MBA assignment

2000 words

APA references style

Running head: ROLES OF A MANAGER

1 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper

ROLES OF A MANAGER

3

Introduction: Manager’s Role Play

As we know, that manager is considered the captain of the ship responsible for performing all his duties to keep his/her team on track to achieve the organization’s desired goals and objectives effectively and efficiently. A manager finds himself/herself in various tasks and responsibilities, i.e., resolving a conflict, act as a negotiator on behalf of the organization between two parties regarding making new contracts, department represented at the board of directors meeting, or putting the request regarding approving new operating system before the board meeting at high priority and many others (Saini, 2016). These roles represent that a manager does not choose to let his organization down in multiple business activities. He has been appointed as a manager to perform all his duties effectively and efficiently. Henry Mintzberg recognized these manager’s roles and argued that there ten basic roles and behaviours that a manager carries and used to categorize his different functions accordingly. The ten basic roles that a manager carries are as follows: Comment by Ken Li: I can’t see any connection between this paragraph with the reference article

· A Figurehead

· A Leader

· A Liaison

· A Monitor

· A Disseminator

· A Spokesperson

· An Entrepreneur

· Efficient Disturbance Handler

· Productive Resource Allocator

· A Negotiator

Those mentioned above are basic roles that a manager performs; these roles are constantly changing according to the situations. As far as the given scenario is considered, if we add another managerial role, i.e., ‘Academic Researcher’ in all the above cluster of roles that the managers already perform, what kind of changes will happen? And what types of differences in approach and challenges will be implied due to this addition in all ten basic manager’s role.

1.

Manager’s Role: Academic Researcher

A manager could be an academic researcher because it has been observed that managers have a habit of reading research-based management books/thesis to understand the different types of issues that may arise in the department or organization. Managers make mistakes to understand the complexity of the issues they face in the organization, and it happens many times while performing their duties. For instance, we take an example of workplace conflict, team members’ issues, and others, resolved by the managers when they read much in research-based management books regarding solving team members’ issues effectively and efficiently (Smith, 2019). Few organizations around the globe provide specific training for the organization’s managers that how to face and tackle the issues that may arise in the organization. For this purpose, academic research helps the managers a lot in terms of identifying the risks, issues understand, and analyse them to reach the perfect solutions effectively and efficiently. Comment by Ken Li: I can’t see the content in this reference article relating to “academic researcher” in this parapragh

Based on the role description of academic research in an organization, it plays a significant role in successfully ruling-out complex issues. To implement academic research as a useful tool for this purpose, a manager can efficiently play the role of an academic researcher in the organization. He has certain responsibilities to examine and analyse various academic researches to solve issues in the organization, along with helping the organization in terms of proposing new ideas that can play an important role in enhancing the overall performance of the organization (Perry & Joseph, 2017). Based on these facts, we can say that manager as an ‘Academic ‘Researcher’ could bring some really good and competitive changes in the organization, which would help the business achieve its desired goals and objectives more effectively and conveniently. Comment by Ken Li: This article talks about “using case research in workplace learning” I suggest to rephase the content to match this article thinking (possible?)
Or find another reference to reflect the writing?

Differences in ‘Academic Research’ Approach

This approach is entirely different from all other approaches/roles that a manager is being performed while working in the organization for years. Academic research approach helps not only in solving the conflicts between teams, but it would also be beneficial in managing the workplace, employee’s encouragement and most importantly providing new ideas to the organization to develop new products, induction of modern and advanced technology and many other tasks, in result organization would be able to perform well in the market along with making successful management effectively and productively. Case Research is adopted by the manager when he is acting as an academic researcher. The main purpose of consulting case research regarding any organizational issue is to identify various risks that act as a key resource to resolve the issues and improve specific organization areas productively. As we know, the Research and Development department R&D works specifically on innovation strategy, but this academic research plays a significant role in solving the temporary issues and with less time (Manatas, 2012). On the other hand, R&D takes much time on each new product to propose the idea before the board of directors of the board meeting. There are certain differences listed below, which can create a significant difference between the academic research approach and other approaches used in the organization’s managerial decisions and the manager’s role play. The differences are as follows: Comment by Ken Li: Wrong name, should be “Mantas”
I can see any connection between this reference article and the writing in this paragraph

· Professional development of managers

· It helps managers in making strategic decisions

· It helps in identifying certain risks

· It can overlap some other manager’s role, i.e., Negotiator, Disturbance handler, etc.

· It provides managers valuable learning experience

· Case research helps managers to know about other organizations, their issues, and techniques to solves those issues

· An effective tool for workplace learning

Those mentioned above are certain differences that differentiate a manager’s role as an Academic Researcher and specific approach from other managerial approaches that a manager carries to perform his/her duties very well. Likewise, these differences address the versatility of this academic research approach. It can overlap some other manager’s role and the effective gain of knowledge regarding other organizations, face serious business challenges, and what kind of strategies they induced to overcome those issues. All these could be handled by efficiently reading and analysing the case research strategy made by the manager when finds a situation to act as an academic researcher to get the department/organization out of it effectively and efficiently.

Challenges

The manager may face certain challenges while performing as an academic researcher in terms of making improvements in the organizational activities and helping to resolve the issues smartly. The challenges are as follows:

· Managers should ground him to do academic research

· Always get back to the basic research methodology

· Always listen to the information they receive

· It may consume much time

· The manager should be focused while doing academic research

· Implementation of these theoretical solutions may become difficult

· It may need confirmation from boards of directors regarding any research-based decision implementation

Those mentioned above are certain challenges that may arise while adding ‘Academic Researcher’ as a manager role among all other basic roles that managers are already performing effectively and efficiently. Likewise, these challenges should be analysed and overcome after implementing effective and efficient academic research strategies productively and successfully. For instance, we take an example that implementation of academic research-based decisions guided by the management books needs an immediate approval from the upper management, i.e., the board of directors, so that this management role would become official. A decision made under this would be accepted by all employees, management, and board.

2.

Role of a manager as an Academic Researcher: Requirements

There are certain requirements needed by the manager to perform the role of an academic researcher. To identify those requirements, we shall discuss some important factors regarding the addition of an academic researcher as a manager; it involves organizational learning, management ethics, ensured total quality management, favourable workplace environment, etc. These are some very important factors that make this role in addition to ten basic roles introduced by Henry Mintzberg; these factors need to be analysed and required to manage this role effectively. The executive’s Ethics is fundamentally a successful and proficient hierarchical administration strategy to force moral principles on representatives, investors, proprietors alongside open.

The executive’s morals, for example, execution assessment. Execution assessment is a fundamental instrument in which representatives, supervisor’s execution is being observed and assess whether they are working acceptable and generally critically under the hierarchical norms or not. In this presentation assessment, consistency in hierarchical moral principles is also estimated to keep the authoritative inside climate spotless, amicable, and profitable. The explanation of checking the director’s exhibition is to choose whether he would be elevated to ranking director post or let him remain at the same post (Fekete, 2014). This presentation assessment measure thoroughly includes improving the general exhibition of the association effectively. This could be done by the managers when they act as academic researchers by taking help from case research, research-based management books, and ethics to make the decision efficient. Comment by Ken Li: The reference article talks about the model of performance evaluation. But the writing here does not mention the similar thing….

Secondly, organizational learning is the most important tool by the managers to perform as an academic researcher because when he is fully aware of organizational standards and decision-making processes, he will perform more effectively and productively. Hierarchical learning is essentially characterized as by and large authoritative climate. Every representative attempts to master something that would help them improve their exhibition powerfully and proficiently. Here, we have a term utilized in the board, for example, ‘investigation,’ which implies the curiosity is high since taking in is being done from new and progressed things. There is another number of encounters that have been examined in this section (Somasundaram, 2014). For example, we take another case of achievement versus disappointment involvement with which we make an honest effort to draw in ourselves in accomplishing work adroitly, so we would have the option to convey something significant; consequently, representatives experience achievement fit as a fiddle of remunerations and addition in motivators and the other way around. Based on extensive organizational learning, a manager would be able to do his research in a more convenient and productive environment to prove what he finds and provide solutions accordingly. Comment by Ken Li: The article talks about employee training and development, is the phase (yellow highlight sentence) refers to this article writing?

The manager as an ‘Academic Researcher’ would ensure the total quality management in his research role and its effective implementation. As we see a definitive motivation behind any business worldwide, it is to catch the market by presenting separated items created under quality guidelines (Ali, 2017). Every single cycle is observed completely until the item is reached to the store rack. All out Quality Management is a significant vital branch of the association on which the general exhibition of the association depends. The highlights incorporate Customer Satisfaction, Innovations, Quality Improvement Projects, Strategic Focus, Customer-Oriented Products, Customer-criticism, and so forth are sure highlights that are considered the drivers of business greatness (Fuller and Nina, 2016). To change the authoritative structure, they will, in general, fit the social change in the organization, which would have given extreme and moment results around then as far as to complete quality and business greatness (Pulli, 2001). Based on these explained factors, we are satisfied in terms of adding an academic researcher as a managerial because it can help in solving various complex issues successfully. Comment by Ken Li: Total Quality Management in this paragraph talks about the quality of the management skills (research skills?) so as the same idea from this article? Comment by Ken Li: Spelling mistake? Comment by Ken Li: Ryan Fuller
Nina Shikaloff
Pattern of reference name is consistent?
I can’t see any connection of this article with the writing in this paragragh Comment by Ken Li: This reference article is full of valuable information
Shall we interpret more points from this article and adding into the paragraph?

Keeping in view this competent addition to the manager’s role, we have identified some requirements that are important in terms of effective implementation of that role to the management of any organization. The requirements are as follows:

· He must possess vast academic research experience.

· He must contain a bachelor’s degree in any business studies, i.e., marketing, HR, etc.

· Extensive organizational learning background

· Quick observer

· He must possess the ability to ensure total quality management by applying his academic research techniques at workplace management

· Competitively analyse and resolve research-based management issues promptly and accurately

Those mentioned above are certain requirements that are needed in terms of productive implementation of academic research approach to solve the management issues along with making the manager responsible for doing an extensive academic study by using research-based articles, case researches, and management books to act as an academic researcher to perform his duties and responsibilities successfully. Comment by Ken Li: This paragraph is the summary of the paper?

References
Ali, D. R. (2017). The Impact of Total Quality Management on Organizational Performance. International Journal of Business and Social Science.
Fekete, M. (2014). The Practical Model of Employee Performance Evaluation. Management, Knowledge and Learning.
Fuller, R., & Nina, S. (2016). What Great Managers Do Daily? Havard Business Review.
Mantas, J. (2012). Challenges in the Successful Research Management of a Collaborative EU Project. Journal of Academy of Medical Sciences.
Perry, C., & Joseph, M. (2017). A Manager/Researcher can Learn about Professional Practices in their Workplace by Using Case Research. Journal of Workplace Learning.
Pulli, K. (2001). From Researcher to a Manager: Transition and Learning Strategies. Business Administration.
Saini, D. S. (2016). How Can Management Researchers make Managers Read and Use Their Research Work in Solving Their Research Problems? HRM Management.
Smith, E. (2019). What is the Difference Between a Researcher and a Manager in a Retail Divsion. Business Management: Managing Employees.
Somasundaram, U. (2014). Training and Development: An Examination of Definitions and Dependent Variables. Training and Development: Knowledge and Skills.

Notes to Final Assignment/A new model for strategy and entrepreneurship in China

A new model for strategy and
entrepreneurship in China

Alternative five forces

S
ince its inception in 1979, Porter’s five forces model has been used by countless

academics and professionals to describe and analyze competitive forces in

business. The five forces consist of:

1. industry competitors (central to the other forces);

2. potential entrants;

3. suppliers;

4. buyers; and

5. substitutes.

However, the authors of this ‘‘Entrepreneurship and strategy in China: why ‘Porter’s five

forces’ may not be’’ believe that this model is no longer (if it ever was) relevant to strategy

development and implementation for entrepreneurs in China. In order to find out if Porter’s

model had played a part in shaping business practice in the country, Wang and Chang

carried out a survey of senior managers and entrepreneurs in China and from overseas.

Porter – relevant for China?

The authors asked if respondents had heard of Porter’s model, and if they had used it in

practice. Of the 70 senior managers from China who responded, less than 90 percent had

never heard of Porter’s five forces (compared to 33 percent of the 30 overseas respondents)

and less than five percent had used it in practice (again, compared to 33 percent of

overseas respondents).

Rather than using Porter, one of the respondents referred to the ‘‘three Ps’’ (or ren, shi, quian

in Chinese) as a tool for strategy and management. These were:

B People – both within the organization and within the wider community.

B Project – in order to assess whether an appropriate opportunity has been identified.

B Penny – because money is at the heart of business.

The respondent felt that the three Ps served his needs more adequately as they related to

elements that were within his control, whereas he believed that Porter’s five forces focused

on elements over which he has less control.

Alternative five forces

As the results of the survey confirmed to the authors that Porter had not and did not currently

play a part in strategy development in China, they turned their attention to the question of

DOI 10.1108/02580540910952172 VOL. 25 NO. 6 2009, pp. 19-21, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 19

what approach would be relevant to this region. This led them to develop an alternative five

forces model based on the philosophy of Sun Tzu who, although he provided strategies in

the art of war, ultimately deemed that war should be avoided. Similarly, the authors propose

that in China there should be more focus on collaboration than competition. The alternative

five forces are:

1. Business purpose. This is referred to by the authors as the moral force of a business. They

believe that although money is a key driver for any organization, companies should also

consider how they can increase profits by employing a ‘‘win-win’’ approach. A contrast is

made between AMC/Peugeot, who did not succeed in China due to the fact that they

wanted local suppliers to buy parts from them but did not try and understand the market,

and Volkswagen, who experienced success due to their desire to co-develop products

and services with local partners in order to understand the market and therefore produce

relevant products. Volkswagen’s co-creation strategy was in line with what Wang and

Chang would describe as a moral business purpose.

2. Business climate. This temporal force is about changing variables such as regulation,

technology, competition and customer values. An example is given within the

telecommunications industry in China where some companies have fared better than

others at creating strategies to deal with the business climate force. Motorola was

originally a market leader due to its early entry but then lost ground to Ericsson. But

Motorola adapted its products and services more in line with market requirements in order

to fight back and did ultimately gain valuable ground. However, the company with the

biggest market share at present is Nokia due to their ability to learn from local rivals faster

than any other multinational.

3. Business location. Unsurprisingly, this spatial force relates to where a business locates in

order to be close to its customers, suppliers and other stakeholders. The authors observe

that this is particularly important in China because of the greater regional differences that

currently exist. This was a lesson that UK brewer Bass learned the hard way when it

located its Chinese joint venture brewery in a remote town in Jilin. Not only was distribution

hampered by regular flooding, but also due to the extremely cold winter temperatures,

production was affected by frozen pipes and therefore frozen draft beer. Bass eventually

sold its stake to the local partner and had to write off its investment of almost US$40

million.

4. Business organization. This force looks at how a business is organized and managed.

Consequently HR and structural issues become important. The authors believe that all

frustrations that Western executives have in China comes from the same source: ‘‘local

people see things differently’’. Therefore this force becomes increasingly important to

manage and requires a very hands-on approach.

5. Business leader (central to the other four forces). Just as competitive forces was central

to Porter’s model, so the business leader is to Wang and Chang’s paradigm. They refer to

the qualities that Sun Tzu identifies such as wisdom, sincerity, human-heartedness,

courage and strictness. It is also pointed out that people who show signs of recklessness,

cowardice, quick temper, sensitivity to honor and over-compassion to people will make

poor leaders. The authors also add that in China leaders need to be able to emotionally

connect with people, be fast to learn and also have the ability to bridge the gap between

local and head office.

Conclusion

By addressing the alternative five forces that have been identified in order to create a climate

of ‘‘collaborative innovation’’, Wang and Chang believe that organizations will be able to play

a key part in the economic development of China.

PAGE 20jSTRATEGIC DIRECTIONj VOL. 25 NO. 6 2009

Comment

This is a review of ‘‘Entrepreneurship and strategy in China: why ‘‘Porter’s five forces’’ may

not be’’ by Wei Wang and Peter Change. This viewpoint provides some controversial and

thought-provoking ideas about the relevance of a well-known and established strategic

academic model for organizations seeking success in China. Although much of the article is

based around anecdotal rather than empirical evidence, the authors do offer some sound

practical advice through the creation of an alternative five forces.

Keywords:

Entrepreneurialism,

Innovation,

Strategic management,

China

Reference

Wang, W. and Chang, P. (2009), ‘‘Entrepreneurship and strategy in China: why ‘Porter’s five forces’ may

not be’’, Journal of Chinese Entrepreneurship, Vol. 1 No. 1, pp. 53-64, ISBN: 1756-1396.

VOL. 25 NO. 6 2009 jSTRATEGIC DIRECTIONj PAGE 21

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Notes to Final Assignment/A revision of Hofstede model of national culture

A revision of Hofstede’s model
of national culture: old evidence
and new data from 56 countries

Michael Minkov
Sofia Local Center, Varna University of Management, Sofia, Bulgaria

Abstract
Purpose – Hofstede’s model of national culture has enjoyed enormous popularity but rests partly on faith.
It has never been fully replicated and its predictive properties have been challenged. The purpose of this
paper is to provide a test of the model’s coherence and utility.
Design/methodology/approach – Analyses of secondary data, including the World Values Survey, and a
new survey across 56 countries represented by nearly 53,000 probabilistically selected respondents.
Findings – Improved operationalizations of individualism-collectivism (IDV-COLL) suggest it is a robust
dimension of national culture. A modern IDV-COLL index supersedes Hofstede’s 50 year-old original one.
Power distance (PD) seems to be a logical facet of IDV-COLL, rather than an independent dimension.
Uncertainty avoidance (UA) lacks internal reliability. Approval of restrictive societal rules and laws is a facet of
COLL and is not associated with national anxiety or neuroticism. UA is not a predictor of any of its presumed
main correlates: importance of job security, preference for a safe job, trust, racism and xenophobia, subjective
well-being, innovation, and economic freedom. The dimension of masculinity-femininity (MAS-FEM) lacks
coherence. MAS and FEM job goals and broader values are correlated positively, not negatively, and are not
related to the MAS-FEM index. MAS-FEM is not a predictor of any of its presumed main correlates:
achievement and competition orientation, help and compassion, preference for a workplace with likeable people,
work orientation, religiousness, gender egalitarianism, foreign aid. After a radical reconceptualization and a new
operationalization, the so-called “fifth dimension” (CWD or long-term orientation) becomes more coherent and
useful. The new version, called flexibility-monumentalism (FLX-MON), explains the cultural differences
between East Asian Confucian societies at one extreme and Latin America plus Africa at the other, and is the
best predictor of national differences in educational achievement.
Research limitations/implications – Differences between subsidiaries of a multinational company, such
as IBM around 1970, are not necessarily a good source of knowledge about broad cultural differences.
A model of national culture must be validated across a large number of countries from all continents and its
predictions should withstand various plausible controls. Much of Hofstede’s model (UA, MAS-FEM) fails this
test while the remaining part (IDV-COLL, PD, LTO) needs a serious revision.
Practical implications – Consultancies and business schools still teach Hofstede’s model uncritically.
They need to be aware of its deficiencies.
Originality/value – As UA and MAS-FEM are apparently misleading artifacts of Hofstede’s IBM data set, a
thorough revision of Hofstede’s model is proposed, reducing it to two dimensions: IDV-COLL and FLX-MON.
Keywords Masculinity, Hofstede’s cultural dimensions, Confucianism, Long-term orientation,
Individualism and collectivism, Uncertainty avoidance
Paper type Viewpoint

1. Introduction
Geert Hofstede is the author of one of the most influential treatises on national culture
(Kirkman et al., 2006), originally published in a short form (Hofstede, 1980), followed by an
expanded version (Hofstede, 2001). According to Bond (2002), cross-cultural psychologists
were “held in thrall” (p. 73) by Hofstede’s intellectual achievement, whereas Peterson (2003)
pointed out that Hofstede’s first book shaped the basic themes, structures, and controversies

Cross Cultural & Strategic
Management

Vol. 25 No. 2, 2018
pp. 231-256

© Emerald Publishing Limited
2059-5794

DOI 10.1108/CCSM-03-2017-0033

Received 13 March 2017
Revised 3 July 2017

14 July 2017
Accepted 1 August 2017

The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2059-5794.htm

The collection of primary data for this study was organized by MediaCom Ltd and the Hofstede Center
at Itim International, a Dutch-Finnish cross-cultural consultancy. Financial support was provided by
MediaCom. Neither of the two organizations has influenced the study design, the data analysis, the
decision to write and submit this paper, or any opinion expressed in it, in any way. All main findings in
this study were shared with Geert Hofstede on several occasions by February 2017.

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Hofstede’s

model

of the cross-cultural field for over 20 years. Hofstede popularized the nomothetic approach
to the study of culture, subsequently employed by other leading researchers (for instance
Inglehart and Baker, 2000; House et al., 2004; Schwartz, 1994, 2008, etc.). Their studies have
proven the utility of this approach. But how accurate is the product that it yielded in
Hofstede’s research? The answer to this question is long overdue. As the issue is complex
and requires a lengthy analysis, a single paper cannot provide all answers. Yet, it can outline
some general conclusions.

This study starts with an analysis of secondary (published) data. Then, it analyzes
primary data from a survey of nearly 53,000 respondents selected probabilistically in
56 countries. The survey was partly designed to check the structure and replicability of
Hofstede’s dimensions.

I remind the readers that Hofstede designed his model at the national level of analysis,
not at the individual. This means that Hofstede’s model explains patterns that are
observable when the agents are whole nations, not individuals. Attempts to transpose
Hofstede’s model to the individual level would be what Hofstede (2001) and others call an
ecological fallacy. Unfortunately, Brewer and Venaik (2014) and Winzar (2015) found that
many authors of articles in leading journals continue to project cultural patterns onto
individuals or organizations. Such attempts amount to expecting the laws of classical
mechanics to apply at the sub-atomic level, where very different quantum physics laws are
in force. Still, if the laws are different at different levels, the logic of the discrepancy needs to
be explained. In one instance, discussed further in this paper, this seems to be a problem for
Hofstede’s model.

Another caveat is also important. Baumann and Winzar (2017) point out that the extent
to which values drive behavior is a function of the circumstances in which individuals find
themselves as well as the relative importance of competing values in particular
circumstances. Minkov’s (2017) work shows that this may be especially true in the East
Asian societies (all those with a Confucian heritage except Vietnam). Nevertheless, this
recently highlighted challenge in the cross-cultural field will be ignored in this study and
Hofstede’s model will be analyzed on the basis of the prevalent conceptualization of culture
at the time of its creation, assuming that culture can be studied through snapshots of static
situations rather than motion pictures.

2. Analysis of secondary data
The analysis of secondary data should shed some light on four basic questions that
entail validity tests for any model in social science or psychology and are therefore relevant
in this study:

RQ1. Did Hofstede’s database, consisting solely of the employees of the IBM Corporation
around 1970, adequately reflect the national cultures of the respondents?

RQ2. Do Hofstede’s dimensions replicate?

RQ3. Do Hofstede’s dimensions have internal reliability? Are their facets really
correlated as the Hofstede model postulates?

RQ4. Do Hofstede’s dimensions have convincing predictive properties? Are they
associated with relevant external variables in accordance with Hofstede’s
theoretical expectations?

2.1 Reliability of Hofstede’s IBM database as a source of knowledge about national culture
In an analysis of data from the World Values Survey (WVS) (www.worldvaluessurvey.org),
Minkov et al. (2015) split all the national samples into several occupational categories.
They found that national samples of respondents from a single category (e.g. only experts)

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www.worldvaluessurvey.org

do not necessarily yield the same dimensions of national culture as samples from another
category (e.g. only skilled manual workers) although the items in the analysis are the same.
Smith et al. (2002) explain why some seemingly matched samples may not be equivalent
and, consequently, may not yield the same results: government employment is appreciated
in Japan, but not in western countries. Consequently, Japanese and western government
employees would probably not provide equivalent samples for comparisons of national
cultures because they do not have the same status in their home countries. Likewise, while
teachers enjoy respect in China, their profession is considered low status in some East
European countries, and there are even derogatory words for “teacher” and “school” in those
societies. Thus, it is possible that employment at IBM around 1970 did not carry the same
social status across the world. As a result, the national subsidiaries of IBM may have
attracted dissimilar types of job applicants. National culture also may have affected actual
recruitment procedures, despite IBM’s efforts to enforce universal global standards.

The IBM database has yielded dimensions of national culture called individualism vs
collectivism (IDV-COLL) and power distance (PD) that are strongly correlated with national
wealth (Hofstede, 2001). This external validation means that at least some of the measured
differences between the IBM subsidiaries reflect actual societal differences and are not pure
artifacts of IBM’s organizational cultures, employee selection, or other local factors. But did
the IBM database correctly reflect national culture in every respect? Critics, such as
McSweeney (2002), were not convinced.

One of the pillars of Hofstede’s masculinity-femininity (MAS-FEM) dimension is
Hofstede’s (2001) finding that distances between the values of men and women are greatest
in MAS nations, whereas FEM ones have smaller distances. In other words, men and women
in FEM countries, such as the Netherlands and the Scandinavian countries, have the most
similar scores on values, whereas men and women in MAS countries, such as Japan, have
the most dissimilar scores. By 2007, it was well established that this was demonstrably
wrong. Guimond et al. (2007) summarize the literature on that subject, including Schwartz
(2005) and Costa et al. (2001). The summary shows that national differences in distances
between the values and personality traits of men and women are not a function of
MAS-FEM but of gender emancipation, underpinned by national wealth. In other words,
these gender differences are strongly associated with IDV-COLL since gender emancipation
is greatest in the most IDV countries. There are diverse explanations of the larger gender
differences in values and personality in the IDV societies, one of which could be that people
in such societies have greater freedom to express their individuality, whereas in COLL
countries there is strong pressure for men and women to be the same in terms of values and
personality. Whatever the right explanation is, far from having the smallest distances
between the values of men and women, as the MAS-FEM theory claims on the basis of the
IBM findings, the Netherlands and the Scandinavian countries have the largest distances.
The values sections in the WVS confirm this. It is noteworthy that MAS-FEM is orthogonal
(unrelated) to IDV-COLL and national wealth (Hofstede, 2001). This means that, in terms of
national distances between men’s and women’s values, the IBM database could hardly have
been more misleading than it was, as it showed a 90-degree deviation from reality. It is
highly unlikely that the structure of male-female distances across the globe has changed so
drastically since 1970 that the IBM revealed a true societal pattern back then, which did not
reflect any geo-economic logic, whereas today we see a 90-degree shift to something that
rests on the solid logic of economic differences between nations and their societal
consequences. Much more plausibly, the societal pattern was the same in 1970, yet the IBM
database was contaminated with IBM-specific peculiarities that made it an unreliable source
of information for extrapolations to the societal level.

Further, the IBM data set has yielded an IDV-COLL index that assigns the
English-speaking countries, and particularly the USA, to the top of the ranking.

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model

Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al. (in press) reviewed all large studies
of national IDV-COLL or closely related constructs, and found that the English-speaking
countries do not have top scores on anything related to IDV-COLL. Of note, some of these
studies are based on the nationally representative WVS or probabilistic data sets that are
close in structure to the national census of each country (Minkov, Dutt, Varma, Schachner,
Morales, Sanchez et al., in press). The leading position of the USA on Hofstede’s IDV-COLL
is doubtlessly an artifact of the IBM database, reflecting its national unrepresentativeness.

2.2 Replicability of Hofstede’s dimensions
Only one peer-reviewed publication in an indexed journal so far (Merritt, 2000) describes an
attempt to replicate all of Hofstede’s IBM dimensions in a single study. While IDV-COLL
and PD replicated reasonably well, UA and MAS-FEM did not. Following this failure,
Merritt (2000) tried constructing an UA dimension and a MAS-FEM dimension with items
that were statistically correlated with those two dimensions, even though they had no face
validity. The outcome was confusing. Merritt (2000) did obtain measures that were highly
correlated with IBM’s UA and MAS-FEM, yet MAS-FEM was composed of classic UA
items, such as a feeling of nervousness and agreement that rules should not be broken, and a
PD item (employees afraid to disagree with superior). Besides, instead of being unrelated to
IDV-COLL, as in the IBM study, this new MAS-FEM, just like UA, was strongly correlated
with it. In short, Merritt’s (2000) work showed that UA and MAS-FEM could not be
replicated, suggesting that they are problematic dimensions.

Single-dimension studies have replicated IDV-COLL successfully (Gelfand et al., 2004;
Minkov, Bond, Dutt, Schachner, Morales, Sanchez et al., in press). This implies that if PD is
seen as a facet of IDV-COLL (Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al.,
in press), it also replicates. Schwartz’s (1994, 2008) work demonstrates that national
aggregates of values in the domain of what he calls “hierarchy” are conceptually and
statistically similar to PD. Thus, Schwartz’s work indirectly confirms the replicability of PD,
yet without necessarily indicating that it is independent from IDV-COLL.

There are no studies in peer-reviewed journals focusing on the replicability of MAS-FEM.
Hofstede (2001) reported that MAS-FEM is highly correlated with Schwartz’s (1994)
measure of “mastery vs harmony.” Yet, Schwartz (2011) stated that he sometimes regretted
his 1994 publication as researchers continued to cite it despite the existence of much more
refined variants of his measures. Schwartz’s latest, unpublished mastery and harmony
measures (personally provided by Schwartz in 2016), recommended by him for validation
purposes, are unrelated to MAS-FEM.

Project GLOBE (Sully de Luque and Javidan, 2004) attempted to replicate
Hofstede’s UA. Yet, GLOBE conceptualized and operationalized UA very differently,
not as a combination of anxiety and a conviction that rules and laws must be followed
strictly. GLOBE’s UA is reminiscent of Hall’s (1959) high-vs-low-context concept as
it measures the degree to which people perceive their societies as having clearly explained
rules or wish to have such rules. The first of these two GLOBE measures (UA practices) is
a variant of IDV-COLL as it creates a more or less clear contrast between economically
advanced countries (more explicit rule communication) and developing countries (more
implicit rule communication), which conforms to Hall’s theory. GLOBE’s UA practices
measure is correlated with Hofstede’s UA at −0.66 ( po0.001, n ¼ 47), suggesting that
people in countries that Hofstede defines as strongly avoiding uncertainty and ambiguity
actually describe their societies as having ambiguous rule communication. This confusing
result can hardly be taken as a replication of Hofstede’s UA. GLOBE’s alternative UA
measure – the degree to which people wish to have clear rule communication – correlates
weakly with Hofstede’s UA at 0.32 ( p ¼ 0.03, n ¼ 47). Again this cannot be seen as a
replication of Hofstede’s UA by any standard.

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Taras et al. (2012) reported that their meta-analysis of studies devoted to Hofstede’s
dimensions, most of them done in a small number of countries at a time, yielded national
indices that are reasonably well correlated with all of Hofstede’s IBM measures. The authors
also report that the original IBM indices for IDV-COLL and PD remain highly correlated
with the corresponding meta-analytical scores from the 1980s to the 2000s, However,
measures of MAS-FEM and UA from the 2000s correlate with the Hofstede’s originals at
only 0.56 and 0.46, respectively, suggesting that MAS-FEM and UA are unstable
dimensions whose modern variants have little to do with their counterparts decades ago.

Taras et al. (2012) conceded that they relied on studies that had used not only Hofstede’s
Values Survey Module but also a variety of other tools designed by various authors to
measure Hofstede’s dimensions. Without detailed information about those unknown and
untested tools, it is impossible to pronounce on what they really measure and, consequently,
how valid the conclusions of Taras et al. (2012) are. Of note, the Values Survey Module has
never been properly tested either. There is not a single study in a peer-reviewed journal
showing how it works across at least 30 countries from all continents.

2.3 Internal reliability of Hofstede’s dimensions
The issue of internal reliability is important as Hofstede’s theories are built on some key
assumptions, such as the positive relationship between societal anxiety and societal
restrictiveness with respect to rules and laws, underpinning the UA dimension, as well as a
negative relationship between so-called MAS and FEM values, underpinning the MAS-FEM
dimension. If these relationships were not confirmed, Hofstede’s model would be seriously
challenged even if it were correct in other respects.

2.3.1 Internal reliability of IDV-COLL and PD. The question of whether IDV-COLL and
PD, as operationalized by Hofstede, are internally reliable is probably irrelevant. Hofstede’s
operationalization of IDV-COLL has not been accepted as a paradigm for major replications
of that dimension simply because many of his items have been seen as lacking face validity
and some have even been viewed as a mystery (Bond, 2002). Replications of IDV-COLL with
entirely different items (Gelfand et al., 2004; Minkov, Dutt, Varma, Schachner, Morales,
Sanchez et al., in press) are characterized by good internal reliability and face validity. There
is no doubt that, measured in this way, IDV-COLL is a robust and important dimension of
national culture.

Surprisingly, major replications of PD are simply missing in the literature. Therefore, it is
impossible to pronounce on that dimension’s internal reliability. The relationship between
IDV-COLL and PD has not been elucidated satisfactorily either. Hofstede’s measures of
these two constructs are closely correlated statistically. Minkov, Dutt, Varma, Schachner,
Morales, Sanchez et al. (in press) argue that they are also related conceptually. If IDV-COLL
reflects differences in treatment of people – as individuals or as members of particular
groups – then PD is a logical facet of IDV-COLL, as it reflects differential treatment on the
basis of one’s position in society. Thus, as PD is merely a conceptual facet of IDV-COLL, and
not an independent dimension, the question of its internal reliability becomes irrelevant.

2.3.2 Internal reliability of uncertainty avoidance (UA). According to UA theory, people
in societies with high levels of anxiety (a facet of neuroticism in the Big Five personality
model) value job security (Hofstede, 2001; Minkov and Hofstede, 2014). Minkov and
Hofstede (2014) found support for this theory albeit across European countries only. Yet,
Table I demonstrates that “good job security” as an important job characteristic,
measured by the WVS in 2000-2004 (Item v88, subsequently discontinued) across the
world, is not associated with any reported measure of national neuroticism or anxiety,
including the most recent estimates of national scores on the anxiety facet of neuroticism
by Allik et al. (2017).

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The UA theory also postulates that societies characterized by high anxiety attempt to
reduce that feeling by believing in, and in fact imposing, strict and unbendable rules and
laws, so as to make life less uncertain (Hofstede, 2001; Minkov and Hofstede, 2014).
However, this theory is not very convincing in view of the fact that anxiety and a
rule-orientation ideology are not correlated at the individual level, which we know
from Hofstede’s (2001) own findings. In other words, the anxious people and the
bureaucratic-minded individuals are not necessarily the same. But if the bureaucrats do not
necessarily have high anxiety levels, what makes them create and insist on unbendable
rules? Are they doing it out of concern for the neurotics who need such rules? If the latter do
need such rules, why do they not, too, believe in them?

Minkov and Hofstede (2014) found that, at the national level, a measure of anxiety is
indeed highly correlated with a measure of the ideology that all laws must be followed
strictly. Yet, this was a study across European countries only. It does not reveal whether
these two facets of UA are correlated highly and positively across a wider set of countries.
There are no secondary data that provide an answer to this question. Yet, the analysis of
primary data below does provide an answer.

Minkov et al. (2013) extracted a dimension of national culture from WVS items
measuring the strength of societal norms in the domain of creation and termination of life,
such as divorce, homosexuality, prostitution, abortion, suicide, and euthanasia. They found
that these items form a strong single factor, called “personal-sexual,” creating a contrast
between economically advanced countries (greater permissiveness) and developing
countries (greater restrictiveness). This factor is closely associated with IDV-COLL
(Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al., in press), but is not related to any
published national index of neuroticism or anxiety. In fact, according to Hofstede (2001) it is
MAS-FEM, rather than UA, that explains societal restrictiveness as measured by “personal-
sexual” items in the WVS. Although the logic of this association is not apparent, it will be
tested in the section devoted to the predictive properties of MAS-FEM.

2.3.3 Internal reliability of MAS-FEM. MAS-FEM has two main facets: MAS values
(achievement, challenge, recognition, earnings, competition) and FEM values (good human
relationships, including compassion). These two facets should be correlated negatively
(Hofstede, 2001).

The 1995-1999 wave of the WVS allows a test of this theory. Item V73 presents the
respondents with four job characteristics – “good income,” “safe job, no risk,” “working with
people I like,” and “important job, feeling of accomplishment” – and asks the respondents to
choose the most important one. The first item and the last two items should reflect
MAS-FEM goals as they correspond to some of the items that loaded highly on MAS-FEM
in Hofstede’s (2001) factor analyses of IBM items (pp. 256-257, p. 284). “Good income”
corresponds to “earnings,” “working with people I like” corresponds to “friendly

National neuroticism (N) or anxiety (A) measure r with v88 n (countries)

N: McCrae (2002) 0.19 16
N: McCrae and Terracciano (2005) 0.34 20
N: Schmitt et al. (2007) −0.07 20
N: Gebauer et al. (2015) −0.05 31
A: Allik et al. (2017) 0.03 17
Notes: Allik et al. (2017) provide several scores for some countries based on different studies. In those cases, I
used the median score. None of the correlations are significant at 0.05
Source: World Values Survey (2000-2004, Item v88)

Table I.
Correlations between
national neuroticism (N)
or anxiety (A) and
importance of “good
job security”

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atmosphere,” whereas “important job, feeling of accomplishment” is a measure of the social
importance of prestige and success, and corresponds to “recognition,” “challenge,” and
“advancement to a higher position” in Hofstede’s analysis. This WVS item format measures
relative importance and avoids response style, approximating the effect of ipsatization (also
known as standardization within subject or by subject) used by Hofstede (2001) in his
analysis of work values from which he extracted MAS-FEM.

Table II demonstrates that the three items are not correlated quite as the MAS-FEM
theory predicts. While “good income” and “working with people I like” are indeed opposites,
“important job” yields correlations that contradict the MAS-FEM theory.

Figure 1 demonstrates that if the items measuring the importance of “feeling of
accomplishment” and “working with people I like” were merged into a single dimension,

1 2 3

(1) Good income 1.00 −0.69** −0.43**
(2) Important job, feeling of accomplishment 1.00 0.31*
(3) Working with people I like 1.00
Notes: All correlations are across 51 countries. *,**Correlations are significant at 0.05 and 0.01 levels,
respectively
Source: World Values Survey (1995-1999, Item v73)

Table II.
Correlations between

three masculinity-
femininity work goals

Dominican Republic

Australia

Norway

Finland

Sweden

China
Puerto Rico

Switzerland

Slovenia

Taiwan

Japan

Germany
Turkey

Hungary
India

Chile

ColombiaRomania

South Africa

Lithuania
Moldova

Uruguay

Bosnia

Russia

Serbia

Korea
Philippines

Slovakia

Salvador

Argentina
Spain

Estonia

Venezuela

Georgia

Mexico

Armenia

Ukraine

Azerbaijan

Latvia

Albania

Croatia

Peru

Bangladesh

Nigeria

Montenegro

New Zealand

50.00

40.00

30.00

20.00

10.00

0.00

0.00 5.00

First choice: Working with people I like

F
ir
st

c
h
o
ic

e
: I

m
p
o
rt

a
n
t
jo

b,
f
e
e
lin

g
o

f
a
cc

o
m

p
lis

h
m

e
n
t

10.00 15.00 20.00 25.00

USA

Czech Republic

Republic of Macedonia

Figure 1.
Visualization of the
relationship between

percentages of
respondents choosing

“feeling of
accomplishment” and
“working with people

i like” as most
important job

characteristics, Item
V73, World Values
Survey (1995-1999)

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it would highlight a contrast between economically developed countries, in the upper right
corner, and developing countries, in the lower left corner. Therefore, the observed
national differences in job priorities are a function of differences in national wealth, not
MAS-FEM, which is unrelated to it. Subsequent waves of the WVS confirm this finding,
although the MAS item in question was fielded without the “feeling of accomplishment”
component. Likewise, across the WVS waves in which these items were fielded,
“good income” and “working with people I like” are negatively correlated and clearly merge
into a single dimension that creates a contrast between economically developed countries
(high priority of people, low priority of income) and developing countries (high priority of
income, low priority of people). Evidently, these contrasts are not a function of MAS-FEM
but are an outcome of differences in economic development, which is unrelated to
MAS-FEM according to Hofstede (2001).

The WVS has fielded some of Schwartz’s items, including importance of success
(V85) and importance of helping (V84) in the 2005-2009 WVS wave, which provides the
largest set of countries that have been scored on both of these items (n ¼ 51). The two items
certainly address societal MAS-FEM values. “Success” is part of Schwartz’s “mastery”
domain, which according to Hofstede (2001, p. 298) contains MAS values. Helping is a major
prerequisite for the maintenance of good relationships. Also, it is found across from
“success” on Schwartz’s (2008) circumplex, suggesting that the two values are opposites,
just as the MAS-FEM theory postulates. A reviewer of this paper helpfully provided the
results of a Monte Carlo simulation analysis of these items, indicating the probability that a
randomly selected male in a specific country will score higher or lower than a randomly
selected female. The results are consistent with the MAS-FEM theory. For example, in 43 of
the 52 countries in the WVS, men are less likely than women to value helping others and
these differences are often substantial, reaching 23 percent (greater probability for males) vs
43 percent (greater probability for females). There is no doubt then that importance of
helping is a FEM value, whereas importance of success is a MAS value.

Across 51 countries, importance of helping and importance of success are correlated
significantly and positively: r ¼ 0.40 ( p ¼ 0.004). Ipsatization at the national level reverses
this correlation and makes it negative, in accordance with the MAS-FEM theory, just like in
Schwartz (2008) where the two items are in opposite sections of the value circumplex,
suggesting a negative correlation. This raises the question of which method is preferable:
comparing raw scores or ipsatized scores? This is a complex issue beyond the topic of this
study. The section on the primary data analysis explains the outcome of fielding MAS and
FEM items as categorical choices without Likert scales, which makes ipsatization irrelevant.

2.3.4 Internal reliability of Confucian work dynamism or long-term orientation (LTO).
Originally called “Confucian work dynamism,” Hofstede’s fifth dimension is also known
as LTO. It is an extremely important dimension as it seems to explain some of the cultural
differences between the Confucian societies of East Asia at one extreme and Africa, the
Middle East, and Latin America at the other. Minkov and Hofstede (2012) successfully
replicated LTO with data from the WVS and confirmed its internal reliability. Still, they
admitted that the dimension lacked theoretical coherence. Minkov, Bond, Dutt, Schachner,
Morales, Sanchez et al. (in press) have provided a radical reconceptualization of this
dimension based on Minkov’s (2011, 2013) work, called “flexibility vs monumentalism”
(FLX-MON). It is partly based on Steven Heine’s self-enhancement and self-stability
theory, and reflects national differences in high vs low self-regard and self-confidence,
being always the same person vs being flexible and adaptable, and liking to help people vs
being reluctant to do that. Minkov, Bond, Dutt, Schachner, Morales, Sanchez et al.
(in press) do not include the concepts of persistence and thrift in FLX-MON, arguing that
these facets of LTO are controversial.

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2.4 Predictive properties of Hofstede’s dimensions
The predictive properties of Hofstede’s dimensions are a central topic in Culture’s
Consequences, Hofstede’s (2001) main monograph. The numerous examples in that book
create the impression that all the dimensions in Hofstede’s model are statistically associated
with, and thus seem to predict or explain, variance in many external variables. However,
given a database of diverse variables measured at the national level, it is easy to select some,
or even many, that are associated at least weakly and at least across some countries. For a
particular dimension of national culture to be credible and of practical utility, it should
satisfy two more stringent requirements. First, it should have strong predictive properties,
yielding high correlations with variables of interest across a large sample of countries from
all, or most, continents, adequately representing the cultural variation across the world’s
modern nations. Second, it should be a strong predictor, withstanding plausible controls.
Appendix 6 at the end of Culture’s Consequences (Hofstede, 2001) shows that the great
majority of Hofstede’s validity tests were performed across fewer than 30 countries, often
from the economically developed part of the world, because Hofstede did not have data from
other countries. This makes most of the reported associations unconvincing.

Taras et al. (2012) studied the predictive properties of Hofstede’s original indices and
found reasonably high correlations, at least with respect to a small number of external
variables, in the past decades. Yet, the strength of these predictive properties has been
declining so much since then that, according to Taras et al. (2012), in another decade or so
Hofstede’s indices may not explain adequately anything anymore. In view of the small
number of dependent variables in the analysis of those authors, the lack of control variables,
and the lack of information on the number and geographic location of the countries across
which each correlation was calculated, their conclusions should be viewed with great
caution. A more detailed dimension-by-dimension check would be beyond the scope of any
article, including this one. Yet, it is noteworthy that Taras et al. (2012) found that
IDV-COLL and PD yielded higher correlations with relevant external variables than did
MAS-FEM and UA. This resonates with the finding of the same authors that MAS-FEM and
UA are more temporarily unstable than IDV and PD, and with Merritt’s (2000) unsuccessful
attempt to replicate MAS-FEM and UA, strengthening the impression that these are
problematic dimensions.

2.4.1 Predictive properties of IDV-COLL and PD. Minkov, Dutt, Varma, Schachner,
Morales, Sanchez et al. (in press) show that IBM’s IDV-COLL index is still a reasonably good
predictor of key variables such as rule of law, human inequality, and accident proneness.
However, Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al.’s (in press) IDV-COLL
index is a considerably better predictor of those key variables, suggesting that the IBM
measure needs updating. Also, Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al.
(in press) show that the Anglo countries, and especially the USA, do not score particularly
high on IDV-COLL or any measure related to it. With the exception of Japan, the Confucian
countries of East Asia score low on IDV-COLL in the work of Hofstede (2001). Yet, due
to their phenomenal economic development in the past decades, they have all climbed higher
on the IDV-COLL ladder, surpassing many developing countries, and currently occupy
mid-range positions.

Table III compares the correlations that Hofstede’s PD and IDV-COLL yield with relevant
external variables that can be expected to be associated with PD. Hofstede’s PD is the better
predictor of only a few of them and in those cases the significant relationship is lowered and
reduced to insignificance after controlling for a still better predictor. This seriously calls into
question the utility of the PD index.

2.4.2 Predictive properties of UA. Exhibit 6 in Hofstede (2001) contains only one
significant correlation between UA and a dependent variable that exceeds ±0.50 across at
least 30 countries: UA predicts a country’s nurse-doctor ratio.

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Hofstede and McCrae (2004) reported that UA was associated with McCrae’s national
neuroticism index. Table IV shows correlations between UA and the four large studies
reporting national neuroticism scores based on the NEO-PI-R or BFI questionnaires. As UA
is related to some measures of neuroticism but not to others, the evidence remains
inconclusive. The correlations between the available measures of neuroticism are not
impressive, suggesting that some of the four studies have not measured it convincingly.
Identifying those studies is beyond the scope of this paper.

Table V provides more correlations between UA and relevant societal indicators that UA
could be expected to correlate with. With the exception of the “personal-sexual” factor,
all selected indicators conform to Hofstede’s (2001) expectations concerning the predictive
properties of UA. Namely, it should predict importance of job security, trust, subjective
well-being, a focus on order, racism, corruption, slow acceptance of innovation, and a lack of
economic freedom. Some correlations were calculated twice: across all available countries
and then across countries in the “very high” category on the UNDP’s (2015)
Human Development Index, since Hofstede (2001) reports that some of UA’s predictive
properties are valid only or primarily across economically advanced countries.

The expectation that UA should be positively associated with importance of job security
and negatively with interpersonal trust (Hofstede, 2001) is not confirmed by the WVS data.
Both variables are closely associated with GLOBE’s UA practices. This suggests high trust
and relatively low importance of job security characterize societies with detailed and
properly enforced formal rules that create predictability. This has nothing to do with
national anxiety.

Variable
r with
PD

r with
IDV-COLL n (countries)

GLOBE’s power distance “practices” (Carl et al., 2004) 0.54** 0.54** 47
GLOBE’s power distance “values” (Carl et al., 2004) 0.07 0.11 47
Schwartz’s hierarchy (personally provided scores, 2016) 0.32* −0.46** 50
Schwartz’s egalitarianism (personally provided scores, 2016) −0.48** 0.56** 50
Schwartz’s intellectual autonomy (personally provided scores, 2016) 0.52** 0.60** 50
Schwartz’s affective autonomy (personally provided scores, 2016) −0.65** 0.69** 50
Schwartz’s embeddedness (personally provided scores, 2016) 0.67** 0.67** 50
Corruption perception index 2015 (Transparency International, 2017) −0.64** −0.68** 68
Same item after controlling for GDP per person in 2014 (World Bank,
2016) and Welzel’s (2014) emancipative values index −0.09 0.07 62
UNDP’s coefficient of human inequality 2015 (Jahan and Jespersen, 2015) 0.55** 0.65** 54
Same item after controlling for GDP per person in 2014 (World Bank,
2016) and Welzel’s (2014) emancipative values index −0.17 −0.08 51
Project GLOBE’s “participative” leadership dimension (Dorfman et al., 2004) −0.49** 0.44** 48
Same item after controlling for Welzel’s (2014) emancipative values index −0.01 0.06 44
Use of superiors as a source of guidance for managerial decision making
(Smith et al., 2002) −0.25 0.20 45
Use of subordinates as a source of guidance for managerial decision
making (Smith et al., 2002) −0.37* 0.45** 45
Same item after controlling for Welzel’s (2014) emancipative values index −0.13 0.19 42
Obedience as a desirable trait for children, WVS 2005-2009, item v21 0.53** −0.38* 38
Same item, after controlling for individualism-collectivism (Minkov, Dutt,
Varma, Schachner, Morales, Sanchez et al., in press) 0.12 0.30 30
Obedience as a desirable trait for children, WVS 2011-2014, item v21 0.44** −0.35* 35
Same item, after controlling for individualism-collectivism (Minkov, Dutt,
Varma, Schachner, Morales, Sanchez et al., in press) −0.01 −0.29 24
Notes: *,**Correlations are significant at 0.05 and 0.01 levels, respectively

Table III.
Correlation patterns of
Hofstede’s power
distance (PD)
compared with those
of Hofstede’s
individualism-
collectivism
(IDV-COLL)

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Although Hofstede (2001) indicated that UA is not associated with risk avoidance,
Table V shows that UA is a positive predictor of preference for a “safe job with no risk” as
measured by the WVS. Yet, controlling for GLOBE’s UA practices reduces this correlation
to statistical insignificance. The strongest preference for job safety is found in societies
without detailed and strictly enforced formal rules (thus scoring low on GLOBE’s UA
practices), which apparently depresses job safety while generating a high desire for it.

One of the most important practical implications of Hofstede’s UA is its presumed
negative association with innovation (Hofstede, 2001). The largest study that supports
this view was conducted across 68 countries more than 20 years ago (Shane, 1995).
It concluded literally that uncertainty-accepting societies may be more innovative than
uncertainty-avoiding societies, based on employees’ preferences for different roles within
their organizations. Intrigued by these findings, Rinne et al. (2012) assessed the predictive
properties of all of Hofstede’s dimensions, using data from the complex Global Innovation
Index as dependent variables. They found that while IDV-COLL and PD were related to
national innovation scores, UA was not related to them. The results in Table V show that
UA is not related to adoption of innovative technologies.

Idiographic analyses further highlight some of the issues that plague the UA dimension
and its index. According to Hofstede (2001), the South East Asian countries tend to score
low on UA. This suggests that their societies should be quite liberal and allow their
members to bend or ignore rules. The observed reality in those countries is precisely the
opposite. They are well known for their harsh punishments, such as flogging for alcohol
consumption during Ramadan in Malaysia, flogging for homosexual intercourse in
Indonesia, prison sentences for graffiti writing in Singapore, and death penalty for
possession of small amounts of light drugs in Malaysia, Indonesia, and Singapore.
Singaporeans do not even have the right to chew gum and jokingly call their home place
“a fine country:” a nice country where one can easily get fined.

2.4.3 Predictive properties of MAS-FEM. Appendix 6 in Hofstede (2001) does not list any
significant correlations between MAS-FEM and a dependent variable that exceeds ±0.50
over at least 30 countries. Nevertheless, some of the presumed key predictive properties of
that dimension are worth examining. Table VI provides correlations between key variables
that MAS-FEM should be associated with according to Hofstede (2001). Some of the
calculations were calculated also across economically developed countries as Hofstede
(2001) indicates that some of the predictive properties of MAS-FEM are valid only across
wealthy countries. Also, some calculations were calculated twice: using raw items and then
ipsatized items, as advocated by Hofstede (2001).

Only two of the variables in Table VI – women’s share of seats in parliament and official
development assistance as share of a nation’s gross domestic product – are associated, albeit

1 2 3 4 5

(1) Hofstede’s uncertainty avoidance 1.00 0.57** 0.18 0.32 43**
n ¼ 28 n ¼ 37 n ¼ 37 n ¼ 60

(2) Neuroticism (McRae, 2002) 1.00 40* 0.49** 0.37
n ¼ 27 n ¼ 28 n ¼ 34

(3) Neuroticism (McCrae and Terracciano, 2005) 1.00 0.32* 0.20
n ¼ 38 n ¼ 45

(4) Neuroticism (Schmitt et al., 2007) 1.00 0.23
n ¼ 51

(5) Neuroticism (Gebauer et al., 2015) 1.00
Notes: *,**Significant at 0.05 and 0.01 level, respectively

Table IV.
Correlations between

Hofstede’s uncertainty
avoidance and

measures of national
neuroticism

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Variable r with UA n (countries)

Importance of job security, WVS (2000-2004, Item v88) (not fielded in the
same form after 2004) −0.11 21
Interpersonal trust, WVS (2005-2009, Item v23) −0.48** 39
Same item after controlling for GLOBE’s UA practices (Sully de Luque and
Javidan, 2004) −0.11 28
Interpersonal trust, WVS (2011-2014, Item v24) 0.41* 36
Same item after controlling for GLOBE’s UA practices (Sully de Luque and
Javidan, 2004) 0.13 24
Personal-sexual factor (Minkov et al., 2013), reflecting restrictive societal
norms with respect to the creation and termination of life −0.11 32
Preference for a “safe job with no risk,” WVS (2000-2004 and 2005-2009,
average of Items v84 and v48) (not fielded after 2009) 0.47* 42
Same item after controlling for GLOBE’s UA practices (Sully de Luque and
Javidan, 2004) 0.23 29
Average life satisfaction, WVS (2005-2009, Item v22) 0.01 35
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.64** 13
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for Welzel’s (2014) emancipative values index −0.37 13
Average life satisfaction, WVS (2011-2014, Item v23) 0.12 35
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.25 12
Subjective perception of one’s own state of health, WVS (2011-2014, Item v11) 0.33 30
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.42 ( p ¼ 0.20) 11
Average happiness, WVS (2011-2014, Item v10) 0.20 28
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.51 ( p ¼ 0.11) 11
“Maintaining order in the nation” most important of four national goals,
WVS 2005-2009 (not fielded after 2009), Item v71 0.04 38
Percentage respondents choosing “people of a different race” as unwanted
as neighbors, WVS (2005-2009, Item v35) 0.00 48
Percentage respondents choosing “immigrants, foreign workers” as
unwanted as neighbors, WVS (2005-2009, Item v35) −0.04 45
Corruption perception index 2015 (Transparency International, 2017) −0.23 68
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.64** 27
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for GLOBE’s UA practices (Sully de Luque
and Javidan, 2004) −0.32 ( p ¼ 0.15) 23
Availability of latest technology according to the Global Competitiveness
Report (2014-2015, Item 9.01) (Schwab et al., 2014) −0.20 64
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.39* 27
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for GLOBE’s UA practices (Sully de Luque
and Javidan, 2004) −0.04 23
Percentage internet users in 2013 according to the Global Competitiveness
Report (2014-2015, Item 9.01) (Schwab et al., 2014) −0.06 64
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.50** 27
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for GLOBE’s UA practices (Sully de Luque
and Javidan, 2004) −0.22 23

(continued)

Table V.
Correlations between
uncertainty avoidance
(UA) and relevant
external variables

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weakly, with MAS-FEM, yet even these correlations become insignificant after controlling
for relevant external variables, such as Welzel’s (2014) emancipative values index and
GLOBE’s assertiveness, proposed by Hartog (2004) as a radical reconceptualization of, and
improvement on, Hofstede’s MAS-FEM. This failure of MAS-FEM to predict female
emancipation should not come as a surprise since it is well known by now that emancipation
is strongly associated with variants of IDV-COLL and national wealth, and is completely
unrelated to MAS-FEM. An example of such an IDV-COLL variant is Welzel’s (2014)
emancipative values index. Welzel’s extensive work in the field of emancipation is fully
convincing and conclusive.

Dimensions of national culture that replicate in one form or another, and have good
predictive properties, produce clear geo-economic spatial configurations as shown by Dobson
and Gelade (2012). This is accepted by Hofstede (Minkov et al., 2013). Yet, MAS-FEM does not
yield a recognizable geo-economic configuration and neighboring countries whose populations
have common ethnic and civilizational origins, such as Mexico and Guatemala, and Japan and
Korea, sometimes have dramatically different scores on MAS-FEM. Naturally, an index that
lacks a geo-economic structure cannot explain variables that have such a structure, such as
most important national statistics and most WVS measures.

2.4.4 Predictive properties of Hofstede’s fifth dimension. Minkov and Hofstede (2012)
showed that their LTO measure predicted national differences in educational achievement.
However, Minkov, Bond, Dutt, Schachner, Morales, Sanchez et al. (in press) demonstrated
that FLX-MON, a radical reconceptualization of LTO, is the best-known predictor of
national differences on TIMSS and PISA tests, considerably outperforming LTO measures.

3. Analysis of primary data
The analysis of primary data focuses on the internal reliability of the two problematic
dimensions: UA and MAS-FEM. It uses data from a new study of national culture and
personality across nearly 53,000 respondents selected probabilistically from all main geographic
regions and economic sectors of 56 countries, reflecting the ethnic, linguistic, and age structure
of most countries quite adequately. In economically developed countries, the samples are also
close to the national census in terms of educational-level differences, whereas the samples in
developing countries consist predominantly of respondents with higher education. Nevertheless,
in nearly each country in the second group there are at least 100 probabilistically selected
respondents without higher education, thus allowing separate cross-national analyses of
samples with and without higher education. This study excluded the Dominican Republic and

Variable r with UA n (countries)

Mobile phone subscriptions per 100 population in 2013 according to the
Global Competitiveness Report 2014-2015, Item 2.08 (Schwab et al., 2014) 0.08 64
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.01 27
Index of Economic Freedom 2016 (Heritage Foundation, 2016) −0.33* 63
Same item, after controlling for GLOBE’s UA practices (Sully de Luque and
Javidan, 2004) −0.07 45
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.74** 27
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for GLOBE’s future orientation practices
(Ashkanasy et al., 2004) and neuroticism (McCrae and Terracciano, 2005) −0.50 ( p ¼ 0.07) 16
Notes: *,**Significant at 0.05 and 0.01 level, respectively Table V.

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Variable r with MAS-FEM n (countries)

Percentage choosing “Working with people I like” as most important job
characteristic, Item v73, WVS (1995-1999) 0.11 28
Percentage choosing “Working with people I like” as most important job
characteristic, Item v48, WVS (2005-2009) (not fielded after 2009) −0.11 36
Percentage choosing “Important job, feeling of accomplishment” as most
important job characteristic, Item v73, WVS (1995-1999) (not fielded in this
form after 1999) −0.34 28
Percentage mentioning “a job in which you feel you can achieve something,”
WVS (2000-2004) (not fielded after 2004) −0.05 23
Importance of helping as a personal value, WVS (2005-2009, Item v84) 0.29 32
Same item, after ipsatization at the national level, across all 10 Schwartz items 0.18 32
Importance of success as a personal value, WVS 2005-2009, item v85 −0.06 32
Same item, after ipsatization at the national level, across all 10 Schwartz items −0.26 32
“Religious faith” mentioned as an important trait for children, Item v19,
WVS (2005-2009) 0.12 38
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.28 15
“Religious faith” mentioned as an important trait for children, Item v19,
WVS (2011-2014) 0.20 30
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.07 11
Importance of family, item v4, WVS 2005-2009 −0.07 37
Same item after ipsatization by nation across five value items in that section
of the WVS −0.09 37
Same item after ipsatization, only countries with a “very high” Human
Development Index (UNDP, 2015) −0.29 19
Importance of work, Item v8, WVS (2005-2009) 0.05 37
Same item after ipsatization by nation across five value items in that section
of the WVS 0.05 37
Same item after ipsatization, only countries with a “very high” Human
Development Index (UNDP, 2015) 0.08 19
Importance of religion, Item v9, WVS (2005-2009) −0.05 37
Same item after ipsatization by nation across the five value items in that
section of the WVS −0.07 37
Same item after ipsatization, only countries with a “very high” Human
Development Index (UNDP, 2015) −0.12 19
Average life satisfaction, WVS (2005-2009, Item v23) 0.01 35
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.16 12
Average life satisfaction, WVS 2011-2014, item v23 0.03 35
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.19 12
Subjective perception of one’s own state of health, WVS (2011-2014,
Item v11) 0.09 30
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.21 11
Gender Inequality Index (UNDP, 2015) 0.08 62
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) 0.20 27
Schwartz’s mastery (personally provided scores, 2016) 0.08 50
Societal restrictiveness vs permissiveness as measured by the WVS
2005-2009: “personal-sexual” factor (Minkov et al., 2013) −0.13 32
Same item after controlling for Hofstede’s IDV-COLL −0.30 ( p ¼ 0.10) 32

(continued)

Table VI.
Correlations between
masculinity-femininity
(MAS-FEM) and
relevant external
variables

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Puerto Rico, where the data were collected by phone, unlike all other countries. Details about the
samples are freely available from Itim International (info@itim.org), an international cross-
cultural management consultancy, licensed by Geert Hofstede.

The questionnaire included 108 items, plus demographic questions, grouped in several
sections. The largest section (52 items) consists of personality items and self-construals,
targeting the Big Five measures of personality and Hofstede’s dimensions. Two smaller
sections measure consumer behavior preferences and sources of guidance in making
purchasing decisions. Analyses of these sections may have interesting implications for
international business.

Comparisons of data from samples with and without higher education did not reveal any
substantial differences in terms of country positions. Below, only results from comparisons
of samples without higher education are reported.

In order to avoid response style associated with Likert scales, all items in this study elicit
categorical responses, plus an intermediate option. Examples are provided below.

3.1 UA
Two items target the two main facets of UA. The first is about anxiety:

1. I worry a lot and often feel nervous. 2. I am somewhere here, in between these two.
3. I am usually relaxed and do not worry much.

The second item is about the conviction that all societal rules and laws must be followed
strictly, which is the societal extrapolation of the conviction that all company rules must be
followed strictly (Minkov and Hofstede, 2014):

1. If I could, I would make all people in our society follow all our laws and rules very
strictly. 2. I am somewhere here, in between these two. 3. If I could, I would allow people to
break useless or meaningless laws and rules.

Scored on a scale from 1 to 3 and aggregated to the national level, the two items correlate
positively at 0.45 ( p ¼ 0.022) across the 26 European countries in the sample, supporting
Minkov and Hofstede’s (2014) findings, and validating the representativeness of the
database used for this analysis, as it produces the same pattern as the nationally
representative European Social Survey used by Minkov and Hofstede (2014). But across
53 countries from all continents, this correlation is −0.23 ( p ¼ 0.094). Figure 2 visualizes the
relationship between the two variables.

Figure 2 suggests that, with the exception of Vietnam[1], it is mostly the economically
advanced IDV societies that have the strongest tendency to give people the discretion to

Variable r with MAS-FEM n (countries)

Same item, only countries with a “very high” Human Development Index
(UNDP, 2015) −0.44 ( p ¼ 0.11) 14
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for Hofstede’s IDV-COLL −0.49 ( p ¼ 0.09) 14
Women’s share of seats in parliament (UNDP, 2015) −0.26* 61
Same item, after controlling for Welzel’s (2014) emancipative values index −0.16 55
Same item, only countries with a very high Human Development Index
(UNDP, 2015) −0.45* 27
Same item, only countries with a “very high” Human Development Index
(UNDP, 2015), after controlling for Welzel’s (2014) emancipative value index −0.38 24
Official development assistance in 2015 (OECD, 2015) −0.47** 27
Same item, after controlling for Welzel’s (2014) emancipative values index
and GLOBE’s assertiveness “as should be” (Hartog, 2004) −0.36 ( p ¼ 0.14) 25
Notes: *,**Significant at 0.05 and 0.01 level, respectively Table VI.

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model

decide which laws and rules are not worth following. With the exception of Italy, all societies
at the opposite extreme are developing countries. This supports Minkov, Dutt, Varma,
Schachner, Morales, Sanchez et al.’s (in press) assertion that this item measures IDV-COLL
differences. In IDV countries, people have greater freedom and individual discretion to
decide whether societal rules are meaningful or not. In COLL societies, people have to follow
the rules that are imposed on them as their fellow countrymen and women do not believe
that giving people discretion is a good idea. This highly meaningful and logical pattern
suggests that the country scores on this item capture logical cultural differences and cannot
be dismissed as a study artifact.

Table VII shows that, unlike Hofstede’s UA, the anxiety item in this study is significantly
correlated with all national measures of neuroticism and anxiety obtained in large-scale
studies. Besides, some of the correlations are quite high. This validates the anxiety item as a
reliable measure of national anxiety. In fact, it may be the best available national measure of
anxiety and neuroticism as it is the only one available that yields such (relatively) high
correlations with each of the remaining measures in the other large-scale studies. In sum,

Japan

2.10

2.00
W

o
u
ld

m
a
ke

p
e
o
p
le

f
o
llo

w
a

ll
la

w
s

a
n
d
r

u
le

s
st

ri
ct

ly
-W

o
u

ld
le

t
p

e
o

p
le

b
re

a
k

u
se

le
ss

la
w

s
a
n
d
r

u
le

s

1.90

1.80

1.70

1.60

1.50

1.40

1.70 1.80 1.90 2.00

Worry-Relaxed

2.10 2.20 2.30 2.40

Portugal

Vietnam Hungary

Greece Belgium

Serbia
Finland Chile

Canada

UK
Denmark

Ireland

Switzerland

Norway

The Netherlands

New Zealand

Turkey

Romania

Sweden

Israel

Malaysia

China

Thailand
Colombia

Peru

Venezuela

South Africa Kenya

Nigeria

Indonesia

Philippines

Kazakhstan

India

Australia

France

Egypt
Germany

Korea

Singapore

Taiwan Spain

Brazil
Poland

Mexico

Hong Kong
Ukraine

Argentina

Russia

Italy

Czech Republic

USA

Figure 2.
Visualization of the
relationship between
anxiety and
preference for strict
laws and rules
(this study)

Variable r n (countries)

Neuroticism in McCrae (2002) −0.62 31
Neuroticism in McCrae and Terracciano (2005) −0.47 35
Neuroticism in Schmitt et al. (2007) −0.67 37
Neuroticism in Gebauer et al. (2015) −0.42 54
Anxiety in Allik et al. (2017) −0.67 37
Note: All correlations are significant at 0.01

Table VII.
Correlations between
the reversely scored
anxiety item used in
this study and
measures of national
neuroticism
and anxiety

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we have solid evidence that this study has measured anxiety and societal restrictiveness
in a very meaningful and reliable way, and that the two measures are not correlated as
UA theory predicts.

3.2 MAS-FEM
Baumann and Winzar (2017) correctly point out that value prioritizations are complex
processes whose outcome may depend on the values themselves and circumstances. From
this perspective, asking people how much they value achievement may not be informative
enough. Everybody values achievement of some sort, yet some people may value
achievement of good human relationships (a FEM value or goal) more than achievement of
recognition (a MAS value or goal) or vice-versa. Therefore, for the purpose of this study, the
text of the achievement item was quite specific:

1. I would like to achieve fame and glory. 2. I am somewhere here, in between these two.
3. I see fame and glory as useless to me.

This conceptualization of achievement is entirely in accordance with Hofstede (2001) who
indicates explicitly that high MAS stands for “achievement in terms of ego boosting, wealth,
and recognition” (p. 298).

The other MAS item addresses one’s willingness to compete, based on Hofstede’s (2001)
indication that MAS cultures have a “concern” for “performance and competition” (p. 313),
and that “The family in masculine societies socializes especially male children toward
assertiveness, ambition, and competition” (pp. 314-315):

1. I like to compete with people. 2. I am somewhere here, in between these two. 3. I hate to
compete with people.

The following items capture the concept of FEM:
1. I like to help people, even if I have to do something difficult. 2. I am somewhere here, in

between these two. 3. I rarely agree to do something difficult to help people.
1. I am a compassionate person. When others have problems, I feel very sorry for them.

2. I am somewhere here, in between these two. 3. If other people have problems, I am usually
indifferent.

Just like helping, compassion is consistent with MAS-FEM theory since Hofstede (2001)
indicates that “The mas/fem dimension affects priorities in the following areas: (1) solidarity
with the weak in one’s society versus reward for the strong” (p. 317), and that “In masculine
societies more people believe that the fate of the poor is the poor’s own fault” (p. 319).

Our data show that, worldwide, we have the same situation as with the “help” and
“success” items in the WVS: men are more likely to adopt the supposedly MAS
self-descriptions (desire for fame, competitiveness) whereas women are more likely to adopt
the supposedly FEM self-descriptions (desire to help and compassion). Thus, there is no
doubt that these items conform to Hofstede’s MAS-FEM theory.

Table VIII shows correlations between these items, scored on a scale from 1 to 3 and
aggregated to the national level, and Hofstede’s MAS-FEM index.

Table VIII demonstrates that all MAS and FEM items are correlated positively. The use
of conceptual opposites within each item instead of a Likert scale means that this pattern
cannot be due to the well-known preference of some societies to agree with most statements
or rate most items as important, since the respondents are not asked to agree with anything
to any specific degree or rate the importance of anything. They have described themselves
in terms of clear statements that they identify with.

Figure 3 visualizes the relationship between liking to compete and liking to help. The two
items create a clear geographic map, with East Asia in the upper right corner, European and
English-speaking countries in the middle, and Africa, Latin America, Southeast Asia, as well
as the Balkans and the Middle East (Turkey, Serbia, Romania and Egypt), in the lower left
corner. These two items obviously measure something very real; otherwise there would not

247

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model

be such a clear geographic pattern. It is evident that the East Asian Confucian cultures are
least likely to socialize their members for a desire to compete and help, whereas the rest of
Asia, Latin America, Africa, and the Middle East exhibit the opposite pattern. This pattern
is indicative of FLX-MON differences, explained in the work of Minkov, Bond, Dutt,
Schachner, Morales, Sanchez et al. (in press).

This finding does not imply that East Asians do not engage in competitions. In fact, it is
well known that they tend to be fiercely competitive in education. The results of this fierce
competitiveness are also known. Children of Confucian heritage surpass those from any
other societies in educational achievement, especially in mathematics. Yet, the nationally
representative study TIMSS reveals that East Asian children are also those who have the
most negative attitudes toward the study of mathematics (Minkov, 2011), and possibly
toward the educational competitions that they have to engage in, under societal pressure.

2.60

2.40

2.20

Switzerland Germany

Israel

Austria Greece

Norway

Poland

India

Malaysia
Italy

Ukraine

New Zealand

South Africa

Turkey

Myanmar

Portugal
Chile

Ireland
Brazil

Kazakhstan

Philippines

Colombia

Vietnam

Nigeria

Kenya

Serbia

Venezuela

Egypt

Indonesia

Mexico

Romania

Peru

The Netherlands
France

Hong Kong

Japan

Korea

China

Taiwan

Singapore

Finland

Canada

Sweden

Russia
Denmark

Czech Republic

Spain Thailand
Belgium

UK
USA

2.00

I
lik

e
t
o
c

o
m

p
e
te

-I
h

a
te

t
o
c

o
m

p
e
te

1.80

1.60
1.20 1.40

I Like to help-I rarely agree to help

1.60 1.80 2.00 2.20

Figure 3.
Visualization of the
relationship between
liking to compete and
liking to help people
(this study)

1 2 3 4 5

(1) Desire to achieve fame 1.00 0.55** 0.32* 0.47** −0.20
n ¼ 54 n ¼ 54 n ¼ 54 n ¼ 42

(2) Desire to compete 1.00 0.61** 0.59** 0.01
n ¼ 0.54 n ¼ 54 n ¼ 42

(3) Desire to help 1.00 0.77** −0.03
n ¼ 54 n ¼ 42

(4) Compassion 1.00 0.12
n ¼ 42

(5) Hofstede’s masculinity-femininity 1.00
Notes: *,**Correlations are significant at 0.05 and 0.01 levels, respectively

Table VIII.
Correlations between
masculinity-femininity
items (self-construals)
in this study
and Hofstede’s
masculinity-femininity
index

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Again, we have evidence of Confucian duality and ability to adapt one’s behavior to the
requirements of the situation even if this means a clash with one’s values and dispositions.

Item v10 in WVS 1999-2004 (subsequently discontinued) measured the importance
of “service to others” as a personal value. The percentages of respondents who have
chosen the “very important” option are highly correlated with the national scores on
the reversely-scored liking-to-help item in this study: r ¼ −0.71 ( po0.001, n ¼ 21).
Considering the 15-year time difference between the two studies, this is a remarkably high
correlation, strongly validating both studies: the WVS and ours. Figure 4 visualizes the
relationship between the two items.

In sum, the MAS and FEM measures in this study are highly reliable and valid as
measures of national culture and the positive correlations between them, refuting the
MAS-FEM theory, are not due to improper measurement.

4. Discussion
Replication and validation studies can have three possible outcomes. First, the original
model may be confirmed and validated. In that case, all is just well. Second, the replication
and validation attempt may produce nonsensical findings. This would not necessarily
invalidate the original model. It may be the case that the original is valid whereas the
replication attempt is plagued by various methodological errors. This study is an example of
the third possible outcome. The original model is not replicated and is not validated but the
new findings are not nonsensical at all. They are underpinned by a very solid logic, which
however differs from Hofstede’s. This new logic is based on nationally representative
studies, mostly the WVS and a survey of 53,000 people chosen probabilistically, reflecting
the structure of the national census more or less closely in each of 56 nations, adequately
representing the world’s national cultures from all continents. Which of the two logics is
stronger – the old or the new – is a question that is not hard to answer.

Egypt

Nigeria

70.00

60.00

50.00

40.00

W
V

S
1

9
9
4

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4
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30.00

20.00

10.00

0.00

1.20 1.40 1.80 2.00 2.20

I like to help-I rarely agree to help

Venezuela

Mexico

Philippines

Chile

Peru

Serbia
Indonesia

India

Canada

Sweden

Spain

Vietnam

1.60

Singapore China

Korea

Japan

USA
Argentina

South Africa

Figure 4.
Visualization of the
relationship between
liking to help people

(this study) and
importance of “service

to others,” v 10 in
World Values Survey

(1999-2004)

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model

This study documents the need for a thorough revision of Hofstede’s model of national
culture. Of the four original IBM dimensions, only IDV-COLL is supported as a coherent and
empirically useful dimension of national culture. Yet, the original IBM operationalization
and the index that it has produced need a substantial correction. First, IBM’s IDV-COLL
does not have good face validity. Second, after Hofstede’s IBM study, the USA and the other
English-speaking countries have never been shown to lead the country rankings on
any major dimension of national culture or any national statistics related to IDV-COLL.
A much-needed correction of the IDV-COLL index is provided by Minkov, Dutt,
Varma, Schachner, Morales, Sanchez et al. (in press).

The internal reliability of PD and its independence from IDV-COLL could not be
established with the data available for this study. It is however clear that IDV-COLL is a
better predictor of the main variables that PD can be expected to predict, making PD
empirically redundant. And since one of the main facets of IDV-COLL is differential
treatment of people based on their group affiliation, PD is logically a sub-facet of IDV-COLL
that need not be seen as independent from IDV-COLL.

The main pillar of UA – the assumption that societal anxiety accounts for societal
preference for strict rules and laws – collapses upon scrutiny. These two presumed UA
facets are correlated highly and positively only across European countries. An analysis
across countries from all continents reveals quite clearly that societal preference for strict
rules and laws is an aspect of COLL, and is not related to national measures of anxiety or
neuroticism as UA theory predicts. This explains why, despite their low UA scores, the
South and Southeast Asian countries have extremely strict rules in domains that their COLL
cultures have traditionally considered important. The fact that westerners observe some
lack of order in South Asia from their own perspective, such as chaotic driving, simply
means that Western driving regulations are still a foreign import in South Asia that has not
taken root in the local culture as it clashes with older cultural rules.

Apart from its lack of internal consistency, UA does not have any of the main predictive
properties that it has been credited with. Whenever UA produces a significant zero-order
correlation with a relevant external variable, that correlation is reduced to insignificance
after controlling for various aspects or facets of IDV-COLL or closely related constructs,
such as GLOBE’s UA or future orientation practices, or Welzel’s emancipative values index.

MAS and FEM values are correlated positively, not negatively, and are not related to the
IBM MAS-FEM index. This finding, as well as the failure of the IBM’s MAS-FEM index to
demonstrate the predictive properties that it is supposed to have, plus the fact that distances
between the values and personality traits of men and women are not a function of
MAS-FEM, discredits the MAS-FEM dimension and suggests that it is an artifact of the
IBM data set without a societal equivalent.

Figure 5 is a cultural map of the world, using Hofstede’s UA and MAS-FEM as axes. It is
puzzling to see the Confucian countries scattered throughout the map. It is also impossible
to explain the close proximity of pairs of culturally distant countries, such as the USA and
the Philippines, Canada and Indonesia, Taiwan and Brazil, Korea and Peru, Germany and
Ecuador, Austria and Venezuela, and Finland and Thailand, to name just a few pairs. While
the Scandinavian countries and the Netherlands have the lowest scores on MAS-FEM, the
other economically advanced countries are at the other extreme on that dimension.
The Latin American countries are also dispersed along the MAS-FEM axis, without any
apparent logic. Some of the Confucian countries score very low on UA whereas others score
very high. Taiwan is in the middle. These patterns do not have close analogues in any
national statistics or other indicators.

Figures 6 and 7 present a new cultural map of the world, using the latest measures of
IDV-COLL (Minkov, Dutt, Varma, Schachner, Morales, Sanchez et al., in press) and
FLX-MON (Minkov, Bond, Dutt, Schachner, Morales, Sanchez et al., in press).

250

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This new map of the world is very much like the real one, drawn from a traditional European
perspective, without the world’s oceans. There is one logical exception: the English-speaking
countries are not scattered across the world but form a fairly compact cluster right above the
center of the map. Indonesia’s proximity to the Arab world and the African countries should not

Japan

VenezuelaAustria

South Africa

Australia

Switzerland

Germany
Italy

Ecuador

Pakistan

Colombia

Mexico

Argentina Greece

Belgium
Turkey

Panama

Serbia
Uruguay

Guatemala
Salvador

Peru

Portugal

Korea

ChileThailand

Finland
Costa Rica

Slovenia

The Netherlands
Denmark

Sweden
Norway

Israel

Brazil

France
CroatiaIran

East Africa

Ireland

UK

USA

Philippines

100.00

80.00

60.00

40.00

20.00

0.00

0.00 20.00 40.00 60.00

Hofstede’s uncertainty avoidance

H
o
fs

te
d
e
’s

m
a
sc

u
lin

ity

80.00 100.00 120.00

Hong Kong

Jamaica

Singapore

Malaysia

India

Indonesia

Canada

New Zealand

Arab

Taiwan

Figure 5.
A cultural map of the

world produced by
Hofstede’s uncertainty

avoidance and
masculinity-femininity

The Netherlands

Belgium

France

Finland

Korea

Hong Kong

ChinaSingapore

Kazakhstan

Thailand

Taiwan

Japan
New Zealand

Australia

UK

Norway

Denmark
Sweden

Switzerland Germany

Czech Republic

Spain
Hungary

Portugal

Italy

Argentina

Chile

Mexico

Peru

Colombia

Venezuela
South Africa

Romania

Myanmar

MalaysiaVietnam
Brazil

Puerto Rico

India

Indonesia

Egypt

Kenya

Nigeria

Philippines

USA
Greece

Ireland

Israel

RussiaPoland

Ukraine
Turkey

Canada

200.00

100.00

0.00

–100.00

–100.00

–200.00

–200.00
–300.00

–300.00 0.00 200.00 300.00100.00

Monumentalism-Flexibility

C
o
lle

ct
iv

is
m

-I
n
d
iv

id
u
a
lis

m

Figure 6.
A cultural map of the
world produced by the

new measures of
collectivism-

individualism and
monumentalism-

flexibility

251

A revision of
Hofstede’s

model

seem surprising. It is supported by proximity on important national indicators, such as
measures of rule of law, transparency vs corruption, accident proneness, and gender inequality
(all associated with IDV-COLL), as well as educational achievement (associated with FLX-MON).

The new cultural map is also the only one available that highlights the cultural
distinctiveness of the Confucian countries of East Asia. They occupy an intermediate
position on IDV-COLL, yet they are leaders in terms of FLX-MON. This explains the leading
position of the Confucian countries in educational achievement, followed by Finland, the
Netherlands, Russia, and Kazakhstan.

This study exposes two perils in cross-cultural research. The first one is over-reliance on
seemingly matched samples whose comparability is not guaranteed. The second is
insufficient testing of the validity of a model of national culture. This includes use of small
and globally unrepresentative samples of nations and reliance on modest zero-order
correlations that have not been tested extensively by controlling for potentially better
predictors. Authors who use Hofstede’s dimensions rarely test the effects of other
predictors, such as Inglehart’s, Schwartz’s, and GLOBE’s measures, alongside Hofstede’s.
This explains why, not only in Hofstede’s work, but also in the studies of many other
authors, UA has been found to be a significant predictor of diverse variables, including
some of those tested in this study. Even MAS-FEM has been reported to produce effects in
some analyses, although it is obviously a fictitious dimension. Most recently, De Mooij
(2017) reported several high zero-order correlations between MAS-FEM and various
variables measured across European countries only. One of these, “agree with university
education is more for boys” (p. 451) is reported to correlate with MAS-FEM at 0.68, without
the number of countries across which the correlation was calculated (p. 451). The same
variable is measured by item v52 in WVS 2011-2014 across the world. Across 30
overlapping countries, it correlates with MAS-FEM at −0.31 ( p ¼ 0.09).

At the time when Hofstede developed his model, and even in 2001, when his main
monograph was published, the scarcity of the available data did not allow adequate

North Europe

Anglo

South Europe

Latin America

Arab

Africa

Russia

South Asia

East Asia

2.00

1.00

0.00

–1.00

–1.00–2.00
–3.00

–3.00

–2.00

0.00

Monumentalism-Flexibility

1.00 2.00 3.00

C
o
lle

ct
iv

is
m

-I
n
d
iv

id
u

a
lis

m

Figure 7.
A cultural map of the
world produced by the
new measures of
collectivism-
individualism and
monumentalism-
flexibility, showing
the world’s main
cultural regions

252

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25,2

large-scale tests. Hofstede’s analysis caused the admiration of many scholars, including the
author of this paper. Yet the world has changed enormously since then and the amount of
information about cross-cultural differences worldwide has increased manifold. This wealth
of information today reveals a picture that is very different from what Hofstede extracted
from his IBM data set and, apart from the fact that the Confucian societies are now
somewhat more IDV-oriented, the difference does not seem to be a result of seismic cultural
restructuring across the world. It comes from the nature of Hofstede’s IBM samples: they
were not good representations of the cultures from which they were drawn, whereas the
samples available today are far more representative.

Might the new model, proposed here, consisting of the new measures of IDV-COLL and
FLX-MON, also be refuted upon closer scrutiny? It may certainly be modified, updated, and
improved, but it cannot be completely dismantled in the near future, before very significant
cultural shifts have occurred across the world. IDV-COLL is a dimension that transpires in
one variant or another from any large study of culture, and each variant is closely associated
with differences in national wealth and a host of other national indicators. The long history
of FLX-MON and its predecessors from diverse studies, including the WVS, is described by
Minkov, Bond, Dutt, Schachner, Morales, Sanchez et al. (in press). The validity of that
dimension is confirmed by its strikingly close and persistent association with differences in
national educational achievement, and measures of self-consistency and self-esteem from a
variety of reliable studies, covering many countries across the globe, including
self-confidence or self-esteem measures by PISA OECD, which relies on the largest
nationally representative samples in the history of cross-cultural studies. Other national
indicators, such as homicide rates and adolescent fertility seem to follow the same
geographic distribution, rising from Confucian East Asia toward Latin America and Africa,
whereas suicide rates and tobacco consumption seem to rise in the opposite direction.
These, and many other research topics, are awaiting further exploration.

Note

1. Vietnam exhibits an unusual pattern on this item. That country scores relatively high in terms of
percentages of people who would enforce strict laws, like in a typical collectivist country.
The percentage of Vietnamese who would allow others to break useless laws is small in absolute
terms, yet high relative to other countries.

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Notes to Final Assignment/Ansoff Matrix pain and gain

Anshoff’s
Matrix, pain and

gain

101

Ansoff’s Matrix, pain and gain
Growth strategies and adaptive learning

among small food producers
Gerald Watts, Jason Cope and Michael Hulme

Lancaster University Management School, Lancaster, UK

Introduction
This paper arises from a programme of research among food sector SMEs in
the North West of England. The research project included both qualitative and
qualitative phases and its primary focus was on the growth and development
needs of the sample firms.

The first part of the title derives from the focus on g rowth and, more
specifically, strategies for growth relative to the four quadrants of Ansoff ’s
matrix (Ansoff, 1965): market penetration, market development, product
development and diversification (Figure 1). In the analysis, we used this
framework to categorise growth strategies and then attempted to relate them to
other variables such as growth history and expectations.

The second part of the title is a reference to the inter-relationship between the
“personal” and the “business”, in that all of the sample were owner-managed
businesses. It is well understood that owner-management has significant
implications at the qualitative level (Bolton, 1971) and that many aspects of the
business, including objectives and strategy are closely related to the personal
characteristics and goals of the owner-manager. (Carson et al., 1995).

As a specific focus, we wanted to explore the usefulness of the Greiner life-
cycle model (Greiner, 1972) in interpreting the relationship between personal
and business experience and learning in a small firm. Greiner’s model depicts
growth as occurring through phases of relatively stable expansion interspersed
with periods of “crisis” which may result in successful adaptation and learning,
facilitating a further phase of growth (Figure 2).

At a broader level, we have set out to refine our understanding of the complex
relationship between the owner-manager and his or her business, in terms of
such factors as growth, horizons, aspirations, limitations and learning.

Theoretical overview
Enterprise growth
A basic problem exists in understanding growth, in that larger, developed firms
are so different from small firms “that in many ways it is hard to see that they
are of the same genus” (Penrose, 1959); the same author likens this growth to the
transformation from caterpillar to butterfly. To explain this metamorphosis in

Inte Jnl of Entrepreneurial
Behaviour & Research,

Vol. 4 No. 2, 1998, pp. 101-111.
© MCB University Press, 1355-2554This research project was sponsored by North West Fine Foods.

IJEBR
4,2

102

more g radual terms, patter ns of enterprise g rowth are frequently
conceptualised in the form of a business life cycle, comprising a number of
phases or stages (Churchill and Lewis, 1983; Miller and Friesen, 1984; Scott and
Br uce, 1987). These stages are then associated with generic management
problems and organisational characteristics.

Figure 1.
Anshoff’s
product/market growth

Current Products

Market
Penetration

Market
Development

New

Product
Development

Diversification

Current
Markets

New
Markets

Source: Iqor Ansoff. “Corporate Strategy”, McGraw-Hill. 1987

Figure 2.
Greiner’s life-cycle

Size
of

Firm

1. Crisis of
Leadership

2. Crisis of
Autonomy

3. Crisis of
Control

3. Crisis of
Red Tape

4. Crisis of
?

Age of Firm1. Growth
through

Creativity

2. Growth
through

Direction

3. Growth
through

Delegation

3. Growth
through

Co-ordination

3. Growth
through

Collaboration

Anshoff’s
Matrix, pain and

gain

103

There is an intuitive descriptive reasonableness in such stage models and
some longitudinal studies, such as that of Miller and Friesen (1984), have
managed to substantiate these general patterns of transformation, albeit in a
descriptive sense. Greiner’s model (Greiner, 1972) includes an element of causal
explanation in hypothesising growth as occurring in relatively stable phases,
interspersed with “crises”; at the crisis point, the organisation either
successfully adapts or fails. In this sense, the crisis may be seen as a necessary
catalyst of learning and further growth.

Adaptation and learning
The “crises” elaborated in the Greiner model are essentially internal; to continue
the lepidopteral metaphor, they may be likened to “growing pains” within the
protective case of the pupa. However, a business is very much an open system
(Bertalannfy, 1950) and, in this sense, a basic prerequisite of survival and
growth is “successful” adaptation to the environment.

There are many issues of conjecture here, not the least of which is how we
define the “environment” and to what is the adaptation being made. In the
discussion here, environmental change may occur gradually or rapidly; not all
“crisis-inducing” change is sudden or unexpected. In biology, extinction of a
species represents the ultimate in adaptive failure. Biologically such failure is
more likely to be the result of an inability to adapt to a series of local
environmental changes, often occurring g radually, rather than to single
moments of crisis – a macro-level parallel to Handy’s “boiled frog” (Handy,
1989).

What do we really mean by “successful adaptation” in the business context?
Not all adaptation is directional. In particular, the concept of learning implies
directionality or purpose: “the creature that lear ns is not the mythical
amphisbaena of the ancients, with a head at each end and no concern where it
is going. It moves ahead from a known past into an unknown future and this
future is not interchangeable with that past” (Wiener, 1950, p. 45).

The concept of purpose, intentionality of life span or the “survival instinct”
is closely related to notions of strategy and planning. It is at such a fundamental
level that concepts of strategy and learning might usefully be discussed in
relation to SMEs. Dawkins (1988) has suggested that “complicated things have
some quality, specifiable in advance, that is highly unlikely to have been
acquired by random chance alone” (Dawkins, 1988, p. 9), a quality of adaptive
ability.

One central concept relevant to this discussion is the notion of system
boundary – where does the “environment” start and end? Adaptive ability can
be linked to the idea of horizon or “range of vision”; Simon (1956) observed that
“we see that the organism’s modest capacity to perform purposive acts over a
short planning horizon permits it to survive easily in an environment where
random behaviour would lead to rapid extinction” (Simon, 1956, p. 134).

W hat becomes increasingly important is the notion of the interactive
relationship between the enterprise and its many micro environments. In

IJEBR
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104

systems terms, the “environment and system do not just co-exist side by side.
They interact to the point of mutual inter-penetration. Some aspects of the
environment become “inter nalised by the system and some aspects of the
system become externalised to become features of the environment” (Emery
and Trist, 1975, p. 43). A central concept here is the extension of the
environment in relation to the enterprise. Behind this lie notions of degrees of
environmental knowledge, degrees of specialised adaptation and limits placed
on knowledge of extended environments. Such limits may be completely
explicit, having a basis in knowledge of the extended environment and therefore
constituting a “knowledge strategy”, or may be implicit or even “instinctual”
with significant knowledge localised. However we conceptualise this, we should
be aware that we are talking here in terms of relative degrees, rather than in any
absolute sense.

Growth strategies
In the context discussed above, marketing strategy is a form of purposive
adaptation, in most circumstances (but not necessarily) informed by learning. It
might typically be proactive in nature, but the degree of proactivity is a relative
concept; SME strategy is often characterised as primarily “reactive” (Fuller,
1994).

Carson (1990) combines the concepts of limited proactivity and personal
management in the concept of an “involved” marketing style, describing how
small firm marketing is often characterised by a high level of direct involvement
on the part of the owner-manager and how it “relies heavily on intuitive ideas
and decisions and probably most importantly on common sense” (Carson,
1990).

Addressing the problem of strategic choice, Cravens et al. (1994) hypothesise
that “choice of marketing growth strategy (in an SME) is a function of strategic
situation, organisational characteristics, and entrepreneur motivations”
(Cravens et al., 1994, p. 247). Many authors have commented on the typical
limitations of strategic alternatives available to the small firm by virtue of such
factors as small market share and limitations of resources and skills (e.g.
Carson, 1985).

Because of these limitations, it has been suggested that certain strategic
alternatives are typically more appropriate for a small firm, namely those that
avoid direct competition with larger firms and that involve the development of
close customer relationships and product adaptation (Storey and Sykes, 1996).
In the specific language of Ansoff ’s Matrix, it has been suggested by Perry
(1987) that for SMEs the most appropriate growth strategies are therefore
product development and market development.

Primary research and findings
Methodology
The primary research included thre e phases: a number of exploratory
interviews, a quantitative survey by means of a postal questionnaire supported

Anshoff’s
Matrix, pain and

gain

105

by telephone introductions and prompts, and a series of 25 face-to-face
interviews with a selected sub-sample of the respondents.

Sample profile
As defined by the sponsors, the sample frame included non-primary food
producers in rural areas of Cumbria, Lancashire and Cheshire. A sample of 256
fir ms was selected as the respondents of the mail questionnaire and 79
completed questionnaires were returned. The profile of the sample was as
follows:

• Age of firm. As shown in Table I, compared with the SME population as
a whole, the sample was older than average, with a flatter age
distribution than might be expected. This reflects the origin of many of
the sample businesses in the agriculture sector.

• Origins. A total of 68 per cent were founder-owners, while a further 16
per cent were continuing a family firm.

• Turnover. The distribution of annual sales is shown in Table II.
• Employment size. Employment ranged from self-employed to a

maximum of 395, with median employment at four full time and two part
time. As might be expected in this industry, employment reflected
seasonality of sales, with 51 per cent of respondents reporting
fluctuation in employment throughout the year.

Growth patterns and aspirations
Recent historical growth (last two years). As shown in Table III, most of the
sample (77 per cent) had experienced some sales growth over the last two years,
with 36 per cent reporting growth of over 10 per cent and 12 per cent reporting
growth of over 50 per cent.

Age (years) <5 5-10 10-20 20-40 >40

Per cent 19 23 23 12 20
Table I.

Age of firm

T/O (£m) <0.25 0.25-0.5 0.5-0.75 0.75-1.0 1.0-1.5 >1.5

Per cent 53 19 4 6 4 13

Decrease Stable >10 10-25 25-50 >50

8 14 41 19 5 12

Table II.
Distribution of

annual sales

Table III.
Percentage growth

patterns (over
past two years)

IJEBR
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106

Short-term growth expectations (next two years). Respondents were somewhat
more optimistic about future growth, with 47 per cent expecting to grow by
more than 10 per cent over the next two years, as shown in Table IV.

Of those forecasting growth, 76 per cent expected to create new jobs (full
time or part time).

Objectives and growth strategies
Business objectives. Respondents were asked to rank their objectives for the
business. The results are shown in Table V.

Sales growth took precedence, with 68 per cent of respondents naming
growth as the primary objective. Surprisingly few respondents appeared to
want to increase their personal (i.e. discretionary) time.

Growth strategy. Respondents were asked to rank their priority growth
strategies, according to the categories of Ansoff’s Matrix (the alternatives being
specified in familiar business language). Results are shown in Table VI.

Respondents placed a high priority on finding new customers for their
existing product range (penetration and market development), whereas they
gave a lower priority to the offering of new products to existing customers
(product development). On balance, there is limited support for Perry’s (1987)
hypothesis that product and market development would be favoured strategies.

Decrease Stable >10 10-25 25-50 >50

1 17 36 36 3 8

Table IV.
Percentage short-term
growth expectations

1 2 3 4 5
Objective (rank) (%) (%) (%) (%) (%)

Grow substantially 14 12 5 2 0
Grow moderately 54 6 6 0 1
Stay about the same size 3 0 2 3 1
Increase profit margins 22 31 11 1 0
Obtain more finance 5 13 18 11 5
Increase personal time 2 7 18 9 6

Table V.
Objectives and
growth strategies

1 2 3 4
Growth strategy (rank) (%) (%) (%) (%)

Market penetration 22 15 7 11
Market development 55 21 5 3
Product development 12 25 24 2
Diversification 121 7 15 22

Table VI.
Priority growth
strategies

Anshoff’s
Matrix, pain and

gain

107

Priority growth strategies were then cross-tabulated with growth expectations,
as shown in Table VII. This table therefore depicts the relationship between
favoured growth strategy and growth expectations, i.e. the outcome of these
strategies.

In exploring this relationship, one might expect to se e an association
betwe en high g rowth expectations and the more radical or higher-risk
strategies and vice versa, i.e. a strategy of market penetration being associated
with lower growth expectations. On the basis of these findings, however, there
does not seem to be much evidence of a clear relationship between strategy and
growth expectations. One interpretation of this could be confusion about the
language used to describe strategic alternatives; although a number of pre-tests
were carried out in developing the questionnaire, this may have been a factor.
Another explanation is that the adopted strategies were equally well developed;
there is no reason why a strategy of market penetration should not yield
significant growth. A further explanation is that at least some of the sample
did not have an elaborated business strategy in the conventional sense.
This issue was one object of exploration in the qualitative phase of this
research.

Qualitative evidence
Interview focus
The interview objective was to review the historical development of the sample
businesses through the personal account of the owner-manager, exploring the
concept of “crisis” and attempting to understand the basis and meaning of
“strategy” in each context.

The overall picture was one of immense diversity: of evolutionary pattern of
the business and of personal background, values and aspirations of the owner-
managers. What became strikingly apparent were the frequently occurring
accounts of “chance” incidents causing changes in business direction, not all of
which could be reasonably described as “crises”. On the other hand, there was
clear evidence among some businesses of a consistent strategy with relatively
long-term horizons. A full analysis of the interviews is beyond the scope of this
paper but the following vignettes will serve to illustrate a number of relevant
issues.

Sales growth expectations (%)
Growth strategy Negative 0 0-10 10-25 25-50 >50

Market
penetration 0 30 35 25 0 10

Market
development 2 15 33 42 4 4

Product
development 0 36 36 18 0 10

Diversification 0 20 40 20 0 20 Table VII.

IJEBR
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108

Case 1: personal and business crisis
One interviewee ran a catering business but developed a small “traybake”
operation as a secondary venture. She was visited by someone who, by chance,
was the father of a major competitor. A few weeks after this incident, the son
(i.e. the competitor) visited the main customer and took away the business. At
the same time her mother died; the outcome of these two incidents was a period
of depression. However, the interviewee recounted how she came out of this
experience thinking “I’ve got lots to live for” and resolved, with later success, to
develop the tray-bake venture as an alternative main business.

Case 2: reframing of personal motivation and aspirations
Another interviewee had become bored with his current business – a delicatessen.
He was buying an important ingredient from a local company and found that the
business was about to be sold. He bought the business and operated it in parallel
with the original venture but soon found that he enjoyed it much more, in terms of
the challenge and the pattern of working life. He decided to concentrate on this
venture and successfully developed it to become the premier regional supplier; in
retrospect, he observed that this incident “changed his life”.

Case 3: an operational crisis leading to critical learning
Another respondent recounted a critical incident in which his freezer broke
down, effectively bringing his business to a halt. He felt obliged to go round all
of his customers and apologise for the disruption. This incident taught him
both the importance of maintaining vital equipment and the value of customer
relationships. More generally, he learned “not to take things for granted” and
that he “should do it properly if he’s going to do it at all”.

Case 4: unplanned acquisition forcing adaptive learning
Another interviewee was a farmer, one of whose customers, a specialist fish and
game retailer, got into financial difficulties and defaulted on payment. The
far mer acquired the business in lieu of debts and, although he had no
experience of a retail business, operated it in parallel with the farm. He made it
work after an uphill struggle: “it was a shock not to have a guaranteed customer
… I was stung a few times – a very expensive learning curve.”

Case 5: long-term market development strategy
Another farmer was a producer of very high quality lamb, which, as is practice,
was sold at auction; however, he always wanted to market his own product. He
could also see subsidies coming to an end, which increased his resolve. He
experimented with direct sales from his house, gained experience and confidence
and now sells through three channels: direct, mail order and specialist dealer.

Case 6: successful opportunistic diversification
The proprietors of an historic water mill generated revenue by offering tours
and producing specialist flour. Soon after acquiring the business, they realised

Anshoff’s
Matrix, pain and

gain

109

that large numbers of people passed the door on the local train and on the
bridleway, representing an attractive potential market, although walkers were
not previously made welcome on the site. They built a tea-room and have
successfully expanded the business.

Case 7: financially driven diversification
A producer of cakes found that competition had increased to the point that,
although he had increased output tenfold, profits had barely doubled. Seeking a
route to higher margin products, he started designing new product ranges from
the customers’ perspective and is now successfully exporting to Canada.

Conclusions
Strategy and adaptation
All of the cases discussed here are examples of successful “adaptation”; most
resulted in what could be described as a new “strategy”. They represent
diversity in many dimensions: timescale, motivation, degree of proactivity and
impact, both positive and negative, on the owner-manager and on the business.

Some of these are clear examples of “strategy that happened” or “emergent
strategy” (Mintzberg, 1994) rather than the deliberate, logically planned or
“intended” notion of strategy often espoused within the planning literature.

What has earlier been described as the “instinctual” combines concepts of
lear ning and action as strategy in one node within the enterprise’s
environmental network. Such a strategy may not be explicit but rather tacit and
localised. Importantly, at this level of discussion there is little or no distinction
between tactics and strategy: “we find that the optimal strategy is just the
simple tactic of attempting to do one’s best on a purely local basis”
(Schutzenberger, 1954, p. 98). Ashby (1960) takes this argument further to
suggest that within such micro environments “the best tactic in the
circumstances can be learnt only on a trial and error basis and only for a
particular class of local environmental variances” (Schutzenberger, 1954,
p. 197).

The business life cycle and “progress”
Scott and Bruce (1987) describe the birth phase of the business life cycle as
being characterised by “owner-r un fir ms trying to establish a niche for
themselves through much product innovation”. In this sense, many of the firms
studied might be described as permanently in the birth phase.

This serves to illustrate one fundamental problem inherent in the very
concept of the life cycle. Key words in this discussion have been environment
and g rowth; an underlying but unspoken concept is that of unilinear
development or “progress” . A consistent theme in our discussion, illuminated
by our research, is that “growth” should more usefully be placed within an
environmental context and should not be confused with progress, if the latter is
seen as an imposition upon environmental change. Indeed, growth here can be

IJEBR
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110

characterised as symbiotic within environments, i.e. g rowth is not an
“imposition” but rather an adaptation.

We have earlier used the term “instinctual” to characterise enterprises
operating in a purely local environment. Learning and strategy is task based
and the level of local adaptation is high. However we must avoid the common
mistake of regarding such enterprises as in “non-progressive” stasis and lesser
“successes” when compared to enterprises actively seeking to extend their
environment. The act of survival in this view is itself an active notion – indeed
to maintain the Emery and Trist line one may go further and relate extinction to
a failure of the enterprise to act symbiotically over time. Therefore the sole
measure of “success” may well be nothing more than temporal survival related
to the enterprise’s intended life span.

Boundaries, learning and intervention
So often it seems that the owners’ boundaries of vision, in both lateral and
longitudinal senses, were simply too narrowly defined and that substantial
benefits might derive from their expansion. Uexküll (1920) wrote that “every
organism cuts out a special part of the environment which part then becomes
its reality. The rest of the environment simply does not exist for the organism” .
In this sense, the bakery in Cumbria supplying within a 30-mile radius has a
more limited environment than the national producer.

However, the local enterprise is embedded within many networks within this
environment and indeed “the firm’s effectiveness will be a function of how well
it integrates the various types of network relationships” (Gibb, 1996). While
these networks “attach” to wider environments, it is their specific localised
manifestation which forms the immediate topography of the local environment.

Based on the environmental adaptation model it is reasonable to argue that a
key role of training in small firms becomes one of extending environmental
awareness such as to stimulate generative lear ning beyond its naturally
occurring level.

The owner-manager and the business
Clearly, the frequently-acknowledged “overlap” of the “personal” and the
“business” is much more than this; instead, it is a super-complex system of
evolving experience and lear ning that is infor ming horizons, goals and
strategies, sometimes subtly, sometimes radically.

Rather than a unidirectional influence of the owner-manager over the
business, we find it useful to characterise the relationship as mutual and
interactive: owners share learning with their businesses and there is mutual
cross-influence in this process. Similarly, the development process can more
usefully be conceived as multilinear or multi-directional, therefore also
complicating the idea of growth itself.

In this context, the concept of “crisis” is clearly problematic, in that the
causality of learning and growth is much more complex than that suggested by

Anshoff’s
Matrix, pain and

gain

111

the Greiner model. This was bor ne out by our research, in that most
interviewees found it difficult to recount specific crises of this nature.

Instead, we recommend that the “systems” view of the firm that we have
developed throughout this discussion provides a richer and more useful
framework for understanding these complex processes.

References
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Ashby, W.R. (1960), Design for a Brain, Chapman and Hall, London.
Bolton, J.E. (1971), Report of the Committee of Enquiry on Small Firms, Cmnd. 4811, HMSO,

London.
Carson, D.J. (1985), “The evolution of marketing in small firms”, European Journal of Marketing,

Vol. 19 No. 5.
Carson, D.J. (1990), “Some exploratory models for assessing small firms’ marketing performance

(a qualitative approach)”, European Journal of Marketing, Vol. 24 No. 11, pp. 5-51.
Carson, D., Cromie, S., McGowan, P. and Hill, J. (1995), Marketing and Entrepreneurship in SMEs,

Prentice-Hall, London.
Churchill, N.C. and Lewis, V.L. (1983), “The five stages of small business growth”, Harvard

Business Review, May/June.
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entrepreneurship and marketing strategy research”, in Hills, G. (Ed.), Marketing and
Entrepreneurship: Research Ideas and Opportunities, Greenwood, Westport, CT, pp. 235-53.

Dawkins, R. (1988), The Blind Watchmaker, Penguin, London.
Emery, F.E. and Trist, E.L. (1975), Towards a Social Ecology, Plenum, London.
Fuller, P.B. (1994), “Assessing marketing in small and medium sized enterprises”, European

Journal of Marketing, Vol. 28 No. 12, pp. 34-49.
Gibb, A.A. (1996), “Small firms’ training and competitiveness. Building upon the small businesss

as a learning organisation”, International Small Business Journal, Vol. 15 No. 3, pp. 13-29.
Greiner, L.E. (1972), “Evolution and revolution as organisations grow”, Harvard Business Review,

July/August.
Handy, C. (1989), The Age of Unreason, Random House, London.
Miller, A. and Friesen, P. (1984), “A longitudinal study of the corporate life cycle”, Management

Science, Vol. 30, October, pp. 1161-83.
Mintzberg (1994), The Rise and Fall of Strategic Planning, Prentice-Hall, Maidenhead.
Penrose, E.T. (1959), The Theory of the Growth of the Firm, Blackwell, Oxford.
Perry, C. (1987), “Growth strategies: principles and case studies”, International Small Business

Journal, Vol. 5, pp. 17-25.
Scott, M. and Bruce, R (1987), “Five stages of growth in small business”, Long Range Planning,

Vol. 20 No. 3, pp. 45-52.
Schutzenberger, M.P. (1954), “A tentative classification of goal-seeking behaviour”, Journal of

Management Science, Vol. 100, pp. 97-102.
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Vol. 63, pp. 129-38.
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Dewhurst (Eds), Small Business and Entrepreneurship, Macmillan, Basingstoke, pp. 73-93.
Uexküll, J.V. (1920), Umwelt und Innenwelt der Tiere, Berlin.
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Notes to Final Assignment/Benchmarking the competitiveness of the ASEAN 5 equity markets

Benchmarking the
competitiveness of the

ASEAN 5 equity markets
An application of Porter’s diamond model

Wanida Jarungkitkul and Sorasart Sukcharoensin
School of Development Economics,

National Institute of Development Administration (NIDA), Bangkok, Thailand

Abstract
Purpose – The purpose of this paper is to study the competitiveness of the stock markets in ASEAN 5,
which are the Stock Exchange of Thailand (SET), the Singapore Exchange (SGX), Bursa Malaysia (BM),
the Indonesia Stock Exchange (IDX), and the Philippine Stock Exchange (PSE).
Design/methodology/approach – This research applies Porter’s (1990) diamond model to analyze
the competitiveness and the data were collected from World Economic Forum, International Institute
for Management Development, the World Federation of Exchanges database, and DataStream.
Findings – The results show that SGX is the most competitive exchange in ASEAN 5 region.
It dominates other exchanges in every dimension. It gains its reputation for being the region’s most
prominent exchange, followed by BM, SET, IDX, and the PSE, respectively.
Practical implications – The results of this investigation provide rank for competitiveness of stock
exchanges among ASEAN 5 and identify the way to improve its competitive position.
Social implications – It is useful for public and private sectors involved in the development and
policy making to promote funding and investment efficiency of the exchanges. It will be benefit to
establish the well-planned development strategy and policy to build up the competitive advantage of
the nations.
Originality/value – Identifying and benchmarking the competitiveness of the stock markets in
ASEAN economies. By using Diamond Model, the authors propose indicators to assess the
competitiveness of the stock markets in ASEAN 5 countries. Assessing the competitiveness of
the ASEAN stock markets in this paper will lead us to better understand about each country’s
strengths and weaknesses and to promote a mutual collaboration among the region toward ASEAN
Economic Community.
Keywords Benchmarking, Competitive advantage, ASEAN, Stock markets
Paper type Research paper

Introduction
The ASEAN has been a regional economic integration initiated in 1967. The collaboration
aims to increase the potential of bargaining position in the global, and share resources
among members within this region. The cooperation has been started by ASEAN Free
Trade Area initiating in 1993. ASEAN’s economic performance continues to outpace the
rest of the world with the Asian Development Bank (ADB) predicting that GDP in
ASEAN countries will grow 5.3 percent in 2013 and 5.6 percent in 2014. One important
attempt devoted to financial sector development is the linkage between seven stock
markets from six countries in ASEAN, namely, ASEAN exchanges. The members of the
ASEAN exchanges are Thailand, Malaysia, Indonesia, Philippine, Singapore,
Ho Chi Min, and Hanoi. The issue of stock markets integration has been emphasized

Benchmarking: An International
Journal
Vol. 23 No. 5, 2016
pp. 1312-1340
© Emerald Group Publishing Limited
1463-5771
DOI 10.1108/BIJ-05-2014-0047

Received 29 May 2014
Revised 5 January 2015
Accepted 13 January 2015

The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-5771.htm

The authors would like to thank Thailand Research Fund (TRF) for research grant.

1312

BIJ
23,5

by the liberalization of financial markets, which start out by relaxation of international
capital flows and the growing cross-border investment into ASEAN. Furthermore, leaders
of the ASEAN countries confirmed their commitment to the founding of the ASEAN
Economic Community (AEC), briefly AEC, by the end of 2015. It is enthusiastically to
transform ASEAN to be a free movement zone of goods, services, skilled labor,
investment, and capital. This impressive performance will shape the region with an
important investment opportunity. One of the main objectives for the collaboration is to
establish market base economies, in which financial sectors are liberalized. It is expected
that financial and capital markets will be integrated to ensure that capital flows are
flowed toward the right mechanism, so reducing the vulnerable to the crisis.

One accelerating pace of regional stock market integration that worth noted is
devoted to ASEAN trading link, a gateway for securities brokers to offer their clients
access to each exchanges at ease. Individual investors can be able to buy about 2,300
shares of a company in Malaysia, Singapore, or Thailand at their convenience with a
tax exemption for capital gains. The link of three exchanges accounts for 67 percent of
the total market capitalization of the ASEAN exchanges group. In stock market
integration areas, there is a marked interest in assessing the issue of competitiveness
among each stock exchange in the region. This attempt toward regional stock market
integration not only creates benefits toward a cross-border harmonization and more
trading of ASEAN centric products, but also intensifies competition among them.
Therefore, benchmarking provides the baseline by which an equity market can
articulate key issues and a means by which to measure their competitiveness among
each national stock exchange. Many organizations worldwide look at benchmarking as
a tool to help them to achieve better result and to learn from others in order to improve
competitive advantage, with no exception for the stock exchanges in ASEAN.

In this study, we benchmark the competitiveness of the stock market among five
nations of ASEAN using Porter’s diamond model. There are two main search questions
for this paper. First, which stock exchange has higher level of competitiveness than
others in ASEAN region? And how to improve competitiveness of each stock exchange
to be more competitive in the future? In answering them, we first construct indicators
examining the competitiveness under Porter’s diamond model. Then, we compare the
competitiveness of each stock exchange in each dimension. Next, we discuss results
and implications for each exchange and ASEAN as a region by introducing many
different ideas and policies for continuous improvement toward competiveness.

The contribution of this research has two folds. First, benchmarking stock market
competitiveness is interesting area of research, which, there are no research has
previously explored. This study will fill a literature gap in benchmarking equity
markets under the theme of financial integration in ASEAN. Through benchmarking
process, we can assess stock market in each country for its competiveness against the
best-in-class exchange in the region and provides an opportunity to learn from others in
order to reduce gap among regional exchanges to foster the future of the economics and
financial integration. The benchmarking process is valuable to each stock market by
introducing many different ideas for continuous improvement toward competiveness.
Since the stock market in one country can compare its score against other exchanges
and identify the weak and strong points, the analysis is also useful for public and
private sectors involved in the development and policy making to promote funding and
investment efficiency of the exchanges. Second, the approach being used in this paper
is new. This paper computes simple indices using published information, organizes,
and adds them for comparing the stock markets of five ASEAN stock markets. To the

1313

Benchmarking the
competitiveness
of the ASEAN 5
equity markets

best of our knowledge, it is also the first attempt to generalize Porter’s diamond model
to benchmark stock market competitiveness. A number of prior researches have been
focussed on comparative study of the stock market integration in the ASEAN region
such as Karim and Ning (2013) or Das (2014). However, these research works are
quantitative studies focussing on one or a few particular aspects of the stock markets,
not the competitiveness aspect. This study analyzes several facets of competitive
advantage using quantitative approach to benchmark stock exchanges in the region.

The paper is divided in five parts. The first part is devoted to the motivation for
competiveness among ASEAN 5 countries. It is then followed by second part, which
presents a short overview of the stock market integration in ASEAN and the literature
reviews and conceptual framework explaining stock market competitiveness based on
Porter’s diamond model. The third section presents the data and methodology used in
the study. After that, we analyze and compare the competitiveness of ASEAN 5 stock
markets in the fourth section based on the diamond model. The last section concludes
the main findings and implications of the research.

Literature review
A brief review of ASEAN stock markets
This section provides a brief review of ASEAN stock markets. A stock exchange is an
organized market in which a participant can trade securities in a publicly visible
manner, under recognized guidelines relevant to all memberships of the organization.
As part of the financial system, exchanges can have an effect on economic growth
through their effects on capital accumulation. The concern for stock market
development is a key alarm in all ASEAN members as important fragment of their
particular financial deepening programs. In 2009, the ASEAN step forward to AEC for
establishing market base and working together to strengthen in the region. One of
activities related to financial sector development is the linkage between seven stock
markets from six countries in ASEAN, namely, ASEAN exchanges. The members of
the ASEAN exchanges are Thailand, Malaysia, Indonesia, Philippine, Singapore,
Ho Chi Min, and Hanoi. The purpose of forming the ASEAN exchanges is to make the
feasibility for funding and investment in the region. Together, there are 3,613
companies listed in seven stock markets. Total stock market value is USD1,980.37
billion, making the eighth ranked with about 4 percent of the market capitalization in
the world according to the World Federation of Exchanges (2012) as shown in Figure 1.
There are 3,613 companies listed in seven stock markets. Hopefully, the integration of
stock markets in ASEAN becomes more interesting in global investor’s perspective and
attracts more foreign investment to the region.

The stock market capitalizations of the ASEAN region have noticed considerable
progress after the 1997 Asian financial crisis, although with different speed of progress
across countries. After Asian financial crisis, ASEAN has been riding an unprecedented
bull market. ASEAN members have initiated plans to develop their local stock markets.
There have been also determinations to synchronize the market, set up settlement
customary, promote transparency, and integrate exchanges among members. The market
value of equity markets in Malaysia, Thailand, and Singapore have approximately been at
comparable level as shown in Figure 2. According to data reported by world federation of
exchange, in 2012, the stock market in Malaysia, Indonesia, Thailand, and the Philippines
are at 466.59, 428.22, 389.76, and 229.32 billion dollars, respectively.

The underlying growth in ASEAN stock market is significant. Table I shows annual
growth rates of ASEAN 5 stock exchanges during 1997-2012. It is noted that the

1314

BIJ
23,5

466.59

428.22

229.32

765.08

389.76

–

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

B
ill

io
n
U

S
D

Domestic Market Capitalization

Bursa Malaysia

Indonesia SE

Philippine SE

Singapore Exchange

The Stock Exchange of Thailand

Source: World Federation of Exchanges (2012)

Figure 2.
Market capitalization

of ASEAN 5
exchange during

1997-2012

NYSE Euronext (US),
13,150.14, 25%

NASDAQ OMX, 4,486.68,
8%

Tokyo SE Group, 3,315.35,
6%

London SE Group,
3,307.19, 6%NYSE Euronext (Europe),

2,479.87, 5%
Hong Kong Exchange,

2,408.09, 4%
Shanghai SE, 2,282.49, 4%

ASEAN exchanges,
1,980.37, 4%

TMX Group, 1,910.35, 4%

Australian SE,
1,293.12, 2%

the rest of the world (43
stock exchanges),
16,867.39, 32%

Note: Units: billion USD
Source: World Federation of Exchanges (2012)

Figure 1.
Market capitalization

of ASEAN 5
exchanges and the
world stock market

Stock market
Average annual market capitalization

growth (1997-2012) (%)
Market capitalization growth

during 1997-2012

Bursa Malaysia 11.33 4.0
Indonesia SE 19.65 13.7
Philippine SE 14.18 6.3
Singapore Exchange 14.20 6.3
The Stock Exchange of
Thailand 20.80 16.0
ASEAN 5 14.98 7.1
Notes: The average annual market capitalization growth is the geometric mean of the market
capitalization for each year during 1997-2012. The market capitalization growth is the change calcu-
lated using 2012 and 1997 data

Table I.
Growth of ASEAN 5

exchanges

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of the ASEAN 5
equity markets

geometric average annual growth rate for the region is 14.98 percent. Among others,
the Stock Exchange of Thailand (SET) occupies the top spot with average annual
growth of 20.80 percent, followed by Indonesia Stock Exchange (IDX) (19.65 percent),
Singapore Exchange (SGX) (14.20 percent), Philippine Stock Exchange (PSE)
(14.18 percent), and Bursa Malaysia (BM) (11.33 percent). Moreover, the total market
capitalization of the SET has ascended at maximum speed, up to 16 times during
1997-2012. IDX is a runner-up in growth. The growth of the market capitalization for
IDX is almost 14 times. The total stock market capitalization of SGX and PSE have
risen more than six folds in the past 16 years, followed by BM, quadruple the market
capitalization, during 1997-2012, respectively.

Benchmarking and the competitiveness
Benchmarking is the process of systematically identifying, analyzing, and adapting
industries’ best practices for an organization’s performance (Boxwell, 1994). Benchmarking
is an increasingly important management tools being used for continuous improvement by
comparing a firm’s practices and performance measures with that of its most successful
competitors (Leibfried and McNair, 1992; Boston Consulting Group, 1994; Attiany, 2009)
defined benchmarking as a systematic approach through which organizations can
measure their performances against the best-in-class organizations. The process of
benchmarking is more than just a means of gathering data on how well an organization
performs against others. It is a powerful and effective tool to learn from other in order to
get the excellence. Benchmarking can also be used at industry or country level. Comparing
best practice from an international geographic location of the comparison organization is
referred to international benchmarking (Watson, 1993). The key motivation behind
benchmarking is for an organization to improve its performance and reduce gap between
the organization and its superior comparables (Oakland, 2003; Van Schalkwyk, 1998).

There are several types of benchmarking that are in use today. These are process
benchmarking, performance benchmarking, strategic benchmarking, international
benchmarking, and competitive advantage benchmarking (Bogan, 1994; Boxwell, 1994;
OECD, 1997). Among these, Lankford (2000) argues that competitive benchmarking is the
most difficult type of benchmarking to practice. For obvious reasons, organizations are not
interested in helping a competitor by sharing information. Most of the time, this form of
benchmarking is measuring the performance, products, and services of an organization
against its direct or indirect competitors in its own industry. This does not just include the
disassembly and examination of the product but it analyzes the entire customers’ path of
the organization’s competitor. This is a difficult thing to do because this information is
not easily obtained; therefore, it needs to do an extensive research and requires unbiased
outsiders to perform the benchmarking functions. Overall, different organizations
can have their own benchmarking methods, but no matter which method is used,
benchmarking practices usually imply the notions of competition. Therefore, in a world of
scarce resources, the attempt to analyze competition has been in the center of researches
since the 1980s. The use of benchmarking as a competitive tool was embraced by firms
cutting across diverse industry including construction, education, aviation, manufacturing,
banking, financial services, insurance, health care services, and government among
others (Luu et al., 2008; Henderson et al., 2006). Andersen (1999) notes that competitive
benchmarking can be useful and add most value when comparing performance levels
and/or strategies of organizations. Among others, some studies have been focus on the role
of benchmarking in achieving competitive advantage or continuous improvement (such as
Boxwell, 1994; Attiany, 2014), but not benchmarking the competitiveness.

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The study of the competitiveness has recognized popular due to its importance in
shaping an organization to a sound business strategy development (Feurer and
Chaharbaghi, 1994). Several studies have been focussed on the issue of
competitiveness. These studies can be grouped further into organization, industrial,
and national competitiveness; in other words, micro-, meso-, and macro-level of
competitiveness. Flanagan et al. (2007) discuss and review main schools of competing
thought for the competitiveness. These are, first, the competitive advantage model of
Porter (1980) which based on the industrial organization view, and second, the
resource-based view of Wernerfelt (1984). The diamond framework by Porter (1980,
1985) has been widely used when analyzing competitiveness at both industry and
national level. There were limited studies on benchmarking or comparative study of
organizations on their competitiveness until Porter published his seminal works on
diamond model system (Porter, 1990, 1998, make possible). He proposed a model that
examines why some states are more competitive and why some industries within states
are more competitive than others are. In this fashion, Porter’s diamond model of
national competitiveness has been perceived as a model that helps understand the
competitive position of a nation in global competition as well.

A resource-based view of competitiveness clarifies its capacity to deliver
sustainable competitive advantage when resources are managed such that their
consequences cannot be imitated by competitors, which ultimately creates a
competitive barrier. In his article “A Resource-Based View of the Firm” Wernerfelt
(1984), on the other hand, assumes competitive advantage does not depend on market
and industry structures, but restrain from the resources inside an organization.
The unique resources such as financial resources, tangible resources, and intangible
resources, of an organization is the source of competitiveness. A competing firm can
come in the market with a resource that has the ability to overthrow the preceding
firm’s competitive advantage, which results in reduced. However, the concept of
resources remains an amorphous one that is rarely operationally defined and
explored in different competitive environments (Miller and Shamsie, 1996). Moreover,
the use of its inward concentration may risk ignoring the market structures
and conditions. More importantly, a resource-based view holds that sustained
competitive advantage can be attained effortlessly by taking advantage of internal
rather than external factors as compared to industrial organization view such as
Porter’s diamond model (Hooley et al., 1998).

Since our objective in this study is to benchmarking the competitiveness
of ASEAN stock exchanges, in which external environment rather than the
performance of the stock exchanges is the main concerns; therefore, it is more
justified to apply Porter’s diamond model as a framework for benchmarking
competitiveness. ASEAN stock exchanges are also appropriate case study for
benchmarking the competitiveness because ASEAN integration is attempted toward
collaborative regional stock market, and at the same time, also intensifies
competition among them. This situation is consistent with benchmarking concept
because benchmarking measures their competiveness against the best-in-class
exchange in the region and provides an opportunity to learn from others in order to
reduce gap among regional exchanges to foster the future of the integration.
The benchmarking process is valuable to each stock market by introducing many
different ideas for continuous improvement toward competiveness. This is because
improving competitiveness is a long-term process rather than a short-term operation
(Dixit and Joshi, 2011).

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Benchmarking the
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Porter’s competitive advantage framework
As the objective of the research is to benchmarking the competitiveness of the stock
exchanges in the ASEAN region, we have to build our indicators representing
competitiveness of the stock exchanges. There are numerous issues that affect the
environment in which stock markets function. We try to develop those indicators on
the competitiveness of the stock exchanges taking into account that stock exchanges
work in a national environment that can develop or hamper those businesses’ ability to
compete within their own countries or internationally. This concern can be assessed by
using Porter’s (1990) framework, which attempts to establish a connection between the
academic literatures in strategic management and international economics. In his book,
Competitive Advantage of Nations in 1990, his model has been constructing a
foundation for developing national policies on competitiveness by introducing the
comprehensive framework, which he calls the diamond. The model is a dynamic
system in which all elements interrelate and support each other so as to make it difficult
to replicate the structure of the industry in another country. Diamond model is
the competitive advantage framework for countries, sectors, and firm levels.
He investigates different economic characteristics of firms operated in ten countries
to find the elements that determine the competitiveness of nations. He tries to explain
why some regions are more competitive than others are and how firms gain superior
positions in the country on global competitiveness.

The phenomena that are analyzed under the model are classified into six broad factors
incorporated into the Porter diamond, which has become a key tool for the analysis
of competitiveness (Porter, 1990). There are four important determinants for the
competitiveness, factor conditions, demand conditions, related and supporting industries,
and firm’s strategy, structure, and rivalry factors. The government influences each
component positively to achieve national competitive advantage. Chance is any event or
occurrence that is outside of control of a firm. The details are illustrated in Figure 3.

Early works using this framework are based on one country’s competitiveness.
Later, several prior studies commonly apply Porter’s diamond model when comparing
competitiveness among nations to identify the sources of international competitive
advantage (Hitt et al., 1999; Öz, 2002). One significant research is Stone and Ranchhod
(2006) utilize Porter’s diamond of competitive advantage and develops a quantitative
approach to determine the competitive advantage of a nation. The paper attempts to
redress this balance by providing a more robust framework for assessing the relative
global competitive advantage of a nation. Applying this approach to the BRIC nations,

The Firm’s strategy
structure and rivalry

The Related-supplier
Industries

Factor Conditions Demand Conditions

Chance

Role of
Government

Source: Porter (1990)

Figure 3.
Diamond model

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the UK, and the USA has yielded some interesting results indicating that the UK is
currently the most competitive nation and that China will soon position itself as a truly
competitive one.
In this study, we propose that the diamond model can be used to analyze stock market
competitiveness. Diamond model chosen for analysis since it is one of the most popular
tools for the competitiveness analysis among nations. Also, we compare many external
environment factors rather than focus on only performance of the stock exchanges;
therefore, it is more justified to apply Porter’s diamond model as a framework for
benchmarking competitiveness instead of using resource-based view’s model. Factor
conditions are basic input and high quality/specialized input such as human resources,
physical resources, knowledge resources, capital resources, and infrastructure.
Specialized resources are often specific for an industry and important for its
competitiveness. Specific resources can be created to compensate for factor
disadvantages. These are commonly called by economists as factors of production and
represent merely the inputs necessary for everyday operations. Within this framework,
we look at basic infrastructure of the country in which the stock markets operate in, for
instance, capital market structure, financial skills of human resources, infrastructure,
availability of financial services, affordability of financial service, and share of stock
market capitalization. Demand conditions in the home market can help companies create
a competitive advantage, when sophisticated home market buyers pressure firms to
innovate faster and to create more advanced products than those of competitors.
In the context of stock exchange, we look at various proxies of market size, growth,
variety of products offered, and level of competition in each market. Related and
supporting industries can produce inputs which are important for innovation and
internationalization. These industries provide cost-effective inputs, but they also
participate in the upgrading process, thus stimulating other companies in the chain
to innovate. We focus on business environment to support the stock exchange
activities. These factors include level of ethical standard, corporate governance
mechanism, auditing, and level of internal control system, as well as availability of
venture capital companies. Firm’s strategy, structure, and rivalry constitute the
fourth determinant of competitiveness. The way in which companies are created, set
goals and are managed is important for success. In our study, we investigate the
basic infrastructure of each exchange to facilitate the security trading, trading
participants, and level of market stability. The presence of intense rivalry in the
home base is also important. It creates pressure to innovate in order to upgrade
competitiveness. We then include market share and overall financial performance
and attractiveness of listed companies into analysis.

Further, role of government and chance can influence each of the above four
determinants of competitiveness. Role of government can influence the supply
conditions of key production factors, demand conditions in the home market, and
competition between firms. Government interventions can occur at local, regional,
national, or supranational level. One of the key relationships between government
and the facets of the model is the governmental policy to impose or reduce taxes
related to security trading such as capital gain taxes or dividend taxes. Although
chance events are occurrences that are outside of control of a firm, they are important
because they create discontinuities in which some gain competitive positions and
some lose. We incorporate efficiency of the country’s public finance policy
and institutional framework, as well as government regulations of business for
the analysis.

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Data and methodology
Data
In this study, we collect the data from secondary sources and compute simple indices
for each factor under the Porter diamond to comparatively analyze the competitiveness
of the ASEAN 5 stock markets. There are a variety of sources the statistical data or
indices are collected. We comply the data and categorize them using Porter’s diamond
framework. The macroeconomics factors are synthesized from the Global
Competitiveness Report presented by World Economic Forum, World Bank, and
International Institute for Management Development. Financial structure data were
obtained from ADB, tax rates and structures are compared using Deloitte International
Tax Source. For stock market information, we collect from the stock market database
of each country, the World Federation of Exchanges database and DataStream.
Corporate governance information is obtained from Asian Corporate Governance
Association. Data relating to performance in monetary and fiscal policy is gathered
from IMD’s World Competitiveness Yearbook. Industry concentration (measured by
Herfindahl Index (HI)), concentration ratio, and volatility of the stock markets are
calculated by the authors using statistics from DataStream. All data are analyzed at the
end of the year 2012 or at the nearest available period.

Methodology
We employ exploratory research to analyze data of various dimensions proposed by
Porter (1990) for stock markets of five ASEAN members. Kotler et al. (2004, p. 345)
described that exploratory research is a kind of research, intended to “gather
preliminary information that will help to better define problems and suggest
hypothesis.” Various academic papers suggest that exploratory research is suitable to
study multi-dimensional phenomena (Yin, 2003) since the methodology provides a
clearer holistic assessment of the context (Ghauri and Gronhaug, 2005).
We acknowledge that selection of performance measures or indicators is one of the
most important steps in benchmarking. Benchmarking will have limited benefits or
even be damaging if the quality of the indicators is not satisfactory. As a result, we then
conduct focus group methodology to identify indicators in each dimension under the
framework of Porter’s diamond model that are appropriate for assessing stock
exchange competitiveness. A group of ten capital market experts are invited to the
forum to generate indicators. These indicators are generally used to compare the
results of one stock market to other stock markets. In doing so, stock market in one
country can compare its score against other exchanges and identify the weak and
strong points. This can consequently seek to reduce the weaknesses by benchmarking
their processes against best-in-class organizations (Helgason, 1997).

After getting raw data for each indicator from various sources, we then use relative
value approach. This method is proposed by Stone and Ranchhod (2006) to describe the
growth of the BRIC nations (Brazil, Russia, India and China) relative to the competitive
advantage of the main OECD nations. Their paper utilizes the framework within
Porter’s diamond of competitive advantage and develops a quantitative approach to
determine the competitive advantage of a nation. They compute the relative value of
subcategories under each competitiveness indicator for comparison. Therefore, we
employ this approach to compute relative value for each indicator under Porter’s
framework among ASEAN 5 stock markets. Relative value approach is a method of
determining an indicator’s value that takes into account the value of other countries’
data for comparison. In contrast, absolute value looks only at a country’s indicators and

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does not compare them to other countries. Supporting references to the methodology
about using the relative value calculation for comparing data for different countries are
World Bank (2011a, b); which the calculation is based on four aspects for financial
sector and stock market development. However, these studies do not cover the
assessment of competitiveness. Since our objective is to benchmark competitiveness of
stock markets in ASEAN; therefore, we use of the Porter’s diamond framework to
measure competitiveness. The indicators based on the diamond model included factor
condition, demand condition, related and supporting industries, and firm strategy,
structure and rivalry are transformed into relative values. The relative value of each
indicator for assessment of stock market development among five nations can be
calculated by using following equation:

CA;i ¼
ValueA;i–MinA
� �

MaxA–MinAð Þ=10
(1)

where CA,i is the relative value of factor A for stock market i; ValueA,I, the numeric
value of factor A for stock market i; MinA, the minimum value of factor A in all stock
market; MaxA, the maximum value of factor A in all stock market; 10 ¼ graph scale full
points to compare among stock market; i ¼ SGX, SET, BM, PSE, IDX; A, the four
important determinants for the competitiveness; factor conditions, demand conditions,
related and supporting industries, and firm’s strategy, structure, and rivalry factors.

Scores that are computed can vary from 0 to 10 and show relative positions on
selected criteria. In principle, a higher competitive advantage stock market should have
higher relative value than a lower competitive advantage equity market for one or all
dimensions. Unlike the absolute value, since the relative value adjust the most
preferable facet to the maximum score and least preferable one to the minimum score.
For instance, among all stock markets, an equity market with a relative value of 10 in
the scale indicates a more competitive condition for a particular aspect comparing to
other stock markets. Therefore, we then hypothesize that the cumulative overall
relative value for a country having higher competitive advantage should be greater
than lower competitive advantage equity markets.

Analysis of the competitiveness for ASEAN 5 stock markets
The competitiveness of stock market among ASEAN 5 nations was analyzed based on
diamond model. This model considers the four aspects of stock market environment
including factor condition, demand condition, related and supporting industries, firm
strategy, structure, and rivalry. In addition, the role of government is affecting factor on four
key factors. We hypothesize that the cumulative relative value for a country having higher
competitive advantage should be greater than lower competitive advantage equity markets.

Factor condition
Factor condition comprises of basic, or non-key, factor and advanced, or specialized,
factor. Basic factor such as unskilled labors and raw materials or basic infrastructures
can be obtained by any organizations. Basic factor refers to quality of infrastructures,
investment in telecommunication, connectivity of people and firms and technological
cooperation. Specialized factors of production involve heavy, sustained investment.
They are more difficult to duplicate. This leads to a sustained competitive advantage
because if other firms cannot easily duplicate these factors. Advanced factor refers to
innovation, skill of labor in finance market and financial deepening.

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The results show that the mean score of the factor condition among five nations
is 4.66. Comparing factor condition between five nations, SGX holds the first position
(CF,SGX ¼ 9.16) and BM is ranked second (CF,BM ¼ 7.44). They are only two stock
markets that have score on factor condition above the mean score. Although SET is
ranked third among ASEAN 5 stock markets, however, the score on factor condition
is below average (CF,SET ¼ 2.85) Whereas the PSE (CF,PSE ¼ 2.19) and IDX
(CF,IDX ¼ 1.67 ) are fourth and fifth in ranking, respectively.

When considering the details of factor condition, we find that SGX has highest score
in almost every aspect. BM has highest score in telecommunication infrastructure
investment, low-financial risk, and high capacity for innovation, but low score for
remuneration in services professions dimension. SET has more strength such as financial
depth, as measured by the market capitalization to GDP ratio, financial risk factor, and
relative competitive remuneration for labors in services professions, but SET has many
weaknesses such as quality of overall infrastructure, language skills, company spending
on R&D, capacity for innovation, and quality of management schools.

Considering the size of the equity markets in this region, the ratio of stock market
capitalization to GDP for Singapore and Malaysia have exceeds 100 percent
(290 percent for SGX and 170 percent for BM). This means the size of the two stock
markets is larger than the size of the economy as a whole for each country. However, it
is not the case and less pervasive for Thailand, Philippines, and Indonesia, which have
the ratio of stock market capitalization to GDP at 87, 83, and 51 percent in 2012,
respectively. The meaning is that the sizes of these stock markets are smaller than the
size of the economy for each country. The details are shown in Table II.

Demand conditions
Demand conditions are the pressure based on requirement about quality and service in
stock market of the market participants. It comprises of two sets: size and growth of
demand, and sophisticated demand. Size and growth of demand refer to GDP growth rate,
market capitalization, and value of share trading. Sophisticated demand refers to number of
listed companies, number of newly listed, products in market, market concentration (CR10),
and HI in industries. The market concentration ratio, CR10, is the percentage market share
attributable to a given number of the ten largest listed firms in a stock market. Likewise, HI
is a measure of market concentration. It is calculated by squaring the market share of each
firm competing in a market, and then adding the resulting numbers. A more developed and
competitive market should have low concentration of a few largest firms in the market and
high competition within a particular industry in order for market participants to take part.

The results in Table III show that among five nations, mean score of demand
condition was 4.37. Comparing demand conditions among five nations, there are three
equity markets in the region having above average score. SGX holds the first ranked
(CD,SGX ¼ 6.14), BM is second ranked (CD,BM ¼ 5.36), SET was third ranked
(CD,SET ¼ 4.62). Another two markets are below the average score; IDX was fourth
ranked (CD,IDX ¼ 3.69). Lastly, PSE holds lowest rank (CD,PSE ¼ 2.04).

Besides, considering the details of demand conditions, we find that SGX has highest
score in almost every aspect, except for relatively slow economic growth, low volume of
share trading, and low-competitive forces as measured by HI. BM has highest score in
accessibility to the stock market as highlighted by a large number of listed companies and
a more dispersed market structure. SET has its strength in turnover velocity and average
daily turnover which is highest among five nations. In addition, SET has a relatively high
variety of investment products, following SGX. However, SET has many threats such as

1322

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y
fo
r
in
no
va
ti
on

4.
4

3
4.
6

2.
9

3.
9

8.
82

0.
59

10
.0
0

0.
00

5.
88

C
om

pa
ny

sp
en
di
ng

on
R
&
D

5.
1

3.
1

4.
7

3.
2

3.
9

10
.0
0

0.
00

8.
00

0.
50

4.
00

Sc
or
e

9.
85

2.
84

6.
97

3.
02

1.
95

M
ea
n
sc
or
e
(4
.6
6)

9.
16

2.
85

7.
44

2.
19

1.
67

Table II.
Factor condition

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Benchmarking the
competitiveness
of the ASEAN 5
equity markets

D
es
cr
ip
ti
on
s

D
at
a

Sc
or
e
(0
-1
0)

SG
X

SE
T

B
M

P
SE

ID
X

SG
X

SE
T

B
M

P
SE

ID
X

2.
D
em

an
d
co
nd

it
io
ns

2.
1
S
iz
e
an

d
gr
ow

th
of

de
m
an

d
G
D
P
gr
ow

th
(%

)
3.
59

4.
50

5.
00

5.
00

6.
54

0.
00

3.
08

4.
78

4.
78

10
.0
0

M
ar
ke
t
ca
pi
ta
liz
at
io
n
(b
ill
io
n
U
SD

)
54
9.
33

23
5.
53

34
5.
77

13
2.
16

28
4.
02

10
.0
0

2.
48

5.
12

0.
00

3.
64

M
ar
ke
t
ca
pi
ta
liz
at
io
n
gr
ow

th
(%

)
14
.7
0

27
.7
1

18
.3
1

36
.0
7

31
.9
5

0.
00

6.
09

1.
69

10
.0
0

8.
07

V
al
ue

of
sh
ar
e
tr
ad
in
g
(b
ill
io
n
U
SD

)
20
4.
7

10
1.
99

71
.5
4

15
.8
3

65
.4
8

10
.0
0

4.
56

2.
95

0.
00

2.
63

V
ol
um

e
of

sh
ar
e
tr
ad
in
g
(t
ho
us
an
d
sh
ar
es
)

11
4.
64

20
1.
29

52
.3

65
.7
2

31
4.
64

2.
38

5.
68

0.
00

0.
51

10
.0
0

St
oc
k
tr
ad
ed

pe
r
ca
pi
ta

(U
SD

)
55
,5
76

3,
23
3

3,
15
4

29
0

55
3

10
.0
0

0.
53

0.
52

0.
00

0.
05

T
ur
no
ve
r
ve
lo
ci
ty

(%
)

0.
52

0.
76

0.
33

0.
22

0.
40

5.
56

10
.0
0

2.
04

0.
00

3.
33

Sc
or
e

5.
42

4.
63

2.
44

2.
18

5.
39

2.
2
S
op
hi
st
ic
at
ed

de
m
an

d
N
um

be
r
of

lis
t
co
m
pa
ni
es

77
8

54
1

95
6

25
3

42
0

7.
47

4.
10

10
.0
0

0.
00

2.
38

P
ro
du

ct
in

m
ar
ke
t

16
13

12
6

10
10
.0
0

7.
00

6.
00

0.
00

4.
00

M
ar
ke
t
co
nc
en
tr
at
io
n
C
R
10

0.
33

0.
47

0.
37

0.
46

0.
46

10
.0
0

0.
00

7.
14

0.
71

0.
71

H
er
fi
nd

ah
l
In
de
x
(H
I)

0.
23

0.
17

0.
15

0.
18

0.
22

0.
00

7.
39

10
.0
0

6.
92

0.
94

Sc
or
e

6.
87

4.
62

8.
29

1.
91

2.
01

M
ea
n
sc
or
e
(4
.3
7)

6.
14

4.
62

5.
36

2.
04

3.
69

Table III.
Demand conditions

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low-stock traded per capita (the SET had USD3,233 per capita, but the SGX had USD55,576
per capita) and lack of newly listed companies (five years average newly listed companies
in SET is 13 firms, and average newly listed in ASEAN 5 exclude PSE was 30-40 firms).
IDX has made a remarkable economic growth and high-volume trading with strong
market capitalization growth, while has poor score for sophisticated demand
conditions. PSE has strong market capitalization growth, but less pronounced score in
almost sub-indicators.

Related and supporting industries
Related and supporting industries are networks of suppliers and distributors that
cooperate with the industry to support it in international competition. Since stock
market is one of the financial intermediations to enhance the effective allocation of the
resources, it interconnects many different sectors of the economy. Synchronization
across these sectors is extremely critical to make sure capital market is able to develop
in a sustainable and efficient manner. The existence of a cluster of competitive-related
and supporting industries serves to enhance competitiveness of the equity markets.

In this study, related and supporting industries refer to venture capital availability,
ethical practices which are implemented in the listed companies. Credibility of
managers and corporate boards of the listed companies, which are the member of each
exchange. Also, auditing firms and accounting practices, as well as image abroad also
enhance their competitiveness for each exchange.

The results show that among five nations, mean score of the related and supporting
industries was 4.93. Comparing among five nations, SGX is the first ranked
(CR,SGX ¼ 9.85) and BM is second ranked (CR,BM ¼ 7.50). The two stock markets have
very high scores on related and supporting industries aspect far above other countries in
the region. Whereas SET is third ranked (CR,SET ¼ 3.47), PSE (CR,PSE ¼ 2.43), and IDX
(CR,IDX ¼ 1.41) are fourth and fifth ranked, respectively. The three countries have much
lower. In addition, considering the details of related and score on related and supporting
industries comparing to the first two countries. Under this facet, we find that SGX has the
highest score in almost every aspect. BM has a relatively high score, holding second rank
in almost categories, comparing to the rest of the stock market in the region.

The SET has moderate score on every indicator, particularly image abroad,
credibility of managers, and corporate boards. However, the SET has many threats
such as venture capital availability, ethical practices, and auditing and accounting
practices. PSE has moderate score on overall country’s ethical practices, credibility of
managers, and corporate boards and auditing and accounting practices. However, it
has poor score in venture capital mechanism and image abroad.

Finally, IDX has made strength in venture capital mechanism and maintain a fair
image abroad, while has poor score for other related and supporting industries criteria.
However, IDX has the lowest score on ethical practices, creditability of the managers,
corporate boards, and auditing and accounting practices. Overall, the results suggest
that stock markets in Thailand, Indonesia, and the Philippines need to improve their
related and supporting industries to catch up with SGX and BM. The results are
showed in Table IV.

Firm strategy, structure, and rivalry. Firm strategy, structure, and rivalry constitute
the fourth determinant of competitiveness. This element describes the conditions in the
nation governing the way in which each stock market is created, set goals and is
managed. These aspects are important for success. But the presence of intense rivalry
in the home base is also important it creates pressure to innovate in order to upgrade

1325

Benchmarking the
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equity markets

competitiveness. The results show that among five nations, mean score of the firm
strategy, structure, and rivalry was 4.94. Comparing the firm strategy, structure, and
rivalry between five nations, SGX is the first ranked (CS,SGX ¼ 7.18) SET is second
ranked (CS,SET ¼ 5.77), then BM (CS,BM ¼ 5.21). These stock markets are above average
score on the firm strategy, structure, and rivalry. For those stock markets that have

Data Score (0-10)
Descriptions SGX SET BM PSE IDX SGX SET BM PSE IDX

3. Related and supporting industries
3.1 Business development
Ethical practices 7.78 5.67 6.84 5.82 5.2 10.00 1.82 6.36 2.40 0.00
Credibility of managers 7.93 6.9 7.33 6.84 5.9 10.00 4.93 7.04 4.63 0.00
Corporate boards 7.05 6.42 7.17 6.43 5.85 9.09 4.32 10.00 4.39 0.00
Auditing and accounting practices 8.3 6.9 7.71 6.92 6.29 10.00 3.03 7.06 3.13 0.00
Venture capital availability 4.4 2.9 4 2.7 3.6 10.00 1.18 7.65 0.00 5.29
Image abroad 8.95 7.1 7.65 4.78 6.1 10.00 5.56 6.88 0.00 3.17
Mean score (4.93) 9.85 3.47 7.50 2.43 1.41

Table IV.
Related and
supporting
industries

Data Score (0-10)
Descriptions SGX SET BM PSE IDX SGX SET BM PSE IDX

4. Firm strategy, structure, and rivalry
4.1 Structure
Market capitalization to
GDP (%) 181.2 70.21 141.8 63.8 41.5 10.00 2.06 7.18 1.60 0.00
Financial sector
liberalization 5.69 4.56 5.4 4.06 4.52 10.00 3.07 8.22 0.00 2.82
Trading participants 30 38 35 118 134 0.00 0.77 0.48 8.46 10.00
Corporate governance
(CG watch report) 69 58 55 41 37 10.00 6.56 5.63 1.25 0.00

4.2 Rivalry
Market share in WFE 1.33 0.68 0.81 0.29 0.74 10.00 3.75 5.00 0.00 4.33
Stability of stock market
Stock volatility 0.067 0.075 0.043 0.064 0.077 2.94 0.59 10.00 3.82 0.00
Stock return 0.02 0.1 0.03 0.09 0.09 0.00 10.00 1.57 9.04 9.16
Skewness of market
return index −0.26 −0.49 −1.41 −0.81 −0.58 10.00 7.99 0.00 5.21 7.22
Exchange rate
volatility 0.017 0.020 0.019 0.020 0.027 10.00 6.56 7.79 6.60 0.00

Fundamental financial
performance
Price-earning ration
(P/E ratio) 12.32 12.08 15.58 17.47 16.7 9.56 10.00 3.51 0.00 1.43
Price to book ratio
(P/B ratio) 1.41 1.78 1.88 1.92 3.13 10.00 7.88 7.27 7.03 0.00
Dividend yield 3.09 3.97 3.39 2.57 2.64 3.71 10.00 5.86 0.00 0.50

Mean score (4.94) 7.18 5.77 5.21 3.58 2.95

Table V.
Firm strategy,
structure, and rivalry

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score below average are PSE (CS,PSE ¼ 3.58) and the IDX (CS,IDX ¼ 2.95). They are third,
fourth, and fifth ranked, respectively. The details are shown in Table V.
Structure of stock market includes sub-criteria such as market capitalization to GDP,
degree of financial liberalization, trading participants, quality of corporate governance.
The three stock markets, SGX, BM, and SET, have superior score in almost aspects
under firm’s structure and rivalry sub-dimension except indicators relating to trading
participants. For risk and return performance of the competing stock markets, IDX and
SET are two markets with higher return and risk comparing to the rest. When
comparing fundamental financial information, on average, the stocks listed in the SET
seems to be cheap among its competing stock markets.

The role of government. The role of government in Porter’s diamond model is acting
as a catalyst and challenger; it is to encourage, or even push, companies to raise their
aspirations and move to higher levels of competitive performance. They must
encourage companies to raise their performance, stimulate early demand for advanced
products, and focus on specialized factor creation and to stimulate local rivalry by
limiting direct cooperation and enforcing regulations or deregulations. The government
of each country takes on plans to develop capital market by formulating and
implementing several policies to foster capital market in various aspects. These include
changing in public finance and fiscal policy, shaping the institution framework, and
changing regulation related to transaction and income generated from the stock
market. In this study, the role of government was separated into three sets; efficiency of
public finance and fiscal policy, institutional framework, government regulation.

The results from Table VI show that among five nations, mean score of the role of
government was 4.16. Comparing between five nations, SGX holds the first ranked
(CG,SGX ¼ 9.81) and BM is second ranked (CG,BM ¼ 6.06). SET is third ranked
(CG,SET ¼ 2.86). Whereas IDX (CG,IDX ¼ 1.72) and PSE (CG,PSE ¼ 0.33) are fourth and

Data Score (0-10)
Descriptions SGX SET BM PSE IDX SGX SET BM PSE IDX

5. Role of government
5.1 Efficiency of public finance
Public finance 7.92 2.95 5.23 2.6 3.24 10.00 0.66 4.94 0.00 1.20
Fiscal policy 10 2.8 3.2 3.0 2.6 10.00 0.26 0.80 0.59 0.00

5.2 Institution framework 9 2.9 4.2 2.8 2.9 10.00 0.10 2.24 0.00 0.08

5.3 Government regulation of business
Burden of government regulation 5.6 3.4 4.6 3 3.7 10.00 1.54 6.15 0.00 2.69
No. of procedures to start a business 3 5 4 15 8 10.00 8.33 9.17 0.00 5.83
No. day to start a business 3 29 6 35 45 10.00 3.81 9.29 2.38 0.00
Efficiency of legal framework in
challenging regs 5.5 3.6 5.1 3.2 3.8 10.00 1.74 8.26 0.00 2.61
Shareholders’ rights 5.6 4.5 5.3 4.7 4.6 10.00 0.00 7.27 1.82 0.91
Public trust in politicians 6.3 2.2 4.4 2.4 3 10.00 0.00 5.37 0.49 1.95

Taxation
Corporation income tax 17 23 25 30 25 10.00 5.38 3.85 0.00 3.85
Dividend tax 0 10 0 15 15 10.00 3.33 10.00 0.00 0.00
Value-added tax (VAT) 7 7 6 12 10 8.33 8.33 10.00 0.00 3.33
Mean score (4.16) 9.81 2.86 6.06 0.33 1.72

Table VI.
Role of government

1327

Benchmarking the
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of the ASEAN 5
equity markets

fifth ranked, respectively. In addition, when we consider the details of role of
government, we find that SGX leave behind other equity markets in the region in
almost aspects. SGX and BM are only two exchanges that have extremely high score on
the role of government. The three exchanges, SET, IDX, and PSE have many threats
such as shareholders’ rights, public trust in politicians, and fiscal policy.

We then combine all aspects into analysis and report the results in Table VII. As we
hypothesized, the overall results are expected. SGX, therefore, holds the highest stock
market competitiveness among ASEAN 5 with highest average score at 8.43. SGX has
received the highest score in every aspect in Porter’s diamond model. This is due to its
distinction on more liberalized market with strong environment and government
aspect. Singapore Government plays an important role in the investment in basic
infrastructure development since this will remove the bottleneck effect caused by
low-infrastructure conditions and to increase energy productivity, transportation
quality, and communication capability. SGX is the heart of ASEAN financial services
industry and the Asian Gateway to global and regional financial markets. With SGX’s
electronic trading system, it provides an opportunity for a global trading access to SGX
markets where 80 percent of the customers are from outside Singapore (Huat Tan, 2002).
Moreover, SGX offers its clients a variety span of equity products such as index
derivatives, uniquely centered on Asia’s three largest economies – China, India, and Japan.
Also, SGX provides opportunity for companies listed on SGX originating outside of
Singapore, which cannot be beaten by its ASEAN counterparts. Last but not least, SGX
offers a fully integrated value chain from trading and clearing, to settlement and
depository services. BM has a second rank with average score of 6.31. Both SGX and BM
have above average score and higher rank than other exchanges in ASEAN 5 region, they
outrank others in almost every dimension in Porter’s diamond model. Although SET gets
third ranked in term of competitiveness and it outranks the other two ASEAN equity
markets (IDX and PSE), all of them have lower than average competitiveness score. In
general, the results are in line with our expectations since similar studies on the
development of ASEAN financial and capital markets by World Bank (2011a, b), also
report the rank on development, though not competitiveness, consistent with our studies.

The results of the assessment of the competitiveness are shown in Figure 4.
We utilize radar chart to graphically display multivariate data in the form of a
two-dimensional chart of five variables. The star plot can also be used to explain the
competitiveness of ASEAN stock markets. Each dimension is represented on a spoke,
where each spoke represents one of dimensions of Porter’s model. The data length of a
spoke is proportional to the magnitude of the variable for the data point relative to the

Score (0-10)
Descriptions SGX SET BM PSE IDX

1. Factor conditions 9.16 2.85 7.44 2.19 1.67
2. Demand conditions 6.14 4.62 5.36 2.04 3.69
3. Related and supporting industries 9.85 3.47 7.50 2.43 1.41
4. Firm strategy, structure, and rivalry 7.18 5.77 5.21 3.58 2.95
5. Role of government 9.81 2.86 6.06 0.33 1.72
Total score 8.43 3.92 6.31 2.11 2.29
Rank 1 3 2 5 4

Table VII.
Summary

1328

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maximum magnitude of the variable across all data points. A line is drawn connecting
the data values for each spoke. This gives a star-like appearance. The bigger star
normally indicates a superior position for this plot; therefore, attain the highest level of
competitiveness. The radar plot also implies that there are inequalities in the level
of competitiveness for stock markets in this region. In particular, there are only two
exchanges, SGX and BM, having superior competitiveness than other countries in the
group. SGX dominates its counterparts in every aspect such as international listings,
robust online trading platforms, and efficient clearing houses. BM outperforms SET in
almost every aspect, except firm structure, strategy, and rivalry dimension. However,
IDX and PSE cannot completely dominate each other in terms of competitiveness.
Results in the figure show that there are vast differences in the level of competitiveness
among stock markets in the ASEAN region. From the results in the figure separate
the five stock exchanges into two groups. The higher competitive markets include SGX
and BM. And, the lower competitive markets are SET, IDX, and PSE.

Policy implications and discussions
One remarkable implications of the radar chart in the above figure is the distance
between each point on the same spoke. The distance represents the competitiveness
gap between two stock exchanges under a particular dimension of Porter’s diamond
model. From the previous analysis, the relative competitiveness score has separated the
five stock exchanges into two groups. There are three aspects of Porter’s diamond
model that contribute to this separation. The higher competitive group surpasses
another in the role of government, factor condition, and related and supporting
industries aspects. The three aspects are more macro-factors related to government
policies and decisions. This indicates that government and the environment the stock
exchanges operating in plays an energetic role in supporting the financial and capital
market development. The result shows that the leader stock exchanges of the region,
Singapore and Malaysia have significant involvements from the government. To learn
from the best-in-class exchange, SGX, the remaining stock exchanges should focus
on the role of government since government plays an important role in the investment

Total Scores: SGX 8.43 BM 6.31 SET 3.92 IDX 2.29 PSE 2.11

1. Factor Conditions

5. Role of Government

4. Firm Strategy, Structure and Rivalry 3. Related and Supporting Industries

2. Demand Conditions

10.0

8.0

6.0

4.0

0.0

2.0

SGX (Singapore) SET (Thailand) BM (Malaysia) PSE (Philippine) IDX (Indonesia)

Figure 4.
Analysis of the
competitiveness
for ASEAN 5
stock markets

1329

Benchmarking the
competitiveness
of the ASEAN 5
equity markets

in basic infrastructure development under factor condition aspect, relaxing regulations
related to investment and taxation under the role of government, as well as creating
supportive activities and business environment for the advancement of equity markets.
Therefore, the government of the lower competitive group should indorse basic
infrastructure, increase level of involvement in public policies and taxation, as well as
promote supporting industries so as to explore domestic and regional demand for
financial products and to improve the supply chain efficiency.

As Flanagan et al. (2007) noted in their paper “research is then suggested to move
forward from understanding competitiveness to improving it. Measuring competitiveness
is not the ultimate purpose; improving it and achieving long-term performance is.”
With the results presented in the previous sections, it is clear that ASEAN 5 stock
markets are in a dynamic environment with unparalleled opportunities. Several things
should have been done for increasing the competitiveness of each market. For SGX, the
battlefield is not ASEAN, it needs to go beyond competing within the region, but a more
challenging landscape in global environment. From the analysis, SGX is obviously
a market dominant and best-in-class exchange in ASEAN. SGX faces its challenges in
demand condition and firm strategy, structure and rivalry aspects, according to Porter’s
diamond model. Specifically, SGX should find its way to stimulate the growth of market
and volume trading as well as correcting the problem of industry concentration.
The highlights should be placed on expanding the total market, protecting market share,
and expanding market share. Since the internal market is nearly soaked, SGX should look
for many alternatives to seize new opportunities. SGX needs to create blue oceans
strategy, the creation of innovative value to unlock new demand. Innovation can be using
new technologies to facilitate investment trading or finding new products for competing.
In doing so, SGX needs to become a leader in some selected industries and should work
with investment bankers to target both companies and investors in these industries and
bring them together on the SGX platform. SGX has targeted biotechnology, but it should
also consider expanding into pharmaceuticals and health care given the long-term prospects
in the global market. Focussing on innovations will stimulate demand condition and at the
same time lessen the concentration to existing industry the exchange has focussed.

BM has reached a second rank, the market challenger. The implication for BM is to
aggressively expand its market share by attacking the dominant exchange, SGX. Since
BM has above average score and higher rank than the remaining three exchanges in
ASEAN 5 region, it outranks the remaining three exchanges in almost every dimension
in Porter’s diamond model. For BM, The analysis of the competitive structure of the
Malaysian stock market reveals that BM has its strong points on factor condition,
related and supporting industries, and the role of the government, comparing to the rest
of the countries. Only exceptions on firm strategy, structure, and rivalry dimension that
it follows the SET. Therefore, BM should improve its policy toward trading
participants and financial return dimensions. For private sector, investment banking
houses can assist the exchange by allocating more research analysts and traders to
cover Malaysian equities among region and to the world. In this way, the true valuation
of the assets will be revealed to the markets for their fair prices. In addition, more
analysts mean more information and analytics, which should attract more investors to
the market accordingly. BM has also need to do various initiatives aimed at improving
its product and service offerings. It should develop new products by using its
strengths. One way to enhance its product variety is to introduce new products related
to its strong points are to encourage development of a wider range of competitive
products and services related to Islamic securities and regulatory framework for the

1330

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Islamic capital market so that it can create a sustainable market for the effective
mobilization of Islamic funds. Liquidity is one of the largest factors for both issuers and
investors make one equity exchange more attractive to an issuer than another.
Therefore, to achieve a more competitive advantage, BM should be positioning itself as
an international Islamic capital market center and increase the liquidity and turnover
velocity of its markets, as well as improving the efficiency and transparency of the
market. To do this, the role of government should be improved. Combining with firm
strategy, structure, and rivalry aspect, the Malaysian Government has to establish its
market infrastructures and policies in supporting the promising embryonic Islamic
capital markets. More relaxed comprehensive accounting procedure is needed to be
revised, more incentives should be given to attract foreign investors, more
tax-reduction scheme or lower fees and taxes on profits earned by institutions
undertaking activities related to Islamic products should be launched; for example.

The SET holds the third position, classified as the market follower which is designated
as a runner-up that should not rock the boat. To enhance its competitiveness over
short run, the policymakers should primarily improve its weakness on the laws and
regulations to facilitate investment environment. Thailand should also ensure easing
procedures, providing better protection to investors, and amendments to the existing
laws to improve investment condition. Most importantly, since the gap analysis in the
previous section indicates that the SET should improve its factor condition, related and
supporting industry, and the role of government facets. These dimensions are the focus
for the SET to improve its competitiveness. Therefore, the trading systems, general
infrastructure quality, and the skills of human resource in financial industry are needed
to be enhanced. The issue of labor quality is the most important sub-dimension since
the labor quality is far below others for the information technology skills, language
abilities, and financial literacy. Next, the SET may consider pursuing focus strategies
by exercising its strength on geographic location in the Greater Mekong Subregion
(GMS). The SET should collaborate with other stock exchanges in GMS to strengthen
its competitiveness. By having a deep understanding of the greater Makong Regions
market and the unique needs of its counterparts, the SET can therefore develop unique
lower cost or differentiated products or services for GMS market. The SET may
consider promoting capital markets connectivity among emerging in-land ASEAN
countries. For instance, it can be the center of the GMS capital market in raising funds
or promoting cross-border listing in multiple exchanges in ASEAN. In addition, the
exchange can also encourage merger and acquisition activities among companies in
the emerging ASEAN countries. In this way, the SET can create competitive advantage
by exploring an entirely new market opportunity or by expanding market supply of
products and services. At the same time, the SET can build up the competitive
advantage in the long run by serving a market segment that other exchanges can
access with more geographic difficulties.

Considering IDX and PSE, from the factor condition perspective, there is a need to
be strengthened for the exchange’s infrastructure and organizational foundation. PSE
should also focus on its general infrastructures, while IDX should focus on quality of
labor issues to improve their competitiveness. From demand condition perspective,
these two markets have not expanded at a speed rapid enough to catch their
counterpart exchanges. There are a variety of reasons. One reason is the predominance
character of less developed countries, in which less investor participation in the stock
markets comparing to SGX, BM, or the SET. Another is low-awareness and negative
perception of the stock market investing that have been prevalent subjects which

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continue to keep investor levels low. Such incidences can be explained by looking at
related and supporting industries dimension. These are due to low ethical practice,
loosing creditability of managers, weak corporate boards, and insufficient auditing
agencies. Moreover, from firm strategy, structure, and rivalry dimension, to expand the
market size and increasing volume, IDX and PSE can learn from the leader’s
experience. They can follow or even improve on the leader’s existing products,
programs, and back-office supporting systems. This will help expand the market with
much less expenses. For example, the exchange authority may consider having a more
efficient internet trading platform to help facilitate the trading transaction, which will
increase liquidity of the market. Electronic trading and modern information
technologies are enabling the two exchanges to attain global access from foreign
investor at very low costs. They can join the ASEAN trading link network leaded by
SGX, BM, and the SET. Also, the exchanges could possibly relax its regulation to allow
for securities borrowing and lending activities that help investors managing their
position more efficiently. Moreover, an increased variety of products available for
trading and enhanced investor base will result in significant mobilization of funds
feeding into capital markets and increasing the number of listed firms and trading
volumes. Information disclosure of the listed firms and good corporate governance
score are low for the two exchanges. Therefore, the two exchanges need to enhance
good corporate governance among their listed firms since transparency and corporate
governance will strengthen investor confidence. For the role of government, it is clear
that government in these two countries should improve its regulations, specifically on
regulation related to business operation and taxation to support firms and facilitate the
trading activities. Regulations at the central and regional level need to be modernized to
comfort the doing of business.

Over the long run, IDX and the PSE can increase their competitiveness by searching
niches to focus on. Specializing in certain product lines or courting specific sectors has
proofed from the leading exchanges to be paid off and indicates significant opportunity
for long-term capital markets growth. Since Indonesia and the Philippines need logistic
infrastructure improvements. Significant development elements, such as nationwide
infrastructure development, are promising opportunities. Due to the limitation of
government funding, it is resulted in the slow achievement of adequate infrastructure
to support rapid development. With capital market, there are opportunities for
cooperation between the government and the private sector under the public-private
partnership scheme. Infrastructure funds are expected to bring in needed capitals. This
massive amount of investment will help boost the size of the stock market and
enhancing the competitiveness of the countries eventually. For example, strategic
collaboration between one of the leading exchanges in ASEAN should be strengthen to
find mutual benefits among exchanges. In doing so, less developed exchanges can learn
from the leaders to improve their competitiveness and can move toward sustainable
growths based on long-term partnership.

Overall, though the results in the previous section point out that there are large
discrepancies among stock markets in the ASEAN region, the main concern is not the
case that SGX is going to prosper to a great extent than another because of the its high-
competitiveness scores. Rather, the evidence points out existing gaps should be
abridged in order to foster the benefits of integration. One effective way to lessen the
gap is to promote strategic alliances among the region. Less competitive markets, such
as IDX or PSE, could finds their weak points in a particular dimension under Porter’s
diamond model. Then, they can match with the higher competitive exchanges to find

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synergies. This helps the lower competitive stock markets to determine what they
could be doing better with the help of the higher competitive ones. The lower
competitive markets would benefit by learning from the leaders’ experiences for its
products and trading systems. Most importantly, firms in the lower competitive
markets can widen the investor base and raise addition funds by means of dual listing
on the local and the more competitive bourses, potentially SGX, BM, or the SET. With a
broader market access to raise capitals within ASEAN, listed companies have the
prospect to circumvent the foreign exchange mismatch when doing business overseas.
This would be especially beneficial for a multinational corporation that prefers to
obtain funding in the location of operation. In doing so, the higher competitive
exchanges also benefit from synergies. They can expand their market size for their
sustainable growth of the stock exchanges, stimulate the growth of market and volume
trading, as well as correcting the problem of industry concentration.

As mentioned on the work of Karim and Ning (2013) on the ASEAN 5 stock markets
integration, there a need for policy coordination among ASEAN 5 members to foster
the success of the integration and mitigate the impacts of financial instability.
For ASEAN, we believe the next important move for all countries would be set the
priority task to improve the role of government dimension in order to benefit from
the full collaboration since this aspect is a crucial condition before doing business
since each country has different regulations. The law and regulations should be first
synchronized and open the room for new products cross-border listings. For example,
the capital gain and dividend taxes for each country should be aligned and harmonized.
Also, cross-border clearing and settlement process have to be redefined and
synchronized since settlement is the final leg of the trade cycle, where assets are
swapped for cash. Likewise, all exchanges including SGX should focus on the
important role of the venture capital industry as a source of financing to emergent
high-growth firms. Policies and initiatives to promote innovation need the funding from
the venture capital industry. One way to do is to increase private sector participation in
the venture capital and private equity industries. Moving forward, the growth of the
role of the private sector in developing the venture capital industry and the
complementary development of the private equity industry are vital strategies to widen
the sources of financing. At last, we expect the agreement to have a cross-border listing
of exchange traded funds, or ETFs. ETFs are useful to track the performance of stock
indices in each country. These products should be open to all ASEAN members and
foreign investors. In this way, ASEAN will benefit from integration and meet its
objective in attracting foreign investors as one of the asset classes to seek further asset
diversification from local markets.

Conclusion
This paper investigates the competitiveness of the stock markets in ASEAN 5,
applying Porter’s diamond model to analyze the competitiveness. The model is based
on five main pillars of competitiveness, comprising of several indicators that emphasize
different aspects of competitiveness. This research contributes to a deepened concern
of the sources of competitive advantage among ASEAN stock markets. To the best
of knowledge, this study is the first to conduct benchmarking on the competitive
advantage for stock exchanges, which has never been studied before. The study sheds
light on the competitiveness structure of the stock markets in the ASEAN region.
The results show that SGX tops the list far ahead of others. BM acquires the second
highest-ranking after Singapore in terms of competitiveness. The SET is third ranked

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ahead of IDX and the PSE, respectively. This finding reveals that the competitiveness
and the development levels of the stock markets in this region are imbalanced.
The existing gaps should be reduced in order to foster the future of integration.
One effective way to lessen the gap is to promote strategic alliances and cross-border
listing of equity products among the region. The benchmarking process in this study
helps the lower competitive stock markets to determine what they could be doing
better. The lower competitive markets should indispensably need to establish the
well-planned development strategy and policy to build up the competitive advantage
and to find synergies among the region before full participation of AEC in 2015.

There is one noteworthy limitation of this study. In our methodology section, we
normalize raw data for each indicator to compare competitiveness score. We convert
published and calculated indices to numbers between 0 and 10 inclusively; therefore, it is
implicitly assumed each indicator receives the same weight under the framework.
Though this limitation exists, the impact of this limitation is little in relation to the overall
findings and conclusions of your study. This is because score on competitiveness for
SGX, the best-in-class stock exchange, is far beyond its counterparts and better than
other exchanges in the same region in every dimensions. Changing weights may not alter
the results. This limitation may affect the rank of two of the least competitive exchanges
when one indicator has more weight than others since their competitiveness score are
almost similar; however, to assign different weights on indicators may trigger another
restraint. For example, one of such question is why one indicator is more important than
others. Also, the level of importance of each indicator for exclusive country may be
different; therefore, we leave this issue as the room for future research.

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Appendix. Factor definition
This section describes indicators constructed using Porter’s diamond model: factor condition,
demand condition, related and supporting industries, firm strategy, structure and rivalry and role
of government.

1. Factor conditions
1.1 Basic factor. Infrastructure. Quality of overall infrastructure: quality of general
infrastructure (e.g. transport, telephony, and energy) in each country (Source: World Economic
Forum, 2013).

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www.world-exchanges.org/statistics

www.world-exchanges.org/statistics

Investment in telecommunication: investment refers to as the annual capital expenditure; this
is the gross annual investment in telecom (including fixed, mobile, and other services) for
acquiring property and network. The term investment means the expenditure associated with
acquiring the ownership of property (including intellectual and non-tangible property such as
computer software) and plant. This includes expenditure on initial installations and on additions
to existing installations where the usage is expected to be over an extended period of time
(Source: IMD, 2013).

Connectivity of people and firms (e.g. telecom, IT, etc.) (Source: IMD, 2013).
Technological cooperation between companies is lacking or developed (Source: IMD, 2013).
1.2 Advancing financial systems. Deepening financial system. Financial depth is measured by

market size of financial market in each of country. It is divided into three types: domestic bank
credit, stock market capitalization, and debt securities market (Source: World bank, 2012).

Availability of financial services: the financial sector provides a wide range of financial
products and services to businesses (Source: World Economic Forum, 2013).

Affordability of financial services: it indicates whether financial service are affordable or not
(Source: World Economic Forum, 2013).

Ease of access to loans: in each country, this variable is measure the ease to obtain a bank loan
with only a good business plan and no collateral. It shows extremely difficult or extremely easy)
(Source: World Economic Forum, 2013).

Soundness of banks: in each country, banks are generally healthy with sound balance sheets
or require recapitalization (Source: World Economic Forum, 2013).

Euro money country risk (ECR) evaluates the investment risk of a country, such as risk of
default on a bond, risk of losing direct investment, risk to global business relations, etc. by taking
a qualitative model, which seeks an expert opinion on risk variables within a country (70 percent
weighting) and combining it with three basic quantitative values (30 percent weighting) (Source:
www.euromoneycountryrisk.com/ 2010).

Financial risk factor: the risk factor in the financial system is adequately addressed. Higher
score indicates adequately addressed to these risks (Source: IMD, 2013).

Quality of labor. Financial skill is the ability to understand how money and economy work,
how people earn or make money, and how they invest and use it to help themselves and others.
If people in the country have higher financial skill, then it has a positive effect on stock market
development (Source: IMD, 2013).

Information technology skills: the way people get access the readily available of information
technology skills (Source: IMD, 2013).

Language skills: the way people have the language skills that meet the needs of enterprises
(Source: IMD, 2013).

Quality of management schools: it shows the quality of management or business schools in
the country. The more number of high quality of management schools can be interpreted as
people can work effectively (Source: IMD, 2013).

Remuneration in service professions: total base salary plus bonuses and long-term incentives,
US dollars. Researcher uses salary of bank credit officer as proxy variable. The higher salary
signals higher quality labor flows into financial industries (Source: IMD, 2013).

Brain drain: country retains and attracts talented people. In financial sector, most
people like to take opportunities working in another country because it provides higher salary
and better benefit. Higher brain drain in the country affects stock market development and
lessens its competitiveness, accordingly. (Source: IMD, 2013).

Capacity for innovation: the level technology and innovation of companies in a particular
country involve with technology. Higher score can be interpreted as higher competitive
advantage of stock market development (Source: World Economic Forum, 2013).

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www.euromoneycountryrisk.com/ 2010

Company spending on R&D: the extent to companies in a country spend money on R&D.
Higher score can be interpreted as higher competitive advantage of stock market (Source: World
Economic Forum, 2013).

2. Demand conditions
2.1 Size and growth of demand. GDP growth: this indicator illustrates the growth of a nation in
terms of the production and income (Source: World Bank, 2013).

Market capitalization: the domestic market capitalization of a stock exchange is the total
number of issued shares of domestic companies. It describes the developing of stock market.
Higher stock market capitalization interprets a higher economy of scale and competitiveness
(Source: World Federation of Exchanges, 2012).

Market capitalization growth: this indicator demonstrates the growth of stock market. Higher
growth of stock markets attracts investors and implies that stock market will have a better
performance in the future (Source: World Federation of Exchanges, 2012).

Value of share trading: this indicator is measured as total number of shares traded multiplied
by their respective matching prices. The liquidity of stock exchange that is important for stock
market development and competitiveness. Higher value of share trading can be interpreted as a
higher competitiveness (Source: World Federation of Exchanges, 2012).

Volume of share trading: it measures liquidity of stock market, like value of share trading.
However, volume of share trading is calculated from the number of shares traded in a security
during a given period of time (Source: World Federation of Exchanges, 2012).

Stock traded per capita: it shows proportion of value of share trading to number of population
in the country. If there is a higher stock traded per capita, it can be interpreted as people in the
country have capacity to invest (Source: World Federation of Exchanges, 2012).

Turnover velocity is the ratio between the Electronic Order Book (EOB) turnover of domestic
shares and their market capitalization. The value is annualized by multiplying the monthly
average by 12, according to the following formula:

Monthly EOB domestic share turnover � 12
Month � end domestic market capitalization

Higher turnover velocity displays a higher liquidity (Source: World Federation of Exchanges,
2012).

2.2 Sophisticated demand. Number of listed companies: it is the number of companies which
have shares listed on an exchange at the end of the period, split into domestic and foreign,
excluding investment funds, and unit trusts, and companies whose only objective is to hold
shares of other listed companies, such as holding companies and investment companies, and
regardless of their legal status. A company with several classes of shares is counted just once.
Only companies admitted to listing are included (Source: World Federation of Exchanges, 2012).

Product in market: it is divided into three parts: equity products (e.g. equity, REITs, warrants,
etc.), derivative products (e.g. index future, index options, single stock future, etc.), and bond
products. A variety product shows market efficiency responsiveness to investor demand (Source:
Autayani et al., 2009).

Market concentrates (CR10): the indicator is measured by the total output produced in an
industry by a given number of firms in the industry. In case of CR10, it uses the market share of
the biggest ten firms listing in stock market each of country. Higher value of CR10 will retract
stock market development and competitiveness because the market is manipulated from some
firm (industry is oligopolistic) (Source: Datastream calculated from researcher).

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Herfindahl Index (HI): it measures the size of firms in relation to the industry and an indicator
of the amount of competition among them. HI index is calculated as the sum of the squares of the
market shares of over all of the firms, according to the following formula:

HI ¼
XN

i¼1
s2i

where si is the market share of firm i in the market, and N is the number of firms.
Higher Herfindahl Index generally indicates a decrease in competition and an increase of

market power, which will retard stock market development and competitiveness (Source:
Datastream calculated by researcher).

3. Related and supporting industries
3.1 Business development. Ethical practices: it is sub-indicators of management practice. Higher
score shows ethical practices are implemented in companies (Source: IMD, 2013).

Credibility of managers: higher score indicates that credibility of managers in society is
strong. (Source: IMD, 2013).

Corporate boards: higher score shows that corporate boards do supervise the management of
companies effectively (Source: IMD, 2013).

Auditing and accounting practices: higher score shows that auditing and accounting
practices are adequately implemented in business (Source: IMD, 2013).

Venture capital availability: this indicator expresses the level to access to capital for entrepreneurs
with innovative but risky projects to find venture capital. higher score shows that the venture capital
in country is available (Source: IMD, 2013).

Image abroad: the image abroad of your country encourages business development (Source:
IMD, 2013).

4. Firm strategy, structure, and rivalry
4.1 Structure. Market capitalization to GDP: it shows the development of stock market compare
with the growth of country economy (Source: World Bank, 2013).

Financial sector liberalization: the Financial Development Report 2012 (World Economic Forum)
summarize the level of financial sector liberalization in 3 levels; conservative, transition, liberal; in
years book analyze from exchange rate stability, bank system, impact of financial crisis.

Trading participants are the number of dealers, brokers, brokers-dealers, and individuals acting
as principals who trade on the exchange through direct access to the trading system. Clearing and
settlement members are excluded. Several branches of a same organization have the right to apply
as trading member to an exchange, and each license is computed as one trading participant.
For example, if two branches belonging to the same organization apply as trading members, they
are counted as two trading participants (Source: World Federation of Exchanges, 2013)

Corporate governance (CG watch report) is a managerial principle for a company to balance
the interests of stakeholders, and enhance efficiency, transparency, and accountability of the
company.

4.2 Rivalry. Market share in WFE: it calculate from market capitalization each of ASEAN 5
country divide total of markets capitalization of markets which are listed in World Federation of
Exchanges. according to the following formula:

Domestic market capitalization � 100
Total market capitalization

Higher scores imply the country has competitive stock market (Source: World Federation of
Exchanges, 2013).

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Stability of stock market: this indicator shows stock market has high liquidity, appropriate
volatility and stock price can reflect market prices. Sub-indicators include stock price volatility,
stock return, skewness of market return index, Exchange rate volatility and fundamental financial
performance (price earnings ratio; price to book ratio; dividend yield) (Source: dataStream
calculated from researcher, average 2007-2012).

5. Role of government
5.1 Efficiency of public finance. The ways government manages revenue and expenditure of the
public authorities and the adjustment of one or the other to achieve desirable effects and avoid
undesirable ones. Five sub-indicators consists of government budget surplus/deficit (percentage
of GDP), total general government debt-real growth, public finance is efficiently managed, tax
evasion, and pension funding (Source: IMD, 2013).

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to
monitor and influence a nation’s economy. Three sub-indicators consist of total tax revenues
(percentage of GDP), real personal tax, taxation (Source: IMD, 2013; Deloitte, 2012).

5.2 Institution framework. Efficiency of monetary policies in the country.
Five sub-indicators consist of real discount/bank rate, cost of capital, efficiency of central
bank policy, foreign policy reserves and interest rate spared (Source: IMD, 2013).

5.3 Government regulation of business. Government has regulated business that need for more
responsive and effective business regulation. Five sub-indicators consist of burden of
government regulation, number of procedures and days to start a business, efficiency of legal
framework in challenging registration, shareholders rights and, public trust in politicians
(Source: IMD, 2013).

About the authors
Wanida Jarungkitkul is a Graduate Researcher in Finance Economics at the Graduate School of
Development Economics, National Institute of Development Administration (NIDA). She had been
involved in several research projects related to capital market development and competitiveness.

Sorasart Sukcharoensin is an Associate Professor and an Associate Dean for Academic
Affairs at the Graduate School of Development Economics, the National Institute of Development
Administration (NIDA), Thailand. He had achieved the Rajapruk award for teaching excellence
from the National Institute of Development Administration. His research interests include capital
market development, corporate governance, insider trading, mutual fund performance, and
benchmarking. Sorasart Sukcharoensin is the corresponding author and can be contacted at:
sorasart@nida.ac.th

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Outline placeholder
Appendix.Factor definition
2.Demand conditions
3.Related and supporting industries
4.Firm strategy, structure, and rivalry
5.Role of government

Notes to Final Assignment/Entrepreneurship and strategy in China_ why ??Porter’s five forces?? may not be _ Emerald Insight.html

Notes to writer:

Below are some management theories I have learned in my 1st DBA seminar.

The content of my assignment may include the thinking / and “its application in the real world” from these management theories

Academic research is valuable from its application (i.e. applied research)

Enclosed pdf files are some research articles relating to these management theories (and its application into real world) which I think you can consider…. (not 100% you shall put into the writing, but intelligently putting in). Rephase your writing may be considered. Thanks!

Classical management

14 Principles of Management by Fayol

Contemporary management

The Five Forces Model of Porter

Porter’s Competitive Advantage Model

Other important theories

· Hofstede’s Theory of Cultural Dimensions

· Maslow’s Hierarchy

· Ansoff Matrix