreign currency rate will increase.
Therefore, speculators who want to maximize their profits sell their reserves in national currency and buy
foreign currency. Together with the above-mentioned factors, this situation plays a role in the depletion of the
reserves as well. Speculative Attack plays an important role in the first generation models. The most important
characteristic of Speculative Attack is that investors decrease the relative share of the national currency and
increase the share of the foreign currencies and foreign assets in their portfolios. Central Bank, which tries to
maintain fixed exchange rate, puts its foreign currency reserves on the foreign currency market. Central Bank,
the reserves of which decreases to a critical level, has to abandon fixed exchange rate regime. As a consequence
of this process, a financial crisis (monetary crisis) erupts. To summarize according to Krugman’s approach;
variables such as financial and monetary expansion result in reserve losses when there is no parity to prevent
loss of foreign currency reserves. This situation creates an increasing pressure on the foreign exchange rate.
(Kaminsky, et al 1998)
1
For more detailed information: See; Krugman, Paul (1979), “A Model of Balance of Payment Crises”, Journal of Money,
Credit, Banking” pp: 311-325
2
Shadow price is the price determined by the supply-demand status of any good when the price is not fixed by the authorized
institutions. Shadow price of any foreign currency is the price that is determined when the exchange rate is not fixed.
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Second Generation Financial Crisis Models suggest financial crises can erupt even when there is no
deterioration in the economic indicators. These models explain how speculative attacks targeting national
currency can result in crises even when the monetary and fiscal policies are consistent. (Özer 1999)
Second generation models emphasize that when there are inconsistencies between fixed exchange rate
and some important economic figures, politicians may prefer to float the exchange rate and not respond to the
speculative attacks even when there is sufficient amount of foreign currency reserve. (Bilgin, et al 2002) To the
second generation models pioneered by Maurice Obtsfel, governments have grounds both to continue and to
abandon the fixed exchange rate policy. Governments make benefit-costs analysis when deciding on whether to
continue or abandon the fixed exchange rate policy. The benefit of the fixed exchange rate system is that it
decreases the inflation pressure and creates an economic environment that promotes trade and investment. On
the other hand, the cost of the fixed exchange rate system is that it causes an increase in the real interest rates. In
case downward inertia is observed together with the high interest rates, unemployment rate increases and
growth rate decreases. As can be understood from the context, increasing real interest rates may lead to failure
to sustain the fixed exchange rate system and, in turn, to eruption of crisis. Since it will not be rational to keep
the exchange rate at its current level in case costs exceed benefits, the exchange rate is floated. To reduce
unemployment and current transaction deficits and to promote growth; governments prefer to switch to the
floating exchange rate system although foreign currency reserves are sufficient to protect the exchange rate.
Third Generation Financial Crisis Models are also called “The Models Explaining Asian Crisis”. Two
main suggestions have been made to explain the reasons of Asian Crisis.
The first suggestion is that Asian Crisis can be explained on the basis of the second generation models.
To this suggestion, the countries that faced crisis were exposed to a self-fulfilling pessimism by the
international investors. That is, the pessimism of the creditors and investors created a pessimist atmosphere for
the other investors as well. The resulting cycle caused the Asian Crisis.
To the second suggestion, the weak economic structure produced by the wrong policies and structural
problems resulted in the Asian Crisis. These structural problems can be summarized as follows:
The first problem was the presence of the microeconomic problematic implementations such as
implicit deposit insurances and confidential public guarantees. These implementations have been suggested to
pave the way for the crisis due to moral hazard and excessive borrowing.
The second problem was the insufficient auditing of the financial sector and particularly the banks.
When the system is not properly audited, banks can enable use of funds by their affiliated companies at such
huge amounts to increase financial fragility. In addition, in weak systems, huge amount of funds inflowing to
the country result in not only high amount of domestic fund transfers via poorly-managed banks but also
domestic demand boom. The loans granted without any risk analysis can not be paid back in economic
shrinkage times and result in crises.
The third problem was the unreliable balance sheets of the banks and non-bank financial institutions.
The problems in the balance sheets of the banks mainly result from mismatch. When the banks borrow money
in foreign currency and lend in national currency and when they make short-term borrowing and make lending
for long-term investments; it means that they encounter both monetary and term mismatch problems. (Yay, et al
2001) Wrongly-valued foreign currencies and unpaid debts are the other balance sheet problems. Such
situations create the appropriate environment for the financial crisis to occur.
Empirical Analysis with Artificial Neural Network (ANN)
“An Artificial Neural Network (ANN) is an information processing paradigm that is inspired by the
way biological nervous systems, such as the brain, process information.” (Stegiou, et al 2009) In the
information processing system of ANN, there may be huge number of highly interconnected processing
elements, neurons, just like in a brain. The neurons in question are organized into the layers of input, output and
hidden. The input layer is connected to the output layer through junctions with a hidden layer. (Cravener, et al
2001) Input, hidden, output layers and the neurons constitute the network of ANN. The brief explanation of the
learning process of ANN is as follows: Firstly, the network tries to find linear relationships between the inputs
and the output. The links between the neurons in input and output layers are assigned weight values. At this
phase, there is no hidden layer. After the linear relationships are found, non-linear relationships are found by
adding neurons to the hidden layer. The values in the input layer, namely the inputs, are multiplied by the
weights assigned by the system automatically and then sent to the hidden layer. The hidden layer produces some
outputs, inputs of the output layer, and sends them to the output layer. Lastly, the output layer produces the
predictions. The network of ANN is adaptive. Because the predicted values are compared with the actual
values, and if there is any error, then the connecting weights are adjusted and/or new hidden neurons are added
to capture all features of the data set and to make accurate predictions, namely to minimize the error.
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Inputs, Output (Variables) and the Dataset
The studies analyzing the Turkish financial crisis of 1994, 2000 and 2001 empirically were examined
to determine the inputs and output. The leading indicators that were found significant in the analysis were used
as the inputs in our study besides the inputs emphasized by the financial crisis models. 96 pieces of monthly
data of each input, between the dates of Janury, 1996 and December, 2003 were used in the analysis. The
monthly percentage changes of each input were used. The data were collected from the Electronic Data
Delivery System of Central Bank of Turkey and the website of Turkish Statistical Institute.
About the Inputs
The inputs used in the analysis are as follows:
� M2 (Money Supply)/Gross Currency Reserves of Central Bank (M2/CBER): The rise of this rate
means that the financial system is vulnerable to shocks. To the third generation financial crisis models, an
increase in this rate increases the probability of financial crisis to occur.
� Total Deposit of Commercial Banks (TDCP): It was observed that bank deposits had declined
before the crisis. The fall in commercial bank deposits mean that bank balance sheets contract and the trust in
banks decline. It is the crisis indicator of the third generation financial crisis models.
� Domestic Credit Amount (DCA): Empirical findings obtained heretofore have proved that domestic
credit amount increases before crisis. Before the financial crisis in November 2000, domestic credit amount,
particularly the amount of consumer credits, increased substantially.
� Consolidated Budget Income/ Consolidated Budget Expenditure (CBI/CBE): To the first generation
financial crisis models, an increase in budget deficit raises the financial crisis risk. In other words, there is a
positive relation between budget deficit and financial crisis risk. Therefore the probability of financial crisis risk
is expected to increase as the value of this input declines.
� Real Exchange Rate (RER): Overappreciation of local currency, that is, the change of exchange rate
in favour of local currency is interpreted as a leading indicator of financial crisis.
� Deposit Rate (DR): There is a positive relation between deposit rate and the probability of financial
crisis.
� Consumer Price Index (CPI): It was observed that inflation rates raised before financial crisis to
have occured.
� Current Account Balance/ Gross Domestic Product (CAB/GDP): An increase in this ratio is
accepted as an indicator of financial crisis. To the former president of IMF, Stanley Fischer, high current
deficient and banking sector caused the November 2000 crisis. (Fischer 2001) To some international finance
institutions, CAB/GDP ratio of Turkey was unsustainable as of fall of 2000.
� Export Coverage Import Ratio (EX/IMP): In an economy implementing fixed exchange rate system,
the fall of export and the rise of import effect the foreign trade balance, thus the current account balance
negatively. Current account deficit increases the pressure on exchange rate and causes speculative attacks.
About the Output
To design the output, a pressure index and a threshold were calculated. The formulas used to find out
the pressure index and the threshold are as follows:1
The pressure index used is Foreign Exchange Market Pressure Index (EMP). “EMP is calculated as the
weighted average of the monthly percentage changes in the gross currency reserves of the central bank and of
the monthly percentage changes in the devaluation rate of TL against US dollar.” (Şen 2005) EMP is formulated
as follows:
EMPT = %∆et − α 1 %∆rt
Where
e t denotes the nominal buying rate of TL/$ at time t
rt
%
denotes the amount of gross foreign currencies of Central Bank at time t
∆ e t denotes the monthly percentage change in the nominal buying rate.
1
The formulas used to design the output were taken from the following dissertation: Şen, Ali (2005), Finansal Krizlerin
Tahmin Edilebilirliği: Türkiye Uygulaması, Đstanbul University.
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∆ r t denotes the monthly percentage change in the amount of the gross foreign currencies of Central Bank
%
α1
is the proportion of the standard deviation of the series of the monthly percentage changes in the nominal
exchange rate to the standard deviation of the series of the monthly percentage changes in the amount of the
gross foreign currencies of Central Bank. Namely,
(
σ e /σ r )
The value of the threshold is calculated by making use of the following formula
βσ emp + µ emp
Where
β
denotes the coefficient of EMP
σ
denotes the standard deviation of EMP series
µ
denotes the mean of EMP series
If
If
EMPit > βσ EMPit + µ EMPit , It is deemed that financial crisis occured in the corresponding month
EMPit ≤ βσ EMPĐT + µ EMPĐT
, It is deemed that no financial crisis occured in the corresponding month.
In the light of these information, the values of the pressure index in November 2000 and February,
March, April and June 2001 were found greater than the value of the threshold. That is to say, it is inferred from
the data that financial crisis occured in the mentioned months. This inference highly overlaps with the
conclusions of some other empirical studies and the crisis experience of Turkish economy. June 2001 crisis
could be accepted as the aftershock of February 2001 crisis.
In analysis, the values of the pressure index, changing from month to month naturally, were used as
output. The values of threshold, standard deviation, mean of the pressure index, and the ratio of ( σ e / σ r )
were found equal to 2.514596, 1.6010, 0.4491, and 0.1172 respectively. The coefficient of “β” is 1.29. It is
important to determine the value of the coefficient of the standard deviation of the pressure index series, namely
“β” while calculating the value of the threshold. Because deciding whether the financial crisis occured is
effected by this value. To determine the value of the threshold, the values of “σ” ve “µ” were calculated by
making use of the data whereas we assigned the value of “β”. We calculated the value of “β” as 1.29. Because
the financial crises dates found out in case of determining the value of “β” as 1.29 overlapped with the actual
financial crisis mentioned above. It is possible to give various values to the coefficient of “β”. For instance, in
some studies1, it was given the values of 1.5, 2.5, and 2.54 respectively.
Model Building (Learning/Training Phase)
In this subsection, an ANN model is built for November 2000 and February 2001 financial crises. All
data were used for learning and validation purposes. The data were not separated as learning or validation data.
That is, the data used to validate the built model was chosen within the sample. Testing phase was skipped.
What desired to achieve with this model is only to find out the effects of inputs on the output, namely the
pressure indice, which are used to specify whether financial crises occurred between 1996 and 2003. The
number of the hidden neurons is 70. Because the model yielded lower R-squared values in case of the utilization
of less number of hidden neuron. The model with the highest value of R-squared was chosen as the best model.
NeuroShell ® Predictor software was used for the analysis.
The summaries of the statistical outcomes of the built model and importance of the inputs are as
follows:
R-Squared: R-squared takes a value between 0 and 1. The closer the value is to 1, the better the net is
able to make predictions. The closer the value is to 0, the net is not able to make good predictions. The Rsquared value of the neural network model is 0.966431, which confirms the closeness of fit between the actual
and trained pressure index. Figure 1 in Appendix shows the plot between the actual and trained pressure indice.
1
Please refer to the following articles: Aziz, Jahangir, Caramazza, Francesco, Salgado, Ranil (2000), “Currency Crises: In
Search of Common Elements”, IMF Working Paper, No.67; Edison, Hali J. (2000), “Do Indicators of Financial Crises
Work? An Evaluation of an Early Warning System”, Board of Governors of the Federal Reserve System, International
Finance Discussion Paper No. 675; Esquivel, G., Larrin F. (1998), “Explaining Currency Crisis”, HIID, No.666
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The blue points represent the actual, the red points represent the predicted indice. From the figure, we infer that
the model is very good at learning the indice, namely the existence or non-existence of the crises.
Minimum Square Error (MSE): MSE is the statistical measure of the differences between the actual
and predicted values of the output. MSE has the value of 0.002832 in our analysis, which is also a good
indicator of the closeness of fit between the actual and trained pressure index.
Relative Importance of Inputs: In Table 1 is given the relative importance of each input. Besides,
Figure 2 in Appendix illustrates the importance of each input in predicting the value of output. The
corresponding number of each input indicates the importance of the input in predicting the output. The relative
importance numbers take a value between 0 and 1, The higher the number, the more important that input is in
predicting the output. “The relative importance numbers are “normalized” so that for all inputs they add up to
approximately 1. Therefore, we may think of these numbers as a percent contribution to the model of the
respective inputs.” (Ward 1997) In view of the results, it is inferred that the input of domestic credit amount has
the highest importance in predicting the output, whereas the input of CAB/GDP has the lowest.
Table 1: Relative Importance of Inputs
INPUT
Domestic Credit Amount
Export Coverage Import Ratio
Real Exchange Rate
Consumer Price Index
Total Deposit of Commercial Banks
Deposit Rate
Consolidated Budget Income/Consolidated Budget Expenditure
M2 (Money Supply)/Gross Currency Reserves of Central Bank
Current Account Balance/ Gross Domestic Product
IMPORTANCE
0.242
0.240
0.208
0.153
0.092
0.047
0.008
0.005
0.004
Model Validation (Validation Phase)
In this subsection, the built model is validated with the same data in order to check whether the built
model is capable enough to predict the actual values of the outcome, pressure indice. R-Squared value and MSE
were found as 0.917785 and 0.006935 respectively. These results prove that the model is strong enough to
predict the values of outome. Figure 3 in Appendix shows the plot between the actual and trained pressure
indice at validation phase. The blue points represent the actual, and the red points represent the predicted indice.
The performance of the model at validation phase proves that the model can predict the pressure indice, namely
the existence or non-existence of the crises almost accurately.
Concluding Remarks
Financial crises, whatever their types are, have been on the agenda of many economists for nearly three
decades. Because they leave destructive affects on the social and economic structures of the countries. As a
result of the studies, empirical and theoretical, to gain an insight into the nature of financial crises, many
theories and models have been suggested. Artificial Neural Network is one of those empirical analysis tools that
could be used. In this study, ANN was used to analyze the economic reasons of November 2000 and February
2001 Turkish financial crises. The inputs and output were determined by making use of the leading indicators of
financial crisis models, and some empirical analyses related to the Turkish financial crises of interest. The
variables found significant in the empirical analyses were added to our study. The time interval, January of
1996 and December of 2003, was selected on purpose to analyze the Turkish crisis in the early 2000’s
particularly. If the time interval had been determined longer, it would have been improper to mention about the
economic causes of the crisis in question due to the inclusion of causes of the Turkish financial crisis in 1994.
To the results at learning and validation phases, a strong model is built to find out the explanatory
variables of November 2000 and February 2001 financial crises. Because the R-squared values of the model at
training/learning and validation phases are 0.966431 and 0.917785 respectively. Besides, MSE values are
0.002832 and 0.006935. Moreover, the plots in figure 1 and 3 also prove the power of the model. It is concluded
that the trained network model is a good fit to explain the reasons of the financial crises in question. In addition,
it is inferred that the input of domestic credit amount played the greatest role in the crises in question whereas
the input of Current Account Balance/ Gross Domestic Product played the smallest.
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Delice, G. (2003). Finansal Krizler: Teorik ve Tarihsel Bir Perspektif. Erciyes University ĐĐBF Journal, No:20.
Edison, H. J. (2000). Do Indicators of Financial Crises Work? An Evaluation of an Early Warning System. Board of
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Kaminsky, G.L., Saul L. & Carmen M.R. (1998). Leading Indicators of Currency Crises. International Monetary Fund Staff
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Đstanbul Ticaret Odası Publications, Publication No:2001-47.
Appendix
Figure 1: Actual and Predicted Values at Training/Learning Phase
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Figure 2: Importance of Inputs at Training/Learning Phase
Figure 3: Actual and Predicted Values at Validation Phase
23
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An Empirical Analysis of Turkish Financial Crises in the Early 2000’s.
Author
Author
ÖZSOY, İsmail
GÖRMEZ, Birol
Abstract
A summary of the resource.
The financing scheme has a crucial function in an economy since it enables fundowners to transfer their funds to those in need. Unless the financing scheme operates effectively, economic growth is hampered severely due to the inadequacy or immobility of capital. The world finance history has experienced many financial crises, the case of malfunction of the financing scheme, repeatedly so far. Many theories and models have been developed to give an insight into the reasons and dissemination mechanisms of, and precautions against the financial crises. This paper is intended to find out the explanatory variables of the Turkish financial crises that took place in November 2000 and February 2001 with the help of the method of Artificial Neural Network (ANN) and within the framework of the models of financial crises. To this effect, the models of financial crises are briefly dealt with; the Turkish financial crises in the early 2000’s are analyzed subsequently by making use of ANN.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
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ff8e81725c8104cf4e2397b79fee8e44
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Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Forecasting of Construction Growth and Investment in Turkey
Filiz ÖZKAN
Kaynarca Seyfettin Selim Vocational School
Sakarya University,
Kaynarca, Sakarya, Turkey
fozkan@sakarya.edu.tr
Ömer ÖZKAN
Department of Construction
Sakarya University
Sakarya, Turkey
omerozkan@sakarya.edu.tr
Abstract: The construction sector is regarded as a significant factor influencing economic
policies in developing countries like Turkey. Construction investments play an important role
in short term economic growth whereas infrastructure investments are vital in long term
growth. Developing countries utilize their construction sectors as regulators. In this study,
forecasting of construction growth and construction investment was analyzed in Turkey.
ARIMA models were used in this study for forecasting of Construction growth and
construction investments. It has been seen that, the variables taken at hand is explained at an
important rate with their own delayed variables.
Introduction
Construction industry and investment is an important determinant in developing economies. Developing
countries utilize their construction sectors as regulators. These investments affected by the government policies
as governments usually regulate the economy (Wigren and Wilhelmsson, 2007; Easterly and Rebelo,1999;
Canning et al., 1994; Sanchez-Robles 1998). That is, they tend to lessen construction projects and cut off funds
fostering this sector when the economy enters a very rapid growth pace and refresh the sector when the economy
suffers from demand shortage and the unemployment rate increases. The construction sector relate to activities
of capital investments in construction. Construction products are a function of investments made in other sectors.
This sector has undertaken a key role in transition from economic stagnation to growth in terms of the inputs it
utilizes and employment it creates, its contribution to the national revenue, its role in creating new employment
fields and opportunities and its relation with other industries Öcal et al. (2007).
Construction sector investments have been classified as Building+Residential (Government),
Building+Residential (private) investment and infrastructure. Except from Building+Residential (private) these
sectors investments have effects of Gross Domestic Product (GDP). There is a clear cointegration between
“GDP-infrastructure investments” and “GDP-building+residental (government) investments”. It has been
concluded that the long term relation in infrastructure investments are not affected by economic shocks in the
short run; however building and residential (government) investments are affected by short term shocks (Ozkan
and Ozkan, 2009). Because of this, the estimates of construction investments take place an important place at the
economies in economical crisis. When it is reviewed that one of the important reasons of the economical crisis
boomed in year 2008 is the mortgage financial system, its importance increases once more.
In this study, forecasting of Construction growth and construction investment was analyzed in Turkey.
ARIMA models are used in this study for forecasting of Construction growth and construction investments.
Construction growth and investment data (1987-2007 June periods) used in this study.
Data and Economic Model
Data collection
In this study makes use of construction growth items. This items are Infrastructure Investment,
Building+residental (government), Building+residental (private) investments monthly data. Data have been
collected from statistics of Central Bank of Republic of Turkey. Construction growth, infrastructure, building
and residential (government), building and residential (private) refers to current prices and 1987:01-2007:01
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period level expenditure data. Values are given in New Turkish Lira. In the analysis stage, logarithmic values
pertaining to series were used and series have been cleared off seasonal effects as well as the trend effect.
Series’ stationary structures have been analyzed via Augmented Dickey Fuller (ADF) unit root test.
ARIMA test has been employed in order to forecast.
Unit Root Test
The unit root test is executed by way of the following formulation.
n
∆Yt = a + ρYt −1 + δT + ∑ b1i ∆Yt −i + ε t
i =1
i= 1,2,…,n
(1)
∆Yt=Yt-Yt-i,
(2)
α, is a drift term, and T is the time trend with the null hypothesis, n is the number of lags necessary to
obtain white noise and ε is the error term. Note that failing to reject Ho implies the time series is non-stationary.
Ho: ρ=0,
H1: ρ≠0,
(3)
Arima Models
ARIMA models are, in theory, the most general class of models for forecasting a time series which can
be stationarized by transformations such as differencing and logging. In fact, the easiest way to think of ARIMA
models is as fine-tuned versions of random-walk and random-trend models: the fine-tuning consists of adding
lags of the differenced series and/or lags of the forecast errors to the prediction equation, as needed to remove
any last traces of autocorrelation from the forecast errors.
A common approach for modeling unvaried time series is the autoregressive (AR) model:
Yt = αo + α1Yt-1 + α2Yt-2 + …+ αn Yt-n + ut
(4)
Another common approach for modeling unvaried time series models is the moving average (MA)
model:
Yt = αo + α1ut - α2ut-1 - …- αn ut-n
(5)
Where Yt is the time series, ao is the mean of the series, ut-i are white noise, and α1……. α n are the
parameters of the model. The value of n is called the order of the MA model.
Box and Jenkins detailed an approach that combines the moving average and the autoregressive
approaches in the book (Box, Jenkins, and Reinsel, 1994). Box and Jenkins was in developing a systematic
methodology for identifying and estimating models that could incorporate both approaches. This makes BoxJenkins models a powerful class of models. The most general Box-Jenkins model includes difference operators,
autoregressive terms, moving average terms, seasonal difference operators, seasonal autoregressive terms, and
seasonal moving average terms. This stage is founded on the study of autocorrelation and partial autocorrelation
(Box, Jenkins, and Reinsel, 1994; Dobre and AnaMaria, 2008)
The Box-Jenkins ARMA model is a combination of the AR and MA models as follows:
Yt = ao + a1Yt-1 + a2Yt-2 + …+ an Yt-n + ut + b1ut-1 + … + bput-p
(6)
Forecasting Result and Discussion
Unit Root Test Results
Forecasting of construction growth and investment are analyzed in Macro-economic time series are
generally characterized by unit root of the stochastic process which reveals the relevant datum. Generalized ADF
unit roots tests were employed in this study to determine time series characteristics of data. The fixed term model
with trend was used in ADF unit root test. The results of ADF unit root test on series are presented in [Table 1].
Table 1: Unit root test results
Level
Difference
ADF
Lag
ADF
Lag
Construction Growth
-0.34
3
-8.44
3
Private (Build.+Res.)
-0.90
1
-6.91
6
Public (Build.+Res.)
-0.631
4
-14.1
2
Infrastruture
-1.19
6
-11.6
2
Note: Numbers in lag column represent lag numbers determined according
to the Schwartz criteria. McKinnon critical values for fixed term ADF
model with trend are as follows: -3.46for %1, -2.87 for %5, -2.57 for %10.
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According to ADF test results, Construction Growth, Private (Build.+Res.), Public (Build.+Res.) and
Infrastruture investment series are not stationary [I(1)]. Series were differentiated of order one to become
stationary. Graphics of series in non-stationary and stationary status are presented in [Figure 1, 2, 3 and 4].
0.3
16
0.2
14
0.1
12
0.0
10
-0.1
8
-0.2
6
-0.3
4
-0.4
88
90
92
94
96
Non-stationary series
98
00
02
years
04
06
88
90
92
94
96
CONSTGROWTH
00
02
CONST GROW T H
Figure1: Infrastructure investment
Figure 2: Private (Build.+Res.) investment
Figure 3: Public (Build.+Res.) investment
366
98
Non-stationary series
04
years
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Figure 4: Infrastructure investment
ARIMA Test Results
[Table 2] show ARIMA model results for Construction Growth, Private (Build.+Res.), Public
(Build.+Res.) and infrastructure investments.
Coefficients
b0
AR(3)
AR(9)
AR(12)
MA(3)
MA(6)
MA(9)
MA(12)
Table 2: ARIMA Model Regression Results
Construction
Private
Public
Growth
(Build.+Res.) (Build.+Res.) Infrastruture
-0.003
-0.01
-0.006
-0.001
(0.65)
(0.39)
(0.72)
(0.85)
0.11
0.52
-0.50
(0.00)
(0.00)
(0.00)
-0.11
(0.00)
0.58
0.79
0.34
-0.32
(0.00)
(0.00)
(0.00)
(0.00)
-0.38
-1.01
0.21
(0.00)
(0.00)
(0.00)
0.38
0.26
-0.21
(0.00)
(0.00)
(0.00)
-0.19
(0.00)
0.35
0.75
(0.00)
(0.00)
Special Statistics
Construction
Private
Public
Coefficients
Growth
(Build.+Res.) (Build.+Res.)
R2
0.50
0.71
0.32
DW
2.08
2.09
2.05
Fprob.
0.00
0.00
0.00
0.41
0.31
0.09
LM Test
(0.66)
(0.72)
(0.91)
4.25
1.68
1.25
ARCH Test
(0.04)
(0.19)
(0.26)
Infrastruture
0.36
2.09
0.00
0.13
(0.87)
1.46
(0.22)
Models of estimates have been constructed for Construction Growth, Private (Build.+Res.), Public
(Build.+Res.) and infrastructure investments. When the results are examined, it is seen in the construction
growth variables’ forecasting models that it is usually the most explanatory variable the value of the variable
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�1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
which explains best the period to be estimated related to its period of one year ago. Besides this, it is seen that
the periods which are retarded from the period to be estimated of 3,6 and 9 months are also effective.
When it is looked at the general construction growth results, R2 values are calculated as 0.50, 0.71, 0.32
and 0.36 in order. These results express that general construction growth is explained at the rate of R2 with its
own retarded values. For the reason that Turkish economy does not have a completely stable structure, as the
economical variables are affected from other external effects, only its retarded variables and explanation rate are
at the values to be taken into consideration.
Conclusion
In the studies at where the relationship between economical growth and construction growth is
examined, the existence of a strong mutual relationship is emphasized. It is clearly seen in the studies that
construction growth is used as a regulator especially at countries which are developing. The assumption that the
crisis experienced in the world is sourced by the mortgage financial crisis and that the exit from the crisis shall
be with the normalization which shall be attained at the construction sector carries a quality to validate these
studies. For this reason, in our study, an estimate model of the construction growth has been constructed. .
In our study, the Construction growth, private (Build.+Res.), Public (Build.+Res.) and infrastructure
investments estimate models of year 1987-2006 has been constructed. For this purpose, in our study, it is
looked at the stagnancy structures of the series with ADF unit root test and ARIMA estimate model has been
constructed. It is reached to the conclusion that the rate of explaining the data of which their estimate models
have been constructed with their own variables is not very high and this result from the structure of the Turkish
economy which is not completely stable and that it is affected from many other external factors.
References
Wigren, R. and Wilhelmsson, M. (2007). Construction investments and economic growth in Western Europe. Journal of
Policy Modeling, 29, 439–451.
Easterly, W. and Rebelo, S. (1993). Fiscal policy and economic growth: an empirical investigation. Journal of Monetary
Economics, 32, 417– 458.
Canning, D., Fay, M. and Perotti, R., (1994). Infrastructure and growth. In: Bsaldassarri, M., Paganetto, M., Phelps, E.S.
(Eds.), International Differences in Growth Rates. St. Martins Press. New York. 285– 310.
Sanchez-Robles, B. (1998). Infrastructure investment and growth: some empirical evidence. Contemporary Economic Policy,
16, 98–108.
Ocal, M.E., Oral Laptali E., Erdis, E. & Vural, G. (2007). Industry financial ratios-application of factor analysis in Turkish
Construction Industry. Building and Environment, 42, 385-392.
Özkan, F., Özkan, Ö. (2009). Construction Investment And Economic Growth: Turkey. International Conference of
Arts,Science,Management and Engineering. April 23-25, Goa, India.
Box. G. E. P., Jenkins. G. M. and Reinsel. G. C. (1994). Time Series Analysis. Forecasting and Control. 3rd ed.. Prentice
Hall. Englewood Clifs.
Dobre, I. and AnaMaria, A.A. (2008). Modelling Unemployment Rate Using Box-Jenkins Procedure. Journal of Applied
Quantitative Methods, 3 (2). 156-166.
368
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Title
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Forecasting of Construction Growth and Investment in Turkey
Author
Author
ÖZKAN, Filiz
ÖZKAN, Ömer
Abstract
A summary of the resource.
The construction sector is regarded as a significant factor influencing economic policies in developing countries like Turkey. Construction investments play an important role in short term economic growth whereas infrastructure investments are vital in long term growth. Developing countries utilize their construction sectors as regulators. In this study, forecasting of construction growth and construction investment was analyzed in Turkey. ARIMA models were used in this study for forecasting of Construction growth and construction investments. It has been seen that, the variables taken at hand is explained at an important rate with their own delayed variables.
Date
A point or period of time associated with an event in the lifecycle of the resource
2009-06
Keywords
Keywords.
Conference or Workshop Item
PeerReviewed
HB Economic Theory
-
https://eprints.ibu.edu.ba/files/original/46ae62d9a14197c75121d576d4df98e0.pdf
9e1c7054938eb3806cdc7046044122dc
PDF Text
Text
1. International Symposium on Sustainable Development, June 9-10 2009, Sarajevo
Colouring Turkish Management Type:
An Empirical Analysis on Supermarket Store Managers
Rana ÖZEN KUTANIŞ
Sakarya University, Economics and Administration Science Faculty,
Management Department, TURKEY
rkutanis@sakarya.edu.tr
Serkan BAYRAKTAROĞLU
Sakarya University, Economics and Administration Science Faculty,
Management Department, TURKEY
serkanb@sakarya.edu.tr
Abstract: This research presents Spectral Management Types and carrying out of these styles
in Turkish managers. This approach leads to eight different kinds of management types.
Spectral theory of personality consists of three important characteristics of a manager –
cognitive, affective, and behavioural. In this research Spectral Management Type Inventory
(SMTI) is used for Turkish managers in a supermarket store. The research is conducted with
mixed methodology. Both qualitative and quantitative methods are conducted. At the end of
the research, just five managerial types are determined. In terms of their colours, Turkish
managers have large managerial perspectives.
Keywords: Management, Management Types, Managers
Managerial Types
Managers have to have some developmental skills for being effective and successful in organisations.
The abilities of experienced managers (like knowledge, skill, experience, personality) are emphasized in
different ways (Eren, 1989; Koçel, 1999). In macro perspective, the most important external factors that affect
the behaviours of managers are education, culture, economical and social environment.
Managers are classified differently in the literature. The most popular classification is about democraticautocratic managers. In this study, firstly, Spectral Management Type Inventory (SMTI) - developed by Baruch
and Lessem (1995) and updated afterwards (Baruch & Lessem, 1997; Lessem & Baruch, 1999) - is practiced.
The dominant dimensions of personality of managers are pointed out.
The eight managerial types are: Innovative Manager, Developmental Manager, Analytical Manager,
Enterprising Manager, Manager of Change, People Manager, Action Manager and Adoptive Manager.
The detailed information on SMTI and explanations of this spectrum were given below:
In this spectrum, the dimensions appeared to have effects on the personality of the managers. At the introduction
of the spectrum it follows as “SMTI reflects your personal and cultural features as a manager. It is affected by
your personal features, your personality, your age and your culture. Your cultural appearance is affected by your
roles and status at the level of national, organisational and professional contexts. You can learn which type of
manager you are as to fill in the questionnaire below. Although you may have all features of 8 manager types,
one of them would be dominant. So there is no good or bad score in this spectrum”.
The eight managerial types are summarised below (Lessem, and Baruch, 1999:11-13):
Innovative Manager
Innovative managers (violet) are total originals, able to create something out of seemingly nothing.
They are propelled forward by an inner compulsion, which is projected onto others by a powerful and visually
expressive imagination. They will be creative learners and while in a group will emerge as inspired team
members. The innovator is probably the rarest of all managers, though s/he is probably more likely to be found
in Silicon Valley than anywhere else. Such managers are the inventors and visionaries, pointing a group, in the
most picturesque language, towards a promised land. Such team members, if their strengths go unrecognized,
can become dogmatic, intolerant and intolerable.
In fact often innovative managers consider themselves as idiosyncratic loners, incapable of being
integrated into a team, and may need the patience and insight of a harmoniser to form a bridge between
themselves and more conventional others.
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Developmental Manager
Developmental managers (indigo) play a balancing role, more similar with that of enabler rather than
fixer that is essentially developmental in nature. For the developmental manager is able to recognize and harness
the forces of diversity. Co-operation and interdependence is to developmental managers what co-ordination and
dependability is to the analytical manager. These types of managers learn through depth of insight and breadth of
exposure rather than through focused instruction or personal challenge. As team members, then, harmonisers are
essentially constructive where others are provocative or even destructive.
Analytical Manager
The analytical manager (blue) is the original executive. S/he fits comfortably into “role” or functionally
based organizations where bureaucracy, in either its negative or positive sense, prevails. Impersonal, objective
and honest in their dealings, such managers prefer certainty to uncertainty and well plans to different
manoeuvres. Analytical managers are a force of law and order in their organizations and progress through the
managerial hierarchy along conventional promotional lines. As a team member, s/he would best be the
conventional chairperson or team leader. Analytical managers welcome authority and responsibility, and want
roles, rules and routes to be closely prescribed. As team members, they are practically thoughtful, and are good
organizers in the conventional sense of the word.
Enterprising Manager
Enterprising managers (green) can manage new markets, recognize and grasp new business
opportunities, and generally enjoy the rough and tumble of business life. They are certainly gamesmen and
women who love a good scrap, and respond immediately to a challenge, especially if it involves some personal
and financial risk. Enterprising managers are at home in the sales-force, in charge of a profit centre or heading up
a new venture. They may be ruthless and unscrupulous but also fun loving, larger than life characters. Such
entrepreneurial characters learn from emotionally laden experiences. The enterprising managers take most of the
responsibility on themselves. This type of manager is typically proactive, seizing every possible opportunity to
steer the group in his/her desired direction. S/he is emotionally influential and commercially realistic. If his/her
strength become overdone, such a person may sabotage group proceedings to retain influence.
Manager of Change
The manager of change (yellow) is intellectual rather than emotional or practical. Such managers need
to work in a mentally stimulating environment, and will seek professional advancement within a particular
organization. As a result managers of change can be prone to job hopping, for the sake of professional stimulus
rather than, at least primarily, money or status. Managers of change will learn through trial and error, applying
their minds to particular tasks and then learning from the consequences. As a team person then, s/he enjoys
working with a wide variety of people. Such a person finds group problem solving stimulating and such a
“networker” will use every opportunity available to involve people from outside the group with them. In that
context this type of managers will seek to generate and share ideas with as wide a circle of contacts as possible;
work, then, must be fun. Should his/her strengths be ignored s/he may become argumentative and stubbornly
resistant to authority, thereby preferring varied consultancy based activity to ongoing, functionally based work.
People Manager
People managers (orange) are naturally friendly, sociable and warm. They characteristically emerge
from the sales-force or from the shop floor, rather than through the graduate management ranks. Such a “people
orientation” in Japan is a prerequisite for advancement across all management ranks. The people manager finds it
difficult to acquire knowledge outside of concrete situations, in association with either people or things. S/he
may be the one to remember, and to celebrate, birthdays both of individuals and also of critical events in the
history of the group or company. If his/her strength is overdone s/he may spend all their time being nice to
others.
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Action Manager
Action manager (red) is at a premium in very fast moving industries, where the expression “work hard,
play hard” has become commonplace. In a production or distribution context where an action speaks louder than
words such a “red” management orientation is often called for. The ability to act fast, and to enact situations, can
be at a premium. S/he learns best, and fastest, in crisis. Characteristically action managers need to react to
external stimuli, in order to learn, and find that any from of management education that is divorced from action
is meaningless. This type of manager values deeds far above words. For that reason s/he tends to be reactive
rather than proactive, thriving on crises, where external stimuli provoke him or her to action. In fact the
compulsive action wo/man can wreak harm by doing things at the wrong time and in the wrong place, not to
mention a propensity to do battle, come hell or high water. Therefore, in a group context, s/he might try getting
on with the job rather than thinking about it.
Adoptive Manager
Adoptive manager (grey) is virtually nonexistent in Western Europe and America. For this type of
manager has such humility, and faith in the company or the creed, that s/he has minimal individual identity. This
person manager immerses him or herself in the surrounding group and culture completely. Adoptive manager is
able to carry out required tasks with a degree of persistence and precision, typified by the Japanese and the South
Koreans.
The Aim of The Research
In this research, 24 stores of a National Supermarket Chain in Turkey, are included, and the
theory is tested by standardized questionnaires and semi-structured interviews. The managerial
properties of the managers are meant to measure by the questionnaire. The research is a pre-test of
SMTI in a supermarket chain in Turkey.
In this research, following the theoretical explanation of the managerial types, questionnaires were
issued and implemented within stores of well-known chain-stores in Turkey.
Standard questionnaire form was used as to explore whether the participants are in line with
the managerial types indicated in the literature.
The Limitations of the Research
The main limitation of this research is the replication of this study made possible in only one
company. The research has been conducted within 5 months within the same sector. However, this
research may be considered as a pilot study that the research framework can be applied to different
sectors in Turkey.
The Methodology
For this research, the standardized questionnaire prepared by Baruch and Lessem (1999) is used with
their written consent. There are additional 24 questions on measuring the managerial types of the managers
qualitatively. During the quantitative research, frequency analyses, Factor Analysis, Cluster Analysis and
Reliability Tests are applied.
The Sampling Method
The sample of the research consists of 59 store managers. There are totally 79 store managers and hence
replication rate is 74.68 % which is at acceptable level. In participant stores (one store manager and 2 or 3
deputy managers are employed). Within the retail sector in which competition is intensive the role of personnel
and the management have been increasing. So retail sector may be a good choice to explore the managerial
types.
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Findings
The data are analysed by SPSS 15.0 at the end of the research. In addition to the management types, the
relationships between the demographics and management types are sought. The managers are categorised
according to personal characteristics at the end of the analyses.
As it is seen in Table 1, managers are mostly male, young, married and collage graduates. They are also
mostly deputy store managers having 1-5 years of work experience and they have chosen their jobs intentionally.
Table 1. Demographic Findings
n
Gender
Female
Male
-30
31-45
Married
Single
Collage
Under-
Age
Marital Status
Education
Graduate
Graduate
Vice Manager
Manager
-1 year
1-5 years
5-10 years
10+ years
Status
Experience
%
10
49
45
14
53
6
40
14
5
16,9
83,1
76,3
23,7
89,8
10,2
67,8
23,7
8,5
43
16
4
38
6
11
72,9
27,1
6,8
64,4
10,2
18,7
In terms of factor analysis (KMO=0,748) and cluster analysis, instead of eight managerial types, five
managerial types are determined (78,223 % of variance is explained). Innovative (violet), Enterprising (green)
and People (orange) Managers could not be determined at the end of the research.
Table 2. Results of Reliability Tests
Alpha-Cronbach (α)
Action Manager (red)
0,71
Developmental Manager (indigo)
0,73
Manager of Change (yellow)
0,67
Analytical Manager (blue)
0,69
Adoptive Manager (grey)
0,79
In Lessem and Baruch’s research there were eight managerial types that was the inspiration of this
study. However as a result of this study, five managerial types were found. Adoptive, developmental and action
managerial types could be identified within the sample. However two of the apparent managerial types are not so
explicit as change manager with (α=0,67) and analytical manager with (α=0,69) that the cronbach alpha levels
are below 0.70.
In terms of the results, the most valuable manager type is Adoptive Manager (α=0,79). The grey colour
shows imitative aspects of learning. Learning process has the most important and general tendency in Turkish
managers’ characteristics. First Learning and imitating, than developing (indigo) their knowledge and showing
their experiences in action (red) are the most important behaviours of Turkish Managers. Analytical (blue) and
change (yellow) managers are also be defined. Finally, in order, grey, indigo, and red are prior colours of Turkish
managers. Secondly, blue and yellow colours are also available within these managers.
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Conclusion
The SMTI, is a measure of managerial styles but not effectiveness. There are innumerable colour
combinations which will affect the shading of a particular managerial type. Different combinations of colour can
be seen in different cultures. Some “colours” are more prevalent in one culture than is to another. The
managerial spectrum inevitably reflects the “surface structure” of a manager’s personality. His/her “deep
structure” will be affected by the particular national, corporate and professional culture of which s/he forms a
part.
The eight “colours” of manager types can be “vertically” considered as eight sub-processes of learning
or innovation. Yellow shows freedom loving person, the green shows entrepreneurship. Grey reflects imitative
aspects of learning, at an early stage of information processing, as compared with indigo type insight at a later
stage. Violet reflects a creative imagination, prior to the orange aspect of innovation, which incorporates
closeness to the customer. Analytical blue shows more methodical managers. Red means more action and
working hard. Managers may be liable to retain their basic managerial orientation throughout their career and
their support colours might vary over time.
In this research, five managerial types were found. In order, adoptive, developmental, action, change,
and analytical managerial types could be identified within the sample. Innovative, entrepreneurial and
humanistic managerial types could not be identified within the sample. As colour spectrum, grey, indigo, red,
blue and yellow colours are important within Turkish managers. Both bright and pastel tones show a kind of
managerial diversity in Turkish managerial style as its culture which is in between west and east.
In the future researches, the same research might be conducted in different Supermarket Chains in
retailing sectors in different cultures. It may be possible to define new types and colours of managers.
References
Baruch, Y. & Lessem, R. (1995). Managerial Development through self and group evaluation of managerial style. Journal of
Management Development. 14(1): 34-39.
Baruch, Y. & Lessem, R. (1997). The Spectral Management Type Inventory- a Validation Study. Journal of Managerial
Psychology. 12(6): 365-382.
Gardner, H. (1993). Frames of Mind, Paladin, London.
Kingsland, K. (1984). The personality spectrum, unpublished working paper.
Lessem, R. (1987). Intrapreneurship; How to be an Enterprising Individual in a Successful Business, Wildwood House,
Aldershot.
Lessem, R. (1990). Developmental Management, Basil Blackwell, Oxford.
Lessem, R. (1991). Total Quality Learning, Basil Blackwell, Oxford.
Lessem, R. & Baruch, Y. (1999). Colour your Managerial type: Colour your Organization. Career Development
International. 4(1): 11-18.
Lessem, R. & Baruch, Y. (2000). Testing the SMTI and Belbin Inventories in Top Management Teams. Leadership and
Organization Development. 21(2): 75-83.
Steiner, R. (1966). Study of Man, London: Rudolf Steiner Press.
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Title
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Colouring Turkish Management Type: An Empirical Analysis on Supermarket Store Managers
Author
Author
ÖZEN KUTANIS, Rana
BAYRAKTAROĞLU, Serkan
Abstract
A summary of the resource.
This research presents Spectral Management Types and carrying out of these styles in Turkish managers. This approach leads to eight different kinds of management types. Spectral theory of personality consists of three important characteristics of a manager – cognitive, affective, and behavioural. In this research Spectral Management Type Inventory (SMTI) is used for Turkish managers in a supermarket store. The research is conducted with mixed methodology. Both qualitative and quantitative methods are conducted. At the end of the research, just five managerial types are determined. In terms of their colours, Turkish managers have large managerial perspectives.
Date
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2009-06
Keywords
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Conference or Workshop Item
PeerReviewed
HB Economic Theory