An Empirical Study on Acceptance of Telecare Health Services in Malaysia Suzari Abdul Rahim, Parimala Nair A/P Gopalan, Nor Aida Abdul Rahman 13-28

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2 List of Articles: The Analysis of Islamic Banks Websites and Reports Regarding the Effectiveness of Their Corporate Citizenship and Community Development Md Shamim Hossain, Sofri B Yahya 1-12 An Empirical Study on Acceptance of Telecare Health Services in Malaysia Suzari Abdul Rahim, Parimala Nair A/P Gopalan, Nor Aida Abdul Rahman Export Pricing Towards Developing Countries: A Proposed Model in the MNEs context Evidence from Malaysia Mahmoud Ata Al-Tawalbeh, Shaizatulaqma Kamalul Ariffin, Zurina Mohaidin An Empirical Analysis of the Perceived Skills in Predicting Managerial Effectiveness: The Malaysian Perspective Rajendran Muthuveloo, Kang Chia Chiek, Teoh Ai Ping Crisis Management, Crisis Communication, and Consumer Purchase Intention Post-crisis Farhana Mansor, Noor Nasir KaderAli Determinants of Future Entrepreneurship and Entrepreneurial Intention Fatema Johara, Sofri Bin Yahya, Shehnaz Tehseen The Role of Board Diversity on Materiality Disclosure in Sustainability Reporting Ngu Sie Bing, Azlan Amran Foreign Exchange Rate, Interest Rate, Inflation Rate and Economic Growth in Malaysia Yan Wah Low, Tze-Haw Chan Green Purchase Intention of Laundry Detergent Powder in Presence of Eco-Friendly Brand Salmi Mohd Isa, Chew Kun Lim, Phaik Nie Chin Corporate Risk Management Disclosure and Corporate Sustainability: The Role of Diversification Fathyah Hashim, Lee Tian Koon

3 Corporate Governance and Sustainability Reporting Practices: The Moderating Role of Internal Audit Function Yuvaraj Ganesan, Yew Wei Hwa, Amar Hisham Jaaffar, Fathyah Hashim Tourism Demand among International Students: Implications on Penang Tourism Industry Chang Ee Ling, Christopher Richardson Professional Identity Formation in Globalization Era: Case of Malaysian Novice Teachers Norfarah Nordin, Mohd Ali Samsudin Impacts of Foreign Currency Exposure on Malaysia s Firm Value: Firm Value, Hedging and Corporate Governance Perspectives Roselene Yam Sou Cheng, Ei Yet Chu, Saw Imm Song, Tian So Lai Consumer Purchase Intention Toward Online Grocery Shopping: View from Malaysia Siew-Lee Chin, Yen-Nee Goh The Impact of Value Co-creation on Service Supply Chain Performance: A Proposed Conceptual Framework Jaludin Janteng, Cheng Ling Tan, Yudi Fernando Defining and Measuring Strategic CSR: A Formative Construct Say Keat Ooi, Azlan Amran, Jasmine A.L. Yeap An Investigation On Residential Solar Power Systems (SPS) Install Intention: View from an Emerging Market Pui-Pui Thong, Yen-Nee Goh, Cheng-Ling Tan, Shaizatulaqma Kamalul Ariffin A Study of Factors influencing Consumer s Purchase Intention toward Green Vehicles: Evidence from Malaysia Ng Lee Yong, Shaizatulaqma Kamalul Ariffin, Goh Yen Nee, Nabsiah Abdul Wahid The Effects of National Culture, Corporate Governance and CSR Governance on CSR Disclosure Quality Wang Zi Jian, Amar Hisham Jaaffar, Say Keat Ooi, Azlan Amran

4 Student Satisfaction and Loyalty in Malaysia Private Higher Education Institutions Jia-Haur Goh, Yen-Nee Goh, T. Ramayah Factors Influencing Malaysian Consumers Intention to Purchase Green Energy: The Case of Solar Panel Nik Salehah Nik Abdul Aziz, Nabsiah Abdul Wahid, Methaq Ahmed Sallam, Shaizatulaqma Kamarul Ariffin Consumer Responses towards Corporate Social Responsibility Electronic Brands in Malaysia Salmi Mohd Isa, Kiong Lee Lu, Shaian Kiumarsi Factors Causing Female Inequality in Malaysian Organisations: A Conceptual Model Malvinder Kaur, Junaimah Jauhar, Zurina Mohaidin Examining Residents Receptiveness towards E-waste Recycling in Penang, Malaysia Chee Hui Tan, T. Ramayah, Jasmine A.L. Yeap, Say Keat Ooi Do Small and Medium Practitioners (SMPs ) Service Quality and Non-Audit Service Fees Paid Matters? The Mediating Role of Satisfaction of Small Medium Enterprises (SMEs) Yuvaraj Ganesan, Hasnah Haron, Ishak Ismail, Anwar Allah Pitchay Factors Influencing Poor Experience Quality in 2-To- 5-Star Hotels: A Content Analysis of Guest Reviews on Trip Advisor Poh Wai Choo, Cheng Ling Tan The Impact of Reward and Transformational Leadership on the Intention to Quit of Generation Y Employees in Oil and Gas Industry: Moderating Role of Job Satisfaction Junaimah Jauhar, Chan Soo Ting, Noor Fareen Abdul Rahim Antecedents of Behavioural Intention to Adopt Internet of Things in the Context of Smart City in Malaysia Gan Wee Leong, Teoh Ai Ping, Rajendran Muthuveloo Perceived Importance and Readiness of Green HRM in Malaysian Financial Services Industry Say Keat Ooi, Azlan Amran, Simin Goh, Mehran Nejati

5 The Analysis of Islamic Banks Websites and Reports Regarding the Effectiveness of Their Corporate Citizenship and Community Development Md Shamim Hossain* Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia Sofri B Yahya Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia *Corresponding author Abstract Purpose The present study attempts to justify the evidence and strengthen the argument on the community development activities and responsibilities of Islamic Banks in Bangladesh by studying the phenomenon among all the Islamic banks. Website and annual reports content will be analysed in order to understand the phenomenon Design/Methodology/Approach The study has been rooted in previous studies and measured an appropriate method for analysis of qualitative data. In addition, the study uses a content analysis methodology to analyze objectively and systematically the websites and annual reports of the Islamic banks Bangladesh. Findings This study indicate that all the Islamic banks in Bangladesh are engaged in community development; at least they proclaim this in their websites and annual reports. Nevertheless, there are variance in their behaviour and contradictions within these reports. Further, the results also portrait that, mainly the Islamic banks in Bangladesh have protected areas of accountability, transparency, ethical behaviour, fair operating practices, human rights, development of community and safety and environment according to their annual reports and websites. Originality/value This study builds on the estimated new community development behaviours through annual reports website content analysis of Islamic banks in Bangladesh. Keywords: corporate community development, Islamic banking, websites, annual reports. Introduction There has been growing interest in community development of the corporations during the past two decades in Bangladesh (Hossain & Yahya, 2017). Business corporations do not operate in a vacuum, but rather through their processes impact the environment that include the corporate stakeholders, community, and other affected actors. Scholars argue that addressing the issues related to community development in Bangladesh affects everyone in some capacity. In spite of the source of the issues or problems arising from corporate exercises related to community development, everyone should take responsibility in some way or another in resolving them as the consequences of these problems affect, either directly or indirectly, everyone. Generally, the community, as a whole, is ethically bound not only to ensure their well-being but also of the future 1

6 generation. Therefore, the community has the responsibility to ensure that corporate exercises related to community development do take into account the interest of the future generation that burden of responsibility should also be applied to financial institutions (Helleiner, 2009). Banks, in particular, play a critical role in an economy with their contribution to the well-being of the community and when they fail, their failure have severe repercussion on the community causing much hardship (Cooper et al., 2015; Johnson & Greening, 1999; Roseland, 2000). Islamic banking, generally, have undertaken community development activities that are of great advantage to the community (Mohammed, 2007). Islamic banks, as corporations are in the position of creating an enriched community with their CCD activities (Bauman & Skitka, 2012; Néron & Norman, 2008; Schur, Kruse, & Blanck, 2005). Their CCD activities have a cascading effect they have brought awareness of CCD to other organizations within the community who had benefited from these CCD activities. Research indicates that that several banks have incorporated community development in their Key Performance Indicators (KPI). Nevertheless, it must be noted that the community development initiatives by the Islamic banks in Bangladesh are merely voluntary, lacking any legislation in Bangladesh mandating community development by these banks. There are no previous significant findings to establish the extent these KPIs related to CCD activities were achieved. Hence, this study shall ascertain the extent the Islamic Shariah based banks in Bangladesh are involved with CCD activities by analysing their website and annual report content, thereby attempting to draw the CCD status among Islamic banks in Bangladesh. Corporate Community Development In recent years, there have been many positive developments concerning issues related to CCD (Banks et al., 2011). A number of premises, and theories have been developed on CCD (Banks, Kuir-Ayius, Kombako, & Sagir, 2013; Hughes, 1988; Winner, 2003). CCD has been generally been defined as a process that increases the selection of choices that creates an environment where persons can implement their full potential to lead creative, and innovative lives (Shaffer, 2006). Figure 1: ISO : Guidance on Social Responsibility, 2012 Source: (Secretary, 2012) Biggs, Phillipson, Money, & Leach, (2006) denoted that community development is a process where persons in a community together with those of governmental authorities develop the financial, communal and cultural situations of communities and societies, which are then integrated into the state of living giving rise to national progress. Sanders, (2008) saw community 2

7 development as a practice moving from phase to phase; a process of functioning towards a purpose; activities of dealings and as a process of improving people s well-being and principles. This is particularly so true for banks whose involvement in economic and well-being of society is highly significant. To achieve the objective of this study, that is, to examine the commitment of Islamic banks of Bangladesh to CCD, the core standards as identified in ISO CCD (ISO/DIS 26000, 2012) will be used to assess the extent of these commitment. Accountability (ISO/DIS 26000, 2012) Accountability gives confidence to the public of those who operate the business as they are held accountable for their actions. It suggests an Islamic bank s culture where accountability is practiced and there is commitment to upholding the laws. Such instances, include effective use of financial, natural and human resources as well as settling of taxes to the government bodies while ensuring fair representation of historically under-represented groups in higher positions in the institute (O Dwyer & Unerman, 2010). Transparency (ISO/DIS 26000, 2012) In regards to the transparency principle, the Islamic banks should be transparent in their judgment and activities that affect the society and the environment (High Commission of Canada & Reed Consulting BD ltd, 2013). Activities should be appropriate and factual, and be offered in a clear and goal oriented manner so as to allow stakeholders to accurately measure the impact that the Islamic bank's decisions and actions have on their particular interests. Transparency is a fundamental standard in the implementation of a CCD plan, however, the major issue in the implementation of this standard is how a transparent strategy ought to be structured in order to improve the CCD behaviour of corporations (Dubbink, Graafland, & Van Liedekerke, 2008). Ethical behaviour (ISO/DIS 26000, 2012) Ethical behaviour requires an organization to behave ethically at all time. Hence Islamic banks behaviour must be based on the values of honesty, sincerity, equity and integrity. The dealing of all stakeholders should be geared to the eventual purpose of an ethical organization (Fassin, 2005). The business organization s end objective is either to avoid legal consequences of its measures or to persuade the stakeholders that the corporation does have their best interests at heart and seeks to serve their interests rather than their own (Joyner & Payne, 2002). In so far as the Islamic banking ethical culture is concerned, it should align with the core values of community. These values involve a concern for people, natures and the environment and an obligation to address the impact of its activities and assessments on stakeholders' interests. Environment (ISO/DIS 26000, 2012) Since the 1960s, human activity has changed ecosystems more rapidly and extensively than in any comparable period in history. Hence, environmental responsible practices are generally seen as part of CCD practices in the Islamic banking sector of Bangladesh. In recent years, Islamic banks of Bangladesh have undertaken remarkable steps in several sectors, including resource saving, financing green initiatives, valuing and protecting biodiversity, protecting and restoring ecosystem services, using land and natural resource sustainably, and, advancing environmentally sound urban and rural development. However, only 11 percent of these banks have separate funds to support such environmental activities (Khan, Islam, & Ahmed, 2010). 3

8 Fair operating practices (ISO/DIS 26000, 2012) Fair operating practice matters arise in the areas of anti-corruption, responsible attachment in the public sphere, fair competition, socially accountable behaviour, relations with other organizations and admiration for property rights. In respect to Islamic banks, fair operating practices concerns with ethical conducts between banks, and between these banks and government agencies, as well as between banks and their partners, customers, competitors, and the associations of which they are members of. The CCD activities by the Islamic banks incorporate fair operating practices in several areas: employee management relations, customer -customer relations, environmental practice, community and social attachment, and transparency in commerce activity (Mijatovic & Stokic, 2010). Human rights (ISO/DIS 26000, 2012) According to the High Commission of Canada & Reed Consulting BD ltd, (2013) Human rights refers to polite treatment of all individuals, in spite of any of their individual characteristics, just because they are human beings. As such, Islamic bank should respect human rights and recognize both their importance and their universality. In Bangladesh, Islamic banks undoubtedly promote human rights, especially in their social investment initiatives in education, healthcare, empowerment, and poverty alleviation as these activities forms the basis of fundamental rights of an individual. Development of community and safety (ISO/DIS 26000, 2012) Development of community and safety is a very significant issue in global era. Competitive and diverse enterprises and co-operatives are crucial in creating wealth in any community. Islamic banks can help to generate an environment in which entrepreneurship can flourish, bringing lasting benefits to communities. Islamic banks can contribute positively to wealth and earnings creation through entrepreneurship agendas, development of local suppliers, and employment of community members, as well as through wider efforts to strengthen economic resources and social relations that facilitate economic and social welfare or generate community benefits. CCD in Islamic banks in Bangladesh The notion of CCD has advanced during the last two decades. Initially, the big organizations were the advocates and implementers of CCD. However, as the scope of definition widened, the small and medium corporations got involved with CCD. The rising importance of CCD is motivated by stakeholders, think tanks, investors, managers, beneficiaries, and even workers. Thus, corporations are being monitored based on their responsible manner of involvement in CCD activities, which is demonstrated in their transparent and accountable conducts. In the study CCD and its role in Community Development, (Ismail, 2009; Ismail, Alias, & Rasdi, 2015) maintained that the fundamental principle of social responsibility is the community convention between all the stakeholders to community, which is necessary obligation of social culture. According to them, community development is not restricted to the existing members of the community, but should also be extended to its prospective members, as well as to situations that would have relevance to the members of community, both present and in the prospect. The character of CCD in community development used in their paper is rather straightforward, that is, the benefits received by the 4

9 society as a result of community assurance of organizations to the overall society and community structure. The general functions of CCD in community development are considered as follows: To share the adverse consequences of outcomes of organizational decisions. This is related to encouraging more ethical dealing practices. Fortify the ties between the organizations and community. By doing so, the organizations and community would work in peace and harmony. Encourage employee ownership in an organization that would lead to the development of the organization as an important financial asset in the community. Corporate Social Responsibility (CSR) facilitates the defending of the environment. CSR activities gives advantage to society and community in protecting the latter s privileges towards obtaining a healthy environment. Social Responsibility provides for human right business sustainability. The United Nations has initiated the Global Compact an idea to encourage global corporations to follow the general norms in relation to safety of human rights To secure connection between an organization and community is another feature of CSR s role in community development as it creates sustainability in the long run. Community development agenda can be seen as assistance to alleviate poverty. Sustainable Business Practices (SBP) symbolizes a continuing commitment by organizations to improving the quality of life of the community and society at large. The enhancement of community through the design of employment prospects and fair operating practices. In the context of Islamic banks in Bangladesh, previous study explains that banking sector can be reckoned as an important environmental forces (Azim, Ahmed, Netto, & Netto, 2011). As argued by Azlan Amran, (2013) empowerment is a practice whereby the person or the community must organize and exercise their rights. The society, in which effective corporate development is to be practised,, should be a matured, and have the necessary, skills and be capable of arguing their rights under definite situations and dealings. Consequently, it is incidental that Islamic banks in Bangladesh should be liable toward community and their stakeholders. Stakeholders offer corporations with a collection of assets such as resources, clients, workforce, materials and legitimacy (Deegan, 2002). They also give the license to operate to the corporations in back for the condition of community satisfaction, or legitimate, performances (Cooper et al., 2015; Suchman, 1995). To support this community convention which allocate corporation to maintain functions (Deegan, 2002), they have to be communally responsible. This can be a fundamental ground why researchers would expect Islamic banks in Bangladesh to be involved in CCD. This fundamental expectation is further entrenched,as examined by Abbasi, Moezzi, & Eyvazi, (2012), since on the whole, corporations as an organism leads the societyin fulfilling the common desires of both the corporation and the society, and hence itbecomes the focal point for continuing excellent innovation or provision of support to the society. There are a number of researches on the topic of sustainability in community development by banking and financial institutes (Ben Bernanke, Andrews, Weech, Seidman, & Cohen, 2009). A recent study by Banks et al., (2016) finds that CCD, that is, those business activities performed with the intent to advantage communitiesdo affect the communities positively. As such, Islamic 5

10 banks in Bangladesh, established on Islamic Shariah principles, fundamentally at the core are already imbued with characteristics in defending the interest of its community and employees as well as shielding the humanity and the surroundings from any destruction out of any of its activities, are way ahead of corporations not founded in Shariah principles (Kamrujjaman & Uddin, 2015). Yuserrie & Haron, (2009) insisted that difficult and ineffective governance, usual penalizing boundaries, and the lack of a joint vision at financial institutions often obstruct Islamic banks advancement toward leading the developing country to a more sustainable and attractive expectations. In another significant study, Aribi & Gao, (2010) investigated the issue of community development in Gulf region by examining the website content of the Islamic Financial Institutes (IFIs). The authors showed IFIs linked themes and report, as well as Shariah management board information, the Zakah, and charitable trust donation. Kamrujjaman & Uddin,(2015) also discovered that rules of Islam pertaining to peace and respect for human life were utilized to improve the financial system and the environment. In any event, among the Islamic banks in Bangladesh, what was problematic was that all the Islamic banks in Bangladesh had their own written social responsibility policy, which collectively were not consistent, hence minimising the impact of the social responsibility. In the following segment, the methodology applied in this study will be briefly outlined. Methodology The study is entirely based on secondary data analysis. In order to analyze the research variables of the present study, an extensive amount of literature had been reviewed and discussed. A systematic search had been adopted by using the topic and keywords e.g. Community Development ; Islamic Bank ; Islamic banking, websites, annual reports. Searches for peer reviewed articles were conducted in ERIC (EBSCO or CSA) and Google Scholar. As in previous studies e.g. Azim et al., (2011) and Kamrujjaman & Uddin, (2015), content analysis methodology was used to analyze the websites and annual reports of the Islamic banks in Bangladesh objectively and systematically. Content analysis is a method of categorizing the content of a written section into different categories against a set of criteria (Adams, 1996).This method has been used in previous studies and is deemed an appropriate method for analysis of qualitative data (Abraham & Cox, 2007; Adapa, 2013). We analyzed our data by using content analysis (Abdul Hamid & Atan, 2011; Azim et al., 2011). One of the most appropriate tools and techniques to analyze contents of a website is content investigation as applied by many studies. Thecontent analysis utilizes a three-step process. First, an appropriate document is chosen. For this study: director s reports, chairperson s reports, divide sections of annual reports and divide sustainability reports, were selected. The second phase is to calculate the unit for determining the content. Different scholars use different units of determination. The third stage in content analysis involves recognizing themes or categories that is classified as against a set of criteria. A perfect example of websites analysis is by Bar-Ilan and Groisman, (2003). The scholars used recent Hebrew literature on the web and applicability of this method. In addition, content analysis was utilized in a study about websites of the Fortune 100 companies. Content analysis was stated as an excellent approach for analyzing the websites in various issues such as descriptions, areas of attainment and indication of the mission and vision of these Fortune 100 companies (Perry & Bodkin, 2000). Further research had been conducted using content analysis on ethical reports of Turkish organizations that highlights on the justifiability of this method for estimated ethical 6

11 perceptions of the organizations such as vision, mission, moral ethics and other related matters (Halici & Kucukaslan, 2005). In view of the relevance of content analysis as revealed in these researches (Chatov, 1980; Mathews, 2001), it is justifiable that content analysis has the potential to analyze community communication and community reporting related to CCD.. Since 1970s, literature reveals that studies related to corporate community treatment within the social and environmental context had used content analysis methods to analyse companies annual report and social responsibility statement (Hackston & Milne, 1996; Milne & Adler, 1999). In general, content analysis is argued to be a characteristic approach to investigation which gets to measure the content of a manuscript in a methodical and replicable approach. This research studied the content of the Islamic banks in Bangladesh websites to analyze various matters related to community development and community exposure and tried to categorize and equate it with CCD core areas. In the last stage, all materials connected to the websites and the annual reports of the Islamic banks in Bangladesh (including news, mission and vision, CCD web pages, etc.) and not merely front-page content were reviewed. Supported on the guiding principle presented in the outline of ISO (ISO/DIS 26000, 2012), seven CCD mainstay segments were selected and used. These areas included: accountability, transparency, ethical behaviour, fair operating practices, human rights, development of community and safety and environment. Findings and discussion The findings of this research illustrate that, though to various extents, Islamic banks in Bangladesh have all engaged in community development sincerely and declare this in their websites and annual reports. However, there are variations in their treatment and the fields covered. The results show that most of the Islamic banks in Bangladesh declare involvement in accountability, transparency, ethical behaviour, fair operating practices, human rights, development of community and safety and environment in their annual reports and websites. Table 1 abridge the study findings. As abridged in the table, all the eight Islamic banks cover the area of accountability and human rights in their annual reports and websites. In provisions of human rights and labor practices, all the banks provide sufficient resources on community benefits, compensation, and awareness development. They also consider the aspects of variety. Some Islamic banks have even moved additional by indicating the significance of a healthy work environment / life stability for their employees. Content analysis of Islamic banks report and websites shows that 75% bank of them managed to show ethical behaviour in their practices. This area of CCD seems (moral obligations) to necessitate the banks to show its good manners and respect to its stakeholders. In provisions of transparency and environment, 63% the studied Islamic banks are somehow involved in preserving transparency and environment through various activities and initiatives. In some situations, these Islamic banks have developed specific community development activities to tackle the transparency and environment issues as well. For the community development issue related to fair operating practices, this study show that the type of community development activities remain unclear only 38% Islamic banks do this actively. In terms of development of community and safety practices of Islamic bank s ethical dealings with other community contribution and improvement, 63% of these organizations directly take responsibility in making contribution in the community and promoting community development in relations with other corporations. 7

12 Overall, the research shows that all of the studied Islamic banks are involved in CCD issues to a confident stage and disclose this through their bank reports and website content, particular pages designed for media, annual reports, etc. In the user concern category, in the context of Islamic bank the researchers considered community beneficiaries issues and investigated the websites for contents giving social responsibility activities information for beneficiaries who were desired to get engaged in the banks. The research shows that all Islamic banks provide adequate information on different aspects of pursuing community development from social responsibilities practices procedure to community development effort, as well as accessible economic resources for community development. Table I: Islamic banks in Bangladesh and participation of CCD activities Banks Establish Corporate Community Development activities in Bangladesh Result A T EB FOP HR DCS E IBBL % ICBIBL % AAIBL % SIBL % EXIM % FSIB % SJIBL % UBL % Total=8 Average CCD activities of Islamic banks in Bangladesh 67% From the above table accountability (A), transparency (T), ethical behavior (EB), fair operating practices (FOP), human rights (HR), development of community and safety (DCS) and environment (E). IBBL is Islami Bank Bangladesh Limited 1983 Listed 1985; ICBIBL is ICB Islamic Bank Limited 1987 Listed 1990; AAIBL is Al-Arafah Islami Bank Limited 1995 Listed 1998; SIBL is Social Islami Bank Limited 1995 Listed 2000; EXIM is Export Import Bank of Bangladesh Limited 1999 Listed 2004; FSIB is First Security Islami Bank Ltd Listed 2008; SJIBL is Shahjalal Islami Bank Limited (SJIBL) 2001 Listed 2007 and UBL is Union Bank Limited (UBL) 2013 under reviewed of listed. Finally, two of the studied banks (one from AAIBL and one from UBL) do not directly report involvement in community on their website. The rest, nevertheless, report this contribution through different activities such as providing donation for community development, providing sponsor and maintain and care for reasonable accommodation for low and middle-income peoples, etc. Islamic banks in Bangladesh generally follow the practice CCD activities unlike as those CCD activites practiced by corporate world. Rather, the Islamic banks seems to exercise a modified CCD practices according to their own individual standards, and hence establishing their own individual CCD metrics. For example, in terms of human rights practices, Islamic banks have adapted the metrics to outfit their desires by taking into deliberation the character of their process and employees. Providing adequate information on employment opportunities and advantages, skilled development for community people, etc. is a general practice involving all banks. Further, examination raises the question: What is the reason behind such community development practices of the Islamic banks? One may argue that the complete justification for a bank is to serve community through funding. Therefore, CCD is redundant in that way. As the issue, corporations might practice CCD 8

13 in order to formulate a better representation in the community and legitimize their performance. In the case of Islamic banks, however, legitimization does not build intelligence while banks are mostly carried by external stakeholders such as governance structure, people, and think-tanks, as long as they do not execute anything beside the standards of the community. Could the reason for the Islamic banks to practicing CCD is to enhance their image? While this is reasonable, the authors do believe that there is an underlying reason that is beyond community relations. As Banks et al., (2016) discuss in present study, conceptualization of corporate community development at the beginning of the present era, the concept of CCD is achieving growing momentum, continuing from its opening focus on the shallow considerations of relation between corporate and community and window open for concept to a severe and critical attentiveness on corporate intentional direction. In other words, now corporations infrequently practice CCD presently as show-off, but rather merge in as part of their intentional trend. To authenticate this in the context of Islamic banks, the researcher studied the mission announcement and vision of the case Islamic banks and entertainingly, most of the studied banks show their fervour and objective for sustainability and solving problems of Bangladesh during their mission statements, values and other contents statement on their annual reports and websites. For example, an Islamic bank in Bangladesh has a definite organization of sustainability where they mitigated issues such as accountability as well as transparency and sustainability. Thus this research concludes that the role Islamic banks in Bangladesh s the community is developing. They are no longer now organizations of financial and economic development, which grants community service in a variety of issues, but relatively they are turning into organizations of financial and economic development which guide responsible community development, human skills improvement, generate charity and donation to solve the uncertain issues and problems and distribute the facilities so that it can advantage the community. Ng eni & Bukwimba, (2015) noted that society is very significant in the effectiveness of the organizations and thus organizations should support its welfare. Briefly, based on that statements, whether the corporation`s CCD influence completely the community`s development and develop peoples well-being is indisputable reality. By replacing the term organizations to company, and in view of the main objective of Islamic banks, it is reasonable for banks to practice CSR. Hence in outlook, this study might guess new community development behaviours by Islamic banks in Bangladesh. After all, the findings of this study shows the Islamic banks in Bangladesh are mainly on the true way for their community development and the concerns that they cover competitive advantage with the core CCD issues established in the ISO Conclusion and Limitations The study shows that Islamic banks in Bangladesh are, in some ways are engaged in community development and sustainability and do publicize their CCD activities in their annual reports and their websites. These practices form a core stucture for community relations in communicating and making joint appreciative, overseeing possible inconsistency (Sanders, 2008) and to achieve legitimacy (Deegan, 2002). This behaviour can be utilized by encouraging and providing a policy of best practices for fewer standard organizations. However, it is constantly supportive for other banks, particularly the ones in community service oriented institutes, to have several best customs as their standard and acclimatize and adapt that to their functioning and community context. As such, banks in Bangladesh can place the Islamic banks in Bangladesh as their standard not only in financial earning areas, but also in issues of community and social sustainable development. 9

14 A limitation of this research is lack of considering the usefulness of community tradition of banks. Though this study investigates Islamic banks community development activities based on their annual reports and website contents, the insights of their stakeholders concerning these community development activities are not considered. This is significant, because it the activities might not convene the stakeholders prospects or even create a negative notion that the banks is doing this only for the sake of encourage itself rather than as a assurance toward community. Present studies show that the outcome of CCD activities on estimates of the organization may be temperate by other aspects (Dev, James, & Sen, 2002; Luo & Bhattacharya, 2006; Sen, 2001). Future researches can find out the result of this practice on stakeholders view and faithfulness on the banks. This research is limited to investigation of CCD activities among Islamic banks in Bangladesh without any interest to the character of banks as being conventional and other specialized banks. It is an issue of enquiry whether there are variations in community development behaviour of conventional and other specialized banks and which ones are mainly apprehensive about their community development disclosure. References Abbasi, M. R., Moezzi, H., & Eyvazi, A. A. (2012). Exploring of Relationship between Corporation Social Responsibility and Loyalty and Satisfaction Customer and the Facilitating Role of Advertising on It (Case study: SHIRAZIT co.). International Journal of Academic Research in Business and Social Sciences, 2(1), Abdul Hamid, F. Z., & Atan, R. (2011). Corporate social responsibility by the Malaysian telecommunication firms. International Journal of Business and Social Science, 2(5), Abraham, S., & Cox, P. (2007). Analysing the determinants of narrative risk information in UK FTSE 100 annual reports. British Accounting Review, 39(3), Adams, P. C. (1996). Protest and the scale politics of telecommunications. Political Geography, 15(5), Adapa, S. (2013). Corporate Social Responsibility in Malaysian Banks Offering Islamic Banking. Journal.sapub.org/mm, 3(7), Aribi, Z. A., & Gao, S. (2010). Corporate social responsibility disclosure. Journal of Financial Reporting and Accounting, 8(2), Azim, M., Ahmed, E., Netto, B. D., & Netto, D. (2011). International Review of Business Research Papers Corporate Social Disclosure in Bangladesh : A Study of the Financial Sector, 7(2), Azlan Amran, et al. (2013). Empowering society for better corporate social responsibility (CSR): The case of Malaysia. Kajian Malaysia: Journal of, 31(1), Banks, G., Kuir-Ayius, D., Kombako, D., & Sagir, B. (2013). Conceptualizing mining impacts, livelihoods and corporate community development in Melanesi. Community Development Journal, 48(3), Banks, G., Kuir-ayius, D., Kombako, D., Sagir, B., North, P., Zealand, N., & Moresby, P. (2011). Corporate community development in Melanesian mining: Past lessons and future challenges, (November), Banks, G., Scheyvens, R., Mclennan, S., Bebbington, A., Banks, G., Scheyvens, R., Bebbington, A. (2016). Conceptualising corporate community development, 6597(February). 10

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16 An evaluation. International Journal of Applied Research, 1(5), Khan, M. H.-U.-Z., Islam, D. M. A., & Ahmed, K. (2010). Corporate sustainability reporting of major commercial banks in line with GRI : Bangladesh evidence (pp. 1 33). Luo, X., & Bhattacharya, C. B. (2006). Corporate Social Responsibility, Customer Satisfaction, and Market Value. Journal of Marketing, 70(October), Mathews, M. R. (2001). Some thoughts on social and environmental accounting education. Accounting Education, 10(4), Mijatovic, I. S., & Stokic, D. (2010). The influence of internal and external codes on CSR practice: The case of companies operating in Serbia. Journal of Business Ethics, 94(4), Milne, M. J., & Adler, R. W. (1999). Exploring the reliability of social and environmental disclosures content analysis. Accounting, Auditing & Accountability Journal (Vol. 12). Mohammed, J. A. (2007). Corporate Social Responsibility in Islam. Néron, P.-Y., & Norman, W. (2008). Citizenship, Inc. Business Ethics Quarterly, 18(1), Ng eni, F., & Bukwimba, M. (2015). The Role of Corporate Social Responsibility (CSR) in Community Development in Tanzania. American Journal of, 5(6), Perry, M., & Bodkin, C. (2000). Content analysis of 100 company Web sites. Corporate Communications: An International Journal, 5(2), Roseland, M. (2000). Sustainable community development: Integrating environmental, economic, and social objectives. Progress in Planning, 54(2), Sanders, I. (2008). Theories of Community Development. Rural Sociological Society. Schur, L., Kruse, D., & Blanck, P. (2005). Corporate culture and the employment of persons with disabilities. Behavioral Sciences and the Law, 23(1), Secretary, I. (2012). ISO : Guidance on Social Responsibility. TUV Rheinland, 140(1872). Sen, A. (2001). Development as freedom. Shaffer, R. (2006). Rethinking Community Economic Development. Economic Development Quarterly, 20(1), Suchman, M. C. (1995). Managing Legitimacy: Strategic and Institutional Approaches. Academy of Management, 20(3), Winner, L. (2003). Are Humans Obsolete? Hedgehog Review, 3(3), Yuserrie, R. S., & Haron, Z. H. (2009). The relationship between corporate social responsibility disclosure and corporate governance characteristics in Malaysian public listed companies. Social Responsibility Journal, 5(2),

17 An Empirical Study on Acceptance of Telecare Health Services in Malaysia Suzari Abdul Rahim* Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia Parimala Nair A/P Gopalan Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia Nor Aida Abdul Rahman Universiti Kuala Lumpur, Malaysian Institute of Aviation Technology (UniKL MIAT), Lot 2891, Jalan Jenderam Hulu, Dengkil, Selangor, Malaysia *Corresponding author Abstract Purpose The primary aim of this research is to investigate the provision of telecare services and telehealth technology to assist people with long-term conditions live independently in their own home. People needing this assistance could freely live in their home at their own comfort and more importantly independently. Devices like personal alarms, sensors and health monitoring devises are used to monitor these people. In the event of any adverse happenings, the devices or sensors could send signals to the immediate contact or family members. Design/methodology/approach This study employs a quantitative approach technique with a survey questionnaire as its primary data to examine the model and mediating effect of intention to use technology between attitude, need, willingness to pay, perceived ease of use, perceived usefulness and use behaviour. A total of 205 questionnaires were distributed to individuals visiting private hospitals, one in Penang and the other Kuala Lumpur respectively. SPSS analysis and Smart PLS software was used to perform the data analysis. Findings The findings of the present empirical study reveal that Malaysians consider telecare as an option to assist aged and people with long-term conditions. Practical implications Due to the demanding environments, and economical needs family members of those in need of care are working and unable to fully be at home to take care of the people in need end and up sending them to centers who can look after them and fee is paid on monthly basis. Originality/value However, this study must be reviewed and expanded to implement telecare health services in Malaysia for the benefit future generation improved life quality. Keywords: Telecare, Technology Acceptance Model, Intention to Use Technology, Attitude, Need, Willingness to Pay, Perceived Usefulness and Use Behaviour. 13

18 Introduction Malaysians have very high expectation concerning healthcare and thus are expecting advanced technology and higher level of health care and this is becoming an extremely important aspect for living. Availability of information and education of individuals empower and brings about a wellness paradigm that is becoming essential to services in the health system of the future. According to the Malaysian Statistics Department released on 30 th October, 2015, the life expectancy at birth of Malaysian residents continue to be an increasing trend. In 2015, a new-born is predicted to live to 74.8 years. This is an increase of 0.7 years as compared to 74.1 years in The Star publications dated 20 th January, 2014, states that at least 10 elderly Malaysians end up in old folks home each week and this is just based on the centers registered officially under the welfare department. Even though Jabatan Kebajikan Masyarakat has setup a program called Home Help Services, where services are provided to older persons who live alone or when there are no family members around, not many have knowledge about that program and hence, there is room for improvement to provide a better and technologically advance healthcare system. Lee and Han (2015) quoted that telecare health services allow users to utilize technologies at their convenience without physically moving to medical or healthcare centres. Tang and Venables (2000) explained that home telecare uses telecommunication technologies such as information, communications, and monitoring technologies to provide medical advice, health care evaluation and the delivery of services to home. The main aim of telecare and telehealth technology is to assist people with long-term health conditions to live independently in their own home. People needing this assistance could freely live in their home at their own comfort and more importantly, independently. Devices, such as, personal alarms, sensors and health monitoring devises are used to monitor these people. In the event of any adverse happenings, the devices or sensors could send signals to the immediate contact (for example family members). This assistive technology could be separated into functional support, alerts and alarms, monitoring and interactive, and virtual services as discussed by Doughty et al. (2007). Since the people in need are being monitored in their own house, this gives way to put off any necessity to stay in hospital or residential home cares. According to Ali et al. (2008), since clients are being monitored constantly, it reduces the need for regular medical check-ups which indirectly minimizes the transportation and medical expenses thus allowing the patient or the caring person to manage long term health conditions in a better manner. Su et al. (2012) explained that there have been improvements in functions from the context of technical suitability, medical practicability and the economic load of medical care services in recent years due to the accelerating evolution of information-related technology. Many countries are making an effort to apply information technology to telecare and advancing the roles to notify during emergencies of any irregularities, reminders to have medication, physiological recording and observation, distance video and medical discussion by combining information technology and medical care. The authors believe that telecare would be reducing a huge medical cost, labour cost and more importantly, is predicted to become a prospective industry in the future. Nevertheless, there are still shortcomings in the present studies related to telecare. Telecare involves home monitoring also concentrates on health supervision or administration and self-care to enhance the potential of the elderly or patients in wellness and self-management. As a result, the elderly or patients perceptions and experiences will become the determining factor to the degree of telecare adoption leading to the successful implementation of telecare. Thus, the present 14

19 study is conducted to focus on Malaysian community in accepting telecare health services as their care provider for the aged community and people with long-term health conditions. Literature Review Telehealth typically refers to the supply of health care assistance, health care teaching and health information services from a distance. The broader scope of telehealth includes telemedicine and telecare. Telecare is defined as constant, self-moving and distant observation to manage the risks related to independent living, especially among older people or those with physical disabilities (Brownsell & Bradley, 2003). Elias, et al., (2012) said that attitude is defined as either favourable or unfavourable evaluative judgment that a person has and directs towards some objects. According to Gua and Zhuo (2015), attitude has two dimensions that are positive and negative of which is evaluated separately. They exist together but are not equal opposite to each other. Behaviour intention is influenced by attitude and effect the actual system usage. Davis (1993) said that attitudes toward the use of a technology is a major determinant of whether or not a consumer will use it. Huang (2013) stated that user s attitude is very much influenced by the perceived usefulness of the service being offered. Willingness to use telecare will increase when attitude to use is high and positive and according to Ajzen (1985) a person s intention to use is determined by the attitude. Davis (1989) defines perceived ease-of-use as the level to which an individual believes that using a specific system would be free from effort. Perceived usefulness is defined as the degree to which a person believes that using a particular system would enhance his or her job performance. Hsieh (2015) mentioned in his study that when potential users perceive an innovation to be consistent with their present necessity and values, there is a higher chance that the users would be willing to adopt the new innovation. Therefore, perceive usefulness will be leading towards intention to use the technology. In most of the studies, perceived ease of use and perceived usefulness are tested simultaneously (Su, et al., 2012; Hung and Jen, 2012). Dafydd, Roberts, and Doughty (2009) explained that it is very difficult to measure value for money in absolute terms as the term value varies widely between individual depending on their perception, current situation and the availability of choices for them. Stahl and Dixon (2010) quoted that willingness to pay is a standard way to bring out patient preference and it is where a person is willing to pay a maximum amount for a good or service rendered to the person. The willingness could be in the form of money for the expenses or other items such as traveling time to obtain the good or service. For any users to adopt a new system, Mathieson et al. (2001) found that hardware, software and monetary resources are essential factors. The authors also found in their study that an individual's intention to use an information system is influenced by the availability of valuable assets such as time, money and expertise. Huang (2013) stated that people will view this system as easy to use if they have a high acceptance of innovation level. Venkatesh et al. (2003) explained that different theories such as TAM and TRA were used to develop a model which target to describe user intentions to use an information system and the usage behaviour. Fishbein and Ajzen (1975) quoted behavioural intentions motivates peoples actual behaviour in specific situations. Venkatesh and Davis (2000) said that technology use behaviour and intention to use are also influenced by another important factor called social influence. Barlow, Bayer and Curry (2006) explained that technological opportunities need to match user needs in order for innovation to be successful. The authors also stated that failure to understand user needs is a major barrier in developing remote care technologies. More 15

20 importantly, the users must be ready and independent enough to accept the technology being offered via this telecare health system if they wish to live in their home when they are old and unwell. Andersen and Newman (2005) stated that illness experiences generate stronger perceived needs for health services according to behavioural model of health service utilization. Wu and Lu (2014) stated that elderly people are considered to have a higher risk of contracting multiple chronic diseases simultaneously which eventually leads to more care being needed. As explained by Huang and Lee (2013), behavioural intention to use and the use of technology has a powerful relationship and the factors impacting the willingness to use telecare differ for the general public and for patients with acute illness. Fishbein and Ajzen (1975) note that the users intention to use the system is determined by the users belief and finally lead to the adaptation of the new system. Previous studies have indicated that perceived usefulness and perceived ease of use has a major influence in intention to use (Davis et al., 1989; Venkatesh & Davis, 2000). In a the study conducted by Wang et al. 2006, it was found that there is a positive influence on behavioural intentions to use a system by variables such as perceived usefulness, ease of use, credibility, self-efficacy and financial resources meanwhile it was noted that perceived credibility and perceived financial resources had very strong impact on intention. According to Ram and Sheth (1989), users perception towards resistance will reduce and increase their intention to use when users perceive that the technology is beneficial and effortless to use. Huang (2013) stated that the usage intention of new technologies can be predicted using the TAM model. Guo and Zhou (2015) explained that under the original version of TAM, attitude towards system use is influenced by two major beliefs: perceived usefulness and perceived ease of use. The TAM ( Davis et al., 1989) adapted from TRA (Fishbein & Ajzen, 1975), assess that users intention to use the system that determines the users adoption of a new information system for which users beliefs about the system are determined. Bouwhuis, Meesters and Sponselee (2012) said that originally TAM was made for acceptance of software applications and computers in an occupational setting and not for telecare. However, since TAM has a relationship with behavioural intention, the model has been critically analysed and serious methodological flaws were identified. Subsequently deployment in telecare systems were systematically compared with the introduction of application software in industrial settings as described by TAM theories. According to Ajzen and Fishbein (1980), TAM is considered an influential extension of the Theory of Reasoned action (TRA). It is the basis to track on how external variables influence belief, attitude, and intention to use as provided by the TAM model. Perceived usefulness and perceived ease of use are advanced as two cognitive beliefs by TAM. According to TAM the actual use of a system is influenced both directly and indirectly by user s behavioural intentions, attitude, perceived usefulness of the system, and perceived ease of the system. TAM also proposes that the mediating effect on perceived ease of use and perceived usefulness affects the external factors of intention and actual use. According to Ajzen and Fishbein (1980), TRA has been broadly used as a model for anticipating behavioural intention and behaviour. The theory implies that human beings normally behave in a rationale manner. Further, the Theory of Planned Behaviour (TPB) is also found to be relevantly applied to the household depending on the situation and adopt the use of technology. TPB is an extension of TRA and additional construct namely perceived control over performance of behaviour are added to the model. According to Taylor and Todd (1995), by combining with some TAM construct, TPB has been customized into the technology adoption context. Ajzen (1991) explained that intention indicates how hard people want to try, the amount of effort that they plan to exert to 16

21 perform a behaviour which means intention is presumed to capture motivational component that impacts behaviour. The author also explained that the availability of resources to a certain extend dictates the behavioural achievement. The model shown below is formed to examine the variables that influence the acceptance of telecare health service if it was to be introduced in Malaysia. Subjective norm is often acquired by requesting respondents to rate the degree to which the crucial others would agree or disagree if they are executing a specified behaviour. Attitude Need Willingness to Pay Perceived Ease of Use Intention to Use Technology Use Behavior Conceptual Perceived Research Usefulness Framework In accordance to the conceptual framework, hypotheses are developed in order to determine the significance of the relationships among the groups of variables. Wilkin et al. (2013) suggested that Technological Pedagogical Content Knowledge (TPACK) that have been inherited will impact teachers attitude towards technology. When positive impact is expected from technology, it is assumed that most likely TPACK will be developed. Researchers applied TAM to various studies to test the relationship between attitudes and behaviour intention, and it was found that attitudes is positively related towards behavioural intentions (Lee & Chang, 2011; Davis, 1993). Therefore, this study proposes: Hypotheses 1 (H1): Attitude is positively related towards intention to use technology. Wu and Lu (2014) stated that elderly people are considered to have higher risks of contracting multiple chronic diseases simultaneously which eventually leads to more care being needed. Davenport et al. (2012) explained that elderly people would consider to use smart technologies as a possible solution to carry out their daily activity performance if they were not satisfied with their current performance level. The authors also said that if the elderly people would consider smart technology as an alternate solution if they desired to reengage in all or part of an activity. Therefore, this study proposes: Hypotheses 2 (H2): Need is positively related towards intention to use technology. Studies have found that consumers are willing to spend extra for tailored products. Kuo and Cranage (2012). Franke and Piller (2004) stated that consumers were ready to spend a notable extra amount of money for a self-designed watch compared to a standard watch. Mohamed et al. (2014) stated that it is important to determine the socio-demographic factors that could boost the willingness to pay for eco-labelled product and obtain information about consumer willingnessto-pay for such products. Therefore, this study proposes: 17

22 Hypotheses 3 (H3): Individuals willingness to pay is positively related towards intention to use technology. As stated in various studies (Davis, 1989; Venkatesh & Davis, 2000), TAM is a wide theoretical model that suggests that adoption of computer-based technologies could be predicted by attitudes toward technology, perceived usefulness and perceived ease of use. Wang et al. (2009) stated in their study that TAM indicated two main variables namely perceived usefulness and perceived ease of use to explain the variance in the intention of users. Wang et al, (2003) explained that users perception of feasibility in their encounter with online service is positively determined by perceived ease of use. As explained by Mathieson et al. (2001), that monetary aspects had an important consequence on perceived usefulness, perceived ease of use and behavioural intention. In a study conducted by Su et al. (2012) it was proven that intention to use telecare system is mostly affected by both perceived ease of use and perceived usefulness. Therefore, this study proposes the following two hypotheses: Hypotheses 4 (H4): Perceived ease of use is positively related towards intention to use technology. Hypotheses 5 (H5): Perceived usefulness is positively related towards intention to use technology. Venkatesh et al. (2003) explained that different theories such as TAM and TRA were used to develop a model that intend to discuss on the usage behaviour and user intentions to use an information system. Fishbein and Ajzen (1975) said that behavioural intentions motivate the peoples actual behaviour in specific situations. Therefore, this study proposes: Hypotheses 6 (H6): Intention to use technology is positively related towards use behaviour. The moderating role of intention to use technology (IUT) between attitude (ATT), need (N), willingness to pay (WTP), perceived ease of use (PEOU) and perceived usefulness (PU) on use behaviour (UB) are being tested. Thus, the hypotheses below are advanced in this study: Hypotheses 7a (H7a): Intention to use technology mediates the relationship between attitude and use behaviour. Hypotheses 7b (H7b): Intention to use technology mediates the relationship between need and use behaviour. Hypotheses 7c (H7c): Intention to use technology mediates the relationship between individuals willingness to pay and use behaviour. Hypotheses 7d (H7d): Intention to use technology mediates the relationship between perceived ease of use and use behaviour. Hypotheses 7e (H7e) : Intention to use technology mediates the relationship between perceived usefulness and use behaviour. Research Methodology The primary research methodology in this study uses quantitative approach based on the technology acceptance model questionnaire. In this study 30 questionnaires were distributed to random individuals visiting two private hospitals and minor feedbacks such as spelling errors were received. The time taken to complete the questionnaire was between 15 to 20 minutes. Reliability analysis using Cronbach s alpha was done and all the seven variables that were selected for this 18

23 study gave good results all Cronbach s alpha were above This study also constructed survey questionnaire to examine the mediating effect of intention to use technology between attitude, need, willingness to pay, perceived ease of use, perceived usefulness and use behaviour. The main reason to explore and apply a quantitative approach for this study is because there are quite a number of studies which have been done in similar method previously (Chau & Hu, 2001; Huang & Lee, 2013; Chau & Hu, 2002; Chen, et al., (2013)). The targets for this study are individuals visiting private hospitals: a private hospitals in Penang and a private hospital in Kuala Lumpur. Stratified sampling method was used as there were specific sub-groups to be surveyed. Only two states were chosen for the study due to cost, response time with regards to data collection and to stay focused within a small number of sample size. For this study, the unit of analysis were individuals visiting private hospitals. The study used structured questionnaire with a standard set of questions and response attached together with an official letter stating the objective of the survey that were distributed to respondents personally. The study adapted a five-point Likert-type scale for measurement, ranging from 1 (Strongly Disagree) to 5 (Strongly Agree) for attitude, need, willingness to pay, perceived ease of use, perceived usefulness and intention to use technology. For use behaviour, the study adapted a five-point Likert-type scale for measurement, ranging from 1 (Strongly Agree) to 5 (Strongly Disagree). The data collected in this research were analysed using statistical package for Social Science (SPSS) and SmartPLS (PLS-SEM). Table 3.2: Measures of Study Variables Source Items Attitude Huang and Lee (2013) 6 Chau and Hu (2001) Need Huang and Lee (2013) 8 Willingness to pay Vlosky,Ozanne and Fontenot 5 Perceived ease of use Davis (1989) 4 Perceived usefulness Davis (1989) 4 Intention to use Huang and Lee (2013) 7 technology Chau and Hu (2001) Use Behaviour Demir (2010) 5 Findings A total of 205 questionnaires were distributed to individuals visiting the two private hospitals in Penang and Kuala Lumpur respectively. The respondents were given a time frame of 15 to 20 minutes to complete and return the questionnaire set. This process was conducted for a duration of six weeks: between May 2016 until early July Out of 205 questionnaire sets, only 190 were collected successfully from respondents as 15 questionnaire sets were not returned. The usable number of questionnaire sets were 140 which accounts for about percent of response rate. Gender of the respondents were almost equally distributed, where females accounted for 58.6 % (82 respondents) as compared to 41.4 % (58 respondents) for males. The majority of the respondents were in the age range of (63%) amounting to 89 respondents, followed by 25% in the age range of (35 respondents). Nine respondents were from the age range of (6.4%). Lastly, there were two respondents between the age of and five respondents between 19

24 the age of The data collected in this research were analysed using statistical package for Social Science (SPSS) and SmartPLS (PLS-SEM). The first step in PLS was to establish the reliability and validity of the measurement model. In PLS, the composite reliability is preferred over Cronbach s alpha, due to its supposition of equal weightings of items. Overall, all the composite reliability values were above 0.7 as shown in Table 1 and this points to the fact that the research model managed to obtain sufficient convergence. Table 1: Measurement Model Assessment (n=140) Construct Scale Item Convergent Validity CR Cronbach s Loadings AVE Alpha Attitude ATT ATT ATT ATT ATT ATT Intention to use technology IUT IUT IUT IUT IUT IUT IUT Need N N N N Perceived Ease of Use PEOU PEOU PEOU PEOU Perceived Usefulness PU PU PU Willingness to Pay WTP WTP WTP WTP WTP Use Behavior UB UB UB UB UB Hair et al. (2011) stated that the cross-loading of a construct must be always higher than its loading of the other construct. Table 2 shows the analysis result according to Fornell-Larcker criterion where the square root of AVE for each construct is higher than its highest correlation with any other construct. 20

25 Table 2: Discriminant Validity Assessment (n=140) ATT IUT N PEOU PU UB WTP ATT IUT N PEOU PU UB WTP Note: Values in the diagonal (bolded) represent the square root of the AVE while the off-diagonals are correlation. PU4 was deleted. Table 3 and Figure 2 show the results of direct effect hypotheses in the study. Out of the six hypotheses, only one, Hypotheses 5, was not supported where perceived usefulness did not have a significant relationship with intention to use technology. Hypotheses 1 was supported, since attitude shows as having an evidential relationship with intention to use technology. Hypotheses 2, also shows an evidential relationship with intention to use technology. Willingness to pay has a significant relationship with intention to use technology: hypotheses 3. Perceived ease of use also has a significant relationship with intention to use technology: hypotheses 4 and lastly, in hypotheses 6, intention to use technology has a significant relationship with use behaviour. Hair et al. (2013) defined bootstrapping as re-sampling method that pulls a big number of sub-samples from the primary data and substitutes it and for each sub sample the model is estimated. Figure 2 shows the statistical findings using the algorithm and bootstrap sample estimates, with the standardized beta coefficients and R value for the study sample of 140 respondents. In this study 500 re-sampling were done. Table 3: Structural Model Assessment (n=140) Hypothesis Pathway Path Coefficient SE t-value Decision H1: ATT ->IUT * Supported H2: N->IUT ** Supported H3: WTP->IUT * Supported H4: PEOU->IUT ** Supported H5: PU->IUT Not Supported H6: IUT->UB *** Supported Note: *p<0.05, **p<0.01, ***p<0.001 Table 4 and Figure 1 show the result of indirect effect hypotheses in the study. It shows that N->IUT->UB (β = 0.073; t = 2.257, p <0.05), WTP->IUT-> UB (β=0.052; t=1.637, p<0.05) and PEOU->IUT->UB (β=0.062; t=1.869, p<0.05) paths are significant (three out of five subhypotheses of H7 is supported). Hence, the intention to use technology (IUT) mediates the relationship between need (N), willingness to pay (WTP) and perceived ease of use (PEOU) on use behaviour (UB) in the positive direction. This indicates that the three variables; need, willingness to pay and perceived ease of use matters when people make a decision regarding telecare. 21

26 Table 4: Significance of Indirect effects- Path coefficients (n=140) Hypotheses Relationship Beta Standard t-value Decision value Error H7a ATT->IUT->UB Not Supported H7b N->IUT->UB * Supported H7c WTP->IUT-> UB * Supported H7d PEOU->IUT->UB * Supported H7e PU->IUT->UB Not Supported Note: *p<0.05, **p<0.01, ***p<0.001 FIGURE 1: PLS-Path analysis of t-values (n=140) FIGURE 2: PLS-Path analysis of Beta value and R- square values (n=140) Henseler and Sarstedt (2013) stated that goodness to fit (GoF) would typically increase when there is change from multi-item to single-item measurement, although it usually does not imply an increase in reliability or predictive validity. Esposito Vinzi et al. (2010) recommended only to consider latent variables with multi-item measurement when calculating GoF to overcome this issue. The rational behind this redefinition of the GoF is that, single-item measurement always implies a communality of one, which means that it does not permit to quantify the measurement error in the indicator. Esposito Vinzi et al. (2010) stated that there is no inference-based threshold to judge the statistical significance of the values and the index value is chained between 0 and 1. Table 5 illustrates the GoF for this study. Table 5: Goodness of Fit (GOF) Average AVE R Square GOF IUT UB

27 Limitations and Suggestion for Future Research Since this study and concept of telecare is considered very new in Malaysia, as there is no existing telecare available in the country at the moment, thus, we could not use hands-on respondents for our questionnaire. The best that could be done, was to get respondents who were visiting hospitals as these were considered the best option of availability of respondents. Further, since only two hospitals were chosen for this study, future research could take into consideration a larger number of hospitals. Future studies also could consider including hospitals from West Malaysia (Kelantan and Pahang) and East Malaysia (Sabah and Sarawak). We also could not give physical examples such as sample of devices or the actual mechanism of telecare for respondents to check or analyse on the service that were being offered. As a result, this could subject to respondents bias and results being not accurate. Secondly, availability of maid or any individual who is willing to look after the people in need for care also leads to respondents reply not reflecting the actual result of this intended research. There are still individuals who prefer to be cared by a person instead of trying out this kind of new technology. Since there would be a cost involved if telecare were to be set-up in Malaysia, future research could focus on tackling the total cost that might be incurred in the course of telecare implementation. Options such as government funding or sponsorship, and time-line to setup a telecare infrastructure should also be evaluated. It is very important for Malaysia to look into this telecare option for future as it may provide better quality and way of living. As such, government and other non-profit organizations should come together to evaluate and promote telecare among Malaysians for a better future and tackle any social issues with regard to aged community. Telecare is always associated with ethical challenges as technologies would be applied in people s home and this might lead toward insecure and estrange feelings. The ethical issue, concerns safety, security and privacy. This study has not taken into consideration the ethical aspect as telecare is relatively new in Malaysia. This factor should be taken into consideration and addressed in future studies prior to telecare implementation. Discussion & Conclusion Out of the eleven hypotheses, the bootstrapping analysis indicated eight hypotheses were supported and three were not supported. H1 was not supported in this study as the analysis failed to prove that there were any significant influence of perceived usefulness on intention to use technology. Under the mediating hypotheses, H7a and H7e were not supported, where attitude and perceived usefulness does not mediate the relationship between intention to use technology and use behaviour. All the other remaining hypotheses (H1, H2, H3, H4, H6, H7b, H7c & H7d) were well supported where attitude, need, willingness to pay, perceived ease of use, intention to use technology were positively related towards use behaviour where else, need, willingness to pay and perceived ease of use has a mediating relationship between intention to use technology and use behaviour. The first research question concerned with whether attitude influenced intention to use technology. The study found that attitude (t=1.673, p<0.05) had a positive relationship with intention to use technology. The result in this study is also consistent with the study conducted by Huang and Lee (2013) as well as with Agarwal and Prasad (1999) where attitude is positively related towards using and the behavioural intention to use telecare. The second research question tested whether need influenced intention to use technology. It was found that, need (t=3.051, p<0.01) had a positive relationship with intention to use technology. Parette s (1992) study is 23

28 found to be supportive of this study, as the authors in that study found that there is a significant need for purchasing needed technology by the respondents with mental retardation. The third research question concerned with whether willingness to pay influenced intention to use technology. Whenever there is cost involved, it will have a significant influence on behavioural intention to use technology. The result in this study is consistent with Mathieson et al. (2001), where willingness to pay is positively related towards intention to use technology. Dafydd, Roberts and Doughty s (2009) study also is found to be supportive of this study as their study also indicated that over half of the service users would be prepared to pay an amount for telecare service. The fourth and fifth research question were concerned with whether perceived ease of use and perceived usefulness influenced intention to use technology. Both these variables were discussed together in most of the studies Huang (2013); Lee & Chang (2011). Many other studies such as Su, et al. (2012); Davis (1989), were found to be supportive over perceived ease of use, and Juniwati s (2014) study was found to be supporting perceived usefulness where it failed to influence the repurchase intention. The sixth research question tested whether intention to use technology influences use behaviour. As predicted intention to use technology (t=3.701, p<0.01) had a positive influence on use behaviour. According to Venkatesh and Davis (2000), use behaviour is directly affected by social influence and facilitating conditions. Paola Torres Maldonado s et al. (2011) study was found to be supportive of intention to use technology and use behaviour. This study has also tested the mediating effects of intention to use technology between attitude, need, perceived ease of use, perceived usefulness and use behaviour. Out of the five hypotheses formed to test the mediating role, it was found that three of the hypotheses were supported. Intention to use technology mediates the relationship between need, willingness to pay and perceived ease of use on use behaviour in the positive direction. Where else, the study found that, attitude, perceived usefulness and use behaviour were not mediated by intention to use. It is due to the fact that when a system is introduced, users pay more attention and are concerned whether they have the financial means to own the system, how simple is it to use and the need to have such a system. This indicates that the three variables; need, willingness to pay and perceived ease of use matters when people make a decision regarding telecare. Although there are many studies conducted previously, this study has combined whether attitude, perceived ease of use, perceived usefulness, need, willingness to pay have direct influence with intention to use technology, which subsequently leads to the use behaviour. This study also tested intention to use technology as a mediating variable between the independent variable and use behaviour. The main aim of this study is to make a valuable contribution to modern health care service through technology. Telecare option should be analysed and introduced as an improved support to the people for better quality of life. It is also expected that this study would raise awareness among health and social providers in Malaysia of the potential contribution telecare in meeting the needs of particular individual or patient groups, within the context of individualized, personalized services for people at home. Malaysians are utilizing a wide range of health services as the government has pledged to provide high quality health care by continuously enhancing the wellness position of individuals, household and communities. However, Malaysia is also encountering big problems similar to other countries, such as limited resources, changing demography, increase in consumer demand, new technologies, and impact of globalization. Telecare implementation in Malaysia has the scope to improve patient safety and living. Effective use of telecare requires involvement of various parties, including the 24

29 government. To brand telecare, impressive additional work need to be done on training practitioners, assessment on technology solutions, procedure observation and dealing with data care and subsequently trying to create a call centre. Training and support must be provided to practitioners so that users are able to get the maximum benefit from the solution that is being offered. There should be establishment of information technology enabled facilities, enhanced monitoring and surveillance systems in order to make telecare as a successful option in future. This study indicates that people are willing to consider and accept telecare as an option for elderly and people with long term health condition. All relevant parties need to brain storm and develop the telecare system, as it has a very practical health care option for many people. Telecare should be able to provide easy and efficient service by just using technologies. Hence, more work is required for the creation of a design focusing on users, and the advancement of devices of which customers are ready to accept, and apply. These features must be able to fit into people s house and lifestyles. It is hoped that the study could be used in moving telecare implementation to the next level by providing a guideline and framework to target and position telecare into the society. The results from this study could assist industries related to telecare to further develop their products to meet users needs. Further, telecare concept should be converted into practice by developing a superior quality telecare system to encourage and educate more Malaysians about telecare as an option in future. The study also should assist in creating guidelines for the various parties involved in health care to position telecare by emphasizing on the advantages and benefits of telecare and how such a technology can improve the lives of people in need of health care as well as the carer. As consumers become attracted to the devices and services, eventually the aim of telecare is to become an underlying feature in the lives of the elderly to live independently in their own homes. References Agarwal, R., & Prasad, J. (1999). Are individual differences germane to the acceptance of new information technologies? Decision sciences, 30(2), Ajzen, I., & Fishbein, M. (1980) Understanding attitudes and predicting social behaviour. Englewood Cliffs, NJ: Prentice Hall Ajzen, I. (1985). From intentions to actions: A theory of planned behavior. In Action control (pp ). Springer Berlin Heidelberg. Ajzen, I. (1991). The theory of planned behavior. Organizational behavior and human decision processes, 50(2), Ali, M. S. A. M., Jahidin, A. H., Nasir, N. M., Saidatul, A., Zakaria, Z., Salleh, A. F., & Mustafa, N. (2008). Malaysia and telecare a preliminary study. In 4th Kuala Lumpur International Conference on Biomedical Engineering 2008(pp ). Springer Berlin Heidelberg. Andersen, R., & Newman, J. F. (2005). Societal and individual determinants of medical care utilization in the United States. Milbank Quarterly, 83(4). Dafydd, G., Roberts, J., & Doughty, K. (2009). Evaluation and value for money analysis of a new telecare service from a user perspective. Journal of Assistive Technologies, 3(3), Barlow, J., Bayer, S., & Curry, R. (2006). Implementing complex innovations in fluid multistakeholder environments: experiences of telecare. Technovation, 26(3), Brownsell, S., Bradley, D., & Porteus, J. (2003). Assistive technology and telecare: forging solutions for independent living. Policy Press. 25

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33 Export Pricing Towards Developing Countries: A Proposed Model in the MNEs context Evidence from Malaysia Mahmoud Ata Al-Tawalbeh* Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia altawalbehmahmoud86@gmail.com Shaizatulaqma Kamalul Ariffin Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia Zurina Mohaidin Graduate School of Business, Universiti Sains Malaysia, 11800, Pulau Pinang, Malaysia *Corresponding author Abstract Purpose: The purpose of this paper is to explore the antecedents and consequences of export pricing in Malaysia, based on Multinational Enterprises (MNEs), which engaged FDI at Electrical and Electronic (E&E) sector. Methodology/approach: To address the issues of export pricing conceptually in the international marketing and business research area by reviewing related literature and industrial issues accordingly. Findings: Mixed findings have been taken on the export pricing field, filling the gap at theoretical and practical developments. Research limitations/implications: The study is limited to developing country and those that have global production share in South East Asia specifically in Penang, Malaysia and targeting the MNEs in electrical and electronic sector. Practical implications: This study represents a platform and business model for business people and policy makers to consider all findings in their decisions making system. Originality/value: It focuses on the MNEs only and covers the exporting functions that is destined to international market by using third party as host country for the productions phase of the electronic products. Keywords: export pricing, export performance, developing countries and MNEs Introduction During the past four decades, the field of exporting had paid particular attention to international marketing strategies that are crucial for national economic and the firms growth either in developed countries or developing countries (Griffith et.al, 2003). According to the World Bank (2015), exports accounted for around 29.8% of the global GDP in The increasing globalization of the business environment and the rapid growth of international trade make it critical for MNEs to seek opportunities for foreign market expansion (Filipescu et al. 2013). The dominance of the United States and other developed countries in export markets has decreased, while some 29

34 industrialized countries, such as China, India, and Brazil, have taken a larger share of the world s exports (Hill,2011; Kotler et al. 1997). As a result of the globalization of the world's economies, exporting has become increasingly important for the survival, growth and long-term viability of business organizations as well as the national economy. Exporting is also the most effective way of solving trade deficit problems by countries and represents a viable strategic option for firms to internationalize and has remained the most frequently used foreign market entry mode as it provides the firm with high levels of flexibility and a cost-effective way of penetrating new foreign markets quickly. Thus, decisions to export marketing strategies and public export promotion policies are taken to boost corporate performance and economic welfare (Morgan & Katsikeas,1997; Zhao & Zou, 2002; Leonidou,1995). Developing markets have considerable impact on the world economy due to their huge economic volume, rapid growth and wide distribution. On the other hand, firms located in developed countries have moved their product lines into developing markets to reduce costs in labour and raw material. Therefore, the developing economies benefit from learning advanced technology, improving income and consumption, and accelerating economic development (Ju, 2015). In 2011, nearly half (49%) of world trade in goods and services took place within global value chains (GVCs). The tendency of countries to specialize stages of a good s production (known as vertical specialization), brought about by foreign direct investment, has created new trade opportunities, especially for small developing countries and eastern European economies. East Asian economies have increased significantly the share of imported components in their exports. Additionally, some of these economies, including China, the Republic of Korea, Thailand and Malaysia have benefited from investments in infrastructure and resources to become the so-called Factory Asia. Over four decades, beginning in the early 1970s as a developing country, Malaysia shifted from being a resource-based economy known throughout the world for rubber and tin to a manufacturing powerhouse centred on large-scale electronics exports with the manufacturing sector s share of total exports rising from six percent in 1970 to over 70 percent by The electrical and electronics (E&E) industry is the leading sector in Malaysia's manufacturing sector, contributing significantly to the country's exports: 33.4% and employment: 23.7% (MIDA, 2017). The electronics industry is mainly located in two main regions: Penang and the North of the country, and the central region and Johor that have the strongest manufacturing base, but enterprise networks are largely limited to Penang and the North. Johor has so far mainly served as a base for firms relocating from Singapore. All three lack an adequate innovation and human resource base, the regional authorities in Penang making the most serious efforts to remedy these problems (UNITED, 2003). The presence of major (MNEs) such as Intel, AMD, Freescale Semiconductor, ASE, Infineon, STMicroelectronics, Texas Instruments, Renesas and major Malaysian-owned companies such as Silterra, Globetronics, Unisem and Inari have contributed to the steady growth of the semiconductor industry in Malaysia. To date, there are more than 50 companies (MIDA, 2017), largely MNEs producing semiconductors devices. Free trade zones (FTZs) were established as the vehicle for attracting electronics MNEs to set up production facilities in Penang (MIDA, 2017). In addition, the Penang state represents the export production hub in Malaysia as the major hub in global production networks and provides a valuable laboratory for a study of the interplay of government policies and global sourcing strategies of MNEs in determining developmental gains from global production sharing (Athukorala, 2014). 30

35 The pricing decision is very important in the domestic market and is very complicated in the international market. Moreover, the export pricing, that is, defined as cross border pricing process that takes into consideration a lot of factors to reach an appropriate decision to achieve the firm success. Therefore, MNEs that came from developed countries needs to be more careful in determining the pricing, due to the differences between the home country and host country accordingly. Price manipulations, one of the most used techniques, to reduce the variations by including volume discounts, credit terms, compensation for exchange rate variations, and special conditions for new product launches (Leonidou et al 2002; Myers et al. 2002; Piercy et al. 1997). As mentioned, this paper aims to investigate the fit factors that influence on the export pricing decisions, filling gap on the existing international literatures, and to examine role the MNEs in the developing markets, consequently this paper leads to answer the following main questions: firstly, why MNEs concentrate their business outside the home country into South East Asia, specifically Malaysia?, and secondly, what is the role of MNEs in the E&E sector of Malaysia in terms of experience and economy growth? Literature Review Export Pricing The international marketing strategies about product, distribution and price differ from those made in a domestic context because strategies that are made within environment are unique to each specific country. Pricing decisions are the core success of any firm because they have a direct effect on revenue (Sousa & Bradley, 2009). Export pricing refers to the pricing process of products made in one country and sold in another country, as part of marketing strategies, it is essential although complex, especially for the exporting firms as they should take various markets into consideration (Jain, 1989; Myers et al. 2002). Also, Dolgui and Proth, (2010), not in References stated that the strategic export pricing as one of many options through which a firm can increase its positioning in the marketplace. Additionally, the export pricing can be considered as a process of valuing the products made in a home country and sold to customers in a host country, considering multiple foreign markets with cultural, economic, legal, and political differences (Lancioni 2005 not in References; Myers et al. 2002). In sum, there is no singular and clear definition for export pricing can be generalized and used in marketing disciplines. Recently few scholars, confirm that the export marketing should be more specific to recognize the issues in the export field in a precise way and through pricing strategies (Tan & Sousa 2011; Chen et al. 2016; Sousa & Bradley 2009). Many scholars had shed light on the export marketing strategies and export performance through systematic literature review and ascertained the main gaps as shown in the Table 1.1. In the context of export pricing, in general, the researchers classified export pricing into two main types :firstly, pricing strategies for long term, such as: competitive posture, price-setting philosophy, pricing process, and currency strategy, and the secondly, the practices in short term, such as sales terms, credit policy, and pricing adaptation (Tan & Sousa 2011; Leonidou et al. 2002). Antecedents of export pricing In fact, the export pricing decisions in general are influenced by many internal and external forces which can or cannot be controlled by firms (Cavusgil & Zou, 1994). Tzokas et al. (2000), not in References classified these factors into three categories: company; market; and product related, which were built based on industrial perspective in developed country (UK) with little focus on the external environment such as competition and technological turbulence as different entity to 31

36 the market factor. On other hand, the company factors were explained from the financial perspective, focusing on the cost and margins issues. Birnik and Bowman (2007) not in References additionally, mentioned that the industry factors and some micro-organization factor related to decisions workflow between the parent company and subsidiaries, and for a voidance of doubt, the export pricing stated as part of marketing mix from resource base perspective. Solberg et al., (2006) confirmed that international pricing can be influenced by contextual and decision-making complexities driven by global organizational and environmental barriers. Also, they highlight the Solberg s (1997) not in References framework that explained the export pricing behaviour in foreign market from contingency perspective, and this framework includes two main dimensions: industry globalism, and degree of the firm s preparedness for internationalization. Sousa and Bradley (2009) identify the factors that influence a firm s export performance and export price adaptation as well as used the contingency framework to explain the issues in context of developed country (Portugal) with more focus on the international experience and environmental factors, and its role on foreign market but the study was limited to joint venture level and multi industry; not focused on specific industry or size firm. Finally, the study concludes that the findings are applicable on countries with similar stage of development and experiencing structural characteristics, with recommendations for future studies in the institutional environment and developing countries context. Following the contingency approach as stated by Sousa and Bradley (2009), there are a set of factors that moderate the relationship between firm export strategy and its performance, one of the more important factor, is the firm size, and how the decisions structure between the parent company and subsidiary in the case of large firms such as MNE and their experience can be effective in the international business. Another important factor, is the consumer characteristics and how to consider individual behaviour similarities between the home and host country. In addition, the legal and cultural environment, by contrast Sousa and Lages (2011) not in References define the concept of psychic distance as the individual s perceived differences between the home and the foreign country. Recently, some researchers, including Hofer et al. (2015) used the dynamic capabilities as antecedent of pricing process by focusing on the pricing value concept from resource base view. Consequences of export pricing The result of pricing decisions should provide with good outcomes with regards to export activates, which is known as export performance. This concept is not new and it is rooted to structure-conduct-performance as suggested in framework of industrial organization in the international business for more than three decades (Cavusgil & Zou, 1994; Myers, 2004; Grif-fith, 2010). The literature on export performance is still not mature, and hence it is inconclusive. There is no full agreement on the theoretical and conceptual bases to predict the drivers of export performance (Katsikeas et al., 2000; Sousa et al., 2008 not in References; Tan and Sousa, 2011; Lages et al., 2008 not in References; Wheeler et al., 2008; Chen & Sousa,2016). Furthermore, export performance is not a uniform or a static concept, it represents dynamic concept in the international marketing and need multidimensional measurements since most of contexts are country, industry and firms level, which lead to more explanations for all issues from the researches and practitioners (Lages & Sousa, 2010 not in References; Katsikeas et al., 2000). Shoham (1998), generally defines export performance as a firm s outcomes achieved in international export sales. However, many scholars defined categories to measure the dimensions of export performance (Madsen,1987; Sousa, 2004; Crick et al., 2011; Lages et al., 2008; Shoham 32

37 et al., 2002) all not in References. The categories are based on the firm s goals that are divided into two main categories: firstly, is the economic or financial measurement such as export profitability, export sales growth, export sales, and export intensity, and secondly, the measurements that is, strategic, such as, management satisfaction, and goal achievement. All supporting articles are listed in Table1.1. In the export pricing context, (Myers & Harvey ;Sousa & Bradley 2005; Tan& Sousa 2011), the tendency of scholars and practitioners is to adopt the economic measurements for many reasons:: the first reason is the objective nature of pricing as it easy to ascertain and determine the direct influence, and the second reason is the direct impact on the overall revenue of firm s performance thatputs the decision maker under pressure from criticality function that is the first question the shareholders would frequently ask. Table 1.1: Export Performance Measures Export Economic Measures Export Sales Growth & Intensity: Alvarez, (2004); Hultman et al., (2011); Lages et al., (2008b); Lages & Lages (2004); Morgan (2012); Morgan, (2004) ; Ogunmokun & Wong (2004) Export Profitability & Increase in Market Share: Das (1994); Hultman et al., (2011); Katsikeas et al (2007); Lages & Lages, (2004); Morgan et al., (2004); Moen(1999);Ogunmokun & Wong, (2004) not in References Export Strategic Measures Achievement of Strategic Goals: Cavusgil & Zou (1994); Das (1994); Francis & Collins-Dodd (2004); Lages & Lages (2004); Styles (1998) & Zou et al.(1998). Management Satisfaction: Cavusgil and Zou (1994); Evangelist (1994); Ling-Yee & Ogunmokun (2001); Haatti et al.(2005); Katsikeas et al., (1996); Wilkinson & Brouthers (2006) not in References Theoretical Framework Within the context of developing country and the MNEs that is engaged in FDI for export purposes in global production share model, we propose a comprehensive framework from the contingency and RBV perspective. This framework can explain the industrial issues and extent the existing academic work in micro-level variables lead well to the interpretations as the previous frameworks were too general and could not identify the phenomena and matters clearly. In regards to the pricing context, the framework will use the economic export measures which are quantitative and can be observed in MNEs environment. Hence, the framework includes antecedent s variable and consequences of export pricing. 33

38 Table 1.2: Systematic Review in Export Field. Authors /year Descriptions Findings /Gaps Tan and Sousa (2011) Chen et al.(2016) They focused on the export pricing and found the main gaps in this field by reviewing about 100 articles in period of 1971 and They focused on export performance and the relations with export marketing strategies and all external and internal during through 124 reviewed studies Using RBV and contingency theories in future studies to compete with each other. Focused on single industry since, multi industry covered by many researchers. Recommended many antecedents (Firm and Management; Product; Industry; and Foreign/Domestic Market) and outcomes (Economic Performance; and Strategic Performance) to export pricing strategies. Most of studies recommends to use SEM instead of regression for the complex model. Many studies in joint venture but not on the firm level. Among the measures of export performance, economic measures are the most frequently utilized, Non-economic performance measures are less frequently employed; the use of multiple measures is important to capture the different aspects of the export performance construct and enhance the effectiveness of the indicators. Most of studies applied RBV theory and recommend to use it with firm that have big resources also to be adequate to fully address the complexity of export marketing framework. And to provide a more comprehensive view, researchers tend to integrate theories to support their analysis and arguments in combining two theories. Most of studies applied on SME with few attention on MNEs Most studies employed multivariate data analysis, such as structural equation modelling (SEM), the partial least square path model (PLS-PM), factor analysis (FA), and multi-regression analysis In future research, more effort should be made to identify additional moderating factors Schmid& Kotulla (2011) Leonidou Katsikeas,& Samiee (2002) They present the major results of a systematic in literature analysis in the field of international marketing standardization/adaptation in 50 years of research, covering more than 300 articles They synthesize extant knowledge on the subject based on a meta-analysis of empirical studies on the export marketing strategy performance relationship, 36 studies contained in 17 publications, originating Conclude that research on international marketing standardization/adaptation is characterized by non-significant, contradictory. Majority of the studies defined the research question into why and /or how firm standardize/adapt their marketing across nations to enhance performance and in which degree. Recommend more studies that concentrate on a small number of industry segments and countries to control for industry-segment- and country-specific differences in the product-profit enhancing effects of the respective situation-strategy fits None of these articles integrates both the concept of situation-strategy fit and a normative theory for systematically and comprehensively deriving performance-enhancing strategies of international marketing standardization/adaptation in given situation. Geographic focus in the majority of studies were conducted in North America, and product type. Unit of analysis mostly in export firm not joint venture for on industrial products by SME company size and major source of data followed by marketing managers and CEOs or presidents. Firms typically do not report the financial details of their exporting activities, it is difficult to access readily available and valid archival data Six pricing-related decision areas were examined for their potential influence on a firm s export performance: pricing method, pricing strategy, sales terms, credit policy, currency strategy, and price adaptation 34

39 Schmid & Kotulla, (2011) mainly in North America and Europe. Presents the results of a systematic literature analysis in the field of international marketing standardization/adaptation. It introduces a theoretical framework combined with the concept of situation-strategy fit through 300 articles over 50 years Research on standardization/adaptation is characterized by non-significant, contradictory, and confusing findings attributable to inappropriate conceptualizations. Most of studies were applied in quantitative approach followed by qualitative with few studies in conceptual nature. The focus of majority studies in product, pricing, distribution and promotions strategies respectively. The most popular theories used in the mentioned articles are contingency, RBV and industrial organization. 35

40 Figure 1: Theoretical Framework Discussion and Conclusion As mentioned in the introduction, the developing country and how the MNEs (that came from developed country) are working in a very dynamic region (SouthEast-Asia) and are serving all industrial consumers (electronic products) along the value chain, by exporting to third destination, such as, Malaysia, which represents an Asia factor for such export product. However, the high technology exporting needs high experience and R&D to meet the market needs globally as well as reducing the distance between countries in internationalization level by understanding the differences in cultural and economic, and political development Within the MNEs context, we used RBV to explain the phenomena, since the MNEs have mixed resources (intangible &intangible) that can give a competitive advantage in the international market. Malaysia, as an example of developing country, attracts FDI from developed country for two main reasons: firstly, it has enhanced economic growth with increasing export share in the global market and reduced unemployment rate with the provision of job opportunities, and secondly, transferring of the knowledge and technology from MNEs that have R&D centers and by doing training programs for the local people to be integrated with the international expertise. This process, enables the local firms to be part of production system and have supplementary role on logistic and resources. We conclude, that the existence of such MNEs, economically made Malaysia to be in a good global position and to be familiar with diversity in the international market. Within the export pricing context, the policy maker on country level and decision makers in MNEs level will benefit from this concept if they plan and evaluate the export success and returns of FDI inside Malaysia. Pricing function is very sensitive and confidential in management which can lead the firm s sustainable growth. Further, pricing gives the decision makers a full picture of profitability, production and distribution costs, in addition to the impact of such information as the exchange rate of the Malaysian currency (RM) as well as the performance of the financial market and stocks. 36

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44 performance: a review of the empirical literature between 1987 and International Marketing Review, 15(5),

45 An Empirical Analysis of the Perceived Skills in Predicting Managerial Effectiveness: The Malaysian Perspective Rajendran Muthuveloo* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Kang Chia Chiek Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Teoh Ai Ping Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia *Corresponding author Abstract Purpose - The purpose of this research is to examine the effects of five managerial skills (Technical skill, Human skill, Conceptual skill, Emotional Intelligence skill and Communication skill) in predicting management effectiveness. Additionally, gender and organizational level had also been explored as moderating factors in the study. Design/methodology/approach - The survey was conducted among 204 managers and employees who work in the manufacturing companies in Penang, Malaysia. In essence, the research had built a framework based upon the behavioral theory of leadership. Data collected was analyzed using SPSS and SmartPLS statistical tool. Findings - The results showed that all five skill dimensions were significantly related with management effectiveness. Nevertheless, only organizational level was justified to moderate the skill-effectiveness relationships, while Gender was not a significant moderator. Practical implications - In summary, it is crucial for the Malaysians, especially those in the leadership roles to understand and continually equip themselves with critical competencies that would transform them, and eventually make them effective and successful leaders. Originality/value This empirical study has included two new variables to the three skills topology, namely emotional intelligence skills and communication skills. These two new variables are found to significantly influence management effectiveness in this study. In addition, management hierarchy has been tested as a new moderator to the relationships between the determinants and management effectiveness but found to significantly moderates only the relationship between conceptual skills management effectiveness. Keywords: Emotional Intelligence, Managerial Effectiveness, Strategic Agility, Strategic Entrepreneurship and Organizational Performance. 41

46 Introduction In this research, the focus was put on managerial effectiveness since it is proven to be one important factor for an organization to stay competitive (Sanyal & Guvenli, 2004, Adegbemile, 2011). Yet, the attributes and characteristics that exemplify a managerial career are shifting along with rapid developments in organizational structure. The competencies that required by an effective manager in the past may not be adequate now in the emerging organizational forms of the 21st century. Because of this, it becomes very crucial to find out what attributes or skills which are important for Malaysian managers in leading manufacturing companies such as Pentamaster Corporation, Plexus Manufacturing, Penfabric, Venture Electronics, Mini-circuits Technologies and etc. in order to compete locally as well as internationally. The existing models of managerial effectiveness have evolved from the traditional models developed by Fayol (1916), Katz (1955) and, Muthuveloo & Teoh (2013). Some studies focused on the individual manager s personality (or the traits ), some on the activities performed by the manager on the job (or the behavior ), while others are trying to develop an integrative model to explain all aspects of managerial performance. According to Ritter, Sohal & D Netto (1998), attributes of an outstanding manufacturing manager can be divided into three main categories, such as attributes related to position, attributes related to people management and attributes related to individual manager. For conceptual and practical reasons, the three managerial skills typology introduced by Katz (1955) along with emotional intelligence skill (Lindebaum, 2012; O'Boyle, Humphrey, Pollack, Hawver, & Story, 2011) and communication skill (Riddle, 2010; Dogra, 2012) were chosen to construct the hypothesized dimension of this research. One reason was that these skills lead to a straightforward and empirically supportable set of hypothesized performance dimension. Literature Review The 3 Skills Topology Katz (1955) and Muthuveloo & Teoh (2017-b) argued that managerial skills are quite different from inborn traits or qualities of leaders. And, if managers were to perform effectively in their roles, they needed specific managerial knowledge. Based on the above assumptions, Katz (1955) proposed that there are three categories of skills such as technical, human, and conceptual. Later, Mann (1965) explored a similar three-skill approach (technical, human, and administrative or conceptual) to managerial effectiveness. Technical skill lies in the understanding or proficiency in specific activities that require the use of specialized tools, methods, processes, procedures, techniques, or knowledge (Shehu & Akintoye, 2011). Frequently, individuals are promoted to managerial positions because they have shown some level of technical competency in their respective field (Hill, 2003; Byrd, Lewis, & Turner, 2004). According to Katz (1955) technical skill primarily meant working with things not people. For example, operating a computer, conducting a sales presentation, and demonstrating the use of a drill press are technical skills required to perform some specialized tasks. The reason managers, especially the entry to middle level ones must have technical skill is that this skill allows the managers to train, direct, and evaluate subordinates in performing specific tasks. Contrasting with technical skill, human skill is primarily concerned with people (Katz, 1955). It is defined as the ability to work cooperatively with others, to inspire enthusiasm, to motivate and build trust and to get the best out of people. The cluster of human or people related skill actually also consists of teamwork, dealing with conflict, and creating organizational climate. In fact, many studies had found human skill as the most important predictor of managerial effectiveness 42

47 comparing to the others (Carmeli & Tishler, 2006, Teoh, A.P., Lee, K. Y. & Muthuveloo, R. (2017). It is the ability that helps a leader to work effectively with subordinates, peers, and superiors to accomplish the organization s goals. Human skill is essential throughout all management hierarchy (Moore & Rudd, 2005). While technical skill focuses on things and human skill focuses on people, conceptual skill focuses on ideas and concepts (Katz, 1955). Conceptual skill is defined as the ability to see the organization as a whole or to have a systemic viewpoint (Yukl, 2002; Northouse, 2012). Conceptual skill is central to creating a vision and strategic plan for an organization. For example, it would take conceptual skill for a CEO in a struggling manufacturing company to articulate a vision for a line of new products that would steer the company into profitability. Similarly, it would take conceptual skill for the director of a nonprofit organization to create a strategic plan that could compete successfully with for-profit organizations in a market with scarce resources. Conceptual skill is most important at the top management hierarchy (Moore & Rudd, 2005; Carmeli & Tishler, 2006). In summary, due to its significance, the 3-skills typology introduced by Katz (1955) and Mann (1965) are still heavily explored by many contemporary researchers (Javadin, Tehrani, & Ramezani, 2010; Shehu & Akintoye, 2011). These key attributes have proven to make the managers successful in their respective field of studies. Hence, in this research, we propose the following: H1: Technical skill is positively related to managerial effectiveness. H2: Human skill is positively related to managerial effectiveness. H3: Conceptual skill is positively related to managerial effectiveness. Emotional Intelligence Skill Since the first publication on emotional intelligence (EI) by Salovey & Mayer (1990), EI has become a popular topic, particularly in the fields of psychology and management (Lindebaum, 2012; O'Boyle, Humphrey, Pollack, Hawver, & Story, 2011; Mills, 2009). It has been recognized and developed as a type of managerial skill which embraces a precise understanding of the emotions of one self and those of others. In this case, the individual will be aware of his/ her own feelings, and know how to control them. From management perspective, leaders who have the ability to perceive their emotions and understand their impacts on their actions and on those of others should have a greater probability of providing effective leadership (Cavazotte, Moreno, & Hickmann, 2012; Guillen & Florent-Treacy, 2011; Kerr, Garvin, Heaton, & Boyle, 2006). Meta-analytic studies have suggested that EI is a more important predictor of personal success than personality traits (Van Rooy & Viswesvaran, 2004). Trabun (2002) defines it as the ability to perceive, understand and effectively manage emotions in order to achieve personal and organizational effectiveness. Managers capable of being balanced, self-motivated, optimistic and highly-spirited play a positive role in motivating others. The ability to empathize with others and manage interpersonal relations enables managers to treat subordinates as individuals with unique needs and abilities. Empathetic managers utilize their social skills to help subordinates to develop their positive feelings and emotions in order to achieve their goals, which in turn, create enhanced performance on the part of employees (Behbahani, 2011 and Chue,K. W., Muthuveloo, R. & Teoh, A. P. (2017). 43

48 Because interpersonal interactions are a basic component of managerial jobs, we can hypothesize that EI will promote collaborative behaviors at work that eventually contribute to leadership performance in work settings. For these reasons, it is examined in the study as an important influence on managerial effectiveness. H4: Emotional Intelligence skill is positively related to managerial effectiveness. Communication Skill Communication skill is fundamentally tied to managing, both in terms of its theoretical role in management and in practical communication behaviors of managers. Through effective communication, leaders lead. Good communication skill enables, fosters and creates the understanding and trust necessary to encourage others to follow a leader. Without effective communication, a manager accomplishes little and he/ she is not an effective leader (Barrett, 2006). The behavioral model of leadership has provided a theoretical role of communication in management for this study. The theory described a leader s behaviors regarding initiating structure and showing consideration in terms of the content of the associated supervisor-subordinate communication. There is considerable consensus about the necessity of communication skill for managers, and there is a growing recognition that a manager s effectiveness inherently depends upon the level of those skills (Hansen, 2004; Lewis, Schmisseur, Stephens, & Weir, 2006; Mosley, Megginson, & Pietri, 2007). It was found statistically significant between the relationship of communication competency and employees reports of their satisfaction, their sense of role clarity, as well as their perceptions of their supervisor s effectiveness (Den Hartog, Boon, Verburg, & Croon, 2012; Madlock, 2008). In a survey conducted among managers and directors by Abraham, Karns, Shaw, & Mena (2001), communication skill was listed as the top 5 important skill that would describe the highly successful manager or executive in an organization. This is even so with the advances in technology, because it now requires global managers to expand upon standard face-to-face teamwork and move toward innovative virtual teams. Therefore, to be effective and competitive globally, managers must exhibit superior communication and computer skills (Pauleen, 2003). Essentially, communication links to all management functions, such as planning, organizing and controlling. One of the important roles of manager is also to present effectively the idea and prospect of every project. This has to be done in an inspirational way making the employees to understand the way they are involved in the project and how their accomplishments at work will be part of the career development. In short, the sheer amounts of time managers spend in communication highlights how important strong communication skill can be for the managers who inspire to advance in leadership position. By communicating more effectively, managers improve their ability to get things done with and through people. Thus, this important skill along with four other managerial skills is picked in the study in predicting leadership effectiveness. H5: Communication skill is positively related to managerial effectiveness. Gender as Moderator The inflow of women into the workforce has been one of the social trends for the past 30 years. The growing number of women not only changed the dynamics of an organization, as they progressed and obtained management positions, but challenged the philosophical core of the traditional management style that had been dominated by men. One of the objectives of this study 44

49 is to investigate issues raised regarding potential gender differences in perspectives on managerial effectiveness. Researchers have found that male leadership behaviors are rated more favorably than identical female behaviors and that women's performance is often devalued, suggesting a male leadership advantage (Ng & Pine, 2003; Peng, Ngo, Shi and Wong, 2009; Bakar, 2012). Prior researches done on leadership and gender have primarily focused on finding the differences and similarities in the leadership styles of men and women (Ng & Pine, 2003; Bakar, 2012; Ielics & Runcan, 2012). Although it is widely believed that there are differences in male and female leadership styles, its influences on evaluations of leader effectiveness remain unclear. There are expectations for women in management positions to be more nurturing and collective than men. If women fail to demonstrate the traits, they may potentially to be rated as less effective than men using the same style. Similarly, if women exhibit too many masculine behaviors (more autocratic than democratic), their evaluations may tend to suffer. On the other hand, studies done by some scholars (Jayasingam & Cheng, 2009; Carmeli & Tishler, 2006) indicated that, although gender differences exist for both personality and leadership style (such that autocratic is more compatible with the masculine traits), males and females appear to be equally effective as managers. Hence, it is uncertain and arguable that gender would be a valid predictor of leadership effectiveness. Therefore, this factor would be explored further in the study, and it will be interesting to find out how the results would be. H6: The relationship between human skill and managerial effectiveness will be moderated by gender. (Specifically, it is suggested that human skill will be a more important predictor of managerial effectiveness for women than for men.) H7: The relationship between emotional intelligence skill and managerial effectiveness will be moderated by gender. (Specifically, it is suggested that emotional intelligence skill will be a more important predictor of managerial effectiveness for women than for men.) Management Hierarchy as Moderator It is strongly believed that management hierarchy would also moderate the managerial skilleffectiveness relationship. Because roles and expectations of managers at different organizational levels often vary, managers at different levels likely rely on a host of different skills to succeed too (Zaccaro, 2001; Jacobs & McGee, 2001; Kaiser & Craig, 2011; Northouse, 2012). Indeed, Katz (1955), Muthuveloo, R., Kathamuthu, K., & Teoh, A. P. (2014) had provided an early observation on the potential for differential skill mixes at different levels of the organizational hierarchy. Due to the fact that leadership requirements increase in complexity at higher organizational levels (Mumford, Campion, & Morgeson, 2007; Charan, Drotter, & Noel, 2011, Muthuveloo & Teoh, 2017-a), and higher skill levels would be needed to manage this complexity, it is commonly believed that there should be a positive relationship between level of management and the leadership skill requirements. Technical skill is the fundamental and most important at entry level of management and higher up the hierarchy, the significance reduces. For top management, such as chief executive officers (CEOs), vice presidents, and senior officers, technical competencies become less critical. While they depend mostly on skilled subordinates to handle the technical issues, it is crucial for these individuals to switch their value, behavior and time application to focus on systemic and strategic matters, which would then require conceptual skill. 45

50 Despite the agreement among these authors, not many data were presented to support these assertions (Carmeli & Tishler, 2006, Teoh, A.P. & Muthuveloo, R. (2012)., especially in the Malaysian context. Therefore, this factor would be included as one of the moderators in predicting managerial effectiveness. H8: The relationship between technical skill and managerial effectiveness will be moderated by management hierarchy. (Specifically, it is suggested that technical skill will be a more important predictor of managerial effectiveness for entry and middle level managers than for top level managers.) H9: The relationship between conceptual skill and managerial effectiveness will be moderated by management hierarchy. (Specifically, it is suggested that conceptual skill will be a more important predictor of managerial effectiveness for top level managers than for entry and middle level managers.) Methodology This research will include both the descriptive study and hypothesis testing. A descriptive study is undertaken in order to ascertain and be able to describe demographics of the variables of interest in a situation (Sekaran & Bougie, 2010). For instance, in this study, characteristics to be collected have included gender, age, marital status, educational level, job position and etc. Meanwhile, hypothesis testing is undertaken to explain the influence of independent variables, such as technical skill, human skill, conceptual skill and etc. in predicting the outcome of dependent variable, which in this case the perceived managerial effectiveness. The Unit of Analysis (UOA) refers to the level of aggregation of the data collected during the subsequent data analysis stage (Sekaran & Bougie, 2010). Since the problem statement focuses on the perceived managerial effectiveness by subordinates, then, we are interested in individual employees in various manufacturing organizations in Penang, Malaysia. This research was a crosssectional study, where a survey has been conducted from 20 August 13 to 5 September 13.The targeted population is the Malaysian employees in Penang state, focusing on manufacturing industry. The population is chosen considering cost effectiveness and availability. Since the UOA is individual, the total studied population is not made known and in a way keeps changing. In this case, the proposed sampling method used would be a non-probability sampling. The recommended technique is convenience sampling. Convenience sampling also known as availability sampling involves selecting cases haphazardly only because they are easily available or most convenient to obtain for your sample (Lewis, Saunders, & Thornhill, 2012). Although the results eventually cannot be generalized, it is ok for this research since the primary purpose is to establish whether different perspective on managerial effectiveness could be integrated to derive a common core of skills from the perspectives of Malaysians. Furthermore, comparatively, this method is very cost effective and can be set up relatively quickly (Lewis, Saunders, & Thornhill, 2012). Then, as far as sample size is concern, the proposed target is to obtain around 300 samples. According to Anderson, Hair, Tatham, & Black (2006), sample size of about 200 and above, but not exceeding 500 is considered as acceptable. Analysis The software tools used in the study include SPSS (or commonly known as Statistical Package for the Social Sciences) and SmartPLS (Smart Partial Least Squares). The descriptive statistics on 46

51 demographic information were carried out using SPSS software tool. In this case, the common measures used to describe a data set, such as measures of central tendency and measures of variability were performed. The demographic data in particular provides an overview or a snapshot of the respondents profile under study. These data, such as gender, age, ethnic group, year of service and etc. are essential to summarize the samples taken from the Malaysian population in Penang manufacturing industry. Then, the data collected was subjected to a series of reliability and validity testing. For reliability testing, SmartPLS introduces a new metrics which takes into account the different outer loadings of the indicator variables, aka composite reliability. It is generally interpreted in the same way as Cronbach s alpha. Composite reliability value of more than 0.7 is considered acceptable according to Hair Jr, Hult, Ringle, & Sarstedt (2013). On the other hand, validity with SmartPLS software is assessed from two important parameters which include the convergent and discriminant validities. Convergent validity is the extent to which a measure correlates positively with alternative measures of the same construct while discriminant validity is the extent to which a construct is truly distinct from other constructs by empirical standards (Hair Jr, Hult, Ringle, & Sarstedt, 2013). Next, all the hypotheses were subjected to various tests. Partial least squares structural equation modeling (PLS-SEM) approach was chosen to test the hypotheses in this study. With SmartPLS software, the testing of hypothesis was carried out in two stages. Firstly, PLS Algorithm was run. This gave a set of report which includes the path coefficient of all independent variables. Then, a process called bootstrapping was conducted to give the significance of IVs. Besides the testing of IV-DV relationship, in this study particularly, two moderating variables such as gender and management hierarchy had also been assessed. Even though gender and management hierarchy are categorical moderators, a product term (or an interaction term) approach is used instead of group comparison approach. According to Henseler & Fassott (2010), the product term approach is a straightforward model of a moderating effect if the moderator influences the strength of the moderated direct relationship linearly. As long as the construct measurement is invariant across groups, the product term approach and the group comparison approach lead to the same results. Findings Demographic Profile of Respondents The summary of respondents demographic profile of this study was shown in Table 1.0. From the table, it was observed that 56.4% of the total respondents were male, while 43.6% were female. Majority of them aged in between 31 to 40 years old with a percentage of 51.5%. Besides, among all, more than half of the respondents were married (68.1%). In terms of ethnic group distribution, majority of them were Chinese (65.2%), followed by Malay (25.5%) and Indian (8.3%). Meanwhile, it was found that, in terms of educational level, 93.6% of the respondents were bachelor degree holders and above. This indicates that the respondents were pretty well knowledgeable enough to understand and answer the questionnaire accordingly. Most of them worked in multinational companies or MNC (89.2%), and they came from various departments, such as supply chain/ manufacturing (66.7%), finance/ accounting (12.7%), research and development (7.4%) and etc. Out of the total, slightly less than half of the respondents were holding managerial positions (42.2%). And, about half of them (56.9%) have already served their existing managers for 1 to 3 years time. With the exclusion of data from respondents with less than a year reporting to their current managers, this provides a strong support in terms of data reliability. 47

52 Table 1.0: Demographic profile of respondents Demographic variables Description Frequency Percentage Gender Male Female Manager s Gender Male Female Age > Marital Status Ethnic Group Education Type of Organization Department Job Position Manager s Position Single Married Divorced Malay Chinese Indian Others Number of Reporting Years > 6 High School Certificate/ Diploma Bachelor Degree Master Degree PhD/ Doctorate Foreign Owned Multinational (MNC) Local Public Listed (PLC Bhd.) Local Organization (Sdn. Bhd.) Administrative Finance/ Accounting Information Technology Supply Chain/ Manufacturing Research and Development Human Resource Sales/ Marketing Junior Senior First Level Management Middle Level Management Top Level Management First Level Management Middle Level Management Top Level Management Testing of IV-DV Relationships With SmartPLS, the testing of hypotheses was done in two stages. During the first stage, PLS algorithm was conducted. Subsequently, a step called bootstrapping was performed. The results obtained from both steps were shown and summarized in Figure 1 as well as in Table

53 Looking at the significance levels (which were translated from t-values), it was found that all IV- DV relationships under testing were proven significant. This means technical skill (H1: β = , p < 0.01), human skill (H2: β = , p < 0.05), conceptual skill (H3: β = , p < 0.01), communication skill (H4: β = , p < 0.01) and emotional intelligence skill (H5: β = , p < 0.01) were all positively related to managerial effectiveness. Figure 1: PLS Algorithm Output In addition, the structural model results indicated that conceptual skill has the strongest effect on managerial effectiveness (β = ), followed by emotional intelligence skill (β = ), communication skill (β = ), human skill (β = ) and technical skill (β = ). Moreover, the five independent variables explain 80.5% of the variance of dependent variable which in this case referred to as the managerial effectiveness (R2 = 0.805), as indicated by the value in the Effective construct (See Figure 1). Table 2.0: Hypotheses analysis Hypothesis Relationship Path Std. t-value p-value Remarks Coefficient (β) Error H1 Tech Effectiveness < 0.01 Accepted H2 Human < 0.01 Accepted Effectiveness H3 Concept < 0.01 Accepted Effectiveness H4 Comm Effectiveness < 0.01 Accepted H5 EQ Effectiveness < 0.01 Accepted 49

54 N/A Gender Effectiveness Act as MV N/A Org Level Effectiveness Act as MV Note: For one-tailed test with df = 203, t-value > 1.65 p < 0.05 and t-value > 2.3 p < 0.01 Testing of Moderating Effects For testing of moderating effects, two categorical moderators, which include gender and management hierarchy were examined. Again, SmartPLS tool was used for this analysis. The interaction constructs were created to the path model respectively in order to simulate their effects on altering the IV-DV relationship. Each of the case was discussed separately in the subsequent sections. Gender The path model was modified to examine the effect of gender on moderating the relationships of human skill and emotional intelligence skill to managerial effectiveness. As mentioned in chapter 3, since the end results are usually equal or more superior to those of group comparison approach (Henseler & Fassott, 2010), an interaction approach was used to examine the moderating effect in this study instead. This was shown in Figure 2. Figure 2: Path Model to Examine Gender as Moderator From Table 3.0, it was obvious that H6 and H7 were rejected. The moderating effects were not significant. Specifically, this means there was no evidence that human skill is a more important predictor of managerial effectiveness for women than for men (H6: p-value = ). And, there 50

55 was also no evidence that emotional intelligence skill is a more important predictor of managerial effectiveness for women than for men (H7: p-value = ). Table 3.0: Interaction analysis for gender as moderator Hypothesis Relationship Path Std. t-value p-value Remarks Coefficient (β) Error H6 Human x Gender Rejected Effectiveness H7 EQ x Gender Effectiveness Rejected Note: For one-tailed test with df = 203, t-value > 1.65 p < 0.05 and t-value > 2.3 p < 0.01 Management Hierarchy The path model was then modified to examine the effect of management hierarchy or organizational level on moderating the relationships of conceptual skill and technical skill to managerial effectiveness. Again, an interaction approach was used for the analysis. This was shown in Figure 3. Figure 3: Path Model to Examine Organizational Level as Moderator According to Table 4.0, H8 is rejected while H9 is accepted. Specifically, this means there was no evidence that technical skill is a more important predictor of managerial effectiveness for low and middle level management than for top level management (H8: p-value = ). However, it is significant that conceptual skill is a more important predictor of managerial effectiveness for top level management than for low and middle level management (H9: β = , p-value < 0.05). 51

56 Managerial Effectiveness Global Business and Management Research: An International Journal Table 4.0: Interaction analysis for organizational level as moderator Hypothesis Relationship Path Std. Error t-value p-value Remarks Coefficient (β) H8 Tech x Org Level Rejected Effectiveness H9 Concept x Org Level Effectiveness < 0.05 Accepted Note: For one-tailed test with df = 203, t-value > 1.65 p < 0.05 and t-value > 2.3 p < 0.01 Nevertheless, even though management hierarchy is moderating the conceptual skill-leadership effectiveness, the effect size is not substantial (f 2 = 0.027, See Table 5.0). Guidelines for assessing effect size, f 2 are that values of 0.02, 0.15 and 0.35 respectively, represent small, medium and large effects (Cohen, 1988). This can also be observed from Figure 4. Table 5.0: Effect size of moderator Included Excluded f-squared Effect size R-squared Small Moderator Low Org Level High Org Level Low Conceptual skill High Conceptual skill Figure 4: Moderating effect of organizational level Discussion The first hypothesis (H1) suggested that there is a positive relationship between technical skill and managerial effectiveness. This hypothesis (H1: β = , p < 0.01) was proven significant with the research findings conducted among all Malaysians whom work in Penang manufacturing 52

57 companies. From employees perspective, the Malaysians think that technical skill is important as a predictor to whether or not a leader should be labeled as effective. This explains why promotion, especially in the case of promoting to the first level managers, candidates are required to possess strong technical capabilities. Based on a sample data collected over 250 executives in one of India s largest vehicle manufacturing companies, Rajadhyaksha (2005) pointed out in his exploratory research that technical skill which comprises of knowledge fundamentals, engineering drawing appreciation, manufacturability appreciation, materials choice appreciation, knowledge of emerging trends and etc. was one of the top four important skills affecting managerial competency. Furthermore, the research finding was aligned with many other literatures (which include Tonidandel, Braddy, & Fleenor, 2012; Hysong, 2000; 2008 and so on). In his study, Hysong (2008) proved that technical skill had accounted for incremental variance in the prediction of subordinate perceptions of managerial effectiveness (β = 0.37, p < 0.001). The second hypothesis (H2) conjectured that human skill is positively associated with managerial effectiveness. With β = and p-value < 0.01 (as shown in Table 2.0), H2 is therefore supported. Human skill is the ability to work with other people in a cooperative manner. Managers with good interactive human skills, build trust and cooperation as they motivate and lead and therefore become effective leaders. Because of the fact that managers get things done through others, human skill is hence perceived by Malaysians to be an essential skill in influencing managerial effectiveness. A similar result was obtained in a study done by Tonidandel, Braddy, & Fleenor (2012), where human skill (r = 0.34, p < 0.001) was tested significantly correlated with managers overall effectiveness. In a research done by El-Sabaa (2001), among project managers from private and public sector organizations, human skill was rated the most important management skill (with a percentile score of 85.3%) as compared to 18 other competencies. Among other similar researches which include those conducted by Belemu & Elizabeth (2000), Javadin, Tehrani, & Ramezani (2010), human skill had also been listed as one very important skill for manager to effectively manage in various sectors or industries such as public hospitals and banks. The third hypothesis (H3) proposed that conceptual skill is positively related to managerial effectiveness. Conceptual skill is the ability to view the organization as a whole and it commonly depends upon an organized thinking process which deals with understanding of the complexities of overall organization. The β value of conceptual skill is with p-value < 0.01; hence, the hypothesis is also accepted. This explains that many employees in Malaysia especially those working in multi-national companies emphasize the importance of conceptual skill with the perception that it will help them to manage the organizations effectively. The result obtained is consistent with the previous study done by Tonidandel, Braddy, & Fleenor (2012). From the research, it was found that the conceptual skill (or administrative skill in the case) had r value of 0.36, with p-value < 0.001, indicating that it was a significant predictor influencing managerial or leadership effectiveness. Besides, in many other literatures, the conceptual skill, which requires complex and integrative thinking, has always been associated closely with competencies required by leaders at the top. (e.g. Jacobs & McGee, 2001; Northouse, 2012). This will be discussed in more detailed in section Good communication is the foundation of sound management. This statement is justified with the forth hypothesis (H4: β = , p-value < 0.01) proven strongly significant. Particularly, H4 suggested that communication skill is positively associated with managerial effectiveness. Furthermore, the result obtained from the survey (refer to table 2.0) shows that communication skill, in fact, has a very strong effect on managerial effectiveness (β = ). Apparently, the 53

58 Malaysian employees perceive that to be an effective leader, one must be able to communicate well with people. Actually, the reason to this is simple and straightforward. Through communication, managers share information and influence employees attitudes, behaviors, and understandings. Their ability to communicate well, both orally and in writing is a critical managerial skill and a foundation of effective leadership. The research finding is in alignment with studies done by other scholars too. For example, in one exploratory research by Fisher (2011), communication skill has emerged as one of the six critical competencies required by people project managers to manage effectively in certain project environments such as IT or the construction industry. Emotional intelligence (EI) has recently become more popular and even emerged as an important skill in the field of management. Therefore, the fifth hypothesis (H5) proposed that emotional intelligence skill is positively associated with managerial effectiveness. Likewise, the hypothesis was proven significant (H5: β = , p-value < 0.01). In fact, according to the descriptive analysis in section 4.6, EI has the second highest average score among the five skills. This shows that the Malaysian managers are keen to equip themselves with high EI skill to be able to lead the employees effectively. A similar result was obtained in a study conducted by Kerr, Garvin, Heaton, & Boyle (2006). The research showed that an individual s EI may indeed be a key determinant of effective leadership. In another research where a quantitative data were collected from 929 managers whom enrolled in executive education programs at an elite European business school, the findings suggested that leadership effectiveness has direct relationship with emotional intelligence among the managers (Guillen & Florent-Treacy, 2011). Both the sixth (H6: β = , p = ) and seventh hypothesis (H7: β = , p = ) which recommended that gender moderates the relationships of human skill and emotional intelligence skill to managerial effectiveness were not justified. Tonidandel, Braddy, & Fleenor (2012) had obtained a similar result from 733 participants whom were managers enrolled in a nationally recognized leadership development program in USA. In the study, it showed that the interaction between human skill and gender was not statistically significant (p-value = 0.48). In another words, the study showed that human skill and emotional intelligence skill are equally important to both men and women in Malaysia to be able to lead effectively in their organizations. Even though statistically, it could be true that women possess a higher emotional intelligence or human skills than men (Mujtaba & Kaifi, 2011; Naghavi & Redzuan, 2011), but the gender differences were not significantly evident in moderating the relationship of skill-effectiveness among the Malaysian managers. Lastly, the eighth (H8) and ninth (H9) hypotheses postulated that the relationships of managerial skills-effectiveness are moderated by management hierarchy (or organizational level) in an organization. From the results obtained (see Table 4.0), it was found that H8 was rejected while H9 was accepted. Specifically, according to the eighth hypothesis (H8), it was assumed that technical skill is a more important predictor of managerial effectiveness for entry and middle level managers than for top level managers. However, contrary to our expectation, the eighth hypothesis (H8: β = , p-value = ) was not supported from the survey done among 204 Malaysians. This shows that regardless of the organizational level, technical skill is perceived by the Malaysians to be a very important skill to be qualified as effective leaders; hence, management hierarchy does not moderate its relationship. A similar result was obtained from a research conducted by Tonidandel, Braddy, & Fleenor (2012). Meanwhile, the ninth hypothesis has particularly suggested that conceptual skill is a more important predictor of managerial effectiveness for top level managers than for entry and middle 54

59 level managers. In alignment with our expectation, the ninth hypothesis (H9: β = , p-value < 0.05) was accepted. This demonstrates that organizational level has indeed moderated the effect of conceptual skill vs. managerial effectiveness. Even though the effect size was low (f 2 = 0.027), it was significantly justified that conceptual skill was more strongly related to managerial effectiveness for top level managers than for entry and middle managers. (Refer to Figure 9). From the past literature, Mumford, Campion, & Morgeson (2007) have conducted a leadership skills strataplex to identify leadership skill requirements across organizational levels and proved that certain strategic skill (e.g. conceptual skill) requirements only fully emerge at the highest levels in the organization. Conclusion This was an important research in the field of management for the Malaysian leadership community in manufacturing industry. The study focused on investigating competencies that influence managerial effectiveness in the 21st century. Apparently, in the era of globalization, Malaysian companies face stiff challenges both locally and internationally. With strong emergence of other countries, like China and Vietnam, cost structure is no longer the only consideration for Malaysian companies to stay competitive in the manufacturing lines. The research will serve as guidelines for Malaysian leaders to continue equip and strengthen their managerial skills to be effective in leading the organizations. It was justified that regardless of gender differences, technical skill, human skill, conceptual skill, communication skill and emotional intelligence skill are strongly related with leadership effectiveness. Furthermore, the higher a leader goes, the more critical is conceptual skill in leading the company. References Adegbemile, O., (2011),. Principals Competency Needs for Effective Schools Administration in Nigeria., 2(4), Abraham, S. E., Karns, L. A., Shaw, K., & Mena, M. A. (2001). Managerial competencies and the managerial performance appraisal process. Journal of Management Development, 20(10), Bakar, N. R. H. A. (2012). Malaysian women in management. Geografia: Malaysian Journal of Society and Space, 8(4), Barrett, D. J. (2006). Strong communication skills a must for today s leaders. Handbook of business strategy, 7(1), Behbahani, A. A. (2011). A comparative Study of the Relation between Emotional Intelligence and Employee's Performance. Procedia-Social and Behavioral Sciences, 30, Belemu, R. B. (2000). The identification of management skills required by middle managers to effectively manage a public hospital in the Eastern Cape. Retrieved from Byrd, T. A., Lewis, B. R., & Turner, D. E. (2004). The impact of IT personnel skills on IS infrastructure and competitive IS. Information Resources Management Journal, 17(2), 38. Carmeli, A., & Tishler, A. (2006). The relative importance of the top management team's managerial skills. International Journal of Manpower, 27(1), Cavazotte, F., Moreno, V., & Hickmann, M. (2012). Effects of leader intelligence, personality and emotional intelligence on transformational leadership and managerial performance. The Leadership Quarterly, 23(3),

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64 Crisis Management, Crisis Communication, and Consumer Purchase Intention Post-crisis Farhana Mansor Graduate School of Business, University Science Malaysia, 11800, Penang, Malaysia Noor Nasir KaderAli* Graduate School of Business, University Science Malaysia, 11800, Penang, Malaysia *Corresponding author: Abstract Purpose - A product-harm crisis can strike a company anytime, inflicting damages, lawsuits to the company, and turning devastating event into a catastrophe. The number of product-harm crisis is rising due to factors like the increasingly complex products, the evolvement of product-safety legislation, and the changing consumer demands. The aim of this study is to assess the consumers perception on the elements of crisis management on consumer purchase intention post-crisis, moderated by crisis communication. Design/methodology/approach - A quantitative study was conducted through an online structured questionnaire by collecting 168 individual responses in Northern Malaysia and analysed using the structural equation model (PLS-SEM) assessment in SmartPLS 3. Findings - The results indicated that blame attribution and perceived crisis responsibility have significant negative influence on consumer purchase intention post-crisis while responsible recall and crisis communication have significant positive influence on consumer purchase intention postcrisis. Additionally, crisis communication moderates the relationship positively between time and consumer purchase intention post-crisis. Also, the results showed that crisis communication and responsible recall are the latent variables with high importance and low performance. Practical implications - Thus, business firms should be ready with effective crisis management and crisis communication strategies that could aid to the success of their implementation of crisis management. Future research can study on how a crisis can be prevented or redirected by identifying signals or trends that may lead to a crisis. Originality/value - Assessing the consumers views on the elements of crisis management (specifically time, responsible recall, opportunistic recall, blame attributes, and perceived responsibility of company in crisis) on consumer purchase intention post-crisis, moderated by crisis communication Keywords: Crisis Management; Crisis Communication; Consumer Purchase Intention Post-crisis; Responsible Recall; Opportunistic Recall Introduction Products are becoming increasingly complex. The evolvement of product-safety legislation, the changing consumer demands and product preferences are among the major contributors to the rising number of product-harm crises in the present market place (Cleeren, 2015). This trend is in 60

65 line with the statements by Dawar and Pillutla (2000) and Dawar and Lei (2009) that there was a sharp increase of the number of defective, unsafe, or harmful products recalled from the market in the last few years. In the European Union market alone, the total number of non- food dangerous product notifications was 2,125 in 2015, an increase of 1,278 in a span of ten years (RAPEX, 2016). Interestingly, majority of previous studies were focusing on the factors influencing consumer response in a product-harm crisis (e.g., Vassilikopoulou et al., 2009; Magno, 2012). However, there is no clear indication on the moderating role of crisis communication on the relationship between crisis management and consumer purchase intention post-crisis in previous studies. Hence, this study is conducted to analyse the relationship between crisis management and consumer purchase intention post-crisis, moderated by crisis communication. Furthermore, this study intends to identify which latent variables are of high importance to business firms and the influence of demographics to the high importance latent variables. Literature Review Crisis Management The second phase of crisis management which is during crisis is important in this study as previous studies (e.g., Siomkos 1989; Siomkos and Kurzbard, 1994; Magno, 2012; Li, 2015) have indicated that crisis response of a company during a crisis is vital in determining the effectiveness of crisis management of a company in crisis. Besides, consumers form perceptions about the company during a crisis, as well as their response after the crisis has ended. Three theories identified to be related to crisis management are (1) the Structural Functions Systems Theory and (2) the Diffusion of Innovation Theory that emphasize on the importance of organizational crisis communication. (3) the Unequal Human Capital Theory emphasizes on the human capital management. The similarity of these theories are that they involve the employees, the internal processes and the communication. Thus, the internal management of an organization is critical in crisis management. In essence, the crisis responses during the crisis, influences the whole crisis management process, whether it succeeds or not. This study focused on the second phase (during crisis) of crisis management process as proposed by Coombs (2007). The latent variables are discussed below. Time Time is defined as the difference between the first signals of product dangerousness and the withdrawal from the market, time taken to react promptly to the crisis issues and quick response to inquiries (Mowen, 1980: Standop, 2006: Roth et al., 2008; Hora et al., 2011; Magno, 2012). Time is also defined as the time period after the crisis (Vassilikopoulou et al., 2009), the year of the sale of the product and the announcement of its recall (Roth et al., 2008; Hora et al., 2011). On the other hand, Johnson-hall (2012) described and classified time into three stages which are Stage 1: end of production to time of defect detection, Stage 2: time of defect detection to public notification, and Stage 3: public notification to the closure of recall activities which include reverse logistic processes by the recalling firm and recall monitoring by the regulatory agency. The definition of time in this study is the difference between the first signals of product dangerousness detected and the withdrawal from the market, time taken to announce the issues, react promptly to the crisis and quick response to inquiries to the product recall are most appropriate in this study. It is an integral element of crisis management of a company during a product-harm crisis which is the main focus of this study. Besides, this study intends to validate 61

66 the findings of other studies that utilised similar definition of time (e.g., Mowen, 1980; Magno et al., 2010; Magno, 2012) Hence, the following hypothesis was formed: H1a: Time has significant influence on consumer purchase intention post-crisis. Product Recall Product recall is defined as the procedure provided for in law that is to be adopted by suppliers for recalling its products due to defects found in the products or services placed in the market (Consumer Defence Protection Foundation PROCON, 2014). Quality failure detections of products that have been released for distribution and consumption, and are well publicized will result in product recall (Chen et al., 2009: Johnson-hall, 2012). A typical product recall involves withdrawing and/ or repairing defective product with the objective of resolving or preventing public safety issues (Carrol, 2016). In the phases of crisis management divided into three by Coombs (2007) which are (1) pre-crisis, (2) during crisis (crisis response), and (3) post-crisis. Product recall is classified as the second phase of crisis management which is the crisis response during crisis. Responsible Recall A responsible recall is defined as a product recall made by a company prior to governmental intervention (voluntary recall) and super-effort (e.g., ease of recall process, wide recall advertisement, offering compensation) (Jolly and Mowen, 1985; Siomkos, 1989; Shrivastava and Siomkos, 1989; Siomkos and Kurzbard, 1994; Magno, 2012). Responsible recall (crisis response) is one of the main factors, instrumental in determining the success of a company when dealing with a crisis situation. Regardless of prior firm reputation (low and high reputation), voluntary recall is the optimal way to go during a crisis as the future purchase will be less negatively influenced by the present crisis (Siomkos, 1989; Siomkos and Kurzbard, 1994). Laufer and Coombs (2006) noted that by carrying out a voluntary recall, a company removes the risks to consumers and demonstrates concerns for consumers. By carrying out supereffort product recall, the damage caused by crisis on the company s image will be reduced. Additionally, consumers perceptions that a company behaved in a responsible manner has positive link to consumers post-recall brand attitude (Magno et al., 2010). Hence, the hypothesis below was developed: H1b: Responsible recall has significant influence on consumer purchase intention post-crisis. Opportunistic Recall Opportunistic recall is described as product recall perceived to be carried out with opportunistic attitude, whereby the organization takes advantage by making customers purchase one of its other products, increase brand awareness of the affected and other products, concealing the real product issues, and carrying out the recall due to external pressures, after being exposed by external parties (Magno, 2012). The product recall due to external pressures (e.g., governmental intervention) is categorized as an involuntary or opportunistic recall, indicate the forced aspect of the recall, as the company is avoiding, or delaying, or refusing to be responsible about the product harm issues, causing a company s reputation to be further eroded (Laufer and Coombs, 2006). Besides, previous studies showed that involuntary (opportunistic) recall has significant negative impact on the 62

67 manufacturer s image, consumer loyalty, consumers post-recall brand attitude as well as consumer purchase intention (e.g., Souiden and Pons, 2009; Magno et al., 2010). Hence, the following hypothesis was formed: H1c: Opportunistic recall has significant influence on consumer purchase intention post-crisis. Blame Attribution Blame attribution is defined as the process by which assessments are made by individuals regarding the causality in response to observed, affect-based negative outcomes, perceived by themselves or others (including social transgressions) as failures (Meier and Robinson, 2004; Harvey and Dasborough, 2006; Fast and Tiedens, 2010). In the context of consumer behaviour, blame attribution is described as the process through which consumers spontaneously construct attributions of responsibility to harmful brand (Gupta, 2009; Regan et al., 2015). Shaver (1985) claimed that blame attribution only occurs when one of the causal element that calls for the evaluation of blameworthiness, and an entity is found to be responsible for the morally objectionable behaviour, the entity will be likely blamed and subsequently penalised. In other words, if the consumers blame the company in crisis, the consumers are more likely to punish it (Gupta, 2009). Hence, the hypothesis below was developed: H1d: Blame attribution has significant influence on consumer purchase intention post-crisis. Perceived Crisis Responsibility According to Coombs (1998), crisis responsibility is described as the degree to which the stakeholders blame the organization for the crisis event. In essence, the amount of crisis responsibility is based on the amount of blame assigned to an organization by the consumers before arriving at their perceptions of crisis responsibility. The level of reputational threat to a company in crisis can be evaluated through the level of crisis responsibility placed by the stakeholders (Brown and Ki, 2013). Busby (2008) noted that a company is perceived responsible by consumers if it is perceived as complicit by being involved in the generation of risks whose action in some way contributes to the risks. In other words, in a crisis event, consumers may look beyond those directly responsible for the crisis and thus attribute the crisis responsibility more broadly across a range of individuals and organisations (Regan et al., 2015). Hence, the following hypothesis was formed: H1e: Perceived crisis responsibility has significant influence on consumer purchase intention postcrisis. Crisis Communication Crisis communication is defined as the collection, processing, and dissemination of information required to address a crisis situation (Coombs, 2010). Fearn-Banks (2007) mentioned that crisis communications is the dialog between the organization and its public prior to, during, and after the negative occurrence to minimize damage to the image of the organization. Situational Crisis Communication Theory (SCCT) developed by Coombs and Holladay (2002) is widely used as it focuses on the reputation as a crisis communication outcome, and it takes into account the affect and behavioural intentions (e.g., purchase intention, negative word of mouth) of 63

68 stakeholders. The basis of SCCT is crisis responsibility that have a significant influence on the perceptions of consumers on the reputation of a company in crisis. Coombs (2010) states that crisis communication is the essence of crisis management throughout the entire crisis management process. Public perceptions about the organization during and after the crisis is influenced by communication decisions made by the organization (Sapriel, 2003: Hale et al., 2005), reflecting the level of commitment and responsibility. However, Communication gap caused by poor inter departmental information flow, impact by poor communication in addressing crisis issues, leads to ineffective inter and intra departmental communication, (Kader Ali et al., ) can be damaging to company in crisis. Thus, Crisis communication has significant influence on the crisis outcomes (e.g., the amount of reputational damage of the company, number of injuries) (Coombs, 2010). The basis of crisis communication which is called the stakeholder reaction management (Coombs, 2009). Hence, the hypothesis below was developed: H2: Crisis communication has significant influence on consumer purchase intention post-crisis. Consumer Purchase Intention Post-crisis Purchase intention is described as the willingness of a consumer to buy a certain product or a certain service. Purchase intention is also defined as the likelihood that a consumer will buy a particular product; the higher the purchase intention, the greater the purchase probability (Dodds et al. 1991: Schiffman and Kanuk, 2000). Hence, consumer purchase intention post-crisis is defined as the willingness of a consumer to purchase the affected company s products after the crisis has ended. The perceptions of consumers about the crisis management of a company during a crisis have influence on consumers purchase intentions post-crisis as established in previous studies (e.g., Klein and Dawar, 2004: Laufer et al., 2005; Vassilikopoulou et al., 2009). However, customers perceptions are hard to change (Kader Ali et al., ) once an entity is found to be responsible for the crisis. Thus, crisis communication has to be credible, accurate, unbiased, trustworthy and convincing. Crisis management team needs to develop solutions that are dynamic and flexible in order to change the perception of consumers affected by the crisis. The reasons behind the evaluation of consumer perceptions on the crisis management and crisis communication carried out by a company during a crisis is that consumers will be able to make informed judgment after observing the overall crisis management and crisis communication carried out by a company as the crisis takes place and possess more crisis information. Secondly, past studies also evaluated consumer response post-crisis in their theoretical models. The Moderating Effects of Crisis Communication on the Relationship between Crisis Management and Consumer Purchase Intention Post-crisis This study includes crisis communication as a moderator to evaluate its significance on consumer purchase intention post-crisis and the relationship between crisis management and consumer purchase intention post-crisis. Hence, the following hypotheses were developed: H3: Crisis management has significant influence on consumer purchase intention post-crisis, moderated by crisis communication. H3a: Time has significant influence on consumer purchase intention post-crisis, moderated by crisis communication. 64

69 H3b: Responsible recall has significant influence on consumer purchase intention post-crisis, moderated by crisis communication. H3c: Opportunistic recall has significant influence on consumer purchase intention post-crisis, moderated by crisis communication. H3d: Blame attribution has significant influence on consumer purchase intention post-crisis, moderated by crisis communication. H3e: Perceived crisis responsibility has significant influence on consumer purchase intention postcrisis, moderated by crisis communication. The conceptual framework of the present research is presented in Figure 1 below. Figure 1: Conceptual Framework Research Methodology Research Design The quantitative research design comprise of questionnaire surveys, analysis on demographics information, goodness of measures, correlative analysis, hypothesis testing as well as determining latent variables with high importance and low performance on crisis management by organizations. The primary data are collected through structured questionnaire survey on online mode about the relationship between crisis management and consumer purchase intention post-crisis, moderated by crisis communication. Stimulus Materials The stimulus materials were based on the real crises of product recall that took place in three different industries which are (1) electronic industry (defective smart phone), (2) vehicle industry (defective airbags installed), and (3) food industry (bacteria contamination). In this study, the product-harm crisis chosen is due to technical error incident which is a crisis that occurs due to equipment or technology failure which results in a defective product. In crisis communication research, this type of crisis has been frequently used by researchers (An and Cheng, 2010). Population and Sampling Procedure The population and unit of analysis of this study were all individuals who have access to online Google Forms, located in Northern Malaysia. The researchers generally used convenience samples to obtain a large number of completed questionnaires quickly and economically (Zikmund, 2003). 65

70 Since the population is unknown, convenient sampling was used in this study. s as well as social media platforms such as WhatsApp containing the link to the structured questionnaire were also utilised. Pilot Study Prior to carrying out the main survey for this study, pilot test was conducted to ensure the success rate of the main study as remarked by Thabane et al. (2010). In essence, the pilot study was conducted to ensure the questionnaire has face validity and the constructs have internal consistency. The face validity of the questionnaire was evaluated by acquiring the respondents opinions and feedback on the measurement items, case descriptions, and the overall questionnaire through face-to-face meetings and online correspondences. Modifications were made based on the opinions and feedback of the selected respondents. Reliability analysis was carried out on the data gathered in the pilot study to evaluate the internal consistency of each construct used in the theoretical model by evaluating the values of Cronbach s alpha and the composite reliability (CR). Measurement of Research Variables All the measurement items in the questionnaires were measured using a five-point Likert scale ranging from 1 representing Strongly Disagree to 5 representing Strongly Agree. In developing the instrument, measurement items were selected and adapted from validated questionnaires used in previous researches; Time (5 items), Responsible Recall (3 items), Opportunistic Recall (3 items), Blame Attribution (4 items), Perceived Crisis Responsibility (4 items), Crisis Communication (7 items), and Consumer Purchase Intention Post-crisis (6 items). The measurement items for time, responsible recall, opportunistic recall, and blame attribution were adapted from Magno (2012) while the measurement items for perceived crisis responsibility were adapted from Brown and Ki (2013). The measurement items for crisis communication were adapted from several sources Ohanian (1991), Siomkos and Malliaris (2011), and Kim and Cameron (2011) while the measurement items for consumer purchase intention post-crisis were adapted from Lin et al. (2011). Questionnaire Design The structured questionnaire comprised of two main parts. Part 1 collected the respondents demographic information while Part 2 was subdivided into three sections. Section A collected the respondents views on the elements of crisis management (time, responsible product recall, opportunistic product recall, blame attribution, and perceived crisis responsibility). In Sections B and C, the respondents views on crisis communication and purchase intention post-crisis were collected respectively (Klein and Dawar, 2004; Magno, 2012). Data Analysis Method The software used for data analysis in this study were SPSS 23 and SmartPLS 3. The analyses carried out were descriptive analysis (frequency analysis and cross tabulation) and correlation analysis in SPSS 23 while in SmartPLS 3, goodness of measures (reliability analysis, convergent and discriminant validity analysis, goodness-of-fit (GoF), and Q 2 measures), hypothesis testing, and importance-performance map analysis (IPMA) were conducted. 66

71 Results Response Rate 300 structured questionnaires were distributed using online survey (Google Forms) and 168 completed survey questionnaire were collected, denoted a response rate of 56%. The response was satisfactory as the survey was ed to groups and individuals and it was also shared through social media platforms such as Whatsapp. The survey was performed over a four week time period and responses received from locations in Northern Malaysia. Profile of Respondents A total of 168 respondents participated in this study. The demographic information about the respondents summarized in Table 2 below showed that 75.6% of total respondents are at the age between 20 and 35 of which 41.7% are male (refer Table 3). 43.5% are single of which 23.2% are male (refer Table 4), 96.4% have qualified tertiary education and 69% earning a monthly income of RM2,000 or more, of which 39.3% are male (refer Table 5). Table 1: Demographic profile of respondents. Variable Description No. of Respondents Percentage (%) Gender Male Female Age (Years) and above Marital Status Single Married Education Level High School Certificate/Diploma Bachelor s Degree Master s Degree Monthly Income RM2,000 and below RM2,001 RM3, RM3,501 RM5, RM5,001 RM6, RM6,501 and above The cross tabulations in Table 3 showed 50.6% of total respondents are male whose age are between 20 to 40 years, while 41% are female between the age of 20 to 40. The cross tabulations in Table 4 showed an almost equal distribution between male-female and marital status distribution. The cross tabulations in Table 5 showed from the total of 53% male respondents, 43.5% male respondents are earning below Rm5,000 a month. Meanwhile, 35.8% female respondents are also earning up to Rm5,000 a month. The cross tabulation analysis between gender/age, gender/marital status and gender/monthly income indicate a fair demographic distribution that would be able to provide responses that would be significant for the purpose of this study many years to come. Table 2: Cross tabulation between gender and age of respondents. Gender Age Total >41 67

72 Male Count % of Total 14.3% 12.5% 14.9% 8.9% 2.4% 53.0% Female Count % of Total 9.5% 17.3% 7.1% 7.7% 5.4% 47.0% Total Count % of Total 23.8% 29.8% 22.0% 16.7% 7.7% 100.0% Table 3: Cross tabulation between gender and marital status Gender Marital Status Total Single Married Male Count % of Total 23.2% 29.8% 53.0% Female Count % of Total 20.2% 26.8% 47.0% Total Count % of Total 43.5% 56.5% 100.0% Table 4: Cross tabulation between gender and monthly income Gender Monthly Income (RM) Total < 2,000 2,001-3,500 3,501-5,000 5,001-6,500 >6,501 Male Count % of Total 13.7% 15.5% 14.3% 4.2% 5.4% 53.0% Female Count % of Total 17.3% 12.5% 6.0% 4.8% 6.5% 47.0% Total Count % of Total 31.0% 28.0% 20.2% 8.9% 11.9% 100.0% Descriptive Analysis On The Importance-Performance Map Analysis (IPMA) Cross tabulations between the respondents demographic information and latent variables based on the importance-performance map analysis (IPMA) were carried out. In specific, the demographic information (gender, age, and monthly income) and the latent variables (crisis communication and responsible recall) were cross tabulated. These two latent variables were chosen for cross tabulation as both the latent variables have relatively high importance but low performances on the endogenous latent variables relationship with consumer purchase intention post-crisis. The cross tabulations between demographic information (gender, age, monthly income) and crisis communication and responsible recall as the latent variables revealed that the majority of the responders regardless of gender, marital status, and monthly income reacted negatively to the latent variables of crisis communication and responsible recall tested in the questionnaire by mostly answering Strongly Disagree and Disagree to the measurement items within the latent variables. The means of all scale items have a range of 1.80 to In general, the means for time, opportunistic recall, blame attribution, and perceived crisis responsibility are above average with values of 4.10, 3.84, 4.20, and 3.98 respectively showing that the respondents agreed to the scale items. On the other hand, the scale items of responsible recall, crisis communication, and consumer purchase intention post-crisis have means of 1.89, 2.20, and 2.00 respectively which indicate that in general, the respondents disagreed with the scale items, indicating the company in crisis shows poor crisis communication and lack of responsible recall on the crisis issues. 68

73 Goodness of Measures Pilot Study Results revealed that the Cronbach s alpha values are between and which are above the value of 0.6 as recommended by Nunnally and Berstein (1994) and the composite reliability values of each construct are between of to which are greater than the suggested minimum value of as proposed by Hair et al. (2013). Hence, the constructs have internal consistency and thus, reliable. Main Study Reliability analysis was carried out by measuring the value of composite reliability (CR) which is a tool to test the internal consistency reliability. Results revealed that the CR values of each construct are from of to which are greater than the suggested minimum value of as proposed by Hair et al. (2013). The Cronbach s alpha values are from to which are above the value of 0.6 as recommended by Nunnally and Berstein (1994). Hence, it was concluded that the measurement items are reliable. Convergent validity refers to the degree of which multiple items measure the same concept are in agreement. Measurement of convergent validity was evaluated using (1) each item s outer loading and (2) the average variance extracted (AVE) of the construct. Results showed that the outer loadings of the measurement items are between and and the AVE values are between and which are above the recommended values of 0.70 for outer loading and 0.50 for AVE construct as proposed by Hair et al. (2014), thus indicating the measurement items and the constructs have convergent validity. Discriminant validity shows the extent to which the construct is empirically distinct from other construct, thus, measuring what it is intended to measure. Two methods were used in this study, namely: (1) the Fornell-Lacker criterion whereby the AVE of each construct should be greater than the highest squared correlation with any other construct whose results are indicated the same in this study. (2) Examining the cross loadings of the measurement items whereby the loadings of each measurement items on their own construct are higher than the cross loadings on other constructs also showed the same result in this study. Hence, the constructs indeed have discriminant validity. Goodness-of-fit (GoF) which is the geometric mean of the average variance extracted (AVE) and the average of R square of endogenous latent variables, represents an index for validating the overall fit of the model. GoF is formed between 0 and 1 of which a higher value represents better path model estimation (Tenenhaus et al., 2005). Global validation of PLS models use cut-off values to determine the entire model goodness-of-fit measure such as GoF smaller than 0.10 indicates a poor fit. GoF higher than 0.36 indicates that the model is a good-fit (Wetzels et al., 2009) as this study showed at 0.81 indicating that the model has acceptable predictive relevance and the overall fit of the model is a good-fit (GoF greater than 0.36). The predictive relevance of the path model was measured using the blindfolding procedure in PLS. The value of Q 2 of the construct consumer purchase intention (PI) is 0.54 which is greater than zero, thus indicating that the model in this study has predictive relevance. To test the strength and direction of relationship between variables, the Pearson correlation coefficients were evaluated. Pearson correlation coefficient of -1.0 indicates the strongest negative correlation while +1.0 shows the strongest positive correlation. All the variables in this study have 69

74 Pearson correlation coefficient values with other variables between and but none have zero correlation which indicate the existence of relationship between variables. Hypothesis Testing Hypotheses testing via the path analysis presented in Table 6 showed the values of the path coefficients (β- values), t-values, and p-values which were used to evaluate the statistical significance of the relationships between the variables. The relationships between the variables are statistically significant if their t-values are more than 1.96 (p-values > 0.05) (t-table value for 5% level of significance for two-tailed test) which corresponds to 95% confidence level. Table 5: Summary of PLS-SEM results Hypothesis Path β-value t-value p-value Remarks H 1a: T PI Not supported H 1b: RR PI ** Supported H 1c: OR PI Not supported H 1d: BA PI ** Supported H 1e: PR PI *** Supported H 2: CC PI *** Supported H 3a: T*CC PI ** Supported H 3b: RR*CC PI Not supported H 3c: OR*CC PI Not supported H 3d: BA*CC PI Not supported H 3e: PR*CC PI Not supported Note: **p <.05. *** p <.01 The path analysis revealed that the R 2 which is 0.791, indicates that the explained variation R 2 of 6 independent variables (time (T), responsible recall (RR), opportunistic recall (OR), blame attribution (BA), perceived crisis responsibility (PR), and crisis communication (CC)) and the moderating effects of crisis communication (CC) on the dependent variable consumer purchase intention post-crisis (PI) is 79.1%. Hair et al. (2014) remarked that the R 2 of is considered weak, is considered moderate while more than is fitting the data and satisfies the requirement. Hence, the R 2 value (0.791) for consumer purchase intention post-crisis (PI) fitted the data. This shows that 79.1% of the changes in the independent variables and the moderating effects are explained by the dependant variable. This analysis also revealed that four of the six independent variables, namely responsible recall (RR), blame attribution (BA), perceived crisis responsibility (PR), and crisis communication (CC) have statistically significant influence on the dependent variable, consumer purchase intention post-crisis (PI) as their t-values are 2.376, 2.303, 3.422, and which are greater than the critical t-value of Also, crisis communication (CC) has statistically significant moderating effect on the relationship between time (T) and consumer purchase intention post-crisis (PI) with the t- value of

75 Importance-Performance Map Analysis (IPMA) According to Hock et al. (2010), by carrying out the Important-Performance Map Analysis (IPMA), the impact of latent variables with relatively high importance and relatively low performance on a particular endogenous latent variable can be identified. In other words, IPMA contributes to managerial insights by identifying the possible areas with high importance and low performance that require improvements (Hock et al., 2010; Schloderer et al., 2014; Shafaei and Razak, 2015). The IPMA results are summarized in Table 7 and illustrated in Figure 2 below. Table 6: Summary of importance-performance map analysis (IPMA) results Latent Variable Consumer Purchase Intention Post-crisis Total Effect (Importance) Index Value (Performance) Time Responsible Recall Opportunistic Recall Blame Attribution Perceived Crisis Responsibility Crisis Communication The importance-performance map analysis (IPMA) results revealed that out of the six latent variables, four of them belong to the low importance-high performance group which are blame attribution, perceived crisis responsibility, opportunistic recall and time with the total effects (importance) of , , , and respectively and the index values (performance) of , , , and respectively. The remaining two variables which are crisis communication and responsible recall belong to the high importance low performance group with the total effects (importance) of and respectively and the index values (performance) of and respectively. Figure 2: Importance-performance map analysis (IPMA) result 71

76 Discussion and Conclusion Time was found insignificant to consumer purchase intention post-crisis but it is negatively related to consumer purchase intention post-crisis at 5% significance level. This finding contradicts with results from studies by Mowen (1980) and Magno (2012) but is aligned with a study by Li (2015). According to Dawar and Pillutla (2002), a company in crisis which possesses high brand equity can afford to delay its product recall as it is immune to the negative publicity, thus can afford to make a better informed recall decision by taking more time. Although the company names in the case descriptions were not revealed in the questionnaire, the respondents could have made guesses on the companies involved as global organization having high brand equity. Considering the insignificant relationship between time and PI, and the mean scale for time in this study is 4.10 with standard deviation at The results in this study indicate the respondents are dissatisfied when organization in crisis took too much time on product recall, did not react promptly to the problem, late in announcing the product issue, and slow in responding to the crisis. On the other hand, findings show that responsible recall has a significant positive relationship with consumer purchase intention post-crisis. This finding is consistent with prior studies that showed a significant positive relationship between responsible recall and consumer response post-crisis (e.g., Vassilikopoulou et al., 2009, Magno, 2012). According to Vassilikopoulou et al. (2009), organisational response (responsible recall) has the highest relative importance among all the other factors (CSR, external effect, time) and thus ranked first among all these factors. Other studies also emphasized the importance of organisational response to crisis and concluded that when a super effort response (responsible recall) is carried out by a company in crisis, consumers are likely to form a positive opinion about the company and thus would buy its product. Meanwhile, the IPMA result (Table 7) in this study shows crisis communication (0.39) has highest relative importance, followed by responsible recall (0.23), indicating organization should prioritize crisis communication followed by responsible recall in managing product harm crisis. On the contrary, opportunistic recall was found to have negative insignificant relationship with consumer purchase intention post-crisis, at 5% significance level. This finding is inconsistent with prior studies which concluded that opportunistic recall has a significant negative relationship with consumer response post-crisis (e.g., Mowen, 1980; Vassilikopoulou et al., 2009). This study imply that if organization in crisis is conducting opportunistic recall due to external pressure, or is trying to conceal the real product issues, or recalled the product because the product defect was found out by external parties, the public will be easily influenced by the spread of negative opinions about the product in crisis, thus affecting the consumer purchase intention post-crisis, despite the organization having high brand equity. Blame attribution was found to have significant negative relationship with consumer purchase intention post-crisis. The finding is consistent with prior studies that emphasized the negative influence of blame attribution on consumer response post-crisis (e.g., Coombs, 2007; Coombs and Holladay, 2006; Magno, 2012). Shaver (1985) claimed that the blame attribution only occurs when one of the causal elements that lead to the situation that calls for the evaluation of blameworthiness is human action. Once the entity is found to responsible for a morally objectionable behaviour, the entity will be likely blamed and subsequently penalised. In other words, if the consumers blame the company in crisis, the consumers are more likely to punish it (Gupta, 2009). Additionally, according to Weiner et al. (1988), consumers will attribute their blame on the company in crisis if the locus is internal, the event is predictable, and the event is within the control of the firm. This study shows that when a company recognizes its responsibility, accepts the blame for the product 72

77 defects and takes the necessary measures to protect consumers interest, consumers will respond positively by having good purchase intentions post-crisis. Similarly, perceived crisis responsibility was found to have significant negative relationship with consumer purchase intention post-crisis. The finding is consistent with prior studies that emphasized the negative influence of perceived crisis responsibility on consumer response postcrisis (e.g., Dean, 2004: Coombs and Holladay, 2014). In this study, perceived crisis responsibility occured when the company in crisis were perceived as responsible for the crisis when it was found that internal organizational issues contributed to the crisis, the company could have avoided or prevented the crisis but did not do so, or the company had the capability to stop the crisis from occurring but failed to stop it, thus affecting the consumers purchase intentions post-crisis. Similar to responsible recall, crisis communication also has a significant positive relationship with consumer purchase intention post-crisis. The finding is consistent with prior studies that emphasized the positive influence of crisis communication on consumer response post-crisis (e.g., Sapriel, 2003: Hale et al., 2005; Coombs and Holladay, 2014). The fundamental belief behind crisis communication is that crisis communication will have positive effects on crisis publics which will in turn benefit the company in crisis (Coombs and Holladay, 2014). This signifies that the better the crisis communication implemented by the company in crisis, the better the perceptions of the consumers of the company which will in turn increase their likelihood of buying the company s products post-crisis. This study implies that the crisis communication can have significant impact on the consumers purchase intentions post-crisis if the company in crisis ensures that the spokesperson tells the whole story, be accurate and unbiased in the fact provided, be objective, convincing and credible in presenting the crisis, and earn the trustworthiness of the public and stakeholders. The honesty in communication to prevent and protect the public from incurring damages, can bring about the trust of the public to the organization and improve the consumer purchase intention post-crisis. Findings from this study also revealed that there is a significant moderation effect of crisis communication on the relationship between time and consumer purchase intention post-crisis. The negative insignificant effect of time on consumer purchase intention post-crisis can be amplified by crisis communication which turns the relationship between time and consumer purchase intention post-crisis into a significant positive relationship. This result signifies that with the implementation of an effective crisis communication, the company in crisis must balance the communication process with the time effectively before commencing its crisis response and at the same time will not suffer from reduced consumer purchase intention post-crisis. The importance-performance map analysis (IPMA) results carried out in this study contribute to managerial insight in terms of areas to address and improve (latent variables in high importancelow performance group) and areas that require re-evaluation in terms of their priorities and allocation of resource (latent variables in low importance-high performance group) when handling a crisis. Based on the importance-performance matrix given in Figure 3 below, crisis communication and responsible recall require immediate attention for improvement by a company in crisis as these are the major weaknesses of a company in handling a crisis (Quadrant D). On the other hand, the matrix indicates that blame attribution, perceived crisis responsibility, opportunistic recall, and time have high performances but low importance (Quadrant A). In other words, in general, a company in crisis uses excessive resources in these areas when handling a crisis despite their relatively low importance. Hence, a company in crisis should deploy its resources away from areas of relatively high performance and low importance (blame attribution, perceived crisis severity, opportunistic recall, and time) and concentrate in its crisis 73

78 communication and carry out a responsible recall when dealing with crisis. These results are consistent with previous studies which emphasized the importance of crisis communication and responsible recall in handling a crisis (e.g. Sapriel, 2003; Magno, 2012; Coombs and Holladay, 2014). Performance Quadrant A Low importance/high performance possible overkill Blame attribution Perceived crisis responsibility Opportunistic recall Time Quadrant C Low importance/low performance low priority Importance Quadrant B High importance/high performance keep up the good work Quadrant D High importance/low performance concentrate here Crisis communication Responsible recall Figure 3: Important-performance matrix (adapted from Martilla and James, 1997, p.78) In conclusion, this study confirms that crisis management and crisis communication have significant influence on consumer purchase intention post-crisis (PI). In detail, blame attribution and perceived crisis responsibility have significant and strong negative influence, respectively on PI while responsible recall has a significant positive influence on PI. Additionally, it has also been proven in this study that crisis communication has a strong positive influence on PI and significant moderating effect on the relationship between crisis management and PI in specific, on the element of time whereby the insignificant negative relationship between time and PI becomes a significant positive relationship, moderated by crisis communication. Apart from that, this study discovers that crisis communication and responsible recall are the areas which company in crisis need to address and improve when dealing with a crisis as these areas have high importance and yet low performances on consumer purchase intention post-crisis. Meanwhile, remaining four elements of crisis management have low importance but high performances on consumer purchase-intention post-crisis indicate that these areas probably receive focus and resources which are excessive compared to their relative importance in dealing with a crisis. Recommendations A few recommendations are drawn based on the study findings. Although previous studies indicated that there are numerous factors influencing consumer response post-crisis (e.g., demographic profile, brand commitment, external and internal effects, company prior reputation), several studies revealed that company response to crisis plays among the most vital roles in influencing consumer response (e.g., Siomkos et al., 2009; Li, 2015). However, within the context of this study, recommendations are based on the model proposed in this study only. Since the probability of product-harm crisis has increased rapidly, business firms cannot afford to remain reactive to crises, instead, they should be proactive by developing comprehensive crisis management and crisis communication strategies to cope with crises which may strike them at the most unpredictable time. While generally, crises are seen as something negative, several authors 74

79 (e.g., Siomkos, 1999; Haunschild and Rhee, 2004) remarked that a product recall could be an opportunity for improvement and at the same time contribute to organizational learning. It has to be emphasized that based on this study, the elements of crisis management which are time, crisis response (responsible recall and opportunistic recall), blame attribution, and perceived responsibility should be considered and extra considerations should be given to crisis response (responsible recall), blame attribution, and perceived responsibility as they have statistical significance in this study. Also, crisis communication should be given high priority and attention during the planning stage of crisis management. While this study is only concerned with the second phase of crisis (during crisis) and the third phase of crisis (post-crisis), crisis management experts emphasized on the importance of all the business firms actions and communications on all three phases (e.g., Coombs and Holladay, 2002). Hence, the researcher s suggestion of business firms having to draft a comprehensive and detailed crisis management plan which is carried out during the first phase of crisis (pre-crisis). In fact, according to Gonzales-Herrero and Pratt (1995) who introduced an additional phase that is issues management prior to the three crisis phases described earlier, a crisis can be prevented and even redirected by identifying trends or issues that may affect the business firms, evaluate them, and develop communication strategy during the issues management phase. In term of the relative importance-performance of the elements of crisis management and crisis communication on consumer purchase intention post-crisis, this study discovers that a company in crisis should address and improve its crisis communication to ensure its effectiveness and when a product recall is necessary, a company in crisis should carry out a responsible recall (voluntary product recall and super-effort) as these two are areas of high importance but low performances on consumer purchase intention post-crisis. Conversely, a company in crisis should not use excessive resources on other elements of crisis management (blame attribution, perceived crisis responsibility, opportunistic recall, and time) as these elements have low importance and high performances on consumer purchase intention post-crisis. In essence, a company in crisis should prioritize the areas to address and improve and determine the allocation of its resources based on the findings of the importance-performance map analysis (IPMA) carried out in this study. The crisis management plan and the communication strategy that have been developed should be tried and tested through simulations in numerous scenarios to check for inadequacies. Once the crisis management and crisis communication strategies have been implemented to deal with a crisis, business firms through their crisis management team should monitor the implementation of their crisis management and crisis communication strategies and evaluate their effectiveness and improvise them to deal with future crises more effectively and well prepared. These evaluation on crisis management and communication effectiveness can be done by analysing consumer response (e.g., consumer purchase intention, consumer brand attitude) and the business firms financial position (e.g., market share) after the crisis. References An, S., & Cheng, I. (2010). Crisis communication research in public relations journals: Tracking research trends over thirty years. In W.T. Coombs & S.J. Holladay (Eds.), The handbook of crisis communication (pp ). Malden, MA: Blackwell. Brown, K. A., & Ki, E. J. (2013). Developing a valid and reliable measure of organizational crisis responsibility. Journalism & Mass Communication Quarterly, 90(2), Busby, J. (2008). Analysing complicity in risk. Risk Analysis, 28(6),

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84 Determinants of Future Entrepreneurship and Entrepreneurial Intention Fatema Johara * School of Business, BAIUST Graduate School of Business, Universiti Sains Malaysia, Penang fatema@student.usm.my Sofri Bin Yahya Graduate School of Business, Universiti Sains Malaysia, Penang Shehnaz Tehseen Universiti Kuala Lumpur, Business School (UniKLBiS), Kuala Lumpur, Malaysia *Corresponding author Abstract Purpose - The core objective of the study is to assess the determinants related to young generation entrepreneurship and their entrepreneurial intention. Design/methodology/approach - This is primarily a conceptual paper focusing on some of the specific objectives set were to determine the relationship at the individual level variables such as age, gender, entrepreneurship education, family background with the mediation effect of attitude between gender and entrepreneurial intention.the paper draws on intention models in entrepreneurship literature to identify gaps. Based on these findings, a new conceptual model is formulated. Findings - There is no research to be found which uses the Theory of Planned Behavior(TPB) to explain about the individual level variables such as age, gender, entrepreneurship education, family background with the mediation effect of attitude between gender and entrepreneurial intention which is an extension of the theory of reasoned action (Ajzen and Fishbein, 1980), where the main variable is intention and without intention, action is unlikely and already been extensively used to analyse entrepreneurial intentions and also career intentions depend on the attitude related to the targeted behaviour, social standards and the level of perceived control. Practical implications - The result has important implications for theory and practice. In theory, it is the first model offering the TPB as the background of formation forfuture entrepreneurship age, gender, family background and encouragement from university environmentaffect the entrepreneurial conviction ofuniversity students. From the various contributions showed that it is possible and relevant to use the theory of planned behaviour to study the emergence and development of entrepreneurshipintention. Originality/value The paper endows with the foundation for a more gradation understanding of entrepreneurial intentions and future entrepreneurship. Age, gender, family background and encouragement from university environment affect the entrepreneurial conviction with the mediating effect of attitude between gender and entrepreneurial intention to both future researchers and policy makers in terms of the journey of young generation entrepreneurship start-up. 80

85 Keywords: Entrepreneurship, Entrepreneurial Intention, Theory of Planned Behaviour, Attitude, Age, Gender, Family background, Entrepreneur Education. Introduction It is widely acknowledged that the future of economic prosperity is closely linked with entrepreneurship (Shneor, Jenssen &Vissak, 2016). Entrepreneurship is considered herein as a phenomenon that is a considerably more general and profound human activity than bringing radical innovations to the market, was only associated with such dramatic activity to accept with respect to both personal attributes and different kinds of capital, besides human also financial, as well as social and cultural capital (Johannisson, 2016). More specifically, in the advanced economies, entrepreneurship is seen as a key channel for countries to increase their economic productivity, in order to sustain standards of living as their populations age (Ács et al., 2016). Starting new ventures is a planned activity (Krueger, Reilly, & Carsrud, 2000; Li~nan, Rodrıguez-Cohard, & Guzman, 2011) and entrepreneurial intentions are considered an antecedent that can drive one s behavior toward it (Kautonen, Van Gelderen, &Tornikoski, 2013; Li~nan& Chen, 2009). Thus, entrepreneuring a processual phenomenon indeed (cf. Steyaert 2007) is here seen as an original and generic human practice; whether founded in a specific mindset, intense commitment to a cause or as a particular behavior (Johannisson, 2016). Entrepreneurial intention represents a cognitive manifestation of individuals materialized in their desire to act in the creation of a new company or within existing firms, prior to the identification of business opportunities (Fini et al., 2009). Previous studies have found that entrepreneurial intentionality is determined by a variety of cognitive and contextual factors which can exert a positive or negative influence on entrepreneurial intention, often modeling them in combinations or as interactions (Feder, & Niţu-Antonie, 2017). The TPB model (Ajzen, 1991, 2002) has been identified within international research as one of the most promising approaches for understanding entrepreneurial intentions and decisions. According to the TPB model, entrepreneurial intention is conditioned by the attitudinal, normative and control type beliefs of individuals; however, in a holistic approach, it also takes into account individual variables (age, gender identity, entrepreneurship education, family background and role models, etc.) and personality traits (Ajzen, 1991, 2002; Krueger et al., 2000; Díaz-Garcia and Jiménez-Moreno, 2010; Rauch and Hulsink, 2015) which may increase its relevance. The purpose of this research paper is to investigate the determinants of young generation entrepreneurship and their entrepreneurial intention with the mediating effect of attitude between gender and entrepreneurial intention. Literature Review Entrepreneurship and entrepreneurs There is no universal definition of entrepreneurship and scholars view of the topic has changed considerably since Schumpeter (1934) defined it for the first time. Drucker (1985) called entrepreneurship an innovative act, which includes endowing existing resources for new wealthproducing capacity. Gartner (1985) described it as the creation of a new organization. It is important to note, however, that entrepreneurship, a primary source of innovation, may involve the development of new visions and business methods for established companies as well as the creation of new organizations (Carrier, 1996). Therefore, entrepreneurship can be applied to all kinds of organizations including non-profit institutions. 81

86 Although many studies assert that entrepreneurs are different from non entrepreneurs, there is no unified definition description of entrepreneurs. Instead, scholars have developed various definitions of entrepreneurs (Brockhaus, 1980a, 1980b). Gartner (1985) attempted to find differences in personality and background between entrepreneurs and non-entrepreneurs namely, that entrepreneurs are cultivated by cultural, economic, social, political, and educational backgrounds that are fundamentally different from those of non-entrepreneurs and that each entrepreneur has his/her unique motivation, goals, and talents for venture creation according to his/her unique background. More recently, Watson, Hogarth-Scott, and Wilson (1998) cited personal background, motivation for start-up, and growth orientation as factors for successful venture creation. According to Morrison s (1999) study, the profile of an entrepreneur is one who: (1) is intelligent and analytical, (2) is an effective risk manager and a networker,(3) possesses a strong set of moral, social and business ethics, (4) exhibits a basic trader s instinct, and (5) is dedicated to life-long learning in many forms. The talents included in Morrison s definition are important requirements for becoming successful entrepreneurs in the knowledge era. Lee and Peterson (2000) state that even those individuals who are motivated by such factors as financial rewards, achievement, social, career, and individual fulfilment need a national culture that supports and encourages entrepreneurial activity. The entrepreneurs of the future In the literature, some scholars have investigated the entrepreneurial intention, interest, or propensity of students (Ang and Hong, 2000; Autio et al., 1997; Begley et al.,1997; Henderson and Robertson, 2000; Lee et al., 2005; Lu thje and Franke, 2003; Parnellet al., 1995; Scott and Twomey, 1988; Turker et al., 2005; Veciana et al., 2005; Wang and Wong, 2004). The approaches of these studies closely overlap with the general mainstream of entrepreneurship literature. Some of them focus on personality characteristics or personal background of respondents. In their study, Ang and Hong (2000) compared entrepreneurial spirits of university students in Hong Kong and Singapore. The study concentrated specifically on the role of some personality characteristics (risk-taking propensity, tolerance for ambiguity, internal locus of control, innovativeness, and independence) and motivational factors (love for money, desire for security, and desire for status), rather than the differences in the contextual factors. Wang and Wong (2004) explained entrepreneurial interest of students in Singapore based on personal background. The study reveals that gender, family business experience, and education level are significant factors in explaining entrepreneurial interest. The study of Henderson and Robertson (2000) also provided a useful insight into perception of young adult on entrepreneurship. The study shows that the respondents perceived entrepreneurs mostly with their innate characteristics. However, most of them thought that entrepreneurial traits should be nurtured by external factors. The literature provides some useful insights into the impact of contextual factors. In an early work, Scott and Twomey (1988) analyzed the ambitions of university students and the results of the study identified parental influence and work experience as significant factors. The study of Begley et al. (1997) compared the role of socio-cultural factors in a four-dimensional model. The study indicated that only social status of entrepreneurs might be predicted as a factor to start a business (Begley et al., 1997). In their cross-cultural study, Lee et al. (2005) investigated the differences in the attitudes of university students towards venture creation in four countries. The study revealed that each country should provide a customized entrepreneurship education to foster entrepreneurship considering their unique cultural contexts (Lee et al., 2005). 82

87 The studies of Autio et al. (1997) and Veciana et al.(2005) analyzed the entrepreneurship of university students through a process-based approach. The study of Autio et al. (1997) checked the robustness of entrepreneurial intention in various cultural contexts. The study indicated that the image of entrepreneurs and encouragement from university environment affect the entrepreneurial conviction of university students. The study of Veciana et al. (2005) tested the desirability, feasibility, and intentionality for entrepreneurship according to gender and entrepreneurial history of students in Catalonia and Puerto Rico. Although the participants had a favourable perception of desirability towards entrepreneurship, their perceptions of feasibility were not positive and so their intentions were relatively low. The proposed model of Lu thje and Franke (2003) incorporated both personality traits and contextual factors. The study revealed that the impact of attitude towards self-employment might be linked to two personality traits (risk-taking propensity and internal locus of control) and two contextual factors (perceived barriers and perceived support). The study of Tu rker et al. (2005) also considered the impacts of both internal factors (motivation and self-confidence) and external factors (perceived level of education, opportunities, and support) on entrepreneurial propensity of university students. The study found that two internal factors and perceived level of support were statistically significant factors. In a cross-cultural study, Parnell et al. (1995) compared the entrepreneurial propensity of American and Egyptian university students. In their study, entrepreneurial propensity was taken as a function of self-confidence, perceived level of education, and perceived opportunities. The study revealed that entrepreneurial propensity of American students is greater than Egyptian students. Entrepreneurial Intentions As mentioned earlier, entrepreneurial intentions are usually defined as one s desire to own one s own business (Crant, 1996) or to start a business (Krueger, Reilly, &Carsrud,2000). Historically, intentions have been used to describe a self-prediction to engage in a behavior (Ajzen, 1991; Ajzen & Fishbein, 1977). That is, once the formation of intentions occurs, actual behavior is expected. Social-psychological studies assume that intention is the single best predictor of actual behavior (Bagozzi, Baumgartner, & Yi, 1989). Many studies have supported the predictive validity of intentions on actual behaviors. For example, according to Sheeran s (2002) metaanalysis covering 422 studies during its previous 10 years, the mean correlation between intentions and behavior was.53, accounting for 28% of the variance in behavior. In entrepreneurship, however, other scholars have cast doubt on whether intentions predict actual entrepreneurial behavior (Douglas & Shepherd, 2002).Nonetheless, multiple studies still regard entrepreneurial intentions as one of the crucial antecedents of actual entrepreneurial actions (Krueger et al. 2000; Lee,Wong, Foo, & Leung, 2011). The Theory of Planned Behaviouras an Underpinning Theory Ajzen (1991) developed a framework, both theoretical and empirical, which enabled us tobetter understand intention; this concept appears essential in most planned behaviours (general and more specific behaviour).the main variable in this model is intention. Without intention, action is unlikely. Intentions represent the belief that an individual will perform behaviour, the belief he/she will act (Bird, 1988). It can be argued that broad attitudes and personality traitshave an indirect impact on specific behaviours, by influencing some of the factors thatare more closely linked to the behaviour in question (Ajzen, 1991).For numerous researchers (Shapero and Sokol, 1982; Bird, 1988; Krueger andcarsrud, 1993; Autioet al., 1997; Tkachev and Kolvereid, 1999), 83

88 new venture creationis a planned and therefore intentional behaviour. Consequently, intention appears to be a better predictor of behaviour than attitudes, beliefs or other psycho socio logical variables(krueger and Carsrud, 1993).The theory of planned behaviour is an extension of the theory of reasoned action(ajzen and Fishbein, 1980), which includes the factor of perceived behavioural control. The central factor of this theory is the individual intention to perform a given behaviour. Intention is the cognitive representation of a person s readiness to perform a given behaviour, the theory of planned behaviour has already been extensively used to analyse entrepreneurial intentions. In this context, career intentions depend on the attitude related to the targeted behaviour, social standards and the level of perceived control (Ajzen,1991). Building on this theory, Krueger and Carsrud (1993) created a new model to study entrepreneurial intention. Drawing on their work, other researcher s derived models designed to explain the development of entrepreneurial intention among students (Kolvereid, 1996; Autioet al., 1997; Tkachev and Kolvereid, 1999). Education and training in entrepreneurship have an immediate impact on the attitude of students and their behavioural intention (Fayolle, 2002; Kolvereid and Moen, 1997), which means that there should be a significant difference between students who have followed an entrepreneurship course and those who have not. We take a closer look at the model developed by Autioet al. (1997), designed to explain the entrepreneurial intentions of students from four different countries; according to the authors, the entrepreneurial intentions of students depend on numerous variables, linked to the university environment, career preferences, values, the image of entrepreneurship, individuals situations and educational as well as professional backgrounds. Moreover, Krueger et al. (2000) tested Ajzen s model in the context of entrepreneurship and the results were significant (R2 of 0.35). One of the most significant factors contributing to entrepreneurial intention is probably the notion of perceived self-efficacy (Davidsson, 1995; Krueger and Brazeal, 1994). The educational setting appears to be a fertile ground for the development of perceived self-efficacy: participation in student associations, evaluation of work in and out of class, peer evaluation. All these elements can contribute to knowing how participants see themselves and whether they believe they are able to become successful entrepreneurs. Krueger and Dickson (1994) showed that an increase in self-efficacy increases the perception of opportunities. Mueller and Goic (2002) say that, at a national level, entrepreneurial potential is represented by that segment of the population which possesses the personal characteristics and self-confidence to launch a new venture. Perception of ability to affect results is crucial to taking an entrepreneurial decision. Furthermore, Davidsson (1995) and Kolvereid (1996) have also argued that mastery experiences, vicarious experiences and social influences are factors that may affect the intention and/or the decision to start a new business. Boyd and Vozikis (1994) show that intentions of creation are stronger when the degree of self-efficacy increases owing to the presence of a role model and when the influence comes from close relatives. Tkachev and Kolvereid (1999) also demonstrate that the role model has been the dominant factor in the prediction of status choice (self-employed or employee). Hofstede (1980) has shown that basic social values emphasize personal initiative and achievement. In contexts where there is a history of entrepreneurship and an economic infrastructure to support it, the likelihood of new venture creation is presumably higher (Krueger, 1993; Shapero and Sokol, 1982). These various contributions show that it is possible and relevant to use the theory of planned behaviour to study the emergence and development of entrepreneurship intention. Regarding specific research focusing on students (Autioet al., 1997), the role of the institution surroundings appears overall significant. Nevertheless, the types of courses and training are not explicitly 84

89 taken into account. Little is known about the impact of variables related to the training itself on the antecedents of the model of Ajzen (1991; 2002) Theoretical framework Starting new ventures is a planned activity (Krueger, Reilly, & Carsrud, 2000; Li~nan, Rodrıguez-Cohard, & Guzman, 2011) and entrepreneurial intentions are considered an antecedent that can drive one s behavior toward it (Kautonen, Van Gelderen, &Tornikoski, 2013; Li~nan & Chen, 2009). Entrepreneurial intention represents a cognitive manifestation of individuals materialized in their desire to act in the creation of a new company or within existing firms, prior to the identification of business opportunities (Fini et al., 2009). Previous studies have found that entrepreneurial intentionality is determined by a variety of cognitive and contextual factors which can exert a positive or negative influence on entrepreneurial intention, often modeling them in combinations or as interactions (Feder, & Niţu-Antonie, 2017). The TPB model (Ajzen, 1991, 2002) has been identified within international research as one of the most promising approaches for understanding entrepreneurial intentions and decisions. According to the TPB model, entrepreneurial intention is conditioned by the attitudinal, normative and control type beliefs of individuals; however, in a holistic approach, it also takes into account individual variables (gender identity, entrepreneurship education, and role models, etc.) and personality traits (Ajzen, 1991, 2002; Krueger et al., 2000; Díaz-Garcia and Jiménez-Moreno, 2010; Rauch and Hulsink, 2015) which may increase its relevance. At the individual level, on average men compared to women have higher INT (Haus et al., 2013). The gender-related differences found in entrepreneurial motivation may be attributable to real and valid differences in constructs used, such as ATT and PBC. According to Maes et al. (2014) women are driven toward entrepreneurship by motives that facilitate a balance in business and personal life, that are less dominant in predicting personal attitude. Moreover, women seem to display lower internal feelings of control than men that are more dominant in predicting PBC (Zampetakis et al., 2017). Traditionally, the age has been used as one of the important variables in contemporary social science research to categorize individuals and explain differences among them (Aapola, 2002). Age is a time of life and particular power or qualification arises as the age increases. The skills of people might improve with the age (Welmilla et al., 2011), because they learn to manage time effectively (Korpunen & Nápravníková., 2008). According to many previous studies, the person s age has been considered as a key demographic characteristic in understanding his or her entrepreneurial behaviors and intentions (Reynolds, 1997). Research has highlighted that most active entrepreneurship is over the age of 25 (Lévesque & Minniti, 2006; Reynolds, 1997). Endeavors by entrepreneurs to manage the connections between business and family can manifest in many behaviors and decisions may affect the entrepreneur's intention to exit or persist in the business (Hsu et al., 2016).Studies by several authors suggest that there is positive relation between family support and entrepreneurial intention of students (Raijman, (2001). Families with business background in most cases encourage and motivate other family members to be involved in entrepreneurial ventures (Joseph, 2017). These set of people have been known to have a higher tendency of initiating new business creation (Auken, Fry & Stephens, 2006). Investments in professional training during school time, instruction at the workplace and experiential learning assure personal competences and knowledge that constitute human capital, as a determining factor of entrepreneurial intent (Bae et al., 2014). The efficiency of entrepreneurship education being taught in the universities, on imparting and developing 85

90 entrepreneurial knowledge is an effective way of stimulating entrepreneurial intention in the mindset of the university students (Turker, & Selçuk 2009). The research on entrepreneurial education in the university carried out by Lüthje, & Franke, (2002) revealed that entrepreneurial education in the university positively impacts entrepreneurial intention. Attitude is a readiness to react to certain objects in the environment as an appreciation of the object (Efendi, F. and Makhfudli, 2009: 103). Attitude is the reaction of an individual to an object in the environment, in the study of these objects is entrepreneurship (Cruz et al, (2015). In TPB, overall attitudes are comprised of attitudes towards the behaviour (entrepreneurship), subjective norms and perceived behavioural control and is expected that all three attitudinal variables should relate positively to entrepreneurial intentions (McNally,et al., 2016). Figure 1: The Proposed Model Development of Propositions Gender and Entrepreneurial Intension A large number of studies have analysed the relationship between gender and intentions towards creation of new venture (Veciana et al., 2005; Delmar& Davidsson,2000;Kolvereid, 1996;Kourilsky&Walstad, 1998; Matthews & Moser, 1995; Scherer et al., 1989). Most of studies have found that males have higher entrepreneurial intentions than females (Delmar & Davidsson, 2000; Matthews &Moser, 1995; Scherer et al., 1989). Simliarly, Kolvereid (1996) applied the Theory of Planned Behaviour in order to anticipate the choice of employment status and found significantly higher preferences of males for self-employment than females. Proposition1: A positive relationship exists between the students gender and their entrepreneurial intentions. Gender and Attitude Very few studies have analysed the relationship between gender and attitudes towards creation of new venture (Maes, Leroy, &Sels, 2014; Leroy et al., 2009) towards Computer Technology and ELearning (Suri & Sharma, 2013). Most of studies have found effect of gender on intentions is mediated via personal attitudes toward entrepreneurship (Leroy et al., 2009; Maes, Leroy, &Sels, 2014). Similarly, Maes, Leroy, &Sels, (2014) &Leroy et al., (2009) ) applied the Theory of 86

91 Planned Behaviour in order to anticipate the choice of gender and found women are more driven toward entrepreneurship by motives to get organized (balance) that are less dominant in predicting personal attitude than male counterparts, Proposition 2: A positive relationship exists between the students gender and their attitude. Attitude and Entrepreneurial Intension Since the introduction of the attitude construct into social science literature, social psychologists have been interested in the link between attitudes and behaviors (Schultz & Oskamp, 1996). The most likely reason that attitudes are frequently studied is the assumption that attitudes guide and influence behavior (Bohner & Dickel, 2010). Attitudes are multi-componential constructs involving both an affective and a cognitive component (Drolet and Aaker 2002). According Cruz et al. (2015), the attitude is a tendency to react effectively in response to the risks that lie ahead in a business. Behavior a readiness to react to certain objects in the environment as an appreciation of the object (Efendi, F. and Makhfudli, 2009: 103). Attitudes indicator towards entrepreneurship intentions can be seen from the interest of the individual with a business opportunity, a positive view of the failure of the business, and business interests at risk (Utami, 2017). Several advocates have found empirical support regarding the influence of attitude and entrepreneurial intentions (Utami, 2017; Buli & Yesuf, 2015; Zaremohzzabieh, et al., 2016). A number of studies have been studied the mediating role of attitude towards entrepreneurial selfefficacy and intention (Tsai, Chang, &Peng, 2016); information and communication technology (ICT) acceptance and intention (Zaremohzzabieh et al., 2016); the autonomy and intention (Al- Jubari, Hassan, & Hashim, 2017), and very few studies studied the mediating role of attitudes towards gender and entrepreneurial intentions (Maes, Leroy, &Sels, 2014). Proposition3:A relationship exists between the students attitude and their entrepreneurial intentions. Proposition 4: Students attitude mediates the impact of gender on entrepreneurial intentions. Age and Entrepreneurial Intension Traditionally, the age has been used as one of the important variables in contemporary social science research to categorize individuals and explain differences among them (Aapola, 2002). Age is a time of life and particular power or qualification arises as the age increases. The skills of people might improve with the age (Welmilla et al., 2011), because they learn to manage time effectively (Korpunen & Nápravníková., 2008). Very few number of studies have analyzed the relationship between age and intentions towards creation of new venture (Reynolds, 1997). Most of studies have found that individuals show their intention towards entrepreneurship at their younger age (25-44) than in older age (above 44) (Sajilan, Hadi & Tehseen, 2015). Proposition 5: A positive relationship exists between the students age and their entrepreneurial intentions. Family Background and Entrepreneurial Intension Entrepreneurial family background refers to those people whose parent(s) or family member(s) is (are) involved in self-employment. Parents, as business owners, can influence their children s entrepreneurial career choices by serving as role models (Aldrich, Renzulli, & Langton, 1998; Hout & Rosen, 1999), providing a chance for their children to acquire human capital (Lentz & Laband, 1990), sharing a similar preference for entrepreneurial activities (Fairlie, 2002), and transferring financial capital (Dunn & Holtz-Eakin, 2000). Despite the motivational benefits of 87

92 an entrepreneurial family background for forming a student s career path, Zellweger, Sieger, and Halter (2011) indicated that entrepreneurship education is less likely to enhance the entrepreneurial intentions of students who come from such backgrounds. First, students from an entrepreneurial family are more likely than those without a similar background to access the critical resources and social networks. Because they are more likely to be able to gain access to these valuable inputs, it reduces their necessities of additional inputs from entrepreneurship education. Second, it is possible that students from an entrepreneurial family background could interpret the materials offered by entrepreneurship education more critically than those from a non-entrepreneurial family. This is because early exposure to entrepreneurship provides people from an entrepreneurial family background with indirect experience about the difficulties of being an entrepreneur. Thus, entrepreneurship education may be less effective on entrepreneurial intentions for students from an entrepreneurial family than for students without an entrepreneurial family background. The studies on family background are evident regarding the positive relationship between family background and the emergence of entrepreneurs. Very first empirical evidence was provided by Collins et al., (1964) about the impact of entrepreneur s family circumstances over the idea of new venture (Veciana et al., 2005). Several advocates have found empirical support regarding the influence of family background and entrepreneurial intentions (Brockhaus & Horwitz, 1986; Kolvereid 1996; Cooper, 1986; Matthews & Moser, 1995; Scherer et al., 1989; Scott & Twomey, 1988). Proposition 6: A positive relationship exists between the students family background and their entrepreneurial intentions. Entrepreneur Education and Entrepreneurial Intension As Watson et al. (1998) pointed out, entrepreneurs are different from non-entrepreneurs in many aspects. Many previous studies have tried to prove this. Furthermore, as Gartner (1985) assumed when he developed his own conceptual framework for describing the phenomenon of new venture creation based on previous studies, the difference among entrepreneurs or new ventures is more considerable than between entrepreneurs and non-entrepreneurs in terms of personality and background. This is because entrepreneurial competencies consist of innate personality as traits, motives, and values, as well as from the external elements as training and education (Thongpoon, Ahmad & Yahya, 2012). These facts strongly imply that entrepreneurial talents can be matured-up by postnatal education since: (1) inborn nature is not sufficient to explain the difference and (2) most factors identified in previous studies were achievable through proper education. So an individual s personality and ability can be uniquely developed according to the context of his orher education and willpower, and motivation can be differentiated according to postnatal environment where an individual grows. Thus, great diversity exists among entrepreneurs based on their growing background of social, cultural, and educational environments (Mckelvy, 1982).Gartner (1989) suggested job satisfaction, previous work experiences, entrepreneurial parents, age, and education as the factors which differentiate entrepreneurs from non-entrepreneurs. According to previous studies, education in particular is one of the critical factors in distinguishing entrepreneurs from non-entrepreneurs. Based on the point that home-education from parents has a significant impact on an individual s life, entrepreneurial parents should also be included in the education category. In addition, many organizations allocate a great deal of resources to training their members through external as well as internal education opportunities. Thus, previous work experiences can be included in the 88

93 category of education in a broad sense. Consequently, we can generalize that the relative importance of education is very high. Cho (1998) also maintained that if entrepreneurial talent were innate and could not be built up postnatally, entrepreneurship education would lose its significance and that entrepreneurial talent should therefore not be perceived as innate. Furthermore, Cho s (1998) study reveals that entrepreneurship education promotes the intention of venture creation because entrepreneurshiprelated knowledge and skills stimulate an individual s motivation to create a new venture. Timmons (1999) stated that team-based venture creation is more common than individual venture creation. Since it is difficult for every entrepreneur to have all required managerial knowledge, individuals with complementary backgrounds make effective teams for creating new venture companies. He also emphasized the importance of entrepreneurship education by maintaining that skills required for successful venture creation are gained through postnatal learning such as teamwork experiences. It is obvious that professional education in universities is an efficient way of obtaining necessary knowledge about entrepreneurship. Although, in their study, Wang and Wong (2004, p. 170) mainly focused on personality characteristics of students, they also pointed out the fact that the entrepreneurial dreams of many students are hindered by inadequate preparation;...their business knowledge is insufficient, and more importantly, they are not prepared to take risk to realize their dreams.. Therefore, academic institutions might have critical roles in the encouragement of young people to choose an entrepreneurial career. However, they are sometimes accused of being too academic and encouraging entrepreneurship insufficiently (Gibb, 1993, 1996). In order to overcome this insufficiency, most universities have offered entrepreneurship courses or programs at the undergraduate and graduate levels. In the literature, some studies analyse how these entrepreneurial interests of universities affect entrepreneurial inclination of students. The study of Gorman and Hanlon (1997) showed that entrepreneurial attributes can be positively influenced by educational program. In their study, Kolvereid and Moen (1997) also indicated a link between education in entrepreneurship and entrepreneurial behavior. Similarly, the study of Galloway and Brown (2002) analyzed the impact of entrepreneurship electives and found that the return on investment in the entrepreneurship education might be long-term rather than immediate. It is clear that an effective education on entrepreneurship can be a factor to push people towards an entrepreneurial career (Henderson and Robertson, 2000).Based on the above discussion, it is proposed that: Proposition 7. Entrepreneurial intention of university students positively relates with perceived educational support. Discussion and Conclusion The intention of this research paper was to explore the determinants of young generation entrepreneurship and their entrepreneurial intention with the mediating effect of attitude between gender and entrepreneurial intention. Entrepreneurship is measured as a phenomenon of profound human activity than bringing radical innovations to the market, is only associated with such dramatic activity to accept with respect to both personal attributes and different kinds of capital, besides human also financial, as well as social and cultural capital. On the other hand, entrepreneurial intention is a symbol of a cognitive manifestation of individuals become visible in their desire to act in the creation of a new companionship or within existing firms, prior to the identification of business opportunities. 89

94 From the previous studies it is observed that there is a close differences in personality and background between entrepreneurs and non-entrepreneurs namely, that entrepreneurs are cultivated by cultural, economic, social, political, and educational backgrounds that are fundamentally different from those of non-entrepreneurs and that each entrepreneur has his/her unique motivation, goals, and talents for venture creation according to his/her unique background. For future entrepreneurship age, gender, family background and encouragement from university environment affect the entrepreneurial conviction of university students. Also some studies considered the impact of attitude towards self-employment might be linked to two personality traits (risk-taking propensity and internal locus of control) and two contextual factors (perceived barriers and perceived support). The underlying theory used for the present study was the theory of planned behaviour which is an extension of the theory of reasoned action (Ajzen and Fishbein, 1980), where the main variable is intention and without intention, action is unlikely and already been extensively used to analyse entrepreneurial intentions and also career intentions depend on the attitude related to the targeted behaviour, social standards and the level of perceived control. From the various contributions showed that it is possible and relevant to use the theory of planned behaviour to study the emergence and development of entrepreneurship intention. The proposed theoretical framework mostly focused the relationships of age, gender, family background and entrepreneurial education with entrepreneurial intention and the mediating effect of attitude between gender and entrepreneurial intention. There are some limitations of this study as well. Firstly, it is only a conceptual paper. Secondly, it did not investigate other possible factors that could positively influence on entrepreneurial intention among students. Thus, it is recommended to empirically test this study s framework and to explore more factors that can lead towards the entrepreneurial intentions among the students. References Aapola, S. (2002). Exploring dimensions of age in young people's lives a discourse analytical approach. Time & Society, 11(2-3), Acs, Z. J., Szerb, L., & Autio, E. (2015). The global entrepreneurship and development index. In Z.J. Acs, L. Szerb & E. Autio (Eds), Global Entrepreneurship and Development Index 2015 (pp.11-31). Springer International Publishing. Ajzen, I. & Fishbein, M. (1977). Attitude-behavior relations: A theoretical analysis and review of empirical research. Psychological Bulletin, 84(5), Ajzen, I. & Fishbein, M. (1980). Understanding attitudes and predicting social behavior. Englewood Cliffs, NJ: Prentice Hall. Ajzen, I. (1991) The theory of planned behavior. Organisational Behaviour and Human Decision Processes, 50, Ajzen, I. (2002). Perceived behavioral control, self-efficacy, locus of control and the theory of planned behavior. Journal of Applied Social Psychology, 32(4), Aldrich, H., Renzulli, L.A., & Langton, N. (1998). Passing on privilege: Resources provided by self-employed parents to their self-employed children. Research in Social Stratification and Mobility, 16, Al-Jubari, I., Hassan, A., & Hashim, J. (2017). The role of autonomy as a predictor of entrepreneurial intention among university students in Yemen. International Journal of Entrepreneurship and Small Business, 30(3),

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100 The Role of Board Diversity on Materiality Disclosure in Sustainability Reporting Ngu Sie Bing* School of Business, Disted College, 340 Macalister Road, Penang, Malaysia Azlan Amran Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia * Corresponding Author Abstract Purpose: Drawing on the stakeholder theory and the resource-based view theory, this paper provides a comprehensive review of the academic literature on board diversity and materiality disclosure in sustainability reporting and proposes a conceptual framework that could promote materiality disclosure from the perspective of governance. Design/methodology/approach: This paper reviews previous studies published across the world from 1981 to 2016, and a conceptual framework is developed to propose the association between board diversity, such as diversity in board and diversity of board, and materiality disclosure in sustainability reporting. Findings: Previous studies on materiality disclosure in sustainability reporting in Malaysia are generally low. The findings from this paper would help to provide the visibility and awareness of business ethics, the disclosure of material information in sustainability reporting, and the corporate social and environmental responsibility issues faced by public listed companies in Malaysia. Research limitations/implications: These findings are only based on the critical review of previous studies. This paper identifies the gap in existing literature with the development of a conceptual model. Practical implications: The proposed conceptual framework not only helps companies and statutory bodies understand the influence of board diversity on the materiality disclosure in sustainability reporting but also facilitates the effectiveness of corporate social responsibility communication. Originality/value: This paper explores into new dimension of sustainability reporting research area by examining the materiality disclosure in relation to the influence of board diversity. Keywords: Board diversity, Materiality, Sustainability Reporting, Stakeholder Theory, Resource-Based View Theory Introduction In recent years, there have been increasing concerns that traditional financial reporting is not able to meet the information needs of stakeholders. Furthermore, there is increased pressure on companies to be transparent about the way in which they act in relation to social and environmental issues. In response to information needs of stakeholders, many companies have 96

101 attempted to provide the information for stakeholder decision-making by complementing their traditional financial reporting through the reporting of non-financial information (KPMG, 2011). This non-financial information is normally reported in the form of a separate stand-alone sustainability report, which is separate from a company s annual report (Frias-Aceituno, Rodriguez-Ariza and Garcia-Sanchez, 2013; ACCA, 2014). These stand-alone sustainability reports have become more complex to fulfil the information needs of stakeholders (De Villiers, Rinald and Unerman, 2014). Based on the findings of GreenBiz (2016), 95% of the 250 largest companies in the world (G250 companies) have now issued separate sustainability reports. Therefore, many global leading companies have moved from corporate social reporting to sustainability reporting. Sustainability reporting is defined as the practice of measuring and disclosing the company's long and short-term social and environmental performance, ensuring accountability to stakeholders, and supporting the company in managing change towards operating in a more sustainable way (GRI, 2013a; GRI, 2013b). Sustainability reporting is a tool for the publication of information that reflects the company s performance vis-a-vis the environmental, social, and governance criteria that stakeholders find important (Bursa Malaysia Securities Berhad, 2016). The reporting work involves planning the report by engaging the stakeholders, identifying material aspects, collecting data, and producing the sustainability report. Sustainability reporting has increased considerably and is now used by company as a communication channel that aims at influencing the public perception of a company and enhancing the image or reputation of a company (Daub, 2007). Sustainability reporting has also become a systematic means of managing and reporting sustainability issues (Park and Brorson, 2005). However, sustainability reporting does not replace traditional financial reporting; instead, it combines financial information and non-financial information, and communicates business strategy, business performance, and environmental, social and governance issues to stakeholders (Eccles and Krzus, 2014). Sustainability reports are usually produced in isolation and thus lack a holistic and complete picture of the business as a whole. Eccles and Krzus (2014) suggested that financial performance should be linked to environmental, social, and governance performance, and then the environmental, social, and governance performance should be linked to business models and strategy. Today s sustainability reporting environment can seem complex, but there is one commonality amongst the different reporting initiatives, that is, materiality. GreenBiz (2014) highlighted the focus on materiality as being one of the top four sustainability reporting trends in The principle of materiality is becoming increasingly important in the sustainability reporting as materiality is an essential filter for determining which social, environmental, and governance information will be considered important and useful to stakeholders (Jones, Comfort and Hillier, 2015). To ensure accountability and transparency to stakeholders, a company must report on those sustainability issues that are considered material (GRI, 2013a; GRI, 2013b). Transparency is a major element in corporate governance and is a reporting practice that ensures stakeholders are better informed and aware of what is happening (Amran and Ooi, 2014). In a developing country, such as Malaysia, materiality disclosure in sustainability reporting is now an emerging trend. An increasing number of Malaysian companies are actively practicing sustainability reporting. Nevertheless, sustainability reporting is still considered to be in its infancy stage in Malaysia. The adoption of sustainability reporting is fairly new for the local community and Malaysian companies. Sustainability reporting is part of integrated reporting. 97

102 Malaysian listed companies take time to embed sustainability reporting before moving to integrated reporting. Similar studies in this context are lacking in Malaysia. Thus, the objective of this paper is to propose a framework that explains the extent of material disclosure from the perspective of board diversity. The remainder of the paper is organized as follows. The second section reviews the literature that has been examined in previous studies. In this section, the Malaysian context is introduced in relation to sustainability reporting. This is followed by the underpinning theory and discussion of the proposed conceptual framework in the third section, which is based on a combination of the resource-based view theory and the stakeholder theory to explain board diversity and materiality disclosure in sustainability reporting. Finally, the fourth section concludes the paper. Literature Review Sustainability Reporting in Malaysia Sustainability reporting is viewed as being as an effective channel for communicating sustainability performance to stakeholders in order to maximize the benefits from their corporate social responsibility activities (Hsu, Lee and Chao, 2013). In 2006, Bursa Malaysia introduced a requirement for Main Market listed companies and ACE market listed companies to disclose their corporate social responsibility activities in their annual reports. However, this requirement focused more on the social aspects of the business (community and people), thus, it had a limited impact on value creation. Companies have tended to focus on philanthropic activities, and not necessarily address the sustainability-related issues pertaining to their business operations (Bursa Malaysia Securities Berhad, 2016). In 2012, Bursa Malaysia re-positioned its 2006 corporate social reporting framework to an initiative for business sustainability, which supports stakeholder value creation, and emphasizes that sustainability should be the main focus of every responsible company. In 2016, Bursa Malaysia published a sustainability reporting guide to aid listed companies to meet the sustainability expectations of a variety of stakeholders. The listing requirements require listed companies to make a sustainability-related disclosure in their annual reports. Main Market listed companies with a market capitalization (excluding treasury shares) of RM2 billion and above as at 31 st December 2015 are required to disclose a sustainability statement of the management of material economic, environmental, social risks and opportunities with effect from the reporting period ending 31 December The sustainability statement should contain non-financial information that is balanced, comparable and meaningful (Bursa Malaysia Securities Berhad, 2016). Empirical research on corporate social and environmental reporting has reached a considerable level in South-East Asia, particularly in Malaysia and Singapore. These two countries were also the subject of two relatively early comparative studies (Foo and Tan, 1988). Andrew, Gul, Guthrie and Teoh (1989) found that social and environmental reporting in Malaysia was influenced by country-specific factors. A study was conducted by Teoh and Thong (1984), which found that company size, as well as the nationality of the company, had an impact on volume of information published in Malaysia. Haniffa and Cooke (2005) found a positive association between company size and information disclosure; however, Ahmad, Hassan and Mohammad (2003) reported no relationship between company size and information disclosure. With regard to industry, the result is equally mixed. Haniffa and Cooke (2005), and Saleh, 98

103 Zulkifli and Muhamad (2010) found that industry had an impact on information disclosure, but Ahmad et al. (2003) did not find any relationship between industry and information disclosure. Several earlier studies examined corporate social responsibility and ownership. Saleh et al. (2010) confirmed earlier estimations that there were positive relationships between institutional ownership and corporate social responsibility disclosure. From the results of Abdullah, Mohamad and Mokhtar (2011), it can be concluded that boards of family-owned companies are negatively correlated with the quality of corporate social responsibility disclosure. They considered that the reason why board independence did not significantly affect corporate social responsibility disclosure could be due to the fact that corporate social responsibility initiatives are strategic in nature. In addition, they also found that company size, performance, and leverage had a significant impact on corporate social responsibility. According to Ahmed Haji (2013), government ownership, director ownership, and company size had a significant effect on the quality of corporate social responsibility disclosures in Board size was also found to have a significant effect on corporate social responsibility disclosure in However, the results for 2009 reported an improved significant correlation between board size and corporate social responsibility disclosures. The results in respect to leverage are mixed, as Chandler and Ku Ismail (2005) found a positive relationship with information disclosure; whereas, Ahmad et al. (2003) found an inverse relationship between leverage and information disclosure. With regard to financial performance, the result of Smith, Yahya and Marzuki Amiruddin (2007) revealed that environmental disclosure was negatively correlated with financial performance. Shamil, Shaikh, Ho and Krishnan (2014) reported that boards with female directors were negatively correlated with sustainability reporting, and that dual leadership and board size were positively correlated with sustainability reporting. They also found that company size and company growth had an impact on sustainability reporting. In addition, their result also revealed that younger companies were likely to adopt sustainability reporting. A study conducted by Amran and Haniffa (2011) proved that only a government linked company in the plantation industry, which was large in size, had a significant influence the sustainability reporting. In summary, several studies have examined the influence of corporate social reporting on financial performance (Chandler and Ku Ismail, 2005; Smith et al., 2007). Some other studies analyzed the internal and external determinants of corporate social reporting in Malaysia (Saleh et al., 2010; Abdullah et al., 2011; Ahmed Haji, 2013), however, their studies did not take the materiality concept into consideration. Hence, this study contributes by helping to fill this gap. Underpinning Theory and the Proposed Framework The stakeholder theory has been used in previous studies to explain the reporting activity (Prado Lorenzo, Gallego Alvarez and Garcia Sanchez, 2009; Fasan and Mio, 2016). The stakeholder theory suggests that boards of directors, being major decision marker in the company, are both responsible for and accountable to a wider range of stakeholders. This study suggests that the stakeholder theory cannot be used in isolation, and that the additional aspect of board diversity, and how it jointly influences reporting, needs to be included. Therefore, the resource-based view theory has been used in this paper which highlights that board diversity enhances the resources available to the board and, thereby, improves network connections with stakeholders. This, in turn, helps the company in understanding and responding to its stakeholders (Bear, Rahman and Post, 2010). This study proposes that a greater 99

104 diversity of board members should lead to better understanding, and, therefore, reporting, of diverse stakeholder needs. Stakeholder Theory The stakeholder theory has been widely used from the perspective of the company. Stakeholder theory was developed by Freeman (1984), starting from a company strategic management theory dealing with how companies communicate with their stakeholders and evolved into a more comprehensive theory addressing different aspects of business-society relations. From the stakeholder perspective, boards of directors, as representatives of the shareholders, play a crucial role in overseeing the creation and execution of the management s plans to balance the interest of the different stakeholders (Harjoto, Laksman and Lee, 2015). The element of stakeholder advocacy is important to ensure the survival of the company. The focus of board of director is no longer mainly concentrated on the shareholders but includes other stakeholders as well. This leads to more responsibility for the board of directors when the stakeholder theory perspective is assumed (Freeman, 1984). Boards should disclose material information on their social and environmental activities to inform stakeholders that the company is meeting their needs and expectations (Amran, Rosli and Mohd Hassan, 2008). Reporting on material sustainability information provides greater transparency and achieves greater accountability for the stakeholders (Vaz, Fernandez Feijoo and Ruiz, 2016). Resource-Based View Theory The Resource-based view theory (Barney, 1991) argues that it is the specific resources of the company that drive business continuity and sustainability. Sustainability is the key to a business success today. The resource-based view theory considers that business success is dependent on the company s capacity to integrate and make proper use of available resources (Nakabiito and Udechukwu, 2008). Amran, Ooi, Wong and Hashim (2016) highlighted that companies are now allocating more resources to social and environmental activities in order to create and sustain competitive advantage. From the resource-based view perspective, boards of directors are seen as being a key resource in company and have significant influence on strategic decision-making of the business, such as disclosure of information (Hafsi and Turgut, 2013), as board members are considered to be the major decision makers in the corporate social responsibility activities of the company. As a decision maker, the board has an active role in seeking external resources, minimizing environmental uncertainty, and establishing an essential link with other companies (Pfeffer, 1981). Therefore, companies need their boards to be an essential resource in providing a link between their company and stakeholders. Board Diversity The link between corporate governance and board diversity is a relatively new one. Board diversity is defined by Frias Aceituno et al. (2013) as the different of the board characteristics presented by the board s members. With respect to corporate governance, the concept of diversity relates to board composition and the contribution of a combination of various attributes, characteristics, expertise by board members in relation to board processes and decision-making (Van der Walt and Ingley, 2003). On company boards, examples of various types of diversity that may be represented among directors include age, gender, ethnicity, background, knowledge, 100

105 technical skills and expertise, as well as commercial and industry experience (Van der Walt and Ingley, 2003). While the importance of board diversity is widely recognized and empirical evidence on the benefits of board diversity is inconclusive (Rao and Tilt, 2016). A study was conducted by Coffey and Wang (1998) revealed that board diversity was positively correlated with social performance. Harjoto et al. (2015) explored the correlation between board diversity and corporate social responsibility in the USA. They used seven different measures of board diversity across 1,499 US companies from 1999 to The seven board diversity criteria were gender, outside directorship, tenure, race, age, power, and expertise. The findings of Harjoto et al. (2015) supported the stakeholder theory and were consistent with the view that board diversity enhances the ability of a company to satisfy the needs and expectation of its stakeholders. From the results, it had also concluded that gender, tenure, and diverse expertise were the driving factors of companies CSR activities. Previous research on board diversity also examined on gender diversity, and documented that the female directors on board could improve corporate governance (Huse, Nielsen and Hagen, 2009). Adams and Ferreira (2009) found that female directors had better attendance records and were more involved with audit, nominating, and corporate governance committees that required intense monitoring, as compared to male directors. With regard to the link between board independence and corporate social reporting, there are two major arguments (Rao and Tilt, 2015). The first argument is that, outside directors tend to be more sensitive to the needs of society. The second argument is that, independent board members are more interested in compliance with regulations and responsible behavior. In addition to board independence, board tenure is also widely used board diversity. Hafsi and Turgut (2013) argued that, as their tenure increases, directors become more familiar with the company business strategy; however, they also become the captive of management. The results of Hafsi and Turgut (2013), however, showed no effect from this. The longer-tenured directors may be too close to managers and try to avoid any conflict in the decision-making process; whereas, shorter-tenured board members are too shy to speak up. This situation may lead board members to follow rather than lead when it comes to dealing with social, environmental and governance issues. In addition to board independence, another emerging diversity characteristic, which has received increasing attention in the sustainability reporting literature, is age diversity. Research indicates that age diversity among board members tends to influence corporate social responsibility (Post, Rahman and Rubow, 2011). Materiality The principle of materiality is attracting increasing attention in sustainability reporting. Bursa Malaysia Securities Berhad (2016) defines materiality as the principle of identifying and assessing a wide range of sustainability matters, and refining them to what are most relevant and important to the company and its stakeholders. Materiality is a key principle in considering the content and quality of the reported content (Mungoni, 2014). The materiality concept is from the field of accounting (Edgley, Jones and Atkins, 2015) and has now become important in sustainability reporting (Jones et al., 2015). Whitehead (2016) noted that financial materiality focuses on issues that are important to investors; while, sustainability materiality has a broader scope and considers issues that are important to all of the stakeholders. 101

106 Materiality is a fairly new concept in the sustainability reporting field (Unerman and Zappettini, 2014), but it is a tool to distinguish material information from the insignificant or immaterial information (Edgley, 2014). A recent study by Nishant, Goh and Kitchen (2016) also addressed the concept of materiality as being important because treating all financial ratios equally may not be practical for companies. They argued that, from the stakeholder theory perspective, materiality in sustainability should reflect those issues that the company considers important enough to influence stakeholder perception. Therefore, nowadays, companies tend to report these specific materiality issues in their sustainability reports. The materiality concept has been widely implemented in sustainability disclosure. However, the implementation of the concept varies widely between companies, and identifying and prioritizing material issues has been noted as challenging (Hsu et al., 2013). It has been pointed out that a major risk in sustainability reporting is that the board of directors only publishes what they consider material information. It is important to adopt the materiality concept to guide companies to focus on the salient aspects of sustainability performance that are most relevant and important to stakeholders (Etzion and Ferraro, 2010). Omitting material information means that it has zero value to the company. Materiality determination is not limited to financial information. A matter is material if it is substantially likely that the information will affect the decisions of a stakeholder (GreenBiz, 2016). Board Diversity and Materiality Disclosure in Sustainability Reporting In this paper, board diversity is classified into the diversity of boards and diversity in boards. The diversity of boards refers to dissimilarities in board attributes (Hafsi and Turgut, 2013). Board attributes are related to the boards formal structure. Boards can be differentiated by three variables: board size, board independence and board activity. The diversity in board refers to dissimilarities in the attributes of the directors (Hafsi and Turgut, 2013). The diversity in board highlights the diversity within a given board, such as the director gender, director experience and director tenure. This paper examines the relationship between the diversity of boards and materiality disclosure in sustainability reporting by examining three different characteristics of the board; namely, board size, board independence and board activity. In addition, the influence of the diversity in board on materiality disclosure in sustainability reporting is also another focus area of this paper. To explore the relationship between the diversity in boards and materiality disclosure in sustainability reporting, this paper examines three different characteristics of the directors; namely, the director gender, director ethnicity and director age. Board Size Through the lens of resource-based view, a company is made up of unique resources, which it must manage effectively (Barney, 1991). Being the business leader, the board of directors is a unique resource, with the ability to link the company to its external environment. Lipton and Lorsch (1992) found that larger board size may lead to a lack of cohesiveness and to the board members not being able to work towards a common objective. However, while Prado-Lorenzo and Garcia-Sanchez (2010) found an inverse relationship, Karamanou and Vafeas (2005), and Cheng and Courtenay (2006) reported no such relationship. Therefore, this paper proposes that a larger board size has a positive effect on the materiality disclosure in sustainability reporting. Therefore, the following hypothesis is proposed: 102

107 H1 Larger board size positively influences the materiality disclosure in sustainability reporting. Board Independence An independent board is considered to be a control mechanism to ensure that the goals of shareholders are achieved (Fama and Jensen, 1983). Board independence is often related to the presence of non-executive directors. According to the resource-based view theory, independent directors are viewed as being a unique resource that connects the company with its external stakeholders (Barney, 1991). Conversely, they are expected to take a company s stand in the interests of both the company and its stakeholders (Amran, Lee and Devi, 2014). Prado-Lorenzo and Garcia-Sanchez (2010) reported a negative correlation between board independence and information disclosure, while other studies found it to have either a positive relationship (Prado- Lorenzo et al., 2009; Cheng & Courtenay, 2006) or no significant relationship (Garcia-Sanchez, Rodriguez Dominguez and Gallego Alvarez, 2011). This paper proposes that more independent boards will actively engage stakeholders during the material determination process to identify the material issues, and the disclosure material information in sustainability reporting. Therefore, the following hypothesis is proposed: H2 A more independent board positively influences the materiality disclosure in sustainability reporting. Board Activity Empirical research is inconclusive in respect of the relationship between frequency of board meetings and sustainability reporting. From the stakeholder theory perspective, there is a need for frequent board meetings in order to oversee the integration of board members and stakeholders, to incorporate the wider view of the stakeholders, and to protect the interests of the stakeholders. Hence, it will lead to materiality disclosure in sustainability reporting. Several studies focused on the association between the boards activities and information disclosed. The results confirmed that boards who meet more frequently will perform their supervisory functions more effectively (Lipton and Lorsch, 1992). There are fewer problems of asymmetric information in the quarterly earnings announcements (Kanagaretnam, Lobo and Whalen, 2007). Other past studies, such as Karamanou and Vafeas (2005), concluded that there is no relationship between board activity and information disclosed. Based on the above evidence, the following hypothesis is proposed: H3 Board activity positively influences the materiality disclosure in sustainability reporting. Director Gender Gender diversity is one aspect of board diversity. Within the board diversity literature, promoting gender diversity is driven by having female directors on boards. The presence of female at the senior management level positively influences the performance of a company (Betz, Connell and Shepard, 2013), because female board members incorporate their roles as wife and mother into their working environment, and apply ethical frameworks and criteria that differ from those of male (Kessler-Harris, 1989). These new behaviour patterns were often 103

108 related to greater information being disclosed regarding sustainability matters (Prado-Lorenzo and Garcia-Sanchez, 2010). Adams and Ferreira (2009) found that the female directors on boards were likely to have a positive impact on the performance of company. Based on the above empirical findings, this paper proposes that the female presence on the board leads to better disclosure of material information in sustainability reporting. Therefore, the above discussion leads to the following hypothesis. H4 Women on the board positively influences the materiality disclosure in sustainability reporting. Director Ethnicity Studies exploring the relationship between ethnically diverse boards and information disclosures are relatively few. Haniffa and Cooke (2005), in focusing on a very specific case in Malaysia, used ethnicity as a proxy for diversity, and concluded that the percentage of native board members had a significant positive impact on the volume of information disclosed. Hafsi and Turgot (2013) found that ethnically diverse directors may result in superior company performance. Ethnically diverse directors may influence the boards decisions concerning better servicing of the needs and expectations of stakeholders, which, in turn, improves the company s image, reputation, relationships with stakeholders, and ultimately, its company performance. As a consequence, the following hypothesis is proposed. H5 Director Ethnicity positively influences the materiality disclosure in sustainability reporting. Director Age Age reflects the directors industry experience and is evidence of their maturity in directing and managing the business operations. There are two arguments regarding to the director age and sustainability reporting. The first argument is that, younger directors are often seen as being more sensitive to ethical and environmental issues based on logic and principle. This sensitivity leads to more environmentally friendly behavior and socially responsible behavior (Bekiroglu, Erdil and Alkpan, 2011). The second argument is that, as directors mature, their generational behaviour increases and they may be more sensitive to society and be more willing to contribute to welfare (De Vries, 1984). A more recent study by Hafsi and Turgot (2013) revealed that age diversity has a negative significant effect on social performance. The result indicated that the higher the age diversity, the lower the social performance. Based on the above findings, the following hypothesis is proposed. H6 Director Age positively influences the materiality disclosure in sustainability reporting. The proposed conceptual framework for this paper is shown in Figure 1 which proposes that there is a linkage between board diversity and materiality disclosure in sustainability reporting based on a combination of the stakeholder theory and resource-based view theory to explain the relationship between board diversity and materiality disclosure in sustainability reporting. 104

109 Board diversity Stakeholder Theory - Enhances board s accountability and transparency to stakeholders Diversity of Board - Enhances board s role to materiality Board Size disclosure in sustainability reporting Board Independence Materiality disclosure in Board Activity Resource Based View Theory sustainability reporting - Enhances internal board resources Diversity in Board (Pooled resources amongst boards) Director Gender Director Ethnicity - Enhances external resources Director Age (Network connection to stakeholders) Figure 1: Proposed Conceptual Framework Conclusion This paper provides an understanding of the influence of board diversity on materiality disclosure in sustainability reporting. From a theoretical perspective, this paper contributes to the literature by proposing a conceptual framework based on the stakeholder theory and resource-based view theory. The interaction of the stakeholder theory and the RBV theory suggests that a more diverse board is more likely to represent diverse stakeholders, which should lead to better materiality disclosure in sustainability reporting. From the resource-based view theory perspective, boards of directors are unique resources for companies and are key decision makers in the company. Board diversity enhances the internal pooled resources amongst the board members and also enhances the external resources through network connections with the stakeholders. From the stakeholder theory perspective, a greater diversity of board members should lead to better understanding, and, therefore, reporting of diverse stakeholder needs. This study extends previous academic literature on corporate governance and sustainability reporting, in particular, board diversity and materiality concept. On the practical side, this paper provides Malaysian regulators, practitioners, stakeholders, and reporting companies with interesting insights into the material issues and aspects of sustainability reporting that need further development and improvement of policy and practice. Malaysian regulators may, therefore, want to formulate specific and detailed materiality disclosure requirements, rather than the current general mandatory requirements, to enhance the material information disclosure in sustainability reports. References Abdullah, S. N., Mohamad, N. R., & Mokhtar, M. Z. (2011). Board independence, ownership and CSR of Malaysian Large Firms. Corporate Ownership & Control, 8(3), ACCA (2014). Sustainability matters, ACCA policy paper. Retrieved from reporting/tech-tp-smapp.pdf 105

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114 Foreign Exchange Rate, Interest Rate, Inflation Rate and Economic Growth in Malaysia Yan Wah Low Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Tze-Haw Chan* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia *Corresponding author Abstract Purpose - This study is to examine the dynamic relationship among macroeconomic variables such as gross domestic product (GDP), foreign exchange rate (forex), inflation rate and interest rate, which are instrumental in the assessment of macro stability and economic performance in a small and open economy (SOE) like Malaysia. Design/methodology/approach - The analysis method embraced in the present study are Unit Root Test, Co-integration Test, Vector Error-Correction Modeling (VECM), Impulse Response Function (IRF), and Variance Decomposition. Findings The analysis discovers the presence of long run relationship among the macroeconomic variables at different signs and magnitudes. A positive relationship was found between GDP and forex (RM/USD), while a negative relationship was identified among GDP-inflation and GDP-interest rates. In the short run, changes in macroeconomic variables have led to similar patterns of behavior with the effects differing mainly in terms of shock adjustments. Dynamic causal effects have also been detected among the macroeconomic variables. Practical implications The study improves existing frame of knowledge with the fresh insights on the dynamic relationship among the GDP, forex, inflation rate and interest rate. The empirical evidence provides the supports for the export-led growth paradigm and finance-led growth hypothesis. In addition, monitoring the macro stability and foreign shocks (via forex) are essential in sustaining the economic performance of Malaysia. Originality/value - The outcomes of the existing study deliver some treasured understandings and numerous significant implications on Malaysia macroeconomic assessment. Keywords: Small and Open Economy (SOE), Economic Growth, Monetary Policy, Foreign Exchange Policy Introduction Economic growth is critical to every country since it reflected their ability to improve goods and services productivity from time to time. Assessment of economic performance and its contributory factors has been skyrocketed over the past decade globally. However, theories and empirical evidences, were still far from consensus in the literature. Different findings were found in the past studies that diversity in culture, macro stability, trade openness and export strategy, central bank s monetary rules and foreign exchange policy, and the extent of financial integration, have played some important roles in the economic performance of one 110

115 country (see Chan and Baharumshah, 2013; Chan, et al., 2014; Garcia and Gonzalez, 2014; Hooy, et al., 2015; Ghosh et al., 2016; Chan, 2017; among others). Among all, the case of small and open economy (SOE) is of special interest but was less being investigated. Surviving in the wave of globalization is hard for SOE due to the smallscale economy and disadvantage in technology advancement that requires substantial capital investment. In that sense, export strategy and foreign exchange policy are important for SOE to compete with the large and developed nations such as the US, China, Japan and German, etc (Hooy, et al., 2015; Chan, 2017). However, trade openness and foreign exchange exposures are risky for the SOEs. For instance, currency depreciations may lead to imported inflation and financial instability, whereas exchange rate appreciations can prompt to an unpleasant loss of competitive edge in foreign markets, exposing minor exports and economic doings. There is also general worry that exchange rate appreciation can weaken economies attraction to fresh foreign direct investment. If we look at Malaysia, the central bank has two fundamental monetary policy objectives the foreign exchange stability and low inflation. However, these two objectives can on occasion clash with each other (see Amato, Filardo, Galati, Zhu, & Peter, 2005). The corresponding clash has regularly happened amongst developing business sector economies that numerous eyewitnesses conclude from the proof of exchange rate adjustment that policymakers only pay attention to the objective of steady inflation. Exchange rate stability can clash with the objective of steady and low inflation on the off chance that either it prompts the improper situation of interest rate policy or the exchange rate straightforwardly handovers foreign currency in an inflationary or recession trend. On the off chance that the domestic exchange rate is steadiness, a solid currency may have threatened by recession, flattening, and weak currency. Conversely, with solidness in an efficient exchange rate regime, successions in the real exchange rates have a tendency to face lesser aggregate deflationary or inflationary constraints. In addition, Malaysia has been promoting export-ledgrowth policy with some extend of undervalued exchange rate in the past decades (Chan, et al., 2014). This may result in imported inflation when imports increase during the exchange rate depreciations. Malaysia has experienced various exchange rate regime and financial crises in the past three decades but survived well in the wave of globalization and export competition. The country appears as good study case to assess the dynamic relationship of macro stability and economic performance. In this study, a system of econometric tests has been employed to assess the dynamic relationship among the gross domestic product (GDP), interest rate, foreign exchange rate (forex) and inflation rate, from 1997 to The rest of paper is organized as follows: in Section 2, literature review is briefly discussed; Section 3 then elaborates the data and methodology; Section 4 reports and discusses the empirical results and finally in Section 5, we conclude. Literature Review A significant part of the collected works on SOEs monetary policy has put attentions on the reaction of central banks against the exchange rate volatility. The confirmation acquired from practical reviews designates which numerous countries consist of exchange rate in their own policy response equation. Ball (1999), Svensson (2000), and Batini et al (2003) discover that comprising exchange rate slightly enhances the corresponded central banks macroeconomic performance (Ball, 1999; Svensson, 2000; Batini, Harrison, & Millard, 2003). Alphada et al. (2010), in addition, have fabricated New Keynesian DSGE model in SOE for South Africa alike SMS model. Their hypothesis included exchange rate data for forsaking presumption of comprehensive threat distributing among countries economy, and presenting a country possibility shock by takes consideration into the variances from revealed interest 111

116 rate correspondence. SMS model accepts which the domestic interest rate is equivalent with the sum of a demand risk major shock and rate of policy of the two separate economies. SMS model defined as a no investment open economy, and their uncovered interest rate correspondence condition likens the predictable depreciation rate with each household in every country, as opposed to the variances of the interest rate established via particular central banks in the policy rates. This hypothesis is to some degree prohibitive, due to the fact that it joins domestic and foreign demands shock with predicted depreciations, and as a consequence, the influence of demand shocks is reduced in the model (Alpanda, Kotzé, & Woglom, 2010). Garcia and Gonzalez (2014), on the other hand, have concentrated on monetary policy reactions based on a delegate sampling from SOEs where the countries put a focus on the inflation, open to universal commercial markets and which is product exporters. Their outcomes demonstrated that monetary policy reacts same as the approach to the monetary policy in closed economies to demand shocks, productivity shocks, and markup shock. Nevertheless, Garcia and Gonzalez point out that these SOEs confront a bigger number of difficulties compared to closed economies in positions of policy creation as well as engagement (Garcia & Gonzalez, 2014). Ghosh et al. (2016) comment upon inflation targeting is appropriate for open market that shortage of other significance protection (for example, a formal peg). However, it ought to be supported by reasonable foreign exchange rate intervention, particularly withstanding unpredictable capital flows. This type of intervention may appear inconsistent with the traditional way of thinking about inflation targeting (Ghosh, Ostry, & Chamon, 2016). Advanced economies, such as Sweden, United Kingdom, and New Zealand who initial adopt interest rate targeting has absolutely appeared to believe that an extraordinary elasticity exchange rate exists as important determinants in order to success in inflation-targeting, additionally permitting which currency to free float is well-thought-out via numerous economist to be an investigation that relies on single indicator which a country s dedication to a dependable interest rate targeting policy (Masson, Savastano, & Sharma, 1997). Indeed, there might be extraordinary exchange rate traverse towards domestic prices, which has worried that organized intercessions in the overseas exchange rate business sector possibly will weaken the integrity of interest rate targeting policy (Mishkin & Savastano, 2001). Foreign exchange rate intervention is not practical which neither desirable in general nor feasible. For the reason that exchange rate variations, stabilize price changes, and revealed interest rate parity are to hold (Benes, Berg, Portillo, & Vavra, 2012), open markets have motives to address together the appropriateness of standard model and also the related policy decisions. Data and Methodology For analysis purpose, the present study relies on monthly data from 1997 to These include the exchange rate (EX, RM/USD), interest rate (IR, overnight policy rate), Consumer Price Index (CPI) and Industrial Production Index (IPI). CPI and IPI are taken as proxy for inflation and gross domestic product (GDP) respectively. All data are sourced from the Department of Statistics Malaysia (DOSM) and Bank Negara Malaysia (BNM). The data are transformed into natural logarithm for analysis. The theoretical model is hypothesized in such way that GDP (Y) is a function of interest rate, inflation and exchange rate. Y = F(IR t, INF t, EX t ) (1) 112

117 where Y represent economic growth, IR represent monthly interest rate, INF represent inflation rate, EX represent exchange rate. Hypotheses are established via the proposed theoretical framework to investigate the interrelationship amongst the variables. H01: There is no co-integrating among all variables H02: There is no significant effect of inflation rate on economic growth. H03: There is no significant effect of interest rate on economic growth. H04: There is no significant effect of exchange rate on economic growth. H05: There is no significant impact of Economic Growth on Inflation Rate H06: There is no significant impact of Economic Growth on Interest Rate H07: There is no significant impact of Economic Growth on Exchange Rate Unit root and Co-integration Tests First, we rely on the ADF unit root test of stationarity to examine the data properties. Modified Akaike Information Criteria (MAIC) proposed by Ng and Perron (2011) is used in the selection of optimal lags. Second, we compute the cointegration tests. Cointegration allows to incorporate both long run expectations (corrections to equilibrium) and short term dynamics (deviations from equilibrium). Standard regression analysis fails when dealing with non-stationary variables, leading to spurious regressions that suggest relationships even when there are none. Johansen-Juselius (1990) procedure is employed in this study to examine the multivariate (system-based) long run relationship among economic variables within different models. Johansen-Juselius s methodology starts with vector autoregression (VAR) of order p given by y t = µ + A 1 y t A p y t p + ε t, (2) where, y t = nx1 vector of variables that are integrated of order one I (1), ε t = nx1 vector of innovations. VAR also can write as p where п = i=1 A i I and Γ i = A p 1 y t = µ + пy t 1 + i=1 Γ i y t i + ε t, (3) p j=i+1 j. When coefficient matrix, п has reduced rank r < n, nxr matrices α and β each exist with rank r. r = the number of co-integrating relationships, α = the adjustment parameters in the vector error correction model (VECM), β = co-integrating vector. Johansen proposes two different likelihood ratio (LR) tests of the significance of these canonical correlations namely the trace test and maximum eigenvalue test, as shown below: n Trace test: J trace (r) = T ln(1 x i=r+1 i ) (4) Maximum eigenvalue test: J max (r,r+1) = Tln (1 x r+1 ) (5) where, T = the sample size, x = the i th largest canonical correlation The trace test tests the null hypothesis of the number of distinct co-integrating vector, r against a general alternative of n co-integrating vectors. The maximum eigenvalue test tests the null hypothesis of r co-integrating vectors against the alternative of r+1 co-integrating vectors (Johansen, 2000). Maximum eigenvalue test is more preferable since it gives results of exactly r co-integrating vectors. Critical values for both tests are tabulated by Osterwald- Lenum (1992). 113

118 Granger Causality Test Next, the study also aims to evaluate causal interrelationship (either unidirectional or bidirectional) the macroeconomic variables. According to theory, if two or more time series are co-integrated, Granger causality must be exist either one-way or in both directions between them but not apply for the converse. The identification of causal relationships is an essential part for understanding the consequences when moving from empirical findings to actions. Granger causality demonstrates the likelihood of causation or the lack of causation more forcefully than does simple contemporaneous correlation, which is same to causation in the classical philosophical sense (Geweke, 1984). Granger causality in its original formulation is a bivariate concept. It is based on the temporal ordering of two time series. The temporal causation is tested statistically, so that it does not necessarily imply true causality. In general, the bivariate regressions take the form: n n y t = α 0 + i=1 α i y t i + i=1 β i x t i + ε t (6) n n x t = α 0 + i=1 α i x t i + i=1 β i y t i + µ t (7) where t denotes the time period dimension for all possible pairs of (x, y) series in the group. The reported F-statistics are the Wald statistics for the joint hypothesis, when β 1 = β 2 = = β i = 0 for each equation (Granger, 1969). The null hypothesis is that x does not Granger-cause y in the first regression and that y does not Granger-cause x in the second regression. Impulse Response Function (IRF) Granger-causality do not have a complete overview about the interactions among the variables in a system. In macroeconomic modeling, Impulse response function (IRF) tracks the evolution of the variable of interest across a specified time horizon interact with exogenous impulse (shock) in a given moment which also affects other dependent variables in existing system via the dynamic structure (Enders, 2014). Impulse response function, yi, with reflect by a shock in εj, where variable, i is response to shock, j at time horizon, t. IRF can be clearly interpreted with a vector moving average (VMA) in condition, yt is covariance stationary. Formally, VMA can be represented y t = µ + ε t + Ξ 1 ε t 1 + Ξ 2 ε t 2 + (8) y t = i=0 Ξ i ε t i + µ (9) By using this VMA, the impulse response yi with respect to a shock in εj can be expressed as y t+n = i=0 Ξ i ε t+n i (10) {Ξ n } i,j = y i,t+n εj,t, j 0 (11) The equations are created through converting vector autoregressive (VAR) model into the vector moving average representation. It is an essential tool in empirical causal analysis and policy effectiveness analysis especially studying specific economic problems (Lütkepohl, 2008). However, IRF is interpreted by assumed all of the other shocks are constant. Thus, structural information must use to specify meaningful shocks. The Cholesky decomposition are suggested in order to identify the underlying shock (Hatemi-J, 2014). 114

119 Variance Decompositions One of the objective for statistical analysis of multi-dimensional data sets is to determine is there any relationship exist among the dimensions. Variance decomposition splits up overall variation in a dependent variable into the component shocks in the system. Thus, variance decomposition delivers the relative significance facts for every random shocks which impact the variables. Cholesky uses the inverse of the Cholesky factor of the residual covariance matrix to orthogonalize the impulses. This imposes an ordering of the variables in the system and attributes all of the effect of any common component to the variable that comes first in the system. Cholesky decomposition, also named Cholesky factorization, is a decomposition of a Hermitian, which positive-definite matrix, A ϵ L n x n factored into the product of L, a unique lower triangular matrix with positive diagonal elements and its conjugate transpose L T. A= LL T (12) where L is the Cholesky factor of A. Partition A and L as a 11 a 12 a 1n a 21 a 22 a l n a 31 a 32 a l 3n = [ 21 l 22 [ a n1 a n2 a nn ] 0 0 ] [ l n1 l n2 l nn l 11 l 21 l n1 0 l 22 l n2 ] (13) 0 0 l nn In short, Cholesky decomposition deconstructs any n x n positive definite covariance matrix into an n x n triangular matrix, post multiplied by its transpose. Findings Unit Root Test The Augmented Dickey-Fuller (ADF) test was carried out to examine data properties of all variables with individual intercept. The appropriate lag lengths are determined by the modified Akaike Information Criteria (MAIC). Table 1 shows that at level, the null hypothesis of unit root fail to be rejected. This reveals that variables in the level stage have unit roots and are non-stationary. However, after first-differencing, unit roots have been rejected for all variables at 5%t significant level which depict stationary pattern. In other word, all the four variables appear to be integrated of order one, I (1). This indicates that every variable used for present study has achieved the compulsory requirement that variables are required to be integrated in the same order for co-integration test. Table 1: ADF Unit Root Test Level First Difference Variables Lag Lag Constant without Trend Constant without Trend IPI (Y) (0.8963) * (0.0005) 11 CPI (INF) (0.9798) * (0.0000) 0 EX (0.1085) * (0.0000) 0 INT (IR) (0.1034) * (0.0000) 3 Note: P-values are presented in the parentheses ( ). * denotes significant at 5% level 115

120 Co-integration Test and Long Run Estimation Next, we proceed with co-integration test to determine the presence of long run equilibrium interrelationship of the variables. This study implemented Johansen and Juselius (1990) Cointegration tests. The results are shown in Table 2. The trace test statistic is which is more than its critical value at 5% level. Hence, the null hypothesis of none cointegrating vector is rejected. Thus, there is at least 1 co-integrating vector. The hypothesis of none co-integrating vector is rejected at 5% significance level for both trace and max- Eigenvalue tests. This would suggest of a single co-integrating vector that four variables have shared a long run equilibrium relationship. Table 3.2: Unrestricted co-integration Rank Test (Trace/Maximum Eigenvalue) Hypothesized Trace 0.05 Max-Eigen 0.05 No. of CE (s) Statistic Critical Value Statistic Critical Value None * At most At most At most * denotes rejection of the hypothesis at the 0.05 level The normalized co-integrating equation is originated by the use of the ratio of every cointegrating vector via the negative co-integrating vector of Y. The outcome demonstrates that null hypothesis of the related variables coefficient equal to zero is rejected, as indicated by the t-statistics reported in the parentheses. As a result, a significant long run interrelationship exists amongst Y, EX, INF and IR and the long run estimation with respective coefficients are presented below: Y = 3.00EX 0.11INF 1.13IR ( ) ( ) ( ) (14) The normalized co-integrating equation indicates that exchange rate (EX) s long run effect is positive and significance on economic performance of Malaysia. The impact is large (coefficient = 3.00) that an appreciation will destruct the growth of industrial production while a depreciation will boost the economy. The depreciation impacts the export-import ratio and improve the trade balance, which hence stimulate economic growth. The finding is in fact in line with Malaysia s global competition policy over the years, that export promotion was pushed through an undervalued foreign exchange against the USD. In a way, the exportled-growth hypothesis is being supported. Meanwhile, inflation and interest rate are both negatively related to economic performance but the latter shows a greater impact with larger coefficient (1.13) being reported. The results are quite consistent with theories that lower interest rate will accelerate investment activities but higher interest rate indicates tightening monetary policy that will lead to lower investment and market liquidity. This, again, is aligning with the finance-led-growth theory that low interest rate promotes capital investments and expand business activities that lead to the wealth construction of real sectors. On the other hand, the log run impact of inflation (-0.11) on Malaysian economic is negative but minor. This may suggest that the central bank and ministry of domestic trade have been successful in maintaining low and stable inflation over the years, through the monitoring of supply side factors such as import-substitution, ceiling price and festival control on food stocks. 116

121 Vector Error Correction Model (VECM) and Causality The VECM estimation that reported in Table 3 shows that error correction terms (ECT) for the Y and IR equations in the VAR model are significant with negative signs. This would suggest that both variables bear most of the short run adjustments towards the long run equilibrium. About 1.6% of disequilibrium was corrected each month by changes in the growth equation, and, about 37.6% adjustment in the interest rate equation. In other word, stability of the industrial production and interest rate is of major policy concern in the short run. Table 3: Vector Error Correction Model Error Correction D(Y) D(EX) D(INF) D(IR) ECT t-statistics [ ] [ ] [ ] [ ] Proofs of co-integration and error corrections amongst entirely macroeconomic variables have precluded the spurious likelihood correlations as well as the Granger non-causality probability that consecutively point toward as a minimum a sole channel of Granger causality be present which can be whether unidirectional or bidirectional. One can reject the null hypothesis at the 5% significance level. The co-integrating vector amongst two variables do not stipulate the causal relation direction. Economic concept promises where Granger Causality exists in at least one direction at all times. It verifies whether any endogenous variables included in existing VAR model could be considered as exogenous in Granger sense. Figure 1: Causal Effect of Economic model in Malaysian Economic Growth Granger causality tests within the VECM is performed and summarized in Figure 1. Exchange rate has evidently Granger-caused interest rate and economic performance (proxy by industrial production) at 1% significant level. On the other hand, unidirectional causal effect is also running from prices (inflation) interest rate. In brief, central bank has been endogenously influenced by exchange rate and inflation movements when setting the interest rates. And, the industrial productions are very much influenced by the exchange rate movement for a small and open economy like Malaysia. 117

122 Impulse Response Function (IRF) Even though Granger Causality test indicates the causality relationship among variables, however it doesn t reveal either the signal of the relationship or how long these impacts would last. The IRF targets to visualize the response of a particular variable to shocks from system variables. If two variables are correlated over time and there is a stable relationship between them, it is expected that a shock in one variable spreads over the other variable. This shock is called innovation or impulse. The IRF have the advantage of not depending on the order of the functions of the VAR model. These functions allow to observe the dynamic response of a determinate variable in the face of shocks or unexpected changes in any other variable. Figure 2 shows the behavior of the variables in the model to one standard deviation shock in economic growth, inflation rate, interest rate, and exchange rate respectively. A shock on LEG (Y), directly moves it to a lower level and then returns to its initial status no-monastically after some time. The LEG (Y) gives negative response to exchange rate (LEXC) and interest rate (INT), but positive and weak response to inflation (LINF). The response o inflation turns negative and clears away after a while. On the other hand, exchange rate (LEXC) and inflation (LINF) give positive responses to economic performance (LEG, Y). LEXC also gives positive response to LINF and INT. The response of INT by LEXC and also by LINF is positive and this response reduce to almost zero after second period. LINF has no response to LEXC while LINF is give weak negative response and then change to strong positive response. 118

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124 Figure 2: Impulse Responses Variance Decompositions To complement the impulse-response analysis, variance decomposition is being performed. Variance decomposition breakdowns variation of an endogenous variable into the component shocks to other endogenous variables in the VAR. The variance decomposition s outcome is to quantify the proportion of variance explained by a variable s own shock versus the variance explained by shock to the other variables in certain period. The variance decomposition for the empirical model is presented in Table 4. In the analysis, majority of the variation in economic performance (Y) is explained by its own shocks with a maximum value of around 99.1% in the second period. This strong contribution is reduced over the period to about 89.6%, suggesting that economic performance begins to react further parsimonious to shocks from other macroeconomic variables. Influences originates from exchange rate (EX) are about 0.6% to 5.6% and variances being explained by interest rate are about 0.3% to 4.5%. On the other hand, inflation makes dismal contribution of 0.009% to 0.3% in explaining the variances of economic performance. Table 4: Variance Decomposition of Economic (Industrial Production) Performance Variance Decomposition of Y: Period S.E. Y EX INF IR Discussion The null hypothesis that formulated in present study, H01, predicted that there is no cointegrating among all variables, which demonstrate that exchange rate, inflation rate, 120

125 interest rate and economic growth has no interrelationship to each other. From the Johansen and Juselius co-integration test, the results indicates that there has at most 1 cointegrating vertor among all the variables. The co-integration analysis also provides a positive relationship between economic growth and exchange rate (MYR/USD); a negative relationship between economic growth and inflation rate, as well as economic growth and interest rate in long run equilibrium. However, in the results provided by VECM, exchange rate still have positive relationship with economic growth and interest rate have negative relationship with economic growth. In contrast with long run relationship, inflation rate has a positive relationship in short run. Numerous macroeconomic theories worked hard to discover the relationship amongst macroeconomic variables. Fisher (1930) proposed the projected interest rates adjustment correspondingly toward variation of projected inflation rate. Mundell (1963) established about expected inflation rate and projected interest rate have no interrelated relationships. This study deliberate the co-integration relationship of interest rate, inflation rate, exchange rate and economic growth in Malaysia over the period of It is well known that Malaysia is a trading country, and thus weighing on Malaysia exchange rate and economic growth is critical. Even though Malaysia s economy accomplished with a solid growth recent years once GST was announced by Malaysia government in 2015, however, Malaysia s economy is experienced a major threat as of sky-high inflation, thus Malaysia s economic growth is presence counterbalance via growing of inflation that has achieved highest record. Assari et al. (2011) has established that growing the interest rate can be effectively in preventive exchange rate volatility in Malaysia. Moreover, figures contained in the inflation also vis-à-vis the forthcoming trail of the exchange rate. This suggests that there is evidence contained in the interest rate relating to the forthcoming trail of the inflation rate (Asari, et al., 2011). They have proved the co-integration relationship in Malaysia among the 3 variables inflation rate, interest rate and also exchange rate which aligned with this present s paper outcome. The findings in this study also consistent with the outcomes in study of Saymeh and Orabi (2013) which has point out interest rate, inflation rate, exchange rate, and economic growth in their study showed noteworthy presence in co-integrating vector which indicates entirely variables exist a long run equilibrium in Jordan (Saymeh & Orabi, 2013). The null hypothesis, H02, expressed that there is no significant effect of inflation rate on economic growth. The null hypothesis is rejected in present study. There is a positive relationship in short run equilibrium among inflation rate and economic growth rate whereas when in long run run equilibrium, the negatie relationship has been resulted. The relationship also supported by impulse response function, the response of economic growth on inflation rate is increase in the initial stage and reduce at the following stage. The related relationship also discussed by other researcher before. Munir et al. (2009) has restudy the problem of the presence of threshold effects within relationship between inflation and economic growth in Malaysia by new econometric methods which offer proper ways for estimation and implication. Assessments were studied with yearly data from 1970 to The empirical results strongly suggest the existence of one threshold value beyond which inflation exerts a negative effect on economic growth. This implies there is non-linear relationship between inflation and economic growth for Malaysia. They have pointed out the fact that inflation may increase economic growth when it is below 3.89%. But, inflation is harmful to economic growth when it is over the threshold level. In short, the policy suggestion resultant from their study is that it is required to maintain inflation rate below threshold level in Malaysia, as it may assist in holding on sustainable growth. Inflation process will carry on as long as the quantity of demands surpasses the quantity of supplies. Umaru and Zubairu (2012) states that inflation does not causal economic growth (GDP), but economic growth was impact on inflation (Umaru & Zubairu, 2012). In the study 121

126 of Datta and Mukhopadhyay (2011), inflation plays the critical role influence economic growth negatively in the short run (Datta & Mukhopadhyay, 2011). Girma claimed that economic growth and inflation rate has negative relationship as well. Economic growth should improve compared to non-inflationary foundations of monetary policy to solve the problems originating from the high inflation rates nowadays in the country (Girma, 2012). Kasidi and Mwakanemela (2013) has performed regression analysis to reveal the relationships between inflation rate and economic growth. The results indicated inflation comprise a disproportional relationship with economic growth in Tanzania which represented that inflation might be destructive to economic growth in Tanzania. Identical findings were reported in Ghana (Quartey, 2010). The outcomes of Johansen and Juselius co-integration test presented that from 1990 to 2011, was no co-integrating vector among inflation and economic growth. Thus, Kasidi and Mwakanemela established that among inflation rate and economic growth in Tanzania do not consist any statistically significant long run relationship at all. Just a statistically significant negatively short run relationship was observed (Kasidi & Mwakanemela, 2013). The performance of Tanzania is consistent with other previous studies (Ahmed, 2010; Chimobi, 2010; Carneiro & Faria, 2001). However, which is inconsistent with the performance in Malaysia, maybe due to Malaysia is a small open market which has incorporate with other determinants instead of one to one relationship. Next, the null hypothesis, H03, stated that there is no significant effect of interest rate on economic growth. The null hypothesis can be rejected in present study. There is a negative relationship exist in both short run and long run run equilibrium. The relationship also ecthablished in impulse response function where the response of economic growth to interest rate is decreaing over period. The relationship among interest rates and economic growth rates has extensive concerned economists. According to Shaw (1973) and McKinnon (2010), interest rates are positively related to economic growth rates. When executes a ceiling on deposit, the financial constraints get up which relieve financial restrictions and allowing market powers control interest rates contribute to higher interest rates. The higher rates of return contribute to higher levels of savings, thus follow by stimulus economic growth and development. (McKinnon, 2010; Shaw, 1973). Montiel (1996), and Banerjee and Adhikary (2009) proposed that financial relaxation predicted to create positive relationship to economic growth. Financial relaxation contributes to positive real interest rate due to the government set low ranks and cause nominal interest rate rise. Real deposit rates were initiate to a positive influence on the savings, follow by positive influence to the investment level. The increasing in interest rates leads to reduce in investment, vice versa. The investment risk portflio is reated closely to the interest rate offered (Montiel, 1996; Banerjee & Adhikary, 2009). On the contrary, the present study empirical result is conflicting with the framework of interest rates are positively related to economic growth rates. On the other hand, the present study empirical result is supported by literature below. An increasing or decreasing rate of interest, might help to spur on economic growth. Mutinda (2014) summarized that by the regression analysis a negative relationship is found among interest rate and the economic growth (Mutinda, 2014). Barro and Becker (1989) deliberate a model with endogenous fertility choice. Real interest rates are assumed by transposed the discount factor into a solid state in typical economic growth model. Barro and Becker suggest a discount factor function that be determined by the economic growth rate. Consequently, a long run relationship among real interest rates and fertility rates is established. The real rates of return reduce in condition that fertility rates drop over the long run. This prototype proposed a negative relationship among real interest rates and economic growth. (Barro & Becker, 1989). Growing or dropping in interest rates impact business and consumer psychology as well. In the meantime of interest rates growing, both businesses and 122

127 consumers will reduce spending. High interest rates cause negative outcome in snowballing the borrowing cost and follow by restricting the comprehensive investment level consumption, as well as the generally economic growth rate in country (Ng etich & Wanjau, 2011). Besides, the null hypothesis, H04, defined that there is no significant effect of exchange rate on economic growth. The null hypothesis has been rejected based on the empirical finding of cointegration test, causal efect and impulse repeonse analysis. Our finding is supported by Razin and Collins (1997) who found that real exchange rate fluctuations may impact economic growth. They have concluded in their study that only in condition of an extreme high overvaluation give the impression that linked with slower economic growth. On the contrast, reasonable to high undervaluation of real exchange rate look like motivate economic growth (Razin & Collins, 1997). MacDonald (2000) also proposed that when the real exchange rate have comparable competitive to boost entrepreneurs to internationalized their business, the entire firms will grow the investment and reduce the domestic unemployment rate, and finally the economy will grow. The productivity gap among the non-tradable and tradable segments is the core contributing factor to real exchange rates. A depreciated real exchange rate benefits economic growth in long term. On the other hand, an appreciated real exchange rate harms economic growth in long run which is conflict with present study outcome (MacDonald, 2000; Vieira & MacDonald, 2010). It ought to be significant yet there is not any compromise, many studies established that currency overvaluations are related to slow economic growth. Meanwhile enhancements in the tradable segment productivity are usually interconnected to economic growth, a relationship among economic growth and real exchange rate is hypothesized as well. As a consequence, the faster growing countries have a tendency to practice real exchange rate appreciations as regards to other, gradually in economies growing (Solanes & Flores, 2009). Cakrani (2014) suggested that real exchange rates not suitable to be used as a monetary policy instrument for encouraging economic growth in Albania because the real exchange rate has no significant influence on economic growth in Albania (Cakrani, 2014). Eichengreen (2008) reported that the real exchange rate unable to influence the growth by own self, however real exchange rate can work as a sourcing conditions. He presented that an applicable real exchange rate policy will be alleviating condition aimed by a country on the lookout for rise the capital level as opportunity for economic growth (Eichengreen, 2008). In a nut shell, the literature studies projected miscellaneous outcomes relating to the influence of exchange rate on economic growth. The null hypothesis, H05, stated that there is no significant effect of economic growth on inflation rate. The null hypothesis cannot be rejected by the Granger causality test. In impulse response function, the response of inflation rate on economic growth has gradually increased over period with the increasing of economic growth. There is not much literature discussed about the impact of economic growth on inflation rate. Among the few studies, Sacală (2015) discovers a positive relationship among GDP/economic growth rate and inflation rate. General understanding that higher inflation is initiated by solid economic growth. A higher inflation rate will be expected if aggregate demand stretched out quicker than aggregate supply in an economy. When demand is growing sooner than supply, which indicates that economic growth is greater than the sustainable growth rate in long run. The null hypothesis, H06, stated that there is no significant effect of economic growth on interest rate. The null hypothesis cannot be rejected in present study,because interest rate and economic growth has shown no causal effect in Granger causality test. In impulse response function, the response of interest rate on economic growth is gradually decrease over period with the increasing of economic growth. An escalation in economic growth, ceteris paribus, might result an upsurge in typical interest rates in an equilibrium economy. In contrast, a 123

128 recession, ceteris paribus, might result a shrinkage in typical interest rates in an equilibrium economy (Suranovic, 2017). Last but not least, the null hypothesis, H07, defined that there is no significant effect of economic growth on exchange rate. The null hypothesis cannot be rejected in present study, because exchange rate has exhibited unidirectional causal effect on economi performance but not the other way. The causal effect is being supported by impulse response function as well that the shock response of exchange rate to economic growth has gradually increased over period. Conclusion This study is designed to examine the dynamic relationship among exchange rate, interest rate, inflation rate and economic performance for a small and open economy like Malaysia. Month data from 1997 to 2016 have been used and various econometric tests including the unit root and cointegration, vector error correction modeling, causality within VECM, impulse response functions and variance decomposition are being conducted. These analyses are useful to gauge the long- and short-run of the relationship, causal effects and shock responses among the variables within a system. The results have been robust and the findings are interesting. The empirical results have given supports to both the export-led-growth and finance-led-growth theories, which are fundamental in the macroeconomic policy settings. Policy makers are to be cautious about the impacts of external shocks via foreign exchange rates and interest rates. Undervalued exchange rate to boost exports has been working but will not sustain without productivity growth and if imported inflation is on the rise. A continuous monitor of prices and foreign exchange stability is essential to ensure macro stability and to achieve sustainable development. Acknowledgements: The corresponding author gratefully acknowledges financial support from the FRGS Research Funding by Ministry of Higher Education [Grant no: 203.PPAMC ]. References Aguirre, A., & Calderon, C. (2005). Real exchange rate misalignment and economic performance. Central Bank of Chile, Working Paper, 315. Retrieved from Ahmed, S. (2010). An empirical study on inflation and economic growth in Bangladesh. OIDA International Journal of Sustainable Development, 2(3), Alpanda, S., Kotzé, K., & Woglom, G. (2010). The role of the exchange rate in a new Keynesian DSGE Model for the South African economy. South African Journal of Economics, 78(2), Amato, J., Filardo, A., Galati, G., Zhu, F., & van Peter, G. (2005). Research on exchange rates and monetary policy: An overview. BIS Working Papers, 178. Retrieved from Asari, F. F., Baharuddin, N. S., Jusoh, N., Mohamad, Z., Shamsudin, N., & Jusoff, K. (2011). A vector error correction model (VECM) approach in explaining the relationship between interest rate and inflation towards exchange rate volatility in Malaysia. World Applied Sciences Journal, 12(3), Ball, L. (1999). Policy rules in open economies. In J.B. Taylor (Ed), Monetary policy rules (pp ). University of Chicago Press. 124

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132 Green Purchase Intention of Laundry Detergent Powder in Presence of Eco-Friendly Brand Salmi Mohd Isa* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Chew Kun Lim Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Phaik Nie Chin Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia * Corresponding Author Abstract Purpose: The purpose of this paper is to explore the relationship between eco-friendly brand and green purchase intention of laundry detergent powder. Our study attempts to contribute to this field by studying the reaction of eco-friendly brand consumers in a Malaysian setting. We first suggest the measure of consumer s reaction toward green purchase intention, namely, eco-friendly brand of laundry detergent powder. Design/methodology/approach: The research was conducted using primary data. PLS model was developed that includes attitude toward the purchase intention of eco-friendly brand, green perceived quality, green perceived risk, green perceived value, and green trust. Survey was carried out through online in Penang and Kuala Lumpur, Malaysia. Total of 186 usable questionnaire were used for the analysis. Findings: This research demonstrates that green perceived quality, green perceived value and green trust has a positive impact on purchase intention of eco-friendly brand. There are also mediating effects of green trust between green perceived quality and green perceived value except green perceived risk. Research limitations/implications: Malaysia s population have different degrees of green practices, the present sample may still not be able to fully capture all the regional differences. This should be treated as a limitation of the present study and calls for caution when projecting the present findings to rural areas of the country. Practical implications: The result offers an insight to both policy makers and green marketers to formulate marketing strategies to market the eco-friendly brand. Originality/value: A large number of studies on purchase intention explore consumer s behavior in the consumption of green consumer products. But limited studies consider laundry detergent powder and eco-friendly brand. Keywords: Green Purchase Intention, Eco-Friendly Brand, Laundry Detergent Powder, Malaysian Consumer Introduction Consumers are aware of the importance of the environmental concern. They are willing to buy eco-friendly goods and services to present their concern to the environment (Fisher, Bashyal & Bachman, 2012). Going green and sustainability had become a trend all over the world, thus a lot of companies have integrated it as part of the company s core values in order to 128

133 remain competitive in market place (Huang, Yang & Wang, 2014). In the Gutfield (1991) survey, 80% of the respondents claimed that they are environmentalists. Therefore, Kirkpatrick (1990) concluded that many companies have altered their business strategy to become more environmentally responsible in an attempt to capitalize on the public s interest in green marketing strategies. In Malaysia, a detergent in the form of powder is still preferable for washing laundry although the market share for liquid detergents is increasing. Since the beginning of the millennia, the detergent sector is moving towards the development of green and eco-friendly products because of the environment regulations and change of consumers behaviors, that is, more concern on environmental issues (Siwayanan, Bakar, Aziz & Chelliapan, 2015). The context of green in detergents can be defined as a product that is manufactured using natural or oleochemical 1 base surfactants and is nontoxic to the aquatic ecosystem. Since manufacturing of green laundry detergent powder is a potential market in Malaysia, the marketer needs to understand the key drivers to drive green consumers behavioral intentions towards ecofriendly laundry detergent powder to enhance the purchase intention of their favorite brand. According to Huang et al. (2014), it is stated that environmental products and eco-friendly brands are more popular nowadays. Consumers perceive the role of the organization with the help of the green products, which plays a role in protecting nature with their performance and assures personation of the nature and surrounding. Customer s green perceived quality, green perceived risk and green perceived value are reflected in a consumer s trust on an eco-friendly product (Chen & Chang, 2012; Chen, Lin & Weng, 2015). In the green era, companies should conduct green marketing strategies to enhance perceived quality and value of their own ecofriendly product and reduce the product s risk with focus on the consumer s concern about environmental issues in order to position their brand to achieve differentiation advantages in the new market and create long-term strategies to carry out their green marketing strategies (Chen, 2010). The biggest challenge for the company will be to match the vision of the environment into their company s vision rather than just promoting the green brand alone. Thus, it is worthy to study and fill up the gap to examine the roles green perceived quality, green perceived risk and green perceived value on green purchase intentions towards ecofriendly brand laundry detergent powder as well as mediating effect of green trust and its relationship in Malaysian market. This study sought to answer the following questions: 1) Is the relationship of green perceived quality, green perceived risk and green perceived value significantly impact on the green purchase intention towards eco-friendly brand laundry detergent powder? 2) What is the influence of green perceived quality, green perceived risk and green perceived value on green purchase intention towards eco-friendly brand laundry detergent powder? 3) What is the mediation impact of green trust in each relationship between green perceived quality, green perceived risk and green perceived value on green purchase intention towards eco-friendly brand laundry detergent powder? Literature Review Green marketing A target for company strategic planning is not only for making profits but also for long term profitability and environmentally friendly. Hence, sustainability has become an agenda to many companies (Boztepe, 2012). According to Suki (2016), companies besides focusing on profits, are actively exploring and researching new business strategies to position their green branding into the consumer s mind and to gain competitive advantage in the market and 1 A chemical derives from natural oil and fats from plant and animal. This chemical is considered as a renewable resource and is eco-friendly. 129

134 achieve business sustainability. Yadav and Pathak (2016) mentioned that green marketing studies have been conducted in many western countries but there is still minimal research in developing countries including Malaysia. Joshi and Rahman (2015) recommended that further research should be conducted in developing countries to ascertain the impact of environmental knowledge on green purchase intention. Obayelu (2016) found that in developing country such as Nigeria, health and environment are important factors in influencing green purchase behavior, while social awareness and value are important in Kenya. There is a lack of research examining the effects of consumer perceptions of green marketing strategies towards green behavior (Cronin, Smith, Gleim, Ramirez & Martinez, 2011). Eco-Friendly Brand Laundry Detergent Powder A laundry detergent market is constantly moving towards green concept. The environmental issue and the increasing cost of raw material of petrochemical, many detergent companies have been changing their product to become eco-friendly product (Siwayanan et al., 2014). Siwayanan et al. (2014) defined eco-friendly laundry detergent as a detergent that produced by natural ingredient based surfactants, non-toxic product and the image of a brand that associated with environmental consideration. Guala and Merlo (2013) stated that word of eco-friendly or green has become an important word in marketing and operation of detergent industries. Previous studies have limited investigation on the eco-friendly laundry detergent product and its association with green brand (Siwayanan, 2005; Mohankumar & Shivaraj, 2010; Siwayanan et al., 2014). Green Perceived Quality Perceived quality is an important element for consumers in making their buying decision. Consequently, consumers will make a comparison of the quality of alternative products with regard to the price within a category (Jin and Yong, 2005). Companies tend to enhance the quality of their products in order to obtain competitive advantages in the market (Parasuraman, Zeithaml & Berry, 1988). Green consumers will judge the brand and product based on the overall environmental excellence or superiority (Zeithaml, 1998). Green Perceived Risk Peter and Ryan (1976) stated that perceived risk is a subjective estimation by consumers connected with the possible outcome of wrong purchase decisions. Consumers will try to reduce the product s risk by spending more time on surveys. In the prevalent Go Green trend, consumers are more concerned about the environment, which will increase their perceived risk (Chen & Chang, 2013). According to Dowling and Staelin (1994), due to high levels of perceived risk, consumers can reduce risk by relying on well-known brands. Green Perceived Value Cronin, Brady and Hult (2000) reported that the overall consumer s assessment of using products or brand is based on the perception of what they have received. Sweeney and Soutar (2001) defined consumers values as consumers perceived preference for the particular product, while Rust and Oliver (1994) defined values can be conceptualized as the overall evaluation of service consumption. According to Chen and Chang (2012), an additional green benefit of the product value would directly influence the consumer s trust of the brand and lead to higher purchase intention. Yadav and Pathak (2017) also confirmed that perceived value is significantly related to green purchase intention. 130

135 Green Trust Consumer s purchase intention is affected by consumer s trust (Harris & Goode, 2010). The literature of Morgan and Hunt (1994) mentioned that trust is a significant mediator that influences purchase behaviors. Trust affects perception and behavior (Morrow, Hassen & Pearson, 2004). According to Chen and Chang (2012), green trust itself is the willingness to use some specific trusted brands that will benefit the environment. This study defined that environmental conscious consumers will have specific belief on a brand that have a positive impact on the environment. Green Purchase Intention Porter (1974) stated that consumer s purchase intention is a kind of decision in which studies why consumer purchases a particular brand, constructs like considering something purchasing a brand and anticipate to purchase a brand aids to scope the intentions of purchasing. Consumers tend to buy a particular brand because they believe the brand provides a quality and value that meet their needs and wants and decrease the risk of using the product. Arshad, Mahmood, Siddiqui and Tahir (2014) defined green purchase intention as an intention to buy a product or a brand that is less environmental harmful. Green consumers tend to use a green product that has less environmental harm and less dangerous effects for the environment. Peattie (1995) found that when consumers are more conscious about the environmental problem, they prefer to purchase a green product that has less harmful impact on the environment. A review study done by Goh and Wahid (2014) stated that environmental attitudes is the most important factor affecting green purchase intention in Malaysia. Theory of Planned Behavior This theory was developed by Azjen (1991) and has been used in many studies to examine the purchase behavior towards environmentally sustainable products. This theory consists of attitude towards behavior, subjective norm and perceived behavior control. The complete framework in the theory enables us to know the factors that influence the decisions engaged in behavior related to the environment issue such as recycling (Boldero, 1995; Chan, 1998) and can be applied systematically to understand the factors that affect the consumer purchase intention for the environmental suitable products. Theory of planned behavior stresses on the relationship between belief and behavior and it has been used in many researches to test the relationship among belief, attitude and behavior intention (Ajzen, 1991). Past researches have confirmed that consumer with a high degree of concern to the environment tend to present a positive attitude, norm and perceived behavior control (Albayrak, Aksoy & Caber, 2013). Hypotheses Development A Relationship between Green Perceived Quality And Green Purchase Intention Chen and Chang (2013) refer to Zeithaml (1988) defined green perceived quality as the customer s judgment about a product s or brand s overall environmental excellence or superiority. A brand associated with quality makes a strong competitive advantage when consumers compare the product s status with other brands. According to Kurniawan and Diryana (2015), perceived quality has a positive impact on green purchase intention. This study intents to know whether consumer s green perceived quality will affect their purchase intention towards eco-friendly brand of laundry detergent powder. Thus, the study purposed hypothesis one as follows: H1: Green perceived quality has a positive effect on green purchase intention. A Relationship between Green Perceived Risk and Green Purchase Intention 131

136 Perceived risk theory states that buyers tend to minimize their perceived risks rather than maximize their expected pay off (Mitchell, 1999). According to Chen and Chang (2012), studies have found that green perceived risk has a negative significant impact on green purchase intentions. This study further examines whether the green perceived risk would have a negative effect on consumer s green purchase intention towards eco-friendly brand of laundry detergent powder. Hence, the study tested the following hypothesis two; H2: Green perceived risk has a negative effect on green purchase intention. A Relationship between Green Perceived Value and Green Purchase Intention Perceived value plays a critical role in environmental era. Consumers purchase decision is affected by perceived value because consumers are more interested to know what kind of benefits they can receive from the product (Leung & Li, 1998). The empirical result in Chen and Chang (2012) and Yadav and Pathak (2017) mentioned that green perceived value is positively related to green purchase intention. Thus, this study would like to further investigate whether green perceived value would have a positive effect on green purchase intention towards eco-friendly brand of laundry detergent powder. The following hypothesis three was developed to test the relationship: H3: Green perceived value has a positive effect on green purchase intention A Relationship between Green Perceived Quality and Green Trust Aaker (1996) mentioned the difference between perceived quality and objective quality. Perceived quality affects consumers pre-existing impression, consumers perception of important quality dimensions differs from that of manufacturers and information disparity, consumers fail to obtain comprehensive information, thus making inferences about the product quality based on only one or two selected piece of information. Chen, Lin and Weng (2015) found that a product s green perceived quality has a positive influence on green purchase intention. This study examines whether consumer s green perceived quality will positively influence the green trust towards the eco-friendly brand of laundry detergent powder. Thus, the study purposed the following hypothesis four: H4: Green perceived quality has a positive effect on green trust. A Relationship between Green Perceived Risk and Green Trust Buyers are unwilling to purchase a product if they feel that the product s information is untrue (Gregg and Walczak, 2008). Consumers who perceive a high product s risk are reluctant to trust the product (Mitchell, 1999). Chaudhuri (1997) mentioned that risk perception has a string relationship with negative consumption emotions. Environmental trend rising, consumers have more concern in environmental considerations and it increases their perceived risk (Chen & Chang, 2012). According to Chen and Chang (2012), green perceived risk negatively relates to consumer s green trust. Thus, this study would like to further examine whether the green perceived risk will negatively impact the green trust towards the eco-friendly brand of laundry detergent powder. Hence, hypothesis five was developed as follows: H5: Green perceived risk has a negative effect on green trust A Relationship between Green Perceived Value and Green Trust To develop a strong perceived consumer value towards a brand is important to enhance the consumer-based brand equity (Malik et al., 2012). Consumers with high environmental concerns tend to trust a brand if they can perceive green value from the product. Perceived value is not only an important determinant to maintain a long-term relationship with the consumers but also plays a crucial role in affecting consumers purchase intention (Zhuan et 132

137 al., 2010). Previous empirical studies have proved that green purchase trust is positively affected by green perceived value (Cheng & Chang, 2012; Ronnie et al., 2015). Hence, this study investigates whether the green perceived value will positively influence the green trust towards eco-friendly brand of laundry detergent powder. Therefore, this study proposed the following hypothesis six: H6: Green perceived value has a positive effect on green trust A Relationship between Green Trust and Green Purchase Intention Chen and Chang (2012) refer to Netemeyer et al. (2005) and Morrison (1979) studies defined green purchase intention as likelihood that a consumer would buy a particular product or brand resulting from his or her environmental needs. Chen (2010) argued that green trust has significant influence on consumer s purchase behavior in the environmental era. An impact of green trust on green purchase intention can be determined through consumers judgment about long-term trust to green product as it positively impacts the environment. Therefore, this study further investigates whether the consumer s green trust has positive influence on green purchase intention towards eco-friendly brand of laundry detergent powder. Hence, hypothesis seven was developed as follows: H7: Green trust has a positive effect on green purchase intention Mediating Effect of Green Trust According to Chen (2010), green trust is defined as a willingness to depend on one object based on the belief or expectation resulting from its credibility, benevolence, and ability about environmental performance. Chaudhuri (1997) stated that if consumers do not have any past experience of a product, they tend to mistrust the perceived quality of the product and possess purchase intention. Chang and Chen (2013) stated that consumers prefer to buy a brand associated with low perceived risk such as brand that possesses better brand reputation and brand equity. In Chen and Chang (2012), it was found that perceived risk has a negative relation with both green trust and green purchase intention. Besides, Chen and Chang (2012) found that companies need to develop products or brands that possess greenness and high perceived value s attribute in order to enhance consumer s green trust and intention to purchase product. This study intends to know whether consumer s green trust will mediate each of the relationship between the three independent variables (i.e. green perceived quality, green perceived risk and green perceived value) and dependent variable (i.e. green purchase intention towards eco-friendly brand of laundry detergent powder). Hence, three hypotheses were proposed as follows: H8 (a): Green trust has a mediation effect between green perceived quality and green brand purchase intention. H8 (b): Green trust has a mediation effect between green perceived risk and green brand purchase intention. H8 (c): Green trust has a mediation effect between green perceived value and green brand purchase intention. Methodology Data Collection and Sample The survey was carried out through online survey in Penang and Kuala Lumpur, Malaysia, which are respectively the urban cities of the country. Moreover, as Kuala Lumpur is the capital city of Malaysia, and Penang is one of its most rapidly developed its green practices, surveying the two should be able to provide valuable insights from the green consumer of the nation s urbanised areas. However, given Malaysia s population and possibly varying 133

138 ecological conditions between regions with different degrees of green practices, the present sample may still not be able to fully capture all the regional differences. This should be treated as a limitation of the present study and calls for caution when projecting the present findings to rural areas of the country. This sampling method resulted in a total of 186 usable questionnaires (54.3% respondents from Penang and 45.7% from Kuala Lumpur). Overall more than half (57.5%) of the 186 respondents were female. Among the respondents, 74.2% of the respondents were in age of 26 to 35 years old. The foregoing demographic characteristics of the sample are similar to those of the entire Malaysian population. However, unlike the entire population, of which only 8% received primary and secondary school education, the majority of the respondents were either high school (22%) or university graduates (69.9%). This is not surprising, as people with higher education, in general, have a greater understanding of the topic under investigation. The most trustable brand was LION; this detergent brand achieved the highest percentage among other brands, which was 45.7%. Measurement of Variables The measurement instruments of the present study were adapted based on input from previous studies. Green Purchase Intention With reference to the Taylor and Todd (1995), Pavlou (2003), Chang and Chen (2008) and Chen and Chang (2012) approach, three statements coded by 5-point likert scales were employed to operationalise the measure of intention. These statements are 1. I intend to purchase this brand because of its environmental concern. 2. I expect to purchase this brand in the future because of its environmental performance. 3. Overall, I am glad to purchase this brand because it is environmental friendly. Green Perceived Quality Five statements were used to measure respondents green perceived quality (cf. Chen et al., 2015). They read as follows: 1. The quality of this brand is regarded as the best benchmark with respect to environmental concern. 2. The quality of this brand is reliable with the respect to environmental consideration. 3. The quality of this brand is durable with respect to environmental performance. 4. The quality of this brand is excellent with respect to environmental image. 5. The quality of this brand is professional with respect to environmental reputation. Green Perceived Risk With reference to Sweeney and Souter (2011) and Chen and Chang (2012), the following five statements were employed in this study: 1. There is a chance that there will be something wrong with the environmental performance of this brand. 2. There is a chance that this brand will not work properly with respect to its environmental design. 3. There is a chance that I will get environmental penalty or loss if I use this brand. 4. There is a chance that using this brand will negatively affect the environment. 5. Using this brand will damage my green reputation or image. Green Perceived Value 134

139 The scale formed by Patterson and Spreng (1997) and Chen and Chang (2012) were adapted. They read as follows: 1. The brand s environmental functions provide very good value for me. 2. The brand s environmental performance meets my expectations. 3. I purchase this brand because it has more environmental concern than other brand s products. 4. I purchase this brand because it is environmental friendly. 5. I purchase this brand because it has more environmental benefits than other brand s products. Green Trust Five statements were used to measure the green trust of the consumer. (cf. Chen, 2010; Chen & Chang, 2012). These statements were as follows: 1. I feel that this brand s environmental reputation is generally reliable. 2. I feel that this brand s environmental performance is generally dependable. 3. I feel that this brand s environmental claims are generally trustworthy. 4. This brand s environmental concern meets my expectation. 5. This brand keeps promises and commitments for environmental protection. Result A statistical tool, Statistical Package for Social Science version 22 (SPSS 22) and SmartPLS were used to analyze the data. Table 1 presents the loadings, composite reliability (CR) and average variance extracted (AVE), which analyze the validity and reliability for all the variables in this study. The basic requirement for an item to be accepted is outer loading needs to be greater than 0.7 and average variance extracted (AVE) for each variable must be greater than 0.5. Table 1: Convergent validity measure Latent Variable Measurement Item Green Purchase Intention (GPI) Outer Loadings Composite Reliability (CR) GPI GPI GPI Average Variance Extracted (AVE) Green Trust (GT) GT GT GT GT GT Green Perceived Value (GPV) Green Perceived Risk (GPR) Green Perceived Quality (GPQ) GPV GPV GPV GPV GPR GPR GPR GPR GPR GPQ GPQ GPQ GPQ

140 Table 2 shows the results of Fornell-Lacker Criterion, value of square root of average variance extracted (AVE) for all constructs were higher than 0.7 and the values were also higher than other inter-correlation constructs (Hair et al., 2014). An additional method to test discriminant validity is heterotrait-monotrait. Table 3 presents the heterotrait-monotrait ratio that is lower than maximum value of 0.9. In summary, this study has an adequate of validity and reliability. Table 2: Discriminant Validity Measure Result Using Fornell-Lacker Criterion GPI GPQ GPR GPV GT GPI GPQ GPR GPV GT Note: Diagonal in bold was indicates the value of square root of average variance extracted while the other entries were indicated the squared correlation. Table 3: Discriminant Validity Measure Result using HTMT GPI GPQ GPR GPV GT GPI GPQI GPR GPV GT Legend: GPQ Green Perceived Quality; GPR Green Perceived Risk; GPV Green Perceived Value; GT Green Trust; GPI Green Purchase Intention Table 4: Path Coefficient Outcome and Hypotheses Testing Path Beta Std Error T-Value P-Value Supported H1: Green Perceived Quality -> Green Purchase Intention H2: Green Perceived Risk -> Green Purchase Intention H3: Green Perceived Value -> Green Purchase Intention H4: Green Perceived Quality -> Green Trust H5: Green Perceived Risk -> Green Trust H6: Green Perceived Value -> Green Trust H7:Green Trust->Green Purchase Intention ** YES NO ** YES ** YES NO ** YES ** YES Note: *p < 0.05; **p < 0.01 Bootstrapping procedure was executed to test the hypotheses. Table 5 shows the coefficients, standard error and significance value in term of t-value and p-value. Green Perceived Quality 136

141 (H1: p <0.01, β = 0.224) and Green Perceived Value (H3: p < 0.01, β = 0.309) have significant positive relationship with green purchase intention. Green Perceived Quality (H4: p <0.01, β = 0.317) and Green Perceived Value (H6: p < 0.01, β = 0.248) also significantly positively influence the Green Trust, which is a mediating variable in this study. Green Trust (H7: p < 0.01, β = 0.208) has significant positive impact on green purchase intention. Surprisingly, Green Perceived Risk (H2: p > 0.05, β = -0.08) has no significant negative effect on Green Purchase Intention as well as Green Trust (H5: p > 0.05, β = ), Thus, H2 and H5 were not supported. Table 4 shows that there is no value zero appears between lower and upper limit. Thus, Green Trust has mediating effect between independent variable, (i.e. Green Perceived Quality, Green Perceived Value) and dependent variable (i.e. Green Purchase Intention). Table 5: Mediation Calculation Bootstrapped Confidence Interval Path a Path b Indirect Effect SE t-value 95% LL 95% UL H8(a): GPQ->GT->GPI H8(b):GPR->GT->GPI No Mediation Effect H8(c): GPV->GT->GPI LL: Lower Limit; UL: Upper Limit Discussion Based on the findings in this study, H1 is accepted that green perceived quality is having significant effect on green purchase intention towards eco-friendly brand of laundry detergent, the finding is consistent with previous studies (i.e. Chen et al., 2015; Alhaddad, 2015; Ariffin et al., 2016). The quality of the ingredient for detergent product is the most important factor for consumers to consider the purchase decision (Genencor, 2011). If the consumers perceive higher quality in the product, they will increase their intention on purchasing the particular product. The finding supported that there is significant positive relationship between green perceived value and green purchase intention. In line with Chen and Chang (2012) and Mahmood, et al. (2014), green perceived value plays a major role in influencing the consumer s green purchase intention. Recently, many laundry detergent companies have begun labeling their brands as being eco-friendly to position their value of the product as environmental sustainability. Surprisingly, the relationship between green perceived risk and green purchase intention was not supported. Previous studies have proved that actual risk factor is valuable (Lamm, Schaude & Trommsdorff, 1971; Olson & Suls, 2000). Chen and Ma (2009) claimed that young generation is more preferable in negative mood than older generation. In this study, most of the respondents were from 26 to 35 years old. Because of their risk taking behavior; hence, green perceived risk has no impact in this study. Similar to Chen & Chang (2013) and Chen et al. (2015), significant positive effect is found between green perceived quality and green trust. Consumers perceived quality always demonstrates a trust, consumers build up their emotions to a particular product and service based on their experience of purchasing the product. Marakanon and Panjakajornsak (2016) indicated that investment in green conception can build up the perceived quality, which gains the green trust among the environmental conscious customers. Green perceived risk in this study is not significantly negatively affecting consumer s green trust towards eco-friendly brand of laundry detergent. The result is contradicted with Chen and 137

142 Chang (2012; 2013). According to Muss and Porton (1998), it is indicated that many people believe that the community appreciates and reward risk-taking behavior. Thus, the respondents in this study have been biased by their belief that risk-taking behavior could be rewarded. Thus, this might increase their value of the risk to purchase the eco-friendly brand laundry detergent powder. The three hypotheses on green perceived value and green trust are found significantly positively related respectively and the results are consistent with Chen and Chan (2012). Trust is a degree of willingness to believe in one object, depending on the expectation of benevolence, reliabilities and abilities (Ganesan, 1994; Hart & Saunders, 1997). Chen and Chang (2012) found that extra green fixture in the value of the product have an impact on the consumer s belief on the brand and lead into intention to purchase the green product. Many laundry detergent companies have turned their focus towards eco-friendly based products in order to gain a better market share and stimulate the Malaysian s green purchase intention. Green trust in this study has significant positive impact on green purchase intention; this is aligned with past studies (e.g. Chen & Chang, 2012; Rahardjo, 2015; Lam et al., 2016). Trust is an important element determinant on the intention of the customer to purchase the product (Schlosser et al., 2006). If the seller gains trust experience from the customer, this will lead to a higher degree of purchase intention. With the rising trend of protecting environment, detergent companies in Malaysia should pay more attention on this matter in order to grab better market share in laundry detergent market. Green trust has a mediating role on green perceived quality and value on green purchase intention towards eco-friendly brand of laundry detergent powder. Green perceived risk has no significant negative relationship on green purchase intention, thus, this study was unable to perform a mediation testing with green trust, the result contrasted with previous studies (Chen & Chang, 2012; Rahardjo, 2015). Chen and Chang (2012) discovered that the mediating effect of trust take place between perceived quality and perceived value on purchase intention, which is in line with this study. Understating on how to gain trust from environmental conscious customers towards eco-friendly brand of laundry detergent powder is essential for any detergent companies to achieve better market share and result. Therefore, three factors should be taken into account to enhance green purchase intention towards eco-friendly brand of laundry detergent powder in Malaysian market. The result has shown that green perceived quality has significant impact on green purchase intention and green trust has mediation effect in between green perceived quality and green brand purchase intention. It means the high quality of the eco-friendly laundry detergent powder would increase consumers impression on the green brand. It will directly enhance the Malaysia consumer s trust on the green brand and stimulate the consumer s green purchase intention on the brand. Besides, green perceived value has shown significant impact on green purchase intention and green trust has mediation effect in between green perceived value and green purchase intention towards eco-friendly brand of laundry detergent powder. The detergent company must integrate green perceived value and green trust into their long-term eco-friendly marketing or brand strategies in the early stage of strategies planning because this study has identified that green perceived value and green trust have an impact to stimulate green purchase intention towards eco-friendly brand of laundry detergent powder among the consumers in Malaysia. Surprisingly, green perceived risk has no significant relationship with green trust and green purchase intention towards eco-friendly brand of laundry detergent powder in this study. The main reason of the result was not supported because the respondents were mostly young generation and they tended to ignore the risk factor to purchase the green product; young generation believe it is the right action to protect the environment. The laundry detergent 138

143 companies can refer to this study to focus their target customers to younger generation. Young generation tend to be more risk-seeking and willing to try a new concept of eco-friendly laundry detergent powder in their daily life. Managerial Implication This research contributed some implications that are beneficial to eco-friendly brand laundry detergent companies and marketing research companies. This research found that green perceived quality and green perceived value are significant in determining green trust on green purchase intention towards eco-friendly brand of laundry detergent powder. The finding has proven with the high degree of green trust, the consumer s green purchase intention towards eco-friendly brand of laundry detergent powder would increase. In the new era, the term of green and eco-friendly have caused the world detergent companies to change their marketing and operation strategies into eco-friendly concepts. It is also because of consumers preferences towards palm oil (natural ingredient) based detergent more than petrochemical (chemical ingredient) based detergents (Siwayanan et al., 2015). Consumers believe that purchasing green products can protect the environment. Thus, the quality and value of the green product play important roles to stimulate the green purchase intention. The detergent companies can use these findings in this research to strengthen their brand image as well as increasing the consumers purchase intention towards the brand. This study found that green perceived risk has no significant impact on green trust and green purchase intention as the respondents in this study were majority in a young age group and young generation tended to be more risk takers and willing to try new things (Deakin et al., 2004). Since, the eco-friendly brand laundry detergent powder is a new concept of laundry detergent in the Malaysian market; thus, the marketers from detergent companies can obtain the information from this study to create green branding strategies to target on young consumer market in order to easily penetrate into the new market. Conclusion Although an active governmental involvement has speed up the economic development of the country, it has also led to accelerated consumption of natural resources and the degradation of the ecological environment. Fortunately, with increasing affluence derived from rapid economic growth, certain sections of consumers have recently begun to realise the hazardous impact of environmental deterioration on their well-being. This realisation certainly creates new challenges and opportunities for both policy makers and green marketers. The green marketing strategies will allow a company to penetrate into new markets and position its brand. Companies should focus more in the consumer s concern about environmental issues in order to position their brand to achieve differentiation advantages in the new market and create long-term strategies to carry out their green marketing strategies (Chen, 2010). The biggest challenge for the company will be to match the vision of the environment into their company s vision rather than just promoting the green brand alone. Alongside this development, the present study examines the green purchase intention of laundry powder detergent on eco-frindly brand of Malaysian consumers. In doing so, a conceptual model has been proposed and subjected to empirical verification with the use of a survey. The results from the structural-equation modeling, support some of the hypothesised relationships of the proposed model. Specifically, it confirms the significant influence of green perceived quality, and green perceived value, on green trust toward green purchase intention. The results also confirm the significant bearing of behavior toward eco-friendly brand on green purchase intention via the mediator of green trust. Hopefully, this better understanding of the process and antecedents of green purchase intention can provide the Malaysian government 139

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148 Corporate Risk Management Disclosure and Corporate Sustainability: The Role of Diversification Fathyah Hashim* Graduate School of Business, Universiti Sains Malaysia Lee Tian Koon Sangfor Technologies, Singapore * Corresponding Author Abstract Purpose: The main purpose of this study is to examine the relationship between corporate risk management disclosure and corporate sustainability. This study also investigate the moderating effect of diversification on the relationship between corporate risk management disclosure and corporate sustainability. Design/methodology/approach: A random sample of eighty publicly listed companies from the Main Board of Bursa Malaysia was taken, and using a content analysis method to collect the secondary data, descriptive analysis, multiple regressions, and hierarchical regression analysis. Findings: The analysis indicated that there is a significant positive relationship between corporate risk management disclosure and corporate sustainability. Furthermore, the level of diversification was found to have a positive moderating effect on the relationship between corporate risk management disclosure and corporate sustainability. Research limitations/implications: This study uses a cross-sectional content analysis for a single country analysis. Future study should replicate using a panel data analysis and compare with multiple countries. Practical implications: Companies will be encouraged to disclose more risk management information to facilitate higher levels of corporate sustainability. Originality/value: This is among first few studies which had look into a potential role of diversification to explain why such companies which disclose more information on corporate risks would have better corporate sustainability. Keywords: Corporate Risk Management, Corporate Risk Management Disclosure, Corporate Sustainability, Diversification Introduction Following the business scandals and corporate failures which occurred in the past few years, works to rebuild public trust in business and in the financial markets have been discussed extensively both in practice and academia. Many current studies in corporate governance have focused on those issues, including corporate fraud, the abuse of managerial power and business social irresponsibility. In response to the changing market, business is being forced to take externalities into account in management behaviour. Corporate social responsibility and ethics are thus becoming a vital part of staying competitive, partly because they help to retain talented staff and to satisfy customers expectation (Gardiner, Rubbens & Bonfinglioli, 2003). 144

149 At the same time, the changing economic and regulatory environment, increasingly complex global business structures, a growing reliance on financial instruments and international transactions, as well as prominent corporate crises gave rise to risk reporting in non-financial indicators. However, many of the existing mandatory structures require just a minimal disclosure of quantifies risk information. Shareholders are putting increasing pressure on corporations to focus on a more sustainable agenda because ignoring the potential risks would be fiscally irresponsible. They continue to call for better, more measurable information that will give them the means of assessing material risk factors arising from intangible factors (Simpson, 2012). Despite recent increased risk research attention on the international scene, there are few Malaysian research studies that specifically address risk management disclosure (e.g. Amran, Abdul Manaf & Che Haat, 2008). As part of good corporate governance, risk management information is expected to be increasingly sought by stakeholders and information users in general, to elicit potentially relevant information that might be intentionally withheld by management for strategic purposes (Lajili & Zeghal, 2005). This would help identify potential managerial problems (and opportunities) and assess management s effectiveness in dealing with business uncertainties and opportunities. The collapse of several Malaysian companies listed on the Bursa Malaysia, or the former Kuala Lumpur Stock Exchange (KLSE), can be at least partially attributed to poor corporate governance, weak investor relations, low levels of transparency, and the ineffectiveness of regulatory agencies in enforcing legislation aimed at protecting minority shareholders (Mohamad, 2002). Higher market performance is a consequence of greater transparency (Amran et al., 2008). Hence, risk management information is expected to be increasingly sought after by stakeholders and information users in general, even information intentionally withheld by management for strategic purposes (Lajili, & Zeghal, 2005). This trend will help identify potential managerial problems and lend tools to assess management's effectiveness in dealing with business uncertainties and opportunities, leading to better corporate sustainability. Corporate sustainability is a positive multi-faceted concept covering areas of environmental protection, social equity, community friendship and sustainable development in corporate governance. Corporate sustainability is generally defined as a business approach that creates long term shareholder value by embracing opportunities and managing risk from three dimensions: economic, environmental and social dimensions (Dow Jones Sustainability Indexes). A sustainable company is one whose characteristics and actions are designed to lead to a sustainable future state (Funk, 2003). Malaysia is a unique country with a diverse racial, ethnic and religious mix, coupled with booming economic growth. Its economic resilience, demonstrated in both the 1997 South East Asian economic crisis and the recent global financial turmoil, has attracted many international investors. The multiracial environment and the rising trend of direct foreign investment have set Malaysian firmly on the international stage, where corporate sustainability issues are now gaining increased attention (Abdifatah & Nazli, 2012). Malaysia is a developing nation that aspires to achieve the status of a developed nation by It is essential for Malaysian companies to exploit corporate risk management disclosure in order to improve their corporate sustainability and to succeed in the emerging knowledge-based economy (Goh & Lim, 2004). 1 In 1991, Vision 2020 was introduced by the Prime Minister of Malaysia during the tabling of the Sixth Malaysia Plan. 145

150 Companies operating diversified businesses in developing countries such as Malaysia are subjected to higher public demand for information on intangibles. This requires large diversified companies to disclose their risks more thoroughly to report better on corporate sustainability. In addition, Seetharaman, Sooria and Saravanan (2002) reported that the present financial accounting framework is in disfavour for its inadequacy in reporting corporate risk. There are almost no past studies on the role of diversification in the relationship between corporate risk management disclosure and corporate sustainability. This study aims to enhance the literature on this topic, in light of the inconclusiveness of previous studies that examined the relationship between corporate risk management disclosure and corporate sustainability. In addition, this study also hopes to enable practitioners to realize on the importance of disclosing risk management information in sustaining their business, especially if their companies are highly diversified. Literature Review Corporate Sustainability The existing literature on corporate sustainability discusses the relationship between sustainability and a variety of organizational topics including leadership, citizenship, human resource management, culture, employee empowerment, innovation (Bos-Brouwers, 2010), and firm performance (Wagner, 2010). There is however, limited studies on the relationship between corporate sustainability and corporate risk disclosure. Wempe and Kaptein (2002) indicate that corporate sustainability is the ultimate goal, with corporate social responsibility (CSR) as an intermediate stage where companies try to balance the Triple Bottom Line (profit, people and planet). Van Marrewijk (2003) recommends a distinction between corporate sustainability and CSR. While CSR is communication -oriented relating to people and organisations (e.g. stakeholder dialogue, sustainability reporting, etc.), CS is concerned with the agency principle (e.g. value creation, environmental management, human capital management, etc.). Linnanen and Panapanaan (2002) depict the relationship between corporate sustainability and corporate responsibility. Three aspects of corporate responsibilities (economic responsibility, social responsibility, environment responsibility) are contained in the realm of corporate sustainability that a business has to be concerned with. It is therefore showing how corporate social responsibility fits into the current corporate sustainability framework. Significant drivers of corporate environmental sustainability include potential cost savings from eco efficiency initiatives, new revenue opportunities, improved reputation, talent attraction and retention, and reduced risks due to emissions regulations addressing climate change (Baumgartner, 2009). As concerns over climate change, supply chain security, and the availability of energy and water continue to grow, the threat of regulations mandating changes in corporate accounting systems and resource use are motivating action. In response to these concerns, there has been a recent proliferation of sustainability indices, reporting standards, and principles to bring legitimacy to corporate sustainability programs. Inventors are driving many of these initiatives Investors are driving many of these industry wide initiatives, including greenhouse gas emissions assessment and reporting (e.g., Global Reporting Initiative, Greenhouse Gas Protocol, climatecounts.org), environmental management protocols (e.g., ISO 14001), responsible investment (e.g., Dow Jones Sustainability Indexes, Calvert SRI criteria, FTSE4Good, Ceres), and global social responsibility and corporate governance (e.g., International Chamber of Commerce Corporate Governance, OECD Principles of Corporate Governance, Sullivan Principles) (Paligorova, 2010; Faccio et al., 2011). 146

151 Corporate Risk Management Disclosure Past empirical studies discuss the incentives to managers to report risk information, and relate them to the costs and benefits of disclosure. Potential benefits arise from the market outcomes of the company s risk reporting activity. Precise assessment of the company s risk profile allows more efficient asset allocation by helping investors estimate market value and accurately forecast security price (Linsley, Shrives & Kaju, 2008). Furthermore, risk reporting is seen as a useful instrument of change management (Abraham & Cox, 2007), as well as an important measure of manager accountability (Linsley & Shrives, 2006). Meanwhile, many industry experts and financial analysts find corporate annual reports very difficult to analyse and quantify. The inadequacy of risk disclosure information in financial reports is a key element that threatens the relevance of financial reports (Cabedo & Tirado, 2004). The decision to disclose information often depends on the personal wealth considerations of management (Faccio et al., 2011). The separation of ownership and control within a company provides managers with an incentive to serve their personal interests at the expense of shareholder interests (Acharya et al., 2011). One major issue is the information asymmetry between managers and shareholders. Managers, as self-interested agents, possess information about the present and likely future performance of the company that is superior to that acquired by shareholders. Managers can disclose or not disclose information at their discretion to facilitate their engagement in behaviour for opportunistic personal gain. Formal contracts are thus negotiated and written as a way of resolving agency conflicts. It is hoped that managers will then voluntarily provide information to reduce bonding costs and encourage investors to invest in the company (Acharya et al., 2011). Quite a number of past studies have examined the extent of risk management disclosure in Western countries, such as Italy (Bereta & Bozzolan, 2004), Canada (Lajili & Zeghal, 2005) and UK (Linsley & Shrives, 2006). Beretta and Bozzolan (2004) studied the quality of risk disclosure in Italian Stock Exchange companies and found that these companies avoided communicating expected economic impacts of risks in quantitative terms. The Italian companies also declined to report past and present risks. Lajili & Zeghal (2005) found that financial risk is the most frequent type of disclosure in the annual reports. They also reported that the disclosures are almost always qualitative in nature and lack specificity and depth. Linsley & Shrives (2006) studied the relationship between company size, levels of risk and the extent of risk disclosure. They reported that there is a positive correlation between the level of risk and risk disclosure, but concluded that higher risk companies were not giving much information to stakeholders. Amran et al. (2008) explored the risk management disclosure in Malaysian annual reports and found lower levels of disclosure than reported in past studies. Dobler et al. (2011) also provides an examination of the nature of risk reporting using a multinational sample. They found that the number of qualitative and past/present/non-timespecific risk disclosures were significantly greater than quantitative, forward-looking risk disclosures. There are six types of major risk management areas listed in Amran et al. (2008) including financial risk, operation risk, empowerment risk, information processing and technology risk, integrity risk, and strategic risk. Risk management disclosure can be found in the chairman s statement, per the listing requirements of Bursa Malaysia. However, Amran et al. (2008) concluded that the Malaysian listed companies do not give much information to stakeholders, and that the practice of disclosure in Malaysia is still in its infancy. 147

152 Diversification Diversification is a strategic option exercised by managers to improve a company s performance and corporate growth by expanding its core product or services into new areas (Branswijck & Everaert, 2012). Diversification is relevant because it is a strategic management action that directly impacts a company s sustainability and core advantage. As suggested by stakeholder theory, diversification has an impact on company growth and sustainability. Unrelated diversification is when a company diversifies away from its core business or main product (Chiao et. al., 2008). Internationalization or geographical diversification is when a company ventures outside its original geographic area, as opposed to industrial diversification, where a company remains within its former region, but expands product lines or services. With the advent of communication and information technology, the avenues for diversification have increased. Although past research has claimed that it is difficult to diversify profitably, diversification is one answer to the problem of sustaining business growth (Singh et al., 2010). Singh et al. (2010) further indicated that business value decreases when diversification is embarked upon because of poor diversification strategies. However, it is assumed that diversification will create corporate sustainability if the diversification strategies are right. Theoretical Framework and Hypothesis Development The disclosure of risk management practices should enhance the confidence of market participants in the willingness of the company to provide information about its specific and aggregate risk exposure, as well as to make efforts to monitor and optimize these risk levels in accordance with the targeted risk and equity profiles. The relationship between corporate risk management disclosure and corporate sustainability The stakeholder theory states that stakeholders expect that the company s strategic activity will be made known to them. The disclosure of risk management practices should enhance the confidence of stakeholders in the willingness of the company to provide information about specific and aggregate risk exposure, as well as to make efforts to monitor and optimize these risk levels in accordance with the targeted risk. The distortion of stakeholders decisions, caused by the difference between perceived and actual risk exposures, is mitigated by making disclosures to stakeholders. This theory also suggests that the ability to disclose more risks is an indicator of good sustainability. Empirical studies support the stakeholder s theoretical justification for greater disclosure in the best interest of a company (Francis et al., 2005); Khurana et al., 2006; Faccio et al., 2011). Therefore, from past empirical findings and theoretical argument, the first hypothesis can be stated as follows: H1: There is a positive relationship between risk management disclosure and corporate sustainability The moderating effect of the level of diversification From past empirical studies, diversification was shown to create better company sustainability in India (Mishra & Akbar, 2007) and similarly in China (Lin & Su, 2008). Highly diversified companies have better sustainability than undiversified companies (Pandya & Rao, 1998). The impact of risk management disclosure on corporate sustainability will vary with the level of diversification. The stakeholder theory states that stakeholders expect that a company s strategic decisions made by the management will be made known to them. This theory suggests that the ability to create value is an indicator of company sustainability. Value creation as a result of 148

153 diversification activity fits the stakeholder theory. Therefore, the second hypothesis can be developed as follows: H2: The positive relationship between risk management disclosure and corporate sustainability is positively moderated by diversification Figure 1: Theoretical framework Method This study used secondary data gathered from the annual reports of the publicly listed companies in Bursa Malaysia for the year ending The secondary data collection was preferred over other forms of data collection because it is publicly available and can be readily collected via the internet, reliably and cost effectively. The content analysis method was used to analyse the nonfinancial section for the existence and types of risk being disclosed, and the extent of such disclosures. The unit of analysis for this study was the publicly listed companies of 2012 on the main market of Bursa Malaysia. The annual reports of 2012 were the best option because the availability of published annual reports in later years are limited to companies with early financial calendar todate. There were a total of 851 publicly listed companies on the main market in Bursa Malaysia in The population was reduced to 720 publicly listed companies by the exclusion of companies classified as PN17, and companies from the Finance, REITS, Closed-End Funds, Hotels, Mining and IPC sectors. A sample size of eighty was chosen by using the rule of thumb suggested by Roscoe (Sekaran & Boogie, 2010), namely that the sample size should be at least ten times the number of variables. The eighty listed companies were randomly chosen from the population. The companies traded in the Bursa Malaysia will always be under public scrutiny and any disclosures made are expected to have information on company sustainability. The dependent variable, corporate sustainability, is being measured using the Dow Jones Sustainability Index (DJSI). DJSI can be used to identify and track the performance of sustainably run companies. There are three dimensions of DJSI as shown in Table 1. The economic, environmental and social dimensions receive equal weighting (33% each). When it comes to the economics, DJSI is looking at corporate governance; risk and crisis management; codes of conduct, compliance, anti-corruption and bribery; and industry-specific performance. On the environment dimension, it s all about reporting and when it comes to social performance, the key elements centre on human-capital development; talent attraction and retention; labour practice indicators; corporate citizenship and philanthropy; and social reporting. 149

154 So, in this study, the disclosure of these items using content analysis as a proxy for corporate sustainability instead of the market ratings conducted by the management of the indices. Past researches consider studies based on the DJSI since there is a consensus that the index is a good proxy for corporate sustainability (Garcia-Castro et al. 2010; Waddock & Graves 1997; McWillians & Siegel 2000; Becchetti et al. 2005). The DJSI was established in September 1999, and is the first ever family of global sustainability stock market investment benchmarks and is the largest global resource for index-based concepts, data and research. It is also claimed to outperform the more generalized Dow Jones Index (DJI) with respect to market capitalization growth. It has become a reference point in sustainability investing. Corporations, NGOs and governmental agencies often refer to the DJSI to illustrate that integrating economic, environmental and social factors into the management of a company increases shareholder value and business activity transparency (Cerin & Dobers, 2001). Table 1: DJSI Corporate Sustainability Assessment criteria Dimension Criteria Economics (33% weight) Codes of Conduct/Compliance/Corruption & Bribery Corporate governance Customer relationship management Financial robustness Investor relations Risk & crisis management Scorecards/measurement systems Strategic planning Industry specific criteria Environment (33% weight) Social (33% weight) Environmental policy/management Environmental performance Environmental reporting Industry specific criteria Corporate citizenship/philanthropy Stakeholders engagement Labour practice indicators Human capital development Knowledge management/organisational learning Social reporting Talent attraction & retention Standards for Suppliers Industry specific criteria Source: indexes.com There are various methods available to researchers seeking to understand the risk disclosure in annual reports, content analysis is the most popular (Guthrie et al., 2004). They also concluded that the method of content analysis is one of the more widely used research methods applied in investigating the type of corporate risk disclosure. This study uses types of risk management disclosure as being used in Amran et al. (2008) including financial risk, operation risk, empowerment risk, information processing and technology risk, integrity risk, and strategic risk. 150

155 The items of each category is presented in Table 2. The formula of risk disclosure index (RDI) as below:- RDI = M d j j=1 M Where, dj is the item j equal to 1 if the item j is disclosed in the annual report, 0 otherwise. M equals to the total number of items in the risk disclosure framework. Table 2: Corporate Risk Management Disclosure Items Types of risk Items (1) Financial risk. Interest risk. Exchange risk.. Commodity.. Liquidity.. Credit (2) Operations risk. Customer satisfaction.. Products development.. Efficiency and performance.. Sourcing.. Stock obsolescence and shrinking.. Product and service failure.. Environment.. Health and safety.. Brand name erosion (3) Empowerment risk. Leadership and management.. Outsourcing.. Performance incentives.. Change readiness.. Communications (4) Information processing and technology risk. Integrity.. Access.. Availability.. Infrastructure (5) Integrity risk. Management and employee fraud.. Illegal acts.. Reputation (6) Strategic risk. Environmental scan.. Industry.. Business portfolio.. Competitors.. Pricing.. Valuation.. Planning.. Life cycle.. Performance measurement.. Regulatory.. Sovereign and political. 151

156 There are three control variables in this study to control the effect on corporate sustainability, i.e. age of business, company size, and leverage. Age of business is calculated as the number of years from inception. Size is included in almost every disclosure study, either as a variable of interest or as a control variable. As the company becomes bigger, the number of stakeholders involved will also increase. With this increase, the burden of disclosure becomes heavier for the company since it has to cater to the needs of a bigger group of people. Leverage has been used as a proxy for risk in many disclosure related studies and the findings show mixed results (Amran et al., 2008). Based on stakeholder theory, the company is expected to undertake more risk disclosure in order to provide justification and explanation for what is happening in the company. When a company has a disproportionately higher level of debt in its capital structure, the creditors may be in a bargaining position to force the company to disclose more information (Amran et al., 2008). Findings The descriptive statistics test produced the maximums, minimums, means, and standard deviations of the dependent and independent variables. Skewness and kurtosis of the data dispersion were also given by the test. In Table 3, the minimum score for the corporate sustainability based on the DJSI index was 0.12 and the maximum score was 0.93, while the average was The results show that on average the corporate sustainability in the research sample was within the acceptable normal range. Table 3: Descriptive statistics (N=80) Minimum Maximum Mean Std. Deviation Skewness Kurtosis risk_fin risk_ops risk_emp risk_it risk_int risk_str risk_all CorpSus Div AgeBiz FirmSz Leverage Notes: risk_fin = finance risk disclosure index; risk_ops = operations risk disclosure index; risk_emp = empowerment risk disclosure index; risk_it = information processing and technology risk disclosure index; risk_int = integrity risk disclosure index; risk_str = strategic risk disclosure index; risk_all = overall risk management disclosure index; CorpSus = corporate sustainability; Div = level of diversification; AgeBiz = age of business from inception; FirmSz = firm size; Leverage = leverage. For corporate risk management disclosure (risk_all), the mean value was with a minimum value of 0.17 and a maximum value of The maximum value of 1.00 shows that there were companies in the sample that fully disclosed their corporate risk items. The average of , indicates that companies generally disclose more than 50% of the items in the list. All six sub categories had mean values above 50% of disclosure. Strategic risk management disclosure (risk_strategic) had the highest mean value of , suggesting that companies preferred to 152

157 disclose strategic items over the other five sub categories. The lowest mean value of was in information processing and technology risk (risk_it). Based on the Herfindahl index as shown in Table 3, the least diversified score is 1 and the most diversified score 0. The maximum score for diversification (Div) was 0.99, while the minimum score was The mean score for diversification was This indicates that on average, most companies in the sample had an inclination towards only low levels of diversification. Table 4 shows the results of multiple regression analyses carried out on Model 1 to test the first hypothesis of the study and its six sub-hypotheses. Model 1a, 1b, 1c, 1f, and 1g show that the risk disclosure is positively related with the corporate sustainability at a 5% confidence level (p<0.05). Model 1d and 1e showed the same relationship, significant at 1% significance level. The first hypothesis is therefore accepted. Risk management disclosure has a positive relationship with the corporate sustainability of a firm. Table 4: Regression analysis results of Model 1 Model 1a Model 1b Model 1c Model 1d Model 1e Model 1f Model 1g Constant (9.457)*** (12.036)*** (12.066)*** (12.705)*** (12.086)*** (11.967)*** (11.143)*** risk_all (3.690)*** risk_fin (2.255)** risk_ops (2.538)** risk_emp (1.887)* risk_it (1.165)* risk_int (4.515)*** risk_stra (3.459)*** Leverage (-1.051) (-0.492) (-0.738) (-0.456) (-0.010) (-0.876) (-0.615) FirmSz (-2.323) (-1.908) (-1.936) (-1.875) (-1.814) (-2.250) (-2.035) AgeBiz (0.820)* (0.698)* (0.682)* (0.686)* (1.059)* (0.601)* (0.641)* R Adjusted R 2 F Statistic p-value D-W Notes: ***significant at 0.01, **significant at 0.05, *significant at 0.10; Model 1: CorpSus = β0 + β1 risk + β2 Leverage + β3 FirmSz + β4 AgeBiz + ε; where CorpSus = corporate sustainability (DJSI index); risk_fin = finance risk disclosure index; risk_ops = operations risk disclosure index; risk_emp = empowerment risk disclosure index; risk_it = information processing and technology risk disclosure index; risk_int = integrity risk disclosure index; risk_str = strategic risk disclosure index; risk_all = overall risk management disclosure index; AgeBiz = age of business from inception; FirmSz = firm size; Leverage = leverage; D-W = Durbin-Watson. The value of the D-W test is in the range of 0 to 4. Values of 1.5 to 2.5 indicate that no autocorrelation problems exist between residuals. 153

158 Tables 5 and 6 show the results of the hierarchal regression analysis on Model 2 and 3 respectively. In Model 2, diversification as a moderating variable was included. In Model 3, the interaction of independent variables and moderating variable were added to the model to test the second hypothesis and its sub-hypotheses. Based on Table 5, all risk management disclosures were found to have a positive and significant relationship with corporate sustainability after adding the moderating variables. Table 5: Regression analysis results of Model 2 Model 2a Model 2b Model 2c Model 2d Model 2e Model 2f Model 2g Constant (5.973)*** (6.406)*** (6.555)*** (6.723)*** (6.361)*** (6.857)*** (7.167)*** risk_all (3.419)*** risk_fin (2.297)** risk_ops (2.491)** risk_emp (1.875)* risk_it (1.304)* risk_int (4.307)*** risk_str (2.923)*** Div (1.707)* (2.178)** (2.082)** (2.118)** (2.205)** (1.784)* (1.226)* Leverage (-1.139) (-0.692) (-0.906) (-0.640) (-0.203) (-1.004) (-0.668) FirmSz (-2.489) (-2.175) (-2.183) (-2.128) (-2.096) (-2.445) (-2.144) AgeBiz (0.804)* (0.680)* (0.668)* (0.670)* (1.078)* (0.595)* (0.645)* R Adjusted R F Statistic p-value D-W Notes: ***significant at 0.01, **significant at 0.05, *significant at 0.10; Model 2: CorpSus = β0 + β1 risk + β2 Div + β3 Leverage + β4 FirmSz + β5 AgeBiz + ε; where CorpSus = corporate sustainability (DJSI index); risk_fin = finance risk disclosure index; risk_ops = operations risk disclosure index; risk_emp = empowerment risk disclosure index; risk_it = information processing and technology risk disclosure index; risk_int = integrity risk disclosure index; risk_str = strategic risk disclosure index; risk_all = overall risk management disclosure index; CorpSus = corporate sustainability; Div = level of diversification; AgeBiz = age of business from inception; FirmSz = firm size; Leverage = leverage; D-W = Durbin-Watson. The value of the D-W test is in the range of 0 to 4. Values of 1.5 to 2.5 indicate that no autocorrelation problems exist between residuals. Table 6 indicates that the relationship between risk management disclosure and corporate sustainability is still positively significant, but not as expected by the second hypotheses. Only four of the seven interaction effects were significantly related with corporate sustainability at the 154

159 1% significance level. This suggests that diversification will only have a moderating role for certain types of risk disclosure. Table 6: Regression Analysis Results of Model 3 Model 3a Model 3b Model 3c Model 3d Model 3e Model 3f Model 3g Constant (2.581)** (3.380)*** (3.603)*** (3.534)*** (3.223)*** (2.527)** (4.302)*** risk_all (0.840)* risk_fin (0.159)* risk_ops (-0.053) risk_emp (0.117)* risk_it (1.515)* risk_int (2.417)** risk_str (1.019)* Leverage (-1.128) (-0.670) (-0.889) (-0.628) (-0.169) (-0.912) (-0.662) FirmSz (-2.468) (-2.180) (-2.203) (-2.130) (-1.937) (-2.398) (-2.125) AgeBiz (0.800)* (0.712)* (0.741)* (0.706)* (0.989)* (0.488)* (0.627)* Div (0.446)* (0.447)* (0.104)* (0.515)* (2.247)** (1.899)* (0.608)* risk_all x Div risk_fin x Div risk_ops x Div risk_emp x Div risk_it x Div risk_int x Div (0.097)* (0.418)* (0.703)* (0.350)* (-1.214) (-1.256) risk_str x Div (-0.037) R Adjusted R F Statistic p-value

160 D-W Notes: ***significant at 0.01, **significant at 0.05, *significant at 0.10; Model 3: CorpSus = β0 + β1 risk + β2 Div + β3 Leverage + β4 FirmSz + β5 AgeBiz + β6 (risk x Div) + ε; where CorpSus = corporate sustainability (DJSI index); risk_fin = finance risk disclosure index; risk_ops = operations risk disclosure index; risk_emp = empowerment risk disclosure index; risk_it = information processing and technology risk disclosure index; risk_int = integrity risk disclosure index; risk_str = strategic risk disclosure index; risk_all = overall risk management disclosure index; CorpSus = corporate sustainability; Div = level of diversification; AgeBiz = age of business from inception; FirmSz = firm size; Leverage = leverage; D-W = Durbin-Watson. The value of the D-W test is in the range of 0 to 4. Values of 1.5 to 2.5 indicate that no autocorrelation problems exist between residuals. Discussion and Conclusion This study aimed to investigate the relationship between corporate risk management disclosure and corporate sustainability among Malaysian listed companies in Based on the disclosures of both corporate risk management and corporate sustainability in annual reports, this study found that there is a positive relationship between corporate risk management disclosure and corporate sustainability. Companies are increasingly pressured to promote and practice sustainability due to global competition (Eweje, 2011; Beermann, 2011; KPMG, 2012). Sustainability, as traditionally defined in the management literature, is continuity through economic performance, growth, and long-term profitability (Aras, & Crowther, 2009). Disclosure of corporate management risk in annual reports has become increasingly important for listed companies in Malaysia to provide investors and stakeholders with confidence through transparency. Effective risk management is essential to improved company performance, contributing to the reduction of fraud and the management of threats. The findings of this study show that there is a significant positive relationship between corporate risk disclosures and corporate sustainability, and furthermore, that diversification also aids corporate sustainability. Hence, corporate management can increase corporate sustainability through greater risk disclosures. This study suggests a longitudinal study (timeline analysis) for future research. Using data from a series of years e.g., , the analysis could become more robust. Cross boundary analysis, such as Malaysia versus Singapore could also be made, so that the unique characteristics of a given country could be isolated and identified. Future research is also encouraged to identify different variables that may be involved. The development of a local risk measurement checklist would help to better reflect on the findings in the local context. References Abraham, S. & Cox, P. (2007). Analyzing the determinants of narrative risk information in UK FTSE 100 annual reports. British Accounting Review, 39, Abdifatah, A. H., & Nazli A. M. G. (2012). Intellectual capital disclosure trends: Some Malaysian evidence, Journal of Intellectual Capital 13(3), Acharya, V. V., Amihid, Y., & Litov, L. (2011). Creditor rights and corporate risk-taking, Journal of Financial Economics, 102(1), Amran, A., Abdul Manaf, R.B &Che Haat M.H. (2008). Risk reporting: an exploratory study on risk management disclosure in Malaysian annual reports. Managerial Auditing Journal, 24(1), Aras, G. & Crowther, D. (2009). Corporate sustainability reporting: A study in disingenuity? Journal of Business Ethics 87,

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163 Corporate Governance and Sustainability Reporting Practices: The Moderating Role of Internal Audit Function Yuvaraj Ganesan * Graduate School of Business, Universiti Sains Malaysia yuvaraj@usm.my Yew Wei Hwa Graduate School of Business, Universiti Sains Malaysia Amar Hisham Jaaffar Department of Management and Human Resource, College of Business Management and Accounting, Universiti Tenaga Nasional, 26700, Muadzam Shah, Pahang, Malaysia. Fathyah Hashim Graduate School of Business, Universiti Sains Malaysia * Corresponding Author Abstract Purpose: The objective of this study is to examine the relationship of corporate governance characteristics and the level of sustainability disclosure with moderating effect of internal audit function. This study focused on the manufacturing industry listed at Main Market Bursa Malaysia. 120 companies were taken in this study. This study underpins Agency Theory to investigate and explain the role played by corporate governance characteristic (e.g. board size, board independence and CEO duality) and internal audit function (IAF) and their association with the level of sustainability disclosure. Design/methodology/approach: Quantitative method by way of content analysis of secondary data was employed to the annual reports of consumer products and industrial products companies listed on the Main Market of Bursa Malaysia in the year Among the secondary data derived from annual reports were board size, board independence, CEO duality, firm size, profitability, internal audit function and sustainability disclosure information. The data obtained was analysed using Partial Least Squares Structural Equation Modeling (PLS-SEM). Findings: CEO duality was found to have significant negative relationship with the level of sustainability disclosure while internal audit function was found moderating the relationship of CEO duality and the level of sustainability disclosure. Research limitation/implications: This study has been carried out just for a one year period. Longitudinal study may improve the consistency of the results. The finding also contributes to the body of knowledge on the moderating effects of internal audit functions and its relationship with corporate governance characteristics and level of sustainability disclosure. Practical implications: The sustainability disclosure level for manufacturing companies has wide gap among themselves. Malaysia manufacturing companies need to improve the sustainability disclosure level to close the gap among themselves. Internal audit function plays an important role 159

164 to monitor and improve sustainability disclosure of the companies. Continuous improvement is needed so that manufacturing industry in Malaysia is able to be a world-class benchmark in future. Originality/ Values: This research paper adds value to current knowledge by highlighting the importance of relationship between corporate governance characteristics, internal audit function, and level of sustainability disclosure, while past research had mostly focused external audit function. Further, this research paper explores the underlying research issues by utilizing PLS- SEM that is not commonly used in the field of sustainability reporting. Keywords: Sustainability Reporting, Internal Audit Function, Corporate Governance, CEO Duality, Board Size Introduction Sustainability reporting nowadays has become a main stream global business practice (KPMG, 2013). It states that even though the fundamental of profit-based companies exist is to serve customer s need, however, they are still expected to fulfil a wide range of stakeholder s need and problems (Ihlen et al. 2011). They are responsible for their stakeholders such as suppliers, customers, shareholders, employees, government, non-government organization, green organizations, unions as well as the society at large (Ihlen et al., 2011). Sustainability disclosure is a promising growing trend in developing countries such as Malaysia (Amran et al. 2013). More Malaysian companies are focusing and practicing sustainability today. This is in line with global trending. Further, this is partly due to the Malaysian government recognition of the importance of sustainability, and hence the government had played a facilitating role in ensuring that the country remains competitive for both local as well as foreign investors. According to Grahovar (2010), companies use sustainability reporting to account for their responsibility, to establish a good reputation and to build a relationship with their stakeholders based on trust. Despite many decades ofresearch on sustainability reporting and corporate governance (Hahn & Kühnen, 2013), yet only limited studies have investigated the relationship between the influence of internal audit function on the relationship between corporate governance characteristic and sustainability reporting practices*. The research paper aims to look into the influence of internal audit function on the relationship between corporate governance characteristics and level of sustainability disclosure of 120 public listed company from manufacturing industry in Literature Review Sustainability Reporting Practices Sustainability activities and practices are important to companies to ensure that their business is running at sustainable way as well as the environment they operate is preserve in sustainable methods (Zainab et al. 2015). In recent years, some of the companies have significantly contributed to the economy and technology but at the same time, they had also been targeted for creating unsustainability problems. These problems included waste generation, source of pollution, unethical product issue, uncontrollable resources mining, human rights especially those large companies who had monopoly on the market (Hussainey & Walker, 2009). One of important ways to resolve those problems is by incorporating sustainability practices in company s value and culture (Zainab et al. 2015). According to Corina (2014), sustainability reporting is also used synonymously with other terms such as corporate social responsibility reporting, corporate responsibility reporting and triple bottom line (TBL) reporting that covered mostly the aspect of economic, environmental, and social 160

165 (Hahn & Kühnen, 2013). KPMG (2015) highlighted that sustainability report is an unbiased, fair, and reasonable disclosure of the company. It should have reported positive and negative issue of the company. Meanwhile, sustainability reporting assists the organisation to set objective, measure performance, change the operation to be more sustainable and communicate the impacts of activities on the society, environment and economy to stakeholders. (GRI, 2013). Corporate Governance and Sustainability Reporting Practices The relationship of corporate governance and sustainability reporting is an important area to study as both these are able to bring benefits such as increasing the company s reputation and profits, improve transparency of company, improve investor s confidence, and many other benefits. Corporate governance and sustainability practices are very closely related to each other (Bhimani & Soonawalla, 2005). Corporate governance and sustainability practices also emphasize on the importance of achieving long term social, environment, and business value which in turn will help to promote a business continued acceptance and existence (Esa & Ghazali, 2012). The concept of corporate social responsibility and disclosure have come together, to ensure better governance (Perrini, 2005; Said et al. 2009). In addition, Shavit and Adam (2011) stated that the need for disclosure and transparency can insure better governance and increase the long term shareholder s value. In addition, Baldarelli and Gigli (2011) noted that the development of sustainability initiatives rewards the firm in terms of superior performance and also persistent profitability. Corporate Governance and Board Characteristics Board Size Board of directors are appointed by shareholders to act on behalf of them to monitor the effectiveness of the organization. They play a very important role in establishing and monitoring corporate governance system in the organization (Khaled, 2011). According to the agency theory, companies are managed by their agents. Therefore, they are responsible in ensuring the businesses are well managed by them. Past study argued that board size can act as mediator to reduce the conflict of interest between management and owners. This is because management can directly access to the company s resources while owner may have different points of view to utilize the resources (Khaled, 2011). Some studies proposed that when there is an increase in board size, at the same time, it will increase communication problems (Said et al, 2009). Besides that, this will also bring up poor coordination issues. The effectiveness of the board to monitor management performance will be decreased. Small boards will mitigate the issue of poor decisions and conflicts between shareholders and managers (Said et al, 2009). Jensen (1993) also found that when size of board is big, it will cause less effectiveness in coordination, communication and decision making. As a result, CEO of the company is more likely to dominate the board decision. Said et al. (2009) also highlighted that poor level of financial disclosure and relationship with board size. This is because the communication problems causes the board of directors not able to do their job effectively and make good decision on it. Ahmed et al. (2006) argued that when board size increases, the functions and roles of directors would be decreasing and be limited. Large board size will have problem of group cohesiveness and it is more difficult for the directors to be united a team. Furthermore, it is noticed that when size becomes bigger, lesser ideas and opinions would be debated (Ahmed et al., 2006). On the other hand, agency theorists argued that bigger board size can reduce the influences of management to dominate the board (Zahra and Pearce, 1989). Bigger board size is able to give different point of views on management issues and to solve the problems of the company (Bonn 161

166 et al. 2004). The CEO would find it more difficult to control the board when the size is bigger. Therefore, big board size is often being related to capability to monitor the decision of management team (Mak & Rousch, 2000). Gabrielsson (2007) argued that bigger board size tends to benefit company because there are different kinds of expertise in the board. They can give advice from different angles based on their unique experiences. Besides, they are able to access to more external resources compared with small board size. Gabrielsson (2007) also highlighted that bigger board size often being described as more active and independent board while smaller board size often being described as passive and family owned board. A study by Gabrielsson (2007) of Swedish companies found that larger board size is able to improve companies performance. Khaled (2011) found large board size is better than small board size. The firm is able to expose to more external environment, resources and information, which can improve company s efficiency. Besides, when there is more information sharing, the decision making will be more effective and be directly beneficial to the shareholders (Khaled, 2011). Board Independence According to agency theory, the responsibility of board of directors is to monitor the performance of management. Therefore, they should not have any interest and relationship with the company so that their decision is truly independent (Tulay, 2016). As suggested by Nicholson and Kiel (2007), the board is truly independent when it consists mostly of directors who are outside of the company. The image of board of directors is more independent when the number of outside director is more in the group (Tulay, 2016). They are not involving in management of company, do not have shareholding of the company and do not have any business transaction with the company. Therefore, they do not have conflict of interest with any party of the company. Independent directors are more convincing that they are able to act on shareholder s interest with their independent judgement (Tulay, 2016). Chen and Jaggi (2000) proposed positive relationship between board independence and level of disclosure. Independent directors want to protect their professionalism and reputation because they want to maintain their outside valuable directorship in the market. Therefore, they are viewed as the group of people who will protect shareholders interest (Chen and Jaggi, 2000). The proportion of outside directors on corporate boards was negatively associated with indicators that measured the quality of the information disclosed, such as the publication of fraudulent or defective financial statements as well as measures of earnings management (Peasnell et al. 2000). Independent directors are not involved in the company management. They are viewed as a party who can defend the interest of shareholders and also stakeholders (Haniffa and Cooke, 2005). They may have tendency to encourage organizations to publish more relevant information to stakeholders. As a result, they are able to handle different stakeholders. Past studies had proposed that the influences of independent directors are the driver for the degree of voluntary disclosures and compliances. Certo et al. (2001) argued that the higher percentage of independent directors can provide assurance of board independence from management. Besides, they can represent multiple responsibilities within the company or among different stakeholders. Independent director s timely presentation of company activities is able to put pressure on the company to ensure the company is well managed in a responsible and sustainable ways (Certo et al., 2001). 162

167 CEO Duality Forker (1992) argued that if a person is occupying a commanding position in the company, it may be tended to be harmful to the shareholders interest. When taking the role of chairman and also CEO, it will bring the whole system to the lowest level of accountability. This is because the conflict of interest exists in this model. Fama (1983) also argued that CEO s role is more on making decision while chairman s role is more on control of the decision. When CEO duality exists in the board, there will be no clear differential roles between this two. Finkelstein and Aveni (1994) claims that CEO duality causes the board not to do their job independently. Therefore, the board is unable to perform monitoring and governance roles efficiently. A study shows that the company s performance can t be discussed openly when CEO duality exist(carver, 1990). Giovanna and Antonio (2012) claimed that CEO duality causes the CEO to have more power and influent in decision making and this would compromise the board s independence (Giovanna and Antonio, 2012). As a result, the main function of the board would be affected. Boards with CEOduality are typically considered to be weaker monitors (Jensen, 1993). Firms characterized by this situation may, therefore, exhibit less disclosure transparency because the board is not in a position to demand greater transparency and CEO duality would tend to reduce the disclosure of information which are negative to company. The empirical results concerning CEO-duality and financial reporting are somewhat mixed. Some studies show no relationship between CEO-duality and reporting disclosure (Agrawal and Chadha, 2005; Uzun et al. 2004; Beasley, 1996). In contrast with the above studies, past studies have proposed positive and significant relationship between CEO-duality and poor disclosure practices. Carcello and Nagy (2004a, 2004b) claimed that lower level of disclosure is related to CEO duality with sampling from US companies. Similar study in Hong Kong, according to Gul and Leung (2004), companies with CEO duality had lower level of voluntary disclosure than those companies who had no CEO duality issue. Ho and Wong (2001) found that corporate disclosure was lower when there is presence of CEO duality on the firm s board. There are also studies to support CEO duality. Anderson and Anthony (1986) claims that it will improve operational excellences because the company will have clearer direction and more defined goals. Besides that, CEO duality is able to give shareholders impression that the company is in focus to achieve the goals. Kaymak (2008) claimed that CEO duality can provide effective and quick decision making process. This is because the CEO is better focused to help improve company s performance. Internal Audit Function and Sustainability Reporting Practices The internal audit function (IAF) is one of the main part of corporate governance system. IAF s role and responsibility had changed timely to suit its expectation. IAF played an important role as surveillance of a company. In addition, IAF roles had evolved to cover more areas such as compliances, risk management and assurance. However, IAF typically involved as consultation instead of direct involvement (Zulkifflee et al. 2012). Independence from management is a key feature of the internal audit function. It is a condition that allows the internal auditor to act in an objective and impartial manner without being subject to the authority of the functions it audits. The ability of internal auditors to execute their roles and responsibilities is vital to the success of the function. Internal auditors need an adequate level of skills and expertise to deliver the depth and quality of the work that is expected of them (MCCG, 2016). Effectively, internal audit supports the governance and strategic decision-making processes of an organisation, by analysing the different risk management systems in place and highlighting areas that could prove problematic to the organisation (Coetzee and Lubbe, 2013). The heightened 163

168 interest in sustainability reporting has been accompanied by an increase in demand for assurance over these disclosures to add to their credibility (Dominic et al. 2015). There is also growing recognition that control assurance services can enhance sustainability reporting systems because it can drive internal organisational improvement and transformation. There is also evidence showing that board of directors and audit committee had requested IAF to involve their roles in sustainability reporting for assurance and consultation (Dominic et al., 2015). Although there were evidences by researchers to argue the IAF of company is more involving in sustainability reporting and practices (Leung et al. 2011; Ridley et al. 2011), there are also evidence that showed IAF is not involving in sustainability issue in some countries. Dominic (2015) indicates that countries such as Australia was very much less focused on sustainability disclosure for their IAF. They are more focused on corporate governance issues. Ahmad et al. (2009) had studied the level of IAF in the Malaysian public sector and how IAF was able to influence the decision making processes. Outcomes of this study indicated that most of public sector were facing short of manpower for their in-house internal auditor. They were not being supported by top management and did not demonstrate good corporation with internal auditor. One of the reason is because the internal auditors were not equipped with necessary knowledge and adequate training on auditing processes and approaches. Firm Size, Profitability and Type of Industry Variables Previous studies found that sizes of company variable have a positive relationship with the extent of corporate social reporting, in which larger companies disclose more CSR information than smaller companies (Haniffa & Cooke, 2005; Vintila, 2013; Bowrin, 2013; Giannarakis, 2014). Compared to small companies, larger companies have more stakeholders that they need higher level of disclosures in order to have a better impact on social expectations as suggested by the Legitimacy theory (Suttipun & Stanton, 2012). Chu et al. (2013) on their study of the drivers for greenhouse gas reporting among Chinese companies have found that larger companies have more tendencies to report higher levels of greenhouse gas disclosure because of their higher level of carbon dioxide emissions. Furthermore, Siregar and Bachtiar (2010) study s findings suggested that larger companies have more disclosures due to two reasons. One of the reasons is larger resources base to involve in social activities and larger asset base over which to spread the costs of social responsibility. Another reason is larger companies suffer higher pressure to have disclosures of their social activities for their stakeholders. Sustainability disclosure level may be different from sector to sector. As an example, sector such as consumer products, industrial products and plantation have experienced higher sustainability disclosure level compared with other industries (Amran and Devi, 2008). One of the reasons for higher disclosure rate is because the nature of activities of the industry may create problem and impact the sustainable issues if it is not handled correctly (Amran and Devi, 2008). The public pressure and expectation on environmental issues are also different from the Chemical industry compared with banking and finance. This is because manufacturing and plantation industries may cause environmental problems (Deegan et al. 2002; Campbell et al. 2003). Therefore, these industries may have greater rate of sustainability disclosure compared with other less sensitive industry (Deegan et al., 2002). Previous studies had found that profitability of company had a positive relationship with the sustainability disclosure level (Haniffa and Cooke, 2005; Hussainey et al. 2011; Mulyadi and Anwar, 2012; Vintila, 2013; Giannarakis, 2014). Chek et al. (2013) on their study of sustainability disclosure rate in consumer products and plantation sectors of public listed companies at Bursa 164

169 Malaysia has found that when company s return of investment is higher, the sustainability disclosure in their annual reports will be more. Moreover, Gamerschlag et al. (2010) found that German s companies tended to report more on information about environmental when the companies have higher profits compared with companies which had poor earning power. Alikhani and Maranjory (2013) explored the relationship between sustainability disclosure level and profitability. One of their findings showed no relationship between profitability and CSED level. Brown and Caylor (2009) found that governance improves operating performance by using Return on Assets (ROA) as measurement. Marty (2015) studied the relationship of corporate governance and social responsibility by using ROA as control variable and found there was a positive relationship with disclosure. Theoretical Framework and Hypothesis Development The sustainability disclosure was the dependent variable (DV) of this study and items for the variables were extract from annual reports. Corporate governance characteristics are the independent variables (IV). In this study the board size, board independence and CEO duality are chosen as corporate governance characteristics. Internal audit function introduced as moderating variable (MV) in the relationship between the corporate governance characteristic (IV) and sustainability disclosure (DV). Internal Audit parameters will be in-house or outsourced internal audit function. Outsource internal audit is conducted by third party whereas insource internal audit is conducted by employees of the company. Control variables for this study are firm size, profitability and sector. Firm size is defined as total assets of company. Profitability are calculated as return of asset (ROA). Companies listed at Bursa Malaysia under consumer and industrial products are chosen under sector. Theoretical framework as shown in Figure 1. Corporate governance characteristics: Board size Board independence CEO duality Sustainability Disclosure Internal Audit Function Figure 1: Theoretical Framework Board Size and Sustainability Disclosure Previous studies show positive relationship with board size and various types of voluntary disclosure. Rao et al. (2012) concluded positive relationship of board size and environmental disclosure. Cheng and Courtenay (2006), Akhtaruddin (2009) indicated board size has positive relation with voluntary corporate disclosure. Said et al. (2009) empirical results show positive 165

170 relationship with board size and CSR disclosure index. Jizi et al. (2014) shows positive relationship with board size and CSR reporting. Hence, it is hypothesized that: H1: Board size is positively impacts sustainability disclosure. Board Independence and Sustainability Disclosure Agency theory suggests that an independent governing board can control and monitor the agents actions effectively. Furthermore, independent directors symbolise higher transparency which leads towards long-term value enhancement (Jizi et al, 2014). Previous studies showed positive relationship of board independence and sustainability disclosure. Wang and Coffey (1992) showed positive relationship with board independence and corporate philanthropy. Johnson and Greening (1999) showed positive relationship with board independence and people and product dimension of CSR. Cheng and Courtenay (2006), Lim et al. (2007) showed positive relationship with board independence and voluntary corporate disclosure. Dunn and Sainty (2009) showed positive relationship with board independence and corporate social performance score. Hence, it is hypothesized that: H2: Board independence positively impacts sustainability disclosure. CEO Duality and Sustainability Disclosure Separating the positions of CEO and chairman of the board arguably encouraged to enhance the monitoring the activities of board director (Jensen, 1993). This dual role situation is quite common in some European countries (UK, France, Spain and Italy), but it may require a balance. Indeed, companies with CEO and also holding chairman position have higher chances to be related to the lower levels of quality of sustainability disclosures. This is because the board is less encouraged and motivated to monitor the companies transparency effectively and promoting a greater level of disclosure. Such lower levels of transparency might be used to conceal fraud and incompetence. Forker (1992), Gul and Leung (2004) and Roberts et al. (2005) argued that CEO duality reduces overall accountability, thus making companies less transparent not only for shareholders but for all relevant stakeholders. Yuen et al. (2009) conducted study on the influence of ownership features, corporate governance mechanisms, and firm-specific characteristics on the voluntary disclosure of randomly selected 200 publicly-listed companies in China. They found negative relationship between CEO duality and the extent of disclosures. This is supported by other empirical studies, such as Ajibolade and Uwuigbe, 2013; Michelon and Parbonetti, 2008; Khan et al. 2012; Buniamin et al. 2008). Hence, it is hypothesized that: H3: CEO duality negatively impacts sustainability disclosure. The Moderating Effect of Internal Audit Function (In-house and Outsourced) on the Relationship between Corporate Governance Characteristics and Sustainability Disclosure The empirical results show inconsistent findings in the relationship between the corporate governance and sustainability disclosure, and these were due to some variables need to be included as moderating. Previous studies have used culture and found positive in board characteristics such as board size and board independence. In this study internal audit function in term of in-house and outsourced were used as moderating variables. 166

171 Internal audit can improve the reliability of this information. Karen (2008) highlighted that outsourcing practice occurs in the audit industry and there has been a growing interest in it. Contracting internal audit services brings value to the organisations who do it by providing both flexibility and expertise when needed most. It also allows management to respond to fast-changing market demands without the burden of permanently employing specialist expertise. Outsourcing is, perhaps particularly, useful for small and medium enterprise (SMEs) requiring expertise as they are resource-poor in general and temporary assistance provides a useful boost (Van Peursem & Wells, 2000). Carmel Mortell, Internal Audit at KPMG Australia (KPMG, 2013) highlighted that big companies normally have their Internal Audit team or department. The size of the team is even bigger for multinational companies which can have more than 1000 people. Internal Audit team need to have various skills so that they can conduct good mechanism. Normally small and medium size organization will engage with outsourced internal audit function. In-house or outsourced internal audit function have their own pros and cons. The benefit to have in-house internal audit function is that they know well about the company processes and issues so that a quick and effective decision can be made. However, it caused management to have full control on it and tended to have independency issue. The benefits of outsourced internal audit function are that more independent image, able to resolve expertise issue, and more cost flexible. However, they tended to be short of company s knowledge and issues so that it might be not effective in some processes. Hence, it is hypothesized that: H4a: Internal audit function moderated the relationship between board size and sustainability disclosure. H4b: Internal audit function moderated the relationship between board independence and sustainability disclosure. H4c: Internal audit function moderated the relationship between CEO duality and sustainability disclosure. Method Data Collection The source of data for this study was collected from companies annual report as this study were applied secondary data. The annual report data was used to assess the variable for board size, board independence, CEO duality, firm size, profitability, internal audit function and sustainability reporting information. Annual reports are chosen as the main data in this study due to the reasons that annual reports are the most important source of corporate communication and reporting. Public listed companies annual reports in Malaysia are the most accessible source of information (Saleh et al. 2010). The reason for using 2015 annual reports instead of 2016 annual reports is because some of the companies have not published their 2016 annual report at this point of study. Besides, this study does not take other sources of sustainability disclosure of companies if the companies reported and disclosed in their company s websites, independent sustainability disclosure report, press material and other channel. This study did not take companies that reported in separate sustainability disclosure report as a sample. This is because to standardize the sample and comparable data between each other. There were several types of internal audit function namely in-house, outsourced, co-sourcing, subcontracting, and secondment. For this study, only companies with internal audit function in-house or outsourced were selected as a sample. 167

172 Sample Selection The sample size consists of 120 consumer products and industrial products companies listed on Main Market of Bursa Malaysia. The minimum sample size for the study is 103 was calculated used G power software. Thus, 120 companies were chosen from 347 companies that consist of 126 consumer products companies and 221 industrial products companies. From the 120 samples, 44 companies were taken from consumer products (36%) and 76 companies were taken from industrial products (64%). Random sampling method was applied to get 44 companies out of 126 from consumer products companies and 76 companies out of 221 from industrial products companies. Measures Dependent variable (DV) for this study is the extent of sustainability disclosure in annual report for listed companies at Bursa Malaysia. Sustainability disclosure is determined using the content analysis methodology. Content analysis is a method of codifying the desired report, sentences or word into what type of group that the researcher want it to classified as. After obtaining the data, quantitative scales were performed to be used for analysis later. The content analysis was carried out on public listed company s annual report of the companies for the year Annual reports are the most important sources of information for stakeholders. It is accessible through stock exchange website or company s website. Study on the sustainability information disclosed in annual reports are one of the ways to examine the level of sustainability reporting level. First, a research instrument consisting of four themes under sustainability (environmental, community, workplace and marketplace) will be designed with reference to items or checklists employed in Mohamad Hafiz et al. (2016). This is followed by using a method of measurement. This study used length of sustainability reporting items in terms of number of sentences will be applied to capture the nature of reporting made in each of the four themes (refer Appendix A). Total Sustainability Disclosure = Total sentences on Environmental Disclosure + Total sentences on Community Disclosure + Total sentences on Workplace Disclosure + Total sentences on Marketplace Disclosure Total sentences in each theme were counted by sums of number of sentences reported for each of the sub-categories. In the case that one sentence with more than one possible category, it should be categorized based on first activity mentioned in the sentence. Any repeated reporting shall be recorded accordingly. For example, when the activities are mentioned by Chairman s report and subsequently at sustainability disclosure, it will count as two times reporting. Independent Variable (IV) for this study are are board size, board independence and CEO duality. The table 1 summarized how those IVs were measured. All the information were collected from the annual reports of the companies. Table 1: Measurement of independent variables Independent Variables Measurement Board Size BSIZE : Number of directors on the board (Said et al., 2009) Board Independence BIND : Percentage of independence non-executive director over board size (Ismail et al. 2014) 168

173 CEO Duality CEO : CEO of company also holds the board chairman position. 1 if the CEO holds the chairman position, and otherwise 0 (Said et al., 2009) Moderating Variable for this study is in-sourced internal audit and out-sourced internal audit. Insourced internal audit is conducted by employees themselves and otherwise for out-sourced. The data was extracted from annual reports when it mentioned in the companies annual report under internal audit function section. 1 is to indicate internal audit was conducted by in-house. 0 is to indicate internal audit was conducted by out-sourced. Control Variable for this study are firm size, profitability, and sectors as depicted in Table 2. Firm size has persistently been found to be significantly and positively associated with disclosure, suggesting that larger companies follow higher disclosures (Hackston and Milne 1996). The size measured by the total assets of the companies reported in annual report Meanwhile, profitability measure in term of return on the assets (ROA). Two sectors were selected that are consumer products and industrial products. Table 2: Measurement of Control Variables Independent Variables Measurement Firm Size FSIZE : Total assets of companies reported in annual report. Profitability Sector ROA : Return on the assets is the percentage of profit after tax over total assets of company. SECTOR : The sector which companies listed under Bursa Malaysia Main Market. 1 is industrial products and 0 is for consumer products. Data Analysis Descriptive Analysis The latest version of SPSS software (IBM SPSS Statistics version 24) was used to run frequency analysis of the sample. Frequency analysis was conducted on variables to check validity samples and to check whether there are missing sample for each variable. Table 3 shows the sample s composition. Total of 347 companies from industrial products and consumer products. Samples were taken from 76 industrial products and 44 from consumer products that were equivalent to 64% industrial and 36% consumer products. Table 3: Descriptive statistics of all the variables used in the study Variables Frequency Percent Nominal variables Internal audit function -Outsourced In house Total CEO duality -No

174 -Yes Total Variables Minimum Maximum Mean SD Continuous variables Bsize Bind 27.27% 75.00% 47.48% 12.12% Fsize 30,833,000 14,382,007, ,254,609 1,768,184,06 2 Roa % 35.58% 3.409% 11.56% Susd Table 3 provides the descriptive statistics for the variables used in the study. Internal audit function (IAF) with one nominal variables of the 120 observed firms, 71 (59.2 percent) had outsourced internal audit function, while 49 (40.8 percent) had in house internal audit function. CEO duality (CEO) of the 120 observed firms, 95 (79.2 percent) had no CEO duality, while 25 (20.8 percent) had CEO duality. With regard to Continuous variables in this study, the average board size (BSIZE) was 7.48 with a minimum size was 4 and maximum size was 12. Board independence (BIND) had a maximum (minimum) of 75.00% (27.27%) and a mean (standard deviation) of 47.48% (12.12%).The average firm size (FSIZE) 919,254,609 had a minimum of 30,833,000 and maximum of 14,382,007,000 and a standard deviation of 1,768,184,062. Return on the assets (ROA) has a minimum of % and maximum 35.58%, mean of 3.409% and a standard deviation of 11.56%. Lastly, the average level of sustainability disclosure (SUSD) 36.41, with a maximum (minimum) of 271 (3) and standard deviation of Structural Model Path Coefficient This study had used structural equation modeling using partial least squares (PLS) to test the hypotheses. PLS is an extension of traditional least squares based regression and uses iteration to extend regression principles for the case of more complex constructs (Hair et al. 2013). The analysis is done by testing the relationships among the constructs and the hypotheses are tested using the structural model. Path coefficients of the structural model can be obtained through PLS algorithm calculation (Ramayah, 2014). Path coefficients indicated the hypothesised relationships among the variables, whether is positive or negative. PLS bootstrapping calculation was run after PLS algorithm calculation in the structural model to obtain t-value. Commonly used critical values for one-tailed tests are with the significance level at 95%, and 2.33 with the significance level of 99% (Ramayah, 2014). When the t-value is greater than the critical value, it is concluded that the path coefficient is significant. Hair et al. (2013) posited that there are four key criteria for assessing the structural model in PLSSEM. These include assessments of: 1) significance of the path coefficients, 2) coefficient determination (R²), 3) the effect size (f²), and lastly 4) predictive relevance (Q²).The results for the assessment of the significance of path coefficients are presented in Figure 2, and Table 4 respectively. 170

175 Figure 2: PLS Structural model for path coefficient and R 2 with moderating effect The structural model in Fig. 1 presented a path model with three direct effects (BSIZE->SUSD); (BIND->SUSD); and (CEO->SUSD) and three indirect (moderating) effects (BSIZE*IAF-> SUSD); (BIND*IAF-> SUSD); and (CEO*IAF-> SUSD) respectively. Evaluation of structural path model is presented in Table 4. Table 4: Path Coefficient and t-value of Independent Variables with Moderating Effect Hypothesis Relationship Path Coefficient Standard Error t-value (1 tailed) Decision H1 BSIZE SUSD Not supported H2 BIND SUSD Not supported H3 CEO SUSD ** Supported H4a BSIZE * IAF SUSD Not Supported H4b BIND * IAF SUSD Not Supported H4c CEO * IAF SUSD ** Supported **p<0.01 The analysis also revealed strong support for the structural model. The coefficient determination (R²) of the model was implying that both independent variables explained 43,8 percent 171

176 changes or variations in the level of sustainability disclosure. Chin (1998) classified the R-squared of 0.19, 0.33 and 0.67 as weak, moderate and substantial respectively. Thus, the R² in this study can be classified as moderate. Another, criterion for evaluating a structural model is effect-size (f²). Cohen (1988) classified effect-size of 0.02, 0.15 and 0.35 as small, medium, large respectively. The effect size (f²) of the self-efficacy was which can be classified as small. However, as mentioned by Chin et al. (2003) that small effect size f 2 does not imply that the moderating effect is insignificant. It is because even small interaction effects can be meaningful under extreme moderating conditions, if the resulting beta changes are meaningful, then it is important to take these conditions into account. The last evaluation criterion for the structural model is predictive relevance (Q²). It is evaluated using construct-cross validated redundancy. Thus, when (Q²) is greater than zero, the model is said to have predictive relevance (Hair et al., 2014). With (Q²) of 0.230, which is greater than zero, the model of this study can be said to have predictive relevance. Discussion Table 4 summarised the path coefficient, standard error, t-value for each independent variable to dependent variable relationship. Hypothesis H1 predicts that board size positively impacts sustainability disclosure. With larger board size, it is predicted that sustainability disclosure will be higher. The result of the analysis showed H1 as statistically insignificant (path coefficient = 0.094, t-value = 0.998), thus H1 was rejected. The result from this study portrays that board size did not affect the relationship with sustainability disclosure as the result showed insignificant relationship. This result was similar with previous study from Saha and Akter (2013), Giannarakis (2014) and Jo and Harjoto (2011). Hypothesis H2 proposed that board independence positively impacts sustainability disclosure. With more independent non-executive directors on the board, predicted that sustainability disclosure will be higher. However, H2 result shows it was statistically insignificant (path coefficient = 0.048, t-value = 0.708), thus H2 was rejected. The results is in line with previous studies conducted by Said et al. (2009), Janggu et al. (2014) and Mohd Ghazali and Weetman (2006) study. Said et al (2009), Janggu et al. (2014) and Mohd Ghazali and Weetman (2006) studies were conducted in Malaysia and all resulted insignificant relationship between board independence and sustainability disclosure. Hypothesis H3 predicts that CEO duality negatively impacts sustainability disclosure. The results show that H3 is statistically significant at p < 0.05 and negatively related (path coefficient = , t-value = 2.21), thus H3 was accepted. The finding is consistent with previous studies conducted by Giannarakis (2014), which had negative and significant results. H4a proposed that internal audit function moderated the relationship between sustainability disclosure and board size. However, the result showed statistically insignificant (path coefficient = 0.128, t-value = 1.319). Thus H4a was rejected. This finding shows that the in-house or outsourced internal audit function did not play significant roles in improving sustainability disclosure regardless how big the board size. H4b proposed that internal audit function moderated the relationship between sustainability disclosure and board independence. However, the result shows statistically insignificant (path coefficient = , t-value = 0.449). Thus H4b was rejected. This finding demonstrates that the in-house or out-sourced internal audit function did not play significant roles to improve sustainability disclosure regardless the percentage of board independence in the company. H4c proposed that internal audit function moderated the relationship between sustainability disclosure and CEO duality. The results show it was statistically significant (p<0.01) and negatively related (path coefficient = , t-value = 2.673). Thus, H4c was accepted. This result demonstrates that when there was no CEO duality in the 172

177 Sustainability Disclosure Global Business and Management Research: An International Journal company, the sustainability disclosure was higher in term of in-house and out-sourced internal audit function compared when there was CEO duality in the board. In-house internal audit function had shown more significant effect on CEO duality and sustainability disclosure compared with out-sourced internal audit function. Sustainability disclosure was higher for in-house internal audit function when there was no CEO duality compared with out-sourced internal audit function. Sustainability disclosure was also higher for in-house internal audit function when there was CEO duality compared with out-sourced internal audit function. However, the rate of sustainability disclosure decreased more significant for in-house internal audit function compared with outsourced internal audit function. This may be due to when there was CEO duality in the board, they can control the in-house internal audit function compared with out-sourced internal audit function. In-house internal audit function tends to know more about its company nature of business and operation. Some information may screened out by the CEO duality as mentioned in the previous study about the transparency issue. While outsourced internal audit function tended to be more independent because they are from third party. Figure 3 illustrates the plotted graph used for analysing the moderating effect on the relationship between sustainability disclosure and CEO duality. It shows that the sustainability disclosure level was higher when there is no CEO duality in the company. The sustainability disclosure rate is higher for in-house and out-sourced compared with when CEO duality were present in the board Outsourced In-house No CEO Duality With CEO Duality Figure 3: The moderating effect IAF on the relationship between sustainability disclosure and CEO duality. Conclusion This study shows the model of corporate governance on relationship of sustainability disclosure with moderator effect of internal audit function. This study only focused on 120 companies listed at Main Market Bursa Malaysia under consumer and industrial products sector (manufacturing industry). Manufacturing industry was selected as a control variable for several reasons. First, manufacturing industry in Malaysia tended to be more labour intensive. Companies tended to disclose more on workplace theme. Second, manufacturing industry is energy intensive. 173

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184 Tourism Demand among International Students: Implications on Penang Tourism Industry Chang Ee Ling Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Christopher Richardson* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia * Corresponding Author Abstract Purpose: This study investigates the determinants of tourism demand among international students in a public university located in the Malaysian state of Penang. The university is located in the tourism enclave of Penang making it an ideal choice for travel seekers. Several factors were included in this study covering demographic characteristics of the students, the destination image of Penang, the quality of accommodation as well as the quality of food. Design/methodology/approach: A close-ended questionnaire was distributed to postgraduate students in the public university both by hand and via eklectronicaly using Google Form. Of the 320 questionnaires distributed, 116 were found to be valid for analysis after rejecting incomplete forms and forms with irrelevant information. Structural equation modelling and analysis of variance estimations were used in this study. Findings: The study found that age, gender, household income and nationality have no statistically significant infuence on tourism demand. Duration of study provided some evidence of statistical influence on tourism demand whereby the longer a student stayed in a programme, the higher the chances of embarking on tourist activities. It was also found that both quality of accommodation and quality of food have a positive influence on the demand for tourism among these international students. Research limitations/implications: The sample size of only 116 respondents is rather low especially when structural equation modelling is applied. The sample is also only the international students studying in a public university in Penang. With the number of public universities in Malaysia, the results of this study cannot be representative. The financial status, nature and culture of many of these students could be very different from students who are studying in a private university. Practical implications: Bring awareness to the importance of educational tourism to the country s economy. Provide deeper understanding to relevant parties such as tour operators, hoteliers, transportation providers on the need for enhanced service to attract more tourists. Suggestions to improve tourism related services; volunteer tour guides, river cruises, better transportation and all-in-one tourist counter in educational institutions. Originality/value: Provide researchers a better insight and understanding of academic tourism. Serve as the basic foundation for academics or researchers who are interested in conducting indepth studies on international students as tourists. 180

185 Keywords: Educational Tourism, International Students, Penang, Structural equation modelling (SEM) Introduction There is an increase in the number of students choosing to study abroad from year to year. Approximately, 96.9 per cent of students who choose to study abroad enrolled in universities located in Organisation for Economic Co-operation and Development countries. Approximately 47.6 per cent of the students who study abroad were in advanced research institutions especially performing their doctoral studies. Students who are going to a particular region are often seen as only students, and usually governments and tourist agencies often fail to notice that they are also tourists, in a way. A substantial percentage of the international students often missed being included in tourism statistics as the students are not included in the classification of international visitors. To be classified as an international visitor the students have to have lived in a foreign country and stayed in the host destination for up to 365 continuous days (WTO, 2010). There is huge potential in hosting international students as they, in a way, become captive audience. The tour agencies or operators in the host destination could offer these students the right blend of products to attract them to travel locally or regionally. Many students are presented with the opportunities to travel in the towns and cities where their universities reside. Most students would take advantage of these opportunities to travel locally as well as further if time and finances allow. Looking back in history, Malaysia has been sending students abroad for decades by providing scholarships to its students especially in key areas necessary for national development. Until year 2007, Malaysia had sent out more students for overseas education than it received. In 2009, 47.6 per cent of these students were enrolled in Australian universities, second choice being United Kingdom at 23.8 per cent and finally the United States at 16.2 per cent. The trend is slowly moving towards channelling the international student community towards this part of the region. International students contribute in the host country in more than one way. According to the World Tourism Organization (2015), international tourism has contributed almost US$1.1 trillion in 2008 in total income, or US$3 billion a day. The main argument here is that with the influx of international students to Malaysia, there is an economic advantage to this nation as these students would eventually be our potential tourist target. Most studies have depended on the survey on respondents from one department or students of one university in the central part of Malaysia. As time is of the essence here, the researcher would focus the study on the international student community of a single university which is located in a tourism hub in the northern part of the country which has not been given much attention in terms of scholarly research. Research Objectives The main objective of this study is to examine the determinants of tourist demand among international students especially in the state of Penang. Therefore, this becomes the primary premise behind this study: 1. To evaluate the demographic determinants of tourism demand. 2. To evaluate the role of destination image on the tourism demand. 3. To evaluate the quality of accommodation on the tourism demand. 181

186 4. To evaluate the quality of food on the tourism demand. 5. To propose the strategies local tourist operators can use to attract foreign students as tourist. Research Questions To achieve the above research objectives, this study tries to answer the following research questions: 1. What is the relationship between demographic determinants and tourism demand? 2. What is the relationship between destination image and tourism demand? 3. What is the relationship between quality of accommodation and tourism demand? 4. What is the relationship between quality of food and tourism demand? 5. What are the strategies that tourist operators can create to attract foreign students as tourist? Literature review On a study on an international student's decision making process on studying in a foreign country, Wilkins, Balakrishnan, & Huisman (2012) found that there are two main factors that influence students' decision to further their studies in a foreign place; those that are related to the university and those that are related to the destination. Not many research studies have been carried out to ascertain the relationship between education and travelling in a host country despite the fact that international students would obviously have to travel to the study destination of their choice (Glover, 2011). One such study worth mentioning is a study on the level of satisfaction of exchange students in Australian universities by Llewellyn-Smith & McCabe (2008), which analysed the factors attracting exchange students by comparing the characteristics of host destination with the characteristics of the university. The classical definition of demand borrowed from economics is the originator of the concept of tourism demand. Tourism demand is usually regarded as a measure of a visitors' exploitation of a good or a service. Information related to the number of tourists arriving and the amount that they spend are often used to measure tourism demand in empirical research. With that note, tourism demand is a special form of demand on tourism product in which the product is a collection of complementary goods and services relevant to tourism (Morley, 1992). Tourism demand is usually regarded as a measure of a visitors exploitation of a good or a service (Frechtling, 2001). Several research have used survey questionnaires whereby several questions related to the intention to travel is asked from respondents including questions related to willingness to travel, motivated to travel, willing to spend money on travel, allocated funds for travel (Chiu, 2008; Reisinger & Mavondo, 2006; Suvantola, 2002). Motivation behind a travel destination is also an oft-studied dependent variable in many studies (Crompton, 1979; Mak et al., 2009; Park & Yoon, 2009; Pearce 2005). Segregating the target market into smaller segments to make it easier to assess the target group s specific behaviours, needs and desires is the essence of market segmentation (Kotler, Roberto & Lee, 2002). Market segmentation is crucial as it helps marketers in identifying different groups of consumers who behave quite differently from one another. Sophisticated analytical techniques are often used by market researchers in their search for better ways of identifying different market segments and product differentiation opportunities (Dickson & Ginter, 1987). 182

187 Since there is no specific agreement on the right way to segment the market, marketers depended on Kotler s criteria, which divided the market into four major segments; geographic, demographic, psychographic, and behaviouristic (Kotler, 1997). According to Armstrong and Kotler (2005), the demographic segmentation divides consumers into different segments based on specific demographic values such as gender, age, family life cycle, family size, occupation, income, religion, education, race, nationality, social class and generation. Psychographic segmentation divides people according to their lifestyles, attitudes, interests, opinions, and values (Pickton & Broderick, 2005). Behavioural variables such as loyalty status, benefits, occasions, user s status, buyer-readiness stage, attitude and usage rate are some of the better initial points for crating market segments (Kotler & Keller, 2009). The wealth of educational opportunities that are already in existent in other countries make for the constant shifting of students to different countries. However, other reasons cannot be forgotten as well. Choosing a destination be it, for education or tourism, is also based upon destination image (Sirakaya, Sonmez, & Choi, 2001). Blattberg, Peacock, and Sen (1976) stated that demographics relates very closely with buyer behaviour, while Frank, Massey and Wind (1972) discussed the use of demographic characteristics in market segmentation efforts. Many researchers found that demographic variables influence the decision on travel choice (Taylor, Fletcher, and Clabaugh, 1993; Teaff and Turping, 1996). Method Research design refers to the planning of data collecting method, variables measurement and method of analysing the data collected. In order to fulfil the first of the study's objectives, namely to identify the determinants of tourism demand among international students residing in Penang, a survey was conducted to determine the factors influencing the international student community in their involvement in tourist related activities in Penang predominantly. The subjects of this study are international students currently studying at a public university in Penang. Although the university has campuses across the country, including in Kelantan and Perak, the present study focuses on students based in the main campus in Penang because the researcher is a full time employ and mobility is not a luxury that can be afforded. In order to collect data from the related respondents, a survey via questionnaire with close-ended questions was implemented. This method was chosen due to the ease of data collection to determine the relationship of the independent variables to the dependent variable by distributing the questionnaire to the target respondents. The questionnaire was distributed both by hand as well as electronically through Google Forms. To complement the research study, descriptive research methods have been used in this study as the main focus of this study was to find out answers to questions such as what are the main determinants of tourism among international students and on whether there is any relationship between the independent variables and dependent variable. Ridhi and Bimal (2013) mentioned that descriptive research is meant for finding the answer for the five common questions which involve what, where, which, how and when. Descriptive analysis is used in this study as it is relevant in the segmentation of international students who are more prone to tourism activities. Structural equation modelling (SEM) was used in this study because it is, for the most part, appropriate for tourism research because the factors or determinants influencing tourism demand are usually associated with individual determinants of consumer behaviour (Smith, 1994) as 183

188 tourists are consumers. For example, the travel decision process is gravely influenced by the differences in images of destinations, perceptions, attitudes, and travel motivations (Sirakaya & Woodside, 2005). ). Given that individual determinants are unobserved, the SEM model can be best used to represent the observed dimensions of an unobserved structure. Apart from that, analysis of variance was also included in the study to analyse the relationship between demographics and tourism demand. All analysis was conducted using IBM SPSS Version 24 and SPSS AMOS Version 24. Findings There were a total of 116 respondents, all of whom are postgraduate students, who took part in this survey. Identifying the international students was a bit difficult as they were not exactly stationed in one place. The library, cafeteria and the lecture halls were the only place where one can find these international students. There was also screening that was done with the questionnaires as 127 returned the questionnaires but only 116 can be used. Six of the questionnaires were filled up by exchange students who were not the target respondents. Five questionnaires had missing crucial information which would not have made good analysis. Normality and outliers One of the main assumptions of implementing structural equation modelling (SEM) method of analysis is that the data used in the study must be normally distributed (Arbuckle, 1999). The data has to be tested for normality before confirmatory factor analysis and path analysis can be carried out. West et al. (1995) consider any value equal to or greater than 7 to be a sign of nonnormality. Using this value of 7 as a guide, a review of the kurtosis values reported in Appendix A shows no item to be substantially kurtotic. The index of multivariate kurtosis and its critical ratio, appear at the bottom of the table. Most researchers use the critical ratio of above 5.00 as an indication that the data is non-normally distributed (Bentler, 1990). The data in this study shows the distribution with a multivariate kurtosis of The data is normally distributed at the univariate level but not at the multivariate level. This would not affect the fit of the model or the results of the study (Arbuckle, 1999). Using the mahanalobis d- squared, there seem to be no serious case of outliers in the data as can be seen in Appendix B. Construct validity Construct validity tests how well the results obtained from the use of the measurement fit the theories around which the test was designed (Sekaran & Bougie, 2016). The inspection was achieved by applying convergent and discriminant validity. The ideal level of standardized loadings for reflective indicators is above 0.70 but 0.60 is considered to be an acceptable level (Barclay et al., 1995). Nonetheless, the cut off point as suggested by Hair et al (2013) at 0.5 points were used here to capture more indicators in the measurement model. Reliability In order to test out the degree of a scale free from random error, reliability analysis was carried out. On the other hand, the inter item consistency of measurement items was tested using Cronbach s Alpha (Sekaran & Bougie, 2016). A Cronbach s Alpha value above 0.70 is considered as good where a value between is considered as fair and the value below 0.5 is not accepted (Nunnally, 1978). 184

189 Table 1: Reliability test Construct Cronbach s Alpa Number of items Destination Image Quality of accommodation Quality of food Tourism demand According to Table 1, all the constructs have an alpha value exceeding 0.7 except for tourism demand which only has alpha = According to Nunnaly (1978), this is still good enough to deem the measurement instrument reliable. Convergent Validity All items in the destination image, quality of accommodation, quality of food and tourism demand construct showed a high level of convergent validity with all items being significant at the 1% level. Correlation estimates for all the items in all four constructs measures a value of more than 0.7. Several measurements are used in reaching the conclusion of convergent validity including the Kaiser-Meyer-Olkin (KMO) Measure of Sampling Adequacy, Bartlett s Test of Sphericity, the average variance extracted (AVE) and composite reliability (CR). Table 2: Convergent validity Constructs KMO Bartlett s AVE CR Destination image Quality of accommodation Quality of food Tourism demand The only issue in this data is that the AVE for the destination image construct is less than the expected 0.50 and the KMO for tourism demand construct is less than All the other measurements are acceptable to conclude a convergent validity for these constructs. Common method bias The data was also tested for common method bias which can happen if the dependent and independent variables were both measured using the same questionnaire and at the same period. CMV is not an issue if less than half of all variance can be explained by the first factor and more than one factor emerges with Eigenvalue greater than one (Podsakoff et al., 2003). Appendix C shows that the first factor accounts for percent variances and there are 12 factors with Eigenvalues more than 1.0. The data is not biased and therefore, fulfil the requirement for CMV. Goodness of fit measures Goodness of Fit (GOF) tests are used to examine the way in which the fixed portions of the model fit the observed data. Once model parameters have been estimated, the hypothesised model would be either retained or rejected. The null hypothesis is that the model fits the data and there should not be enough statistical power to reject the null hypothesis. 185

190 Table 3: Goodness of Fit Index Name of Index Requirements Value Results CMIN/df Good Fit CFI Moderately good fit RMSEA Not a good fit RMR Good Fit GFI Moderately good fit Five different goodness of fit measurement were used in this study. All except one showed that data did not fit the model. Since the rest of the indices showed that there is model fit, it can be assumed that the data fit the model of study. The final model Path coefficients were used for hypothesis testing. This study consists of a total of eight direct hypotheses. It is justified that one tailed test was performed as the hypotheses of this study aims to investigate the relationship between variables only in a single direction. Based on Hair et al. (2013), for one tailed test, the critical values were 1.65, 2.33 and In which they were at 5% significant, 1% significant and 0.1% significant respectively. Table 4: Regression weights Item Construct Estimate P TourDemand QualFood TourDemand DestInImage TourDemand QualAccom TE1 (Personal safety and security.) DestInImage.671 *** TE3 (Overall cleanliness of the destination.) DestInImage.728 *** TE8 (Organization of the local transportation services.) DestInImage.822 QA1 (Overall quality of the accommodation.) QualAccom.713 QA2 (Value for money.) QualAccom.673 *** QA3 (Behaviour and professionalism of the staff and owners.) QualAccom.611 *** QA4 (Ambiance of the surroundings of the accommodation.) QualAccom.789 *** QA6 (Cleanliness of the accommodation.) QualAccom.809 *** QA7 (Facilities/equipment of the accommodation) QualAccom.807 *** FD1 (Overall quality of restaurants, cafés and bars you QualFood.770 *** visited.) FD2 (Customer service of restaurants, cafés and bars you QualFood.806 *** visited.) FD7 (Cleanliness in general.) QualFood.679 TD1 (I am willing to travel and tour within Penang) TourDemand.941 *** TD6 (I have always wanted to travel in Penang.) TourDemand

191 Figure 1: Structural Model Tourism demand is influenced by the quality of food (β = ) and the quality of accommodation (β = ). The influence of quality of food on tourism demand was achieved at p-value of less than 0.05 whereas the influence of the quality of accommodation on tourism demand was achieved at p-value of less than 0.1. Unfortunately, the destination image was not significant in this study. Quality of accommodation fared very well as a positive influence on tourism demand. Quality of accommodation construct is in turn influenced by several observable factors. The cleanliness of the accommodation has a very high correlation with the perceived quality of accommodation at β = followed by the facilities/equipment of the accommodation at β = The ambience of the surroundings of the accommodation is also ranked high at β = followed by the value for money (β = 0.611) of the accommodation. The behaviour and professionalism of the staff and owners were given the final ranking at β = As for the quality of food constructs, the item on overall quality of restaurants, cafes and bars has a positive and significant influence on the quality of food in Penang at β = Respondents placed importance on the customer service of restaurants, cafes and bars with a coefficient value of as well as cleanliness with β = Demographics and tourism demand This section provides the empirical differences of demographic factors on the tourism demand. The factors that being tested include gender, age, region/ nationality, duration of study and household income. However, the details of empirical results are not shown here due to the lengthiness but are available upon request. What follows are the discussion of the statistical results of the t-tests, ANOVA F-tests and the Duncan and Tukey tests. 187

192 Gender To test whether there is a difference between males and females in their tourism demand an independent samples t-test was carried out. Though the means and standard deviation do not appear to be different, a test is still needed to support (or reject the null hypothesis). The Lavene s Test value is at assuming equal variances. The t-test significance is at making this statistics insignificant. Therefore, there does not seem to be any difference in means. The null hypothesis is supported. There is no difference between males and females in their tourism demand. Age The significance level 0.64 is greater than α = 0.05, therefore the null hypothesis cannot be rejected. There are no significant differences in the mean for the dependent variable between the four groups of ages. Since the F-test is more than the critical F-value (2.297>1.96), indicating some level of significance, a post-hoc test was conducted. The Tukey tests output to compare the different age groups against each other. All the age group comparisons show that there is no significance of the mean of all the groups against tourism demand. Region / Nationality To test whether there is a difference between different nationalities or country of origin in their tourism demand an independent samples t-test was carried out. Though the means and standard deviation don t seem to appear different, a test is still needed to prove (or reject the null hypothesis). The Lavene s Test value is at assuming equal variances. The t-test significance is at making this statistics insignificant. Therefore, there does not seem to be any difference in means. The null hypothesis is supported. Nationality or region has no influence on tourism demand. Duration of study The significance level 0.64 is greater than α = 0.05, therefore the null hypothesis cannot be rejected. There are no significant differences in the mean for the dependent variable between the three groups. Since the F-test is more than the critical F-value (2.437>1.96), indicating some level of significance, a post-hoc test was conducted. Table 4.39 shows the Tukey tests output to compare the different study duration groups against each other. The three year group is significantly different than the other two groups but there is no significant difference between the other two groups. Only one group show a significant value although it is at the 10% level of significance. Three years of study duration shows the significance value of 0.091with a mean difference of The Duncan and Tukey tests both create homogenous groups also known as segments based on their means. This is displayed in Table 8. All three groups form a segment with Tukey test whereas the Duncan test reveals three years and two years duration forming a segment. The null hypothesis can be rejected and the duration of study does have some positive influence on tourism demand. 188

193 Household income The significance level is greater than α = 0.05, therefore the null hypothesis is rejected. There is no significant difference in the mean for the dependent variable among the four groups of income. Since the F-test is more than the critical F-value (2.029>1.96), indicating some level of significance, a post-hoc test was conducted. Appendix H shows the Tukey tests output to compare the different groups of monthly household income against each other. All the monthly household income group comparisons show that there is no significance of the mean of all the groups against tourism demand. The null hypothesis is rejected. Implications Out of the 184 countries in Asia Pacific, Malaysia ranked at number 26 in terms of contribution of tourism to its national income. Many countries are opening up their borders in the hope of taking advantage of global integration making tourism a source of revenue from foreign exchange. The development of the domestic tourism industry also helps countries achieve competitiveness in the global markets, through significant investments in the development and promotion of the tourism industry. In its efforts to move from a middle income into a high-income country, the Malaysian government launched the Economic Transportation Programme (ETP) in One of the key pillars of ETP was the transformation of the tourism sector which was explicitly recognised as one of the national key economic areas (NKEA). To tap the growth potential of this sector, the Malaysia Tourism Transformation Programme (MTTP) was established with a potential target of attracting 36 million international tourists with RM168 billion as revenue in 2020 (Ministry of Tourism and Culture, 2013). In 2015, 25.7 million tourists visited Malaysia earning the country approximately RM69.1 billion (Ministry of Tourism and Culture, 2016). All these efforts by the government are good in the sense that they will help develop the tourism sector beyond its present form. Within the context of this study, educational tourism could also be included in the various types of tourism that the country currently promotes. According to the Malaysia Tourism Promotion Board (popularly known as Tourism Malaysia), Malaysia offers five types of tourism namely cultural tourism, adventure tourism, medical tourism, beach tourism and agricultural tourism. There are currently ten niche products that are sold by the Malaysian tourism agencies in promoting tourism in the country; shopping, birding, golfing, cruise, diving, angling, yachting, bike tourism, wedding & honeymoon and home stay. Out of the list of products, most would not be too attractive to students since many of them would need a higher level of purchasing power which these students would not be able to afford. Tourism needs improvement in the accommodation, food and beverage, transportation sectors to name a few. According to the United Nations World Tourism Organization, tourism's total contribution to global employment in 2013 was between six and seven per cent of the overall number of jobs in the world. Perhaps, the newly suggested light rail transit systems proposed could pave a way for a more tourist friendly transportation system. One of the ways that awareness can be created among international students on tourist related activities is by providing information related to tours, tourist activities and places of interest directly to the students. The cleaning up of these rivers is crucial as rivers can be turned into another transportation route for tourists to take to explore the island. The tickets can be priced competitively so that students 189

194 may not find these cruises too expensive and conventional tourists might see it as an attraction itself. Tour operators can also provide guides in tourist spots to promote places of interest. These could be paid guides or volunteers whose responsible would be to guide tourists and provide explanation on the places of interest. The Japan National Tourism Organization provides a list of volunteer guides that are placed in different tourist spots. These guides are trained in the historical knowledge of the places of interest to provide the necessary explanation to tourists. In Seoul, there are a team of volunteers who act as a walking tourist information centre. A similar arrangement can be done in Penang whereby volunteers can be placed in specific locations to provide the necessary explanation to tourists. Conclusion This study investigated the determinants of tourism among postgraduate students of a public university in the Malaysian state of Penang. Postgraduate students were selected as they make the bulk of the international students in the University. The study was conducted using several statistical methods namely structural equation modelling, one-way ANOVA and independent samples t-test. The study revealed that the quality of accommodation and the quality of food has a significant influence on tourism demand among international students. Tourism demand was measured using a construct that surveyed the students intention to travel. A descriptive analysis was also conducted on several characteristics / traits of the respondents to measure their influence on their demand for tourism. The traits were gender, age, nationality, household income and duration of study. This study revealed that duration of study has positive influence on tourism demand. The longer the study duration of the student the higher the chances of the student travelling. In spite of several limitations of the study, the results presented here can serve as reference for decision makers in the tourism sector as well as a model for future researchers who are interested to expand the body of knowledge in the study of student tourism demand in Malaysia. References Arbuckle, J. (1997). Amos users guide version 3.6. Chicago IL: Smallwaters Corporation. Armstrong, G. & Kotler, P. (2005). Marketing: An introduction. Upper Saddle River, N.J. Prentice Hall, 7. Edition. Barclay, D., Thompson, R. & Higgins, C. (1995). The Partial Least Squares (PLS) approach to causal modeling: Personal computer adoption and use an illustration. Technology Studies, 2(2), Bentler, P.M. (1990). Comparative fit indexes in structural models. Psychological Bulletin, 107(2), Blattberg, R.C., Peacock, P. & Sen, S.K. (1976). Purchasing strategies across product categories. Journal of Consumer Research, 3(3), Chiu, S. P. (2008). Tourism and crime. Police Science Bimonthly, 39(1), Crompton, J.L. (1979). Motivations for pleasure vacation. Annals of Tourism Research 6(4), Dickson, P. R. & Ginter, L. (1987). Market segmentation, product differentiation and marketing strategy. Journal of Marketing, 51(2),

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197 Professional Identity Formation in Globalization Era: Case of Malaysian Novice Teachers Norfarah Nordin * Graduate School of Business, Universiti Sains Malaysia norfarah@usm.my Mohd Ali Samsudin School of Educational Studies, Universiti Sains Malaysia Abstract Purpose: The study aimed to investigate the potential factors that influence the formation of professional identity among novice teachers in Malaysia. Research methodology: Data were gathered through semi-structured interviews of ten respondents. Findings: Findings revealed that the formations of teacher professional identity among novice teachers are highly dependent on the personal experience, professional context and on the external political environments. Practical implications: This showed that professional identity of novice teachers are both personally and socially constructed. Therefore, both factors need to be considered in developing professional identity of novice teachers as well as to help them to view and understand themselves as teachers. Value: This study relates to teacher professional identity that is important for the stakeholders and policy maker especially the Malaysian Ministry of Education. This study is in line with the development of the country's current education policy that focuses on increasing the professionalism and quality of teachers. Research limitations: The current study recognized limitations in considerations of qualitative research method that is to gain valuable descriptive understanding of the topic of inquiry and not to generalize findings. Other limitation of this study is possible bias from the subjectivity of the researcher. Keywords: Professional identity formation, Malaysian novice teacher, working conditions. Introduction The experiences and ideas of educators about their career, working conditions, prestige and achievements have a great impact on their actions, as well as on the quality and effectiveness of their teaching (Darling-Hammond et al., 2017; Grion & Varisco, 2007). Based on these perspectives, professional identity of teachers is subject to individual values. Based on Olins (2017) and Korthagen (2004) research, professional identity is linked to ones personality and personality is very difficult to change. However, personality in certain ways can be shaped by the environment. New habits and new traits might be developed. Therefore, based on Dinham et al. (2017), Alsup (2006) and Ross and Bruce (2007) research findings, professional identity is a core factor of the development of an effective teacher. In other research, ones personality and the individual s values are influential in professional identity development on top of teacher s experiential learning opportunities (Hong, Greene & Lowery, 2017). Experiential learning is argued to allow beginning teacher to develop an individual professional identity through application of educational content in real classroom and real school scenario. However, other than internal factors such as ones personality and 193

198 perception of teacher profession, external factor such as supportive attitude of school management and school s facilities has a strong tie to novice teacher identity construction. In this sense, professional identity is not something teachers automatically have, but necessary to be developed because it is a basis for them to make sense of themselves as teachers (Dinham et al., 2017; Coldron & Smith, 1999). This approach is supported by a number of studies on the role of emotions in teaching, which claim that the feelings of teachers about teaching and students are as important for the outcome of teaching as technical competence or curriculum standards (Hargreaves, 1998). Novice teachers uneasy feelings such as dissatisfied, alienated, stressed identities are proven to create negative emotions that take away creativity and success from one's professional practice (Fineman, 1999). Accordingly, teacher professional identity has a substantial influence on student achievement, rather than being a mere indicator of the well-being of educators. Alsup (2006) finds a strong relationship between the self-assessment, professional development of educators and student achievement. These findings support that research on novice teacher professional identity development is important. In term of theory, theoretical discourse on teacher professional identity is dominated by several different approaches, each of them focusing on a specific dimension of its formation. These dimensions involve (1) the dynamics of the formation of identity, (2) the determining role of the broader social context, and (3) the role of the discourse in its construction and constant negotiation (Varghese, Morgan, Johnston & Johnson, 2005). Formation of professional identity involves many knowledge sources, such as knowledge of affect, teaching, human relations, and subjects (Antonek, McCormick & Donato, 1997). As Coldron and Smith (1999) note, professional identity is not something teachers have, but something they use in order to make sense of themselves as teachers. In the context of the early years of teaching, teacher professional identity is regarded to be an ongoing process of interpretation and re-interpretation of experiences, which reflects the various successive stages of the transformation from student roles and behaviour patterns into professionalism (Beijaard, Meijer & Verloop, 2004). Watson (2006) describes this process as the constant production of narratives about one's own teaching practices. These narratives are developed by both social interaction and cognitive reflection about the position, roles and professional achievements of the self. Ten Dam and Blom (2006) see the construction of a professional identity as equal to the process of becoming teacher, which includes the interpretation of education, the teaching profession, and the self within this educational practice. This process enables the educator: "To become a teacher whose activities are relevant to the profession and practice and who is prepared to take responsibility for his or her actions; in other words, a teacher who is competent of acting as a fully-fledged participant in education" (Ten Dam & Blom, 2006: 651) Furthermore, in Malaysia, study which relates to teacher professional identity is important for the stakeholders or policy maker especially the Ministry of Education. This type of study is also in line with the development of the country's current education policy that focuses on increasing the professionalism and quality of teachers. It is clearly in the direction of the development of national education as stated in the Malaysia Education Development Plan (Pelan Pembangunan Pendidikan Malaysia) Chapter 5. Therefore, it is important to carry out this study because consequently it will contribute to the field of teacher education and professional development of the teachers in Malaysia. 194

199 Figure 1. Miller s pyramid of assessment The first years of teaching are of crucial and importance for the formation of professional identity among novice teachers. During this transitory period between pre-service teacher training and experienced teaching, novice teachers are assigned to their own classroom or teaching subject without constant direct supervision. For some novice teachers, guidance and scrutiny are perceived as meaningful and important check point for progress. However, in reality the situation is in contrary to the idealistic theories. In idealistic theories and controlled teaching situations which dominated their pre-service training, these conditions facilitate a new phase of learning, based mainly on the practical questions and problems emerging from their own classroom experience (Huling-Austin, 1990; Feiman-Nemser, 2003). Table 1. The specific issues, challenges and threats which determine the formation of professional identity during the early years of in-service teaching Issues Challenges Threats Encountering classroom Struggle for daily survival, Dialectics of direct teaching experiences and the Frustration, Alienation from reality pedagogical theories and practices as learnt at the preservice progressive teaching training methods Integration to Establishment of professional and social relationship Role, prestige and power the institutional with staff members and principals, conflicts, and social Integration to the first workplace, Socio-economic and environment Finding and negotiating a place within the school and its staff, Experience of the hierarchy and inequalities among cultural conflicts, Attrition, 'Too successful' integration: teachers, full adoption of the Experience of the social status, income status, working dominant teaching style conditions and prestige of teachers within the society 195

200 Apart from being crucial for the future professional career of novice teachers, the first years of service for novice teachers are also important for the education system as a whole. This transition timeframe to adapt has a significant impact on students learning and school s performance as well. In Malaysia, the constant intake of novice teachers can serve as a 'natural' improvement potential to education systems. At the same time, however, it may also endanger the quality and effectiveness of teaching in the long term. During the first years of their professional career, beginning teachers face numerous issues and challenges that may pose serious threats to the whole education system (see Table1). Therefore, the issue of professional identity development among the novice teacher is important. Novice teachers, for the first time in their career, encounter everyday teaching and classroom management issues. Besides that, they also encounter socio-economical and socio-cultural inequalities divides in their classrooms. The first year of in-service teaching is widely claimed to be concerned about survival rather concerns about reflective teaching or a systematic professional development (Marshall, Fittinghoff & Cheney, 1990; Mandel, 2006). Despite the numerous examples of induction and mentorship schemes present in a range of national education systems, the daily struggle for survival still tends to be a dominant feature of the life of beginning teachers (Maciejewski, 2007; González-Calvo & Fernández-Balboa, 2016). Novice teachers are supposed to give a successful response to some immediate practical issues, such as preparation to the upcoming lessons, classroom management, time management, evaluation of student performance and communication with parents (Meister & Melnick, 2003; Mandel, 2006). Naturally, the struggle for survival is an important source of compromises between the teacher's daily practice and the idealistic principles of teaching acquired during the years of pre-service training. These compromises may either facilitate or paralyse the process of identity formation. The success of novice teachers does not depend solely on their classroom experiences, as it is also facilitated by the institutional context (Goodson & Cole, 1994). Establishment of professional and social relationship with their colleagues and superiors, along with the negotiation of their place within the school and the staff, form a substantial challenge for novice teachers. Teaching is claimed to be among those professions which provide little or no guidance for novices in the course of their integration to the organisational climate and professional practice of their first place of assignment (Fantilli & McDougall, 2009; Schein, 1992). Due to the lack of effective induction, novice teachers face substantial challenges and conflicts during the integration to their school and its broader institutional environment. According to McCoy's (2003) findings, the prestige of teaching profession, the salary and working conditions of novice teachers, and their relationship with students and parents formulate the main issues of these conflicts. Failed or troubled integration is widely claimed to be a principal reason of leaving the profession in the early years of service (Bradley, 2016; Kelley, 2004; Shakrani, 2008; Smith & Ingersoll, 2004). Therefore, this study is intended to investigate the potential factors that will influence the formation of teacher professional identity of novice teachers in Malaysia. Methodology The research adopted qualitative research approach. It is focusing on the interpretation of data collected from 10 respondents (novice teachers) who agreed to take part in the study. The semi-structured interview was the preferred method of collecting the data because the respondents could reveal their views, feelings or attitudes towards the subject allowing for less response error. Furthermore, the interviews were designed to acquaint the participant with the nature of the study, to set a context for phenomena, and then to obtain depth and details of the experience. Initially the researcher acted as a passive listener in the interviews. 196

201 The data then was analysed throughout the study including the process of reading through the data and interpreting them. When the documentation of the data and the process of data collection have been completed, the analysis process begins with (i) data reduction which is organized and categorized of the data into concepts; (ii) connection of the data to show how one concept may influence another in displaying the data and (iii) corroboration or legitimization, by evaluating alternative explanations and disconfirming evidence in order to draw and verify the conclusion. Furthermore, in order to improve the analysis and understanding of construction of others and also at the same time to ensure the validity of the data, triangulation is a step taken by researchers which involved several investigators or peer researchers interpretation of the data at different time. In a related way, as stated by Johnson (1997), a qualitative researcher can use investigator triangulation and consider the ideas and explanations generated by additional researchers studying the research participants (respondents). Findings and Discussion The findings were discussed based on three sub-theme namely personal experience (personally constructed), professional context and the external political environment (socially constructed). (i) Professional Identity Personal Experience The respondents expressed their feelings and views as to what extent professional identity is constructed within individual. All respondents gave positive feedback about teaching profession. Many of them highlighted that being a teacher is an extremely noble profession. This is mainly because teachers are the one who guided young minds to become great person with hearts of gold and become a better person in life. Furthermore, respondent A stated that he get the sense of satisfaction whenever he is able to teach new knowledge to his student whom previously having difficulties in learning. He said, Once my student managed to capture the essence of what I am teaching, he will be able to apply it thus improving its performances in class. That kind of accomplishments is very gratifying. I would trade anything to just be able to experience that kind of wonderful moments with my students. I mean teaching itself is exceptionally rewarding to me. In addition, all respondents feel very grateful with their choice to become a teacher. Respondent B expressed her feeling as stated below, At this moment, I think I am more inclined to be tremendously grateful that I have chosen this route in life. I am very grateful that I have become a teacher. Once I become a teacher, I wanted to dedicate my life in giving them the best education ever. At first, I am a bit nervous really due to lack of experiences in teaching. I vividly remember that I am shaking continuously during my first meeting with my students, having knowing nothing about them. Over times, I began to enjoy and looking forward to such events. Positive views and feelings by respondents towards teaching profession are good because teachers values and beliefs play an important role within the development of a professional identity. This is because teachers identities are their sense of self as well as their knowledge and beliefs, dispositions, interests and orientation towards work (Drake, Spillane and Hufferd-Ackles, 2001). Besides, Sachs (2001) states that teacher identity is mediated by 197

202 their own beliefs and values about what it means to be a teacher and the type of teacher they aspire to be. Further, this discussion will discuss on respondents personal training experience. Majority of the respondents said that their training as a teacher is insufficiently prepares them for their teaching career. Participant C stated that, Honestly it is not enough. We only learn about the basic and we have to learn so much when we really start teaching at an actual school. The environment during practical is very different because at that time we are still learning so we lack the responsibilities as a teacher. Additional to that, respondent D said that, It is not enough because we always stumble upon new things. It requires us to be up to date with the current situation. We need to undergo workshops. Meanwhile, respondent J stated that the training he had received is sufficient for him to become a teacher. He said that, When I am a teacher in pre-service, I have made lots of preparations for instance for five years and six months if I am not mistaken. So I think I am equipped to teach after undergoing three practical practices, whereby one practical last for six months. In three different schools, I have experienced doing the same course but with different people. In other times, I have learned how to deal with students of various ethnicities. Having repeatedly doing the same routine for five and a half years have fully equipped me to become a teacher. Teacher training experience is also important in developing professional identity among novice teachers. Lazzari (2012) maintains that teachers carry images and experiences of their own learning into their classrooms which have a profound impact on their identity development. Therefore, novice teachers training experiences should sufficiently prepare them for their teaching career. Nevertheless, it is pleased to note that insufficient teacher training is not giving negative influence towards the formation of professional identity of novice teachers. This is because teacher identity is something that is not fixed, nor imposed; it is established through experience and the interpretation of that experience (Ballantyne, Kerchner & Aróstegui, 2013) and being a teacher implies the understanding of identity as a process, a process which as is open, negotiated and shifting (Sachs, 2001). Sachs (2001) also states that teacher identity is mediated by teachers experience in schools. This statement will discuss further on the next sub-theme. (ii) Professional Identity Professional Context This sub-theme will discuss on professional context in terms of school where the teaching takes place. Majority of the respondents gave positive feedback about their school. The schools provide comfortable environment and great facilities to the teachers and students. One of the respondents, respondent E said that, If I wanted to do an activity involving students, the school management really supports us in terms of financial, facilities and infrastructure. They will also provide advices and will cover all since the activities done can really improve students performances. 198

203 However, there were two out of ten respondents who were not satisfied with their school due to the workload and lack of facilities. Respondent G feels pressure with the heavy workloads. He said that, My school gave me a tremendous pressure. Plus, the workload is very heavy. I even have to work on Saturday really. Sometimes we have meetings or any events so basically I am forced to be there. It is not in terms of teaching but more to administration work. Meanwhile, respondent H mentions about lack of facilities and equipment as stated below, Right now I am teaching in an old school. In terms of teaching and learning, we don t have any modern equipment. In terms of infrastructure that leaning towards technology it is quite lacking. Lots of electronic plugs are not functioning, using our own telephone to contact people. For laboratories we can still manage but students have to compete for lab instruments really. We also have to buy most of the teaching materials for teaching activities. Basically teachers have to spent lots of money to do activities, finding suitable places for the activities among others. According to Mahlangu and Pitsoe (2011), the school context plays an important role in enhancing teacher professionalism. This means that the influence of professional context (school context), negative or positive, can play a very important role in shaping teachers identity, it can be both facilitates or prevent professional development. Therefore, a compressive and comfortable environment with fully equipped with load of facilities of a professional context will positively facilitates the professional development of novice teachers. Nevertheless, Reynolds (1996) states that professional identity implies both context and person, teachers are always expected to act and think professionally in a professional context. This means that professional identity of novice teachers can be developed well even they face challenges, as for example in terms of workload and inadequate facilities in their school context, because they will act and think professionally in a professional context as mentioned earlier by Reynolds. In addition, the role of the local school leadership and staff is also enormous in the facilitation of novice teachers (Joiner & Edwards, 2008; Worthy, 2005). (iii) Professional Identity External Political Environment When asked as to what potential influence of external political environment could have on their professional identity, all respondents stated that external parties such as community, parents and government namely Ministry of Education have potential to influence them. Respondent F mentioned that parents and communities have a negative perception on teachers as stated below, Those who stayed in educational field are often looked down. The community often talked about bad things on teachers. From parents perspective, maybe when they encountered a bad teacher, they would assume all teachers are bad. Their perspectives are so fixated and we as teachers should face the challenges head on. Once we know such thing is bad, we don t have to impose them upon our students so that the parents perspectives on us remain crystal clear. Well it is true some of them looked down on teachers. We should ignore them and focus on doing our best at teaching. 199

204 This finding is in line with Hansen (2001), who mentioned that teacher identity which is the social identity of the teacher is formed on the basis of the broader community s view of the profession, and this is echoed by Schepens, Aeltermann and Vlerick (2009) who maintain that the teacher s professional identity is influenced by the conceptions and expectations of other people which may conflict that teachers personally desire and experience as good teaching. Teachers perceptions about their work and how they do it are necessarily influenced by these societal opinions about teaching. Therefore, in order to overcome this challenge, novice teachers should act and think professionally as respondent F said, We should ignore them and focus on doing our best at teaching. Besides that, majority of respondents also have difficulty and depressed with the orders and the workload especially from the ministry of education. One of the respondents namely respondent I said that, Well there are lots of challenges, most of them centred on the visions. Because we are all taking orders from the ministry, once they ordered us to do anything we have to do it although the orders are not that practical in school. Although the upper management committee has great ideas, they did not think from the perspectives of teachers. Additional to that, Respondent J said that, The current system are burdening to teachers because we have to pay close attentions to students all the time. Sometimes I forgot to fill in the system requirements. Plus, I have to settle a lot of other things expected of me. Sometimes I keyed in the students data at the end of the year or just twice a year that is in the mid year and at the end of year. Whether I like it or not, since I worked under them I have to do what they said. Maybe the ministry can do some improvements. For instances if they wanted to do online systems, they should provide a strong internet connection at schools. Right now they wanted us to do online systems but the internet connection provided at schools is very bad and it is dreadfully problematic to teachers. This finding is in line with Kokkinos, Stavropoulos & Davazoglou, (2016) and Cojocnean (2013) who revealed that teachers nowadays experienced more workload and that there was actually less free time in their lives and do not have more time for their professional development. As according to Mockler (2011), comprises the discourses, attitudes and understandings surrounding education that exist external to the profession, experienced by teachers largely through the development of government policy which relates to their work and the ways in which political ideology impacts upon their work as a result of government policy. Additional to that, an increase in teacher workload has been identified as an undesirable consequence of changes in government policy. These will affect the morale of the novice teachers and teaching itself became less central and less obviously valued. Furthermore, increasing of workload is commonly associated with increased stress or tension (Kokkinos, Stavropoulos & Davazoglou, 2016; Kyriacou, 1987; O Connor & Clark, 1990; Pithers & Fogerty, 1995; Wisniewski & Gargiulo, 1997; Wylie, 1997). Based on the findings, Respondent B said that teachers nowadays need to attend psychological workshop because they have faced a great tension, 200

205 We need to undergo workshops, not just internal workshops, external workshops but also psychological workshops. This is because teachers faced huge tension. Stress management is very important for teachers. According to Pillen, Beijaard and den Brok (2013), tension is often accompanied by feelings of helplessness, frustration or anger, and the teachers had a strong desire to learn to cope with them. Besides, it is expected, though, that tension may become problematic if it has severe (emotional) consequences for novice teachers learning and functioning, or if novice teachers do not know how to cope with their tensions (Pillen et al., 2013). Therefore, because of their negative impact on novice teachers professional development, it is important that government and schools management pay serious attention to tensions like these that relate to novice teachers professional identity as tensions can be of great importance for the development of teachers professional identity (Meijer, 2011). Additional to that, it is hope that the government, especially Ministry of Education will reduce and eliminating unnecessary teacher workload in order to ensure novice teachers are able to focus on teaching and their professional identity development. Implications for Teacher Professional Identity As teachers are the most influential factor in student learning, teacher professional identity becomes a critical area for scholars and practitioners to focus on promoting quality teaching and learning experiences. This study revealed that teacher professional identity as a process of negotiation between individual and contextual factors including social and professional context. Based on individual or personal aspect, the values and beliefs by novice teachers towards teaching profession have an influence on the development of their professional identity. If it is positive, professional identity can be developed well or otherwise. Besides, novice teachers personal experience such as teacher training at college or university, practical in school and other experiences related to the teaching profession may also influence novice teachers on how to teach in schools and hence may influence their views towards teaching profession and also the development of their professional identity. However, insufficient training does not have significant impact on developing novice teachers professional identity. This is because personality and identity of teachers are to be developed from experiential learning. But this is not to conclude that developing professional identity can happen without any formal practical and theoretical education from the teacher training college. Awareness about the reality of huge difference between the situation during their practical (pre-service teacher) and situation after serving as a teacher (in-service teacher) need to be highlighted in teachers training college. Growing responsibility and additional administrative roles are to be expected by novice teacher. The awareness about their growing roles for the school besides teaching load helps novice teacher to prepare mentally to cope with additional stress to achieve. Besides awareness, novice teachers need to be equipped on how to cope with the current situation and find the solutions to adapt well with it. The awareness and ability to adapt with the process may help novice teachers to develop their professional identity as the 'on -going' nature of identity development offers the hope that teachers can change. These are to curb novice teacher s frustration and overwhelming feeling about their new role. Meanwhile, as for the contextual factors, professional context such as the school environment within which the novice teachers worked had a bearing on the formation and development of their professional identity. Adequate facilities as well as supportive colleagues and the school administration may help novice teachers to work effectively and at the same time increase 201

206 their passion towards teaching profession and consequently develop their professional identity. But limitation on school facilities and less supportive colleagues should be expected particularly in Malaysian school context, there are huge divide in term of geographical limitation. In schools that faced geographical challenge, inadequate teachers and facilities should not limit novice teachers creativity to nurture their professional identity. Professional identity of novice teacher who faced contextual limitation (due to school location) should be better developed. However, positive perspectives on contextual factors are highly dependent on the novice teacher personality. Besides that, the workload given by the Ministry of Education (policy maker) as well as school administration should also be reduced because more workload may give a negative impact on the novice teachers emotion, which can trigger anger, stress and tension. This kind of situation is influencing the development of novice teachers' professional identity. Therefore, the policy maker and the school administration must be aware with this issue and takes appropriate action in order to reduce and eliminating unnecessary novice teacher s workload. With an awareness of this issue, may help in increasing the development of teacher professional identity of novice teachers. Furthermore, the influence of society should be sufficiently positive and conducive to teacher development of novice teachers. This could in turn influence the behaviour and practice of novice teachers, thus enhancing the development of their professional identity. As with any research, the current study recognized limitations in considerations of method, population, and findings. This research acknowledged that the goal of qualitative research is to gain valuable descriptive understanding of the topic of inquiry and not to generalize findings. Other limitation of this study is possible bias from the subjectivity of the researcher. Another limitation is in the number of participants exist due to difficulty in scheduling group members for focus group inclusion. However, the discussion in these focus groups was rich and provided valuable descriptive knowledge of the small group experience. But researcher acknowledges that with more members may have provided qualitatively different findings. Additionally, the current study did not achieve theoretical saturation due to the limited number of participants. Conclusions The formation of teacher professional identity of novice teachers in this study is highly dependent on the personal experience of the individual, professional context and on the external political environments. This showed that professional identity is the result of (i) novice teachers inner motivations which reveal their views and feelings of being a teacher and (ii) the influence of external factors such as what they experienced in the past and also in the present time. In addition, Malaysian societies in general often view teaching profession as an easy job and less rewarding. However, the truth is that teaching is very challenging and rewarding. Moreover, there are also strong sentiment in Malaysia about the future of students are in the hands of the teachers. Therefore, the policy marker especially the Ministry of Education Malaysia should assist in developing teacher professional identity. There are indications of negative experiences among novice teachers suggest that basically lies in the management of their schools and support given by other teacher. These issues are rooted from hierarchical of the Malaysian educational system, ranking and divisions of the teacher among teachers within the education system. Bottom-line is professional identity are both personally and socially constructed. A qualified teacher is capable of producing quality education that will develop human capital with a strong identity, competent, noble, knowledgeable and high skills in order to fill the need for developed countries as in line with Malaysia Education Blueprint

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210 Impacts of Foreign Currency Exposure on Malaysia s Firm Value: Firm Value, Hedging and Corporate Governance Perspectives Roselene Yam Sou Cheng SEGi College, Penang Ei Yet Chu* Graduate School of Business Universiti Sains Malaysia eychu@usm.my Saw Imm Song Department of Business Management Universiti Teknologi Mara, Penang Branch Tian So Lai School of Economics, Finance and Banking Universiti Utara Malaysia * Corresponding Author Abstract Purpose: This study examines and assesses the relationship between foreign currency exposures in terms of account receivable and payable and firm value of Malaysia firms. Design/methodology/approach: The study takes the balance sheet approach where a total sample firm of 148 Malaysia public reported their foreign currencies exposure from 2006 to Foreign currencies exposures in USD and SGD are regressed on firm value as these are most reported foreign currencies exposures. The study examines the issues from the perspective of firms size, hedging strategy, and corporate governance perspective. Findings: The findings suggest that Malaysia firms do not manage their exposures to USD well, both account payable and receivable. Large firms are also not well equipped to improve firm value when it is highly exposed, especially to USD as compared to SGD. Hedging strategies are not effective in the country as it does not significantly improve firm value. However, the presence of independent directors and large shareholders assert some monitoring effects on USD payables exposures and SGD receivable exposures, which lead to a positive firm value. Research limitations/implications: Corporate governance could substitute the role of hedging strategy in managing foreign currencies exposures. The research is hindered by the limitation information on hedging reported in annual reports. Practical implications: The study suggests the role of corporate governance is essential in various perspective of financial management. Large shareholders and independent directors could assert an effective role in monitoring risk as their controlling stake increases. In terms of USD exposures, which is more volatile, Malaysia firms are not managing USD exposures well 206

211 and lead to declining of firm value. Malaysia firms should be more prepared financially and strategically when dealing with USD exposure, which is more volatile. Originality/value: The study applies balance sheet approach based on account payable and receivable on currencies exposure. Various perspective, especially issues on corporate governance is new when approaching the issues of foreign currencies exposures, especially in the contexts of emerging economy. Keywords: Foreign currencies exposures, Malaysia, risk management, hedging, corporate governance Introduction Generally, risk management in foreign currency divides the exposure of foreign currency into operation exposure, transaction exposure and translation exposure (Eiteman, Stonehill and Moffett, 2006). Extant literature in foreign currency exposure study the issues from the balance sheet and economic model approach (Akay and Cifter, 2014). The balance sheet approach examines the outstanding account acceptable and account payable of foreign currencies exposure while market model approach examines the exposure as the residual between foreign currency and its impact on stock markets. The balance sheet approach gives a perspective of a firm s account payable and receivables exposures of foreign currency while market model approaches the issues from sensitivity of stock prices when there are changes in exchange rates. The East Asian financial crisis in 1997 had led Malaysia government to peg the Ringgit Malaysia against USD from 1997 to During the crisis, many Malaysia firms had not taken any protection measurements and badly hit by the crash of Ringgit Malaysia against USD, especially. After 2005, the government has pursued with the manage-float system just like prior to financial crisis. Since 2005, the Ringgit has strengthened from 3.60 to 3.00 against USD. The period has also shown an upsurge of Bursa Malaysia Composite Index. The strengthening of Malaysia Ringgit has two edges. Theoretically, it enhances importers value as less Ringgit Malaysia is required to pay to their overseas sellers. On the other hand, it adversely affects exporters as exporters receive less Ringgit for each USD of goods exported overseas. The changes in the foreign currency affected firms in the country after their painful experience in A study to look at the issue from the exposures from balance sheet perspective is essential as its influence firm profit and loss account directly. The fluctuation of the exchange rate will affect the costs and revenues of firms that involve in international trade or non-trade activities, as they are unable to estimate the inconsistency of costs and revenues. Thus, risk adverse companies will try to avoid or minimize any types of currency risk exposure by implementing risk management. Firms, which are big and are strong in financial strengths will apply hedging strategies such as option, swap, forward and future contract to limit their exchange rate risk exposures. In this context, we are uncertain on the general foreign currencies exposures of Malaysian firms. Moreover, we are uncertain how they manage foreign currency exposures that could minimize negative impacts on shareholders value. The paper is organized into five sections. Next, literature review and hypotheses development will be discussed; Section 3 explains the sample and methodology in this study. The findings are shown and discussed in section 4 and section 5 concludes the study. 207

212 Literature Review Foreign Currency Exposures and Firm Value Generally, multinational firms dealing in import, export and investment abroad will expose to foreign exchange risks but domestic firms will also be affected by exchange rate changes indirectly even though it is not dealing in international trade as the exchange rate fluctuation affect costs of imported materials. Pertaining to this, Aggarwal and Harper (2010) showed that 1265 domestic firms on the NYSE, AMEX and NASDAQ are no different from multinational firms that have direct involvement in international trade in terms of foreign exchange exposures due to the macroeconomic effect of USA. The results are consistent when it is applied in the European market. The research by Nydahl (1999) found that around 26 percent of the 47 firms in the sample of Swedish firms are significantly exposed to exchange rate changes. In the study of Bartram (2008) which performed a detailed analysis of the foreign exchange rate exposure of a large nonfinancial multinational German firm VEBA AG showed that the firm has significant exposure to foreign exchange rate risk due to its foreign currency-based activities but the exposure was insignificant to the total cash flow performance. Exchange rate exposures have two edges towards firms value. However, it is the ability of firms risk management that minimise the expsure and enhance the value of the company. Foreign currency exposures are similar across countries. Based on 100 European blue chip companies from 2001 to 2012, Mozumder, Vita, Larkin and Kyaw (2015) found that there is no difference of foreign currencies exposures between Eurozone, and non-eurozone, financial and non-financial firms. However, there is a positive relationship between exchange rate fluctuation and the market value of firms. The impacts of currency exposures are very much depending on time variations of the study. The factors of uncertainty and different time dimensions influence the findings. Grambovas and Mcleay (2006) showed that the currencies of Eurozone firms response positively to firms value in the pre-euro period in anticipating of introduction of Euro curency. Afterwhich, the currency exposures led to negative relationship with firm value. There are many ways of measuring foreign currency exposures, depending on availablity of reporting in a particular country. Ademola and Kemisola (2014) used account collection period and account payment period as proxies for working capital management which are associated with accounts receivable and accounts payable. When a firm involves in foreign currencies based activities, both accounts receivable and accounts payable will expose to foreign currencies risk as a result of fluctuation on the exchange rate. Using a similar approach, Abuzayed (2012) showed that account payment period and account collection period have a negative relation and positive relation, respectively to firms profitability. Vural, Sokmen and Cetenak (2012), Muscettola (2014) also evidenced positive and negative relationship between account payable and receivable and firms value. In general, account payable in foreign currencies reflect uncertainties of payment overseas and its tendency to reduce firm s value when the foreign currency becomes volatile and on depreciating trend. A higher exposure of account payable reflects that firms need to pay a higher amount of money from home currency perspectives, therefore it leads to a lower firm value. Hence, the study proposes that:- 208

213 H1a: There is a negative relationship between firm value and foreign currency payable exposures. On the other hand, the value of account receivable in foreign currency exposures implies that the amount of home currency received will be bigger when home currency is under downward pressure. Exporters benefit from depreciation of home currency as the amount of money exchanged is more than the contract amount which is in foreign currency. Therefore, the study proposes that:- H1b: There is a positive relationship between firm value and foreign currency receivable exposures. Firm s Size and foreign currency exposure Size s effect has significantly influence financial decisions in firms. Large firms generally have an effective risk management strategy, which is guided by a good team of risk management in order to minimize the business risk and maximize firm s value. They are also more efficient, experience in international business, and benefited from economies of scale than smaller firms. They may position better in coordinating their global foreign currencies assets and liabilities in order to reduce the net total foreign currencies exposure as well as having enough resources and knowledge in practicing hedging activities. In the UK, Zhou and Wang (2013) demonstrated a larger firm size is positively correlated with foreign exchange exposure implying a bigger firm involved in higher degree of foreign activities. However, the effectiveness of large firms in practicing good risk management produce mix results. In this perspective, El-Masry and Abdel-Salam (2007) proved that exchange rate exposure significantly impacts on stock returns of the large firms as compared to smaller firms. Mozumder, Vita, Larkin and Kyaw (2015) showed that the relationship between foreign currency exposure and firm size is weak. In their finding, a smaller firm has more exposed to exchange rate movement compared to larger firms, especially during the financial crisis. Lee and Jang (2010) studied on U.S. lodging firms also show that domestic firms and smaller firms are more exposed to foreign currency risk comparable to multinational firms as multinationals are able to diversify away from the risk. Similarly, Aggarwal and Harper (2010), domestic firms also faced foreign currency exposure and the level of exposure is related inversely to firm size. The finding is consistent with Lee and Jang (2010) on the study of the U.S. lodging firms effect of internationalization on foreign currency exposure coefficient showed that domestic firms which are smaller in size are more exposed to foreign currency risk. Similarly, Aggarwal and Harper (2010) illustrated an inverse relationship between foreign currency exposure and firm size. Following the big size effect that bigger firm will be more effective, and have the necessary risk management in their foreign currencies exposures in account payable and receivable, the study proposes that:- H2a: There is a positive relationship between firm value and foreign currencies payable exposure in a large firm. H2b: There is a positive relationship between firm value and foreign currencies receivable exposure in large firm 209

214 Hedging and Foreign Currency Exposures The prime motive of using hedging by a company is to manage the risk that involved in their daily business operations. Basically, hedging provides insurance against risks arising out of the price fluctuations (Eiteman, Stonehill and Moffett, 2006). It is a common practice that multinational firms may achieve better position by engaging financial hedging to reduce the adverse effect of net total foreign exchange rate exposure on firm s performance in coordinating their global foreign currencies assets and liabilities (El-Masry and Abdel-Salam, 2007). Some of the literature concluded that the use of hedging strategy will enhance firm value. In the studies of Hagelin and Pramborg (2004) for the firms in United States, Allayannis and Ofek (2001) for Swedish firms, Junior and Laham (2008) for the firms in Brazil, Zhou and Wang (2013) for the firms in UK showing evidence that hedging activities could reduce the foreign currency exposure and enhance firm value. The use of hedging strategy in managing foreign currency exposure is sometimes debatable as it incurs costs when the movement of the foreign exchange rate is stable. The impact of hedging is especially significant during the financial crisis. Yip and Nguyen s (2012) indicated that during the financial crisis, the level of foreign currencies derivatives mitigates foreign currency exposure. Moreover, multinational firms will engage in financial hedges and operational hedges combined with long-term financing, marketing and investment strategies that significantly improve foreign currencies exposure. On the other hand, Belghitar, Clark and Mefteh (2013) showed that the use of foreign currency derivatives reduces overall foreign currency exposures. However, the hedging strategies are not significantly found to influence firm value. The effectiveness of hedging of foreign currencies is observed through its impact on net cash flows. A good hedging prevents firms from paying more when the currency depreciates and receiving less when the currency appreciates. The result of Bartram (2008) showed that the managers use hedging to reduce its exposure of total net cash flow. Generally, the hedging is proposed as enhancing firm value, therefore, the study proposes that:- H3a: There is a positive relationship between firm value and foreign currencies payable exposure with hedging activities. H3b: There is a positive relationship between firm value and foreign currencies receivable with hedging activities. Corporate Governance and foreign currency exposures Corporate governance plays an important role in monitoring the overall activities of a firm. Failing which, it may cause ineffectiveness in the risk management program and could have a negative impact on the firm s value. In this perspective, Allayannis, Lel and Miller s (2012) study across 39 countries highlighted that corporate governance plays an important role in monitoring the firm on the use of foreign currency derivatives as it can be used for managers self-interest, hedging and speculative purposes. The establishment of strong internal and external corporate governance could ensure effective hedging that reduces risks in firms and further enhances firm value. Corporate governance mechanisms such as independent directors have been emphasized as a mechanism to reduce the agency cost in firms. This is emphasized in OECD s code of corporate governance and has been adapted in many countries. The role of independent directors is to help 210

215 monitoring firms decision and reduce conflicts between agent and principles. It also helps to reduce information asymmetry between shareholders and managers. Since 2000 Malaysia Code of Corporate Governance has also emphasized the requirement of 1/3 independent directors as the member of the board. The role of 33% of independent directors is to exert monitoring in firms decision making. Another mechanism that could mitigate the risk management in firms is due to the alignment of interest of the managers. Jensen and Mecking (1976) states that managers should be given equity interest so that their objective align with other shareholders interest. In Malaysia, where controlling owners are generally large shareholders, their presence could help to reduce agency problem as proposed by Shleifer and Vishny (1997). Mauri and Pajuste (2005) reveal that large shareholder with the fair distribution of votes have a positive effect on firm value. Similarly, Isokov and Weisskopf (2014) concluded that family firms with moderate ownership reveal higher value. With the combined effects of independent directors and large shareholders as governance effects, a good governance improves firm value irrespective of firms currencies exposures. Hence, the study proposes that:- H4a: - There is a positive relationship between firm value and foreign currencies payable exposure with governance effects. H4b: - There is a positive relationship between firm value and foreign currencies receivables exposure with governance effects. Methodology Although Malaysia firms have exposure to various currencies such as EURO, JPY, THB, RMB and AUD, but the major currencies used are USD and SGD. The data for measure is collected from firms annual report where firms reported each r foreign currencies exposures equivalent in Ringgit Malaysia for account payable and asset receivable. The firm value is measured as Tobin s Q defined as market capitalisation divided by total assets. The data is obtained from Osiris database. A high Tobin s Q implying investors perceive a higher market value of the firm as compared to book value. TBQ i,t, = αi + ß1 USD pay i, t-1 + ß2 USD rec i, t-1 + ß3 SGD pay i, t-1 + ß4 SGD rec i, t-1 + ß5 control variable i,t-1 + Ɛ i, t (1) The independent variables are defined as follow. USD pay = USD payables exposure, USD receivables exposure, USDrec = USD receivables exposure, SGD pay = SGD payables exposure, SGD rec = SGD receivables exposure, control variable = control variables. All the independent variables are applied at the lag of one year as Tobin s Q measure the value for firm s long term perspective. The foreign currencies exposures on account payable and receivable are obtained from annual report respectively. Control variables applied in this study include dummies for industries, trading and services sectors as comparison to consumer product sector. A year effect for 2010 is also applied as the year 2010 recorded the strongest Ringgit Malaysia currency for our study. The sample year covers from 2006 to 2013 which recorded the recovery of Ringgit Malaysia to around RM3.05 per USD in

216 In general, a large firm is frequently using hedging activities in order to minimize the foreign exchanged exposure and maximize the firm value. In order to examine the relationship between foreign currencies exposure and firm value in the consideration of firm size and hedging, the study controls the regression with the following conditions. Throughout all the regression, generalised weighted least squares are applied to reduce the problem of heteroscedasticity. where E (TBQi,t SIZE) = ƒ(size), where firm size more than RM239 million (median of the sample in this study) where E (TBQi,t HEDGING) = ƒ(hedging), firms with hedging activities only. where E (TBQi,t INDEPENDENT and LARGE SHAREHOLDER) = ƒ(independent>0.33) andƒ(large SHAREHOLDER>15%) The sample of this study consists of 148 Malaysian listed firms on Bursa Malaysia. Bursa Malaysia consists of 916 listed firms. The study scrutinized 500 listed firms annual report under three sectors that are consumer products, industrial products and trading or services, and found that there are 148 listed firms annual reports have available information on the foreign currencies exposure in account receivable and account payable. As foreign currencies exposure tend to vary under different market conditions, the sample period focuses on the years before the declination of crude oil price in Findings Table 1 shows the number (percentage) of firms involved in foreign currencies exposure for receivables and payable exposure for eight years from 2006 to It can be observed that there was an increasing trend for both receivables and payables exposure for the past 8 years. The numbers are in the increasing trend due to more firms have reported their risk exposure in their annual report, and secondly, more firms are now involved in international trade and other activities. Moreover, there are not much difference between the number of firms report account receivable and account payable from 2006 to Table 1: Firms with Foreign Currencies Exposure Reported in Account receivable and Payables Receivables 43.2% 46.6% 55.4% 56.8% 67.6% 69.6% 77.0% 73.3% Payables 39.2% 41.9% 52.0% 58.8% 60.8% 68.2% 75.0% 71.6% Source: From Sample of 148 Listed Firms Note: % of firms involved in foreign currencies exposure can be found by dividing the total number of sample 148 Figure 1 illustrates exposures of firms in Malaysia towards different foreign currencies. The value of the USD exposures amounted to RM5, 000 million equivalents reported by 101 firms in 2013, indicates that majority of export firms using USD as their trade currency. This is followed by exposure in SGD (61 firms) of RM2, 160 million equivalent in From our 148 sample firms, 16 firms recorded the account receivable of RM197 million equivalents for Renminbi (RMB) transaction. In 2013, the value of exposures to Euro (25 firms) also declined to RM44 million equivalents from the peak in Other currencies that are less significant for Malaysia 212

217 USD, (Millions) SGD, RMB, Euro, JPY AUD (Millions) USD, SGD, RMB (Millions) Euro, JPY and AUD (Millions) Global Business and Management Research: An International Journal exporters are Japanese Yen (JPY)- 8 firms reported and Australia Dollar (AUD)-12 firms reported. 6,000 5,000 4,000 3,000 2,000 1, USD SGD RMB Euro JPY Aud Figure 1: Total Account Receivable (currencies exposures) Figure 2 illustrates Malaysia firms account payable exposures. Malaysia import exposures in USD amounted to RM11,868 million by 81 firms in Forty-four Malaysia firms recorded RM293 million equivalents to SGD. From our sample, 15 firms reported their RMB exposures of RM65 million equivalents. The number of Malaysia firms expose to Euro and JPY was 38 and 20 for the value of RM145 million and RM306 million, respectively. As the numbers of observation for exposures in RMB, Euro, JPY and AUD are too few, this study focuses the currencies exposures in USD and SGD and its impact on firm value USD SGD RMB Euro JPY AUD Figure 2: Total Account Payable (currencies exposures) firms or 28% Malaysian listed nonfinancial firms have protected their currency risk via hedging from year 2006 to 2013 (Receivables and Payables). In other words, more than half of the firms were not practicing hedging activities to reduce the foreign currency risk. From the above table, it can be observed that Malaysian listed nonfinancial firms are practicing hedging activities mostly on the receivables, which may due to a higher amount of export value denominated in foreign currencies. 213

218 Table 2: Number of Firms Involved in Hedging Activities Receivables % 21% 24% 26% 28% 24% 26% 24% Payables % 2% 3% 7% 1% 6% 7% 6% Table 3 presents the descriptive statistics of the variables applied for the regression analysis. We applied total assets of the firms to normalize currencies exposure for receivables and payable exposures. The mean of firm value (Tobin s Q) is implying the firm value for Malaysia listed non-financing firms are averagely low in value. The mean for foreign currencies exposure for USD receivables and USD payables are and which is higher than SGD receivables and SGD payables respectively. USD exposure is higher than SGD exposure implies that Malaysian firms mostly use USD to conduct business activities with their international counterparts as USD is a worldwide acceptable currency. On the other hand, SGD is mainly transacted with Malaysian cross-border partner Singapore for trading purposes. Lastly, the median of assets value is RM239 million and we have classified the size of firms as large if the firm s assets value is more than RM239 million. Table 3: Descriptive Statistics EXPOSURE MEAN MEDIAN MAXIMUM MINIMUM STANDARD DEVIATION Tobin Q USD Payables USD Receivables SGD Payables SGD Receivables Assets 1,260, ,374 35,439,900 34,099 4,240,609 Note 1: All the foreign currencies exposure values have been normalized by Total Assets. Note 2: All Asset value are in RM'000. As shown in Table 4, the correlation coefficient is not significantly high as none of the value is more than 0.7. The correlation coefficient for both USD receivables and payables with Tobin Q is and , respectively. The negative sign implying a higher USD exposure likely lead to negative firm value. Besides, the correlation coefficient for SGD receivables and payables exposure with Tobin Q is and which are both in positive sign indicates the exposure to SGD is likely to increase firm value. On the other hand, the correlation coefficient between SGD receivables and SGD payables exposure is 0.669, indicating that Malaysia and Singapore are an active trading partner in import and export activities. Moreover, the correlation coefficient between assets and Tobin Q is 0.368, implying that the value of assets increase, there is also an increase in the value of the firm. Hedging has a negative and low correlation with foreign currencies exposure indicating that with the implementation of hedging activities, it will reduce the level of firm s exposure. However, hedging shows a 1 Mean for USD receivables represent 3.5% of the total assets are receivables exposure. 2 Mean of USD payables represent 3.2% of the total assets are payables exposure. 214

219 negative correlation with Tobin s Q indicates that the cost of hedging may not be sufficient to offset the benefits for the firm. Table 4 Correlation Coefficients TOBINQ USD REC USD PAY SGD REC SGD PAY ASSETS HEDGING TOBIN Q USD RECEIVABLES (-3.226)*** USD PAYABLES SGD RECEIVABLES (-1.555) (1.618) (7.890)*** (-2.514)** (-1.410) SGD PAYABLES (1.336) (-1.584) (1.208) (12.402)*** ASSETS (5.452)*** (-0.948) (3.746)*** (-1.725)* (-0.684) HEDGING (-0.425) (-0.850) (-2.007)* (-2.679)** (-2.470)** (-0.405) The regression results shown in table 5 assess the influences of foreign currencies exposures on firm value. The column (a) and (b) assesses the exposures in USD and SGD, respectively. In contrast to our prediction, account payable and receivable show opposite signs as predicted to hypotheses 1a and 1b. The finding for SGD exposures is interesting as both SGD account payable and receivable show a positive impact on firm value. In column (c), we regress on firms with both USD and SGD, and in column (d), the regression includes dummies for industries, and year effect The inclusion of dummies for industries sectors- industry, trading and services sectors, indicate that both sectors have relatively lower firm value than the consumer sector. On the other hand, the time effect Year 2010 shows relatively higher firm value than other years. This implies that there is a recovery of firm performance immediately after the financial crisis The findings are consistent with column (c), and we, therefore, find support for hypothesis 1a for USD where exposure for account payable will lead to lower firm value. Similarly, we find a significant result for SGD account receivable exposures where it leads to a higher firm value for hypothesis 1b. The inconsistency of hypotheses and findings illustrate that some firms in our study do not possess effective foreign currencies risk management. In order to address this, we include firm size effect where a bigger firm is expected to have better foreign currency management and hedging strategy in our regression in table 6. Table 6 presents the models where large size firms with total assets more than RM239 million (column e and f), the median of the sample s total assets in this study are regressed. Eighty-seven firms meet the criteria of large firms in our regression. 215

220 Table 5: Currencies Exposures and Firm Value Dependent: - Tobin s Q C ( )*** USD PAYABLES (i, t-1) USD RECEIVABLES(i, t-1) SGD PAYABLES (i, t-1) SGD RECEIVABLES(i, t-1) INDUSTRIES TRADING YEAR 2010 Global Business and Management Research: An International Journal (a) (b) (c) (d) (1.8644)* ( )*** ( )*** (1.2705) (2.2076)** ( )*** ( )*** ( )*** (0.0639) (3.3119)*** ( )*** ( )*** ( )*** (1.8468)* (2.6263)*** ( ) ( )** (1.9601)** R F-Statistic Note 1: Figures in the parentheses denote values of the t-statistics, *, ** and *** indicates statistical significance at the 10%, 5% and 1% respectively. Note 2: All the foreign currencies exposure value have been normalized by Total Assets. Note 3: Generalized weighted least squared are applied throughout all models. Table 6: Currencies Exposures and Firm Value (Large and Hedging firms) Dependent Independent (e) Large Firm C ( )*** USD PAYABLES (i, t-1) ( )*** (f) Large Firm ( )*** ( )*** (g) Hedging ( )*** ( )* (h) Hedging (1.2617) ( ) USD RECEIVABLES (i,t-1) ( )** (1.1875) (1.0265) ( ) SGD PAYABLES (i, t-1) (1.2943) (0.0505) (0.8999) (1.4093) SGD RECEIVABLES (i, t-1) ( )** (1.9575)** (1.4442) (0.6355) INDUSTRIES TRADING YEAR 2010 R ( )*** ( )*** (0.1578) (1.4223) ( )*** ( ) F-Statistic Note 1: Figures in the parentheses denote values of the t-statistics, *, ** and *** indicates statistical significance at the 10%, 5% and 1% respectively. Note 2: All the foreign currencies exposure value have been normalized by Total Assets. Note 3: Generalized weighted least squared are applied throughout all models 216

221 In table 6, model (e), in large firms, the exposures of USD are found to be reducing firms value significantly via account payable and receivables. Similarly, exposure of SGD receivables does not enhance firm value, which illustrates high uncertainty in the foreign currency market. In model (f), control variables are included, we do not find support for hypothesis 2a for USD and SGD account payable exposures, as USD exposures show a negative relationship, while SGD exposures are insignificant. In fact, in a larger firm, USD payable shows a 0.15% further decline in firm value as compared to model (d) in table 5. Nonetheless, the regression shows a significant support for SGD account receivable exposures for the large firms, as a larger firm further enhance firm value. Hence, the hypothesis 2b for SGD is supported. In model (g) and (h), we select only firms with the hedging strategy. A total of 42 firms are in the sample. None of the exposures variables have shown significant value for the study. We find no support that hedging could help firms in managing currency exposures and enhance firms value. The study finds no support for hypothesis 3a and 3b. Thus far, the study has not found the consistent support of the hypotheses for the currencies exposure and firm value. A larger size firm does not seem to be effective in risk management and the benefits of hedging are also not observed. We examine the last option based on the governance mechanisims- firms with independent directors which is more than 33% of total board member and large shareholders controlling more than 15%. Table 7: Currencies Exposures and Firm Value (Independent Directors and large shareholders) Dependent Independent C ( )*** USD PAYABLES (i, t-1) (1.0254) USD RECEIVABLES (i, t-1) ( )*** SGD PAYABLES (i, t-1) SGD RECEIVABLES (i, t-1) INDUSTRIES TRADING YEAR 2010 (i) (0.3582) (1.3558) (j) ( )*** (2.4123)** ( )*** (0.9618) (3.2194)*** (1.1173) ( )* (2.0945) R F-Statistic Note 1: Figures in the parentheses denote values of the t-statistics, *, ** and *** indicates statistical significance at the 10%, 5% and 1% respectively. Note 2: All the foreign currencies exposure value have been normalized by Total Assets. Note 3: Generalized weighted least squared are applied throughout all models Under the condition of 33% of independent directors must be on the board and large shareholder who control more than 15%, the sample produces 97 firms observation. The regression result shows USD payables exposure with the coefficient value of is positively correlated to firm value at 5% significant level. In contrast, USD receivable exposure is negatively correlated 217

222 to firm value with the coefficient value of at 1% significant level whereas SGD receivables exposure with a slightly relatively higher positive coefficient value of at 1% significant level. This implies that with 1% increase in SGD receivables exposure, there will be 0.68% increase in firm value. SGD payables exposure is however, positively not significant. Therefore, we accept Hypotheses H4a for USD payables and Hypotheses H4b for SGD receivables. Comparing column (j) and (d) in consideration of governance effects (Independent directors and large shareholders) on the relation of foreign currencies exposure and firm value show that USD and SGD payables and receivables exposure are affected by internal factors. We observed that the influence of these internal factors have changed the regression model of USD payables exposure from negatively significant to positively significant, whereas SGD receivables exposure has a greater degree of positive impact. This evidenced that with effective corporate governance effects, it can help to improve the impacts of currency exposures towards a better firm value. Conclusion The study shows that Malaysia firms are especially exposed to USD and SGD. Although the acceptance of hypotheses and findings are not consistent, the exposure of USD regardless of account payable or receivables significantly reduce firm value, while account receivable and payable of SGD improve firm value. This indicates that Malaysia firms do not manage their exposures on USD well as compared to SGD. The reason could due to USD which is more volatile in the international market during the sample period. However, firms with high exposure to the account receivable in USD for the export, and lead to a negative value clearly indicate that Malaysia firms generally do not manage to reduce risks and costs in their currency exposure account. Hedging strategies appear to be weak when used to countervail currencies exposures. It is found to be insignificant in explaining currencies exposures and firm value. However, it could also suggest that the benefits of hedging may not overwhelm the cost of holding hedging contract, which is expensive. Furthermore, firms may also not report their hedging in their annual report for strategic reasons. Moreover, a larger firm which normally has higher currency exposures in the country are not effective in their management of foreign currency exposures, as only exposures of SGD receivables is able to enhance firm value. SGD account payable is also not significant. The findings suggest that large firms are not well equipped to minimise risks when firms have high exposures in foreign currency although large firms have higher resources. The presence of large shareholders and independent directors, however, improve importers USD exposures in the payable account. USD receivables exposures are however significantly negative indicating prudent risk management is needed on exporters. The findings suggest that governance could play a significant role when hedging strategy is not effective in the study. The presence of large shareholders and independent directors could assert monitoring effect on firm financial decision-making. Acknowledgement The authors gratefully acknowledge the short-term grant from Universiti Sains Malaysia 304/PPAMC/

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225 Consumer Purchase Intention Toward Online Grocery Shopping: View from Malaysia Siew-Lee Chin Graduate School of Business, Universiti Sains Malaysia Yen-Nee Goh* Graduate School of Business, Universiti Sains Malaysia * Corresponding Author Abstract Purpose: The purpose of the current study was to determine the factors influencing consumer purchase intention toward online grocery shopping with online purchasing experience as the moderating variable between the relationship of attitude and purchase intention. Design/methodology/approach: A total of 297 usable questionnaires were collected in Penang, Malaysia. Data collected were analyzed using PLS-SEM. Findings: The findings show that perceived ease of use has the strongest effect on consumers attitude toward online grocery shopping followed by perceived usefulness. Online purchasing experience moderate the relationship between attitude and purchase intention. Research limitations/implications: This study finding are limited to Chinese consumers who live in Penang, Malaysia which cannot reflect the whole population in Malaysia. In this study, caution must be applied, as the findings might not be generalize to all consumer in Malaysia. Practical implications: The finding has important implication for developing robust marketing strategies in relations to improving the perceived ease of use and perceived usefulness of online grocery shopping in Malaysia. Originality/value: This study expanded both TRA and TAM s theory to examine key factors that influence consumers purchase intention toward online grocery shopping. Keywords: Perceived ease of use, Perceived usefulness, Attitude toward Online Grocery, Customer s Purchase intention, Malaysia Introduction In recent years, online shopping has been getting acceptance among consumers. Consumers could buy anything from the brick and click retailers such as books, apparel, electrical appliances and groceries at their convenience. Online grocery shopping has been gaining its popularity in Malaysia owning to an increasing trend among consumers to shop online. Online grocery shopping refers to the consumer purchase of grocery products via retailer s websites and the purchased groceries will be delivered directly to buyer s home (Choi, 2013). Online grocery shopping offer many advantages as highlighted by Mohd Zaini et al. (2011) and Jiang et al. (2013). For example, online grocery shopping offers better selection in terms of more varieties, time savings, convenience and available almost anytime and not limited to any business hours (Mohd Zaini et al., 2011; Jiang et al., 2013; Shah Alam et al., 2011). Moreover, online grocery shopping has made the repeat orders simple as the consumers can customize their weekly shopping lists as well as 221

226 stored the weekly order lists on the retailer s website (Mohd Zaini et al., 2011). In Malaysia, many retailers have started to introduce online grocery shopping by implementing e-commerce technology in their business (Mohd Zaini et al., 2011). Recently, there are many e-grocers in Malaysia such as Tesco, Cold Storage, Sam Groceria, Sunshine Online Grocery and many more. Tesco is the famous hypermarket in Malaysia which offer more than 12,000 goods including fresh and chilled food, non-food items such as household, baby, health and beauty items to consumers through online (Lee, 2016). According to the Association Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) foresees Malaysia has better economic outlook in 2017 and 2018 (The Star Online, 2017). Coupled with the continued weakening of the ringgit, retail sales are expected to growth 5% in 2017 (Kana, 2016). Moreover, based on PwC Total Retail Survey Report 2016, online shopping in Malaysia is also expected a significant growth in According to the survey report, revealed that 93% of Malaysia s consumers have shopped online and about half of Malaysian respondents purchased goods online monthly (Mangalingam, 2016). Additionally, Malaysia Government s policy agenda targeted to increase the income levels in the next five years and trying to turn Malaysia into a high-income country by year 2020 which would boost retail sales as well (PricewaterhouseCoopers, 2013). In view of the rapid growth of online shopping in Malaysia, this study provides an important opportunity to advance our understanding of the potential determinants which influence consumer purchase intention when it comes to online grocery shopping. Nonetheless, questions have been arising about the risk and security concern when shopping online. The issue of consumers feeling unsecure when dealing with privacy information like credit card details might inhibits consumers to shop online. The risk involved when shopping grocery online might influence their purchase behavior. Therefore, the aim of this study is to shine new light on these debates through the examination of trust, financial risk, time risk, privacy risk, security risk, perceive benefits, perceived enjoyment, perceived ease of use and perceived usefulness which influence consumer purchase intention on online grocery shopping. Literature Review and Hypotheses Development Both theory of Theory of Reasoned Action (TRA) (Fishbein and Ajzen, 1975) and Technology Acceptance Model (TAM) (Davis et al., 1989) were used in this study to measure the beliefs and forecast future purchase intention. TRA use to predict consumers purchase intention by consumers attitude toward that behaviour (Choi, 2013). Due to the strength in the empirical support and theoretical basis, TAM is widely adopted by researcher to explain the persons intentions and actual behaviours of a particular technology (Khare & Sadachar, 2014). TAM needs to be modified and expanded by including other variables in order to adapt it to online grocery shopping perspective to enhance the explanatory power (Keen et al., 2004). Besides that, perceived usefulness and perceived ease of use of online shopping have positive influences on consumers attitudes towards online grocery shopping (Hansen, 2006). Moreover, perceived enjoyment also shows positive impact on consumers attitude toward purchase intention of online shopping (Celik & Yilmaz, 2011). Therefore, this study seeks to proposed a research model that expand more variables of TAM theory by incorporating seven additional constructs that is trust, financial risk, time risk, privacy risk, security risk, perceived benefit and perceived enjoyment. 222

227 Consumer s Purchase Intention Purchase intention is the consumer s willingness to use online technology to purchase products (Ha & Janda, 2014). Behavioural intention can be defined as people who have positive or negative attitude toward certain product, it will affect the purchase intention to perform the targeted behaviour (Davis et al., 1989; Fishbein & Azjen, 1975). Based on previous study of Bianchi and Andrews (2012), consumers attitude towards online purchasing is a vital factor on purchase intentions. Consumers who are more likely to purchase through online when they have a favourable attitude (Lee et al., 2011). Besides that, consumers like to use new technology when they beliefs that it will increase their work performance (Lee et al., 2011). Consumer s purchase intention is a vital factor in determining the consumer s online shopping behavior. Hence, consumer s purchase intention is treated as the dependent variable in this study. Trust Trust is known as trust intentions and trustworthiness (Edelman, 2011), and also meant for appropriate generosity, integrity and capability which based on a set of beliefs that individual s behave to others in a socially acceptable manner (Constantinides et al., 2010). Trust is normally recognized as confidence to another party (D Alessandro et al., 2012). Besides that, trust is a prerequisite of social behaviour when making vital decisions during purchasing (Edelman, 2011). In electronic commerce, trust makes consumers confident and comfortable to share their private information, following online vendor guidance and making purchases through internet (Lee et al., 2007). Trust development may be low for first time customers if compared to the repeat customers base on recent academic findings (Eastlick & Lotz, 2011). When serving or communicating with online buyers, online vendors must show their honesty, capability and kindness to customers in order to increase the level of trust (McCole et al., 2010). Establishing trust for new online consumers is very crucial toward develop ongoing trust and this initial trust should be put priority (Grabner-Krauter & Kaluscha, 2008). Previous literature showed that trust has a positive effect on attitude towards online shopping (Celik & Yilmaz, 2011). Therefore, the following hypothesis is proposed: Hypothesis 1: Trust positively affect the attitude towards online grocery shopping. Perceived Risk Perceived risk means that uncertainty feeling when making a purchase decision (Bianchi & Andrews, 2012). Perceived risk was identified as one of the strong factor influencing consumer attitudes (Ting, Goh & Mohd Isa, 2016). A consumer inability to inspect the purchased products and compare the products quality will give an impression to consumers that possible risk is involved when purchase goods online (D Alessandro et al., 2012). The research has shown that the consumers perceived risk is one of the variable which slow down the purchase process in relations to electronic commerce (D Alessandro et al., 2012). Based on previous studies, there are many different dimensions of perceived risk such as financial risk, time risk, performance risk, psychological risk, physical risk, delivery risk, social risk, private risk, resource risk and service risk (Zhao & Li, 2012). In this study, fours dimension of perceived risks namely financial risk, time risk, privacy risk and security risk are investigated. 223

228 Financial Risk Financial risk is also known as economic or monetary risk in which there is a potential net loss of money associated with the initial purchase which include product damage, insecure credit card usage and potential financial loss due to fraud (Crespo et al., 2009). Financial risk entails possibilities that consumer s payment information may be used fraudulently by other people and losing money while performing transaction through online shopping (Lee, Rao, Nass, Forssell & John, 2012). Previous research shown that financial risk is negatively influences consumers intention to shop online (Kim, 2007). As a result, the following hypothesis is proposed: Hypothesis 2: Financial risk negatively affect the attitudes towards online grocery shopping. Time Risk A shorter waiting time is essential. According to Anesbury et al. (2016), shoppers desire for time efficiency when it comes to online grocery shopping. Online consumers who wish to have quick shopping will feel uncomfortable when there is a delay in processing their online transaction or increase in the actual waiting time (Rajamma et al., 2009). Some factors which cause the delay in completing online transactions include uploads (e.g. waiting for page submission to be uploaded to the web-site), slow page downloads (e.g. waiting the pages to open up) and extensive forms to fill out for permissions (Rajamma et al., 2009). Besides that, long waiting time will cause the consumers frustration and discontinue to purchase online (Lee, 2009). Waiting time will cause the dissatisfaction of consumers and abandonment the shopping cart or discontinue to purchase through online (Rajamma et al., 2009). Thus, the following hypothesis is proposed: Hypothesis 3: Time risk negatively affect the attitudes towards online grocery shopping. Privacy Risk Privacy risk occurs when consumer s personal information is used without their notice or permission by others (Lee, 2009). Based on public opinion surveys, majority of consumers have the concern of losing control over their information when organization handle their personal information (D Alessandro et al., 2012). Besides that, privacy risk is also mean that the consumers encounter potential losses of their privacy and confidential personal information resulting by the misuse of that information by others people (Featherman, Miyazaki & Sprott, 2010). Individual worries that the information provided to the website might be misused by the organization or sold to someone else for profiling or marketing purposes (Kansal, 2014). Past studied shown that privacy risk had negatively impact on online shopping intention (Crespo et al., 2009). Thus, it can be postulated that: Hypothesis 4: Privacy risk negatively affect the attitudes towards online grocery shopping. Security Risk Consumers are worried about the security risk which cause by the fraud or hackers during an online transaction (Lee, 2009). Consumers concern about online shopping including the security of the capital transferred during the transaction process (Zhao & Li, 2012). The security concerns such as credit card theft have influence the consumer s decision to purchase through internet (Coker, Ashill & Hope, 2011). Previous research of Coker et al. (2011) provided strong evidence that the internet security risk affect the consumers purchase intention. This research measured the security 224

229 risk and the risk of having consumer s confidential information made public and unauthorized use of credit card information (Coker et al., 2011). Therefore, the following hypothesis is proposed: Hypothesis 5: Security risk negatively affect the attitudes towards online grocery shopping. Perceived Benefit Perceived benefit referred to customer s perception whether online shopping can fulfil their wants and needs and beneficial to them (Delafrooz et al., 2011). Compare with the shopping at the brick and mortar store, the main advantages of shopping through internet is consumers can purchase products wherever they want at any time which is 24 hours per day and 7 days per week (Delafrooz et al., 2011). Additionally, customers can enjoy window shopping through online without feeling the pressure to buy (Delafrooz et al., 2011). There are many reasons that consumers like to purchase through internet, among them are time saving, convenience, wider selection, lower price, 24 hours customer service, fun and entertaining (Delafrooz et al., 2011). The most vital advantages of shopping through online is there are no time and space limitation exist on the internet (Kwon & Noh, 2010). Existing literature shown that most consumers have positive attitudes on perceived benefit when shop through internet (Yan & Dai, 2009). As a result, the following hypothesis is proposed: Hypothesis 6: Perceived benefit positively affect the attitude towards online grocery shopping. Perceived Enjoyment Perceived enjoyment is one of the sub-dimension s construct that measures the real motives of consumers using information systems and computer-human interaction (Qiu & Li, 2008). Perceived enjoyment play a crucial role in attract more customers to shop online and it is a growing interest in research of information systems (Celik & Yilmaz, 2011). Perceived enjoyment attracts consumer s purchase intentions through online when sellers web sites design in an attractive way resulting favourable behavior such as feeling the enjoyment and pleasure when shop online (Celik & Yilmaz, 2011). Past study found that perceived enjoyment has positive effect on consumer s behaviour intention and attitude shopping online (Chiu et al., 2009). Hence, the following hypothesis proposed: Hypothesis 7: Perceived enjoyment positively affect the attitude towards online grocery shopping. Perceived Ease of Use Perceived ease of use (PEOU) is originated from TAM and related to the intrinsic motivation which accelerates the respected outcomes by solving the process (Celik, 2011). PEOU have severe discrepancies between the ease of e-trading and browsing the web pages, but it has effect on entire information system or information technology usage (Chiu et al., 2009). The benefit of PEOU in e-commerce include ease of ordering at any time and any location, perceived ease of information search, and overall ease of use (Gong et al., 2013). PEOU has been empirically tested and proved that PEOU directly influences behavioural intentions through usefulness especially in the exploratory stage of technology used (Celik, 2011). Previous research proved that there is a positive relationship between PEOU and consumers purchase intention (Kim & Forsythe, 2011; Johar & Awalluddin, 2011; Celik, 2011; Lee et al., 2011; Yulihasri et al., 2011; Tong, 2010). Thus, it can be postulated that: 225

230 H8: Perceived ease of use (PEOU) positively affect the attitude towards online grocery shopping. Perceived Usefulness Perceived usefulness (PU) examines people believes of using a particular technology and whether that technology can improve the performance of a specific task in an efficiency way (Lee, 2009). Perceived usefulness of online shopping is related to the perceived benefit such as maximizing time-saving, minimizing cost during a transaction and making online grocery shopping become more convenience (Choi, 2013). Moreover, online shopping would increase the effectiveness and efficiency in the entire online purchasing process by comparing prices from different retailers, searching the product information, placing an order, making payment, tracking the shipment and assessing the customer services (Celik, 2011). Hence, perceived usefulness of online shopping can be conceptualized as the degree of online shopping provide relative benefits to consumers if compared with offline shopping (Chiu et al., 2009). Past studies identified that perceived usefulness has positively impact consumer s intentions towards online shopping (Tong, 2010). So, the following hypothesis is proposed: Hypothesis 9: Perceived usefulness (PU) positively affect the attitude towards online grocery. Online Purchasing Experience Online purchasing experience means that consumers have previous experience in purchasing products through internet (Lu et al., 2011). A consumer who are getting more experience with buying groceries online, may adjust their purchase behavior (Campo & Breugelmans, 2015). Consumers evaluate their online shopping experience through their perceptions on security or privacy risk, product information, payment method, delivery services, service offered and enjoyment (Tong, 2010). Consumers with greater online shopping experience are usually more willing to shop from different web services if compared to those inexperience consumers (Lu et al., 2011). For instance, in online hotel reservation, past online purchase experience are related to the consumer intention (Saw, Goh & Mohd Isa, 2015). Hence, it is apparent that the more satisfying consumers with their past online shopping experiences, they would make the higher purchase amount of goods online shopping (Tong, 2010). Previous study shown that online experience has direct influences on consumers perceptions, attitude and behavior intention toward online shopping (Lu et al., 2011). Therefore, online purchasing experience is a moderator between attitude and consumers purchase intention toward online grocery, it can be postulated that: Hypothesis 10: The relationship between attitude towards online grocery shopping and purchase intention is greater when online purchasing experience is high. Attitude towards Online Grocery A person s attitude is determined by the set of people s feelings or beliefs regarding an entity with some degree, issue or person (Ha & Janda, 2014). Attitude also relates to individual s perception either a favorable or unfavorable behaviour (Hansen, 2008). Individual will more likely to engage in the behaviour when they have more favourable attitude (Hansen, 2008). It means that a person attitudes affect their behavioural intention which in turn affect their actual behaviour action of purchasing a product (Celik & Yilmaz, 2011). When consumers have positive attitudes towards 226

231 online shopping, they are more likely to use and adopt it with stronger purchase behavioural intention (Celik & Yilmaz, 2011). As a result, the following hypothesis is proposed: Hypothesis 11: Attitude towards online grocery shopping positively affect purchase intention. Method Data collection During data collection, convenience sampling was applied. Out of 400 questionnaires, 200 questionnaires distributed via and the remaining 200 were self-administrated questionnaires distributed via mall intercepts in Penang. After data screening, a total of 297 questionnaires were fully completed and used for this analysis. The demographics profile of the respondents shows that most of the respondents do not have the experiences to purchase groceries through internet and shown 55.9 per cent in this study. Most of the respondents were female in this study and has 68 per cent compared to 32 per cent are male respondents. The respondents in this study skewed toward younger consumers as 57.2 per cent of respondents fell into age category while 32.3 per cent of respondents fell between age categories. Majority of the respondents was Chinese that is 86.5 per cent followed by Malay (8.8 per cent). All the respondents in this study were Malaysian in Penang state (100 per cent). Besides that, the respondents in this study was highly educated as 70.4 per cent of the respondents had at least bachelor degrees. Moreover, 81.5 per cent of the total respondents had monthly income under RM2001 RM4000 category and RM4001 RM6000 category. In term of marital status, majority respondents were single (62.6 per cent) and the rest of the respondents were married (37.4 per cent). Based on the survey, majority consumers would like to purchase households products (58.2 per cent) through online. Followed by the apparel, gifting and non-food that had 36.0 per cent of the consumers would like to purchase through internet. In addition, 32.0 per cent of the consumers would like to purchase health and beauty products through online. Fresh food (3.7 per cent), pet s products (7.4 percent) and chilled and frozen food (7.7 per cent) had the lowest percentage which consumers do not prefer to purchase through online. Furthermore, consumers would like to purchase canned food (25.3 per cent), biscuits and cakes (19.9 per cent), cooking ingredients (18.9 per cent), rice (18.2 per cent), chocolate and snacks (17.8 per cent) and baby products (12.8 per cent) through online in this study. Measurement The type of the survey used in this research was a self-administrated questionnaire. Seven-point Likert-scale from 1 (Strongly Disagree) to 7 (Strongly Agree) were used to measure the relationship between one variable to another variable. In order to ensure the validity and reliability of the scales, measurement items were adapted from prior literature whenever possible. Trust of the individuals was measures on five items adapted from Ha and Janda (2014). Financial risk, time risk and privacy risk was measured with three item based on Crespo et al. (2009). Three items measuring security risk and four items measuring perceived benefit were taken from Lee (2009). Three items for perceived enjoyment were adapted from Celik and Yilmaz (2011). Perceived ease of use and perceived usefulness were measured with five item based on Tong (2010). Three items for online purchasing experience were adapted from Lu et al. (2011). Attitude toward online grocery and customer s purchase intention was assessed using three items adapted from previous study of Hernandez et al. (2010). The data collected through questionnaire was coded and 227

232 analyzed using the computerized SPSS 22.0 and Smart Partial Least Squares (PLS) 2.0 (Ringle, Wende & Will, 2005). Findings Measurement model In terms of validity, both convergent validity and discriminate validity tests were performed. To demonstrate reasonable convergent validity, Hair et al. (2014) suggested that factor loading of each dimension and AVE should exceed 0.5. Based on the results shown in Table 1, all the items have the factor loading above 0.50 which indicate significant cross loadings. The average variance extracted (AVE) in Table 1 showed that the items were in the range of to and meet the recommended criteria (Hair et al., 2014). Regarding discriminant validity testing, if the square root of the AVE is larger than its correlations with other constructs, discriminant validity is proved (Fornell & Larcker, 1981). As shown in Table 2, all the diagonal values exceed the inter-construct correlations, thus satisfying the criteria to establish discriminant validity test is satisfied. To assess the internal consistency of each construct, composite reliability (CR) and Cronbach s alpha were calculated. However, Cronbach s alpha tends to underestimate the internal consistency reliability and sensitive to the number of items in the scale (Hair et al., 2014). Due to the limitation Cronbach alpha s in the population, composite reliability (CR) method is more appropriate to measure the internal consistency reliability (Hair et al., 2014). Based on Hair et al. (2014), the composite reliability values should be higher than and the results shown in Table 1 range within to which indicate adequate internal consistency. Table 1: PLS result of convergent validity measures Item Factor Loading CR a AVE b Cronbach's Alpha Trust The online grocery web site commit their promise The online grocery web site does not make false statements and information. The online grocery web site has sufficient experience to market the groceries that it offers. Most of what the online grocery web site says about its grocery promotion is true. The information offered by this web site is honest and sincere Financial Risk I will have concerns that I really would not get my money's worth from the grocery purchased through internet. I am concerned about providing my credit card number and details during purchasing groceries through online. There would be many possibilities for non-delivery of online purchased groceries. Time Risk I am concerned about wasting too much time making the order through online. There would be many possibilities that I have to spend too much time searching for the groceries through online. I would be concerned that I have to wait too long for the delivery of the purchased groceries

233 Privacy Risk There would be many chances that my personal information would be used without my knowledge when purchasing groceries through online. It would increase the possibilities that I would receive unwanted s regarding the advertisement when purchasing groceries through the internet. When purchase groceries through online, it would lead to a loss of privacy because of the improper use of my personal information. Security Risk I would not feel totally safe providing personal privacy information over the online grocery shopping. I am worried to purchase groceries through online because other people may be able to access my personal information. I would not feel secure sending sensitive information when purchase groceries through online Perceived Benefit I think that purchasing groceries through online can save my time I feel that online grocery web site can offer me a wider range of grocery products and services. I can enjoy 24 hours online grocery shopping Online grocery shopping allows me to shop around for the best pricing Perceived Enjoyment I am happy when purchasing groceries through online I would feel excited when purchasing groceries through online I enjoy purchasing groceries through online Perceived Ease of Use Instructions for online grocery shopping are easy to follow Internet shopping for groceries is easy to understand and clear I would find online shopping for groceries are easy to use I would find it easier to use the internet to buy the groceries that I want to buy. It would be easier for me to become skillful at shopping groceries through online Perceived Usefulness Using the online grocery shopping would enable me to accomplish tasks quicker. Using the online grocery shopping would increase my productivity. Using the internet would make shopping for groceries easier Using online shopping for groceries is advantageous Using the internet to purchase groceries would improve my shopping performance Online Purchasing Experience I am comfortable purchasing groceries through the Internet as I am familiar with the Internet. I spend many hours using the internet I frequently use the internet to purchase groceries

234 Attitude toward Online Grocery Using internet to purchase groceries is a good idea My general opinion of online grocery shopping is positive Using the internet to purchase groceries seems an intelligent idea to me Customer's Purchase Intention I am likely to purchase groceries through the internet It is likely that the internet will be the medium I use to make my grocery purchases in the future. I intend to use the internet to purchase groceries Note: a Composite Reliability (CR) = (square of the summation of the factor loadings)/ {square of the summation of the factor loadings} + (square of the summation of the error variances)} b Average Variance Extracted (AVE) = (summation of the square of the factor loadings)/ {(summation of the square of the factor loadings) + (summation of the error variances)} Table 2: Discriminant Validity ATT ATT PI FR OP PB PEOU PE PU P S TR T PI FR OP PB PEOU PE PU P S TR T Note: Attitude toward online grocery (ATT), Financial Risk (FR), Online Purchasing Experience (OP), Privacy Risk (P), Perceived Benefit (PB), Perceived Enjoyment (PE), Perceived Ease of Use (PEOU), Customer s Purchase Intention (PI), Perceived Usefulness (PU), Security Risk (S), Trust (T), Time Risk (TR). Diagonal: square root of AVEs reported along diagonal in italics. Off-diagonals: correlation between latent variables Structural Model In this research, bootstrapping is applied where a minimum sample of 5000 were selected for bootstrapping. Critical values for a one-tailed test were 1.28 (significance level of 10%), 1.65 (significance level of 5%) and 2.33 (significance level of 1%) (Hair et al., 2014). Path estimates and t-statistics were calculated for hypothesis testing. The results are presented in Figure 1. In Figure 1, the result of the coefficient value (β) and t-value suggested H7, H8, H9, H10 and H11 were statistical significance. The independent variable of perceived enjoyment (H7: β = 0.118, p < 0.1), perceived ease of use (H8: β = 0.463, p < 0.01) and perceived usefulness (H9: β = 0.236, p < 0.01) were positively significant to consumer s attitude toward online grocery shopping. Perceived ease of use was the most significance predictor for consumers attitude toward online grocery shopping in this study followed by perceived usefulness. Additionally, the results showed that online purchasing experience with path coefficient of (p < 0.05) has significant 230

235 moderation effect on the relationship between consumer s attitude toward online grocery shopping and customer s purchase intention. Therefore, Hypothesis 10 is supported. Besides that, consumers attitude toward online grocery shopping significantly associates with purchase intention, with a path coefficient of (p < 0.01). Thus, Hypothesis 11 is supported as well. Trust Financial Risk Time Risk Privacy Risk Attitude toward online grocery (R 2 = 0.587) 0.457*** Customer s Purchase Intention (R 2 = 0.722) Security Risk ** Perceived Benefit 0.118* Online purchasing experience Perceived Enjoyment Perceived Ease of Use 0.463*** 0.236*** Not significant Significant Perceived Usefulness Figure 1: Research Model with Results Note: *p < 0.1, **p < *** p < However, trust (H1: β = , p > 0.1), financial risk (H2: β = , p > 0.1), time risk (H3: β = 0.341, p > 0.1), privacy risk (H4: β = 0.226, p > 0.1), security risk (H5: β = 0.057, p > 0.1), and 231

236 perceived benefit (H6: β = , p > 0.1) have insignificance relationship with consumer s attitude toward online grocery shopping. As a result, H1, H2, H3, H4, H5, and H6 were not supported in this research. R 2 values before and after adding the interaction effect has increase from to The predictive power of this research model can be assessed by the percentage of total variance explains (R 2 ). Based on Figure 1, the R 2 value was which mean that 58.7 percent of the variance in extent of attitude toward online grocery can be explained by trust, financial risk, time risk, privacy risk, security risk, perceived benefit, perceived enjoyment, perceived ease of use and perceived usefulness. Besides that, the R 2 value of indicate that 72.2 percent of the variance in customer s purchase intention can be explained by the extent of consumers attitude toward online grocery and online purchasing experience. According to prior literature, when R 2 values exceed 10 percent, acceptable explanatory power is proved (Falk & Miller, 1992). Discussion The findings indicated that trust, financial risk, time risk, privacy risk, security risk and perceived benefit have no effect on consumer s attitude toward online grocery shopping. Whereas, perceived enjoyment, perceived ease of use and perceived usefulness have a positive relationship on consumer s attitude toward online grocery shopping. Besides, this study found that online purchasing experience moderate the relationship between attitude toward online grocery and customer s purchase intention. Contrary to expectations, this study did not find a significance difference between trust and customer s attitude toward online grocery shopping. This finding is inconsistent with those of Delafrooz et al. (2011) who suggest that there is a positive and significant relationship between trust and consumer s attitude toward online shopping. A possible explanation for this is that most of the respondents in this study still perceive that e-commerce is unsafe platform and the trust level to the online vendor is low. According to Business Insider Malaysia report, revealed that male teens are more like to shop online than female teens (Schlossberg, 2016). Therefore, 68 percent of respondents in this study are female who have less tendency to shop through internet than males might contribute to the insignificance result. Additionally, female respondents might have the feeling that online vendors will deliver low quality products or services to them. Hence, they do not exhibit trust to the online vendor. This study has been unable to demonstrate that financial risk negatively affects the attitude toward online grocery shopping. The findings of the current study are not consistent with those of Crespo et al. (2009), Lee (2009), and Kwon and Noh (2010). This inconsistency may be due to most of the respondents are highly educated. Most of the respondents in this study have a bachelor degree (70.4 per cent) which mean that most of them are highly educated. Highly educated respondents have the knowledge that transaction through internet was safe due to the transaction authorization code (TAC) will be requested on every purchase through online. So, they do not have the concerns of lossing money when performing a transaction through online shopping. Therefore, financial risk for these groups of respondents become less influential and the relationship become insignificant. It is somewhat surprising that no relationship was noted between time risk and consumer s attitude toward online grocery shopping. These results differ from Rajamma et al. (2009) and Lee (2009) who have found that time risk has a significance negative relationship on consumer s attitude toward online shopping. This result may be explained by the fact that consumers nowadays felt that it is more time efficient to purchase online. Moreover, most of the e-grocers have improve their delivery services with some offering free delivery services to attract consumers to purchase 232

237 online groceries. Hence, the probability of having time risk involved is much lower which makes the relationship become insignificant. In contrast to earlier findings, however, no evidence of privacy risk affect consumer s attitude toward online grocery shopping. The present findings seem to be consistent with other research by Yulihasri et al. (2011). This result may be explained by the fact that respondents knew that their personal data or information are well protected. In Malaysia, there is a Personal Data Protection Act (2010) which aimed at regulating the processing of personal data in commercial transactions. A consumer personal data such as name and contact number are protected during online transaction so the privacy risk concern is minimal. In addition, security risk did not affect customer s attitude toward online grocery shopping. The result of this finding contradicts with previous studies from Lee (2009) & Coker et al. (2011) who found that security risk has negatively impact on consumer s attitude to shop online. It may be that the respondents of this study understood that for every successful online transactions, TAC is required to complete the transaction. Hence, only the right owner of the credit card user with their registered mobile number will received TAC. As such, the issue on security risk become less important to affect consumer attitude. There are no relationship found between perceived benefits and consumer s attitude toward online grocery shopping. This research finding is inconsistent with previous studies from Kwon and Noh (2010) and Delafrooz et al. (2011) who found out that perceived benefit has positive impact on consumer s attitude toward online shopping. It seems possible that these results are due to majority of the respondents in this study are full time worker (56.2 per cent) and unmarried (62.6 per cent).most of the respondents might busy on their work and single. They have less time and motivation to cook at home. Therefore, the intention to browse the information and search grocery items through internet is less. The current study found that perceived enjoyment positively influence consumers attitude toward online grocery shopping. This results agree with the findings of other studies by Celik and Yilmaz (2011) and Al-Magharabi and Dennis (2011) which found that perceived enjoyment has positive relationship on consumer s attitude toward online shopping. Perceived ease of use is also found to have positve influence on attitude toward online grocery shopping. This finding confirms the association between perceived ease of use and attitude, consistent with previous studies by Crespo et al. (2009), Johar and Awalludin (2011), Celik (2011), Yulihasri et al. (2011), and Gong et al. (2013). The positive result between these two variables might due to the online vendor provide good quality of service, easy and friendly systems such as an accesible, responsive and informative browsers, order tracking tools and accesible after sale services for consumers. Perceived usefulness is shown significantly and positively influence on consumer s attitude toward online grocery shopping. This result match those observed in earlier studies such as by Crespo et al. (2009), Johar and Awalludin (2011), Celik (2011), Yulihasri et al. (2011), and Gong et al. (2013). One possible explanation is that online vendor has improved efficiency and effectiveness of online shopping process which provide extensive information and facilitate product and price comparison that helps consumers make their best judgements. The findings of this study also revealed that online purchasing experiences moderate the relationship between consumers attitude and purchase intention toward online grocery shopping. This mean that having greater online purchasing experience enables stronger relationship between attitude toward online grocery and purchase intention. This moderation effect result is supported by previous study from Tong (2010), Lu et al. (2011), and Soto-Acosta et al. (2014). Consumers with online shopping experience have more motivation to shop online, this is due to consumers are more knowledgeable about online shopping process and feel lesser risk associated with the 233

238 online shopping fraud. Thus, they are more likely to purchase items online compare to those who have never shopped online (Soto-Acosta et al., 2014). This study support the positive relationship of attitude toward online grocery shopping on customers purchase intention. The study finding is consistent with previous studies from Hernandez et al. (2010), Lee et al. (2011), Ceik and Yilmaz (2011), and Ha and Janda (2014). Consumers are more likely to engage in purchase intention of online shopping as their behaviour intention affected by their attitude which in turn affect their actual behaviour (Celik & Yilmaz, 2011). Consequently, positive feeling and attitude would affect consumer s purchase intention. Therefore, this finding has significance positive relationship between attitude toward online grocery shopping and customers purchase intention. Conclusion and Policy Implications This study expand on the Technology Acceptance Model (TAM) theory which makes use of innovative technology systems to investigate consumers acceptance of online grocery shopping. Besides that, Theory of Reason Action (TRA) which include the dimension of attitude and purchase intention are examined in this study. Perceived enjoyment, perceived ease of use and perceived usefulness which positively influence on attitude toward online grocery shopping have been confirmed. This study have expands on TRA and TAM model and contributes to the growing body of literature on the purchase intention of online grocery shopping in Malaysia. From a business perspective, the result in this study would imply some implications to the marketers and online grocers. This study will help marketers and online grocers to design better marketing strategies and improve their return on investment and also sales performance. The findings from this study can benefit online marketers target existing and new consumers by creating an effective and efficient e-commerce platform systems that brings convenience and cost savings to them. In addition, online marketers can target and reach out consumers anywhere, anytime. Therefore, online grocery shopping is better option and online grocers can generate incremental sales growth for the industry. This study have a numbers of limitation worthy for improvements. First, this study may not be a valid reflection of actual behaviour as it relied on self-reports which there is a possibility of some under-reporting. Second, the sample of this study was dominated by Malaysian Chinese which contain 86.5 per cent, this is opposed the actual population in Malaysia. Therefore, the result in this study may biased toward this ethic group. Furthermore, the findings in this study may not reflect the whole population in Malaysia as this study only conducted in Penang, Malaysia. Third, this study have the limitation on the specific category of products and services (grocery items) as it does not specify clearly the products and services to the respondents. This is because different category of products and services have its specific set of variable for measurement. A number of possible future studies would worth to investigate in this online grocery shopping context. First, in this context, future study can investigate similar topic by using the sample sizes that follow the actual ethnicity population in Malaysia. Which mean that, the future study sample should include the mixed ethic group instead of one ethic group. Additionally, other vital factors that could influence consumers attitude toward online grocery should investigate in the future study such as value consciousness and normative social influence. 234

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243 Vol. 9, No. 4s (Special Issue 2017) The Impact of Value Co-creation on Service Supply Chain Performance: A Proposed Conceptual Framework Jaludin Janteng * Labuan International Campus, Universiti Malaysia Sabah, 87000, Labuan, Malaysia Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia jaludin@ums.edu.my Cheng Ling Tan Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia Yudi Fernando Faculty of Industrial Management, Universiti Malaysia Pahang, 26600, Pahang, Malaysia * Corresponding Author Abstract Purpose: This study aims to propose a conceptual framework that link value co-creation, service innovation capability and service supply chain performance. Design/ methodology/ approach: We performed an extensive literature review in the field of service supply chain performance with its various determinants in order to draw a conceptual framework. Findings: The findings of the proposed determinants of service supply chain performance suggest that there is a positive relationship between value co-creation in improving the service supply chain performance, in particular interaction through dialogue, close discussions and collaboration with customers. Research limitations/ implications: The initial observation shows that studies on service supply chain performance are limited in the literature. This allows a deeper understanding of the relationship between value co-creation, service innovation capability, and service supply chain performance of service organisations. Practical implications: This study contributes to additional knowledge and ideas to firms when applying the newly developed value co-creation concept. The positive evidence of its linkages for improving the service supply chain performance is useful for the practitioners who may need to consider reviewing the current strategies used in their organisations to improve service supply chain performance and adopt the proposed determinants. Originality/ value: The contributions of this study is to fill the existing gaps in service chain literature. Additionally, service innovation capability has been used as a mediator that can help to improve the linkages to the service supply chain performance. Keywords: service supply chain performance, value co-creation, service innovation capability, content analysis, conceptual framework, service industry, operations management. 239

244 Vol. 9, No. 4s (Special Issue 2017) Introduction Service supply chain management is a business strategy from the perspective of supply chain management. It enables organisations to achieve competitive advantage and profitability. Many companies which are considered as manufacturing companies are shifting their focus to service activities, namely from classic manufacturing-oriented supply chain to service-oriented supply chain (Ellram, Tate, and Billington, 2004). The main reason is that the manufacturing companies are facing challenges to manage operational activities due to increase operation costs and declining profits (Suzari and Jayaraman, 2014). For example, International Business Machines Corporation (IBM), the largest computer firm in the world have shifted their focus to services by offering product support services, consultation, and consumer solution. The implementation of value co-creation is another management initiative that companies can adopt to increase firm competitiveness and have better interaction with customers. Value cocreation is the joint creation of value by the company and the customer, allowing the customer to co-construct the service experience to suit their context (Prahalad and Ramaswamy, 2004). The co-created value arises from the unique experience is shared within the company. The companies interaction with the consumers allows them to identify new knowledge and profitability opportunities, as well as creating superior brand loyalty. There is a need for companies to assess their supply chain management performance to assess their effectiveness and efficiency in running business operations. There is a trend to investigate supply chain management concepts (Balfaqih, Nopiah, Saibani, and Al-Nory, 2016; Boon-Itt, Wong, and Wong, 2015; Cho, Lee, Ahn, and Hwang, 2012; Lo, 2016; Maull, Smart, and Liang, 2014; Tan, Mohd. Zailani, Tan, and Shaharudin, 2016; Wang, Wallace, Shen, and Choi, 2015). This study investigates the effects of value co-creation towards firm s service supply chain performance in Malaysia. It is an investigation to link the relationship of value co-creation to improve the firm s service supply chain performance. The authors are interested in reviewing the current gap in the industry and to propose a business model in the study area. The paper is structured as follows: first, it discusses the problem statement; second, it provides a comprehensive literature review of the related variables, and the proposed model; and the final section is on the findings as well as conclusion. Problem Statement Supply chain management is becoming very challenging in the highly competitive economic world. Companies have to compete with their competitors through highly differentiated, efficient, and effective supply chains. Thus, there is a need for manager in the service sector to assess their company s supply chain performance, in particular, the service supply chains performance in the service sector (Cho et al., 2012). It is a difficult to measure service supply chain performance due to the unique characteristics of services. Service is intangible, perishable, heterogeneous and variability. It is impossible to repeat the same service quality at some other time or location, and it is not easy for companies to offer the same services consistently. Thus, companies will have difficulty to assess service supply chain performance. This study is going to propose a model to overcome the above problem, through the use of value co-creation and service innovation. Therefore, this study is significant for supply chain managers to improve their service operations. In the service sector, the main problem is an inconsistent level of customer satisfaction because it affects the reputation of the company. There is a need for companies to provide quality services consistently in order to obtain customer satisfaction, which is significant in enhancing business 240

245 Vol. 9, No. 4s (Special Issue 2017) performance (Lo, 2016). Therefore, the ability of the companies to offer high quality services will help to attract more customers and attain higher profitability (Oyner and Korelina, 2016). However, to attract new customers is more expensive than keeping existing ones. Thus, it is crucial for the service companies to satisfy any of their existing customers. Based on the problem, the researcher found that customer satisfaction is necessary to earn customer loyalty (Oyner and Korelina, 2016). Therefore, supply chain management and customer satisfaction are important elements in the service industries that should be given serious consideration. Moreover, many companies are facing a decline in profits due to the inefficient management of supply chains. To sustain competitively, companies have to introduce innovative elements into their service operations (Taghizadeh, Jayaraman, Ismail, and Rahman, 2016). This make the service industry more challenging. Companies have to generate new strategy by considering service innovation in their organization. Taghizadeh et al., (2016) suggests that companies should implement value co-creation and apply innovative supply chain management practices in new product and service development. Service innovation will lead the companies to generate new ideas and gain new competitive strategies. Therefore, there is a need for companies to study the role of service innovation capability for improvement of firm s service supply chain performance. It is hoped that this study will help service companies to make some improvements in its service supply chain management and to gain a competitive advantage in the market. Therefore, the implementation of innovative supply chains strategy will give advantages for the service companies and contribute to their development in the context of Malaysian service industry. To sum up, this study will provide a valuable guideline for companies to review their supply chains strategy. Background of the Study In Malaysia, between 2011 to 2015, services industry is the largest contributor to the Gross Domestic Product (GDP), with a recorded 53 percent and at a growth rate of 6.3 percent yearly (Economic Planning Unit, 2016). The service sector has benefited from increasing household income, higher tourists arrival, rapid development in telecommunications and excellent financial market. It is the target of the Malaysian Government that the service sector will be the greatest player in the Services Sector Blueprint, which is launched in 2015 under the 11 th Malaysia Plan. The services sector will be transformed to a sector that is skill-intensive and with innovative services. The services industry to grow at 6.8 percent per annum and is expected to contributes 56.5 percent to the GDP in 2020, and is able to produce 9.3 million jobs (Economic Planning Unit, 2016). By looking at this statistic, the service sector has the potential to be the leader in service industry, attracting huge amount of private investment, strengthening service exports, and generating more high-income jobs. Therefore, it is crucial to study the service industry in Malaysia to attract the attention of academicians, practitioners, and investors on the potential of the service sector. Literature Review Value co-creation Value co-creation is viewed as a marketing strategy to improve business and create innovation blueprint (Prahalad and Ramaswamy, 2004). It provides a resource to firms to create value through interaction between consumers and firms to co-construct the service experience. Firms should develop a supplier-customer relationship through interaction and dialogue to strengthen the 241

246 Vol. 9, No. 4s (Special Issue 2017) relationship in business (Payne, Storbacka, and Frow, 2008). The interaction between consumers and firms recognized through consumer s experiences provides value to the company through the use of customers as a source of competence (Vargo, Maglio, and Akaka, 2008; Zwick, Bonsu, and Darmody, 2008). The implementation of value co-creation contributes towards establishing deep engagement and the willingness to act on both sides. Thus, the combination of the value cocreation dimensions, namely dialogue, access, risk assessment, and transparency enables firms to create value for new co-creation experiences. Therefore, value co-creation is crucial for the transformation of the relationship between firms and consumers (Prahalad & Ramaswamy, 2004). The continuous popularity of innovative development among consumers is making firms, to rely on innovation activities to satisfy their customer s demand (Mohd. Nasurdin, Tan, Khor, 2015; Taghizadeh et al., 2016). Hence, firms are putting substantial efforts to create values with their consumers as part of the innovation process to attain the competitive advantages. To strengthen the model, service innovation capability will also test the mediation effect between value cocreation and service supply chain performance. Service innovation capability Service innovation capability refers to specific capabilities such as organisational competencies, routines, and processes (Hertog, Aa, and Jong, 2010). It can benefit the firm by offering new services related to firms existing products, allowing them to break into new markets and reach new customers (Grawe, Chen, and Daugherty, 2009). As service innovation is a main priority, firms can generate service innovation by creating added value to existing products to create organisational capabilities. Scholars of previous studies such as Wonglimpiyarat (2010) stated that service innovation capability indicates the business capability to bring new knowledge or technologies to develop a new service, resulting in a significant improvement in the production or delivery of goods or services. Daugherty, Chen, and Ferrin (2011) found that capabilities are what firms do with assets; how they make use of their assets by transforming assets into something for better service or innovative products which will give firms an edge in the marketplace. The service innovation capability declares that a firm attains a competitive advantage when it identifies a capability and create a new resource, so that it can differentiate itself from the competitors. Service innovation capability enable firms to have a significant effect on supply chain performance (Daugherty et al., 2011; Grawe et al., 2009; Hertog et al., 2010; O Cass and Sok, 2013; Taghizadeh et al., 2016; Wonglimpiyarat, 2010). This means that service innovation capability is able to increase the service supply chain performance in the service industry. Service innovation capability is crucial to create a new and improved service in the supply chain. Hence, firms should enable service innovation capability in organisation to create new service design and new service development for the improvement of service supply chain performance in the service industry. Service supply chain performance Service supply chain performance is known to assess its performance to respond in time to the market needs, deliver superior value to customers, minimise order process, and perform promising activities. It represents the performance measurement in the process of quantifying the effectiveness and efficiency of services provided to the customer (Neely, Adams, and Kennerley, 2002). Cho et al. (2012) found that to generate effective supply chain management, firms have to manage a network of suppliers, service providers, customers, and other service partners that transfer resources into services delivered to and received by the customers. The effectiveness of 242

247 Vol. 9, No. 4s (Special Issue 2017) service supply chain performance can generate firm s responsiveness, flexibility, and reliability (Brignall, Fitzgerald, Johnston, and Silvestro, 1991). Moreover, service supply chain performance also can increase customer satisfaction (Gunasekaran, Patel, and Tirtiroglu, 2001). Previous studies emphasised on the service quality will increase the customer s satisfaction in various contexts (Chan and Tan, 2016; Chen and Tan, 2017) However, Parasuman, Zeithaml, and Berry (1988) study stressed that the five dimensions of service quality namely reliability, responsiveness, assurance, empathy, and tangibles are related to service supply chain performance. Effective supply chain management would be successful as long as each organisation can capitalise on supply chain capabilities and resources to bring products and services to the market faster, at the lowest possible cost, with the appropriate goods and service features, and the best overall value (Gunasekaran et al., 2001). The combination of value co-creation and service innovation capability will improve service supply chain performance and lead the innovation of services into the next level. The framework of service supply chain performance measurement would be beneficial to researchers and practicing managers in the identification of opportunities for improvements in service supply chain (Cho et al., 2012). Hence, it is suggested the service supply chain performance enables firms to view and assess the design and management of service supply chain processes in a different way as, as opposed to traditional management. Underlying Theory The relational view theory is used to support the conceptual framework of this study. This theory focuses on potential resource efficiency in the service company as a strategy to achieve competitive advantage. Relational view theory suggests that a firm s supply chain management performance is affected by a source of relational rents. A relational rent is defined as a supernormal earning produced in an interchange relationship that cannot be produced by the firm in isolation and can only be generated through the joint individual contributions of the particular alliance partners (Dyer and Singh, 1998). Companies need to recognise the potential relationship with alliance partners in order to achieve higher supply chains performance. In other words, there must be a source of relational rents in a company that include relation-specific assets, knowledge-sharing routines, corresponding resources or capabilities, and effective governance within the relationship (Dyer and Singh, 1998). This study will apply a relational view to investigate the relationship between value co-creation, service innovation capability, and service supply chains performance. Value co-creation is the main sources of supply chain strategy that will give impact to the strategic focus of company supply chains. The implementation of a particular supply chains strategy will then affect the companies supply chain management performance regarding joint creation of value between consumer and company as an alliance partner (Prahalad and Ramaswamy, 2004). The participation of customer into supply chain management strategy will allow the consumer to co-construct the service experience to be acceptable to their condition. Moreover, the development of buyersupplier relationships is helpful and it can become competencies if there is a well-built relationship with their supply chains partners. This relationship will result in long-term relationship with good communication and intense customer collaboration (Whipple and Boyer, 2015). Therefore, the mixture of value co-creation and service supply chains management practices allow companies to create usefulness through consumer experiences and refined relationships among supply chains partners by focusing on the network relationship. 243

248 Vol. 9, No. 4s (Special Issue 2017) Proposed Model and Propositions This study aims to examine the impact of value co-creation towards service supply chain performance. The investigation role of service innovation capability will be included in the study to test the mediating effect between value co-creation and service supply chain performance. In this study, value co-creation is an alternative to the current views on the service companies strategies. In relational view, value co-creation involves external resources that companies view as valuable resources. Therefore, there will be an interfirm collaboration between company and consumers. This will extend the relationship into the organisation s network. As a result, there is an existence of supply chain in the network among them in order to construct an alliance. This study will develop the theory concerning the relationship between certain variables and hypotheses construct. The theory will be used to explain the relationship between the variables with the intention to test the proposed model. Based on the relational view theory, companies can generate supernormal earnings through the partnership with particular alliance partners (Dyer and Singh, 1998). However, the interchangeable relationship cannot be performed by only one party; instead a collaboration among them is needed. Therefore, the framework of the proposed model based on the relational view theory is given in Figure 1. Value co-creation and service innovation capability The relationship of value co-creation and service innovation capability has been examined in various studies by measuring the impact of different dimensions of value co-creation on service innovation capability. Numerous studies have attempted to explain about the relationship of value co-creation and service innovation capability. In later studies, researcher conceptualised strong links between value creation and service innovation capability (Hamidi and Gharneh, 2017; Taghizadeh et al., 2016). Taghizadeh et al. (2016) found that firms rely on innovation activities to satisfy consumers demand. The evidence suggests that firms are putting substantial efforts to create values with their consumers as part of the innovation process. Moreover, with the advancements in interaction technologies, consumers can easily make impacts on firms through the active interaction between consumers and firms (Hamidi and Gharneh, 2017). This means that customers are playing dual roles, that is, as value creators and consumers simultaneously. The influence of value co-creation on service innovation capability can be seen through the interaction between the company and the customer to produce new ideas of service innovation and service development through consumer experiences. Value co-creation is the performance of actions that increase the worth of goods, services or even business. The interaction between companies and customers was never seen as a source of value creation and service innovation capability. The value of a service was always decided by the company with the customers simply paying the value of products and services. However, by the implementation of value co-creation concept, value creation is no longer company centric. Company and consumer interaction play a vital role in deciding company s value and it is recognised as a part of service innovation development. In this study, the researcher will examine the relationship between value co-creation and service innovation capability by addressing the following hypothesis, which would specifically test the influence of value co-creation and service innovation capability in service industry. P1: Value co-creation relates positively to service innovation capability. 244

249 Vol. 9, No. 4s (Special Issue 2017) Service innovation capability and service supply chain performance Several studies have attempted to explain about the relationship between service innovation capability and service supply chain performance (Chong, Chan, Ooi, and Sim, 2011; Daugherty et al., 2011; Grawe et al., 2009; Hamidi and Gharneh, 2017; Taghizadeh et al., 2016; Yang, 2012). Chong et al. (2011) found that innovation improvement in organisation results in better organizational performance. Hence, firms have to assess the relationship of service innovation and service supply chain performance. In this study, service innovation capability is the mediator variable, and will be used to strengthen the relationship between value co-creation and service supply chain performance. As suggested by Taghizadeh et al. (2016) that the mediation effect of innovation strategy is significant between value co-creation and market performance. Moreover, Hertog et al. (2010) proposed that the introduction of service innovation capability could lead companies to success and enable them to develop new service. Later, another study conducted by Daugherty et al. (2011) found that service innovation is significant as a mediator in the relationship between organizational resources and market performance in logistic service industry. Thus, service innovation capability has a significant influence towards the relationship between value co-creation and service supply chain performance. In this study, the researcher will examine the relationship between service innovation capability and service supply chain performance. Therefore, the researcher has come forward with the following hypothesis in order to address the relationship between variables. P2: Service innovation capability relates positively to service supply chain performance. Value co-creation Service innovation capability Service supply chain performance Figure 1. Proposed model of the study Figure 1 shows the types of variables and construct involved in the model and how the study will be measured. In this model, value co-creation is an independent variable. It is a management initiative that brings different parties together in order to produce a mutually valued outcome. Moreover, this concept brings together companies and a group of customers via collaboration in order to generate new ideas for new product and services (Prahalad and Ramaswamy, 2004). In this model, value co-creation variable will be measured indirectly towards service supply chain performance. While, the service supply chain is a dependent variable. Service supply chain performance will be the main focus of this study with the aim of improving and reviewing the supply chain strategy for the organisation. To strengthen the model, service innovation capability will also test the mediation effect between value co-creation and service supply chain performance. Method This study starts with the selection of topic related to service supply chain area. Literature review will be executed for the collection of information to help the authors identify the real situation in 245

250 Vol. 9, No. 4s (Special Issue 2017) study area. The information is collected by reviewing selected articles from main databases such as Emerald, Science Direct, Taylor and Francis, Springer and Sage. It is clear from the proposed model that the authors will investigate the effect of value co-creation towards firm s service supply chain performance. To strengthen the proposed model, the mediation role of service innovation capability also tested. Each of the variable will be investigated to see whether it is positive and significant for the improvement of the firm s service supply chain performance. To investigate the relationship between value co-creation and firm s service supply chain performance, the authors propose to use semi-structured questionnaire on manager of car service centre for local car manufacturer in Malaysia. The main purpose is to process the preliminary data gathered from the industry. It is expected to provide more insights regarding the study area and to help the authors in understanding the practical operation. The exploration of the practical evidence leads to the discussion to refine the model. Finally, this paper is expected to come out with conclusion. The illustration of the research process can be seen in the Figure 2. Selection of the topic Literature Review Exploratory Study Proposed Model Discussion Conclusion Figure 2. Research Process Expected Findings The objective of this study is to test value co-creation as a predictor to the improvement of service supply chain performance with the mediation role of service innovation capability. The authors expect to find that there is a positive relationship between value co-creation and service supply chain performance. To strengthen the relationship between value co-creation and service supply chain performance, firm service innovation capability will be tested for mediating effect. These findings are in accordance with other studies conducted by (Hamidi and Gharneh, 2017; Taghizadeh et al., 2016), which shows the positive relationship between value creation and firm s performance. 246

251 Vol. 9, No. 4s (Special Issue 2017) Discussion Supply chain management is important for a company to manage its resources in effective and efficient ways. Company is trying to compete with competitors to sustain in the competitive market. Based on the literature and practical evidence in this study, companies are competing through their supply chain. They need to assess their supply chain performance in order to improve firm s performance. Therefore, there is a need for top management to review their business strategy and measure their supply chain performance from time to time. Value co-creation concept in marketing perspective is viewed as an initiative for companies to create relationship between companies and consumers. The relationship can be from active interaction through dialogue and discussion. The value co-created together in product and service design leads to supplier and customer satisfaction. Therefore, it can be concluded that value cocreation has a positive and significant effect on firm s service supply chain performance. To strengthen the relationship between value co-creation and firm s service supply chain performance, the role of service innovation capability is tested as a mediator. It is found that service innovation capability has a positive and significant effect on the relationship between organisational resources and market performance (Daugherty et al., 2011). Thus, the authors are proposing service innovation as a mediator in this study. The implementation of value co-creation concept is important for organization. However, firms need to have better interaction such as dialogue and discussion between the customer and company. The interaction need to be a clear understanding. Moreover, the customers need full access to all information and a sense of transparency (Taghizadeh et al., 2016). All information must be clear and risk should be shared. The engagement of customers in value creation will eventually lead to higher customer satisfaction and higher loyalty to the company. Conclusion The main objective of this study is to develop a model to improve firm s service supply chain performance. The proposed model will provide an insight to managers and practitioners about the effects of value co-creation and firm s service innovation capability towards service supply chain performance within the organization setting. This study will contribute to service supply chain managers by providing guidelines on the assessment of service supply chain in effective and efficient ways. Moreover, the proposed model will contribute to the literature of service innovation area by incorporating external resources such as consumers to generate novel and creative ideas for new products and services. The service innovation development will differentiate a company from its competitors and thus increase its competitive advantages. References Balfaqih, H., Nopiah, Z. M., Saibani, N., & Al-Nory, M. T. (2016). Review of supply chain performance measurement systems: Computers in Industry, 82, Boon-Itt, S., Wong, C. Y., & Wong, C. (2015). Supply chain management in service industry: A process capabilities perspective. IEEE International Conference on Industrial Engineering and Engineering Management, IEEM Brignall, T.., Fitzgerald, L., Johnston, R., & Silvestro, R. (1991). Performance measurement in service businesses. International Journal of Service Industry Management, 69, 34. Chan, S. J. & Tan, C. L. (2016). A model linking store attributes, service quality and customer 247

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253 Vol. 9, No. 4s (Special Issue 2017) Payne, A. F., Storbacka, K., & Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36, Prahalad, C.., & Ramaswamy, V. (2004). Co-creation experiences: The next practice in value creation. Journal of Interactive Marketing, 18. Suzari, A. R. & Jayaraman, K. (2014). Sustainable Financial Supply Chain in Global Manufacturing Companies. International Journal of Organizational Innovation, Special Issue: Taghizadeh, S. K., Jayaraman, K., Ismail, I., & Rahman, S. A. (2016). Scale development and validation for DART model of value co-creation process on innovation strategy. Journal of Business & Industrial Marketing, 31, Tan, C. L., Mohd. Zailani, S. H., Tan, S. C., & Shaharudin, M. R. (2016). The impact of green supply chain management practices on firm competitiveness. International Journal of Business Innovation and Research, 11(4), Vargo, S. L., Maglio, P. P., & Akaka, M. A. (2008). On value and value co-creation: A service systems and service logic perspective. European Management Journal, 26, Wang, Y., Wallace, S. W., Shen, B., & Choi, T.-M. (2015). Service supply chain management: A review of operational models. European Journal of Operational Research, 247(3), Whipple, J. M., & Boyer, K. K. (2015). A Dyadic Investigation of Collaborative Competence, Social Capital, and Performance in Buyer- Supplier Relationships. Journal of Supply Chain Management, 51. Wonglimpiyarat, J. (2010). Innovation index and the innovative capacity of nations. Futures, 42, Yang, C.-C. (2012). Assessing the moderating effect of innovation capability on the relationship between logistics service capability and firm performance for ocean freight forwarders. International Journal of Logistics Research and Applications, 15, Zwick, D., Bonsu, S. K., & Darmody, A. (2008). Putting Consumers to Work: `Co-creation` and new marketing govern-mentality. Journal of Consumer Culture, 8,

254 Defining and Measuring Strategic CSR: A Formative Construct Say Keat Ooi * Graduate School of Business, Universiti Sains Malaysia, Malaysia ooisaykeat@usm.my Azlan Amran Graduate School of Business, Universiti Sains Malaysia, Malaysia Jasmine A.L. Yeap School of Management, Universiti Sains Malaysia, Malaysia * Corresponding Author Abstract Purpose: Of late, scholars and practitioners have paid greater attention to the strategic implication of corporate social responsibility (CSR). However, limited research on its measurement, and model misspecification issue hinder its development. The purpose of this paper is to define and conceptualise strategic CSR, and proves strategic CSR as a formative construct. Design/methodology/approach: It makes use of an extensive literature review to conceptualise strategic CSR. Then, redundancy analysis is performed to confirm the presumed specification. Findings: It is demonstrated that strategic CSR is a formative construct. It is an aggregation of three measurement items: organisation vision and mission embedded with CSR values, existence of CSR committee, and collaboration with NGOs. Research limitations/implications: This paper focuses on strategic CSR as a formative construct to avoid construct misspecification in structural equation model that may lead to bias in parameter estimates. Practical implications: Strategic CSR has become extremely relevant for businesses. Hence, it is important for businesses to engage in CSR strategically. This paper offers insights into how CSR can be internalised strategically at the corporate level. Originality/value: There is limited research on the measurement of strategic CSR. This paper provides insights into the internalisation of CSR strategically, and empirically evidenced that strategic CSR is a formative construct. Keywords: Strategic CSR, Formative construct, Vision and mission, CSR committee, Collaboration with NGOs, Corporate Sustainability. Introduction With the rapidly growing global population, alongside accelerating development, overutilisation and depletion of non-renewable resources and anthropogenic impact on the environment, it seems like business as usual is no longer a viable option for a sustainable tomorrow (Werther & Chandler, 2006; Stern, 2007). Referring to ecological footprint, it is generally acknowledged that human have consumed 50% more than what the Earth can provide (Robertson, 2014). This 250

255 unsustainable consumption rate has led to the constraint of resources concerns. The underlying discussion is that there is an urgent need for businesses to find sustainable solutions, and to implement them. It was expected that businesses should also proactively alleviate the pressing social and environment issues (Bhattacharyya et al., 2008; Kleine & Hauff, 2009). As such, one of the most profound trends in the corporate sector over the past few decades have been the increasingly gaining momentum of corporate social responsibility (CSR) practices (Jamali, 2008; Carroll & Shabana, 2010; Amran et al., 2015; 2016). Business corporations, whose primary concern has traditionally been emphasised on shareholder value maximisation, are progressively adopting CSR and corporate sustainability practices (Amran et al., 2013; Amran & Ooi, 2014), demonstrating their commitment towards triple bottom line (Elkington, 1998), as a response to the stakeholder and public expectations to address a larger social, environmental and economic responsibilities (Sullivan & Gouldson, 2012). Nowadays, the CSR bandwagon has more than just corporate philanthropy, it has evolved and expanded into a more strategic approach embracing environmental challenges, in parallel with social and economic considerations (McWilliams & Siegel, 2011; Orlitzky et al., 2011). However, CSR activities and practices require a significant amount of resources (Porter & Kramer, 2006; Bhattacharyya, 2010). Hence, it is prudent and sensible for business decision makers to initiate or commit CSR activities and practices that are not only for social and environmental cause, but economic reasons for their organisations. This notion of attaining economic benefits from CSR has been termed Strategic CSR (Lantos, 2001; Porter & Kramer, 2006; Bhattacharyya, 2010). Strategic CSR has become an important consideration in forward-thinking business entities. Strategic CSR is very much different from the traditional philanthropic type of CSR (Jamali, 2007). From the lens of Strategic CSR, it is expected that incorporating CSR elements in the corporate strategy, has the benefit of creating sustainable competitive advantage for the organisation besides serving the cause of CSR and addressing corporate sustainability issues (Galbreath, 2009; Bhattacharyya, 2010; McWilliams & Siegel, 2011; Orlitzky et al., 2011; Asif et al., 2013). A substantial group of CSR scholars (Burke & Logsdon, 1996; Lantos, 2001; Porter & Kramer, 2006; Bhattacharyya et al., 2008; Asif et al., 2013) opined that strategic CSR should be at the forefront business considerations, as this approach would do the greater good for the society, while maximising the business return. Hence, there has been a resurgence of interest in strategic CSR, among researchers and practitioners, who indulged in socially responsible as well as economically successful business (ACCA, 2017). From an empirical point of view, research on strategic CSR remained limited despite the intense interest and debate. For instance, Asif et al. (2013) revealed that a lacuna exists in the conceptualisation of strategic management of CSR. They highlighted that the effective integration of CSR into business processes remain unclear. Hence, they proposed a top-down integration and bottom-up community-related indicators development approaches to integrate CSR into business processes (Asif et al., 2013). Nevertheless, the framework does not lead to practical results of CSR internalisation through strategic management because the measurable indicators are still underdeveloped. Thus, the development of a set of effective strategic CSR measures remains an unresolved challenge (Carroll et al., 2016). In addition to the lack of dimensions, indicators or measures of strategic CSR, a recent publication has further complicated the inadequacy of strategic CSR measures by challenging the distinct stages of CSR maturity of an organisation, which may need to be evaluated when CSR is integrated into business strategies (Marques-Mendes & Santos, 2016). 251

256 Apart from that, given the increasing popularity of structural equation modeling (SEM) techniques in the social sciences research (Urbach & Ahlemann, 2010; Lee et al., 2011; Hair et al., 2014), which allow researchers to examine measurement and structural models simultaneously (Hair et al., 2014), the importance and relevance of this paper for the conceptualisation of strategic CSR as a formative construct heightened, as many researchers tend to overlook the relationship between measures and their relevant latent constructs (strategic CSR in this context) (Jarvis et al., 2003). The lack of concern regarding the measurement model has led to some considerable methodological pitfalls, as some researchers assumed all constructs are treated alike regardless of the formative or reflective considerations (Jarvis et al., 2003; Petter et al., 2007; Diamantopoulos et al., 2008). Construct validity and model misspecification issues have initiated a pressing need to re-examine strategic CSR measurement model specification. As Hulland (1999) highlighted, it is crucial to have proper model and indicator specification. A proper model specification is indeed crucial to assign meaning and make more sense conceptually. For instance, Thien et al. (2014) revealed that Hofstede s cultural values should be a formative construct, as the meaning would be better captured using a formative measure, instead of usually operationalised as reflective construct. Literature review suggested that few studies applied formative indicator measures, even though they should (Jarvis et al., 2003). The lack of attention, understanding and knowledge regarding measure specification, as well as the nature of formative measures may hinder its development (Petter et al., 2007). Throughout the years, the notion of strategic CSR has gain its popularity, and it is growing at an unprecedented pace, though researchers introduced it few decades ago (Burke & Logsdon, 1996; Lantos, 2001). With the lack of measurement and model misspecification issues, it is suggested that the conceptualisation and measurement of strategic CSR is essential. As a starting point, this paper contributes to the emerging literature of strategic CSR by focusing on the initial conceptualisation, and the formative nature structure. In particular, this paper defines and conceptualises the notion of strategic CSR based on the relevant literature. It is then followed by redundancy analysis suggested by Hair et al. (2014) to confirm its presumed formative specification. Towards a Definition of Strategic CSR The concept of CSR has been around for decades. It focuses on the role of business in addressing social and environmental issues beyond traditional economic objectives (European Commission, 2011). Numerous authors (Carroll, 1999; Asif et al., 2013) have provided a comprehensive description of the evolution of CSR terms over the last few decades. Additionally, the growing interest in CSR has led to the development of a variety of different definitions (Dahlsrud, 2008). Of late, the CSR practice is getting more public attention and scrutiny due to its sustainability related approach (Kleine & Hauff, 2009). Stakeholders, including the investors have become more concerned about the business organisations that are contributing to the betterment of the society (Sullivan & Gouldson, 2012; Amran & Ooi, 2014). Meanwhile, businesses voluntary involved in CSR practices to enhance their competitiveness and reputation (Orlitzky et al., 2011). This is evident through the CSR practices reported in the corporate annual and sustainability reports (KPMG, 2015; Ooi & Amran, in press). But does this CSR practice really pay off? Those disclosed corporate reports (KPMG, 2015) paint a universally positive picture. Throughout the years, CSR researches have evolved from definition development towards empirical oriented, examining the relationship between CSR and organisation performance or reputation (Carroll, 1999; Branco & Rodrigues, 2006; Carroll & 252

257 Shabana, 2010; McWilliams & Siegel, 2011; Orlitzky et al., 2011; Melo & Garrido-Morgado, 2012). Although Heslin and Ochoa (2008) outlined 7 strategic CSR principles and a number of exemplary CSR practices, it remains lacking in the understanding of strategic CSR, which is the integration of CSR into the overall organisation strategy (Galbreath, 2009; Bhattacharyya, 2010). Nevertheless, CSR has strategic implications, which influence the interaction between the society, stakeholders and the business organisations (Porter & Kramer, 2006; McWilliams et al., 2006). With such uncertain and dynamic business environment, the business world is becoming increasingly competitive. Overtime, CSR has become a mainstream business strategy due to the changes in business environment. The emphasis on sustainable development and resources consumption pattern have further offered stiff competition among business organisations. In fact, those corporate resources used to perform CSR initiatives are considered as opportunity costs (Bhattacharyya, 2010). Hence, those CSR initiatives should be aligned with specific business gains. As the pioneer, Burke and Logsdon (1996) introduced strategic CSR, which focuses on corporate strategy attributes that linked to CSR practice. According to them, corporate social responsibility is strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm s effectiveness in accomplishing its mission (Burke & Logsdon, 1996, p.496). Business gains by involving in strategic CSR has been thoroughly discussed by a number of researchers (Husted & Allen, 2007; Jamali, 2007; Bhattacharyya et al., 2008; Bhattacharyya, 2010). It is suggested that businesses should internalised CSR strategically. This is especially true, with the changing social expectations, rising affluence, globalisation and free flow of information, and sustainability driven implementation, strategic CSR has become extremely relevant for businesses (Werther & Chandler, 2006; Kleine & Hauff, 2009). Therefore, it became important for businesses to engage in CSR strategically. Conceptually, Lantos (2001) classified corporate responsibilities into three types: ethical, altruistic, and strategic. Based on his articulation, strategic responsibilities are the fulfilment of philanthropic responsibilities which will simultaneously benefit the business. The Lantos (2001) conceptualisation provides insights as in strategic CSR yield benefits for business while addressing societal issues, merits attention. But, it was Porter and Kramer (2006) that popularised strategic CSR. Since then, there has been an increasing school of thought of incorporating CSR into business strategy (Sekhar Bhattacharyya et al., 2008; Galbreath, 2009; Sekhar Bhattacharyya, 2010), which lead the businesses towards achieving socially responsible, ecologically sustainable and economically competitive (McWilliams & Siegel, 2011; Orlitzky et al., 2011). In particular, strategic CSR is a concept whose origins can be traced back to Baron (2001), who coined it as profit-maximizing strategy that some may view as socially responsible. It is the idea that CSR needs to be integrated into overall business strategy due to the long term benefits it brings to the business. The term strategic implies that the socially oriented activities are implemented voluntarily to assist business in achieving its dual strategic and economic objectives. Most importantly, strategic CSR is different from traditional (philanthropic) CSR, because the underlying assumption for traditional CSR is doing good that is tied to societal need, but not directly connected to business objectives (Husted & Allen, 2007; Jamali, 2007). Hence, based on the discussion, strategic CSR considers both societal needs and economic gains. It creates shared value and win-win situation, it benefited both the society and the business organisation by channelling CSR initiatives into societal problems, which eventually strengthen 253

258 the business s competitive advantage, as well as corporate reputation (Porter & Kramer, 2006; Husted & Allen, 2007; Carroll & Shabana, 2010; Orlitzky et al., 2011). A capability that is difficult for competitors to imitate. In fact, businesses could initiate CSR activities that maximise the social impact and gain maximum profits in return for the business (Porter & Kramer, 2006). Hence, strategic CSR is referred to as voluntarily socially oriented activities intended to assist organisations in achieving its strategic and economic objectives. In an attempt to respond to Carroll et al. (2016) s call for strategic CSR measures, this paper draws from Asif et al. (2013) to articulate that strategic CSR needs to be expressed in top-down integration and bottom-up community-related indicators development to be effective in integrating CSR elements into business processes. As such, strategic CSR will be more compatible to the corporate internalisation process to ensure effective implementation. Additionally, based on other useful literature, three crucial measurement items of strategic CSR are proposed. Measures of Strategic CSR In this section, the top-down and bottom-up approaches (Asif et al., 2013) were considered. To effectively integrate CSR into business processes, it is essential to embed the CSR values throughout the organisation. By articulating and embedding these CSR values into vision and mission statements, this top-down approach guides the organisation in its day-to-day operations, and utilise its resources effectively to create lasting value (Asif et al., 2013). Meanwhile, a bottom-up approach to the development of community-linked indicator suggested that extensive community involvement is crucial to promote sustainable businesses (Asif et al., 2013). Organisation Vision and Mission Embedded with CSR Values The resource-based perspective describes that the ultimate survival of businesses depends on many factors, stakeholder relationship is one of the determinants (Russo & Fouts, 1997; Branco & Rodrigues, 2006). Since business profitability is always contributed from customers (one of the stakeholders) who are satisfied with the value the business offered; businesses need to incorporate the concerns of stakeholders within their strategic outlook (Werther & Chandler, 2006). Business exists for many reasons, such as to be economically profitable and achieving society objectives. Such objectives are generally stated as the vision and mission of the organisation (Bhattacharyya, 2010). While it is generally agreed that strategic activity should be able to help businesses to achieve its vision and mission. Though a right positioning of its CSR activities is a key element of competitive advantage, its implementation begins with a clear action plan (Werther & Chandler, 2006). Hence, CSR activities need to be aligned with the overall business objectives and strategies, in order to create and capture the value intended (McWilliams & Siegel, 2011). A CSR activity which is strategic should be embedded in the vision and mission of the organisation (Werther & Chandler, 2006; Bhattacharyya, 2010). Strategic CSR made visible through vision and mission statement will drive all the subsequent decision making throughout the implementation process. For instance, as part of the Body Shop s mission, they produce cosmetics that do not hurt animals. It is clear that CSR issue (avoid animal cruelty) has been embedded in their business objectives (developing highest quality, innovative, effective and safe cosmetic products) (Galbreath, 2009). Additionally, the CSR value embedded in vision or mission of a business generates resources that cannot be easily substituted by a non-csr activity 254

259 (Bhattacharyya, 2010). Through recognising intangible resources such as organisational value and reputation, businesses are able to embrace a good strategy that leverage on business interest while addressing external environmental issues in which it operates. An organisation s vision is an articulated statement of what it seeks to become, and an organisation s mission identifies how the organisation attains its vision (Werther & Chandler, 2006). The importance of vision mission statement is it will determine the direction and actions of a business organisation. As such, both vision and mission act as a strategic guide in driving a sustainable business. Vision and mission embedded with CSR values help an organisation to adopt a good strategy which develops organisational competencies and fulfils external environment demands. Hence, organisation with vision and mission embedded with CSR values is expected to create a stakeholder oriented environment, which will lead to sustainable competitive advantage. Existence of CSR Committee As when CSR activities are strategic in nature, it should have a long-term focus (Bhattacharyya, 2010). While the CSR activities are intended towards its vision and mission, it should be equipped with substantial resource commitment (Russo & Fouts, 1997; Branco & Rodrigues, 2006). The CSR committee refers to human capital resources. With the available experiences, skills and knowledge, it ensures CSR activities to be part of the organisation s strategic direction, and translate it into tangible actions. To be strategic in nature, the sacrifice and dedication of substantial amount of resources are required over a period of time (Bhattacharyya, 2010). This flows from the discussion on proactivity (Burke & Logsdon, 1996). Having organisation vision and mission embedded with CSR values, an effective strategic CSR implementation requires proactive action. Creation of CSR committee demonstrates organisational commitment to the stakeholders. With the existence of CSR committee, it formulates the direction that the organisation needs to pursue in addressing stakeholders demand of social and environmental concerns. It ensures CSR to be institutionalised within the organisation s core business vision, mission, objectives and strategies. Furthermore, it motivates the organisation to measure and report their CSR performance publicly. In fact, it reflects the organisation s intention to perform its activities responsibly. Additionally, the CSR committee also acts as a governance mechanism to monitor CSR performance of an organisation. The planning, execution and reporting of CSR practices will be facilitated by the members of the CSR committee. This will ensure the mission and vision become a very important agenda for the organisation. Therefore, organisation structure with CSR committee is vital for strategic CSR. To quote some examples, Berthelot and Robert (2011) indicated the establishment of an environment committee to oversee environmental related issues, is associated with a higher extent of climate change reporting. Similarly, Rankin et al. (2011) also revealed that organisations with an environment management committee are more likely to disclose GHG emissions information than organisations without an environment committee. These examples indicated that, in order to exercise CSR strategically, having objectives reflected in the vision and mission statements alone is not sufficient, in fact, the existence of CSR committee drives the CSR practice of an organisation strategically. Collaboration with Non-Governmental Organisations (NGOs) With the increasing attention being paid to CSR practice, the society at large pressures businesses to address pressing social and environmental issues. Proactively, businesses involve 255

260 in CSR related activities such as self-regulation beyond legal obligations, managing stakeholder relationships and developing cross-sector partnerships and collaboration with various stakeholders. Non-governmental organisations (NGOs) are one of the important stakeholder groups (Savitz & Weber, 2006; Arenas et al., 2009). The trend of NGOs collaborating with businesses has developed considerably as there is an increasing number of business actively engaging in CSR activities. This collaboration is further encouraged by global entities such as the World Bank and the United Nations Development Programme, which are promoting and advocating this collaboration (Eweje & Palakshappa, 2009). Given the overall rise in the importance, NGOs have been seen as the motor of CSR (Arenas et al., 2009). Collaborations between businesses and NGOs are potentially effective and efficient CSR strategy. The collaboration between businesses and NGOs has been termed as strategic partnerships by Eweje (2007). By combining resources and strengths, and offset weaknesses, this strategic partnership addresses core objective associated with their respective positions (the economic position of the business and the social position of the NGOs) based on win-win and mutual gain perspectives (Eweje & Palakshappa, 2009), as the key principle of the collaboration is the complementary of core competencies (Eweje, 2007). Gradually, this collaboration has been embraced by businesses as part of their organisation strategy to obtain mutually beneficial objectives which bring significant benefits to the society (Eweje & Palakshappa, 2009). In the collaboration, partners jointly address sustainability related challenges (Eweje & Palakshappa, 2009). The notion of the collaboration lies in resources sharing to produce synergistic effects in which it is difficult to achieve it alone. It is the sharing of essential resources and knowledge transfer that produce synergistic outcomes for a more influential position (Hardy et al., 2003). For instance, the collaboration between Chiquita (an American producer and distributor of bananas and other produce), which was badly criticised for its poor environmental practices and human rights abuses, and the Rainforest Alliance (an NGO), created win-win solutions as the Rainforest Alliance developed a certification programme to assess and conducted audits to verify that Chiquita s operation is deemed proper for long term sustainable development benefits (Savitz & Weber, 2006). Another widely used example of the strategic role of NGOs is the Brent Spar case. It was the protest initiated by Greenpeace (an NGO) that reversed the Shell s (Dutch multinational oil and gas company) plan for the oil platform which had been approved by the British government (Savitz & Weber, 2006). All of these examples clearly showed the strategic determinant role of NGOs in business operations. It is therefore appropriate to conclude that the collaboration with NGOs is becoming increasingly important for businesses. Businesses cannot be socially responsible if they do not have the knowledge and insights regarding the problems, whereas NGOs do not have the resources or capacity to implement their plans to address the issues. Hence, the collaboration between businesses and NGOs is a strategic move to combine their complementary strengths, to benefit the society at large as in achieving mutually beneficial objectives align with CSR (Arenas et al., 2009; Eweje & Palakshappa, 2009). In this context, it indicates that the collaboration with NGOs drive CSR activities in an organisation strategically Strategic CSR as a Formative Measure In SEM, every construct or latent variable (Strategic CSR in this context) is assigned a set of indicators or measures. The review of terminology used in SEM can be obtained through Petter et al. (2007) or Hair et al. (2014). Latent variables are not originally fixed as either reflective or formative, in fact, it depends on theoretical considerations. When assessing the measurement 256

261 model, it is important to differentiate between the reflective and formative constructs (Lee et al., 2011). Often, the question of formative or reflective measures is a critical issue when specifying the measurement model. Reflective and formative constructs are two different concepts, which require different assessment criteria. A proper specification is crucial to locate meaningful relationships. Misspecification of the measurement model undermines the construct statistically and theoretically, which lead to bias in the statistical significance of the parameter estimates, causing inaccurate interpretation of the structural relationships (Jarvis et al., 2003; Lee et al., 2011). The major difference between reflective and formative measurement is constructs cause variance in its reflective measurement items, a change in the construct affects the underlying measurement items; whereas formative measurement items cause variance in its construct, a change in the formative measurement items causes changes in the construct (Hair et al., 2014). The formative measurement items are not highly correlated, and deleting of a measurement item may alter the meaning of the construct. On the other hand, reflective measurement items are interchangeable, highly correlated and capable of being excluded without changing the meaning of the construct. The measurement items of a reflective construct are assumed to reflect the variation of the construct; meanwhile the measurement items of a formative construct determine the construct (Jarvis et al., 2003; Diamantopoulos et al., 2008). Details of the differences between formative and reflective measurements can be obtained through Jarvis et al. (2003) and Petter et al. (2007). Based on the relevant literature review, this paper conceptualises strategic CSR as a formative construct, whereby the measurement items jointly determine the conceptual and empirical meaning of the construct (Jarvis et al., 2003). In fact, this is supported by Mohd Isa & Reast (2014), who defined and recognised that CSR is a formative construct. Thus, conceptualising strategic CSR as a formative construct means that the measurement items represents inputs to the constructs. In this context, strategic CSR consists of three measures: (1) Organisation vision and mission embedded with CSR values, (2) Existence of CSR committee, and (3) Collaboration with NGOs. In line with the logic of a formative measure, it is believed that when all the three measurement items combined, it indicates a comprehensive picture of strategic CSR, as each of this measure covers different aspects of strategic CSR. Strategic CSR is an aggregation of these three measures. This implies that the three items: organisation vision and mission embedded with CSR values, existence of CSR committee, and collaboration with NGOs, captures different aspects of strategic CSR. It is generally agreed that changes in these three items cause changes in strategic CSR construct. Therefore, the combination of these three items defines the construct of strategic CSR. Research Design and Sample Structure Within the context of this paper, strategic CSR is conceptualised and operationalised as a formative construct. The principles underpinning formative measures are basically different from reflective measures. There are specific criteria that are required to be fulfilled when assessing formative measure (Hair et al., 2014), which is different from the usual approaches to examine reflective measure. The internal consistency reliability of reflective measures cannot be used to assess formative measures as formative measures do not necessarily correlate highly. Hence, assessment of the formative measure based on correlation may lead to serious content validity concerns, as the assumption for formative measures is its indicators fully capture the content domain of its 257

262 construct (Hair et al., 2014). Besides, formative indicators are assumed to be error free (Diamantopoulos et al., 2008), the internal consistency reliability concept is deemed inappropriate in this circumstance. Furthermore, it is not meaningful to examine the convergent validity and discriminant validity with the same procedures in reflective measures, as formative indicators are measured with outer weights instead of loadings (Hair et al., 2014). Thus, a systematic procedure suggested by Hair et al. (2014) was followed to confirm the presumed specification of strategic CSR. The research design and sampling frame are based on the context of this research. Undoubtedly, CSR awareness has heightened stakeholders expectations on businesses to report their CSR information through corporate annual and sustainability reports. Businesses seek to engage and assure stakeholders that they are responsibly responding to this issue through various communication channels (Amran et al., 2015). Thus, content analysis (Hackston & Milne, 1996; Berthelot & Robert, 2011; Rankin et al., 2011; Amran et al., 2015; 2016) has been employed to capture and analyse strategic CSR information disclosed in corporate annual and sustainability reports, which are considered as secondary data. Additionally, this research employed the largest 100 companies by market capitalisation listed on Bursa Malaysia, which is consistent with prior CSR studies (Hackston & Milne, 1996; Ooi & Amran, in press). Larger companies were selected as they are more visible and perceived to have greater impact on society (Hackston & Milne, 1996). Furthermore, these companies have more socially and environmentally conscious stakeholders (Hackston & Milne, 1996), and larger companies are believed to have more resources to embark on CSR initiatives (Branco & Rodrigues, 2006). Findings Within this context, strategic CSR has been conceptualised as a formative construct. Partial least squares (PLS) was used to confirm the presumed specification, the software used was SmartPLS 2.0. PLS is the recommended method to assess formative measures (Hair et al., 2014) as examining formative measures with covariance-based SEM usually lead to identification issues (Jarvis et al., 2003). The evaluation process of strategic CSR as a formative construct was based on the procedures suggested by Hair et al. (2014). The measurement model delineates the relationships between construct and their corresponding indicators. Derived from the literature, strategic CSR is measured by three indicators. Based on the fact that each indicator captures a specific aspect of the construct and eventually determine the meaning of strategic CSR, it is assumed that all these three indicators cover different aspects of CSR in the strategic manner. In this case, internal consistency reliability is not an appropriate measure to examine the validity of strategic CSR (Jarvis et al., 2003). Instead, convergent validity is a more relevant indicator (Hair et al., 2014). The direction of the arrows is from the indicators to the construct (Jarvis et al., 2003; Diamantopoulus et al., 2008). The statistical assessment for formative measure focuses on examining whether each formative indicator contributes to the formation of the formative construct by carrying the intended meaning (Hair et al., 2014). An evaluation of formative measure is based on the weights of the indicators. Therefore, the significance of the indicator weights should be examined. The following section reports the three steps undertaken to examine the formative measurement model. 258

263 Convergent Validity Convergent validity is the extent to which a measure correlates positively with alternative measures of the same construct (Hair et al., 2014). To establish convergent validity, redundancy analysis is performed to examine the formative construct (strategic CSR). This involves the correlation of formative indicators with a reflective indicator of the same construct (Hair et al., 2014). It involves the use of existing formative construct as an exogenous variable to predict the endogenous variable which is operationalised through one reflective indicator. This reflective indicator summarises the essence of the construct in which the formative indicators intend to measure (Hair et al., 2014). In this research, strategic CSR can be measured reflectively through placing CSR within the context of strategy, which is CSR strategy. Husted and Allen (2001) suggested that CSR strategies are plans, investments and actions put into practice to achieve better social and economic performances, and lead to sustainable competitive advantage. Figure 1: Redundancy analysis for convergent validity Figure 1 presents the redundancy analysis for strategic CSR. The strength of the path coefficient connecting the two constructs is indicative of the validity of the specified set of formative indicators in tapping the construct of interest (Hair et al., 2014). As revealed, the redundancy analysis yields a path coefficient of 0.828, which is higher than the threshold of 0.80 (Hair et al., 2014), which means the formative construct carries 82.8% of the intended meaning. Additionally, the R 2 value obtained is 0.686, which is also within the range of recommended (Hair et al., 2014), suggesting that strategic CSR, the formatively measured construct, has sufficient degrees of convergent validity, and the formative indicators contribute adequately to its intended meaning. Collinearity In a next step, the collinearity of indicators of the formative measure is examined. High correlations are not expected between indicators in formative measures, as its impact on the estimation of weights and statistical significance. To examine the level of collinearity, the tolerance and variance inflation factor (VIF) values are obtained in the regression analysis output. The tolerance value shows the variance amount of one formative indicator not explained by other indicators within the same construct. Meanwhile VIF refers to as the reciprocal of the tolerance, which is the degree to which standard error has been increased due to collinearity. A tolerance value of 0.20 or lower and a VIF value of 5 or higher suggest a possible collinearity concern. These values indicate that 80% of the variance of an indicator is explained by the other formative indicators. VIF value greater than 10 indicates critical multicollinearity (Hair et al., 2014). 259

264 From the analysis output, all three formative indicators reveal the tolerance level within the range of ; the indicator Collaboration with NGOs has the lowest tolerance level of 0.749, which means 74.9% of its variance is not explained by other formative indicators. Meanwhile, the VIF values fall within the range of , which means all values are uniformly lower than the critical value (refer Table 1). Hence, collinearity issue is not prevalent in the formative construct, and none of the indicators are dropped. Table 1: Collinearity assessment for strategic CSR Formative Indicators Collinearity Statistics Tolerance VIF Organisation vision & mission embedded with CSR values Existence of CSR committee Collaboration with NGOs Significance of Formative Indicators Lastly, the significance of the outer weights in the formative measurement model should only be examined if collinearity is not a concern. The significance and relevance of each indicator s outer weights are analysed through the bootstrapping resampling procedure. With the recommendation of Hair et al. (2014), 5000 bootstrap subsamples were used. After running the bootstrapping routine, the t-values obtained were compared with the critical values from the standard normal distribution to determine its significance. The critical values for significance levels of 1% and a 5% probability error are 2.57 and 1.96 respectively (Hair et al., 2014), which means, when the critical t-value is > 2.57, it is assumed that the path coefficient is significantly different from zero at a significance level of 1% (α= 0.01; two-tailed test). Based on the empirical t-values obtained, as displayed in Table 2, all formative indicators are significant (p < 0.01). Hence, empirically it provides support to retain all the indicators. Table 2: Outer weights significance for strategic CSR Formative Construct Formative Indicators Outer Weights t-values Strategic CSR Organisation vision & mission embedded with CSR values ** ** p <0.01 Existence of CSR committee ** Collaboration with NGOs ** The analysis of outer weights concludes the evaluation of strategic CSR as a formative construct. Considering the joint findings from redundancy analysis for convergent validity, collinearity assessment, and the significance level of formative indicators, the formative construct (strategic CSR) exhibited satisfactory statistical assessment criteria. From the analysis, the convergent validity indicated that the three strategic CSR indicators covered the entire domain of strategic CSR., absence of potential collinearity issues, and the significance of the three indicators indicated high quality formative measurement model. Therefore, this research has confirmed 260

265 strategic CSR as a formative construct, whereby each indicator contributes to the index formation. Discussion Though CSR has become a major focus of organisational research lately, integrating CSR into business strategy remains largely unexplored area. Additionally, the limited research on its measurement, and the epistemic nature of strategic CSR has largely been ignored, have provoked this research to conceptualise and specify the epistemic nature of strategic CSR. While most businesses are very concerned with profitability, initiating CSR practices do not necessarily cause a negative impact on corporate profitability (Robertson, 2014). In fact, integrating CSR into business strategy is increasingly important to the competitiveness of a business. By focusing on their social responsibility initiatives strategically, businesses can create new business opportunities, manage stakeholder-related risks better, as well as building longterm employee and consumer trust as a basis for sustainable business (Bhattacharyya et al., 2008; Bhattacharyya, 2010; McWilliams & Siegel, 2011; Robertson, 2014). With a strategic approach of CSR, the business organisation will gain sustainable competitive advantage and achieve long term profitability. The integration of CSR into business strategy can be the organisation s differentiation strategy, which contribute to profit maximisation (McWilliams et al., 2006; McWilliams & Siegel, 2011). Obviously, this is the goal of every business. To develop a formative measure of strategic CSR, and better understand its formative conceptualisation, this paper assessed the epistemic nature of strategic CSR and the indicators that form the construct. The measures were developed based on literature review. While strategic CSR has been defined as voluntarily socially oriented activities intended to assist organisations in achieving its strategic and economic objectives, three indicators of strategic CSR which are critical to the success of the business organisation have been identified to assist corporations in achieving their social, environmental and economic benefits. First of all, any initiative that is strategic in nature should be able to assist businesses in achieving its mission and vision (Bhattacharyya, 2010). Besides, CSR practice needs visibility, time, effort and details, hence, a CSR committee is needed to define, execute and monitor the organisation s CSR direction (Werther & Chandler, 2006). Then, as an important stakeholder group, collaboration between business organisation and NGOs are widely recognised as an essential strategy (Eweje, 2007). It is expected that CSR elements will strategically ingrain throughout the organisation with the existence of these three elements. Therefore, it is proposed that strategic CSR can be measured by the aggregation of organisation vision and mission embedded with CSR values, existence of CSR committee, and business-ngo collaboration. The epistemic nature of strategic CSR, with its three measures are found concurred with the four decision rules of formative measure suggested by Jarvis et al. (2003). Concerning (1) direction of causality, the direction of the arrows is from the indicators to the construct, changes in the indicators should cause changes in the construct; (2) interchangeability of the measures, the three indicators are clearly not interchangeability; (3) correlations among the measures, the indicators are expected to highly correlated with each other; and (4) nomological net of the measures, the indicators are not expected to have the same antecedents and consequences. In this research, the justification of measurement model specification is based on these four criteria (Jarvis et al., 2003). Hence, combining the three indicators capture the entire notion of strategic CSR. Apart from that, the statistical inspection (Hair et al., 2014) also proved the same. Strategic CSR is obviously seen as a formative construct. 261

266 To this end, one would acknowledge that strategic CSR is an important consideration to drive business success (ACCA, 2017). However, this paper has a number of implications as in advancing research in strategic CSR. Undoubtedly, the conceptualisation of strategic CSR will assist in enhancing the knowledge of CSR in the strategic manner. Additionally, the validation process to confirm strategic CSR as a formative construct will help to prevent model misspecification, and contribute to the continuing measurement process of strategic CSR. It becomes evident that researchers need to be aware of the epistemic nature of constructs. Apart from that, the proposed indicators may offer insights into how CSR can be internalised strategically at the corporate level, as strategic CSR has become extremely relevant for businesses, and it is important for businesses to engage in CSR strategically. Conclusion With the increasing awareness and knowledge towards sustainable development, businesses are under pressures to be socially responsible. Nevertheless, it is still not very clear that how businesses can be rewarded for their CSR practices. The most concerning feature of current CSR practices is its lack of strategic value that contribute to sustainable competitive advantage. The notion of strategic CSR can serve as the basis for an effective business strategy for sustainable development, and effectively cater to the demands of various stakeholders. Hence, this paper introduces strategic CSR as a mechanism for sustainable competitive advantage purpose, and justify the indiscriminate use of corporate resources. Specifically, this paper provides a comprehensive perspective for designing strategic CSR for businesses. Based on a research among Malaysian businesses, it is then proven that the combination of 3 indicators, starting from (1) CSR values embedded in corporate vision and missions, (2) presence of CSR committee, and (3) collaboration with NGOs, explain the meaning of strategic CSR from an integrated perspective. Each of these indicators captures the different aspects of strategic CSR, and they are the crucial elements for efficient and effective strategic CSR implementation, which help the business organisation to reap benefits from its CSR initiatives and become responsible corporate citizen. References ACCA. (2017). CSR strategy and strategic CSR. Retrieved from Amran, A., Mohd Zain, M., Sulaiman, M., Sarker, T. & Ooi, S.K. (2013). Empowering society for better CSR: The case of Malaysia, Kajian Malaysia, 31(1), Amran, A. & Ooi, S.K. (2014). Sustainability reporting: meeting stakeholder demands. Strategic Direction, 30(7), Amran, A., Ooi, S.K., Mydin, R. T. & Devi, S. S. (2015). The impact of business strategies on online sustainability disclosures. Business Strategy and the Environment, 24(6), Amran, A., Ooi, S.K., Wong, C.Y. & Hashim, F. (2016). Business strategy for climate change: An ASEAN perspective. Corporate Social Responsibility and Environmental Management, 23, Arenas, D., Lozano, J.M. & Albareda, L. (2009). The role of NGOs in CSR: Mutual perceptions among stakeholders. Journal of Business Ethics, 88(1), Asif, M., Searcy, C., Zutshi, A. & Fisscher, O. A. (2013). An integrated management systems approach to corporate social responsibility. Journal of Cleaner Production, 56,

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270 An Investigation On Residential Solar Power Systems (SPS) Install Intention: View from an Emerging Market Pui-Pui Thong Graduate School of Business, Universiti Sains Malaysia Yen-Nee Goh* Graduate School of Business, Universiti Sains Malaysia Cheng-Ling Tan Graduate School of Business, Universiti Sains Malaysia Shaizatulaqma Kamalul Ariffin Graduate School of Business, Universiti Sains Malaysia * Corresponding Author Abstract Purpose: In this study, the effect of perceived benefits and perceived trust on attitudes toward residential solar power systems was analyzed. The effect of attitudes, environment value, perceived cost and awareness on residential SPS install intention were also investigated where an empirical model was proposed. Design/methodology/approach: A self-administered questionnaire was designed and a survey to 248 respondents was conducted in Penang, Malaysia through convenience sampling. Statistical Package for the Social Sciences (SPSS) and Partial Least Square (PLS) were used to analyse the data. Findings: Based on the results, it was found that perceived benefit and perceived trust have a positive and significant effect on attitudes toward residential solar power systems. Moreover, attitudes toward residential solar power systems, environment value and awareness are having positive influence on residential SPS install intention. Predictably, perceived cost has a negative influence on residential SPS install intention. Research limitations/implications: Firstly, this study depends on self-reports that may not be a valid reflection of real behavior and there may be chances that some under-reporting may have happened. Secondly, this study utilized convenience sampling, where the sample consists mainly Malaysian Chinese (80.6% respondents are Chinese) which restricted to the real population structure in Malaysia. Thirdly, the study was conducted in northern of Malaysia which limit in Penang state only. Hence, generalizing the results to the entire population may be limited. Practical implications: Implications of the results and future research directions are addressed. Keywords: Attitudes; environmental value; perceived cost; solar power systems install intention; Malaysia 266

271 Introduction Over the past decade, there has been a dramatic increase in electricity supply and consumption either globally or locally. Based on an online report on Key World Energy Statistics available from International Energy Agency (IEA) in 2015, the electricity supply at global level as reported until 2013 is dominated by natural gas, coal, nuclear, hydro-electric, oils and others (i.e. include geothermal, solar, wind, heat and so on) with 21.7, 41.3, 10.6, 16.3, 4.4 and 5.7 percent electricity respectively. Another online report from Malaysia Energy Statistics Handbook stated that the electricity consumption (GWh) in Peninsular Malaysia has increased from 94,666 in 2010 to 105,861 in 2013 (Malaysia Energy Commission, 2015). In Sabah and Sarawak, an increase electricity consumption has also been observed in year 2010 to 2013 with an increased from 4,127 to 5,097 and 5,730 to 12,118 respectively. On the other hand, the final energy consumption by fuel type (i.e. natural gas, petroleum products, coal and coke, biodiesel, electricity) also recorded a rapid increased from 17,728 ktoe to 51,583 ktoe in 1993 and 2013 respectively (Malaysia Energy Commission, 2015). With an intense increase in electricity consumption, tapping into renewable energy such as solar energy becomes pertinent at this juncture. Solar energy has attracted much attention as an alternative solution. As argued by Muhammad- Sukki et al. (2011), solar energy has enormous potential in Malaysia. Chua and Oh (2012) refers solar energy as solar photovoltaic (PV) electricity generation, a form of renewable energy (RE) which is clean, non-depleting and does not emit any greenhouse gases (GHGs) since it generates energy directly from the sun by means of PV effect (p.565). Solar power system (SPS), including both Solar Thermal (ST) and Photovoltaic (PV) technologies are devices that convert light into electric current using the photoelectric effect (Chen, 2014). The advantages of developing solar-energy technologies are global (International Energy Agency, 2011), in particular for Malaysia environment, with long sunny days every year. Solar energy has many advantages as compared to other sources of energy and since energy taken directly from sun and can be used for the production of electricity (Mekhilef et al., 2012; Saidur, 2010). Zero pollutant release, highly reliable, less maintenance cost, high life expectation of almost 20 to 30 years on average made this source of energy very popular in present and in coming future (Saidur & Mekhilef, 2010). Moreover, the strategic geographic location of Malaysia is another decisive factor of why solar energy is favorable. Malaysia is located on South China Sea and between (1 and 7 ) in North latitude and (100 and 120 ) in East longitude (Nugroho, 2010). Malaysia is a country in Southern Asia that consists of Peninsular Malaysia, Sabah and Sarawak. The climate of Malaysia except highlands is very humid and has high temperature and level of humidity ranges between 80 to 90 percent (Mekhilef et al., 2012). The temperature in Malaysia varies between 22 C and 33 C (72 91 F) throughout the year with an average temperature of 26.5 C daily (Mekhilef et al., 2012). The level of solar radiation per month is around MJ/m2 and it rises in Northeast Monsoon time and decreases in Southwest monsoon (Nugroho, 2010). As the climate of Malaysia is tropical so this is favorable for solar energy development due to excessive sunshine having 1643 kwh/m2 per year on average (Haris, 2008). The location of Malaysia has made it ideal for the installation of large scale solar power plant (Mekhilef et al., 2012). According to data summary from PV Industry Handbook, PTM, it reported that George 267

272 Town, Bayan Lepas and Kota Kinabalu get maximum solar radiation in Malaysia. Moreover, Sabah and Penang are the two best points to produce electricity from sunlight (Saidur et al., 2009). On the other hand, the increased in the electricity tariff in the last few years have intensified the need for cheaper energy on a long-term basis. As reported in The Star Online news in December 2013 (The Star Online, 2013), the tariff of electricity being raised at an average of around percent in Peninsular Malaysia, and around 17 percent in Sabah and Labuan started on 1 Jan To be specific, the electricity tariff in Peninsular Malaysia will raise by 4.99 sen per kwh on average or percent from the present average rate of sen/kwh to sen/kwh. On the other hand, in Labuan and Sabah, the average tariff will increase by 5.0 sen per kwh or 16.9 percent from current average rate of sen per kwh to sen per kwh. The last revision was done in January, 2014 at a 15% hike to sen per kilowatt-hour (kwh). Recent updates from The Star Online in 15 December 2015 highlighted the fact that tariff hikes in electricity are here to stay for the next few years. Hence, in order to reduce the dependency on electricity consumption provided by TNB, Malaysian consumers should consider the potential benefits provided from solar energy, such as from Solar Power System (SPS) installation. Moreover, residential home owners who sell solar power to Tenaga Nasional Berhad (TNB) will get an average of RM500 a month as returns if they install a solar panel system in their homes as highlighted in an online news article (The Star Online, 2012). Given its potential and benefits, harnessing solar energy through solar power system installation is timely and relevant. There have been several studies in the literature described on the outlook of renewable and solar energy in Malaysia. However, to the best of authors knowledge, there has been little discussion about consumer perception towards renewable energy; in particular, on residential solar power systems install intention in Malaysia. Past research in Malaysia focus on energy review and energy conservation in general such as by Basri, Ramli and Aliyu (2015) and Nordin, Samsudin and Harun (2016). Basri et al. (2015) presented a comprehensive review on energy sector and Malaysia energy strategy towards sustainability while Nordin et al. (2016) examined on student behavior towards energy conservation. A number of researchers have reported on consumer behavior like purchase intention on energy efficient household appliances (Tan, Ooi & Goh, 2017); adoption of electric vehicle (Mohaidin & Rajah, 2014) and green purchase behavior in general (Goh & Abdul Wahid, 2015) but no previous study has investigated on solar power system install intention in Malaysia. An extensive review on solar energy and solar photovoltaic (PV) were attempted by Chua, Oh and Goh (2011), Chua and Oh (2012), Muhammad-Sukki et al. (2012) and Mekhilef et al. (2012). Wong, Ngadi, Tuan Abdullah and Inuwa (2015) described the recent advances of Feed-in-Tariff (FiT) in Malaysia. In 2011, Muhammad-Sukki et al. published a paper which is based on a preliminary survey results to understand public willingness to invest in the Feed-in-Tariff (FiT) scheme by installing the Photovoltaic (PV) residential house in Malaysia. A careful study of the literature reveals that factor which affects the residential solar power systems install intention in Malaysia remains unexplored. An intense increase in electricity consumption has raised the awareness on alternative solution like solar energy which is green and sustainable for the long-term consumption. In view of this, tapping into renewable energy such as solar energy becomes pertinent at this juncture especially in Malaysia considering the geographical advantage. However, Solar Power System (SPS) installation among the residential consumer s remains low and this creates challenges among the manufacturers of solar panel. Hence, an understanding of SPS install intention among residential consumer s in Malaysia is timely and relevant. 268

273 It should be noted from the above literature review, however, that limited studies are available on Malaysian consumer perception towards residential solar power systems install intention and this has motivated the present study. The current study involves an investigation of the effects of perceived benefits and perceived trust on attitudes toward residential solar power systems. The effect of attitudes, environment value, perceived cost and awareness on residential solar power systems install intention were also investigated where an empirical model was proposed. Literature Review and Hypotheses Development Residential Solar Power Systems (SPS) Install Intention According to Chen (2014), install intention is a combination of residents interest to install a solar power system and the possibility to install. Numerous studies have attempted to explain on residential solar power system install intention. Schelly (2010) measured socioeconomic circumstances, environmental concern and ecological conditions to predict residential solar thermal technology adoption in U.S. In another study, Schelly (2014) investigated the factors which homeowners to adopt residential solar electric technology. In addition to work of Schelly (2010; 2014), Islam and Meade (2013) analyzed the diffusion of photo-voltaic solar panels in Ontario, Canada. Their analysis revealed that price negatively influence solar panel installation on adoption times. Moreover, they reported that households have a higher probability of adoption when they are less sensitive to cost of an installation. It was also found that greater awareness of technology and more positive attitude to energy conservation leads to higher adoption probabilities (Islam & Meade, 2013). In another study, Chen (2014) showed that environmental value is the most important factor for solar power system install intention. Perceived Benefit Perceived benefits are benefits relates from the extensive use of renewable energy sources and the processing technologies in producing usable energy (Kim et al., 2014). Several cognitive studies have shown that potential expectations regarding an individual s perceived benefits are significantly associated with the individual s attitude towards newly introduced technology (Chen, Lin & Cheng, 2013). Research findings by Park and Ohm (2014) and Kim et al. (2014) discovered that perceived benefits have positive effect on public attitude toward renewable or solar power technologies. Therefore, the following is hypothesized: H1: Perceived benefit has a positive influence on attitudes towards residential solar power system Perceived Trust According to Kim et al (2014), perceived trust is defined as a cognitive state affecting the users intention to accept vulnerability based upon positive anticipations of the intention or behavior of another (p.526). When the public do not have any experience in using a specific service or technology, their perceptions towards the service or technology can be generated by (social) trust. In other words, residents attitudes toward newly introduced services and technologies such as solar power system are primarily motivated by the residents perceived trust (Kim et al. 2014). Therefore, the following is hypothesized: H2: Perceived trust has a positive influence on attitude towards residential solar power system 269

274 Attitudes Toward Residential Solar Power System In studies of TRA and related fields, an individual s attitude is defined as the perceived level of positive and negative impressions toward acting on the particular behavior (Ajzen & Fishbein, 1977; Ajzen, 1991). Attitudes are the significant predictors for behavioral intention to use public transportation as supported by Zailani, Iranmanesh, Ariffin Masron and Chan (2016). According to Ajzen (1991) which indicated that attitude is referred to as the perceived level of positive feelings about thinking about or using solar energy technology. The research study by Kim et al. (2014) showed that the intention to use the technologies was determined by public attitude. This is consistent with the findings of Park and Ohm (2014) and Zografakis et al. (2010), which showed that attitude towards solar energy technology is significantly related to intention to use the technology. In addition, favorable attitudes influence the consumer purchase intention for example on energy efficient appliances as confirmed by Tan et al. (2017). Therefore, the following is hypothesized: H 3: Attitude towards residential solar power system has a positive influence on residential solar power system install intention Environmental Value Chen (2014) defined environmental value as an enduring prescriptive or proscriptive belief that directly reflects individual s environmental concern. Solar power system as a low-carbon source is perceived to be environmental friendly energy. Some of the potential residents adopters are driven in order to reduce greenhouse gas emissions and others think that solar power system will help in achieving it. Promoting environment value like green image by installing solar power system was one of the aims for some residents (Caird & Roy, 2010). The desire of improving environment sustainability caused the residents environmental value positive influence their install intention towards solar power system (Chen, 2014). Therefore, the following is hypothesized: H4: Environmental value has a positive influence towards residential solar power system install intention Perceived Cost The solar power system perceived cost includes initial investment for setting the machines and their periodic maintenance costs (Alam et al., 2014). The lower perceived costs of residents to solar power system, the higher the installation intention, and vice versa (Alam et al., 2014). When new technologies and products are introduced, the concept of perceived cost is considered among one of main factors that can slow down the acceptance and technological improvements of the technologies and products. Previous studies on renewable energy technologies have shown that the concept of perceived cost is negative influence in employing solar power system renewable energy (Alam et al., 2014). These same results also get supported by (Park & Ohm, 2014) in estimating residents install intention towards solar power system. Therefore, the following is hypothesized: H5: Perceived cost has a negative influence towards residential solar power system install intention 270

275 Awareness Awareness refers to the degree to which users have know-how of the existing new technology- its advantages and disadvantages and can have a check of updates on new technologies (Alam et al., 2014). The solar power system install intention is contingent on cognitive learning enabling residents to become acquainted with the applicability of the product to satisfy their needs. Residents first purchase should be appreciated by him/her through the information of products features (Woersdorfer & Kaus, 2011). Residents level of awareness about solar power system i.e. technological knowledge will determine the solar power systems install intention. The higher level of awareness is justified by several studies (Alam et al., 2014) in positive influence residents install intention towards solar power system. Lack of information about solar power system is one of the possible reasons for the slow installation intention among residents. Therefore, the following is hypothesized: H6: Awareness has a positive influence towards residential solar power system install intention Method Study Area and Sample Collection A quantitative study with self-administrated questionnaire is used and the responses are taken at a scale of five points as 5 for Strongly Agree and 1 for Strongly Disagree. There are two different sections of the questionnaire used in this study. Section one consists of demographics profile of the respondent which include age, gender, ethnicity, nationality, highest level of education, monthly income of the respondent and marital status whereas section two constitutes questions regarding perceived benefit, perceived trust, attitude towards residential solar power system, environment value, perceived cost, awareness effects on residential solar power system install intention. Details on the measurement items used in this study is shown in Table 1. Convenience sampling was adopted as the sampling approach. Penang residents above the age of 21 years are target population for present study. A total of 248 complete questionnaires were collected for the analysis and it made 55.1 percent response rate out of 450 copies of distributed questionnaire. Table 1: Measurement Items Variables Items Source Perceived Benefits Employing solar power system gives us environmental and social Kim et al. (2014) benefits. Overall, I feel that employing solar power system is beneficial for our society. Using solar power system gives us more economic and industrial benefits than other energy technologies. Perceived Trust Solar power system is more reliable than other energy technologies. Kim et al. (2014) Solar power system is more trustworthy than other energy technologies. Solar power system is more secure than other energy technologies. Environmental Value It is important to me that the products I use do not harm the environment. I consider the potential environmental impact of my actions when making many of my decisions. My purchase habits are not affected by my concern for our environment. Chen (2014) 271

276 Perceived Cost Awareness Attitude Install Intention I am concerned about wasting the resources of our planet. I would describe myself as environmentally responsible. I am willing to be inconvenienced in order to take actions that are more environment friendly. I think the equipment cost of employing solar power system is expensive. I think the maintenance cost of using solar power is expensive. It takes a considerable amount of effort and cost to use solar power system. I can recall which types of energy is solar power system. I am aware of solar power system. I can easily recognize solar power system. I do not have any difficulties in imagining solar power system. It would be a wonderful idea to employ solar power system. I would have positive feelings toward solar power system in general. It is better for me to employ solar power system, as opposed to other energy technologies. If I buy or own an independent house, I will install solar power system in it. I will strongly suggest my family or my friends to install solar power system in their independent house. To me, it deserves to install solar power system despite its long simple payback periods and high capital costs. If possible, I will plan to install solar power system in my current house. Park and Ohm (2014) Alam et al. (2014) Kim et al. (2014) Chen (2014) Mean and Standard Deviation for All Scale Items The result showed that the values of mean for all scale items range between (item AW1: I can recall which types of energy is solar power system ) to 4.21 (item EV1: It is important to me that the products I use do not harm the environment ). Generally, the scale means of perceived benefits was which demonstrated that respondents shown consent for the install intention were really based on the perception toward benefit of Solar Power System. Besides that, the scale means of perceived trust, environmental value, perceived cost and awareness were above average 3.53, 3.974, 3.928, 3.23 respectively indicated that the respondents were (1) agreement that install for solar power system will more reliable than other source of energy, (2) highly concern on potential environment impact and value environment resources, (3) stongly think that the cost for solar power system is expensive and (4) well aware and having good understanding toward solar power system. Moreover, the scale mean of install intention (3.494) proposed that higher level of motivation of respondents to install solar power system in their own properties. Additionally, the means of scale show that the respondents established favorable attitudes (3.893) toward solar power system. Smart PLS SEM 2.0 and SPSS 22.0 are the software that was used for the analysis of data and for testing the hypotheses. From the demographic data analysis, 52.4 percent of the respondents have their own properties but not installed with solar power system and female participants (74.2%) and this is a major portion of the study. Chinese constitute 80.6 percent of the sample majority in ethnicity and 33.1% respondents are from years of age and 32.3% respondents fell in years age bracket. Moreover, 71.8 percent of the respondents were having a bachelor degree showing the level of education of the respondents. Majority of the respondents having monthly income between RM 2001 to RM 4000 constitute 63.7 percent of the sample. Also, 58.1 percent of the respondents were single. 272

277 Measurement Model Confirmatory Factor Analysis (CFA) is carried out in this study and validity and reliability are also tested in order to examine the goodness of fit of the data. Convergent validity refers to the degree to which multiple items to measure the same concept are in agreement as defined by Hair et al. (2013). Accordingly, to Hair et al. (2013), to establish convergent validity, researchers used the main loadings, composite reliability (CR) and average variance extracted (AVE) to assess convergent validity. This is important to show that all item loadings are greater than the suggested or standard value 0.50 as given by Hair et al., (2013). Composite reliability CR measures the internal consistency reliability and the assumed standard is considered above In Table 2, the range of the constructs indicators were between and and this is also greater than the suggested value of 0.70 as given by Hair et al. (2013). In addition, the measure to which a latent construct describes the variations in its own indicators the average variance extracted (AVE) is also given and above 0.50 is considered good in justifying a construct (Hair et al., 2013). The values of the average variances extracted lies between and Therefore, the constructs have the ability to explain more than 50 percent of the variation of its indicators giving less error remains in the items. So, it can be stated that the overall measurement model is adequate in this study. Table 2: PLS Result of Convergent Validity Measures Latent Variable Measurement Item Loading CR a AVE b PB Perceived Benefit PB PB PT Perceived Trust PT PT EV EV Environment Value EV EV EV PC Perceived Cost PC PC AW Awareness AW AW AW ATT Attitude ATT ATT ITT Install Intention ITT ITT ITT Note: a Composite Reliability (CR) = (square of the summation of the factor loadings)/ {square of the summation of the factor loadings} + (square of the summation of the error variances)} b Average Variance Extracted (AVE) = (summation of the square of the factor loadings)/ {(summation of the square of the factor loadings) + (summation of the error variances)} 273

278 Besides, Discriminant validity is the extent to which a construct is truly distinct from other constructs, in term of how much it correlates with other constructs, as well as how much indicators represent only a single construct (Hair et al., 2013). According to Fornell-Larcker (1981) and Hair et al. (2013) criterion, items should load more strongly on their own constructs in the model, and the square root of average variance shared between each construct and its measures should be greater than the variance shared between the construct and other constructs. Table 3 shows that the values of the squared correlations for each construct are less than the square root of average variance extracted by the indicators. Hence, all constructs are fulfilling the criteria of discriminant validity as well as the overall measurement model. Table 3: PLS Result of Discriminant Validity Measures Latent Variable ITT ATT AW EV PB PC PT Install Intention (ITT) Attitude (ATT) Awareness (AW) Environment Value (EV) Perceived Benefits (PB) Perceived Cost (PC) Perceived Trust (PT) Note: Bold values represent the square root of average variance extracted (AVE) while the other entries represent the squared correlations using Fornell-Larcker criterion (Fornell and Larcker, 1981). The value of R2 is showed that 44.5% of the variations in dependent variable i.e. attitudes toward residential solar power system is explained by perceived benefits and perceived trust and the value of the R2 is which suggests that 39.7% of the variances in residential solar power system install intention are explained by the independent variables i.e. attitudes toward residential solar power system, environmental value, perceived cost and awareness toward residential solar power system install intention. For the examination of the tests of hypotheses, bootstrapping is used and minimum number of bootstrap samples was 5,000 selected, 1.65 is the critical values for 5% level of significance in one tailed test and 2.33 for 1% level of significance (Hair et al., 2013). The results of bootstrap designate the significance of all hypotheses. Table 4: PLS results of path coefficients and hypothesis testing Hypothesis Relationship Coefficient SE t Value p Value Supported H1 Perceived Benefits -> Attitude *** Yes H2 Perceived Trust -> Attitude *** Yes H3 Attitude -> Install Intention *** Yes H4 Environmental Value -> Install Intention *** Yes H5 Perceived Cost -> Install intention *** Yes H6 Awareness -> Install Intention *** Yes Note: *** p <.01, a beta negative sign 274

279 Table 4 demonstrates that perceived benefits (β = 0.458, p < 0.01) and perceived trust (β = 0.366, p < 0.01) were positively influences attitudes towards residential solar power system. Hence, H1 and H2 of this study were supported. The result showed that attitude (β = 0.407, p < 0.01) and environmental value (β=0.114, p < 0.01) positively influence residential solar power system install intention whereas perceived cost (β = , p < 0.01) was negatively related to residential solar power system install intention. Beside that awareness (β = 0.247, p < 0.01) showed positively influence of residential solar power system install intention. Therefore, H3, H4, H5 and H6 were supported. Figure 1 illustrates research model in the present study. Perceived Benefits O.458*** Attitudes towards solar power system Perceived Trust O.366*** O.407*** Environmental Value O.114*** Residential solar power systems install intention -O.152*** Perceived Cost O.247*** Awareness Figure 1: Research Model Note: Significant path ***p<0.01 Discussion Perceived benefit was found to have a positive relationship with attitudes towards residential solar power system. This finding is consistent with findings of past studies by Kim et al. (2014) and Park and Ohm (2014), who found out that residents' who have high perceived benefits towards solar power system, would have positive attitude toward solar power system. From the demographic analysis, it was found that 71.8 percent of the Penang residents who responded to the survey were a degree holder. Their education background demonstrates that they are highly 275

280 educated and hence they have a basic understanding of what a solar power system is and its potential benefits. The present finding also support Kim et al. (2014) and Park and Ohm (2014) study which concluded that perceived trust was found to have positive relationship with attitudes towards residential solar power system. Penang residents who perceived that solar power system which is more reliable, trustworthy and secure than any other energy technologies will tend to have a positive attitude on residential solar power system. Malaysia received excessive sunshine throughout the years in which it reassures the continuous supply of solar energy through the installation of solar power system, where it shows to be reliable and suitable for residential purposes compares to other energies like wind and water energy. Kim et al. (2014) and Park and Ohm (2014) found that attitude plays an important role to influence residential solar power system install intention, which is in good agreement with the results of the present study. The reason being the respondents in present study are mostly higher educated (71.8% bachelor degree holder), and most of them have the technical knowledge and information regarding solar power systems. Therefore, these well informed respondents demonstrate a favorable attitude towards solar power systems. The finding provides evidence that environment value positively influence residential solar power systems install intention. The result is in the lines of earlier literature of Chen (2014), Islam and Meade (2013), Schelly (2014) and Tsantopoulos, Arabatzis and Tampakis (2014). They found that environment value most significant and have positive impact toward residents solar power install intension. In this study, it was discovered that the environmental value among the Penang residents is strong. For instance, this could be noticed from the support given to the No Plastic Bag campaign launch by the Penang government a few years ago. It has significantly helped to reduce the plastic wastage and indirectly help promoting environmental value among Penang residents. Penang residents bring their own recyclable bag when shopping for groceries. Till now, this campaign has been practiced in other states of Malaysia and receiving overwhelming response from the general public. Consistent with findings by Kim et al. (2014), Park and Ohm (2014) and Alam et al. (2014), we found that perceived cost have a negative relationship with residential solar power systems install intention. From the demographic analysis of the respondents, it was found that majority have middle range income between RM2001 and RM4000 (63%). It became unfavorable to install solar power system in view of the income level. The cost of installation, ranging from RM50, 000 to RM150, 000 (Muhammad-Sukki et al., 2011), appears to be high. In addition, as reported by Muhammad-Sukki et al. (2011), majority of the people are not willing to invest in solar photovoltaic installation under Feed-in-Tariff scheme, partly due to the high cost of installation. Similarly, as argued by Wong et al. (2015), the long payback period of solar power system is one of the perceived costs and which played an important role influencing residents decision making towards solar power system installation. Awareness was found to have a positive relationship with residential solar power systems install intention. This finding was predictable with past study from Alam et al. (2014) and Tsantopoulos et al. (2014). Penang residents who have greater awareness towards residential solar power system will strongly influence their install intention Moreover, the mass media also play a role in raising the awareness. Latest news and updates on solar energy development in Malaysia, such as in Penang are published. In addition, there are news published on the increased in the number of offshore facility plant for solar panel production and setup of solar energy manufacturing site by 276

281 international companies from Germany and China in Penang. This indirectly showed that solar panel are gaining the acceptance and demand from the market in view of the significant benefits. Moreover, the ongoing exhibition and roadshow on Green Technology and Green Property at Subterranean Penang International Convention and Exhibition Centre (SPICE), Penang has also contributed to raise the awareness toward solar energy and solar power system among the general public in Penang. Conclusion and Managerial Implications The present study was designed to determine the effect of perceived benefits and perceived trust on attitudes toward residential solar power systems. The effect of attitudes, environment value, perceived cost and awareness on residential solar power systems install intention were investigated. This study has found that generally perceived benefits and perceived trust are significant in predicting attitudes towards residential solar power systems. Hence, more effort should be carried out by the Malaysia government and Tenaga Nasional Berhad (TNB) to inform the public and encourage a positive change of attitudes especially towards residential solar power systems installation. By having a positive attitude, it is believed that the intention to install will be higher as found from the present study. On the other hand, environmentally friendly campaign should be promoted on an on-going basis by the government bodies and also non-profit organization. This is important to continuously raise the awareness on safeguarding the environment and create strong environment value among the residents. The high installation cost of solar power system to Malaysia residents is another impediment which required attention. Solar power system may be favorable to the residents, but the high installation cost turns them away. At this juncture, Malaysia government plays an important role to provide an alternative solution which can reduce the cost. For instance, through funding some R&D project on solar panel. It is believed that if the cost of installation is low, the resident s intention to install will be high. The contribution of this study is obvious as the resulting outcomes can be capitalized as guidelines to solar power developer and marketer in formulating effective marketing strategies and better market segmentation. Moreover, policy makers and government bodies may refer to the findings and create greater level of awareness among Malaysian residents such as through workshop and exhibition. Further research in this field might investigate other essential components which influence attitudes towards residential solar power systems, for example the effect of perceived risk on residential solar power systems install intention. A number of limitations associated with this study are worth to be noted. Firstly, this study depends on self-reports that may not be a valid reflection of real behavior and there may be chances that some under-reporting may have happened. Secondly, this study utilized convenience sampling, where the sample consists mainly Malaysian Chinese (80.6% respondents are Chinese) which restricted to the real population structure in Malaysia. Malaysian Chinese was influenced by Confucianism philosophy; consequently, the results may be one-sided toward this classification of ethic group (Ramayah et al., 2003). Thirdly, the study was conducted in northern of Malaysia which limit in Penang state only. Hence, generalizing the results to the entire population may be limited. Based on the limitation of the study, future researches on this topic are recommended to make changes in specific ranges. To begin with, the sample collected for the future research in the comparable topic should follow the actual population structure in Malaysia and attempt to maintain 277

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285 A Study of Factors influencing Consumer s Purchase Intention toward Green Vehicles: Evidence from Malaysia Ng Lee Yong Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Shaizatulaqma Kamalul Ariffin* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia shaizatulaqma@usm.my Goh Yen Nee Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Nabsiah Abdul Wahid Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia *Corresponding author Abstract Purpose The production of green vehicles, such as hybrid vehicles and electronic vehicles are a solution to reduce carbon dioxide emission intensity by 45 per cent by Governments and global automobiles manufacturers are committed to change the way of citizen travelling, leading to substantial progress in the global electric vehicle market. Thus, factors affecting Malaysia s green vehicle purchase intention is important to be investigated. Following Theory of Planned Behaviour, this study examined purchase intention of green vehicle by investigating the interrelationships between the consumers environmental attitude, perceived behaviour control, subjective norm and green vehicle. The moderating role of previous user experience has also been added to the framework model. Design/methodology/approach - Survey method was used for the purpose of data collection in January 2017, and quantitative approach has been used as well. This study Theory of Planned Behaviour to support this framework. Respondents consisted of 300 consumers in Malaysia Findings: Result from a survey on 300 consumers confirmed environmental attitude, perceived behavioral control and subjective norm directly influenced consumers purchase intention toward green vehicle. However, previous user experience was found to be insignificant as a moderator. Research limitations/implications - The result can be more inclusive if interview session is carried out on the respondents. The understanding of what drives consumer purchase intention toward green vehicle can be enrich through in-depth interviews with individual consumer. More in-depth information can be accumulated when examining the relationship between variables. Practical implications - The results from this study can be used to provide important insights for policymakers in developing programs or projects to increase consumers awareness, removing obstacles and focus on major influential factors for vitalising green vehicles industries in Malaysia. Originality/value - The current discussion on green issues is largely on the investigation on Malaysian environmental knowledge and their tendency to perform the environmental activities, 281

286 consumer environment responsibility feeling, environmental values, environmental advertisement and environmental product. There is limited literature discussing on the green purchase behaviour among Malaysian. Thus, investigation on the purchase intention toward green vehicles is crucial to the industry and government. Keywords: Perceived Behavioural Control, Subjective Norm, Environmental Attitudes, Green Purchase intention, Previous user experience. Introduction Malaysia is the third highest vehicles ownership in the world, with 93% of its citizen own one vehicle and 54% own more than one vehicles (Channel News Asia, 2015). The increasing number of registered motor vehicles will certainly increase the emissions. Currently, the CO 2 emission increases from about 15 million tons to million tons in the transport sector. According to Ahmad Hadri Harris, Chief Executive Officer of the Malaysian Green Technology Group, with over one billion global emissions of harmful carbon dioxide and nitrogen oxides, transport sector is a major contributor to global warming and climate change. Harmful gases released and waste of automobile polluted the quality of air and damaging the environment. Most of the transport infrastructure failure due to the lack of proper planning and design. Thus, the air pollution and other environmental hazards is a critical issue that occur in Malaysia. Many drivers are still using the vehicles that use gasoline and diesel which release CO 2. To discover the scope of carbon dioxide emissions in the transportation and automobile sector in Southeast Asia, Malaysia is the second largest per capita greenhouse gas emissions in ASEAN countries (Salahudin & Abdullah, 2013), producing million metric tons of carbon dioxide, which shares 22.9% of the total carbon dioxide emissions. Base on the energy emission report by Suruhanjaya Tenaga, the transportation sector consumes about 43.3% energy in 2013 (Suruhanjaya Tenaga, 2015). As a developing country, Malaysia is acting to develop their own responsibility towards a sustainable development model to protect the environment. Malaysia has promised to reduce carbon dioxide emissions intensity by 45 per cent by Malaysia's Minister of National Resources and Environment Wan Junaidi Jaafar stated that Malaysia can achieve at least 40 per cent reduction in greenhouse carbon dioxide emissions by (Channel News Asia, 2015). In line with this goal, Ministry of Transport (MOT) and International Trade Ministry of Industry (MITI) and Department of Energy, Green Technology and Water (MEGTW) work together on an integrated project to support the infrastructure and roadmap for green vehicles in Malaysia (MITI, 2013). As a result, in 2014, Malaysia became a regional car centre for green vehicles in line with the objectives of the 2009 National Automotive Policies. The manufacturing process protects the interests of consumers in a sustainable manner to provide safer, better quality products at more competitive prices (MITI, 2014). With the technological revolution, automakers are aware of the residual effects of automobile production and they want to use technology to reduce greenhouse gas emissions by giving priority to the use of green vehicles. In line with this objective, Datuk Madani Sahari, the CEO of Malaysia Automotive Institute (MAI) stated that Malaysia is gearing towards launching only green vehicles by 2025, denoting a 100% green vehicles penetration, from 42.8% in He also believes by 2025 all new models to be sold in Malaysia will definitely be green vehicles (Ee, 2017). By owning a green vehicle, it helps to increase the responsibility of citizen to be more responsible and appreciative environment and maintain sustainability of future. Although the green vehicles are the solution to reducing the air pollution that related to climate change and also resource shortage, but its purchase rate is still low and only few car manufacturer 282

287 introduced them at small production volumes in Malaysia market. They still represent a small niche market in passenger vehicles market. Granting green marketing becomes a major trend of business world for now, but this is still new for Asian countries especially Malaysia (Wahid et al., 2011). Due to lack of experience, Malaysia's green marketing strategy has directly adopted from Western countries (Shahnaei, 2012). Besides that, there is limited literature discussing on the green purchase behaviour among Malaysian and this is encouraging the researchers to fill the literature gap, especially in the context of expensive, infrequent, and highly risky product such as purchases automobile (Dowling & Staelin, 1994). The current discussion is largely on the investigation on Malaysian environmental knowledge and their tendency to perform the environmental activities, consumer environment responsibility feeling, environmental values, environmental advertisement and environmental product (Yusof et al., 2013; Corina et al., 2013; Harun et al., 2011). Investigation on the purchase intention toward green vehicles is crucial to the industry and government. The lack of information about the country's green purchasing intentions and consumer behavior toward green vehicles, companies, local and international marketers face the challenge of developing adequate and effective marketing strategies to achieve those objectives. More updated studies are needed to overcome this shortcoming to assist companies and marketers to identify and to understand consumers needs toward green product and to develop market offerings. Haytko and Matulich (2008) emphasized although green marketing effort continue to grow, marketers did not have adequate tools for evaluating the green marketing success, nor they did not have sufficient tools for determining consumers environmental attitudes, intention to purchase and consumer behavior toward green marketing. However, some of the previous studies shows that consumers have transformed the environmental problems into actively buying green products due to the increasing awareness of environmental issues (Barber et al., 2012). Saleki and Seyedsaleki (2012) implied that there is a significant relationship between environmental knowledge, environmental concerns and purchase intention towards green products. It can be seen that there are many studies emphasized on the context of environmental concern and consumers green behaviors in the past (Nor Azila et al., 2012). Yet, in the context of Malaysia is not that encouraging. Based on afore mentioned above, it shows that consumers are the essential engines to implement eco-responsible consumption. Previous studies have shown that consumers have changed their environmental issues into the green products actively buying. As automobile industry in Malaysia is one of the industries that move along with the increase of consumer awareness of green issues, it is hoped that the contribution of this study could change consumer preferences toward green vehicles. Therefore, this study aims to provide valuable information to the automobile industry on factors that affecting consumer purchase intention toward green vehicle in Malaysia in order to help them to promote green vehicles in the Malaysia market. Following Theory of Planned Behaviour, this study hypothesizes that consumers environmental attitude, perceived behaviour control and subjective norm would influence their purchase intention toward green vehicles. On the other hand, previous study pointed that the relationship among constructs appearing in the TPB model would be moderated by previous user experience (Taylor & Todd, 1995). Their empirical study substantiated this assumption since the impact of TPB was stronger in the case of users with relatively more experience. Thus, previous user experience would be tested as a moderator in the study model. 283

288 Literature Review Green vehicles Green vehicles are a road vehicle that has lesser harmful effects on the environment than conventional engine vehicles operating on gasoline or diesel or conventional diesel engine using certain alternative fuels. Green vehicles are powered by alternative fuels and advanced vehicle technologies and include hybrid electric vehicles, plug-in hybrid electric vehicles, battery electric vehicles, compressed-air vehicles, hydrogen and fuel-cell vehicles, neat ethanol vehicles, flexiblefuel vehicles, natural gas vehicles, clean diesel vehicles, and some sources also include vehicles using blends of biodiesel and ethanol fuel or gasohol (US Department of Energy, 2010). Fortunately, green vehicles such as hybrid vehicles, solar-powered vehicles, and other environmental protection vehicles have been invented in recent years. Not only vehicles properties could be fit for environmental protection laws and terms, but also puts marketing essential factors like fashion into the vehicles design. Many past researches focus on designs of engine and fuel systems. There are few researches to try to find the relationships between customers needs and characters of green vehicles (Lin & Ho, 2011). In a nutshell, these vehicles are more environmentally friendly, technologically advanced, and expensive than their non-green counterparts (Oliver & Lee, 2010). Economic gain, technological interest, and environmental values are among the top reasons behind green vehicles patronage (Ozaki & Sevastyanova, 2011). Despite the optimistic forecast on the green vehicles market in Malaysia, some studies indicated that the sales of green vehicles might be slower because there are limited of new model to stimulate the market and it will eventually experience market cycle as similar to these conventional vehicles models (Mahalingam, 2013). Hence, to push the purchase intention rate of customer to further extend the green vehicles, the automotive manufacturers and government agencies should understand the Theory of Planned Behaviour that can explain factors affecting green vehicles purchase intention among local consumers. Environmental attitudes Attitude is defined as a positive or negative evaluation behaviours. Various studies have indicated that the attitude is significant variables anterior of intentions (Dickinger & Kleijnen, 2008). The more positive attitude consumers have, the more consumer intention to perform certain behaviour (Beck & Ajzen, 1991). Environmental attitudes characterized as personal values. Environmental protection on the green product favourable or unfavourable attitude and the service actually "in their environment" practice their propaganda behaviour (Mei et al., 2012). Chang (2011) explained, consumers can have an ambivalent attitude towards environmentally friendly products as they assess the positive and negative products. For example, users prefer to buy green products because they preserve their environment, but at the same time it does not mean they are willing to make compromises on the quality and reasonable price. Therefore, the study developed Hypothesis 1: There is a positive relationship between Environmental Attitudes and Consumer Purchase Intention toward Green Vehicles. Subjective norm Subjective norm can be defined as an individual s perceived social pressure from other people or groups who are important to him/her that wish or expect him/her to perform in a certain way (Ajzen, 1991). It is proven in previous studies that subjective norm affects purchase intention positively (Han & Kim, 2010). Jeon et al. (2012) believed that higher subjective norm of consumer, 284

289 the higher intention to buy green vehicles. The findings show that there is a significant relationship between subjective norm and intention to purchase for consumer in China. It emphasized that the growing of social pressure will influence consumer to perform certain acts and implement their intention. Therefore, it is expected that more group behaviour will be taken, such as purchasing green products. Therefore, the study developed Hypothesis 2: There is a positive relationship between Subjective Norm and Consumer Purchase Intention toward Green Vehicles. Perceived behavioural control Perceived behavioural control is the degree of ease and difficulty level perceived by an individual with respective to conduct behaviour (Ajzen, 1991). Thus, for individuals who perceived to have full control over the behaviour, he/she will have higher willingness to engage in the behaviour in question (Ajzen, 1991). An individual s behaviour is strongly linked with their perceived ability to perform the behaviour in question. The resources like time availability, budget, and skill can increase consumer behavioural intentions. Currently, the notion of perceived behavioural control including technology, price, availability, or knowledge of the use of green products and the ability to perform behaviours lifted. The more users have the ability to control these factors, the more likely any intention to change behaviour (Axsen & Kurani, 2013). Therefore, the study developed Hypothesis 3: There is a positive relationship between Perceived Behavioural Control and Consumer Purchase Intention toward Green Vehicles. Previous user experience of conventional vehicles Previous user experience can be defined as the individual s personal experience of using a product in the past. The wider relationship between the product and the user is investigated (McNamara & Kirakowski, 2011). In this study, previous user experience of conventional vehicles will be added as a moderator in the relationship between factors of TPB and green vehicle purchase intention. Previous user experience of conventional vehicles such as consuming more fuel, has less salient features, release unhealthy emission which cause air pollution would probably influence consumer green vehicle purchase intention. If the person has a strong awareness and responsibility towards the environment, this would probably will lead him/her to purchase a green vehicle (Kollmuss & Agyeman, 2002). Environmental attitudes consist both of cognitive and affective perception which is based from previous user experience. Based on this, it is proposed that previous user experience would moderate the relationship between environmental attitude and green vehicle purchase intention. Ivan and Penev (2011) stated that consumer would evaluate green vehicles by using the same as criteria as evaluating conventional vehicles. Consumers would have previous experience of conventional vehicles that will lead them to have a positive or negative perception based on this experience. In addition, previous user experience is proposed to moderate the relationship between subjective norm and green purchase intention. Previous studies pointed that the sharing of experience, product reviews from close relatives, friends and colleagues would influence the relationship between subjective norm and green vehicle purchase intention (Brucks, 1985). Previous studies, Yoh et al. (2003) believed that previous user experience has a significant impact in the relationship between perceived behavioural control and online shopping intention. Similarly, Saba and Messina (2003) found previous user experience moderates the relationship between perceived behavioural control and purchase intention toward organic food. Whilst, Shim and Drake (1990) have also found that previous user experience has influenced consumer purchase intention in their study on online purchase intention. It can be concluded that previous user experience would moderate the 285

290 relationship between perceived behavioural control and green vehicle purchase intention. Therefore, this study developed Hypothesis 4: H4a: Previous user experience of conventional vehicle moderates the relationship between Environmental attitudes and green vehicle purchase intention. H4b: Previous user experience of conventional vehicle moderates the relationship between Subjective Norm and green vehicle purchase intention. H4c: Previous user experience of conventional vehicle moderates the relationship between Perceived Behavioural Control and green vehicle purchase intention. Green purchase intention Green purchase intention is defined as the intention to purchase services or products that has lesser harmful and environmentally friendly products (Chen & Chai, 2010). The intention to purchase is one of the main drivers that tend buyers to continue in payment transaction and finishing with buying products or services. Intention to act is a psychological behaviour. Fishbein and Ajzen (1975) found that attitudes and subjective norm determine green purchase intention. The intention to buy can be classified as a component of user s cognitive behaviour of how people intend to buy a product or service. Consumers demand as well as their attitude toward environmentally friendly products will not be uniform in some markets and culture (Rahbar & Wahid, 2010). Green purchase intentions is those who promote and use natural conscious companies that care about what they buy is green products. Those consumers who are care about their health status will choose to buy thhis type of products. Their expectations in green products is in the same level with other dairy products. Green purchase intention asserts that consumers attitudes and norm pertinent to environmental matters strongly determine their actual behaviours and green purchase actions (Albayrak et al., 2013). In this study, the behavioural intention derived from TPB shall reflect the purchase intention of green vehicles. In the context of marketing and management, green purchase intention has been an essential element and the focal point of large numbers of studies (Oliver & Lee, 2010; Ramayah et al., 2010; Kim & Chung, 2011). Figure 1 presents the research model for this study. Figure 1: Theoretical framework 286

291 Method A total of 300 survey questionnaires were distributed to individual consumers who live in the metropolis of Malaysia especially Penang, Selangor and Johor over a period of three months. These three states were selected because they are representing the Northern, Central and Southern areas of peninsular Malaysia. Online survey forms were distributed through the internet as this method enabled the researchers to reach respondents who are relevant to this study. Items for the questionnaire, namely, Perceived Behavioural Control (I believe I had the ability to purchase Green Vehicles), Subjective Norms (Most people who are important to me would want me to purchase Green Vehicles), Environmental Attitudes (I feel good about purchase product that benefit to environment), previous user experience (conventional vehicles release unhealthy emission cause air pollution) and Green Purchase Intention (I have intention to purchase green vehicles because of its positive environment contribution) were adopted/adapted from previous studies (Paul et al., 2015; Mo & Wong, 2012). Likert scale was used to measure four item statements on perceived behavioural control (1=strongly disagree to 5=strongly agree), four item statements on subjective norm (1=strongly disagree to 5=strongly agree), four item statements on environmental attitudes (1=strongly disagree to 5=strongly agree), three item statements on previous user experience of conventional vehicles ((1=strongly disagree to 5=strongly agree) and five item statements on green purchase intention (1=strongly disagree to 5=strongly agree). The data were analysed using the IBM SPSS version 24. Findings Of 206 returned questionnaires, only 179 (86.9%) were usable for further data analysis. Respondents profile reveal that majority of them were male (63.7%), from the age category of years old (38.5%), possess Bachelor Degree (46.4%) and an income level below RM3000 per month (43.6%). Table 1 shows the profile of respondents. Table 1: Summary of respondents profile Demographic Profile Descriptions Frequency Percentage (%) Gender Male Female Ethnicity Malay Chinese Indian Others Age and above Monthly Income RM3000 or below RM3001 to RM RM5001 to RM RM7001 and above Academic Qualification Diploma Bachelor Degree

292 Master Degree PHD Others Goodness of measurement Goodness of measurement must be assessed prior to conducting of any analysis. This is to ensure that the measurements do indeed measure the variables they are supposed to measure and that they measure them accurately. There are at least two important methods to assess the goodness of measure namely: factor analysis and reliability analysis (Sekaran, 2010). This study performed a factor analysis using principle components and the Varimax rotation technique. This research has performed factor analysis on Perceived Behavioural Control, Subjective Norm, Environmental Attitudes and Green Purchase Intention. The cut-off value for loadings at 0.40 (n 179) is used as a significant acceptable level (Hair et al., 2006). Factor analysis was conducted on the 20 items. The first run of the factor analysis on independent variables resulted in KMO=0.86, Bartlett s test of sphericity (p=0.00), Anti-image Correlation > 0.50, and Communalities ranged from 0.64 to 0.84 (> 0.50). Items were maintained to make up the three factors. Total variance explained is 73.15% and it exceeded minimum recommended value of 60%. (Hair et al., 2013). Therefore, the claim that the result of factor analysis had fulfilled all the six assumptions by Hair et al. (2006). The dependent variable in this study is green purchase intention. The result of the first run of factor analysis yielded one factor, the KMO value is 0.73 Bartlett s test of sphericity (p=0.00, Anti-image Correlation > 0.50, and Communalities > Items were maintained to make up the one factor. Total variance explained is 61.16%. The statistics presented in Table 2 indicate that all variables loading value is greater than The first run of the factor analysis on moderating variable resulted in KMO=0.69, Bartlett s test of sphericity (p=0.00), Anti-image Correlation > 0.50, and Communalities > Items were maintained to make up the one factor. Total variance explained is 74.76% and it exceeded minimum recommended value of 60%. (Hair et al., 2013). Therefore, the result of factor analysis had fulfilled all the six assumptions by Hair et al. (2006). Table 2: Factor analysis on variables Variables Items Loading Perceived 1) Clean and tidy environment is important to me Behavioural 2) I believe I had ability to purchase Green Vehicles Control 3) If it were entirely up to me, I am confident that I will purchase Green 0.81 Vehicles. 4) I see myself as capable of purchasing Green Vehicles in future Subject Norm 1) Most people who are important to me think I should purchase Green Vehicles. 2) Most people who are important to me would want me to purchase Green Vehicles. 3) My friend s positive opinion will influences me to purchase Green Vehicles. 4) My family s positive opinion will influences me to purchase Green Vehicles. Environmental 1) I prefer consuming environmental friendly product

293 Attitudes Green Purchase Intention 2) I have a favourable attitude toward purchase to environmental friendly 0.83 product. 3) I feel good about purchase product that benefit to environment ) Environmental protection is important to me when I intent to purchase ) I have intention to switching to Green Vehicles for saving fuel ) I have intention to purchase on Green Vehicle because of the 0.79 performance. 3) I have intention to purchase Green Vehicles because of its positive 0.82 environmental contribution. 4) I would recommend my family and friend to purchase a Green 0.81 Vehicles. 5) I want to purchase Green Vehicles in near future Previous user Experience 1) Conventional vehicles consumer more fuel ) Conventional vehicle has less salient features ) Conventional vehicles release unhealthy emission cause air pollution Note. N = 179; Item with less than 0.40 were deleted Reliability This study evaluated reliability by assessing the internal consistency of the items representing each construct using Cronbach s alpha coefficient that has been widely used in many studies (Hair et al., 2006). Reliability is an indication of the stability and consistency with which the instrument measures the concept and helps to assess the goodness of measure (Sekaran, 2010). The results of the reliability analysis summarized in Table 2 affirmed that all the scales displayed satisfactory levels of reliability with Cronbach s alpha values of much higher than the minimum threshold (Cronbach s alpha > 0.70). This indicates that the instrument is stable and consistent in measuring the concept of the respective variables. Besides, it is possible to say that the respondents really understood the survey questions. Table 3: Summary of Reliability Analysis Type of variables Variables No. of Item Cronbach s Alpha Independent Variable Environmental Attitude Subjective Norm Perceived Behaviour Control Dependent Variable Green Purchase Intention Moderator Variable Previous user experience Multiple regression analysis A multiple regression analysis was carried out to analyze the direct relationship between independent variables and consumer green puchase intention. In order to test hypothesis 1 (H1), hypothesis 2 (H2) and hypothesis 3 (H3), which proposed a positive and significant relationship between environmental attitudes, subjective norm, perceived behavioral control toward green purchase intention respectively. The regression equation would test the impact of the three factors on green purchase intention. The analysis shows the Durbin Watson value is at 2.02 which means the value is between the accepted range of 1.5 to 2.5. The collinearity statistics (VIF) is less than 10 means that there is no multicollinearity problem in this model. The result of the multiple regression analysis is presented in Table 4, which suggests that three factors namely, environmental attitudes (β = 0.21, p<0.01, t = 2.99), subjective norm (β = 0.27, 289

294 p<0.01, t = 4.15) and perceived behaviour control (β = 0.38, p<0.01, t = 5.63), were found to be positively and significantly influenced the consumer green purchase intention. Therefore, it can be concluded that the hypothesis of H1 (a relationship between environmental attitudes and green purchase intention), H2 (a relationship between subjective norm and green purchase intention) and H3 (a relationship between perceived behavioural control and green purchase intention) are supported. In addition, the result also suggests that among three factors, perceived behavioural control (β = 0.38, p<0.01, t = 5.63) is statistically the most important in explaining the variance in consumer purchase intention toward green vehicles. Table 4: Multiple regression analysis Dependent Variable Independent Variable Unstandardised Coefficient t-sta Beta Std. Error Green Purchase Perceived Behavioural Control *** Intention R 2 = 0.52 Adjust R 2 = 0.51 F-statistics = Durbin Watson=2.02 Note: Significant level: ***p<0.01 Collinearity Statistics (VIF) Subjective Norm *** Environmental Attitudes *** Hierarchical regression analysis The hierarchical regression analysis was performed to test the moderating effects of previous user experience in the relationship between value environmental attitudes, subjective norm, perceived behavioural control and green vehicle purchase intention. The moderated regression technique established by Baron and Kenny (1986) and Sharma et al. (1981) were performed. A four-step hierarchical regression was conducted for the moderator. The dependent variable was entered in the first step, followed by independent variables in the second step, the moderating variable was entered in the third step, and lastly, the interaction between moderating variable and independent variables were entered in the fourth step. The result of the four-step hierarchical regression to test hypothesis 4 (H4), which states that previous user experience moderates the relationship between factors of TPB (environmental attitudes, subjective norm, perceived behavioural control) and green vehicle purchase intention in this study is described in Table 5. Table 5 shows the summary of the analysis. When previous user experience has been added to the model. The R 2 change from 0.52 to 0.54 indicating that previous user experience affected the relationship between independent variables and dependent variables as the R 2 increased 2%. The relationship between independent variables and dependent variables remained significant. However, when the interaction effects between previous user experience and independent variables entered to the next step. The moderating effect of previous user experience was found to be insignificant indicating the relationship between Perceived Behavioural Control, Subjective Norm and Environmental Attitudes and Green Vehicles purchase intention appeared to be unaffected by previous user experience of conventional vehicles. Therefore, it can be concluded that H4a, H4b, H4c are not supported. 290

295 Table 5: Hierarchical Regression: Moderating Effect of Previous user experience Dependent Variable Independent Variable Standard Coefficient Beta (β) Step 1 Step 2 Step 3 Green Vehicle Purchase Intention Independent Environmental attitudes Subjective norm Perceived behaviour control 0.22*** 0.17** 0.33*** Moderating Previous user experience of conventional vehicles 0.20*** 0.01 R 2 Adjust R 2 F-statistics Interaction EA x PUE SN x PUE PBC3 x PUE *** 51.83*** 29.82*** Note. Significant levels: ***p<0.01, **p<0.05, *p<0.10 Discussion The main goal of this study is to examine the relationship between environmental attitudes, subjective norm, perceived behavioural control of consumers and their purchase intention toward green vehicles. The moderating role of previous user experience of conventional vehicles has also been tested on this model. This study has investigated factors that affecting consumer purchase intention toward green vehicles in Malaysia. The environmental attitudes, subjective norm and perceived behavioural control of consumers has been hypothesized to have a significant and positive impact on the green purchase intention. The result of this study indicates that three factors have a significant and positive impact on green purchase intention (H1, H2 and H3). However, the moderating effect of previous user experience was found to be insignificant indicating the relationship between Perceived Behavioural Control, Subjective Norm and Environmental Attitudes and Green Vehicles purchase intention appeared to be unaffected by previous user experience of conventional vehicles. Thus, it indicated the hypothesis 4a, 4b and 4c are not supported. The finding of Hypothesis 1 which tested the effect of the relationship between perceived behavioural control and green purchase intention is consistent with previous studies including Wang et al. (2016) and Peters et al. (2011). Perceived behavioural control is said to affect green purchase intention, in which, consumers with high level of perceived behavioural control in terms of financial ability and time availability will have a higher level of green purchase intention toward green vehicles. The positive perceived behavioural control among Malaysian consumers may perceive the ease of adopting green vehicles in the market. It may raise due to the availability of trial experience, sufficient product knowledge, and/or financial incentives from the Malaysian 291

296 government due to the financial package offered in line with the objective to become the green technology hub in ASEAN market. The availability of trial experience on green vehicles (including hybrid vehicles and electric vehicles) across automobile companies showrooms in Malaysia may enhance the green purchase intention as the consumer might get familiar with the technology involved. In term of purchase price, Turrentine and Kurani (2007) revealed that higher quality vehicles and new technologies need to be compromised with higher purchase price. Whilst, the finding of Hypothesis 2 which tested the effect of the relationship between subjective norm and green purchase intention is consistent with previous studies including Jeon et al. (2012) and Nayum et al. (2013). The highlight of social influence that affects the purchase intention of green vehicles is the central point of this study. Consumers are believed to be affected by others purchasing and consumption pattern. The collectivism and strong social pressure in Malaysia, embedded with the obligation to comply with the perceived expectation of society is vital in the green purchase intention of green vehicles. Social norm in environmental behaviours is an important part in promoting sustainable behavior (Corner & Randall, 2011). By putting the subjective norm into equation, the adoption of green vehicles among innovator may create a chain effect to further encourage the conventional vehicles user to purchase green vehicles (Roger, 2004). In a similar research conducted by Gaker et al. (2010), providing peer purchasing decision, can positively impact consumer s vehicle purchasing decision. The finding of Hypothesis 3 which tested the effect of the relationship between environmental attitudes and green purchase intention is consistent with previous studies including Gopi and Ramayah (2007) and Shih and Fang (2004). Consumers who are more involved with the environment, they are more likely to purchase green product. In addition, previous studies implied that consumer purchase environmental products are influence by their green awareness. The young generation believed when they consumed environmental friendly products, it reflects their consciousness and social awareness toward green environment (Johri & Sahasakmontri, 1998). Meanwhile, the finding of Hypothesis 4 is in contrast with previous findings which found previous user experience moderates the relationship between individual knowledge of organic product and purchase intention (Kim & Chung, 2011; Dsouza et al., 2006). Other researchers have also argued that adding previous user experience in the TPB model may enhances the prediction of consumer behaviour (Bagozzi et al., 1991). However, moderating role of previous user experience was found insignificant in this study. Most of the previous studies has tested previous user experience as an independent variable toward online purchase intention, such as in deciding the reliability of the website (Ranganathan & Jha, 2007; Yoh et al., 2003). Besides, some of the past studies has tested previous user experience on purchase intention toward luxury and expensive products (Yoo & Lee, 2012, 2009). The finding of this hypothesis shows that conventional vehicles which consuming more fuel, has less salient features and release unhealthy emission which cause air pollution were not influenced respondent s green vehicle purchase intention. It is possible to say that the respondent could not compare the condition between green vehicles and conventional vehicles as they never own green vehicles. The respondents of this study might never experience own green vehicles. It is in line with past research which stated the low purchase rate on green vehicles among Malaysian consumers and even though green issues become a major trend of business world today, but this is still new for Asian countries especially Malaysia (Wahid et al., 2011). Managerial implication This study provides valuable information to the companies and practitioner in the automobile industry on factors that affecting Malaysian consumer s purchase intention toward green vehicles. 292

297 With regards to the significant positive relationship between perceived behavioural control, subjective norm, environmental attitudes toward green purchase intention, many respondents feel confident to purchase green vehicles than conventional vehicles even though it involved greater amount of uncertainty in term of financial and social risk. Thus, to stimulate consumers confidence, marketers may provide an effective platform to showcase the current environmental issues, the production process and the benefits of green vehicles to enhance consumers awareness or familiarity in this issue. In addition, the industry can come out with the relevant strategies and marketing programs to boost the sales of green vehicles by creating green vehicle campaign as well as environmental issues. This study will be of great practical significance contribution to market and promote green vehicles, as it serves as a reference to understand the most important factor that influencing consumer green purchase intention. The finding of this study can be viewed as a guide to identify a target market, increase customer value propositions and organize effective activities. Both local and foreign automobiles makers can make further research on this study to improve the green vehicle purchase in the local automotive market. For the academics, this study made several contributions to the literature related to green product purchase intention. It made a significant contribution to answer the research problem by using the Theory of Planned Behaviour. As such, the TPB model were proved to be an important dimension for the formation of green purchase intention This research enriches understanding of consumer green purchase intention on green vehicles purchase by providing strong empirical evidence through careful and convenient sampling method applied in this study. On the other hand, future investigation on factors such as safety performance, cost and government aid is valuable. TPB is open to the addition of predictors for better study. The moderator variable also can be added to the framework such as willingness to pay, product knowledge and perceived value. Conclusion The finding of this research indicates that there is a significant positive relationship between perceived behavioural control, subjective norm and environmental attitudes towards consumer green purchase intention. It can be concluded that consumer when they decide to purchase green vehicles, they will consider their ability to purchase. Family and friends would also influence their purchase decision toward green vehicle and a person with a favourable attitude towards environmental friendly product will be more likely to purchase green vehicles because they feel environmental protection is important. Therefore, companies and practitioners need to consider these factors to promote their green products to the consumers. This information can be a great opportunity to the company to develop an effective marketing strategies in order to enhance green vehicles usage. References Ajzen, I. (1991). The theory of planned behavior. Organizational Behaviour and Human Decision Processes, 50(2), Albayrak, T., Aksoy, S. & Caber, M. (2013). The effect of environmental concern and scepticism on green purchase behaviour. Marketing Intelligence and Planning, 31(1), Axsen, J. & Kurani, K. S. (2013). Developing sustainability-oriented values: Insights from households in a trial of plug-in hybrid electric vehicles. Global Environmental Change, 23 (1),

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302 The Effects of National Culture, Corporate Governance and CSR Governance on CSR Disclosure Quality Wang Zi Jian Graduate School of Business, Universiti Sains Malaysia, Malaysia. Amar Hisham Jaaffar* College of Business Management and Accounting, Universiti Tenaga Nasional, Pahang, Malaysia Say Keat Ooi Graduate School of Business, Universiti Sains Malaysia, Malaysia. Azlan Amran Graduate School of Business, Universiti Sains Malaysia, Malaysia. * Corresponding Author Abstract Purpose: This study investigates the effects of national culture, corporate governance and CSR governance on corporate social responsibility (CSR) disclosure quality based on stakeholder, legitimacy and agency theories in the Asia-Pacific context. Design/methodology/approach: Content analysis was applied to examine the annual and standalone CSR reports of 139 public listed companies in the Forbes Global Findings: While CSR committee and NGO alliance influence CSR disclosure quality positively, individualism inversely related to the disclosure quality. Apart from that, top management commitment failed to reveal a moderating effect in this study. Research limitations/implications: This study deepens the understanding of CSR disclosure quality in the Asia-Pacific context, and suggest the importance of CSR committees. Practical implications: This study creates interest in CSR disclosure among the Asia-Pacific countries, and provides some insights into how different national context and governance perspectives can enhance the quality of CSR disclosure. Originality/value: This study demonstrated that national culture, corporate governance and CSR governance as the drivers of the quality of CSR disclosure. Keywords: Corporate social responsibility disclosure, National culture, Corporate governance, CSR governance, Hofstede s cultural index, Asia-Pacific. 298

303 Introduction Ever-growing industrialisation and urbanisation has posed worldwide sustainability issues, such as climate change, natural resources depletion, and poverty (OECD, 2009). Corporations are being continuously held responsible for the adverse impacts of their activities on the natural and social environments (Costa and Menichini, 2012). This has sparked growing interest in corporate social responsibility (CSR). According to the European Commission (2011), CSR is a concept whereby businesses integrate social, environmental, ethical, human rights and consumer concerns into their business operations. Therefore, CSR has been considered as a means of achieving sustainable development, which combine the three elements: the society, economy, and environment (Kolk and Tulder, 2010). To better convey CSR, voluntary disclosure has become a mainstream phenomenon. Many companies have greatly improved their corporate responsibility performance through disclosing relevant information in stand-alone CSR or traditional annual reports (Eng and Mak, 2003; Islam and Deegan, 2010; Amran and Ooi, 2014). Due to the pressure from the external environment, it has been observed that there is a global uptrend in CSR reporting which creates additional values to the companies (Gurvitsh and Sidorova, 2012). However, international comparative studies suggest that substantial differences exist on CSR understanding and disclosure level from countries to countries (Chen and Bouvain, 2009; Freeman and Hasnaoui, 2011; Amran et al., 2016). Since the last decade, the Asia-Pacific has gradually become a focus ground for CSR disclosure studies (Belal and Momin, 2009). As a matter of fact, the Asia-Pacific economies hold a significant position within the global economic structure (Zha, 2015), especially for emerging economies like China, India and Malaysia, which play a vital role in revitalising and facilitating the continuous growth of global economy. According to Visser (2008), there are several important reasons to study CSR in the developing or emerging market context. Firstly, these countries have higher potential of economic growth and investment which may bring more social and environmental impacts (Visser, 2008). Secondly, the social and environmental crises in the developing countries are usually strongly felt by the rest of the world (UNDP, 2006). Thirdly, developing countries present distinctive CSR challenges which are quite different to those faced in the developed countries (Visser, 2008). Scholars have cautioned that multinational corporations in the host countries have been facing problems in the business operations with regard to adjusting the foreign cultures (Bondy and Starkey, 2014). The lack of thorough cultural values understanding can create overwhelming barriers to companies success (Muwazir, 2011). Notably, Van der Laan Smith et al. (2005) asserted that it is important to understand the different cultural context of CSR disclosure, so that companies can adjust their disclosure strategy accordingly when entering foreign markets. Besides, corporate governance has received increasing attention, especially with the mega corporate failures and scandals from Enron, WorldCom, Shell, Nike, and Northern Rock (Zaheer, 2013; Amran, Lee, and Devi, 2014). Given the global pressure for corporate sustainability, companies are experiencing transformation towards a more sustainable oriented operation. Though with the proliferation of CSR research lately, there are still sparse and inconclusive about the possible contextual factors influencing CSR disclosure (Adnan, 2009). Gaps remain on how CSR can be effectively integrated with the existing business processes and governance structure (Asif et al., 2013). As CSR research in the Asia-Pacific context remain limited, this study intends to examine the effect of national culture, corporate governance and CSR governance on CSR disclosure quality of 13 countries in the Asia-Pacific. 299

304 Literature Review National Culture and CSR Disclosure Quality Hofstede made the most prominent contribution in cultural research due to the establishment of the National Culture Index (NCI). He proposed four value dimensions: power distance refers to the society acceptance of unequal distribution of power; uncertainty avoidance refers to the extent to which people feel threatened by unknown and ambiguous situations; individualism refers to the inclination of people to look after themselves instead of the society s need; and masculinity refers to the extent of masculine values such as assertiveness and materialism that prevail in society (Hofstede, 2001). As such, several CSR disclosure research have been conducted based on NCI, explaining the variation of reporting practices across countries. For instance, Van Der Laan Smith et al. (2005) examined CSR disclosure based on 26 US companies, and 32 Norwegian and Danish companies, in the electric power generation industry, meanwhile, Adelopo et al., (2013) conducted their research in the western European context, justifying the robustness of the index (Ringov and Zollo 2007; Peng, Dashdeleg, and Chih, 2014). Corporate Governance and CSR Disclosure Quality Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs (OECD,2005, p.3). In the existing corporate governance literature, the effectiveness of the arrangement of the board of directors, explicitly board size and independence essential for improved transparency and accountability practices has received much consideration (Kolk and Pinkse, 2009). Board size is one of the most significant elements within the corporate governance mechanism (Abdul Razak and Mustapha, 2013). It represents the total number of directors on the board containing both executive and non-executive directors (Mulyadi and Anwar, 2012). Although findings revealed that larger board size could bring communication and coordination problems resulting in less cohesiveness of companies practices (Said et al., 2009; Mulyadi and Anwar, 2012); and the agency conflicts between shareholders and managers are more likely to occur when the board size is large (Lucyanda and Siagian, 2012), Esa and Ghazali (2012) affirmed that board size is positively associated with the level of CSR disclosure after analysing the annual reports of 27 Malaysian government-linked companies. Meanwhile, board independence is defined by the proportion of independent non-executive directors on the board (Liao et al., 2014). It is argued that the existence of independent directors on the board will enhance the board effectiveness (Said et al., 2009). Rouf (2011) found that board independence could positively affect the level of CSR disclosure. However, study conducted by Haji and Ghazali (2013) suggested that board independence has no significant relationship with the voluntary disclosure by examining the Malaysian corporate annual reports. Similarly, Amran et al. (2013) also reported that board independence does not have any significant impact on the quality of CSR disclosure. CSR Governance and CSR Disclosure Quality With the constant and more optimised evolution of CSR practices, an integrated CSR governance system has increasingly gaining attention. De Colle and Gonella (2003) identified two broad 300

305 approaches for the integrated CSR governance. The establishment of CSR committee on the board could be considered as an important attempt in managing CSR related issues, as the internally focused approach. Whereas, the alliance establishment or collaboration with NGOs is an effective externally focused approach (Baldwin, 2010). The existence of CSR committee on the board reflects companies efforts in incorporating the awareness of social and environmental responsibility into board structure. CSR committees play a vital role in CSR management due to their inherent functions (Baldwin, 2010). It could also be engaged in setting the directions regarding the transparency, structure and scope of CSR disclosure (Adnan, 2009). Wahyuni et al. (2009) argued that companies with an environmental committee are more likely to voluntarily disclose greenhouse gas emissions information than companies without such committee. Similarly, Liao et al. (2014) reported that companies with environmental committees on the board tend to be more ecological transparent after studying 329 largest companies in the UK. Apart from that, Deegan and Blomquist (2006) noted a trend in which NGOs collaborate with businesses by providing monitoring services to them. As such, those businesses have also been more likely to embrace NGOs to form a green alliance to achieve better and greener environmental and social performance. Such tendency can lead to a win-win circumstance which has mutual benefits for both NGOs and businesses concerning CSR performance. Control Variables and CSR Disclosure Quality The variation in the types of industrial sectors cause different environmental and social impacts which in turn will give rise to different CSR disclosure levels. A study by Stadon and Hooks (2007) revealed that companies with high level of toxic releases are associated with high disclosure level. Likewise, Sobhani et al. (2012) claimed that the nature of industry could be considered as an important factor influencing corporate environmental and social disclosure. Profitability is another important corporate characteristic to be considered as an influential CSR disclosure determinant (Amran et al., 2012; Mulyadi and Anwar, 2012; Lucyanda and Siagian, 2012; Lu and Abeysekera, 2014). The Moderating Effect of Top Management Commitment Spencer et al. (2013) suggest that top management commitment could act as a strong driving force in enhancing corporate environmental performance. Meanwhile, Asif et al. (2013) argued that a top-down approach helps to fulfill CSR responsibilities, facilitates communications with different stakeholders and translates strategic goals into actual practices. Furthermore, Abdul and Ibrahim (2002) indicated that nearly 65% of managers in Malaysia support socially responsible activities which enhance their corporate image and benefited their company. Nevertheless, very few studies empirically examined the moderator effect of top management commitment. Theoretical Framework and Hypotheses Development Power Distance and CSR Disclosure Quality It has been avowed by scholars that low power distance societies are characterised by greater egalitarian values (Ali and Rizwan, 2013). With regards to CSR practices, Ringov and Zollo (2007) indicated that social and environmental initiatives are more likely to emerge, flourish and be openly discussed if power distance is low in a specific context. Furthermore, scholars have also argued that companies communicate and fulfil stakeholders expectations and adhere with social values regarding environmentally and socially responsible business operations, which can be 301

306 explained by the stakeholder and legitimacy theory (Hassan and Ibrahim, 2012; Amran et al., 2015). However, such expectations and value systems could be dissimilar and affected by various cultural factors across the countries in a global context (Orij, 2010; Lindgreen et al., 2012). Hence, it is hypothesised that: Hypothesis 1: There is a negative relationship between companies based on the culture of high power distance and CSR disclosure quality. Uncertainty Avoidance and CSR Disclosure Quality Risk-averse societies tend to be more rule-oriented, indicating that people are more likely to prefer stable rules, social norms to seek for sense of security (Nord, 2006). Stable social norms and highly structured bureaucracies are of great help in minimising uncertainty (Ringov and Zollo, 2007). Therefore, given that the attributes of rule-oriented, it is reasonable to predict that companies from high uncertainty avoidance societies are more attuned to CSR-related rules and norms, leading to higher quality CSR disclosures: Hypothesis 2: There is a positive relationship between companies based on the culture of high uncertainty avoidance and CSR disclosure quality. Individualism and CSR Disclosure Quality Hofstede (2001) argued that highly individualistic societies lack strong bonds and linkages among members. Moreover, people value their personal interests and self-actualizations over social concerns and responsibilities (Adelopo et al., 2013). Adelopo et al. (2013) also reported that companies in a collectivistic society are more willing to disclose CSR issues compared with those in individualist society. Therefore, it is predicted that firms from highly individualistic cultures are less concerned with social issues, leading to less quality CSR discloser: Hypothesis 3: There is a negative relationship between companies based on the culture of high individualism and CSR disclosure quality. Masculinity and CSR Disclosure Quality Highly masculine society place great emphasis on economic development, power, and material wealth over social concerns like caring for people and the environment (Ringov and Zollo, 2007). Moreover, Orij (2010) reported that masculine societies lack social orientation, meaning that less value will be placed on caring and nurturing. The literature has also revealed the negative relationship between masculinity and CSR disclosure quality (Ringov and Zollo, 2007; Van der Laan Smith et al., 2005). However, in the context of Asia-Pacific, it is also important to understand the extent to which companies in this region mirror those found elsewhere. Hence, it is hypothesised that: Hypothesis 4: There is a negative relationship between companies based on the culture of high masculinity and CSR disclosure quality. Board Size and CSR Disclosure Quality According to agency theory, board size helps to reduce agency problem, resulting in the effectiveness of managing and monitoring business activities (Khan et al., 2013). Larger board 302

307 sizes with more directors will benefit the company by mitigating information asymmetry and manager opportunism (Lucyanda and Siagian, 2012). With regards to CSR disclosure, several studies have claimed that board size can influence the level of voluntary and social disclosure (Esa and Ghazali, 2012; Abdul Razak and Mustapha, 2013), it is then hypothesised that: Hypothesis 5: There is a positive relationship between board size and CSR disclosure quality. Board Independence and CSR Disclosure Quality The enhancement of board effectiveness could also be reflected through the monitoring function of the independent directors towards the management s behaviors. This is because the presence of independent directors is typically perceived as a tool for effective monitoring (Abdul Razak and Mustapha, 2013). Jizi et al. (2013) also contended that high levels of board independence presumed to contribute more ineffective monitoring and controlling system. Arguably, thia study expects that such effective monitoring function from board independence could contribute to higher quality of CSR disclosure. Therefore, it is hypothesised that: Hypothesis 6: There is a positive relationship between board independence and CSR disclosure quality. CSR Committee and CSR Disclosure Quality The literature suggests that CSR committees direct their companies in the pursuit of meeting stakeholders demands, which are usually aligned with societal norms and values to ensure legitimacy (Wahyuni et al., 2009; Amran et al., 2013). A recent study by Liao et al. (2014) reported that companies with environmental committees on the board tend to be more ecologically transparent. Thus, it is hypothesised that: Hypothesis 7: There is a positive relationship between CSR committee and CSR disclosure quality. NGO Alliance and CSR Disclosure Quality Scholars have avowed that NGOs can raise CSR awareness and stimulate companies to take deliberate considerations regarding the environmental and social impacts of their business operations (Sobczak and Martins, 2010). As such, the significance of NGOs could lead to organisational alliances with NGOs which will help to enhance the disclosure quality of CSR information. Earlier studies have also conducted the research on the influence of NGOs on companies disclosure of CSR information but in different context (Hussain-Khaliq 2004; Islam and Deegan, 2008). Hence, it is timely to understand the relationship between NGO alliance and CSR disclosure quality. It can be conjectured that: Hypothesis 8: There is a positive relationship between NGO alliance and CSR disclosure quality. Moderating Effect of Top Management Commitment Top management commitment is considered as the strongest driving force in facilitating performance improvement (Babakus, Yavas, Karatepe, and Avci, 2003). It has an impact on company responses to provoked issues and directs resolutions to manage these issues (Spencer et. al., 2013). Furthermore, the stakeholder and legitimacy theory also suggest that interaction with corporate stakeholders can be appropriate means of better understanding stakeholders demand (Asif et al., 2013; Amran et al., 2015). As stated by Ahire et al. (1998), top management 303

308 commitment is also vital in altering corporate policy to ensure that it is acceptable to all level of employees in the company. Hence, it could be predicted that the presence of top management commitment could moderate the relationship between corporate governance, CSR governance and CSR disclosure quality: Hypothesis 9: The relationships between national culture corporate governance, CSR governance and CSR disclosure quality are stronger when the top management commitment is high. Method Sample A total of 139 companies was selected based on the stratified random sampling method from 13 main Asia-Pacific countries listed on the 2012 Forbes Global Table 1 indicates that around 30% of the sample companies were from Japan, followed by China, 20.1%. Table 1: Sample distribution from respective countries in Asia-Pacific No Countries Frequency Percentage 1 Japan China Korea India Hong Kong Australia Taiwan Singapore Malaysia Thailand Indonesia Philippines New Zealand Total Measurement of Dependent Variable CSR disclosure quality was measured by the presence or absence of several activities encompassed in the CSR disclosure index, which was completely developed by integrating relevant indicators from prior CSR disclosure literature (Hossain et al., 2006; Rouf, 2011; Sobhani et al. 2012; Amran et al., 2016). Furthermore, global reporting initiatives (GRI) also make necessary contributions to the completion of items classification. By referring to various studies, a comprehensive disclosure list of 67 items were determined and grouped into six main dimensions, namely Environment, Energy, Community, Product, Human Rights and Human Resource Development. The following equation, based on Amran et al. (2015), represents the scoring system in measuring CSR disclosure quality. 304

309 TD = total disclosure score of a company, d = 1 if the item d1 is disclosed; d = 0, if the item d1 is not disclosed; n =number of items. The possible maximum score being 67 if all the items in the CSR disclosure index were found to be disclosed. Measurement of Independent Variable The independent variable, national culture, comprised four dimensions: power distance, individualism, uncertainty avoidance, and masculinity, with measurement items adopted from Hofstede (2001). Measures for Board size and Board independence were adopted from Zaheer (2013) and Abdul Razak and Mustapha (2013) respectively. CSR committee and NGO alliance were adopted from Amran et al. (2013). There are two control variables in this study: industry type and profitability, with measures adopted from Amran et al. (2012). Based on Akadiri et al. (2013), top management commitment was measured by manager s attitude of paying attention to the sustainability issues in the business operating process. Thus, scores were given based on the binary form, that is, if the statement indicating corporate attitudes of responsibility towards environment and social welfare from the chairman of companies board of directors exist in the annual report, then the number 1 will be given to the company. Otherwise, the number 0 will be assigned. Multiple Regression Model The regression model used in this study including moderating effect analysis is shown as follows. CSRDQ =α+ β1pd+ β2ua + β3ind + β4mas + β5bs + β6bi + β7csr_c + β8ngo_a +β9in_t+β10prof+β11topmgt*pd+β12topmgt*ua+β13topmgt*ind+β14to PMGT*MAS+β15TOPMGT*BS+β16TOPMGT*BI+β17TOPMGT*CSR_C+β18TOPMG T*NGO_A+ ε Where, α is intercept, β is the estimation from the regression model, CSRDQ is the CSR Disclosure Quality, PD is the Power Distance, UA is the Uncertainty Avoidance, IND is the Individualism, MAS is the Masculinity, BS is the Board Size, BI is the Board Independence, CSR_C is the Existence of CSR Committee, NGO_A is the NGO Alliance, IND_T is the industrial type, PROF is the Profitability, TOPMGT*PD is the interactive term between Top Management Commitment and Power Distance., TOPMGT*UA is the interactive term between Top Management Commitment and Uncertainty Avoidance, TOPMGT*IND is the interactive term between Top Management Commitment and Individualism, TOPMGT*MAS is the interactive term between Top Management Commitment and masculinity, TOPMGT*BS is the interactive term between Top Management Commitment and Board Size, TOPMGT*BI is the interactive term between Top Management Commitment and Board Independence, TOPMGT*CSR_C is the interactive term between Top Management Commitment and Existence of CSR Committee, TOPMGT*NGO_A is the interactive term between Top Management Commitment and NGO Alliance, and ε = stochastic term. Findings Descriptive Statistics The results of descriptive analysis for continuous variables are shown in Table 2. CSR disclosure quality presented a mean of 42.3, meaning that out of 67 necessary CSR items from the CSR disclosure index, 42.3 items on an average were disclosed by sample companies in Asia-Pacific. 305

310 Most CSR-related items, which is approximately 63.3% of items were disclosed, showing that the CSR disclosure quality in Asia-Pacific achieved a moderate level. However, there are still room for advancement for CSR disclosure quality in Asia-Pacific. Besides, a mean of 64.81, and show a relatively high level of power distance, uncertainty avoidance and masculinity respectively in Asia-Pacific. While a mean of and 0.42 shows a low level of individualism and board independence in this region. Besides, there is a normal level for board size with a mean of for sample companies in Asia-Pacific. Table 2: Descriptive analysis results of continuous variables N Minimum Maximum Mean Std. Deviation CSRDQ PD UA IND MAS BS BI PROF Regression Results For regression analysis including control variables, hierarchical multiple regression is commonly used since variables will be included into the equation in a pre-determined order. The moderating effect from moderator is excluded in this section. Table 3: The results of hierarchical multiple regression analysis of direct effect Model Standardised t-value Sig. Collinearity Statistics Coefficients Beta Tolerance VIF (Constant) PROF IND_T (Constant) PROF IND_T PD UA IND MAS BS BI CSR_C NGO_A Note: Dependent Variable: DV: CSR Disclosure Quality 306

311 As shown in table 3, there is significantly positive relationship between CSR committee existence and NGO alliance with the CSR disclosure quality as p-value for both variables are less than Moreover, in the same model, only significant relationship has been revealed between individualism and CSR disclosure quality compared to other relationships. Regarding the beta value, the largest beta coefficient is , which is for individualism, whereas the beta value for CSR committee existence and NGO alliance were and 0.265, respectively. This indicates that the independent variable of individualism made more contributions to the variance of dependent variable as opposed to CSR committee existence and NGO alliance. Furthermore, by taking control variables into account, the results showed that neither industrial type nor profitability made a statistically significant contribution because of the p-value. In other words, the inclusion of these two control variables did not help in explaining the variance of CSR disclosure quality. Table 4: Moderating effect of top management commitment on the relationship between independent variables and CSR disclosure quality Variable Model 2 Model 3 Model 4 β t β t β t Control PROF IND_T Independent PD UA IND -.407** ** -.390** ** -.742** -.289** MAS BS BI CSR_COM.228** 2.637**.208** 2.583** NGO_A.265** 3.362**.136** 1.728** Moderator TOPMGT Interactive Effects TOPMGT*PD TOPMGT*UA TOPMGT*IND TOPMGT*MAS TOPMGT*BS TOPMGT*BI TOMGT*CSR_COM TOPMGT*NGO_A R 2.263**.367**.405 Adjusted R 2.206**.312**.310 R 2 change.235**.104**.038 Sig F change Note: * p<0.05 ** p<

312 For the model considering the moderating effect, the multiple regression result is shown in the Table 4. In Model 4, the interaction term between independent variables and moderator has been included into the analysis. The results indicate insignificant change in R 2 (0.038). Nevertheless, the result shows that top management commitment does not have an overall moderating effect on the relationship between independent variables and CSR disclosure quality. Even so, it is still noteworthy that top management commitment had the effect of changing directions of relationships between certain independent variables and CSR disclosure quality. For example, by comparing Model 4 with Model 2 in Table 4, it could be found that the relationship directions of power distance and individualism towards CSR disclosure quality changed from negative to positive, while those for masculinity, board independence and CSR committee existence changed from positive to negative. Discussion and Conclusion Statistical results indicate the existence of relatively high disclosure quality, which can perhaps be attributed to the rapidly growing awareness of CSR and the increasing trend of CSR disclosure and reporting by companies in Asia-Pacific. KPMG (2013) reported that CSR is receiving increasing public attention. Furthermore, the relatively high quality in CSR disclosure could also be due to continuously improving CSR endeavors from emerging markets. For example, it has been reported that currently in China, the listed companies are more likely to voluntarily provide CSR information in their annual reports than in previous decades (Qu and Leung, 2006). It has also been affirmed that Indian government has made obliged the companies to spend at least two percent of their net profits on CSR causes (Hadfield-Hill, 2014). Therefore, due to the awareness of the external stakeholders in the society, the companies are increasingly inclined towards higher CSR disclosure. The results also suggest that power distance, uncertainty avoidance, masculinity, board size and board independence are not significant predictors for CSR disclosure quality in Asia-Pacific. The Asia-Pacific region comprise of various national cultures. The results highlighted the challenges of achieving homogeneity across national cultural contexts, thus possibly affecting CSR disclosure. These results support those of Kimber and Lipton (2005), who assert that one cannot draw generalisations about the Asia region as a whole, since there has been substantial variations among Asian countries on the level of economic development, political systems and cultural values. Further it has been argued by scholars that economic, political and cultural distinction among Asia-Pacific countries will reflect in various level of CSR endorsement, and will ultimately lead to the heterogeneity of CSR disclosure quality (Welford, 2005). Furthermore, regarding cultural issue, it can also be argued that the innate modesty in the Asian cultures works against flaunting one s success in activities such as CSR (Welford, 2005), and therefore some activities may not be as readily recognised by outside observers. In this study, board size and board independence were found to not play any influential role in CSR disclosure quality. This might be due to board s effectiveness that could neutralise the effect of CSR disclosure. It has been asserted by the scholars that the effective board shows more responsible management strength, and thus less effort is focused in disclosure practices (Amran et al., 2013). As for board independence, the primary reason for the insignificant result could be that an independent director is typically not involved in the day-to-day operations. The in-depth influences on disclosure information will be greatly restricted if they are not given thorough information of corporate daily operation (Amran et al., 2013). 308

313 Furthermore, there might be several possible reasons that lead to the negative relationship between individualism and CSR disclosure quality in the current study. Firstly, people from the society with a culture of high individualism are more self-oriented as reflected by placing great value and priority on self-interests and personal development (Adelopo et al., 2013). Moreover, individualist culture is less likely to share values and concerns with others, such as social concerns (Ciccarini, 2011). Secondly, from the stakeholder and legitimacy theory point of view, stakeholders from a society with high individualism culture may not have much expectation and not put much pressure on companies regarding their CSR-related practices, and which ultimately have negative influence on companies CSR disclosure quality. Additionally, the positive role of CSR committee in facilitating CSR disclosure quality could be interpreted from the perspective of its inherent significant functions. On the management level, such committee helps to oversight the efficiency on socially and environmentally responsible corporate business activities (Baldwin, 2010). On the execution level, it also engages in setting the direction of CSR disclosure scope and assists the company for legal and regulatory compliance (Adnan et al., 2009). From the theoretical point of view, it could help to increase the interaction with stakeholders and better understanding their demands (Asif et al., 2013). Furthermore, it can be asserted that the inherent important functions of NGOs also contribute to the quality of CSR disclosure. In the current global phenomenon, it has been seen that NGOs are tremendously contributing to raise the awareness of problems and highlighting the role and responsibilities of companies to reduce the negative impact of their activities and products on the society (Sobczak and Martins, 2010). Furthermore, NGOs could also act as observers in overseeing the claims and programs that companies are carrying out in achieving better CSR performance (Amran et al., 2013). Besides, NGOs greatly help companies in enhancing their positive impacts toward the environment as NGOs normally possess relevant expertise and skills, especially international NGOs, like WWF (Sobczak and Martins, 2010). Therefore, it has been revealed that NGO alliance enhances the CSR disclosure quality among the companies in Asia-Pacific. Apart from that, it is also suggested that the moderating effect of top management commitment is insignificant in this context. It might happen due to several reasons, such as the personal quality and characteristics of top management, which influence the social and environmental commitment, could vary considerably and are more likely to be affected by several inherent and nurtured acquired characteristics of their career (Quazi, 2003). A study by Quazi (2003) conducted in Australia, revealed that managerial commitment towards social and environmental obligations has a significant relationship with the level of managers education and training status. Besides, religion could also influence managers perceptions of social commitment. On the other hand, top management commitment towards the environment and society is also less likely to be used by companies as a buzzword or public relations strategy to enhance corporate image. An article supported this statement by reporting the complications and pragmatic barriers pertaining to CSR information disclosure based on the context of a real company, which is Nike (DeTienne and Lewis, 2005). The article presented the criticisms and suspicions from the public towards Nike s practices in advertising CSR disclosure using various public relation media to remedy its negative company image. Therefore, considering the finding of this study, it can be asserted that perhaps the prevalence of top management commitment from companies in Asia-Pacific has not yet enough to help reflect a clear moderating effect of top management commitment towards CSR disclosure quality. In summary, this study has presented an investigation of CSR disclosure quality based on the legitimacy, stakeholder and agency frameworks in the Asia-Pacific context. The empirical results 309

314 provided important insights into the influence of national culture, corporate governance and CSR governance on CSR disclosure practices. The findings suggest that individualistic society would tend to have lower CSR discloser quality. In fact, a national culture which is more inclined towards collectivism is important to enhance the quality of CSR disclosure. Perhaps, the quality of CSR disclosure among businesses can be improved through collectivist society. Furthermore, it would be worth the effort for businesses to collaborate with external stakeholders such as NGOs, as this initiative is an effective measure for businesses to maintain and improve their CSR disclosure. There is also a need to form a CSR committee as a strategic move. It is believed that the existence of a CSR committee unveils the varied perspectives and advantages, and most importantly is the positive influence on the quality of CSR disclosure. As CSR disclosure continue to be one of the important aspects in corporate governance, these findings further endorsed the significant role of CSR committee and NGO alliance, both are crucial to enhance the quality of CSR disclosure. Overall, the current research model can be applied as a guideline for future research. Nonetheless, future studies may consider other potential determinants and examine their association in a longitudinal basis. Moreover, future studies may want to replicate this study from other context and compare the results to verify the findings. References Abdul, M. Z., & Ibrahim, S. (2002). Executive and management attitudes towards corporate social responsibility in Malaysia. Corporate Governance, 2(4), Abdul Razak, S. E., & Mustapha, M. (2013).Corporate social responsibility disclosures and board structure: Evidence from Malaysia. Jurnal Teknologi, 64(3), Adelopo, I., Moure, R.C., & Obalola, M. (2013). On the effects of legal and cultural institutions on corporate social disclosures by banks. Leicester Business School, De Montfort University. Retrieved from Adnan, S.M. (2009). Do culture and governance structure influence CSR reporting quality: Evidence from China, India, Malaysia and the United Kingdom. Doctoral dissertation. Department of Accounting and Finance, University of Auckland. Ahire, S. L., & O shaughnessy, K. C. (1998). The role of top management commitment in quality management: An empirical analysis of the auto parts industry. International Journal of Quality Science, 3(1), Akadiri, P.O., & Fadiya, O.O. (2013). Empirical analysis of the determinants of environmentally sustainable practices in the UK construction industry. Construction Innovation: Information, Process, Management, 13(4), Ali, W., & Rizwan, M. (2013). Factors influencing Corporate Social and Environmental Disclosure (CSED) practices in the developing countries: An institutional theoretical perspective. International Journal of Asian Social Science, 3(3), Amran, A., Lee, S. P., & Devi, S. S. (2014). The influence of governance structure and strategic corporate social responsibility toward sustainability reporting quality. Business Strategy and the Environment, 23(4), Amran, A., & Ooi, S.K. (2014). Sustainability reporting: meeting stakeholder demands. Strategic Direction, 30(7), Amran, A., Ooi, S.K., Mydin, R. T., & Devi, S. S. (2015). The impact of business strategies on online sustainability disclosures. Business Strategy and the Environment, 24(6),

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319 Student Satisfaction and Loyalty in Malaysia Private Higher Education Institutions Jia-Haur Goh Graduate School of Business, Universiti Sains Malaysia Yen-Nee Goh* Graduate School of Business, Universiti Sains Malaysia T. Ramayah School of Management, Universiti Sains Malaysia * Corresponding Author Abstract Purpose: This study examined the impact of image, perceived value, price fairness, service quality and trust on student loyalty with student satisfaction as mediator. Design/methodology/approach: The expectation disconfirmation theory was applied as the theoretical foundation, which was tested using convenience sampling method and data from 222 self-administered questionnaires. Findings: The findings indicated that perceived value, price fairness and service quality positively and significantly affected student loyalty. The effect of image and trust upon student loyalty was not significant. Student satisfaction had a full mediating effect upon the relationship between perceived value and student loyalty as well as between service quality and student loyalty. Research limitations/implications: This study sampled the opinions and perceptions of Penang students in private higher education institutions. An outcome of this is that the results may not provide a generalized view. Future research should target a wider group of respondents, such as students from private higher education institutions located in other states in Malaysia. Practical implications: The many factors that influence student satisfaction and student loyalty of higher learning institutions in developing nations, such as Malaysia, still remains under studied. This study contributes a significant knowledge to the service industry specifically to higher education. Originality/value: - This study intends to make a significant contribution towards understanding the influences on student satisfaction and loyalty from the perspectives of private higher education institutions. This understanding enables business practitioner better equip in devising marketing strategy that meets the student expectations. Keywords: Student satisfaction; student loyalty, private higher education institutions, Malaysia Introduction Currently, many students are under the illusion that the more tuition fees they pay, the betterquality education they will receive. However, in many cases this does not ring true. Some private higher education institutions charge higher fees but fail to provide an exceptional education to the 315

320 students. Conversely, some private higher education institutions do furnish a valuable education at competitive fees. Higher education should be regarded as a business-like service industry, with higher education institutions viewing students as customers, determined to meet or even exceed their needs (Alam Malik et al., 2012; Gruber et al., 2010; Sumaedi et al., 2011; Woodall et al., 2012). In 2013, Malaysian education authorities received complaints from the public and the students about private higher education quality and they conducted reviewed of nine private universities and colleges in Penang. Service quality was a major element of the review rating system for private higher education institutions (News Straits Times Online, 2013). This intervention further highlighted the importance of student satisfaction as one of the measurements for the learning environment (The Star Online, 2012), and the need for education institutions to establish a loyal client base and address issues that impact student loyalty (Sampaio et al., 2012). Private higher education institutions generate more profit when student enrollment is high (Fox 2012), which is linked to high student loyalty (Perin et al., 2012; Tair and El-Halees, 2012). Hence, student satisfaction is required because higher education institutions are charging heavy tuition fees as highlighted by Alam Malik et al., (2012). Consequently, investigating student satisfaction at this juncture become crucial. As argued by Ahmad (2015), maintaining student satisfaction and loyalty are becoming one of the key objective of the international branch campus private universities in Malaysia. With the need for world class knowledge workers expected to increase in Malaysia (Department of Higher Education, 2013), the number of private institutions of higher education is also expected to increase (World Bank, 2013). As competition among private institutions is also increasing, to maintain profits, institutions have to increase the number of students, resources, and performance to market themselves in environments of uncertainty (Shah and Sid, 2013). An increased in the empirical studied focusing on private higher education institutions in Malaysia have confirmed its importance and relevance in view of the globalized education market (see Tan et al. 2015a; 2015b, Ahmad, 2015; Ahmad & Buchanan, 2017). Developing Penang as an education hub is a major project for the state education authorities, requiring improved infrastructure and managing the contribution of private higher education institutions. The announcement in 2010 to build a 200-acre education hub in Balik Pulau indicated the state government s commitment to boost the economy, upgrade educational infrastructure, reduce the brain drain, attract talent and improve administrative systems (Chan, 2013). In 2013, Penang had 30 private higher education institutions offering pre-university, certificate and degree levels programs registered with the Department of Higher Education (2013). These institutions vary in size, enrollment and subject areas, and nearly all collaborate with overseas universities. Given the strong competition to attract students, understanding student loyalty is important for institutions to establish management and marketing strategies (Helgesen and Nesset 2007b). In addition, Woodall et al., (2012) emphasized that satisfaction and loyalty are impacted by a range of factors, including service quality (Nadiri et al., 2009), trust (Sampaio et al., 2012), perceived value (Boksberger and Melsen, 2011) and image (Alves and Raposo, 2010). Yet, according to Martin et al., (2009), research examining how customer loyalty and price fairness affect each other is lacking, and Maringe and Mourad (2012) found that the research on the relationship between student satisfaction and student loyalty is scarce for developing nations; hence, the need to examine the factors which influence student satisfaction and student loyalty is valid (Bowden, 2013). Accordingly, the present study attempts to explore variables affecting student loyalty in Penang private higher education institutions is timely and needed. This was the motivation behind the present study. 316

321 Literature Review and Hypotheses Development This study used a widely adopted model for determining the level of customer satisfaction and purchase intention is Oliver s (1980) expectation disconfirmation theory. The construct of customer satisfaction is the process of exceeding or meeting their expectations (Lee et al., 2004) and repurchase intention has been defined as a behavior that signifies loyalty (Matute-Vallejo et al., 2011). Satisfaction has also been shown to be a substantial determinant of customer loyalty (Gustafsson et al., 2005). In the context of students, satisfaction leads to student loyalty, and promotes positive word-of-mouth, student involvement, and collaboration with their institution both during and after their studies (Wilkins and Balakrishnan, 2013). Ever since Oliver (1980) developed the model to theorize whether customers satisfaction of using a product or service determined their intention to purchase again, expectation disconfirmation theory has been widely used in the studies of satisfaction and repurchase intention (Kim et al., 2003). For example, Guliling et al., (2013) adopted the model in their study of image, satisfaction and loyalty on a heritage destination, and confirmed image can be considered as an expectation component that influences customer satisfaction and repurchase intention, and that image has an impact on loyalty where satisfaction plays the mediating role. In conducting their study in the context of e-learning, Chiu et al., (2005) examined the relationship between perceived value and e-learning continuance intention where satisfaction played a mediating role. They included perceived value as a construct of perceived performance in their research by following the expectation disconfirmation theory, and confirmed that perceived value can influence e-learning continuance intention and the relationship can be enhanced by including satisfaction as the mediator. Another study, by Matute-Vallejo et al., (2011), conceptualized price fairness, satisfaction and loyalty in the financial sector. Using an attribute of price discrepancy, the researchers conjectured that price fairness is a component of disconfirmation, resulting from a combination of expectation and perceived performance. The results concluded that price fairness led to satisfaction and influenced loyalty. During their exploration of the relationship of service quality and behavioral intention among forest visitors, Lee et al., (2004) proposed satisfaction as the mediating variable, and operationalized service quality as a disconfirmation element after combining the constructs of expectation and perceived performance with the expectation disconfirmation theory. The researchers also confirmed that service quality impacts behavioral intention and the relationship can be strengthened when satisfaction has a mediating effect. Additionally, Kim et al., (2003) studied the effect of trust on repurchase intention with satisfaction as a mediator to find that trust can be generalized as a component of expectation and affects repurchase intention with the mediation of satisfaction. This research verifies the function of image and trust as an expectation construct, perceived value as a perceived performance variable, and price fairness and service quality as disconfirmation components. The linkages between the different variables are presented in the research model in Figure 1. Student Loyalty In this study, loyalty refers to the student intention of maintaining a relationship with a service provider comprises of allocating more funding, patronizing recurrently and involving in positive word of mouth (Perin et al., 2012). A number of studies positively and significantly related image to student loyalty. For example, in a study on the Ghanaian banking industry, Narteh (2013) found that student loyalty was influenced by a bank s image, whether it provided commendable, quality services. According to Helgesen and Nesset (2007a), student loyalty was positively and 317

322 significantly affected by the image of a higher education institution and the image of its study program. Narteh and Owusu-Frimpong (2011) also found that image was the foremost determinant of student loyalty in the banking industry, where students were loyal to a bank if the institution created a positive image. Existing research show perceived value has positively and significantly influenced student loyalty. An empirical study by Carvalho and Mota (2010) of 21 higher education institutions in Brazil, and a study by Perin et al., (2012) found that perceived value positively and significantly affected student loyalty. Perin et al., (2012) noted that students how perceive value from their institution were more likely to exhibit loyalty towards the institution. Education institutions offering low tuition fees which are considered acceptable for the price paid are one of the choice criteria by students for enrollment as identified by Ahmand and Buchanan (2017). Furthermore, Bei and Chiao (2001) found that price fairness positively and significantly influenced customer loyalty. Customers who sensed that their purchase was worthless did not repurchase, even though they were contented with the product or service. Martin et al., (2009) reported that customers repurchase a product or service if they believed that its pricing was sensible, which supported the proposition that price fairness positively and significantly affects customer loyalty. In this study, student loyalty was expected to increase if they thought the price of the education service was fair. A significant amount of literature exists confirming the positive effect of service quality on customer loyalty (Chen and Hu, 2012; Lee, 2013). A study across six industries by Kuo et al., (2009) also noted a strong linear relationship between service quality and customer loyalty, as did similar studies by Mosahab et al., (2010) and Lee (2013). Trust positively and significantly influences customer loyalty (Seto-Pamies, 2012). In higher education, Perin et al., (2012) study found that trust positively and significantly impacted student loyalty, as did a study of Brazilian students by Sampaio et al., (2012), and a student loyalty study by Carvalho and Mota (2010), which reported students exhibit higher levels of loyalty when they have high levels of trust in their higher education institutions. From these findings, this study constructed the following hypotheses: H1: Image positively and significantly affects student loyalty. H2: Perceived value positively and significantly affects student loyalty. H3: Price fairness positively and significantly affects student loyalty. H4: Service quality positively and significantly affects student loyalty. H5: Trust positively and significantly affects student loyalty. Image H1 H2 Perceived Value Price Fairness H6, H7, H8, H9,H10 H3 Student Satisfaction Student Loyalty Service Quality H4 Trust H5 Figure 1: Research Model 318

323 The Mediating Role of Student Satisfaction In addition to its direct impact on student loyalty, student satisfaction has exhibited a positive mediating impact on the relationship between image and student loyalty in the context of higher education (Alves and Raposo, 2010). The researchers discovered that image has an indirect effect on student loyalty via student satisfaction. A similar mediating relationship was confirmed by Lam et al., (2004) and Yang and Peterson (2004), who confirmed that customer satisfaction fully mediated the relationship between perceived value and customer loyalty. Satisfaction has also been shown to mediate the relationship between price fairness and loyalty (Bei and Chiao, 2001). Using an integrated model, they discovered that price fairness had an indirect effect on customer loyalty through customer satisfaction. Research in a service industry by Martin-Consuegra et al., (2007) found that customer satisfaction mediated the relationship between price fairness and customer loyalty. They supported that an indirect effect exists from price fairness onto customer loyalty when customer satisfaction is included. Kheng et al., (2010), in their study on 238 bank customers in Malaysia, found that satisfaction had a mediating effect on service quality and loyalty relationship in the banking industry. They found that the impact of service quality was higher on customer loyalty when the relationship between service quality and customer loyalty was enhanced by customer satisfaction. In a study of mobile instant messages in China, Deng et al., (2010) found that customer satisfaction partially mediates the relationship between trust and customer loyalty. This body of research forms the basis for the following hypotheses. H6 Student satisfaction mediates the relationship between image and student loyalty. H7: Student satisfaction mediates the relationship between perceived value & student loyalty. H8: Student satisfaction mediates the relationship between price fairness and student loyalty. H9: Student satisfaction mediates the relationship between service quality and student loyalty. H10: Student satisfaction mediates the relationship between trust and student loyalty. Method Sampling and Data Collection The unit of analysis of this study was individual college students from private higher education institutions in Penang. By utilizing the convenience sampling technique, a total of 400 hardcopy, personally-administered questionnaires were distributed. Out of 400, 270 questionnaires were returned, which was a response rate of 67.5%. The response rate was high because the data was collected on the spot. Out of 270 returns, only 222 questionnaires were answered completely and useable for data analysis. The demographic characteristics of sample are described in Table 1. Measurement This study utilized a structured questionnaire. All items were assessed on a 5-point Likert type scale ranging from one (strongly disagree) to five (strongly agree). Image was measured using four items adapted from Alves & Raposo (2007), and Ledden & Kalafatis (2010). Four measurement items for perceived value were adapted from Sampaio et al. (2012). Price fairness was measured by four items adapted from Martin-Consuegra et al. (2007) and Nguyen (2012). Service quality was measured using five items adapted from Tam (2004) and Sivadas & Baker- Prewitt (2000). Four measurement items of trust were adapted from Perin et al. (2012). Student satisfaction was measured utilizing five items adapted from Nguyen (2012). Student loyalty was measured using five items adapted from Sampaio et al. (2012) and Perin et al. (2012). The collected data were processed and analyzed using the Statistical Package for Social Science (SPSS) software version 20. The data analysis included descriptive analysis, factor analysis, 319

324 reliability analysis, correlation analysis and regression analysis to establish the reliability and validity of each variable. All hypotheses were tested. This study met the recommended rules for research laid out by Hair, Black, Babin & Anderson (2010), which were to have at least 100 respondents, and sample size ratio of ten-to-one. Based on the rule of ten-to-one ratio, this study, consisting of seven variables, required a sample size greater than 70. Thus, the sample size of 222 exceeded the recommended minimums of 70 and 100 (Hair et al. 2010). Findings The results, shown in Table 1, indicate the percentage of females to be higher than that of male students (57%: 42%). More than 70% of the respondents were below the age of 20, and 38.7% of the students had an average monthly income of less than RM2000. In terms of current education level, 48.2% of respondents are diploma students in the institutions. Table 1: Profile of Respondents (n=222) Demographics Frequency Percentage (%) Gender Male Female Age < > Ethnicity Nationality Average Monthly Family Income Secondary Education Background Current Education Level Types of Program How Do You First Get To Know This Institution? Malay Chinese Indian Others Malaysian Non-Malaysian Less than RM 2000 RM 2000-RM 2999 RM 3000-RM 3999 RM 4000-RM 5000 More than RM 5000 Government Secondary School Private Secondary School International School Others Certificate Diploma Bachelor Degree Others Business Engineering Information Technology Mass Communication Pre-University Others Internet Newspaper Education Fair Teachers Family and Friends Others

325 Factor analysis was applied through principal component analysis with varimax rotation to validate the construct validity of the questionnaire data. It verified the dimensions of the measurements were operationally defined, determined the most suitable items of measurement for the study, and reduced the inappropriate items that might affect the validity of the study (Sekaran, 2003). The analysis extracted five factors with eigenvalues more than 1 explaining 75.3 cumulative percentage of the variance. The factor loadings for all independent variables were all above the accepted level of 0.5, while cross-loadings and all independent variables were below the accepted level of 0.35 cut off point (Hair et al. 2010). The factor loadings for student satisfaction and student loyalty were also above the accepted level of 0.5. Reliability analysis, using Cronbach s Alpha (Sekaran, 2003), ensures the consistency and stability of the measurement items. Cronbach s Alpha recommended value is 0.7 to be considered reliable. The independent variables of this study were all above 0.7 and none were dropped: image 0.85, perceived value 0.84, price fairness 0.9, service quality 0.92 and trust Other measurement items, student satisfaction (0.94) and student loyalty (0.88), had high values for Cronbach s Alpha. The next step in the testing was inter-construct correlations. The analysis demonstrates that multicollinearity was not a serious issue as the inter correlations were all below Multiple regression analysis was then used to examine the relationship between multiple independent variables and the dependent variable (see Table 2). Table 2: Regression Result of the Relationship Between Image, Perceived Value, Price Fairness, Service Quality, Trust and Student Loyalty with The Mediator of Student Satisfaction. Predictor Variables Criterion Variables Standardized Beta Student Loyalty (Without Student Satisfaction) (Model I) Student Satisfaction (Model II) Student Loyalty(Model III) Student Loyalty (With Student Satisfaction) (Model IV) Image *** Perceived Value.136 **.186 *** Price Fairness.304 ***.248 *** *** Service Quality.205 ***.207 *** Trust *** Student Satisfaction ***.410 *** R Adjusted R F-Value Note: ** p <0.05; *** p <0.01. Model I = IV DV; Model II = IV MV; Model III = MV DV; Model IV = IV+MV DV. In this study, the independent variables were image, perceived value, price fairness, service quality and trust, and the dependent variable was student loyalty. First, we tested the direct effect of the independent variables to loyalty. This yielded an R 2 of 0.498, indicating that 49.8% of the variance in loyalty can be explained by the 5 predictors. Only perceived value, price fairness and service quality were significant; thus H2, H3 and H4 were supported, whereas H1 and H5 were not supported. Based on the three regression analyses suggested by Baron & Kenny (1986), the results 321

326 are illustrated in Table 2 shows the results of the mediation test (comparing Model I with Model IV). The results indicated that student satisfaction mediated the relationship between perceived value (full mediation), price fairness (partial mediation), service quality (full mediation) and loyalty. This gives support to H7, H8 and H9, whereas H6 and H10 were not supported. Discussion This study has identified that some of the predictors did not have a positive effect on student loyalty and contradicted previous research. First, image is not positively related to student loyalty. This is rather surprisingly since previous studies asserted a significant relationship (e.g. Narteh & Owusu- Frimpong 2011). Hence, this study argues that university students are less concerned with image when considered loyalty to their institution. Other outcomes from the study were consistent with previous studies. The current study indicated that perceived value positively and significantly affects student loyalty. This is consistent with previous studies, such as Carvalho & Mota (2010) and Perin et al. (2012). College students who perceive that their enrollment in a Penang private higher education institution is a good deal, reasonable and worthwhile would be more loyal. Additionally, price fairness positively and significantly affected student loyalty, which supports previous results from Bei & Chiao (2001) and Martin et al. (2009). From this, it could be argued that the Penang university students who perceive the pricing policy of their institution is fair, ethical and acceptable, would be happier to stay. Service quality positively and significantly affected student loyalty, which is also aligned with previous findings by Lee (2013) and Mosahab et al. (2010). From this study, Penang university students who experience quality service are encouraged to stay loyal. In contradiction to earlier findings by Perin et al. (2012) and Sampaio et al. (2012), trust was not positively related to student loyalty. It is argued that Penang university students do not trust their institutions when they perceive that the staff and lecturers are not dependable, competent, acting with integrity, and responsive. Additionally, the mediating role of student satisfaction showed mixed results in this study. It did not mediate the relationship between image and student loyalty. This contradicts with Alves & Raposo (2010), but Rundle-Thiele (2005) noted that the image of a new company or a new institution did not affect customer satisfaction and customer loyalty because image takes many years to be established. Hence, in this study, students do not hold a strong perception of the image of their institution because Penang private higher education institutions are relatively new compared with other universities in Malaysia. Student satisfaction had a full mediation effect on the relationship between perceived value and student loyalty, and supports Cronin, Brady & Hult (2000), and Yang & Peterson (2004). This study concluded that students of Penang private higher education institutions perceived good value from their institution, felt satisfied and would remain loyal. Student satisfaction had a partial mediation effect on the relationship between price fairness and student loyalty. This result is similar to previous studies of Bei & Chiao (2001) and Martin- Consuegra et al. (2007). In the current study, price fairness created satisfaction and Penang students remained loyal to their institution. Student satisfaction had a full mediating effect in the relationship between service quality and student loyalty. This is consistent with previous studies by Kheng et al. (2010) and Osman & Sentosa (2013). In Penang, when students believed that their expectations of service quality were met, they were satisfied, which enhanced student loyalty. In contrast to previous studies, student satisfaction had no mediating effect in the relationship between trust and student loyalty. Previous studies, such as Deng et al. (2010) argued that a mediating effect did exist. An alternative view, that may explain the current finding, was from Henning-Thurau et al. (2001) who argued that trust can only be built up through frequent face-to- 322

327 face interaction. When there is less face-to-face interaction, there is less impact from trust on student satisfaction and student loyalty (Henning-Thurau et al. 2001). Thus, this research suggests insufficient face-to-face interaction between students and the institutions lecturers and staff. In other words, students of Penang private higher education institutions only trust their institution when they have sufficient face-to-face interaction with their lecturers and staff. For business practitioners, this study describes the influences on student satisfaction and loyalty, which can be used in university marketing campaigns. For instance, this study found that perceived value, price fairness and service quality impact student loyalty. It also implies that the use of image and trust are crucial considerations in influencing students to be loyal to their institution. Conclusion To examine the factors that influenced student loyalty, this study sampled the opinions and perceptions of Penang students in private higher education institutions. An outcome of this narrow perspective is that the results may not provide a generalized view. We recommend that future research targets a wider group of respondents, such as students from private higher education institutions located in other states in Malaysia. Further, the cross-sectional approach applied in this study may not furnish a detailed comprehension of student satisfaction and student loyalty. A more comprehensive explanation of the impact image, perceived value, price fairness, service quality and trust on student satisfaction and student loyalty would come from a longitudinal research method. The aim of this study was to examine the impact of image, perceived value, price fairness, service quality and trust on student loyalty, with student satisfaction as the mediating variable. The respondents were students at Penang private higher education institutions. The findings show that perceived value, price fairness and service quality were positively related to student loyalty, but image and trust were not. Nevertheless, image, perceived value, price fairness, service quality and trust positively and significantly affected student satisfaction. Student satisfaction as the mediator was found to have a full mediating effect upon the relationship between perceived value and student loyalty, and upon the relationship between service quality and student loyalty. A partial mediating effect was discovered upon the relationship between price fairness and student loyalty. For the relationship between image and student loyalty, and the relationship between trust and student loyalty, the mediating effect of student satisfaction was not significant. The significance of this study to marketing academicians and business practitioners is evident. These findings elucidate the impact of image, perceived value, price fairness, service quality and trust upon student satisfaction and student loyalty. Business and marketing managers who have a deeper understanding of the mediating effect of student satisfaction are better equipped to devise a marketing strategy that influences students choice in an education institution, which in turn generates more profits by enhancing student loyalty. References Ahmad, S. Z., Buchanan, F.R. (2017). Motivation factors in student s decision to study at international branch campuses in Malaysia, Studies in Higher Education, 42(4), , Ahmad, S.Z. (2015). Evaluating student satisfaction of quality at international branch campuses, Assessment & Evaluation in Higher Education, 40(4), Alam Malik, S., Hassan, S. & Iqbal, M.Z. (2012). Measuring student perceptions and expectations in business schools of Pakistan, Asian Education and Development, 1(3),

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332 Factors Influencing Malaysian Consumers Intention to Purchase Green Energy: The Case of Solar Panel Nik Salehah Nik Abdul Aziz Graduate School of Business, Universiti Sains Malaysia, Pulau Pinang Nabsiah Abdul Wahid* Graduate School of Business, Universiti Sains Malaysia, Pulau Pinang Methaq Ahmed Sallam College of Administrative Sciences, Najran University, Najran, Saudi Arabia Shaizatulaqma Kamarul Ariffin Graduate School of Business, Universiti Sains Malaysia, Pulau Pinang * Corresponding Author Abstract Purpose: Although the Malaysian government is promoting the use of clean source of energy such as solar energy, the application of the green product is still very much at infancy stage in the country. This study investigates whether Malaysian consumers intention to purchase solar panel are influenced by perceived government policy, perceived costs and maintenance, product knowledge and experience, solar panel aesthetics, social influence, environmental concern, product benefits and demographic factors (education level, income) Design/methodology/approach: Self-administered questionnaire survey was utilized to collect data from Malaysian consumers who are non-solar panel users, especially those residing in Selangor, Penang and Johor. Multiple regression analysis carried out on the 211 useable data revealed that from eight independent variables, only perceived cost and maintenance, product knowledge and experience, social influence and product benefits have direct impact on consumer s solar panel purchase intention. Findings: Perceived government policy, solar panel aesthetics, environmental concern and demographic factors (education and income level) were found to have insignificant relationships with purchase intention. Research limitations/implications: The research emphasized on non-solar panel users that were mainly from Selangor, Penang and Johor. Other users from other states and other countries can also be the target in the future. Practical implications: The findings have contributed towards the advancement of knowledge on green marketing as both government and marketers now understand better purchase intention behaviour of Malaysian consumers of solar panels and can move forward to create suitable government policy and incentives to further promote the adoption of the product among Malaysians. Originality/value: The field study provides new insights on green energy purchase in Malaysia. Keywords: Solar Panel, Purchase Intention, Green Energy, Attitude, Product Knowledge 328

333 Introduction Malaysia is aiming to become a developed country in To achieve a sustainable development and a better quality of life, Malaysia has launched its latest plan, i.e. the 10th Malaysia Plan, to support, enhance and further grow the renewable energy market and industry in Some of the plans include the implementation of Feed in Tariff (FiT) system (a system that enables power provider to buy electricity produced from renewable energy resources at a fixed price for a specific period) as well as to encourage more Foreign and Domestic Direct Investment (FDI and DDI) by the MNCs and local players in renewable energy. According to International Energy Agency (2011), solar energy has many technological applications; amongst them are solar photovoltaics (PV) that is also known as solar panel, solar hot water and concentrated solar power. PV contains PV modules that are normally electronically connected and placed on a supporting structure. The modules transform light energy (photons) from the sun into electricity through the photovoltaic effect either through on-grid or off-grid PV solar system. On-grid system is the most commonly used where electricity generated from the system is connected to the national grid. On the contrary, the off-grid system is used primarily to store electricity and is more commonly used in remote areas (Adam, 2013). The advantage of promoting solar panel use in Malaysia is due to its tropical climate which means that the country can harness the sun s radiation to an average of MJ/m2 per month (Mekhilef et al., 2012). Sabah, Penang, Kedah, Perak, Perlis and Kelantan are the few identified states with highest solar radiation in the country and thus, presents the biggest potential for solar panel adoption. Although the Malaysian government is promoting the use of clean source of energy such as solar energy, the application of the green product is still very much at infancy stage in the country. Despite the government s effort to encourage solar panel usage and to develop the industry, several issues may have affected on solar photovoltaic (PV) market and industry in Malaysia in one way or another. The issues pertaining to perceived government policy, perceived high initial costs and maintenance, lack of product knowledge and experience, solar panel aesthetics, social influence, demographic factors such education level and income as well as lack of environmental attitude and concern may be part of the barriers to the adoption of domestic solar panel in Malaysia (Nik Abdul Aziz and Abdul Wahid, 2015; Faiers and Neame, 2006; Farhar & Coburn, 2000; Zhang et al., 2012; Tsoutsos & Staltiboulis, 2005; Sovacool, 2009). These issues may have become the bottleneck that affect the sustainability of businesses in this industry, particularly the Malaysian based industry players. While the use of solar panel for companies may directly support the solar panel industry s growth in Malaysia, it is important to note the limitation the industry faces if the product s usage is not expanded to include the individual consumers. It is believed that individual consumers segment is vital to ensure the industry s survival, hence an understanding on how the various factors identified in this study may impact on the consumers purchase intention of the product. The study will provide insights that may lead towards the creation and/or refinement on relevant policies, incentives, and strategies alike to spur the growth of the industry Literature Review Theory of Reasoned Action (TRA) and Diffusion of Innovation Theory (DIT) Many studies have applied Fishbein and Ajzen s (1975) Theory of Reasoned Action or TRA as the basis of their investigation in line with the theory s main aim which is to forecast and gain insight into individual s intention to behave such as intention to purchase; it has been vast applied in many disciplines such as psychology, health, consumer behaviour, education and management. 329

334 According to Gotschi et al. (2010) and Ng et al. (2009), TRA is a great theory to predict green purchase behaviour. For example, TRA was used to explain factors influencing the green purchase behaviour of Penang environmental volunteers (Abdul Wahid et al., 2011). In another example, it was utilised to explain the antecedents of green purchase intention among Malaysian consumers (Ooi et al., 2012); in addition is its application describe the influence of environmental knowledge and concern on green purchase intention and examine the effect of attitude as mediator (Aman et al., 2012). It is important to note that TRA has three assumptions to be met for it to be applied in any studies. First, purchase intention is assumed to be totally under consumer s control. Second, consumers are assumed realistic individuals and thus, would make efficient use of information accessible to them. Third, consumers are also assumed to evaluate the impact of their actions before they make decision to perform or not of a specific behaviour (Fishbein & Ajzen, 1975). According to TRA, beliefs are the antecedent of attitude and subjective norms. Consequently, both attitude and subjective norms determine behavioural intention and then actual behaviour. In addition to TRA, Diffusion of Innovations Theory (DIT) is a theory that describes the spread of new ideas, products or technology among members of a given culture (Rogers, 2010). According to Rogers (2010), it is typical for a new product or idea to be embraced by only a small number of people known as innovators (2.5%) when they are firstly introduced before it is accepted by other members, namely, early adopters (13.5%) early majority (34%), late majority (34%) and laggards (16%). Beal and Bohlen (1957) suggested the importance of demographic factors like age, education level and income as predictors of each type of adopters intention. DIT is very much dependent upon innovation, communication channels, social system and time aspects to ensure diffusion is achieved. As Rogers (2010) explained, effective communication ensures a new idea or innovation is diffused which at some point will reach the critical mass. This is when the social system such as government policy is crucial to motivate the mass to adopt the innovation. In addition, Rogers (2010) identified knowledge, persuasion, decision, implementation and confirmation as the five stages of innovation process to happen. These stages suggest that individual s decision to adopt innovation can be due to either positive or negative aspects of the product in question. As such, an individual s intention to adopt or purchase a solar panel may be due to perceived product benefit and aesthetics (positive evaluations) or due to cost and maintenance incurred (negative evaluation). Similar to TRA, DIT is also widely applied in many disciplines investigating technological innovations; for instance, it is considered most suitable theory for examining technology acceptance in higher education environment (Medlin, 2001; Jacobsen, 1998). Similar conclusion was reached in other studies like Goslar (1987) who investigated the acceptance of microcomputers in marketing community, Brancheau and Wetherbe (1990) who studied the adoption of spreadsheet software by end user, López-Nicolás, Molina-Castillo and Bouwman (2008) who assessed the acceptance of advanced mobile service among the Dutch in the Netherlands, or Faiers and Neame (2006) who conducted their research to understand consumer behaviour in domestic energy usage. In conclusion, both TRA and DIT are acknowledged theories for predicting consumers intentional behaviour towards innovative products which can include green energy. Combining variables from both the theories may be able to give a better insight on why individuals display intentional behaviour the way they do. Nik Abdul Aziz and Abdul Wahid (2015) have suggested that perceived government policy, perceived cost and maintenance, solar panel aesthetics, product benefit and demographic factors (education level and income) may be the variables from both TRA 330

335 and DIT that can be investigated together in one framework. They believed that both variables and theories will lead to the advancement of knowledge in green energy consumerism. Consumer Purchase Intention Green purchase intention refers to the probability and individual inclination to choose environmental friendly energy products over the conventional products in their purchase decision (Rashid, 2009). As for green purchase, Ramayah et al. (2010) defined it as a motivation to behave in a specific way; for instance, Chan and Lau, (2000) suggested that the act is to show individual s environmental friendly behaviour or concern to the Mother Nature. Hence, green consumerism is conceptualised as consumption of products which will minimize pollution, preserve the nonrenewable resources and environment, and to recycle (Mostafa, 2006). There have been many studies on green consumer behaviour that investigated various factors that influence intention and decision to purchase green products. Environmental concern, perceived cost, perceived maintenance, government subsidies, solar panel aesthetics, exposure and experience were factors investigated assumed to have influence over Malaysian landed property owners preference of solar water heating usage (Lee, 2011); perceived government legislation, self-efficacy, media exposure, health and safety concern as well as environmental attitude were studied by Qader (2008) in her investigation of lecturers intention to purchase electronic green product; while attitude, behaviour, value and knowledge were factors examined in Alodini s (2008) study on customers willingness to pay more for environmental friendly products in USM. In addition, Abdul Wahid et al. (2011) has used social influence, environmental effect, environmental label, environmental knowledge, environmental attitude, environmental concern and demographic variables (educational level and income) in their research to identify the green purchase behaviour of environmental related volunteers in Penang. Many determinants such as environmental concern, product knowledge and experience, attitudes, social influence, product cost and maintenance, government legislation and demographics have been proven to influence consumers choice in making purchase decisions (Qader, 2008; Tan, 2010; Lee, 2011). Linking Perceived Government Policies to Consumers Purchase Intention Government policies include encouraging car-pooling and providing incentives to manufacturers of green products (Ooi et al., 2012). Lee s (2011) study to find out whether government subsidies benefiting in the promotion of green energy adoption in Malaysia focused on the government s initiative to subsidize the consumer via residential feed-in tariffs introduced in 2011 by major energy providers such as Tenaga Nasional Berhad, Sabah Electricity Sdn. Bhd (SESB) and Sarawak Electricity Supply Corp. (SESCO). This is because greater adoption of solar panels has been observed in Western countries such as the US and Europe when more aggressive government policies which include a minimum of 30% tax credits in the US were applied. Similar government policies have also seen significant increase of green products in Taiwan (Chang et al., 2011). In Malaysia, Qader (2008) argued that the government initiative not only accelerated green purchase behaviour but it is also designed to protect consumers at large. Results from studies conducted by Ooi et al. (2012), Sinnappan and Rahman (2011) as well as Tsen et al. (2006) reported that perceived government legislation strongly influence green purchase intention among Malaysian consumers. Their findings further suggested that consumers think government should take their responsibilities to encourage and nurture environmental behaviours. However, findings from Qader and Zainuddin (2011) proved that perceived government legislation did not have any impact on environmental attitude or purchase intention. 331

336 Linking Perceived Cost and Maintenance to Consumers Purchase Intention The consumer perception on product costs differs based on financial and education background, social exposure and other factors. Cost benefit of adopting the technology has been found to be the strongest predictor for its adoption (Zhai & Williams, 2012). A study on solar panel adopters in China shows the perceived drawback of a solar panel is the cost benefit which is gained after 21 years as opposed to its lifespan of 25 years. Other studies have found similar findings; Faiers and Neame (2006) for instance reported how individuals with positive perception on solar PV technology restrained themselves from adopting the technology due to the financial cost. Yuan et al. s (2011) study identified perceived high installation cost as the reason for why 23% of their respondents did not adopt green energy. Perceived high maintenance of solar PV has also been found to be critical factors for why consumers decided not to adopt the green energy product in various studies (Zhai & Williams, 2012; Lee, 2011; Beckstead, 2008). Smith and Paladino s (2010) study however revealed that price (perceived cost) was not a predictor of consumers purchasing behaviour. Linking Product Knowledge and Experience to Consumers Purchase Intention Generally, knowledge refers to how consumers collect, manage and analyse products (Alba & Hutchinson, 1987). Abdul Wahid (2017) found that while consumers knowledge of products or issues were made of both objective and subjective knowledge, subjective knowledge was the superior source amongst the two. This may be due to the fact that consumers prior knowledge or exposure of the product play important roles in how consumers search and process information (Pillai & Hofacker, 2007). Past studies have identified product knowledge and experience as significant predictors of green purchase behaviour by a considerable amount of research (Diaz- Rainey & Ashton, 2008; Arkesteijin & Oerlemans, 2005; Chan & Lau, 2000; Abdul Wahid et al., 2011; Ooi et al., 2012; Aman et al., 2012; Mostafa, 2006). Examples from both Diaz-Rainey and Ashton s (2008) and Arkesteijin and Oerlemans s (2005) studies that attempted to profile potential adopters for green electricity tariffs in UK and Netherlands (Dutch residential users) respectively found prior knowledge on green energy and environment to strongly influenced green power adoption. Lee s (2011) study identified lack of product knowledge as part of the reason for the low adoption of solar water heating system in Malaysia. Lee s (2011) study supported Farhar and Coburn s (2000) finding whereby inadequate product information was identified as one of the obstacles for green energy adoption (PV system) by residents of society. As they explained, most customers were unwilling to choose a product that they have less knowledge of even if it will help them save money because acceptance to renewable energy is dependent on the society s knowledge and familiarity. Contrary to these studies, the literature found noted studies like Paco and Raposo (2009) and Laroche et al. (2001) who found knowledge not a predictor of green purchase behaviours. Linking Product Aesthetics to Consumers Purchase Intention Lee (2011) emphasized that physical appearance and aesthetics of solar panel are indeed very important to consumers because most of them do not prefer to install visible and bulky unit of solar panel on the rooftop of their home. Faiers and Neame s (2006) study found that the placement of solar panel affected the visual landscape of home owners which led to consumers negative attitude towards installation of solar power adoption in UK although other studies carried out in Arizona and Germany reported how the physical characteristic of solar panel showed less significant impact 332

337 on consumers purchase intention when compared to other factors (Zhai & Williams, 2012; Zoellner et al., 2008). Linking Social Norms to Consumers Purchase Intention It is acknowledged that peers, co-workers, family and opinion leaders can influence individual s perception on product s high social value (Zia-ur-Rahman et al., 2013). Social norms significantly motivated individual s environmental friendly behaviour (Ewing, 2001); the peer pressure can largely shift individuals behavioural actions particularly when the persons did not comply with social norms (Ooi et al., 2012). Schelly (2014) found that the chances of a society embracing an innovative technology relied upon the combination of its demographic compositions, perceptions among the individuals and social leader as well as the social influence to accelerate the information flow. Lee s (2008) study discovered that social influence to be the top predictor of Hong Kong young consumes green purchasing behaviour. This is similar to Kalafatis et al. s (1999) study whereby social influence was the top antecedent to predict UK consumers willingness to purchase green products. Other studies like Ooi et al. (2012) and Abdul Wahid et al. (2011) also reported how social positively correlated with consumers green purchase behaviours. Linking Environmental Concern to Consumers Purchase Intention A considerable amount of literature that examined the relationship between environmental concern and green behaviour has been published (Abdul Wahid et al., 2011; Ramayah et al., 2010; Chan & Lau, 2000; Paco & Raposo, 2009; Lee, 2008). Result from study conducted by Abdul Wahid et al. (2011) who investigated the behaviour of green purchase among environmental volunteers in Penang for example showed a positive, significant relationship between environmental concern and the volunteers. Similar findings were found by other researchers like Lee (2008) on green purchasing behaviour among Hong Kong young consumers and Chan and Lau (2000) who found strong, positive correlation between Chinese consumers environmental concern and their green purchase intention. However, Ramayah et al. s (2010) study on Malaysian consumers purchase intention of cloth diapers reported that environmental consequences (environmental concern) did not predict green purchase intention. This was supported by Paco and Raposo s (2009) findings on Portugese consumer market which indicated that even though Portugese consumers are concerned about environmental issues, the concern do not transformed into their purchasing activities. Because of the contradictory findings from literature, this study will analyse whether environmental concern is an important predictors of consumers purchase intention. Linking Perceived Product Benefits to Consumers Purchase Intention Benefits offered by a product have been suggested as a factor that can influence consumers intention (Nik Abdul Aziz & Abdul Wahid, 2015). For instance, consumers believe that environmental friendly products provide advantage compared to conventional products. Studies found that alleviation of global warming, reduction of air pollution and energy depletion issues can all be provided by green energy (perceived product benefit) (Roe et al., 2001; Clark et al., 2003). Qader s (2008) study confirmed product benefits as one of the influencing factors of consumer s purchase intention of green electronic products. Similarly, consumers were found willing to pay for green products as long as the product benefits them (Diamantopoulos et al., 2003; Ali et al., 2012; Roe et al., 2001), like environmental and economic benefits (Mendonca et al., 2009; Zoellner et al., 2008). Korcaj et al. (2015) however argued that consumers purchase decision of solar panel does not solely depend on product benefits; other significant factors that 333

338 affected consumers adoption of solar panel include price, government policy, product knowledge and social influence. Linking Demographic (Income and Education Level) To Consumers Purchase Intention There have been studies reporting on the importance and unimportance of demographic factor like income and education on consumers intent to purchase green products. For instance, higher income has been found to increase consumers intention to pay for green electricity (Diaz-Rainey et al., 2011, Ek et al., 2008; Rowlands et al., 2003; Zarnikau, 2003). Similarly, higher level of education has been found to show very strong correlation with consumers willingness to purchase green electricity (Ek et al., 2008; Rowlands et al., 2003; Wiser, 2007; Zarnikau, 2003). However, there are other studies that reported otherwise whereby income was not significant to help predict consumers green buying behaviour for the Dutch market (Arkesteijn et al., 2005), the UK market (Diaz-Rainey et al., 2008) or the US market (Kotchen et al., 2007). It is thus quite important to see whether demographic factor represented by income and education level are indeed important predictors of consumers intention to purchase green products like solar panel. Theoretical Framework and Hypothesis Development Following the literature, a relevant theoretical framework and the hypotheses are being proposed. Specifically, the model was developed based on the integration of both Theory of Reasoned Action (TRA) and Diffusion of Innovation Theory (DIT) which was supported by past literature. Figure 1: Theoretical Framework H1: How consumers perceive the government policy would significantly influence their intention to purchase solar panel. 334

339 H2: How consumers perceive product cost and maintenance would significantly influence their intention to purchase intention solar panel. H3: What consumers know of a product and experience would significantly influence their intention to purchase solar panel. H4: Product aesthetics would show significant effect on consumers intention to purchase intention of solar panel. H5: How much consumers are influenced by their social norms would significantly effect on their intention to purchase solar panel. H6: Consumers environmental concern would be significantly influencing their intention to purchase solar panel. H7: Product benefits are significantly related to consumer purchase intention of solar panel. H8a: Demographic factor such as income is significantly related to consumer purchase intention of solar panel. H8b: Demographic factor such as education level is significantly related to consumer purchase intention of solar panel. Method This study is designed to be correlational in nature, thus, it was built upon non-contrived settings (Sekaran & Bougie, 2013). Online survey, created using Google form was chosen as a way to collect data. As the unit of analysis is individual, the study targeted white collar Malaysian employees who are non-solar panel users, especially those residing in Selangor, Penang and Johor since the locations represent the metropolis of Malaysia apart from them being proactive states in adopting and developing their own green sustainable projects such as the green mega city of Iskandar Malaysia, Penang Cyber City development into an Eco-Town, No Plastic Bag Campaign, and recovery of North Banjar Mangrove forest (Yeoh, 2010; Harvey, 2012). White collar employees were chosen as target respondents due to their high income and educational background. Sampling wise, the size was determined based on the number of variables investigated in this study. Sekaran and Bougie, (2013) advised that the number of respondent for academic study is 20 x the number of variables. With nine variables, the study needed to accumulate at least 190 respondents although more were sent out to ensure the target can be achieved. To ensure that data were only collected from non-solar panel adopters, a disclaimer was written on top corner of the survey form that it is intended only for those who have not installed/bought solar panel at home. With this effort, it is assumed that the surveys collected from respondents would be from nonadopters of solar panel. The questionnaire was divided into subsections to help collect consumer s profile and all nine variables to be measured. The items to measure the variables were adapted from past literature, like from Qader (2008) for perceived government policy, Lee (2011) for perceived cost and maintenance as well for product knowledge and experience and solar panel aesthetics, Tan (2010) for social norms, Lee (2011) and Qader (2008) for environmental concern, Murray (2012) for product benefits and purchase intention. Except the demographics, all responses to the items were measured using a five point Likert-Type scale; 1 for strongly disagree to 5 for strongly agree. Findings From 300 questionnaires distributed through social network and s, 211 were returned amounting to response rate of 70.3% and all were found usable for further analysis. Demographic 335

340 profile of respondents show that most respondents were from Selangor (28.9%), followed by Johor (19.9%) and Penang (19.4%). Malay (63%) dominated the samples followed by Chinese (30.3%) and Indians (6.6%). Majority of respondents aged between 30 to 58 years old (83.9%); highly educated (88.2% were university graduates) and high earners (49.3% earned more than RM5000/month). Gender wise, the samples were quite evenly distributed with 53.1% females and 46.9% male respondents. Table 1 displays the profile. Table 1: Profile of respondents Demographic Category Frequency Percentage % State Selangor Johor Penang Other Total Age (years) < 30 years years > 58 years Total Race Malay Chinese Indian Total Education Diploma First degree Post graduate Professional certificate Total Income < RM2, RM2,001 - RM3, RM3,501 - RM5, >RM5, Total Gender Male Female Total Reliability Analysis The reliability analysis which is performed individually on all independent variables and dependent variables under study will generate Cronbach Alpha value. This value need to be more than 0.6 to be considered as an acceptable value for good reliability and positive relationship between variables (Sekaran & Bougie, 2013). Based on summary of the reliability analysis in Table 4.9, Chronbach Alpha for variables under study ranged from the minimum value of (product knowledge and experience) to the maximum value of (social norm). Other variables showed excellent values; namely, perceived government policy (0.721), product cost and maintenance (0.795), solar panel aesthetics (0.827), environmental concern (0.805), product benefits (0.814), and purchase intention (0.807) well above the benchmark value of 0.6. Factorial Analysis Overall, each variable under study has Kaiser-Meyer-Olkin (KMO) value ranged from to which is well above the benchmark of 0.5. Bartlett s Test of Sphericity values for all the 336

341 variables under study were 0 indicating they were excellent and valid (< 0.5 significance level) for factor analysis. All diagonal elements of the matrix for all variables under study were found greater than 0.5; the principle component analysis revealed that factor loadings for all items also exceeded the required value of 0.5; and that total variance explained for all variables ranged from to well above the benchmark value of 50%. Therefore, the model was concluded to fit the data very well. Table 2: Summary of factorial analysis result Construct Item F1: PGP Perceived government policy (PGP) B1.792 Perceived cost maintenance (PCM) B2.750 B3.653 B4.778 F2: PCM C2.687 Correlation Analysis Correlation analysis performed to investigate the strength of interdependence between the two variables requires that the Pearson s correlation coefficient value (r) to range between -1 to 1; in social science research, correlation coefficient of , and would depict weak, F3: PK C3.754 C4.842 C5.859 Product knowledge (PK) D1.686 D2.887 D3.779 Solar panel aesthetics (SA) F4: SA E1.863 F5: SN E2.873 E3.852 Social norms (SN) F1.870 F2.863 F3.904 F4.884 Environmental concern (EC) F6: EC G1.798 G2.845 G3.752 G4.789 Product benefits (PB) H1.784 H2.806 H3.819 H4.801 Purchase intention (PI) J1.844 J2.927 J3.780 KMO Bartlett s Test of F7: PB F8: PI Sphericity Total variance explained

342 moderate and strong correlation respectively with 1 as perfect relationship (Dancey & Reidy, 2004). The study found overall, all correlation values to be well below 0.9 indicating no serious multi-collinearity issues. Results shown in Table 3 indicate product benefit and environmental concern to reflect moderate to strong relationship towards other variable; environmental concern for instance moderately correlate with perceived cost and maintenance (r=-0.36), while it also moderately correlate with product knowledge and experience (r=-0.35). Purchase intention also show moderate relationship with product benefit (r=0.56). The results show a strong and significant correlation between product benefit and environmental concern (r=0.657). Table 3: Pearson Correlation analysis result I E PGP PCM PK SA SN EC PB PI Income (I) 1 Education (E) Perceived government policy (PGP) Perceived cost maintenance (PCM) Product * *.337 ** 1 knowledge (PK) Solaraesthetics (SA) Social norms (SN) * Env concern (EC).199 ** ** ** ** 1 Product benefit ** ** **.657 ** 1 (PB) Purchase intention (PI).142 * * **.354 **.562 ** 1 Regression Analysis Based on regression analysis between all independent variables and dependent variable (purchase intention) displayed in Table 4, only perceived cost and maintenance (β = 0.147, t = 2.45, p <0.05), product knowledge and experience (β = 0.168, t = 2.682, p <0.05), social norms (β = 0.171, t = 2.794, p <0.05) and product benefits (β = 0.553, t = 7.485, p <0.05) show significant and positive relationship with purchase intention. The four variables explained 43.4% of variation in purchase intention. The other four variables, namely, perceived government policy, solar panel aesthetics, environmental concern and demographic factors (education level and income) do not show any significant statistical influence. The results indicate support for only four hypotheses (H2, H3, H5 and H7) while the rest (H1, H4, H6, H8a, H8b) had to be rejected. The ranking of factors in term of their significance carried out additionally identified product benefits (β = 0.553) as the most significant factor that influence consumers solar panel purchase intention. Table 4: Result of regression analysis between independent variables & dependent variable. IV to DV Beta t-values Sig Perceived government policy Perceived cost & maintenance.147** Product knowledge & experience.168**

343 Solar panel aesthetics Social influence.171** Environmental concern Product benefits.553** Education level Income R Adjusted R R 2 change 0.43 F Value Durbin Watson Statistic Note: ***p<0.01 and **p<0.05 and *p<0.1 Discussion Only four variables, namely, perceived cost and maintenance, product knowledge and experience, social norms and product benefits show direct impacts on consumers solar panel purchase intention. These are found consistent with some of previous studies (Zhai, 2010; Yuan et al., 2011; Beckstead, 2008; Muhammad-Sukki et al., 2011). Findings from the current study proved that majority of consumers feel that solar panel has high maintenance. Solar panel actually requires minimum maintenance from users but lack of this information has caused customer to lose interest, making it less attractive and further reducing intention from buying the solar panel. Recent study revealed that Malaysians are not willing to buy the solar PV due to high installation cost even after FiT program is introduced (Muhammad-Sukki et al., 2011).The high market price can be attributed to the cost to compensate research and development as well as grants that have been granted for studies. Further making the situation worse, banks and creditors are reluctant to give financial assistance since the payback period doesn t meet their requirement and technological reference is insufficient to support the applications. It is surprising to find perceived government policies to exhibit insignificant relationship with solar panel purchase intention, which this study did not predict. This finding is inconsistent with past studies like Lee (2011), Qader (2008) and Chang (2011). Sumo (2013) had highlighted that while the Malaysian government encourages the public and industry players to support the sustainable energy campaign, it enforces quotas ( first come, first served lottery system ) on solar PV applications in the country. Although the quota is meant to ensure fairer share of applications from the public is achieved, strict and unclear legal guidelines have been the obstacles for adoption which is discouraging for the industry s growth. The unattractive FiT scheme return enforced by SEDA compared to other types of investment in Malaysia may also contribute to the decision not to adopt green energy by the public (Mekhilef et al., 2012). This inconsistency may require further research on potential solar panel users to gain more insights in this issue. From the findings of regression analysis, product knowledge and experience reflect significant relationship with solar panel purchase intention. The more knowledge consumers have, the higher the intention to buy will be and vice versa. Respondents are asked if they understand how solar panel works, if they have enough information on solar panel and if they know anyone that has purchased solar panel. Result shows that the mean for product knowledge and experience are quite low, with 1.55 score based on a five point Likert scale. This proves that consumers have lack of product knowledge and experience which then become the critical barriers for solar power adoption in Malaysia. Since solar panel is a new industry, the public doesn t know much about the 339

344 product. According to Muhammad-Sukki et al. (2011), recent surveys reflect that Malaysians are not aware of the national policies and many incentives related to solar power that is being provided by the government. Furthermore, they point out that the government s awareness programs are ineffective. With little knowledge on the benefit and incentives as well as low level of experience, it is impossible to accelerate the market penetration of solar panel. Therefore, it is suggested that the government should increase more awareness programs for the public to educate Malaysians about solar panel product, its incentives and related policies. For solar panel aesthetic measurement, respondents are asked if solar panel may enhance the architecture or the look of the building, if solar panel makes a house looks unattractive and if solar panel on the rooftop negatively affect aesthetics of a house. The mean for this variable is 2.84 which is consistent with regression result that it is not significant. The response score is close to neutral and does not converge anywhere. Clearly, findings of this study proved that solar panel aesthetics shows insignificant relationship with solar panel purchase intention. This means that Malaysian consumers feel that solar panel aesthetics do not influence their purchase intention. Current study is inconsistent with previous study conducted by Lee (2011) and Faiers and Neame (2006) where the consumers feel that the physical appearance as well as the placement of solar panel has significant impact on the visual landscape. Possible explanation to the contradictory result is different respondent group. Faiers and Neame s (2006) respondents are UK households who are British who either retired or approaching retirement while Lee s (2011) respondents are 106 non solar water heating system Malaysian consumers which 73% of them is Chinese. Respondents for current study however consists of 63% Malay out of 211 useable responses. Thus, it is suggested that future study would include a balance and proportionate representative of major races in Malaysia to shed light on this matter. Past literature emphasizes that green consumption has been significantly motivated by social norm (Ewing, 2001; Zia-ur-Rahman et al., 2013; Abdul Wahid et al., 2011; Kalafatis et al., 1999; Lee, 2008). Lee s (2008) respondents are Hong Kong teenagers aged years old, Kalafatis et al. s (1999) respondents are high profile pressure group in UK versus lower profile pressure group in Greece, Abdul Wahid et al. s (2011) respondents are Penang environmental volunteers and 84% of the respondents for this study are white collar employees between years old. Possible explanation of the result is that these groups have high societal influence. Peer pressure among youth is common in terms of style, behavior, taste, looks, ideology and. It is strong among teenagers because none of them wants to be left out. In social groups, peers influence others to change their beliefs, attitude or even behaviors to adapt to the groups. In addition, friends highly influence white collar employees because most of them spent more time at work every day. Other literature on green consumption, Schelly (2014) in her study of what motivates early adopters in Wisconsin highlighted that the adoption of green technology depends on integration of demographics and social influence. Rogers (2010) argued that early adopters are risk takers and educators who educate other people and boost the adoption of new technologies through the social networks of adopters. He further revealed that part of the reason to adopt innovation is the need to acquire social status. This study finds that environmental concern has no impact on purchase intention, which contradicts some of the previous studies. According to Abdul Wahid et al. (2011), environmental concern was found to have positive, meaningful relationship with green purchase among environmental volunteers in Penang. There are many environmental issues related to the burning of fossil fuels that create adverse impact to the environment and consequently led to the growing environmental concern. Some examples are the release of harmful greenhouse gasses, climate 340

345 change, the effect of global warming on bio diversity and the stability of the ecosystems. In Malaysia, the trends and values towards the environment have changed significantly. Nowadays, there are more going green campaign, renewable energy program for sustainable development and television programs as well as radio advertisement related to environmental awareness compared to older days. These show that Malaysians are becoming more concern and aware of how human and economic activities that influence the Mother Nature, however, their concern does not translate into purchase behavior. Perceived product benefit has been found to be the top predictor for consumers purchase intention of solar panel. One possible explanation for this result is the education background of the respondents as white collar employees. The result indicates Malaysian consumers agree that solar panel provides financial benefit and reduces the overall energy bill for its owner. Besides that, majority of consumers strongly believe that solar panel is a great option for alternative source of energy and concur that it is indeed an environmental friendly energy resource. The findings of this study are consistent with previous studies where researchers such as Qader (2008), Diamantopoulos et al. (2003), Ali et al. (2012), Roe et al. (2001), Mendoca et al. (2009) and Zoellner et al. (2008) highlighted that the adoption of green products is heavily dependent on environmental and economic benefits of the products to consumers. Several authors from past studies agreed that income and education level have strong correlations with consumer s purchase intention (Diaz-Rainey et al., 2008; Ek et al., 2008; Rowlands et al., 2003; Wiser, 2007; Zarnikau, 2003) which is inconsistent with the result of this study where income and education level. Overall, the findings from this study are not only vital for academic knowledge but it is also critical for other stakeholders such as the solar panel industry and the policy makers. In a nutshell, the findings of this research demonstrate that more effort/emphasis should be done by the related stakeholders (marketers in the industry, the government, NGO) to improve consumers perception on solar panel s financial costs and maintenance responsibility as well as to increase consumers awareness on solar panel s benefit. These will be discussed more in the next sections. With increased concern on environmental issues nowadays, this study can shed some light on the importance of going green and the need to support environmental friendly technology. Identifying the factors that affect consumer purchase intention of solar panel will help solar panel firms and marketers to gain insights into their target market s behaviour. Marketers should be mindful that the strongest predictors of consumer s solar panel purchase intention are product benefits, followed by social influence, perceived cost and maintenance as well as product knowledge and experience. With these information, marketers should emphasize more on creating compelling value proposition of the product which can be done by providing product/service which is niche that other competitors do not have, competitive, and gives value added to consumers at an appropriate price. Marketers should highlight the usefulness and uniqueness of solar panel in terms of its benefits, that is a form of clean energy which doesn t pollute the air, thus helps to reduce global warming. It is a cost efficient product too, because it enables consumers to save money in the long term with reduction of global warming issues. Since result indicates social norms as the second predictor of purchase intention, marketers can utilize social media channels such as Facebook, Twitter and Instagram to share information about solar panel to the public. Marketers should strategize effective marketing activities to persuade these customers to transform intention into actual purchase behaviour. Successful marketing strategies will indeed help the business to gain competitive advantage in the industry and consequently ensure sustainable business growth in renewable energy industry. Findings of the study will contribute towards government policy 341

346 and incentives to further promote the adoption of solar panel among Malaysians. Strong government policy is crucial to support solar PV industry and market growth. Since part of the barriers of solar panel adoption is low understanding on government policies and incentives, the government can improve the public s awareness through educational programs at school, exhibitions as well as campaign and advertisement in the mass media. To spur the growth of the industry, the government should provide grants to the universities to increase research and development for solar panel output efficiency. In addition, the government may also attract more foreign direct investment to further lower down the cost per kwp as well as to promote healthy competition among industry players. Conclusion The usage of fossil fuel for power generation is not sustainable as this resource is depleting very fast. Furthermore, many incidents which are caused by fossil fuel, for instance air pollution, oil spills, destruction and extinction of wildlife have significantly affect the environment throughout the years. All of these issues have caused government to shift its energy mix to renewable energy such as solar energy. However, despite the rapid growth of solar panel industry in worldwide market, the adoption of solar panel in Malaysia is very limited compared to other country. This research reveals that product benefits, social influence, product knowledge and experience, as well as perceived cost and maintenance have direct, significant impact on solar panel purchase intention. The study also uncovers interesting findings that perceived government policy, solar panel aesthetics as well as demographic factors (income and education level) do not have any influence on purchase intention of solar panel. To conclude, it is believed that an understanding of factors that impact consumer purchase intention of solar panel deserves additional research in the future. Current study proved that although consumers have concern about environmental issues and are aware of solar panel s benefits, they don t have enough knowledge and experience on solar panel to help and change their current attitude into purchase activities. This study further reveals that majority of Malaysian are unaware of government policies related to solar panel. Consumers also perceived solar panel as expensive products. All these factors are the critical barriers that may hinder the adoption of solar panel among Malaysian consumers. For this reason, it is hoped that the findings will help marketers to develop effective marketing activities to sustain business growth in renewable energy industry and help the policy makers as well to design better policies and institutional actions to increase solar panel adoption among Malaysians. There are several limitations in this study which should be considered for future research; namely to include consumers from lower income category rather than the higher income segment to get a better insight of consumers purchase intention and to all states in Malaysia. Data collection for future study is also recommended to include all states in Malaysia for generalization of Malaysian consumers instead of certain states only. References Abdul Wahid, N. (2017). Investigating consumers objective and subjective knowledge on perceived household water issues. Science International Journal, 29(1), Abdul Wahid, N., Elham R. & Tan, S. S. (2011). Factors influencing the green purchase behavior. International Business Management, 5(1), Adam, C. (2013). Which is best for you Grid-Tied solar or off-grid solar energy? Retrieved from 342

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351 Consumer Responses towards Corporate Social Responsibility Electronic Brands in Malaysia Salmi Mohd Isa* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Kiong Lee Lu Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia Shaian Kiumarsi Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia * Corresponding Author Abstract Purpose: CSR practicing brands has been taking the advantages of their marketing strategies using CSR but the main concern still needs to figure out the responses of general public regarding such brands. This study intends to analyse the directing impact of CSR electronic brands on face concern and CSR skepticism and ultimately on consumer responses to brands associated with corporate social responsibility (CSR). Design/methodology/approach: An exploratory survey based study was conducted to test the proposed conceptual model in consumer reactions to CSR brands. Target population was general public to get to know the real responses about people s perception regarding CSR associated electronic brands. Findings: The findings of the study demonstrate that face concern influences the perceived quality of the CSR brands but it does not have significant influence over people responses. Additionally, People have less awareness about CSR brands in Malaysia which ultimately make them less skeptical about the brands they are using. Perceived quality strongly mediates the relationship between CSR electronic brands and consumer responses. Practical implications: This study gives basic implications to the detailing of brand administration systems, especially for global firms entering Asian markets like Malaysia where individuals have a high level of face concern and less awareness regarding CSR practices and their contribution to the society and environment. Originality/value: This study highlights the moderating role of face concern and CSR skepticism in the relationship between consumer responses and electronic brands associated with CSR. It also suggests the mediating role of consumers perceived brand quality in the relationship between CSR brands and consumer responses. Keywords: Corporate social responsibility, Perceived brand quality, Brand management, Face concern 347

352 Introduction Business organizations have been progressively called upon to work on the strategies except their financial and production characteristics of their operations and consider the social and ecological effect of their business exercises. After considering this context, many organizations have altered their strategies and exercises and got associated to Corporate Social Responsibility (CSR). At the firm level, CSR is executed through different practices, which mean to improve the organization's social and the performance relating to the environment. The idea of CSR has been under consideration for a very long time now as this has turned into a basic idea for the brands attempting to grasp larger share of market. Current study has considered CSR practices of electronic brands and its effect on the consumer responses. The study also considered the role of face concern and CSR skepticism which could influence the effect of CSR activities on purchase intention and word of mouth (WOM) of the people regarding electronic brands. CSR might give the idea that organizations excitedly react to open concerns with respect to their operations and contribution to social practices. Face concern has caught the attention of the researchers recently but this concept has significant role while considering the consumer s perception, intention and their responses to the organizations which are linked to CSR activities. People always consider maintaining their face and never want to lose it. For this very reason, most of the researches have confirmed that the face concern plays a vital role when people decide about the brands they are going to spend their money on. It also has significant influence over the quality they perceive for a brand and their responses towards the brand. Even in some cases, it was observed that people do not care if the brand is contributing to society and environment but just to save their face, they will buy that particular brand. Few examples of corporate misconduct of ambiguous acts, however were observed as paradigms of CSR, have uncovered huge inconsistencies between CSR communications and actual practice. This contradicting confirmation leaves the effect of CSR on business practice open to exploration further. From one point of view, there are signs that organizations dynamically attempt to realign their business practices to meet CSR requirements existing in the general public ground. On the other hand, the validity and suitability of these exercises consistently brings up issues and firms are as regularly as conceivable reprimanded for using CSR as an advertising strategy. Initially, it might create the impression that firms energetically react to open concerns in regard to their operations and taking part in socially mindful practices. To confirm the past research findings and to identify some mechanism which ensures that the considered variables are significantly related, current study has considered CSR electronic brands, face concern, CSR skepticism, perceived quality and consumer responses. Literature review Corporate social responsibility (CSR) Recently, CSR programs have turned out to be well known components of branding systems in light of the fact that these projects have been perceived as one of the vital business goals that convey economic advantages to universal business firms in the global profitable markets (Kang, 2010; Waller & Lanis, 2009). For instance, past research has demonstrated that there is a positive relationship between corporate social performance and corporate financial performance (Stanwick & Stanwick, 1998). In advertising, analysts have found that consumers as a rule will frame a positive attitude and furthermore have a higher purchase intention towards a company's items or brands with the probability if they observe that the company is related with CSR activities (Dean, 2004; Sen et al., 2006). Recently, a few researchers have likewise found that CSR impacts 348

353 consumer attributions and brand assessments in choosing an item. Without a doubt, a company's CSR activities can moderate consumer negative brand assessments for a product which may not be much known to others (Klein & Dawar, 2004). As highlighted by Auger et al., (2010, p. 143), the expansion of consumers' consideration in social item attributions, (for example, ecological and work condition) can be because of the rise of emphasize on the concept of CSR, increasing media enthusiasm for social and ethical issues, increasing circle around CSR by real businesses and the accessibility of better-quality "moral" products. In an investigation of global brand purchase intention, Ozsomer and Altaras (2008) call attention to that social responsibility might be one of the courses through which global brand managers can improve the probability of their brand's purchase. A brand's apparent validity may infer that the brand demonstrations in a socially responsible manner which would prompt to a more grounded consumer preference. Consumers will probably distinguish themselves with companies that are related with CSR in light of the fact that it can satisfy their requirements to keep up a positive rational self-image. Thus, they will frame a positive assessment toward the company with CSR associations. Most recently, a few studies have proposed that consumer attitudes toward a CSR brand are subject to their level of contribution with product classification (Berens et al., 2005) and their brand awareness and perceived fit between the brand nature and the social cause (Nan & Heo, 2007). Also, the effect of CSR on consumers' purchase intention is reliant on consumers' familiarity with the CSR activities (Sen et al., 2006). It can be observed through the above literature that CSR contributes to the image of the organizations positively. It may have weak relationship with different situations and criteria but it influences the overall consumer s perception positively. As CSR is highly related to the protection of environment or some social cause which would contribute to the society, it easily has captured the significant attention for further research. Considering the importance of the concept of CSR, current study will consider its influence on different variables explained later in this chapter. This study will consider CSR in context to electronic brands. Face concern The idea of face has turned out to be one of the key bodies that impacts social connections all around society and has got significant research consideration in cross-cultural psychology, social psychology and sociology literature (Du et al., 2010). The idea was originated from Chinese culture. For instance, earlier research has recognized the inevitable and effective impact of face on different angles crosswise over Asian and Western social settings, for example, negotiation, conflict management, gifts giving practices, and so forth (Oetzel et al., 2001). Regardless of the way that face universally affects human practices in social interaction, diverse research has concurred that individuals in Asian social culture put more prominent attention on face issues than those in Western social culture (Oetzel et al., 2001). Asian social culture and Western social culture are portrayed by the cultural measurement of cooperation and independence separately. In collectivist cultures of Asia, individuals emphasize on connections and characterize their self-ideas in connection to others. Thus, Asians value social connections, standards, and obligations. Conversely, individuals in unconventional cultures focus on freedom and view themselves as an individuated element (i.e., isolate from others). They tend to value individual needs, rights and prospects. Given that face underlies the human requirement for social acknowledgment and is a basic social asset in keeping up social connections, Asians who concentrate on social connections and interactions will be more concerned for face than Westerners. The literature clearly states the significance of face concern particularly in Asian 349

354 cultures. The increasing significance of the concept of face concern can be observed from latest research studies. For this reason, current study also considered it as a contributing variable in the context of current study. CSR skepticism Skepticism is characterized as a propensity towards disbelief (Pirsch et al., 2007). Skepticism is every now and again utilized as a part of mix with the term doubt (Webb & Mohr, 1998). Skepticism is seen as a doubt in others happening when an individual surmise that the conduct of others is for their own self-regarding intentions. This doubt is quite often present when the motives of the other part are not clear. Discontentment can be seen as an individual attribute, while skepticism is not generally present and is situation oriented (Webb & Mohr, 1998). Pessimistic individuals may respond with more skepticism in specific circumstances. Heider's attribution theory (2013) can be utilized to break down suspicious reactions of people who are skeptical. People give inner or external ascriptions concerning their own perception for others' accomplishments as well as conduct. Consumers could comprehend CSR activities of the organization by crediting the intentions of a company. In such situation, inner satisfaction will center consumers' consideration around the sincere, inherent intentions of the company's CSR activities; though, external perception will concentrate on the external assumption developments, for example, profits, enhancing doubts, or emphasize from overall beliefs or negative vibes from other sources. At the point when consumers make an apparent perception about a company's motives and see it to be profit-driven, they may get to be distinctly skeptical about the company's intentions to involve in the CSR activities. Regardless of the significance and high emphasize of consumer skepticism toward firm activities, research studies on the determinants and outcomes of consumer skepticism toward CSR are lacking. This lack of research is surprising for few primary reasons. To start with, skepticism establishes a noticeable place amongst the most arising questions that are regarding to the circumstances (McGrath, 2011). According to past researches, consumers view such practices as unethical and not matching to the social cause in light of the fact that the company is captivated with its own advantages (Vlachos et al., 2009). Additionally, consumers are probably going to question and doubt CSR endeavors when they value the retailer's social attachment to get clear ideas about self-centered reasons. With the concept of CSR, idea of CSR skepticism also came into existence. It is a parallel factor which surely is present when the CSR activities are being communicated to the common public. People would be skeptical for any organisation if it has some more advantages to offer, in case the motives of the organization are vague or hidden. In current technological era, people have become more aware of the policies and regulations. For this reason, current study has taken this variable as an important contributing moderating variable. Hypotheses development Given that the face concern is the degree of an individual shows interest in the protection and enhancement of face (Chan et al., 2009), consumer with a high (vs. low) face concern would perceive CSR brands to have a higher quality, have a higher purchase intention for CSR brands, and have a higher propensity word of mouth to recommend CSR brands to others (Wan, Poon & Yu, 2016). According to Mak et al. (2009), to maintain the face, people may try branded items but it is not always safe to try new brands as may be fashion or trends are not suitable for everyone. In such situation, people may buy new branded items and in such a way they will not save the face and would not lose it either. For this reason, people with high face concern are regarded as the 350

355 people who will do anything to save their face. For this reason, people would prefer to buy luxury brands to maintain their face. The brands which are more concerned with CSR may have better image than those who don t care about their social image and would not contribute to their society. Therefore, from the literature above, it can be hypothesized that the people with high face concern would be more conscious about the image of the brand and will perceive CSR brands as high quality brands. H1. Consumers with a high face concern will perceive a higher brand quality than those with low face concern when the brand is associated with CSR. Bolton and Mattila (2015) suggested in their study that CSR associated brands are considered to be more reliable and validated in the eyes of the customers. CSR enhances the reputation of the brands and ultimately it can increase the consumer liking of the brands. People like to identify themselves with the brands which have good reputation socially. This is perceived as building their own good image if they use the brand with good image. For this very reason, they would have higher purchase intention for any particular brand with socially good image (Wan, Poon & Yu, 2016). Therefore, following hypothesis can be formed on the basis of above literature: H2a. Consumers with a high face concern will have a higher purchase intention than those with low face concern when the brand is associated with CSR. According to the past researches, if the consumer has high standards, they might spread more word of mouth either it is positive or negative (Hudson et al., 2015). Negative word of mouth is related to face enhancement and the consumers who have high face concerns are tend to spread more negative word of mouth than the consumers who have low face concern (Shi, Zheng & Yang, 2016). These researches are the foundation of the following hypothesis: H2b. Consumers with a high face concern will have a higher propensity word of mouth to recommend CSR brands than those with low face. According to Gatti, Caruana and Snehota (2012), the relationship among CSR, perceived quality of the brand and purchase intention have been under consideration since recent decade. CSR has significant effect on the buying behaviors of the consumers. CSR brands increase the level of perceived quality and helps improving the image of the brand which ultimately influence the purchase intention of the consumer. H3a. The consumer s purchase intention towards CSR electronic brands is mediated by perceived quality of the brand. According to the study conducted by Huang (2014), CSR has significant influence over word of mouth and the propensity of recommendation to others as well. CSR creates a strong brand image which is perceived positively by the consumers. The brands which contribute to improve society or environment are perceived as socially responsible. Such brands have positive image which compel consumers to spread positive word of mouth about the brand. If the perceived quality about the brand is positive, consumers are tending to spread positive word of mouth about the brand. 351

356 H3b. The consumer s propensity word of mouth towards the CSR electronic brands is mediated by perceived quality of the brand. Given that the CSR skepticism is the extent to which a consumer question and doubt CSR efforts contributed by a corporation. CSR activities have a positive influence on the consumers responses towards a corporation when the motives are believed to be sincere (Bolton & Mattila, 2015). A negative effect was found when there was much skepticism, which also has an effect on consumers purchase intention and word of mouth (Reza & Samiei, 2012). When consumers think that a corporation initiates CSR activities solely for profit, then ultimately the perceived quality, purchase intention and propensity word of mouth will be lower. Therefore, the hypotheses are developed as below: H4: Consumers with a high CSR skepticism will perceive a lower brand quality than those with low CSR skepticism when the brand is associated with CSR, but this difference is not significant when the brand is not associated with CSR. According to the study conducted by Elving (2010), skepticism about a company s motives has negative influence on consumer intent to purchase the brand and on consumer attitude towards the company. Earlier studies by Reza and Samiei (2012) concluded their research studies with same results that CSR skepticism plays negative role for the company image. Elving s study (2010) is the foundation to form the following hypothesis: H5a: Consumers with a high CSR skepticism will have a lower purchase intention than those with low CSR skepticism when the brand is associated with CSR, but this difference is not significant when the brand is not associated with CSR. According to the study of Leonidou and Skarmeas (2015), CSR skepticism is ignored when brands are associated with CSR. They conducted the study for green products which could help improving environment. Their findings suggested that CSR plays positive role and consumers spread positive word of mouth about the brand if it is involved in CSR initiatives and activities. The findings of their study also confirmed that negative word of mouth can be generated through CSR skepticism. On the basis of their findings, following hypothesis can be formed: H5b: Consumers with a high CSR skepticism will have a lower propensity word of mouth to recommend CSR brands than those with CSR skepticism, but this difference is not significant when the brand is not associated with CSR. Theoretical framework Based on the developed hypotheses, a proposed theoretical framework is presented as follows: Consumer Responses: Face Concern H2a 352 Purchase Intention

357 Figure 1: Proposed Theoretical Framework Methodology Participants and design The study used survey design for the data collection process and for these reason questionnaires was used as data collection tool. The consumers of electronic items in Malaysia are potential respondents for this survey. The targeted sample frame of this study was 350 or above. For this study, simple random sampling and snowball sampling was used to select elements from the population. Response rate was 85.15% for this study. Out of 281 respondents, 105 (37.4%) were male and 176 (62.6%) were female. Only 1 respondent was below the age of 15. Most of respondents were from age group of which were 58% of total respondents. Findings and discussion Data was tested through Smart PLS and for hypothesis testing, path coefficients and t-values were considered to confirm the results. In current study, at the level of significance of 0.5 the t-value should meet the requirement of being greater than The following Table 1 indicates the results of hypothesis testing: Table 1: Path coefficient and hypothesis decision Hypotheses Path Path Coefficient T-value (1-tailed) Decision on Hypothesis 353

358 H 1 CSR Face Concern Perceived Quality Supported H 2a CSR Face Concern Purchase Intention Not Supported H 2b CSR Face Concern WOM Not Supported H 4 CSR CSR Skepticism Perceived Quality Not Supported H 5a CSR CSR Skepticism Purchase Intention Not Supported H 5b CSR CSR Skepticism WOM Not Supported The findings of the study have presented that the relationship is significant between electronic CSR brands, face concern and perceived quality. This supports the study of the interaction effect of face concern plays a significant but negative role. As people might not care about whether the brand is following CSR strategies or not when it comes to their face concern. This clearly depicts that people would prefer to keep their image of having any good brand rather than thinking about taking care of CSR activities of the company. These results are in line with the findings of Poolthong and Mandhachitara (2009). As the direct relationship between CSR brands and perceived quality of the brand are positively associated to each other. When engaging in appropriate CSR initiatives, firms tend to increase their potential to gain positive perception of their service quality and more favorable attitudes among the company s stakeholders. Moreover, customers tend to trust organizations because of positive perception towards quality of products or services they offer, rather than the CSR activities (Poolthong & Mandhachitara, 2009). Consumers with high face concern will perceive high brand quality if the brand is associated with CSR and on the other hand consumers with low face concern will perceive low quality even if the brand is associated with CSR. Current study suggested that the relationship between CSR, face concern and perceived quality is strong but even higher face concern may not care about the brand if it is associated with CSR activities or not. The major reason could be the customer s satisfaction level which is highly influenced by face concern but little do they care about CSR association of the brand. Ting-Toomey's (1994) study presented that one's cultural legacy is a critical factor. Further her theory (1998) extended that the culture is significantly connected to the issue of face concern and the different ways this is negotiated across cultures. The justification for these results could be the study conducted by Mak et al. (2009), which was conducted to assess the level of distress and face concern among Chinese. The study suggested that Chinese are very much concerned about not losing the face. The sample of current study contained 186 Chinese people which make the most of respondents. For this very reason, the results have depicted that face concern is strongly but negatively related to the relationship between CSR brand and their perceived quality. Which makes a clear interpretation that the people would less care about if the brand is associated with CSR but even with higher face concern, they would not care about CSR linkages to their desired brand? The second hypothesis that the consumers with high face concern would have higher purchase intention than those of with low face concern when the brand is linked with CSR activities was also not in line with the previous studies done by Wan and Poon (2014); Bian and Forsythe (2012). The direct relationship of CSR brands with purchase intention was found to be not significant which ultimately got nothing to do with face concern. For this reason, it can be interpreted that CSR has not been considered as significantly as it should be according to the previous studies (Wan & Poon, 2014). Purchase intention would be ultimately depending on the other factors may be which are of more significance for customers. Those factors could be price, personal preference, location etc. which is given more importance than the fact that their preferred brand is not even associated with CSR activities. These results are also not supported by the study done by Creyer 354

359 (1997), who strongly suggested that the purchase intention is significantly influenced by the business concerns with social activities. The second part of second hypothesis considered the propensity to recommend others instead of purchase intention. These results are also not supported by the previous study done by Wan, Poon and Yu (2016) tut the results are depicting even the weaker relationship among CSR brands and word of mouth and ultimately it does not support that the higher face concern would be having positive word of mouth than those of with low face concern when the brand is associated with CSR. People may recommend the brand to others for other reasons but not keeping into consideration the brand s association with CSR. Moreover, the results for fourth hypothesis suggested that CSR brands influences the perceived quality and CSR skepticism have significant influence on perceived quality but the interaction effect of CSR skepticism does not justify the proposed hypothesis. Because the results have become insignificant after considering CSR skepticism in between the relationship of CSR brand and perceived quality of the brand. These results suggest that consumers may not care about CSR association and ultimately CSR skepticism is of less importance for people. For this reason, perceived quality may remain less influenced. The study done by Skarmeas and Leonidou (2013) does not support these results as it has strongly suggested that CSR skepticism influence the perceived quality of the brand. The results of first part of fifth hypothesis further did not confirm the findings of Skarmeas and Leonidou (2013) regarding the significant influence of CSR skepticism on purchase intention when the brand is associated with CSR. The results have confirmed that the interacting variable of CSR skepticism can nullify the significant relationship between CSR brands and purchase intention of the consumer. The same insignificant results were obtained for second part of fifth hypothesis while keeping into consideration word of mouth or propensity to recommend to other was considered. The role of CSR skepticism does not signify the relationship between CSR brands and word of mouth. These results are confirming that the people responses become less influenced when they already have doubts about the CSR activities of any brands they prefer to use. The skepticism factor would have greater influence when the people are concerned with the brand association with CSR. If people are less concerned about the CSR activities of the brand, they may have indifferent intentions toward purchase and spreading positive word of mouth. According to the study conducted by Leonidou and Skarmeas (2015), despite of the fact that the concern about environmental issues is increasing, consumers still are reluctant to buy green products. People would show concern about their environment and society but will take care of their personal preferences and are observed to be reluctant in buying such products (Öberseder et al., 2011). Consumers skepticism about the environmental benefits of green products translates into a decreased willingness to purchase them. The third hypothesis regarding relationship between electronic CSR brand and purchase intention is significantly mediated by perceived quality. It is supported by the previous studies (Gatti et al., 2012) that depict the same results. People would have positive intentions to purchase a brand which is associated with CSR if they perceived the quality of that brand is positive. The brands which are positively perceived regarding their quality would be preferred and if they associated with CSR then it would be an additional benefit to the consumers which will ultimately make their intention to buy that brand stronger. Furthermore, the second part of third hypothesis i.e. electronic brands which are associated with CSR are also get the higher propensity of word of mouth if the perceived quality is higher. These results are supported by the previous studies that CSR association strongly and positively influence the word of mouth and propensity to recommend the brands to others. 355

360 Current study also considers the perceived quality as one of the significant variable which plays a vital role while making people to spread positive word of mouth for the brand which is associated with CSR. Table 2: Mediation testing Hypothesis Path VAF Decision on Hypotheses H3a CSR Perceived quality Purchase Intention 0.89 Supported H3b CSR perceived quality WOM 0.98 Supported In this study, other factors may have played role as the electronic brands are not only used for routine domestic or social chaos but also people are very much concerned about having luxurious electronic brands just to keep their face concerns and while considering the face losing fear, people may not care about the CSR activities of the brands. The results of current study have depicted different aspects considering the variables which were less focused in the previous research studies. The variables were not used simultaneously and for this reason, they have yielded more realist results after considered together in one study. The degree of higher and lower face concern and CSR skepticism did not seem to have influence over perceived quality, purchase intention and word of mouth because these both interacting variables do not moderate the relationships between CSR brands and perceived quality. It also has very low or no interacting effect between CSR brand and purchase intention and word of mouth. In Malaysian context, these results can be considered realistic as typically people do not pay attention to the social practices like CSR usually. Chinese being the major part of Malaysia turn the concept of CSR to little or no use considering their face concern and traditionally enforced perceptions of saving their face in the society. It is also observed that Indians usually do not care about such practices being less in number in comparison with the other two ethnics groups. They tend to save their own traditions more carefully and giving more consideration to them. Hence, the numbers of people representing only Malaysian citizens do not tend to have high concerns over societal issue except for activists, politicians but youngsters are usually found to be careless. For these reasons, constructs like face concern and CSR skepticism are not considered to be much highlighted concepts. A major role is played by the technology use among youth and their purchase intention. Youth today supports the brands which is comfortable for them. There is huge number of youngsters who only buy electric devices like mobile phone with expensive rate just to save their face having high face concern. In this situation, they usually do not care about having any social responsibility in mind. For this very reason, they care less about the social causes and are more concerned to maintain their comfort zone. Particularly in Malaysian context, these findings have portrayed a true picture of consumer s attitude. 356

361 Figure 2: Structural Model Global Business and Management Research: An International Journal Conclusions The results of the study have depicted the different aspects of the CSR association, face concern, skepticism and people responses. The mediation between variables yielded positive results and the direct effects were mostly positive but the addition of interaction effect of face concern and CSR skepticism made the results insignificant. Which is a proof that these variables do not influence as interacting variables? The results may have been different because of different ethnic and cultures considered in the current study. The study may not have yielded good results as expected but are realistic to be considered for future implications. The findings of current study demonstrate that face concern favorably affects consumers' perceived quality of CSR brands to others. More particularly, consumers with high or low face concern have significant effect on CSR brands. But this does not prompt a higher purchase intention and WOM. Hypothetically, this study gives imperative implications, as it sheds new light on current CSR research with regards to consumer responses to CSR brands. Though past research has identified different factors such as consumers' general opinion and personal support toward CSR practices, level of involvement of product or service and awareness about CSR activities, which could influence consumer responses to CSR brands, there is a lack of literature concerning the impact of personal values. Personal values have for quite some time been recognized as key factors that formulate consumer purchasing behavior. 357

362 This study proposes a model that includes the impact of face concern on consumer assessments and responses toward CSR brands. Face concern is self-esteem factor which directly influence personal values. Current study also gives basic ramifications to global companies in the definition of brand administration methodologies, especially to enter an Asian nation like China where individuals have a high level of face concern. This examination additionally gives updated bits of knowledge on how and when a firm ought to develop a brand associated with CSR. Ownership of extravagance brands is undoubtedly considered as an approach to upgrade the face or social image of a man. When propelling another item, the item can be positioned as an item associated with CSR or basically introduced as a CSR brand. The marketing directors may attempt to highlight the enhancement of one's own face for being a proprietor of a CSR brand. Level of face concern can fill in as a consumer division variable with the goal that consumers can be classified based on face concern and personal values. The study suggests that Asian consumers may not care if the organization is associated with CSR practices or not. In this regard, companies need to spread awareness among the people. They can enhance their CSR activities and can associate them with face. Likewise, CSR skepticism should be considered for research as the current study strongly recommend that CSR awareness among common public is needed to have people attention over social issues. As suggested by previous researchers, current study has included multi-cultural respondents which are strength of this study. Future research can be extended to direct observational experiments in more favorable settings. References Auger, P., Devinney, T.M., Louviere, J.J. & Burke, P.F. (2010). The importance of social product attributes in consumer purchasing decisions: A multi-country comparative study. International Business Review, 19(2), Berens, G., Riel, C. B. V., & Bruggen, G. H. V. (2005). Corporate associations and consumer product responses: The moderating role of corporate brand dominance. Journal of Marketing, 69(3), Bolton, L. E., & Mattila, A. S. (2015). How does corporate social responsibility affect consumer response to service failure in buyer seller relationships? Journal of Retailing, 91(1), Bian, Q., & Forsythe, S. (2012). Purchase intention for luxury brands: A cross cultural comparison. Journal of Business Research, 65(10), Chan, H., Wan, L.C., & Sin, L.Y.M. (2009). The contrasting effects of culture on consumer tolerance: Interpersonal face and impersonal fate. Journal of Consumer Marketing, 36(2), Creyer, E. H., & Ross Jr, W. T. (1997). Tradeoffs between price and quality: How a value index affects preference formation. The Journal of Consumer Affairs, Dean, D.H. (2004). Consumer perception of corporate donations: Effects of company reputation for social responsibility and type of donation. Journal of Advertising, 32(4), Du, J., Fan, X., & Feng, T. (2010). An experimental investigation of the role of face in service failure and recovery encounters. Journal of Consumer Marketing, 27(7), Elving, W. J. (2010). CSR and skepticism: The influence of fit and reputation on skepticism towards CSR communication. In the Proceedings of Conference on Corporate Communication (pp ). 358

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365 Factors Causing Female Inequality in Malaysian Organisations: A Conceptual Model Malvinder Kaur * Graduate School of Business, Universiti Sains Malaysia, USM, Penang, Malaysia kaurmalvin@yahoo.com Junaimah Jauhar Graduate School of Business, Universiti Sains Malaysia, USM, Penang, Malaysia Zurina Mohaidin Graduate School of Business, Universiti Sains Malaysia, USM, Penang, Malaysia * Corresponding Author Abstract Purpose - Gender diversity and inclusion programs have been implemented in the workplace, however achieving gender equality in the workplace are rather slow. Thus, in order to achieve gender equality and sustainable development, it is crucial to optimise female talents and leverage diversity. This conceptual model explores and examines the relationships of discriminatory organisational culture as well as motherhood and pregnancy stereotype on female inequality in organisations. Design - Referring to the literature review, this current research develops conceptual model consisting of discriminatory organisational culture, motherhood and pregnancy stereotype and female inequality in organisations. Findings - The research propositions are discriminatory organisational culture as well as motherhood and pregnancy stereotype has a significant impact on female inequality in organisations. Practical implications - The research propositions may minimise female inequalities in organisation issues by providing the recommendation to Malaysian organisations and Ministry of Women, Family and Community Development Malaysia by designing appropriate guidelines. In order to assist the policy makers to comprehend factors causing female inequality in organisations, a review of current relevant policies may be needed. Originality - The lack in studies on the variable of motherhood and pregnancy stereotype and female inequality in organisations has prompted the researcher to dwell in this area. This conceptual model is crucial to reveal the importance of women getting equal treatment for the reason that women bring significant and positive results in organisations and economic in the Malaysian context. Keywords: Discriminatory Organisational Culture, Motherhood and Pregnancy Stereotype, Female Inequality in Organisations Introduction Women have been getting a higher level education and they are equipped to be a par with men. Yet the perception that women are unequal to men and powerless will not end soon. Ely, Ibarra, 361

366 and Kolb (2011) contended that women remain highly underrepresented at leadership levels, and gender inequality is still a significant issue. Gender inequality in the workplace has caused serious consequences in society. Prime Minister of Malaysia Dato' Sri Najib Tun Razak stated that several initiatives have been set to increase the participation of women's labour to 59 per cent by 2020 (Khoo, 2015). The strategies drafted in the 11th Malaysia Plan of Malaysia's economic blueprint. In order to ensure women in the region have the same opportunities to succeed, Dato' Sri Najib has emphasised to strengthen the future by increasing the number of empowered female leaders. Besides, referring to Sander and Verghis (2012), in 2010, Malaysia's female labour force participation rate remains low at 46 per cent compared with ASEAN countries such as Singapore 60 per cent and Thailand 70 per cent. Similarly, the report found that the number of working-age women; employed or finding jobs for the same salary level will remain low in Malaysia compared to other countries. According to Economic Cooperation and Development (OECD) Employment Outlook 2010, which the data as of 2009, women labour force participation is low compared to OECD, such as Italy were 51 per cent, Korea was 55 per cent, Ireland was 63 per cent, the United Kingdom and Australia were 70 per cent respectively, Germany was 71 per cent, New Zealand were 72 per cent, Denmark was 76 per cent and Sweden was 77 per cent. While, according to TalentCorp and the Association of Chartered Certified Accountant (ACCA) of Retaining Women in the Workforce in February 2013, Johan Mahmood Merican, the past Chief Executive Officer of TalentCorp, stated that Malaysian corporations need to achieve more to retain women in the workforce. It is not for welfare reasons because women bring significance to business and it is the proper thing to do. The World Bank Country Director for Malaysia, Annette Dixon stated that if more women participate in the labour force, Malaysia would have the opportunity to accelerate their transformation into a high-paying economy. According to Merican and Ghani (2016), in 2011, the Malaysian Government targets to escalate women s participation to 30 per cent of decision-making positions in corporate sector by the end of However, as of June 2016, for director s position in the top 100 listed companies on Bursa Malaysia (Kuala Lumpur Stock Exchange), women accounted for only 15.2 per cent. Thus, to bring Malaysia to high-income status, closing gender gaps is important as well as encourage women to demonstrate their capabilities to the labour market. Therefore, the current research would like to focus on Services sector organisations in Malaysia, by examining female labour force participation in these sectors. Women participation in the labour force is essential to enhance economic growth and specifically to achieve Malaysia policy of 59 per cent FLPR and 30 per cent club by In addition, the Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim stated that about 71 per cent of university students are female and they have to anticipate broader participation in the workforce, however, they leave the workforce to start a family (The Star, 2016). Gender equality and inclusion programs have been implemented in the workplace, however achieving equality in the workplace are quite slow. Based on the report of the statistics on labour force derived from Labour Force Survey 2015, Department of Statistics Malaysia indicated that total labour force participation rate was 67.9 per cent, male and female labour force participation rate was 80.6 per cent and 54.1 per cent respectively. Based on the above facts, it shows that women are under-represented in the workplace. Why is female participation in the labour force crucial? How does low female participation in workforce affect the sustainable growth of organisation, economy and Malaysia especially towards achieving 59 per cent FLPR by 2020 and 30 per cent involvement of women in decision- 362

367 making positions in the private sectors by 2020? Both female and male will gain benefit by advancing women at work and in leadership. According to Hunt et al. (2015), analysis has been done to the companies in the United States, Canada and the United Kingdom, stated that gender diversity companies and ethnically diverse companies were 15 per cent and 35 per cent respectively more likely to outperform. Thus, the continuous stagnant number of women involved in leadership could have a negative business and social impacts globally (Devillard et al., 2013). When women fully participate at all levels, the companies and countries will be more competitive (Barch & Yee, 2011; Catalyst, 2004; World Economic Forum, 2010). However, a research conducted by Hassan, Marimuthu and Johl (2017) on 60 top Malaysian listed companies argued that gender diversity has no significant impact on firm value. This is compelling findings which have prompted the researcher to dwell in this area. According to Golesorkhi (2006), women have increasing extent of powerful impact on company performance. As per Eagly, Karau and Makhijani (1995), stated that both male and female are equally effective as leaders. Female leaders are more transformational compared to male leaders (Eagly, Johannensen-Schmidt & van Engen, 2003). However, Bass and Avolio (1993) stated that researchers have shown consistently high inter correlations between transformational and transactional leadership because the ideal leaders are both transactional and transformational. Female participation in the labour force is not only a women's issue but pertaining to sustainable growth of organisations and economic. Due to that, leveraging diversity and optimising female talents is crucial because male and female will complement each other to enhance organisations growth and economic growth. Literature Review Female Inequality in Organisations Based on Reilly et al. (2016) research in New Zealand Business School, one of the respondents stated that if you have families and at the same time you have other responsibilities as well, an organisation still expecting that person to perform like someone that does not have any. The implementation of men clubs brings disadvantages to female and they view the process of promotion as troublesome. The invisibility of systemic inequalities is contributed by the dearth of institutional information on inequality, policies and rights. If female does not perceive inequalities as crucial and legitimate, thus no action will be taken to address the inequalities issues. In addition, some female in this research refused the question on the issue of gender inequality. Female prone to utilise an adaptive discourse (Monroe et al., 2008, p. 218), which they will not confront the issue, rather find ways to adapt, gendered power dynamics, as well as avoiding direct political confrontation. According to Gill (2011), this is post-feminist climate, where inequality is inexpressible. Additionally, gender and gender inequality are sidelined (Acker, 2006, p. 452) although there are formal equality policies. Negative stereotypes are one of the reasons females being underrepresented in management (Adams, 2016). Adams argues that ample of research has to be carried out to comprehend the advantages of the board's diversity. Besides, Fei et al. (2017) contended that work-family conflict and barriers to career achievement were positively related to occupational stress among women middle managers. Due to that, it is important to comprehend the factors causing female inequality in organisations. Eventually, by addressing this issue it will encourage female labour force participation and their continuous contribution to the organisation and economic growth which lead to sustainable development. Why is women participation in the workforce important? Does women participation enhance organisation growth and economic growth? It is a loss to economic growth 363

368 potential when the skills of highly qualified females are not fully utilise (European Commission, 2012a, p. 3). Using the same line of reasoning, this is one of the reasons for Malaysia to optimise female talents in labour force participation. In addition, European Commission (2012b) argues that the boards of listed firms can achieve higher and sustainable economic growth rates if there are more gender diverse of listed firms in Europe. In line with European Commission arguments, Malaysia recommended to adapt similar practices and optimise the female talents. Besides, ample of boardroom diversity policies cited research by Catalyst (2007), McKinsey (2007) as well as Credit Suisse (2012), it demonstrates that boardroom diversity will lead the firms to perform better. Furthermore, the fourth quartile of board gender diversity (referring to the women on the board s proportion) in Fortune 500 firms have outperformed in return on equity, return on sales and return on invested capital compared to the first quartile, Catalyst (2007). However, there is a dearth of women role models in top management. Women involvement in top management is crucial because only women can understand other women needs. Additionally, it is hoped that women at the top management will implement the policies pertaining to optimising female talents. Eventually, male and female will complement each other to enhance organisations growth and economic growth. However, as per Milliken and Martins (1996), it might take longer to make decisions if boards and management teams are genders diverse. Therefore, there is still a contradiction in point of view regarding women participation in the organisation. Besides, the gender gaps in directorship position may be greater in countries with less family-friendly policies compared to Sweden (Adams & Funk, 2012). The findings suggest that barriers to boardrooms may be higher in the United States (US) because female directors in the US is less likely to be marrying and has a small number of children compared to female directors in Sweden. The major problem is in the prolonged existence of multiple barriers confronted by the highly qualified women that available for board positions and on their way to holding high positions in the companies (European Commission, 2012a, p. 3). Among the reason of female are not appointed to board positions are gender stereotypes in recruitment and promotion, a masculine-dominated culture and the dearth of transparency in board appointment processes. Many females prefer to experience a gender egalitarian world, which gender issue no longer matters and they are exhausted of confronting gender discrimination (Kelan, 2009, p. 198). Indeed statistical data able to demonstrate a valuable unequal outcome, however in order to identify further insights on inequality and the barriers to addressing the issue, it requires thorough and detailed knowledge obtained from specific studies (Goltz & Sotirin, 2014). Thus the current research will examine discriminatory organisational culture as well as motherhood and pregnancy stereotype towards female inequality in the organisation. This research is specifically to Malaysian women and pertinent towards achieving 59 per cent FLPR by 2020 and 30 per cent participation of women in decision-making positions in the private sectors by Discriminatory Organisational Culture Culture is a complex issue. Multiple studies have emphasized the success of a firm is determined by the organisational culture. Beliefs, values, knowledge and needs influenced people to create, shape, transform and manage the culture (Pettigrew, 1979). Thereafter, many studies have developed, define and explain the organisational culture s concept in numerous ways. Multiple scholars defined organisational culture differently (Hofstede, Neuijen, Ohayv & Sanders, 1990; Keesing, 1974; Schein, 1990).There are many organisational culture definitions, but there are not contradictory. According to Lee and Bin Ahmad (2009), evaluation of organisational culture in numerous dimensions has resulted in models and theories, that are conceptually distinct however 364

369 fundamentally similar. The economic participation of women in Asian countries is much lower than the countries of North America and Europe (Hausmann, Tyson, & Zahidi, 2011). Female to male ratio of management in Thailand were lower compared to the U.S. (Hausmann et al., 2011). Organisational culture is a barrier to development (Catalyst, 2003). Additionally, women often refer barriers to advancement associated with masculine cultures and unjustly inflicting constraint especially on a minority as an undesirable organisational culture, excluding from informal networks, attitudes towards women and stereotyping as well as gender discrimination (Catalyst, 2003, 2004; Metz & Tharenou, 2001; Wilson-Kovacs, Ryan & Haslam, 2006). According to Maume (2004), glass ceiling concentrating on inequality within management positions and profession trajectories due to the failure of female to reach the senior and executive level. As per Cotter, Hermsen, Ovadia and Vanneman (2001), there are three criteria of the glass ceiling; first and foremost, even though female and minority have the same qualifications, they still face obstacles in their career advancement. Second, limited promotional prospects have increased the number of men to survive to the top levels whereby women are not encouraged from the initial placement on the job ladder. Last but not least, the glass ceiling is developed when organisations may agree to pay high salaries to women, but they still hesitate to place them where they can contribute to the organization's profit. The organisational policies, career development, promotion and compensation are among the reasons contributing to glass ceiling that hamper women from reaching the top. Referring to Ibarra (1992) as well as Burke, Rothstein, and Bristor (1995), exemptions from crucial aspects of organisational life can lead to the severe disadvantages to the advancement of women s career. Furthermore, the findings of the research conducted by Jauhar and Kaur (2016) stated that organisational culture has a significant impact on female inequality in the organisation". However, Fullagar et al. (2003) stated recently more women participation in managerial positions than in the past in the United States. This is contradicting to previous researcher s findings. Thus ample of research has to be conducted at different points in time to figure out if such findings will continue to change over time. In order to develop appropriate organisational culture and attitude toward gender equality, the current research may reveal potential implications, especially to female managers. Proposition 1: Discriminatory organisational culture has a significant impact on female inequality in organisation Motherhood and Pregnancy stereotype There is a tendency for people making negative conclusions rather than making positive conclusions. Stereotyping often has a negative perception where it can be seen as ignorant and wrongful that is a far from the truth (Schneider & Barsoux, 2003). If it is demonstrated in a negative way it would create conflicts but on the other hand, it leads to cultural advantage. Often gender stereotypes impact the views of leaders and managers (Littrell & Nkomo, 2005). Rimashevskaia (2008) contended that certain social factors such as the nature of feminineness of childbearing, need social services and maternity leave is among the reasons labour force regards women as a burden. According to Agars (2004), while women trying to climb the corporate ladder, they have to confront pervasive gender stereotypes and gender discrimination. In addition, Eagly, Makhijani, and Klonsky (1992), as well as Heilman (2001), stated that women who are interested in achieving higher positions have to confront with negative stereotypes suggesting that women have low levels of leadership, career commitment, and emotional stability. 365

370 Furthermore, there is lack of female role models especially in many male-dominated organizations because of the preferences for masculine rather than feminine work styles (Davey, 2008; Eagly, Karau, & Makhijani, 1995; Linehan & Scullion, 2008; Yoder, 1994, 2002). On the other hand, there are contradictory findings found in stereotyping literature which women evaluated more favourably than men. Women are evaluated as favourable and sometimes more favourably compared to men (Eagly & Mladinic, 1989, 1994; Eagly, Mladinic & Otto, 1991). These are interesting findings and seem incompatible with the ones presented earlier in this research. Therefore, the guidance needed for the researcher so that renewed attempts to analyse gender stereotypes at work will make a significant contribution (Agars, 2004). Marital status becomes as an important role in women's career enhancement over men. Employers regarded married men as a responsible and stable (Gattiker & Larwood, 1990). Employers are unwilling to recruit married women, especially those who are mothers due to the likelihood of employment interruption (Adler, 1993). In addition, Jauhar and Kaur (2016) contended that married women stereotypes has a significant impact on women inequality in the organisation. In Malaysia and other Asian countries, married women and women after childbirth have the tendency to leave the job (Kaur, 2004). However, there is dissimilarity to the general findings in the literature whereby married women with children and employed husbands were exceedingly satisfied with their profession (Schneer & Reitman, 1993). These are compelling findings. In order to resolve the time conflicts between career and family responsibilities the working women with families will choose flexible jobs, that is progressively available (Silver & Goldscheider, 1994).While, if in families that both husband and wife are working, the husband will be taking care of children their during the time their employed wives on non-regular shifts (Presser, 1986, 1988). Women s decision regarding their professions are influenced by the tendency of society treating women differently and the social expectation towards them. Halpert, Wilson and Hickman (1993), as well as Corse (1990), argued that pregnant managers are warmer but less dedicated, less reliable, less authoritative to their job, being more emotional and irrational compared to non-pregnant managers, thus the disadvantages that women faced in the workplace are not limited to salary. On the other hand, Corse (1990) contended that a pregnant manager is unbiased, being more understanding and empathetic compared to the non-pregnant manager. This is compelling finding, however, there are contradiction findings regarding the motherhood and pregnancy women in the organisation. Why are mothers believed to be less dedicated to their job? Researcher opines that mothers confront subtle discrimination when employers making evaluations of hiring, promotion, and the decision of pay. The current research concern on why would be a motherhood and pregnancy leads to drawbacks in the workplace? Literature reviews regard to discrimination on pregnant women at work by Russell and Banks (2011) has emphasised the dearth of empirical evidence examining the experiences of pregnant women at work (McDonald & Dear, 2006). The present research will examine, does motherhood and pregnancy stereotype leads to female inequality in the organisation. Proposition 2: Motherhood and Pregnancy stereotypes has a significant impact on female inequality in the organisation. Role congruity theory Conflict still exists in the workplace, especially within leadership roles for women. According to Eagly and Karau (2002) as well as Eagly, Karau, and Makhijani (1995), when people hold beliefs or stereotypes of a group that is incompatible with the behaviour considers necessary to 366

371 succeed in a particular role is known as prejudice. Both men and women seek to achieve and adhere to the responsibilities provided to them in society through the role-related skills (Eagly et al., 2000). Due to role congruity, leadership thought as a more masculine role and dominated by men. These include terms of the glass ceiling, which have been well defined and proven. As stated by Eagly and Karau (2002), congruent between gender and other available roles, such as leadership roles known as gender role congruity. Eagly & Karau (2002) contended that leadership is more congruent with the masculine gender role compared to the feminine gender role. Moreover, Powell, Butterfield and Parent (2002) stated that the gender of the leader is not the main focus as long as the leader has to have masculine characteristics and ascribed to leaders in many contexts. Besides, Eagly, Karau, and Makhijani (1995), as well as Heilman (2001), stated that women confronted discrimination on leadership positions specifically in male dominated organisations, for instance, the women s gender role perceived as incongruent with the positions. In addition, masculine business environments have low female labour force participation rate that holding top positions in organisations (Eagly, 2004; Eagly & Carli, 2003). However, Brabant and Mooney (1986), as well as Bergen and Williams (1991), stated that between 1972 and 1988 gender stereotypes showed slight changes. While there is a slight increment in gender stereotyping based on 18 longitudinal types of gender stereotypes research that have been conducted (Lueptow et al. 1995). Besides, research conducted towards 60,470 respondents consisting of both men and women revealed that around 46 per cent of them reported preferring men than women bosses (Elsesser & Lever s, 2011). In addition, Talbot (2003) and Kattara (2005) stated that women managers confront stereotyping such as not able to conduct meetings well, incompetent in giving orders, and unable to challenge ideas that they disagree. Thus, the present research examines the factors causing female inequality in Malaysia organisations (discriminatory organisational culture as well as motherhood and pregnancy stereotype) to female inequality in organisations. Discriminatory Organisational Culture Motherhood and Pregnancy Stereotype Female Inequality in Organisations Figure 1: Conceptual Framework Method Research Design This conceptual model is a quantitative research with self-administer questionnaires distribute for collecting the data to examine the relationship between discriminatory organisational culture as well as motherhood and pregnancy stereotype on female inequality in organisations. Sampling and Administration of Survey This current research is non-probability sampling. In purposive sampling, the researcher will focus on service industry in Malaysia. Based on Department of Statistics Malaysia, Gross Domestic Product Fourth Quarter 2016, the highest key contributors to the Malaysia economy is 367

372 service sector with 54.6 per cent. The growth rate for service sectors was 5.5 per cent. The current research unit of analysis will be the female labour force in this sector, especially focusing on the female manager. Referring to labour force survey report 2015 by Department of Statistics Malaysia, the number of female managers and male managers were 1,619, 000 and 5,567,000 respectively. Does it mean that organisations are reluctant to appoint females to managerial positions? Supportive manager behaviours have a positive relationship with employee performance and satisfaction (Kraus & Gemmil, 1990). In addition, Davis, Schoorman and Donaldson (1997) contended that if the managers identify with the organisation they are motivated to bring success and empowered to carry out their jobs as this will allow them to utilise their initiative in promoting the organisation success as well as their principals. The sample size that is larger than 30 and less than 300 is normally applicable for most research, thus recommended sample size should be 10 times the number of variables in the research (Sekaran, 2003). There are 3 variables in the present research. Based on this thumb of rule, 30 respondents are required to conduct this research, but the researcher set the sample size for 100. Conclusion Gender inequality is still an essential issue because females persist underrepresented at leadership levels. Optimising female talents and leveraging diversity is important because men and women will complement each other to enhance the sustainable growth of organisations and economic. References Acker, J. (2006). Inequality regimes gender, class, and race in organizations. Gender & society, 20(4), Adams, R. B. (2016). Women on boards: The superheroes of tomorrow?. The Leadership Quarterly, 27(3), Adams, R. B., & Funk, P. (2012). Beyond the glass ceiling: Does gender matter? Management science, 58(2), Adler, N. J. (1993). An international perspective on the barriers to the advancement of women managers. Applied Psychology, 42(4), Agars, M. D. (2004). Reconsidering the impact of gender stereotypes on the advancement of women in organizations. Psychology of Women Quarterly, 28(2), Barch, J., & Yee, L. (2011). Unlocking the Full Potential of Women in the US Economy. McKinsey & Company Special Report (April). Retrieved from l_potential.aspx Bass, B. M., & Avolio, B. J. (1993). Transformational leadership: A response to critiques. In M. M. Chemers & R. Ayman (Eds.), Leadership theory and research: Perspectives and directions (pp ). San Diego: Academic Press. Bergen, D. J., & Williams, J. E. (1991). Sex stereotypes in the United States revisited: Sex roles, 24(7), Brabant, S., & Mooney, L. (1986). Sex role stereotyping in the Sunday comics: Ten years later. Sex Roles, 14(3-4), Burke, R. J., Rothstein, M. G., & Bristor, J. M. (1995). Interpersonal networks of managerial and professional women and men: Descriptive characteristics. Women in Management Review, 10(1),

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378 Examining Residents Receptiveness towards E-waste Recycling in Penang, Malaysia Chee Hui Tan Graduate School of Business, Universiti Sains Malaysia, Malaysia T. Ramayah School of Management, Universiti Sains Malaysia, Malaysia Jasmine A.L. Yeap School of Management, Universiti Sains Malaysia, Malaysia Say Keat Ooi * Graduate School of Business, Universiti Sains Malaysia, Malaysia ooisaykeat@usm.my * Corresponding Author Abstract Purpose: Discussions concerning climate change and sustainable development draw on an increasing focus of recycling practices. While evidence suggesting that attitude and subjective norm influence individual s behaviour, this research intends to examine if those variables are applicable in the electronic waste (e-waste) recycling practices, in addition to how environment knowledge and awareness, personal norm, social norm, as well as recycling habits extend the Theory of Reasoned Action (TRA). Design/methodology/approach: A behavioural framework was adapted from the TRA, and questionnaires were disseminated randomly to residents of an urban, highly populated state in Malaysia to determine the significant predictors of e-waste recycling intention of Penang residents. Partial least squares analysis was conducted on the 269 usable responses. Findings: E-waste recycling intentions are predicted by attitude towards recycling as well as subjective norm. Environmental awareness and knowledge influences attitude while both personal and social norms influence subjective norm. Recycling habit has no moderating impact on the attitude-intention to recycle relationship. Research limitations/implications: The TRA has been extended by the inclusion of belief factors affecting attitude and subjective norm and also a moderating variable on the attitudeintention to recycle relationship. The extended TRA model can be successfully applied to explain e-waste recycling intentions among residents in Penang. Practical implications: An understanding of the influential factors of e-waste recycling intention would definitely help the government to revise or formulate necessary policies and support programmes on promoting e-waste recycling behaviour towards a sustainable society. Originality/value: This paper contributes to the understanding of the e-waste recycling intention of the Penang residents. Keywords: Electronic waste recycling, Attitude, Recycling habits, Environment knowledge and awareness, Theory of Reasoned Action. 374

379 Introduction The Intergovernmental Panel on Climate Change (IPCC) reports asserted that climate change is unambiguous, and the man-made (anthropogenic) greenhouse gases (GHGs) emission has been proven as the primary cause of climate change (IPCC, 2007; 2014). The reports suggested that the industries have become more aware of the considerable climate change risk implications, and those businesses have started to reveal their corporate sustainability practices through corporate reporting practices (Amran & Ooi, 2014; Ooi & Amran, in press). Obviously, the businesses have some crucial role to play in tackling climate change and addressing sustainable development issues (Amran et al., 2015; 2016). Nevertheless, individual environmentallyoriented behaviour and practices, such as recycling, has been highlighted as an important measure for environmental and climate change challenges (Chan & Bishop, 2013). In fact, these climate change and sustainable development concerns have led to rapidly increasing recycling practices (Bjorklund & Finnveden, 2005). The recycling behaviour and practices should be encouraged as it not just to reduce the consumption of non-renewable resources, but reduce the GHGs emission (climate change and environmental impacts). Despite its importance to preserve the environment, the extent of recycling awareness is still relatively low among Malaysians, only 15% of waste was recycled, compared to Singapore (59%), Taiwan (60%) and Germany (62%) (Bernama, 2016). Malaysia is falling behind in recycling rate compared to the neighbouring and developed countries. Due to the sustainable development benefits of recycling, there is a need to encourage more Malaysian to recycle. Most of the past research focused on recycling of paper, plastic, glass and aluminium, there is limited research which focus on electronic waste, or more commonly known as e-waste recycling. Due to the growth of social status and enhancement of lifestyles, there is a demand for newer and more advanced technologies (Amran et al., in press) and this has caused the life span of electronic devices to become shorter. Hence, more and more out-dated electronic devices, which were obsolete, have been discarded. In fact, United Nation s report indicated that 41.8 million tons of e-waste have been discarded in 2014, which put our community and the environment at risk (Balde et al., 2015). E-waste is explained as all obsolete, outdated or discarded electronic and electrical devices or equipment which are commonly used in daily life (Electronic Recyclers of America, 2006). Common household and office items considered as e-waste include computers, facsimile machines, mobile phones, photocopier, radio, television sets, video recorders, and CD/DVD players. E-waste is harmful to humans as well as the environment as it contains relatively high amount of toxic heavy metal and substances such as mercury, lead, cadmium, chromium, lithium and nickel. Presently, e-waste is mostly discarded as garbage in landfills as there is no proper and sufficient mechanism to handle the waste. In reality, these wastes can contaminate or pollute the land surface or ground water either in the short or long term. Therefore special pre-treatment and disposal process is needed to filter and neutralise the toxics and chemical content from the waste before they are exposed into the environment (Sinha-Khetriwal et al., 2005). Improper handling of e-waste causes negative impacts to the environment and residents, thus effective and efficient recycling activities or programmes need to be carried out. According to Hamzah and Adeline (2011), domestic e-waste is expected to increase as the population of Malaysia in urban areas increases, coupled with the adoption of modern lifestyles and demand for newer eletronic devices. In order to prevent any delay in e-waste management, the Penang government has carried out many recycling activities. Approximately

380 communities comprising institutions, government agencies, as well as the non-governmental organisations participated in these recycling activities (Social Economic & Environment Research Institute, 2009). Although Malaysia has her own recycling policies but still, its recycling rate is lower compared to Singapore where Singapore has more public support and participation in their Singapore s National Recycling Policy (NRP) (Ramayah et al., 2012). Furthermore, data analysis of the Penang E-waste Project indicated that the low e-waste recycling rate among residents is due to lack of awareness of recycling, causing low recycling activities (JICA Expert Team, 2012). Despite e-waste recycling systems implemented in Penang, the e-waste recycling rate is relatively low. Changing the perceptions and discarding rigid behaviour towards e-waste recycling is not an easy task. With that, this research aims to identify the determinants that influence the e-waste recycling intention among the residents in Penang. By knowing the important determining factors of e-waste recycling, this study will help to increase the e-waste recycling rate in Penang, and hopefully it can assist to enhance the effectiveness of e-waste recycling systems in Penang. Moreover, it can also be used as a reference model to other states/cities of Malaysia. Literature Review Underlying Theory In this study, the Theory of Reasoned Action (TRA) forms the basis of the research model developed. TRA explains the rationality of human beings in which people can think and rationalize whether to carry out an action or not in performing certain behaviour (Ajzen & Fishbein, 1980). According to Ajzen and Fishbein (1980), an individual's behaviour is primarily determined by the intention of that individual to perform a behaviour in question. Behaviour is volitional and people choose the reasonable choice among other alternatives under a high degree of volitional control (Han et al., 2010). Intention is influenced by two factors as shown in Figure 1 below. Firstly, attitude towards the behaviour, i.e. individual belief toward the action performed after evaluating the consequence and desirability of the action and secondly subjective norm, i.e. individual perception on whether they will act accordingly as a result of the important person or people thinking that they should perform the behaviour in question. Attitude toward behaviour Intention Behaviour Subjective norm Figure 1: Theory of Reasoned Action (TRA) Source: Adapted from Ajzen and Fishbein (1980). 376

381 Theoretical Framework and Hypothesis Development According to Davies et al. (2002), environmental awareness and knowledge is a cognitive component to attitude where it has a direct relationship with attitude. Shih and Fang (2004) stated that attitude consists of the belief on the awareness of consequences with the multiplication of individual's self-valuation. Studies have shown that high levels of respondents' awareness of the harm that batteries, electrical and other e-waste devices bring ranks highly for recycling intentions (Keramitsoglou & Tsagarakis, 2013). Consequently, Tan and Lau (2010) mentioned that it's important for the government to understand the environmental knowledge of citizens in order to promote a favourable attitude towards environment among Malaysian consumers. However, Wang et al. (2010) found that general awareness of the environment is not a significant influence on the willingness of residents to participate in e-waste recycling. Interestingly, it's surprising that Malaysian students considered it difficult to have a positive attitude in protecting the environment even when they had a strong awareness and knowledge of the environment (Hassan et al., 2010). In fact, many researchers found that environmental awareness and knowledge is significant influence to the recycling attitude and recycling behaviour (Aung & Arias, 2006; Nnorom et al., 2009; Keramitsoglou & Tsagarakis, 2013). Furthermore, according to Ramayah et al. (2012), environment-related knowledge and awareness is significant in influencing attitude. In general, majority of research show that environmental knowledge and awareness is positively and significantly related to attitude. Hence the following hypothesis was developed. H1: Environmental knowledge and awareness is positively related to attitude. According to Afroz et al. (2011), attitude of residents should be included in studies as attitude is the important indicator showing positive influence on recycling behaviour. This finding is also supported by Ojedokun (2011) and Swami et al. (2011) where both stated that personality trait needs to be incorporated in behaviour models. Indeed, many researchers show that recycling attitude can positively and significantly influence recycling intention and indirectly influence behaviour (Tonglet et al., 2004; Bezzina & Dimech, 2011; Ramayah et al., 2012). Besides, several researchers have suggested that the attitude-behaviour gap and value-action gap be investigated because individual may not necessary recycle as the attitude does not translate into actual behaviour though the respondents might declared themselves to be recycle and environmentally conscious (Blake, 1999; Ajzen, 2008; Vermier & Verbeke, 2008). Hence, the following hypotheses was developed. H2: Attitude is positively related to recycling intention. Subjective norm concerns the influence from others in forming a norm behaviour where subjective norm is significant when the social influence is strong (Bezzina & Dimech, 2011). In other words, this means that social norm has a significant and direct influence on subjective norm where positive social norm leads to positive subjective norm. The social norms that a person perceived from other people or social group who are important to him/her directly influences the person's recycling behaviour (Do Valle et al., 2004). This means that people are more likely to practice recycling if they felt that the community where they live in, namely friends, families and neighbours around them are also practicing recycling. During implementation of a new recycling system, strong social norm is especially needed to encourage new adoption (change in environment behaviour) as people do not know their adoption is accepted by those around them (Carrete et al., 2012). Furthermore, according to Nnorom et al. 377

382 (2009), recycling behaviour is influenced by social norm where behaviour is shown by friends to be the major influence of a person's behaviour. Thus, the following hypotheses is developed. H3: Social norm is positively related to subjective norm. According to Schwartz (1968a, b), social norm is more likely to translate into personal norm when the normative value is internalized at personal level. In other words, since the social norm is positively related to subjective norm, naturally personal norm is also positively related to subjective norm. However, when an individual notices that he/she behaviour has no visible effect on others, this will influence and weaken the personal norm of that individual to transform into behaviour (Bratt, 1999). This is supported by Davies et al. (2005) whereby individuals practising high levels of recycling cannot be presumed to increase the recycling levels of others because those high levels of recycling may be viewed as extreme environmentalist behaviours. Nevertheless, many other researchers found evidence that personal norm significantly influences behaviour. According to Jansson et al. (2010), personal norm has a significant, positive influence on willingness of the behaviour. Similarly, Aung and Arias (2006) mentioned that strong personal norm can help to increase the intention and behaviour of residents towards waste management. Subsequently, Kalafatis et al. (1999) also stated that personal norm is posited to have a significant impact on behaviour. With majority of research works stating that personal norm has a significant impact on subjective norm, hence following hypotheses is developed. H4: Personal Norm is positively related to subjective norm. Key theories like TRA and (Ajzen & Fishbein, 1980) and the Theory of Planned Behaviour (Ajzen & Fishbein, 1980) asserts that subjective norm positively influences behavioural intention. According to Taylor and Todd (1995), attitude and perceived behavioural control positively influences the intention to recycle. In addition, many studies found that subjective norm positively and significantly influences behavioural intention (Cheng et al., 2006; Baker et al., 2007; Han et al., 2010; Ranjbarian et al., 2010; Ramayah et al., 2012). In this sense, it is hypothesized that: H5: Subjective norm is positively related to recycling intention. Recycling habit is measured by the past experiences of recycling which indirectly influences actual recycling behaviour by acting as a predictor to recycling intentions (Wang et al., 2010; Ittiravivongs, 2012). According to the research of Knussen and Yule (2008), recycling habit has moderated the relationship of attitude-intention and made a significant contribution to the variance of intention to recycle. This finding can be supported by Webb et al. (2009) where habit has a moderating effect on the intention to recycle. For example, people who have strong habit to recycle will tend to act following their past experience whereas people who have a weak habit will tend to act following their intentions (Verplanken et al., 1994; Ouellette & Wood, 1998). This is because past behaviour is vital in strengthening current intentions when the waste disposal practices are done automatically without thought and becomes habit eventually (Tucker, 2003). Once the habit is formed, it's more difficult to change and formed a new habit. In fact, recycling habit shows significant negative moderating effect to recycling intentions where people with strong recycling habit are likely to recycle automatically and pass to actual behaviour without focusing on how they feel towards recycling (attitude) (Ittiravivongs, 2012). Therefore, it is hypothesized that the moderating effect of recycling habit on the relationship between the attitude and recycling intention is such that: 378

383 H6: The effect of attitude on recycling intention is weaker when recycling habit is high. Figure 2 presents the theoretical framework of this study. Recycling Habit Environmental Awareness and Knowledge Attitude Recycling Intention Personal Norm Subjective Norm Social Norm Figure 2: Theoretical Framework Method Sample and Data Collection The targeted respondents for this research are residents of Penang. To qualify as participants for the study, the targeted respondents must fulfil the conditions of having resided in Penang for at least 3 months and being at least 18 years old. Data was collected using questionnaires via a nonprobability sampling technique (convenience sampling). A total of 300 questionnaires were distributed randomly to participants either through face-to-face or online. Out of the 275 questionnaires collected back, only 269 were found usable for data analysis. The response rate for this study, i.e. 92%, is considered good and reasonable compared to the response rate for some studies on e-waste recycling carried out by other researchers. For instance, Wang et al. s (2010) study on e-waste recycling in Beijing only garnered a response rate of 60%. Measures The questionnaire used in this study comprised of four sections. The first section provided some brief information on e-waste recycling. The second section asked for respondents demographic details such as their gender, age, nationality and ethnicity. The third section assessed respondents environmental awareness and knowledge, attitude towards recycling and their recycling habit as well as their personal, social and subjective norms while the final section assessed respondents intention towards e-waste recycling. Table 1 presents details on the measurement items pertaining to the variables examined in this study. The items were measured using a five-point Likert scale (1=strongly disagree to 5 strongly agree). 379

384 Findings Data was analysed using a combination of two software namely SPSS version 20 and SmartPLS 3.0 (Ringle et al., 2015). SPSS was used to get a feel for the data through frequencies, descriptive and principal components factor analysis whereas SmartPLS 3.0 was used for the estimation of both measurement model as well as structural model. Respondents Profile Out of 269 respondents, majority of the respondents were females (59.5%). The respondents comprised of year olds (42.0 %), followed by < 25 years olds (26.8%), year olds (23%), year olds (6.7%) and lastly > 51 year olds (1.5%). Almost all respondents were Malaysians (97.8%) whereby majority were residents of Penang (71.0%) who have been staying in Penang for more than 3 years (71.0%), followed by those who have been staying for 3 to12 months (16%) and 1 to 3 years (13%). Most of the respondents were Chinese (69.5%), followed by Malays (22.3%), Indians (4.8%) and other minority races (3.3%). Generally, majority of respondents surveyed were highly educated individuals who had Masters or PhD degrees (42.4%) and Bachelor degrees (40.9%) while the rest had either a secondary school or diploma level education (14.9%) and primary school level education (1.9%). A large percentage of them are still single (72.1%) whereas the remaining ones were either married (26.4%), divorced (1.1%) or widowed (0.4%). Table 1: Properties of the Measurement Items Construct Definition Source No. of items Environmental Individuals understanding of the Tonglet et al. (2004), 6 Awareness and Knowledge environment problem or issue in question as a prerequisite to intend and behave in certain way. Ramayah et al. (2012) Attitude Psychological motion that determines whether the individual s evaluation of performing the behaviour is favourable or unfavourable. Ramayah et al. (2012) 4 Personal Norm Social Norm Subjective Norm Recycling Habit Recycling Intention Individual s belief on his/her behaviour s outcome which influences attitude towards behaviour. How an individual is perceived to be held by other persons or social group that are important to him/her. A function of belief that specific individuals approve or disapprove when performing a behaviour. Repeated practices that are deeply rooted in daily life and tradition. Immediate determinant of behaviour, whether to perform or not perform a specific behaviour. Bezzina & Dimech (2011) Bezzina & Dimech (2011) Tonglet et al. (2004), Ramayah et al. (2012) Ittiravivongs (2012) 3 Han et al. (2010) 3 In terms of recycling experience, some of the respondents have been recycling for 1 to 3 years (28.6%), followed by those who have been recycling for more than 5 years (20.1%) and 3 to 5 years (7.4%). However, there were still many of them who have only been recycling for less than a year (43.9%). Majority of the respondents revealed that they usually recycled 1 to 2 types of materials (58.0%) while some recycled as many as 3 to 4 types of materials (32.7%). Only a

385 small group of the respondents recycled as many as 5 to 6 materials (6.3%) and more than 6 materials (3.0%). Common Method Bias The measurement items used in this study were tested for common method bias which is variance attributed to measurement method rather than variance explained by the study s constructs. To test for this bias, the Harman s single factor test was employed. There is evidence for common method bias if one principal factor counts for the majority of variance explained (Podsakoff & Organ, 1986); that is if the percentage of variance explained for a single component in the factor analysis exceeds 50 percent. Results of the principal components factor analysis revealed that the principal factor explained as much as % of variance explained indicating no domination of a single factor. In addition, common method bias is usually reflected by extremely high correlations (r > 0.90). In this study, the correlations between constructs did not exceed (see Table 3), signifying the lack of common method bias. Measurement Model The measurement model consists of relationships between the indicators and the constructs. Evaluation of the measurement model concerns establishing convergent and discriminant validity. Convergent validity is the extent to which a measure correlates positively with other measures of the same constructs (Hair et al., 2014). In other words, it is the degree to which dimensional measures of the same concept are correlated. To establish convergent validity, outer loadings of the indicators, average variance extracted (AVE) and composite reliability are considered (Hair et al., 2014). Table 2 lists the outer indicator loadings, composite reliabilities and AVEs for the constructs in this study. Table 2: Convergent Validity Measurement Items Outer Loading CR a AVE b Environmental Awareness and Knowledge Recycling saves energy Recycling creates a better environment for future generations. Recycling help protect the environment Recycling is a major way to reduce pollution Recycling is a major way to reduce wasteful use of landfills. Recycling is a major way to conserve natural resources Attitude I believe that my recycling behaviour will help to reduce pollution I believe that my recycling behaviour will help reduce wasteful use of landfills. I believe that my recycling behaviour will help conserve natural resources. I feel good about myself when I recycle Personal Norm I believe that recycling is good and rewarding I feel that responsibility to separate waste

386 I encourage other people to separate and recycle their waste. Social Norm In our society, recycling is the right things to do The responsible authorities are doing their best to address the issue of waste management. The general public is doing its part to address the issues of recycling. Subjective Norm Most people think I should recycle Most people would approve of me recycling My friends expect me to engage in recycling behaviour My family expects me to engage in recycling behaviour Recycling Habit I feel that I have a habit of recycling waste I agree that I recycle waste without consciousnesses I think that I recycle waste because it is my habit Recycling Intention I am willing to recycle e-waste I plan to recycle e-waste I will make an effort to recycle e-waste Note: a Composite reliability = (square of the summation of the factor loadings) / [(square of the summation of the factor loadings) + (square of the summation of the error variances)] b AVE = (summation of squared factor loadings) / (summation of squared factor loadings) (summation of error variances) As Table 2 shows, the outer loadings of all indicators, ranging from to were well above the acceptable threshold of 0.70 (Hair et al., 2014). The AVEs of all constructs exceeded the general rule of thumb which is 0.50 (Hair et al., 2014). Composite reliability scores for all constructs were above 0.70 thereby indicating high internal consistency reliability (Hair et al., 2014). In short, there was sufficient evidence to conclude that convergent validity was established. Discriminant validity is the extent to which a construct is truly distinct from other constructs (Hair et al., 2014). It can be established using the Fornell-Larcker criterion which compares the correlations between constructs with the square root of the AVE for a construct. Using this criterion, the square root of each construct s AVE should be greater than its highest correlation with any other construct (Hair et al., 2014). Table 3 presents the establishment of discriminant validity for this study s measurement model. The elements in the matrix diagonals, representing the square root of the AVEs, are greater in all cases than the off-diagonal elements in their corresponding row and column, indicating adequate discriminant validity. Table 3: Discriminant Validity Constructs ATT ENV HAB INT PER SOC SUB Attitude (ATT) Environmental Awareness and Knowledge (ENV) Recycling Habit (HAB) Recycling Intention (INT)

387 Personal Norm (PER) Social Norm (SOC) Subjective Norm (SUB) Note: Diagonals represent the square root of AVE while the off-diagonal entries represent the correlations between constructs. Structural Model The structural model concerns the relationships between the constructs. A bootstrapping procedure of 2000 resamples was applied in the analysis of the structural model to obtain the t- values and standard errors needed for determining the path (relationship) significances. Table 4 reports the statistical results of the structural model. As the results show, environmental awareness and knowledge (β=0.629, p<0.05) had a significant positive effect on attitude, accounting for 39.5% of variance in attitude. Personal norm (β=0.310, p<0.05) and social norm (β=0.207, p<0.05) were found to have a significant positive effect on subjective norm of which personal norm held the stronger effect on subjective norm between the two variables. Both variables explained as much as 20.5% of variance in subjective norm. Attitude (β=0.525, p<0.05) was observed to positively affect recycling intention, as did recycling habit (β=0.255, p<0.05). However, subjective norm (β=0.03, p<0.05) was found to have no significant impact on recycling intention. As for the moderating effect, recycling habit (-0.101, p=0.119) did not exhibit any significant influence on the relationship between attitude and recycling intention. Altogether the proposed model accounted up to 47.6% of variance in recycling intention, with attitude exerting the strongest effect on recycling intention among all other variables. In sum, only H1, H2, H3 and H4 were supported. Table 4 summarized the results of the structural model. Table 4: Results of the Structural Model Dependent variable Independent variable Path Attitude Environmental Awareness and Knowledge t-value R 2 coefficient * Subjective Norm Personal Norm * Social Norm * Recycling Intention Attitude * Subjective Norm Recycling Habit * *p<0.01 Attitude x Recycling Habit Discussion The findings revealed that all the hypothesized paths were found to be significant except for the relationship between subjective norm and recycling intention and the moderating effect of recycling habit on the attitude-recycling intention path. Environmental knowledge and awareness has been found to be positively significant with attitude. This is supported by Ramayah et al. (2012), as environment-related knowledge and awareness is positively related to attitude. People with high awareness of environmental consequences are the ones with higher intentions of recycling (Hopper & Nielsen, 1991). According to Maio (2011), environmental concern is the strongest predictor for environment protection actions. This is because by having the knowledge 383

388 and awareness on the consequence, an individual knows the reason or necessity behind recycling is and this knowledge shapes the attitude that individual (Tucker, 2003; Comber & Thieme, 2012). Hence, awareness acts as an important factor influencing habitual non-recycling behaviour and simultaneously increases the positive attitude of recycling (Comber & Thieme, 2012). The positive relationship between attitude and recycling intention found in this study is verified by previous studies. As Tonglet et al. (2004) explained, people will recycle only when they regard that the positive outcomes can be derived from their actions. Individuals with strong attitude toward ecological sustainability will have strong intentions to recycle (Comber & Thieme, 2012). Similarly, attitude was found to be an important predictor to recycling intention and this transforms into recycling behaviour (Nigbur et al., 2010).This is because individuals who have a positive attitude believe that recycling can reduce the pollution problem, thus they are more likely to recycle (Ramayah et al., 2012). Both personal norm and social norm were found to have a positive impact on subjective norm in this study. Many researchers have found that personal norm is a powerful motivator for the environmental behaviour (Hooper & Nielsen, 1991; Vining & Ebreo, 1992; Stern & Dietz, 1994). According to Bedford et al. (2010), identity (personal norm) is a strong power affiliation to social groups where person norm is strongest influence to the pro-environmental values in a social group. This is because once a person believes himself to be a recycler, he would assume the identity of a recycler and this would be difficult to be influenced by any other motivation (Thomas & Sharp, 2013). The opposite is also true. Those people may have felt that their identity (not recycling) be threatened when they perceived the pressure to recycle from others and this threat causes people to refuse to change (Murtagh et al., 2011). On the other hand, subjective norm is largely determined by internal social influence than external social influence where internal social influence is explained as family and external social influence is explained as friends and neighbours (Taylor & Todd, 1995). This finding supported by Gronhoj and Thogersen (2012) and Torres-Antonini and Valtralova (2012) who discovered that parents act as important role models to influence the behaviour of their children through their beliefs, value and pro-environment behaviour within the interaction in household. Additionally the pro-environment behaviour of neighbours also acts as an important influence to the individual, leading to intention and obligation to act the same behaviour (Juneman, 2013). In the study conducted by Chu and Chiu (2003), primary normative belief and secondary normative belief are important predictors for subjective norm where primary normative belief is explained as family, friends and neighbours and secondary normative belief is explained as government and environment society. The relationship between social norm and behavioural intention is stronger when the individual's sense of group membership is increased which is recognized as social influence (Braun & Clarke, 2009 ; Cialdini, 2009). However, it is interesting to note that between personal norm and social norm, personal norm exerts a stronger influence on subjective norm, as shown in this study s findings. Respondents tend to maintain their personal beliefs instead of merely being relying on social norm. This may be due to the recycling norm having already assimilated into the personal norm of an individual whereby this recycling value becomes consistent with their internal values. Kelman (1961) attested to this where he stated that persisting social norms can progressively and gradually internalized into personal norms when the pro-environment social norm is stabilised. In contrast, subjective norm was not found to have a significant to recycling intention. Tekkaya et al. (2011) found similar results whereby subjective norm does not have a significant impact on 384

389 recycling intention. This could be due to the reason that attitude exerts a much stronger influence on recycling intention compared to subjective norm. This is supported by Godin et al. (1990) who posited that when attitude and perceived behavioural control is significant and positively related to intention, subjective norm becomes the weakest or a negative predictor to recycling intention. Moreover, many researchers found that subjective norm has no relationship or a weak relationship with intention when attitude and perceived behavioural control exhibit stronger impact on intention (Taylor & Todd, 1995; Chu & Chiu, 2003 ; Knussen et al., 2004). Recycling habit was found to have no moderating effect on the relationship between attitude and recycling intention. This may be due to the strong recycling intention that minimizes the moderating effect of recycling habit. For instance, habit has weak moderating effect when the intention is strong and vice versa (Thomas & Sharp, 2013). When individuals have strong recycling intentions, they will recycle even though they have a weak recycling habit. On the other hand, the relationship between intention and habit is weaker recycling is a non-habitual behaviour (Ouellette & Wood, 1998). Theoretically, this study has extended the TRA through the addition of variables that affect the two core components of the theory namely attitude and subjective norm. The addition of beliefs particularly environmental awareness and knowledge, personal norm and social norm as precursors to attitude and subjective norm showcase the importance of capturing beliefs that are central in shaping how an individual regards recycling (attitude) and what the individual thinks others would like him to do (subjective norm). Apart from that, the inclusion of a moderator such as recycling habit in the research framework provided better depiction of consumers recycling intentions while clarifying findings of previous studies. Examining recycling habit is valuable given the influence of past behaviour (recycling habit) towards intention has not been reconciled fully given contradictory findings from various studies (Barr et al., 2003; Miafodzyeva & Brandt, 2012; Tonglet et al., 2004). In terms of practical contributions, the findings of this study will enable the local government to better understand the e-waste recycling behaviour of Penang residents. This study has also provided some benchmark or reference model for other states in Malaysia to increase their e- waste recycling rate. Thus far, Penang has the highest recycling rate (30%) compared to other states in Malaysia, exceeding the 2020 recycling target rate (20%) of Malaysia (CleanBiz Asia Ltd, 2013). A full understanding of factors motivating and discouraging people to recycle will help to increase the recycling rate (Afroz et al., 2011). Awareness campaigns and advertisements are especially required because it is very likely that respondents indifference towards recycling is due to their lack of awareness and knowledge about the importance of environmental conservation and how it affects them (Md Zain et al., 2012). Thus, the idea is to get them to first be aware of all the environmental concerns happening around them and the benefits of doing their part by recycling so that their attitude towards recycling will change for the better. This will lead to higher intentions of recycling and once they start recycling and develop the action into a routine, such recycling actions would gradually turn into a habit. Conclusion This study has shown that the TRA can successfully be applied to explain e-waste recycling intentions among residents in Penang. It has been found that a person s e-waste recycling intentions are personal, predicted largely by his or her attitude towards recycling rather than the approval or disapproval of specific significant individuals in a person s life. Such attitude is determined by the person s environmental awareness and knowledge Furthermore, if one s 385

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395 Do Small and Medium Practitioners (SMPs ) Service Quality and Non-Audit Service Fees Paid Matters? The Mediating Role of Satisfaction of Small Medium Enterprises (SMEs) Yuvaraj Ganesan* Graduate School of Business, Universiti Sains Malaysia, Penang, Malaysia. yuvaraj@usm.my Hasnah Haron Faculty of Industrial Management,Universiti Malaysia Pahang, Pahang, Malaysia Ishak Ismail Faculty of Industrial Management,Universiti Malaysia Pahang, Pahang, Malaysia Anwar Allah Pitchay School of Management, Universiti Sains Malaysia, Penang, Malaysia * Corresponding Author Abstract Purpose: The present study examines the effect of service quality of small and medium practitioners (SMPs) that provided by non-audit services (NAS) to satisfy small and medium enterprises (SMEs) and satisfaction effect to level of fees paid for the NAS. In addition, were investigating the mediating effect of satisfaction in the relationship between services quality and level of fees charges. Design/methodology/approach: This study utilised exploratory research design and based on cross-sectional. The unit analysis is SMEs as the perception of SMEs on the quality of non-audit services by SMPs is the main concern of this study. The population of this study is consists of clients who have received NAS from SMPs. Random sampling method used to distributed 450 questionnaires to the respondents which are identified from SME Corporation website. Findings: A total of 106 usable responses was utilized to answer the research objectives. The research findings indicated that service quality has a significant relationship with satisfaction and level of non-audit fee. In addition, we also find that satisfaction also has a significant relationship with the level of non-audit fee. It was also discovered that satisfaction mediates the relationship between service quality and level of non-audit fees. Research limitations: The limitation of study is the data collected based on perceived using same five Likert scale for all variables. Practical implications: This contributed to services provided of NAS particularly SMPs that they need to focus in some of the services quality dimensions in order to improving the satisfaction level of their customer and indirectly able to charging the level of fees SMPs planned to charge to sustain their business in the long run. In addition, this study served as guides to Malaysia Institute of Accountants (MIA) to understand the perception of SMEs on SMPs on services quality and 391

396 helps them to drafts/improved relevant standards to improve the quality of NAS and maintain good image of MIA and accountants. Originality/value: This is one of few studies that highlighted quality of NAS provided by SMPs which linked to the satisfaction and level of fees of NAS from the perception of SMEs. Keywords: SMEs, Non-audit services, Services Quality, Satisfaction, Level of non-audit fees Introduction Small Medium Enterprises (SMEs) play an important role on the world economy as a potential contributor such as creating job opportunities, and maintaining the overall health and welfare of the world s economy (Korsching & Allen, 2004). In most developing and transitioning countries, it is found small businesses have significant advantages such as alleviate poverty (Morris, Woodworth & Hiatt, 2006) and contribute to national sustainable development (Tilley & Parrish, 2006). In most countries, SMEs play vital role on a country s economic growth. However, the optimum potentials of these SMEs remains undiscovered even though SMEs actually dominates the economy of a country as far as the employment and number of companies are concerned (Schlogl, 2004). A matter of consideration here is, though there is a wide understanding of the advantages and positive impacts of SMEs in the growth of economics, the economic importance of SMEs are yet to be tested in a wholesome manner. Having understood the importance of SMEs contributions towards the national economy, it is timely to study the ways and means to benefit the prospective of SMEs. Through this research, a way that can be suggested is the evaluation of the role of professional accountants in enhancing the business advisory services or non-audit services (NAS) in order to help SMEs manage their business decisions in a more informed manner (PAIB Committee, 2005). This is important because the SMEs are facing shortage of skilled personnel, low expertise in technical and management knowledge and human resource constraints (Ting, 2004; NSDC 2012). Past literatures have highlighted that SMEs will look for the external advisor to overcome weaknesses and constraints in order to improve business performance (Bennett & Robson, 1999; Berry, Sweeting, & Goto, 2006; Xiao & Fu, 2009). External advisor refers to solicitor, consultants, external accountants, chambers of commerce, bank, academia, government agencies and so on (Bennett & Robson, 1999; Berry, et al., 2006; Ong, Azmi, Isa, Jusoh, & Kamarulzaman, 2008). Previous studies found that external accountants are the main advisors to SMEs (Bennett & Robson, 1999; Berry, et al., 2006; Leung, Raar, & Tangey, 2008). This finding is also sync with past study conducted in New Zealand where the results show that accountants are the key source of advice for SMEs. Accountants are frequently referred to, and their advice is rated as significant and useful (Lewis, Massey, Ashby, Coetzer, & Harris, 2007). The research conducted by Deakins, Logan, and Steele (2001) find that accountants assist in establishing networks, advice in business performance and ensure that learning happens in SMEs. The same study also identified that SMEs who seek advice from accountants are usually in the beginning stage of the business cycle. Meanwhile, research conducted in Malaysia shows that there are six areas that SMEs will normally seek for assistance from an external accountant and they are: (i) accounting services, (ii) taxation services, (iii) assurance services, (iv) corporate services, (v) corporate finance services and (vi) business consulting services. Among the services offered by external accountants, taxation service is rated as the top most service that is sought after by SMEs (Ong, et al., 2008). 392

397 NAS also may rescind an accountant s professionalism and the client if Small and Medium Practitioners 1 (SMPs) provide the services with lower quality. The quality of service performed depends on the level of fees being charged (Chia, Lapsley & Lee, 2007). According to Frankel, Johnson & Nelson (2002), audit firm used non-audit fees as their strategy to increase their income and the fees being charged to their clients were not based on the quality of work performed. Carcello, Hermanson, Neal, and Riley (2002) finds that firms are willing to pay high audit fees in order to receive good quality of audit service. Meanwhile, Chia et al. (2007) stated that the amount of audit fees charged is depends on the quality of audit services. The higher the audit service quality is, the higher will be the amount of fees charged. Auditors might charge any level of fees if they only provide non- audit services because there is no regulations to control it (Craswell & Guest, 2000). SMPs need to provide services with good quality to SMEs. With this assistance, SMEs will be able to overcome the challenges and barriers. Thus, this will increase the efficiency of the SMEs and also reflect to positive contribution to country s economic growth. Directly, SMPs are able to increase the firms revenue by capturing the SMEs market by offering the service needed by them. In addition, they can determine level of fees which can be charged without impairing their independence. Non-audit service is as important as audit service because the responsibility is almost the same as audit service and the effect to accountant of lower quality service with may destroy the client and as well as the auditor professionalism. Therefore, this study would like to explore services inform of NAS by SMPs may have quality that influence satisfaction level of SMEs and the effect of satisfaction on the level of non-audit fees. Furthermore, we investigate the mediating effect of satisfaction in the relationship between services quality and level of fees paid. It becomes an interesting gap in the academic and this issue need to be investigated. Literature Review Service Quality Quality is an emotional experience for customers which deal in purchase of products or/and services offered by sellers. Every customer aims to feel satisfied, expected to get best value for money and also proud to be dealing with a company with high quality image. Johnson (1991) find that customer wants to know whether the money is well spent. Quality is defined by Oakland in his book Total Quality Management as satisfying customers requirement and is not limited to the functional characteristics of a particular product or service. Quality is considered as a pushing factor for people in any organization to perform better and improve in their own functions. In addition, it is also the enabling factor to pursue a common goal which unites people with different abilities and priorities to readily communicate with each other. In order to meet the different demands and needs of individual customers, products and services are designed with intentional differences in quality. Customers able to compare the performance, features, reliability, conformance, durability, safety, aesthetics, serviceability and other perceptions if a product is tangible (Garvin, 1984). On the other hand, the quality of services such as non- audit services which are classified as intangible products are difficult to be defined and measured. Therefore, several arguments states that customers tend to define quality of intangible products or services in terms of its value to themselves (Heskett, Sasser & Hart, 1990). 1 Small and Medium Practitioners (SMPs) is represent audit firm, non-audit firm and external accountant. 393

398 Services have been given various definitions according to the researches done. It is considered as a performance which can be offered by one party to another. Service is necessarily intangible and does not end up to any kind of ownership (Kotler, 2006). Ramaswamy (1996) concluded through his research, that service is a business transaction taking place between a donor who is the service provider and the receiver who is the customer. This is in order to come out with an outcome which satisfies customers. Besides this, each service provider often supplies different services and performance of services (Booms & Bitner, 1981). There are very less chances for a service provider to reproduce the same results consistently and exactly the same. In addition, production and consumption takes place together, therefore services are inseparable (Upah, 1980). The assessment of deliverance of service level compared to customer expectations is defined as service quality by Lewis and Booms (1983). Adapting to customers expectations consistently is what meant by the deliverance of quality services. According to Parasuraman, Zeithaml, and Berry (1985), service quality is intangible and heterogeneous varying from customers, days or producers, therefore it is very difficult to define or measure it. There are two types of service quality proposed by Gronroos (1984), which are technical and functional quality. Gronroos (1984) developed the first conceptual model of service quality. The purpose of this model is to increase the understanding of the perceptions of customer service quality and also the factors influencing those perceptions. Many other comprehensive model of service quality was later developed based on the model created by Gronroos (1984). A function of the differences between expectation and performance with the quality dimensions is what has been proposed by Parasuraman et al. (1985) as service quality. Tangibles, reliability, competence, responsiveness, access, courtesy, credibility, security and communication, understanding/knowing the customers are the ten dimensions determining service quality according to Parasuraman et al. (1985). The determination of the overall perceived service quality as proposed by them are the differences between the comparison of perceived performance and expected performance of these particular ten dimensions. According to Ziethaml, Parasuraman, and Berry (1990), original dimensions are not necessarily independent of one another; the ten dimensions have been grouped into 5 groups. The relationship among items representing several of the original ten dimensions is revealed by several statistical analyses done earlier. The refinement of the original model, in addition to the confirmation of its reliability and validity is done through these analyses of data. Only five distinct dimensions are in the final SERVQUAL model, but it still captured the aspects of the ten original dimensions as following: 1. Reliability refers to the ability to perform the promised service dependently and accurately. 2. Responsiveness reflects the willingness to help a customer and provide prompt service. 3. Tangible refers to the appearance of the physical facilities, equipment, personnel and communication material. 4. Assurance refers to knowledge and courtesy of employees and their ability to inspire trust and confidence 5. Empathy refers to caring, individualized attention the firm provides its customer. SERVQUAL was used in auditing sector in some studies done by Ismail, Haron, Ibrahim, and Mohd. Isa (2006). They concluded that public listed companies in our country were only satisfied with tangible dimensions. They found that relationship between reliability dimensions and customer satisfaction are partially mediated by customer loyalty. Bungsu (2004) found out that SMEs were not satisfied with all the SERVQUAL dimensions especially on reliability dimension. 394

399 But she found a positive pattern between customer loyalty and service quality. The adapted SERVQUAL model was used by Che (2008) with the purpose of examining the relationship between the perception of SMEs on the quality of service and the level of fees. Satisfaction As satisfaction has received considerable attention from various disciplines, it is very hard to define what satisfaction is (Oliver, 1997). In marketing context, satisfaction is an expectation of what customers perceived in the performance of products (services or goods) (Kotler & Armstrong, 2001). Satisfaction involves the evaluation or judgment as Yi (1990) stated that customer satisfaction is driven by expectation in performance and experience. Bitner (1990) proposes the expectation-disconfirmation model and attribution theory to explain customer satisfaction from services encountered with lower perception than expectation. It implies that disconfirmation leads to customer satisfaction, and vice versa. Conversely, Oliver (1980) argued that satisfaction occurs when the product positively disconfirms consumers expectation by performing better than expected. Moreover, Oliver addressed that satisfaction could also occur when the product confirms consumers favourable pre-purchase expectations. Customer satisfaction is also about purchase and consumption experience. Andreassen and Lindestad (1998) stated that customer satisfaction is accumulated of the experiences in purchase and consumption. This is in line with Crosby, Evans and Cowles (1990) where they stated that the past satisfaction experience will affect customer s decision to repurchase or re-consume. The emotional perception and perceived functionality will drive the Satisfaction of customer (Kotler, 1996). Instead of debating the definition of satisfaction, this research proposes the Hill (2003) description of satisfaction. They surmise: All you have to do is think of how you feel when you are a customer in a supermarket, on the train, having a car serviced anywhere. Satisfaction is simple. If you get what you want, if your requirements are met, you are satisfied. If you are not met, you will not be satisfied. The above description describes customer satisfaction as the relationship between customer wants and customer requirement. In the end of 1990s, the satisfaction term has been shifted to delighted. Rust and Oliver (2000) stated that there is no merely satisfied customer, because there will be satisfied customer as long as there is no better offer; meanwhile, delighted customer is more than likely to remain loyal. Kotler and Armstrong (2001) confirmed this preposition. They argued that companies should not only satisfy the customer but rather exceed the customer satisfaction to the delight level. Bitner and Hubber (1994) conceptualized the satisfaction and its determinant using two frameworks, namely: 1. Transaction Specific Satisfaction or Encounter Specific, which is customer s dissatisfaction or satisfaction with discrete service encounter, and 2. Overall Satisfaction or Cumulative Satisfaction, which is the customers overall dissatisfaction or satisfaction with the organization based on all encounters and experiences with particular organization. According to Zeithaml and Bitner (2000), there are four factors that influence perceptions of service and satisfaction feeling, which are: (1) Product and service feature, (2) Customer emotions, 395

400 (3) Attribution for service success and failure, and (4) Perception of equity. These four influencing factors are aligned with Hempel (1977) who mentioned that customer satisfaction is determined by the degree of realization of product benefits that customers expect from products. Level of fees Level of fees has been identified as an average price at which products or services are charged. (Wynne, 2008). But according to Hall (2002), level of fees is considered as a practice to setup a specific standard. This is in terms of the weight of work given, the distance and the value of work carried out. Besides this, level of fees as defined by the Malaysian Institute of Accountant (MIA) By-law B1-6 is refers to the fees which is charged to the client, as long as it does not endanger the professionalism of an auditor in any way (By-Law, pp 30-39). In this study, level of fees is defined as satisfaction of a customer upon receiving service from the audit service. By Law B-6.1 Professional fees charged by members in public practice shall be a fair reflection of the value of the work performed for the client, and shall take into account inter alia - (a) the skill and knowledge required for the type of work involved; (b) the level of training and experience of the persons necessarily engaged on the work; (c) the time necessarily occupied by each person engaged on the work; and (d) the degree of responsibility and urgency that the work entails B-6.2 (1) No member shall charge an unrealistically low professional fee. Fees are charged at different levels which it is depend on the client s company size (Palmrose, 1986). Meanwhile Besacier and Schatt (2007) find that it is based on companies business sector. On the other hand, Simunic (1980) state that fees are charged according to the type of risk being handled and, Naser and Nusibeh (2007) revealed that corporate size, status of the audit firm, industry type, degree of corporate complexity and risk are the main determinants the fees. In the context of Malaysia, Nizam, Haron, and Ahmad (2005) find that in the year 2001 and 2002, the size of audit firm become the significant impact in the determination of audit fees for SMEs. MIA By- Law has come out with a benchmark on the fees to be charged for the Malaysian audit market. This serves as a guideline for auditors on the level of audit fees to be charged. In spite of this, there is still lack of proper guideline given for the level of fees to be charged for the non- audit services. Therefore, we realize that level of fees to be charged is a subjective matter. This is especially for the non-audit services as there are no guidelines. Based on the research done by Ismail et al. (2006), 98% of respondents from the public listed companies all over Malaysia felt that high level of fee for taxation is reasonable for the current service provided to them. Theoretical Framework and Hypothesis Development Based on the past studies contribution to the area of study, we developed a theoretical framework to demonstrate the relationship between service quality, satisfaction and level of non-audit fees paid. Figure 1 shows, service quality as the independent variable, level of non-audit fees paid is the dependent variable and satisfaction as the mediator. The key relationship in this model is to determine whether the satisfaction will mediate the relationship of service quality and the level of non-audit fees paid. The basis of the theoretical framework in this research is based on DeAngelo s (1981). The quality theory being applied on non-audit services which DeAngelo (1981) used this model in audit service. The tested theory explain that with good control the audit service increased and as outcome 396

401 higher fees able to charge. It stressed by DeAngelo (1981) that client willing to pay high amount of audit fees with the aim to receive a high quality of service. The dimensions in Service Quality adapt from Parasuraman, Berry, and Zeithml (1991), and Ismail et al. (2006) where they stated there are five (5) dimensions: tangible, reliability, Responsiveness, Assurance, and Empathy. Previous research such as Behn et al. (1997) and Gao (2003) found there is relationship between service quality and satisfaction. In term of the relationship between satisfaction and level of fee, Athanassopoulos (2000) argued that the direct link between satisfaction of customers and the level of price/fee. Furthermore, Palmroses (1986) find there is a significant relationship between service quality and highly paid fee. Niemi (2004) find firms tend to pay higher fees to big audit firms with the expectation that the big audit firms will provide good quality in audit services. SERVICE QUALITY Tangible Reliability Responsiveness Assurance Empathy SATISFACTION Figure 1: Theoretical Framework LEVEL OF NON- AUDIT FEES PAID Service Quality and Satisfaction High service quality is a driver for the success of the firm (Ismail et al. 2006). Past studies find that service quality leads to customer loyalty (Lewis, 1994), and also higher profitability (Gundersen et al., 1996). Service quality is also induce the satisfaction of the customers (Ismail et al., 2006). Service quality is an important factor of customer perception because it is an antecedent to customer satisfaction (Ismail et al., 2006). Pasuraman et al. (1998) address five dimensions in assessing the service quality which are; reliability, responsiveness, assurance, empathy, and tangibles. The similar also concluded that these five dimensions can enhance the satisfaction of customers. Zeithaml and Bitner (2003) address that customer expectations are beliefs about service delivery that function as standard or reference point against which performance is judged. Furthermore, they explained that to satisfy the customers, it is essential to know what customer expects. Then, the expectation can be matched to the service quality dimensions. Bolton and Drew (1991), and Sohail (2003) stated that service quality has a significant relationship to customer satisfaction. Fornell et.al, (1996) states that the satisfaction of customer is depends on the experienced of customer which valued the quality of services. Zeithaml and Bitner, (2000) defined that satisfied customer would remain loyal, required service more often, fewer price sensitive and shall talk favorable things about the company. In the other contexts, by using SERVQUAL model, Sewell (1997) found in medical studies that patients emphasize greater importance on reliability dimension. Angelopoulou, Kangis, and Babis (1998) find that quality perception in services has significant influence on customer satisfaction. This finding is also sync to Manaf (2006) who finds service quality perception has effect on customer satisfaction. 397

402 In the context of auditing, service quality offered by audit firms is a very important issue when signs of dissatisfaction with the service arises (Behn, Carcello, and Hermanson, 1997). Bad service quality will consequence to dissatisfaction and at the end of this transaction, it will affect the audit firm s reputation (Fuerman, 2003). Behn et al. (1997) investigated the relationship between audit service quality and client satisfaction. The study finds that responsiveness, effectiveness, on-going interaction and the appropriate conduct of audit field influence the clients satisfaction significantly. This finding is also sync to Gao (2003) who find that audit service quality has positive and significant relationship to clients satisfaction. In the context of Malaysia, Ismail et al. (2006) conducted a study on 115 public listed companies and the study find that there is a partial relationship between service quality and satisfaction. Thus, based on the past empirical evidences, the following below are the hypothesizes for the present study; H1: Service quality has a significant relationship with satisfaction. H1a: Tangibility has a significant relationship with satisfaction H1b: Assurance has a significant relationship with satisfaction H1c: Responsiveness has a significant relationship with satisfaction H1d: Reliability has a significant relationship with satisfaction H1e: Empathy has a significant relationship with satisfaction Satisfaction and Level of Fees Paid The service marketing field was used to investigate further on the relationship between satisfaction and level of fee. According to Kotler and Keller (2006), a satisfied client would not mind paying at any price for the services they received. Meanwhile, Athanassopoulos (2000) highlighted the direct link between satisfaction of customers and the level of price/fee. Ennew and Binks (1999) examined over 1,200 small firms which investigate the impact of customers satisfaction retention. The study find that small firms in UK tend to have paid higher fee behaviour after receiving satisfaction as the form of customer retention. Meanwhile, Hallowell (1996) find the direct relationship between satisfaction and level of price/fee. In the context of Malaysia, Sohail and Saeed (2003) find that the satisfaction relationship to level of fee in pursuing private higher education in Malaysia. It is very rare to find research examine the link between satisfaction and level of fee in the context of auditing. Hay et al. (2006) find the relationship between satisfaction and audit fee by using meta-analysis. Ali, Sahdan et.al, (2006) confirmed the findings. The study find significant relationship between satisfaction and level of audit fee in Malaysia companies after investigating KLSE listed companies over the period Therefore, this research hypothesizes that H2: Satisfaction has a significant relationship with the level of non-audit fees paid. The Mediating effect of satisfaction on the relationship between service quality and Level of non-audit fees paid The level of satisfaction and issues of measurement can mediate the development of conceptual relationship between services quality and level of fees. This is to reveal the power of both direct relationship and mediating effect which could help to strengthen the association between service quality and the level of fee. According to Niemi (2004), small clients are still satisfied with the quality of the audit as the quality service is in-line with the given prices. Hallowell (1996) constructed the mediating effect of satisfaction on the relationship between service quality and the level of fee. This is done by using behavioural intention perspective. Satisfaction is considered as a value perception, which is based on the quality of service delivered 398

403 and the satisfaction is very closely related to price. Therefore, the mediating effect on satisfaction is revealed. It is based on the relationship between service quality and level of fee. This is again reconfirmed by Athanassoupoulos (2000). The attribution of price is highly associated with customer satisfaction. Therefore, this research can hypothesize that: H3: Satisfaction has a mediating effect on the relationship of service quality and level of nonaudit fees paid. H3a: Satisfaction has a mediating effect on the relationship between tangibility and level of nonaudit fees paid. H3b: Satisfaction has a mediating effect on the relationship between assurance and level of nonaudit fees paid. H3c: Satisfaction has a mediating effect on the relationship between responsiveness and level of non-audit fees paid. H3d: Satisfaction has a mediating effect on the relationship between reliability and level of nonaudit fees paid. H3e: Satisfaction has a mediating effect on the relationship between empathy and level of nonaudit fees paid. Methodology The absence of information and also very few previous researches on the service quality of nonaudit service, therefore, the present study employed exploratory research design. The perception of SMEs on the quality of non-audit services by SMPs is the main concern of this study. As a result, SMEs is the unit of analysis in this study and we only focuses on SME organizations as the end users of the non-audit services. The nature of the present study is based on cross-sectional. The target population of this study is consists of clients who have received NAS from service providers that are the audit firms and non-audit firms. NAS includes secretarial practice, taxation, consultation and internal audit. The samples or respondents selected for the study are SMEs that received NAS from SMPs only excluding the Big 4 firms. This research employed primary data obtained from the survey questionnaires which are sent to SMEs in Malaysia. The questionnaire is distributed using random sampling method. A total of 450 questionnaires are distributed to the respondents which are identified from SME Corporation website. The questionnaire is comprised of three (3) variables; services quality, satisfaction, and level of fees and likert-scale used as the parameter to measure the tested items. Firstly, the service quality measured through five (5) dimensions and 22 items which are tangible (3 items), assurance (5 items), responsiveness (4 items), reliability (5 items) and empathy (5 items). The service quality variables in this research are similar to SERVQUAL model used in Ismail et al. (2006). Secondly, the satisfaction about the NAS provided by small and medium practitioners (SMPs) is measured by 4 items. The service quality and satisfaction dimensions are measured using the rate on a scale of 1 (strongly disagree) to 5 (strongly agree) their agreement with regards to statements provided. On the other hand, the level of non-audit fees paid is measured by requested the SMEs to choose the average range amount of fees that have paid for the NAS over the past 3 years to SMP on the 5-items likert scale range, from 1 to 5. 1 for less than RM1, 000, 2 for RM1,000-RM3, 000, 3 for RM3, 001-RM5, 000, 4 for RM5, 001-RM10, 000 and 5 is More than RM10, 000. The final data is analysed using multiple-regression analysis using Statistical Package for the Social (SPSS). 399

404 Findings A total 106 questionnaires have been collected and can be used for data analysis. The factor analysis and reliability test are performed to validate and reliability of the constructs. All the variables in study fulfil the requirement of goodness of measurement. Table 1 below provides the descriptive statistic for the tested variables. The mean values is range from 3.29 for responsiveness to 4.05 for empathy. Thus, the relatively lowest standard deviation (0.39) was non-audit fees and Responsiveness as the highest one (0.83). Table 1: Descriptive statistics Variables Mean Std. Deviation Tangible Assurance Responsiveness Reliability Empathy Satisfaction Non-audit Fees The relationship between Service Quality and Satisfaction Table 2 below shows the multiple-regression results between service quality and satisfaction. We find the first hypothesis 1 (H1) result shows service quality has a significant relationship with satisfaction. The model is significant with R square 0.524, Adjusted R square 0.500, and F Value (p<0.001). This implies that in model, the coefficient of determination (R square) was found to be 52.4 percent of the level of client satisfaction is explained by quality of service. The result showed that the Service Quality dimension such as Tangible (β= 0.322; p<0.001), Assurance (β= 0.177; p<0.05), Responsiveness (β= 0.318; p<0.001), and Reliability (β= 0.232; p<0.001) were found have a positive influence on client satisfaction. However, empathy was found no relationship with client satisfaction (β= ; p>0.05). In summary, only H1a, H1b, H1c, and H1d were accepted while H1e was rejected Table 2 below surmised that SMPs has to emphasize on the responsiveness and tangible of service quality to induce the satisfaction level of its clients. As depicted by the result, the clients will have higher satisfaction level, if the quality delivery has higher quality in tangibility and responsiveness. Table 2: Relationship between Service Quality and Satisfaction Standardized Coefficients (β) Tangible.322*** Assurance.177* Responsiveness.318*** Reliability.232** Empathy R².524 Adjusted R².500 F Note: *p<0.05, **p<0.01, ***p<

405 The relationship between Satisfaction and Level of Non-audit Fees paid Hypothesis 2 tested in this section. H2 is developed to test whether satisfaction has a significant relationship with the level of non-audit fees. Table 3 below indicates the relationship between clients satisfaction and level of non-audit fees. The F value of is significant at p< 0.001, indicating that the model is significant. R² of indicates that the model can explain 24.6% of the variance in fee was explained by the client satisfaction. Client satisfaction is positively related with level of fees (β= 0.496; p<0.001). Therefore, the H3 accepted. This indicates the more the SME satisfies, the more SME willing to pay non-audit fee higher. This result sync with the previous study result conducted by Fornell et al (1996), and Athanassoupoulos (2000). The past studies stated that satisfaction level has significant association with level of fee. Table 3: Relationship between satisfaction and Level of Non-audit fees paid Standardized Coefficients (β) Satisfaction.496*** R².246 Adjusted R².239 F Note: *p<0.05, **p<0.01, ***p<0.001 The Mediating Effect of Satisfaction on the Relationship between Service Quality and Level of Non-Audit Fees paid In this study, bootstrap method is used based on Hayes s PROCESS tool in SPSS to answer the mediating relationship. This method is robust because it focused on the effect of mediation via the indirect effect and produce the confidence interval for the effect. According to Field (2013), if the confidence interval does not include a value of zero, then it can be concluded that the indirect effect of service quality to level of non-audit fees paid is significant and mediation is established. In addition, the effect size of indirect effect can view by kappa-squared by the range a small effect is 0.01, medium effect would be around 0.09 and a large effect in the region of Table 4 below depicted the results of mediating analysis. From five dimensions of services quality, only three dimensions which are Tangible (b=0.109, BCa CI [0.063, 0.178]; k 2 =0.224), Reliability (b=0.079, BCa CI [0.026, 0.158]; k 2 =0.141) and Assurance (b=0.072, BCa CI [0.025, 0.148]; k 2 =0.148) have significant indirect effect on level of non-audit fees through satisfaction as the confidence interval did not include zero value showed that there are mediation effect. Table 4: The indirect effect of services quality on Level of non-audit fees paid by satisfaction. effect (b) Bootstrapped standards Confidence Interval Kappa squared (k 2 ) Mediating error Lower Upper Effect Size Level Level Tangible Yes Reliability Yes Responsiveness No Assurance Yes Empathy No 401

406 Discussion The Relationship between Service Quality and Satisfaction Table 2 shows that there is a relationship between service quality and satisfaction. Statistically, it showed that Tangible (β=0.322) and Responsiveness (β=0.318) have a significant relationship to satisfaction at significant level. It also depicted that Assurance (β=0.177) of service quality has a significant effect on satisfaction at 0.05 significant level. Furthermore, it also shows that Reliability (β=0.232) has a significant relationship to satisfaction at 0.01 significant level. Parasuraman et. al, (1991) addressed that Reliability was ranked as the most important service quality dimension followed by Assurance, with Tangible being the least important dimension in service firms. This differs from the research result. This research suggests that Tangible and Responsiveness are the most important factor in service quality, followed by Reliability and the least important dimension is Assurance. Meanwhile, Empathy was not found to have any significant relationship with satisfaction. The high significance of Tangible and Responsiveness dimensions suggested that SMEs are more concerned about tangibility which implies anything that the client see and hear will affect their perception includes physical facilities, equipment and appearance of firm members. Responsiveness reflects how SMPs quickly responds to the issues in SMEs. For SMEs, the responsiveness into the issue that can be tackled is more important compared to Reliability and Assurance. This finding sync to Ting s (2004) study which found that SMPs need to be quick to respond to new demands and needs of their customers in order to sustain the business. The findings of this research contradict with past study conducted by Ismail et al. s (2006) findings. The past study find that listed companies in Malaysia expect audit firms to perform the services accurately. In other words, big companies are more concerned about the Reliability and Assurance dimensions. Tangible dimension is not given priority compared to Reliability and Assurance by large companies. Furthermore, the appearance of audit firm s physical infrastructure such as latest technology is not that important for the large companies (Ismail et al., 2006). Therefore, the Tangible dimension will not affect the satisfaction of a large company. Meanwhile, we can see in the profile of SMEs, this research result is in line with the characteristic. The size of SMEs in term of employees is very small which the range is between 5 to 19 employees and most of it have an average turnover of less than RM1 million. It indicates that SMEs have issues relating to human resource and difficulties in accessing information. This explains why SMEs need responsiveness and good tangibility from SMPs. However, in the end, the conclusion is still the same. The result still confirms the previous research such as Bolton and Drew (1991), and Boulding et al. (1993), Fornell et al. (1996), and Sohail s (2003) whereby the service quality has significant relationship to satisfaction. Depending on the companies sizes, whether big or small medium, they have different needs in service quality regards to satisfaction. In accounting context, the result is in line with Behn et al. (1997) where they found that responsiveness, effectiveness, on-going interaction and the appropriate conduct of audit field influences the clients satisfaction significantly. This research also confirms Gao s (2003) who found that audit service quality has positive and significant relationship to clients satisfaction. The Relationship between Satisfaction and Level of Non-Audit Fees Paid Table 3 suggested that there is significant relationship between satisfaction and level of fee at significant level. The result shows that satisfaction is significantly and positively related to the level of fee paid. It indicates that the more the SMEs are satisfied, the more the SMEs are 402

407 willing to pay for non-audit fee. This result confirms the previous researches such as Fornell et al. (1996), and Athanassoupoulos (2000). They stated that satisfaction level has significant association with level of fee. Based on the classic work of Oliver (1980), it is stated that customer satisfaction is a post-hoc evaluation of consumption experience. Anderson s (1996) addressed that customer satisfaction has its own limit and creates the level of price tolerance. Here, according to Anderson (1996), price tolerance is the maximum price increase which satisfied customers are willing to pay or tolerate before switching. It implies that customers have the tolerance level in price before they switch to others. As satisfaction will drive the loyalty and widen the price tolerance, this shows that there s a significant relationship to level of fee. SMEs will give wider price tolerance to SMPs as they perceived the satisfaction. The Mediating Effect of Satisfaction on the Relationship between Service Quality and Level of Non-Audit Fees This research also aims to investigate the mediating effect of satisfaction on the relationship between service quality and level of non-audit fees. This mediating effect is taken as the contribution of this research to the body of knowledge. Table 4 shows that the Tangible, Reliability and Assurance are established the mediation effect. It implies that there is mediating effect on Tangible, Reliability and Assurance dimension of service quality on level of non-audit fees through satisfaction. This result indicates that satisfaction plays a significant role in Tangible, Reliability and Assurance of service quality to drive SMEs in paying higher level of fee. The effect size for the mediation established for this three (3) dimensions are able to classify as medium to large as the effect size in the range of to On the other hand, Tangible, Responsiveness, Reliability, and Assurance are the dimensions affecting Satisfaction. This implies that SMEs need the physical report, transfer technology, enhancing human resource, and will feel no regret after spending money. Furthermore, the engagement meeting between SMPs and SMEs gives good perception about the knowledge, skills, technical ability, quick problem solving skill, trustworthiness, and good capability of the SMPs. This rationalization will give SMEs more satisfaction by the service quality. The indirect effect of service quality dimensions namely Tangible, Reliability and Assurance only have effects on the level of fee through satisfaction meanwhile Empathy and Responsiveness does not have indirect effect to level of fees. This implies that these three dimensions on service quality affect the level of fee after the interaction with satisfaction the SMEs willing to paying higher level fees. The effect of these three mentioned dimensions on level of fee has been strengthened as satisfaction interacts in between of the relationship. It can be explained that reputation plays a role in service quality. The appearance in knowledge, skill, technical ability, and responsibility, and trustworthy play more roles in level of fee after there is interaction of satisfaction. SMEs will not pay a higher fee only because emotional attachment or show willingness by SMPs and this implies that SMEs are rational in when it comes to the level of fee. The price tolerance also plays a role in this interaction. SMPs can show their Tangible, Reliability and Assurance from the engagement meeting until the final report. If this is the case, SMEs will not hesitate to pay higher fee to SMPs. Implication of study To this end, our study has shown that the levels of satisfaction and non-audit fees are determined based on the experience of the service quality. SMPs can increase the satisfaction and level of fee by providing good service quality in certain dimension. In term of satisfaction, SMPs can enhance 403

408 their service quality in Tangible and Responsiveness. They also can induce their Reliability and Assurance of service quality to satisfy SMEs as it has small significant level. SMPs might not waste their resource by emphasizing on Empathy of service quality as it does not have significant relationship to SMEs satisfaction. In other words, this research implies that SMPs can stress on Tangible and Responsiveness, Reliability and Assurance to satisfy the SMEs. SMPs have to make sure the firm members are well dress, neat and are polite to the clients. Besides that, SMPs also have to educate the staff so that they are more knowledgeable and well equipped with the latest updates and are able to answer questions which arise from the clients. Most importantly, SMPs have to be assured that the firm members being perform their task with professionalism. Apart from that, SMPs also must provide prompt services, exhibit willingness to assists their clients, delivers the services within the time frame as promised and performing service dependably and accurately as promised. In the end, SMPs has to induce certain part of their service quality to enhance the satisfaction as it can induce the level of non-audit fees. SMPs might increase the level of non-audit fees, if SMPs emphasize in Tangible, Reliability and Assurance dimension of service quality. Despite the findings that have been discovered and discussed, this study also realises its limitation that a proposal is made for future research. Researcher is suggested to conduct focus group interview which may provide qualitative information which enrich the finding of the research. The advantage is most of the information needed for the research can be gathered and the information will be more reliable. Besides that, future studies may increase the sample size where it can be consisted of all types of industries as different industries have different needs. Furthermore, future research, it would be useful to investigate the relationship between quality control and service quality from auditors' perspective. The reason is because the auditor knows best about their control. As this research addresses that SMPs have to pay attention to their certain dimension of service quality, SMPs also have to identify how their quality control can induce this dimension of service quality. Furthermore, SMPs can also induce their quality control for better satisfaction of SMEs. Conclusion There are several aspects of service quality dimensions that should be introduced to enhance the relationship between SMEs satisfaction and SMPs fees. The present study results indicate that the services quality dimensions such as Tangibles, Responsiveness, Assurance, and Reliability are important to be equipped by SMPs which able to improve the SMEs satisfaction and maintain their client s satisfaction. Meanwhile, SMPs should less focus on the dimension of Empathy compared to other dimension as it has been shown to have no effect on SMEs satisfaction. Furthermore, SMPs can enhance their non-audit fees by emphasizing on several dimensions on service quality. The dimensions that should be introduced by SMPs to enhance the fee are: Tangible, Reliability, and Assurance. On the other hand, SMPs should downplay the role of Responsiveness and Empathy as they do not have an indirect effect on the level of fee. Nevertheless, because Responsiveness has an effect on satisfaction, this indicates that this dimension cannot be eliminated so as to maintain or improve SMEs satisfaction. In conclusion, this study addresses that service quality has significant relationship on satisfaction and indirectly on level of fee. Therefore, SMPs should be aware the way can improve and maintain their clients satisfaction and their non-audit fees. 404

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413 Factors Influencing Poor Experience Quality in 2- To- 5-Star Hotels: A Content Analysis of Guest Reviews on Trip Advisor Poh Wai Choo* Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia stevenchoo0611@yahoo.com.sg Cheng Ling Tan Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia *Corresponding author Abstract Purpose: The objective of this study is to identify the problems influencing poor customer experience which has been expressed by customers in reviews called Trip Advisor. Design/methodology/approach: This paper investigates the reviews on 2-star to 5-star hotels located in Kuala Lumpur City (342 hotels), Malaysia. A content analysis of 64 reviews from Trip Advisor from 15 May 2016 to 15 May 2017 was conducted. Each specific customer s review of poor customer service experience is assessed according to the related context such as product experience, outcome focus, moments of truth and peace of mind. Findings: It implied that most upscale and luxury hotels indeed have performed better and have the least problems than lower rated hotels. Kuala Lumpur has 18.71% negative reviews on two- star hotels, 20 on three-star hotels, 18 on four-star hotels and 12 on five-star hotels are to be analysed descriptively. Research limitations/implications: This study selected hotels in Kuala Lumpur City and the selected negative reviews are evaluated in a limited time frame. Findings of this study might not be the same as those in different cities in the Malaysia and could limit generalisability in its findings. Practical implications: Trip Advisor review is a powerful source of customer-knowledgesharing platform which creates an innovative opportunity for managers/hotel industry players/ future researchers to consistently explore new method(s) to improve their new service offerings, avoid similar service failures, and reduce costs in hospitality firms. Originality/value: This content analysis aims to provide managers/future researchers as to what are the top-priority problems that contribute to poor customer experience and to help them to address the problems. The challenge is how managers/future researchers turn vulnerability of challenges into a competitive advantage. Keywords: Customer service experience quality, product experience, outcome focus, momentsof-truth, peace of mind. 409

414 Introduction Bendapudi and Berry (1997) have suggested that just as sick individuals should be studied to understand a particular pathology, so this research should address the poor customer experience to understand the phenomenon fully. The phenomenon can be explored through the acquisition from customer-knowledge-sharing platform which is the Trip Advisor review online site. This phenomenon helps service providers to identify what area (s) of competitive advantage and what fields that need to be improved about delivering exceptional customer experience. Customer experience incorporates company-customer interaction that includes both functional and emotional clues developed through different touch points (Khan, Garg & Rahman, 2015). The firm s capacity is to learn the phenomenon and as to how internal knowledge-based resources enable the development of new innovative knowledge that influences the degree of delivering quality customer service experience for the fulfilment of customers. The knowledge sharing via Trip Advisor review online site on customer experience journey touch-point activities include interactions between customers and service providers when making a room reservation, check-in at the front desk, while staying at the hotel and check-out at the front desk. This will further increase the value of capturing the real essence of sharing unfiltered and candid knowledge (Xie, Zhang, & Zhang, 2014). The knowledge is evaluated as accurate as customers have shared their rich personal views as for how they have experienced real-life 2-star to 5-star rated hotel services provided by service providers to them during their past hotel stays (TripAdvisor, 2016). This sharing of accurate knowledge is systematically analysed and used to investigate potential gaps of customer experience delivery design from the perspective of the customer journey touch point activities (Zomerdij & Voss, 2010). For example, before making a room reservation, a sensible action is seeking a few options of possible hotels to stay from Trip Advisor reviews online site, and then decides a preferred choice of a hotel which is expected to provide a reasonable quality accommodation and services. If the sought expectations are met or exceeded, service quality is perceived to be satisfactory (Chan & Tan, 2016; Chen & Tan, 2017). Customers can judge if their expectations are met after their customer experience journey of a hotel stay. The positive or negative judgments are then shared in the Trip Advisor review online site. The judgments can be supported with photos of customer s hotel stay. If there was a positive judgment, the customer has learned that staying in the chosen hotel was the right choice. His/her positive judgment increases the likelihood of repeat purchase behaviour and negative judgment, decreases the probability of repeat purchase behaviour. Hotel service providers can assess to the customer s judgment and reply to them. The key features of online sharing activities, such as ease of reference, enables companies to gain valuable insights about the trends of changing expectations on customer sought service experiences (Lee, Reid, & Woo, 2012); and how customers evaluate a company's response to their complaints or how those efforts influence subsequent customer relationships with the firm (Goodwin & Ross,1989). The customer experience journey touch-point analytically screened knowledge from online sharing activities can be permanently integrated to further improve the product or service (Kumar, Aksoy, Donkers, Venkatesan, Wiesel, Tillmann, 2010) and to further develop new services through consumer value co-creation (Rasa, Lai, & Indre, 2015). Trip Advisor has been attempting to minimise the problem of fake reviews since it was established in the year 2000 from Stephen Kaufer cofounder, Trip Advisor (Livingston, 2008). Trip Advisor (2017) has posted notices in their site warning that fake reviews will not be tolerated. Hotels that attempt to manipulate the system will be penalised in their rankings and notice of fake reviews will be posted (Trip Advisor, 2017). The power of the crowd from 410

415 consumer Generated Media (CGM) influences the fall of fake reviews as they are overwhelmed by genuine consumer generated content. Tourists tend to share knowledge in CGM as to prevent consumers from selecting inappropriate products and hiring poor services. Sharing this knowledge in CGM is considered an obligation of helping one another as consumers and protects themselves (Munar & Jacobsen, 2014) from irresponsible corporate marketers. This study attempts to minimize the problem of fake Hotel reviews through a screening process by choosing hotels with ten or more poor and terrible reviews. Each complainer s review is systematically examined by hand to locate the source of mistakes, problems or service failures -- performance that falls below customer experience quality expectations This screening process is also done in accordance with previous researchers (Ekiz, Lattimore, & Memarzadeh, 2012; Zehrer, Crotts, & Magnini, 2011) who have set a similar number of cases in order to enhance the authenticity of their studies. Accordingly, this study has reduced the number of hotels analysed from 342 to 64. Thus, a total of 64 individual valid scripts (one script from each hotel) of negative reviews are to be analysed descriptively on two- star hotels, 20 on three-star hotels, 18 on four-star hotels and 12 on five-star hotels. Hospitality Industry in Malaysia Tourism is one of the major focal points that the Malaysia government has been focusing on to stimulate economic growth (Nasurdin, Ahmad, & Tan, 2015). It has long been recognised as a primary source of capital inflow and a creator of jobs. Malaysia's tourism and hospitality sector is the 6th largest contributor to the national economy, contributing a total of RM161 billion or 5.7% of Gross Domestic Product (GDP) in At the same time, it generated 724,500 jobs representing 5.3% of total employment in Malaysia. This primarily reflects the economic activity generated by industries such as hotels, restaurants, leisure, travel agents, airlines and other passenger transportation services (excluding commuter services). Malaysia is ranked 26 th with the earnings of US$49.2 billion on the world country listing of Travel & Tourism s Total Contribution to GDP (World Travel & Tourism Council, 2015). The services sector is expected to grow at 6.8% per annum and contribute 56.5% to the GDP in 2020, and provide 9.3 million jobs (Economic Planning Unit, Prime Minister s Department, 2016). Table 1: Tourist arrivals in ASEAN countries Countries Brunei 3,279 3, Cambodia 4,210 4,503 4,775 Indonesia 8,802 9,503 10,407 Laos 3,779 4,159 4,684 Malaysia 25,716 27,437 25,721 Myanmar 2,044 3,081 4,681 Philippines 4,681 4,833 5,361 Singapore 15,568 15,095 15,231 Thailand 26,547 24,780 29,881 Vietnam 7,572 7,874 7,944 Source: ASEAN (2017). According to Table 1, Thailand has been a stiff competitor of Top tourism destination to Malaysia in terms of number of tourist arrivals between 2013 to According to the global, 411

416 Travel & Tourism Competitiveness Index 2015 Ranking (World Economic Forum, 2015), Malaysia was ranked 25 th compared to Thailand, 35 th. Malaysia has a better ranking in Travel & Tourism competitiveness owing to its tourism uniqueness -- combination of modern infrastructure, exotic jungles, lively historic ports, and ancient colonial heritage as well as the country s intercultural Asian atmosphere (World Economic Forum, 2015). Given the arrivals of international tourists to Malaysia as primary source of capital inflow (Nasurdin, Ahmad, & Tan, 2016) and Malaysia has been facing a stiff competition from Thailand in terms of tourist arrivals (ASEAN, 2017), the authors of this qualitative research are motivated to assess the expectations of customer service experience in Malaysia s hotels by applying the measurement of the customer service experience quality model introduced by Klaus and Maklan (2012). The measurement consists of product experience, outcome focus, moments of truth and peace of mind (Klaus & Maklan, 2012). Datuk Dr. Victor Wee, ex-chairman of Tourism Malaysia (2009 to 2013) has addressed that customer service experience is of paramount importance in Tourism Malaysia s agenda. He has rated the impact of customer service experience on Malaysia economy as Very High (Raydar Research.com, 2011). Malaysia Tourism Transformation Program Quality Assurance (MyTQA) provides recognition of the quality of tourism products, services and different cultures in Malaysia. It provides the exposure to industry players that delivering quality services is important (Motac Strategic Plan: , 2016). MyTQA is aligned to the ASEAN Strategic Tourism Vision Malaysia is part of the ASEAN which consists of 10 countries (ASEAN, 2016). To continue sustaining quality assurance, potential service gaps need to be identified and rectified. The service gaps are the problems that contribute to poor customer service experience. This research provides hotel industry players/managers and future researchers as to what are the top-priority problems that contribute to poor customer experience in hotels that should be addressed. To be leaders in Hospitality Industry, it is important to continuously explore innovative solutions to the evolving problems and redefine hotel delivery of services according to the changing expectations of focused customers. As the problems are evolving, continuous yearly analysis of the customers review from Trip Advisor on poor hotel service experience can be addressed. This paper attempts to analyse the problems addressed between May 2016 and May The aim of continuous improving hotel customer service experience is to increase hotel occupancy. A continuous joint collaborative effort from hoteliers and researchers to manage the differences/similarity among customer fulfillment of receiving lasting service experience can motivate tourists to choose Kuala Lumpur City as MICE and preferred tourism destination. Kuala Lumpur City Kuala Lumpur is the capital city of Malaysia and with a population of 1.73 million people as of This capital city is equipped with an excellent infrastructure, coupled with efficient transportation and communications systems. KL possesses the right ingredients to ensure meetings, incentives, conferences and exhibitions (MICE) on the run smoothly. KL's MICE facilities are of international standards and are located in various purpose-built centers, corporate and conference retreats, as well as hotels. The Meetings, Incentives, Conventions and Exhibitions (MICE) segment remains an important demand source to Malaysia, and the country continues to target this segment by offering financial incentives to organisers and planners. The country is a competitive regional MICE destination for high-profile international conventions. Based on International Congress and 412

417 Convention Association (ICCA) 2015 rankings, Kuala Lumpur was in the 3 rd position amongst ASEAN cities. According to JLL Hotel & Hospitality Group (2015), there are 42,000 hotel rooms in Kuala Lumpur (KL) with just under 1,000 rooms added in As at November 2014, additions to hotel supply have remained limited with approximately 740 hotel rooms and 160 serviced apartment units have opened in the city. The majority of the new supply is concentrated in KL Sentral and KL City Center (the Golden Triangle). Kuala Lumpur, an established Corporate and MICE destination, received 16,452,224 total hotel guests in 2014; of these, up to 60% constituted international guests. In fact, Kuala Lumpur is the top location regarding international visitations (37.5% of all international visitors to the country). This may be attributed to the fact that Kuala Lumpur is Malaysia s top international gateway city. One of the continuous improvement measure on the customer quality experience as a MICE destination is by managing negative feedback of customers staying in 2-star to 5-star hotels in Kuala Lumpur city through the Trip Advisor reviewer site. Negative feedback in bad customer service experience about Kuala Lumpur city will be addressed in the research methodology. Table 2: ASEAN countries ranking: number of meeting per city Ranking Cities Countries Meetings 1 Singapore Singapore Bangkok Thailand Kuala Lumpur Malaysia 73 4 Manila Philippines 41 5 Bali Indonesia 40 6 Hanoi Vietnam 18 7 Phonom Penh Combodia 9 8 Yangon Myanmar 6 Not listed Bandar Seri Begawan Brunei Not listed Not listed Vientiane Laos Not listed Source: ICCA (2015). Literature review The literature review in this section covers areas such as nature of experience and, customer experience quality (product experience, outcome focus, moments of truth and peace of mind). Nature of Experience Cohen (1979) and MacCannell (1989) have found that in tourism, the best way to analyse experiences is focusing on focusing from sociological point of view. According to them, tourists seek actual experiences while staying in hotels. Experience is an effective tool for differentiation (Cetin & Dincer, 2014), creating sustainable competitive advantage and a new engine of economic growth for hotels (Rena, Qiu, Wang, & Lin, 2016). Customers always have an experience -- good, bad or indifferent -- whenever they stay in a hotel (Berry, Carbone, & Haeckel, 2002). The key is how effectively hoteliers manage the experience. Khan et al. (2015) found that effective Hotel operation practices include a combination of functional and emotional experience benefits in hotel attributes. The business strategy and position of 2-star to 5-star hotels can influence the design of experiences. Hotel star-rated classification serves to provide 413

418 uniform expectations for customers. Regardless of 2-star or 5-star hotel, hoteliers should try to reach a better understanding of their guests to offer experiences desired by them (McIntosh & Siggs, 2005). Ladhari (2009) has established that consumption emotions experienced by guests vary according to the type of hotel in which they stay. Based on Richins (1997), consumption emotion set (CES) consists of any of 43 emotional descriptors, which are frustrated, angry, irritated, discontented, nervous, worried, scared, embarrassed, contented, fulfilled, optimistic, hopeful, happy, pleased, joyful, excited, thrilled, surprised, amazed, and astonished. To prove the claim from Ladhari (2009), this paper attempts to explore different types of the hotel (2-star, 3-star, 4-star and 5- star). Regarding service experience, consumption emotion is of the utmost importance. According to Barsky and Nash (2002), consumers feelings about a service affect their loyalty and willingness to pay more. Pricing is currently the hotels competitive advantage. The way prices are presented must take into account consumer psychology, balancing the consumers desire for bargains with their understanding of the overall cost of the total customer experience they are purchasing (Morgan, 1996; Al Khattab & Aldehayyat, 2011). The aim is to explore the actual interaction experiences that the customers had with their service providers during their past hotel stays. It offers clues on how to design products and services to facilitate positive experiences. This paper attempts to determine the gap between what hoteliers believe they deliver and what customers have experienced during past hotel stays. Customer Experience Quality The key to providing superior service is learning to understand and respond to the customer changing expectations (Parasuraman, Berry & Zeithaml, 1991). To do so, Hoteliers and researchers need to understand customers and respond to their problems by learning their changing expectations of experience and with the learned knowledge, attempt to continuously improve the quality of customer experience through continuous team collaborative innovation. The frontline employees and cohesive cross-functional team should have highly innovative behaviour -- fast in developing innovative solutions/experiences and frequent introduction of new innovative solutions/experiences to customers (Vera & Crossan, 2005). The origin of this validated experience quality (EXQ) research was conducted in the United Kingdom by Klaus and Maklan (2012), and they have examined into retail banking, mortgage, fuel and service station and luxury goods. Khan et al. (2015) adopted EXQ -- product experience, outcome focus, a moment of truth, and peace of mind -- scale measurements from Klaus and Maklan (2012). Khan et al. (2015) s hotel industry research titled Customer Service Experience in Hotel Operations -- an Empirical Analysis -- was conducted in India. As EXQ measurements were validated in the hotel industry, this paper attempts to adopt it in the context of problems which influence poor customer service experience quality in a 2-star to a 5-star hotel in Malaysia. The problems are examined via Trip Advisor review online site. There are few important differences between different hotel star ratings in Malaysia that are worthy of discussion. The hotel industry in Malaysia and around the world is constantly redefined and redesigned. A challenge that seems to be emerging from literature is how can hotels systematically engineer their customer experiences (Carbone & Haeckel, 1994). The lack of existing research using validated measurements of customer service experience quality in Malaysian Hotel Industry, 414

419 along with the considerable attention given to the concept of experience quality in the present competitive environment, form the basis of this study. Product experience Khan et al. (2015) have defined product experience as experiences developed from the features and range of different product offerings. Hotel star rating classification serves to provide uniform expectations on the features and range of different product offerings. Trip Advisor adopted standard rating systems of AA star rating in the UK (CNN Travel, 2014) and other countries with Mobil Travel Guide s Star System (Jeong & Jeon, 2008) in their online websites to distinguish levels of service across properties. AA star rating system and Mobil Travel Guide s Star system are nearly parallel to American Automobile Association s (AAA) Diamond system and Malaysia Tourism and Culture of Malaysia s minimum requirement for the star rating of hotel system. TripAdvisor.com adopts the Star system to indicate the level of each hotel s service. This study reviews the Star rating system. The system classifies all hotels into five different categories from 1 star to 5 stars to signify the levels of service and perquisites a guest can expect. This paper focuses on 2-star to 5- star hotels. Khan et al. (2015) have extended the concept of uniform expectation of a product (hotel) to product experience. Outcome focus Khan et al. (2015) have defined outcome focus which reflects the significance of goal-oriented experiences and related with the reduction in customer s transaction cost, for instance, customer can seek any particular service in the fastest possible way. In other words, hoteliers should attempt to access which is the goal-oriented experience that motivates their focused customers to stay in a hotel. If hoteliers can fulfil the goal-oriented experience, their focused customers real sought expectations can be met. Fulfillment of a goal reflects the outcome focus of a customer s expectation. Product-class features are marketed hotel attributes which represent hotel brand differentiation promises and aligned to a uniform hotel classification expectation of star rated system. This is a concept related to customer s feature-to-goal association (Huffman & Houstan, 1993). Moments of truth Khan et al. (2015) have defined Moments-of-truth which is based on flexibility (Liljander & Strandvik, 1993) and service recovery (Tax, Brown & Chandrashekaran, 1998) when a complication arises with a customer. The customer forms an experience during this moments-oftruth and that becomes not only durable but also influences the consumer buying decisions. Peace of mind. Peace of mind dimension is related to the emotional side of services (Klaus & Maklan, 2012; Liljander & Strandvik, 1993) and incorporates the evaluation of all the touch points with the service offered. These touch points can occur pre-purchase, during purchase and post purchase of the service. Hoteliers should attempt to engage guests by taking care of their well-being. By engaging customers throughout the customers touch points, hoteliers can learn how to develop a peace of mind environment for them. 415

420 Method This research attempts to uncover the reasons for hotel guest complaints and hotel operation management problems of underperforming hotel attributes which influence the quality of customer service experience at the four-stage-hotel-guest-cycle key journeys touch points -- prearrival (e.g. hotel room reservation), arrival (e.g. hotel check-in process), occupancy (e.g. staying in the hotel room and using hotel facilities) and departure (e.g. hotel check-out process). Once a customer has given negative feedback in the Trip Advisor reviews, first, the service provider of a hotel needs to investigate the root causes of mistakes, problems or service failures. Then take an innovative corrective action(s) to fix the hotel guest complaint (service recovery) and to fix hotel operation management problem (s) which arises from the hotel guest key journey touch point(s). The objective of innovative corrective action (s) is to ensure the customer revisit intention and creation of positive word of mouth referral (Ekiz et al, 2012). Research Design In this exploratory research, a purposeful sampling of 64 negative case reviews posted on Tripadvisor.com is used as the data. The percentage of random sampling in Kuala Lumpur city is 18.7% of 342 hotels. The content analysis of the Trip Advisor customers review focuses on 342 hotels in Kuala Lumpur two-star hotels, 180 three-star hotels, 69 four-star hotels and 12 five-star hotels. Based on random sampling from the Kuala Lumpur Trip Advisor reviews, 14 on two- star hotels, 20 on three-star hotels, 18 on four-star hotels and 12 on five-star hotels are to be analysed descriptively. The reasons for choosing Kuala Lumpur city is a popular MICE and tourism destinations. Due to the frequent updates of the TripAdvisor website, this study set the time frame to collect guests reviews from May 15, 2016, through May 15, At the point of the data collection, a total of 342 hotels in Kuala Lumpur city are listed on TripAdvisor.com. TripAdvisor.com offers two different formats for guest reviews of a hotel: written comments and ratings of nine attributes (room, value, cleanliness, location, check-in & check-out, service, business service, guests satisfaction, and intentions). Through the careful comparison between written comments and ratings, it is believed that the ratings of each attribute are most likely to be reflected in the guest s written comments. Therefore, this study attempts to focus on the quantitative ratings of each attribute by minimising the authors subjective judgments on the written comments. Customer experience clues are observed in the written comments. Descriptive analysis of factors influencing the four dimensions of Customer Service Experience quality Descriptive analyses are conducted to understand the overall characteristics of hotels better. The analytical approach is used in this study. Hotels in Kuala Lumpur City are evaluated separately by hotel classes (e.g. 2-star, 3-star, 4-star, 5-star) and are grouped together into four separate customer service experience quality measurement scales -- Product experience, Outcome focus, Moments of Truth and Peace of mind. Product experience Descriptive analysis on Trip Advisor Review is done and found that a total of 9 customers express their negative feedback related to product experience at Hotels in Kuala Lumpur City. Product experience includes four measurements PE 1a: freedom of choice, PE 1b: crossproduct comparison, PE 1c: comparison necessity and PE1d: account management (Khan et 416

421 al., 2015). Each of the measurement is differentiated to the hotel star rating system. Some negative customer s feedback is provided in each measurement according to hotel star rating system -- 2-star, 3-star, 4-star and 5-star. Table 3: Product experience measurement according to hotel star rating system in Kuala Lumpur Product Experience measurement Kuala Lumpur 2-star hotel 3-star hotel 4-star hotel 5-star hotel Sub-total of negative comments PE 1a: Freedom of choice PE 1b:Cross Product comparison PE 1c: Comparison necessity PE 1d:Account Management Kuala Lumpur: Total of customer s negative comments on product experience PE 1a: Freedom of choice The descriptive analysis from 3 customers who have stayed in 2-star hotel is related to poor choices of hotel attributes. Hotel attributes of certain 2-star hotels in Kuala Lumpur do have problems influencing customer choice. Hoteliers from 2-star hotels should attempt to be more cautious if they are falling short on Freedom of choice. 3-star to 5-star hotels are perceived to have the least problem related to PE 1a: Freedom of choice in Kuala Lumpur as no negative Trip Advisor review. PE 1b: Cross Product comparison Each customer who has stayed in 2-star hotel and 3- star hotel in Kuala Lumpur has expressed a negative feedback respectively about their internally held reference price -- sought expectation -- which did not match their subsequent judgment on hotel room price, quality and value. Hoteliers from 2-star and 3-star should attempt to be more sensitive in delivering quality hotel attributes over their charged hotel room price -- Cross Product comparison. 3-star to 5-star hotels are perceived to have the least problems related to cross-product comparison in Kuala Lumpur as no negative Trip Advisor review is detected. PE 1c: Comparison necessity Two mindful customers from 2-star hotel and 1 mindful customer from 5-star hotel have expressed their negative feedback when comparing different options of hotels. The price differentiation gap between 2-star and 3-star hotels is small (RM30 RM50 per room per night) as both are categorised as budget hotels. 2-star hotel operators should attempt to be mindful of the possible challenges in sustaining their business as customers may tend to change to a better 3-star hotel option -- comparison necessity. 1 customer has expressed a negative feedback of a 5-star hotel. The 5-star hotel tends to have challenges in maintaining 5-star hotel brand experiences from hotel loyalty members. Although loyalty members have been promised that they can have the same brand loyalty experience throughout different hotels worldwide, 417

422 however, the argument to the problem is each hotel has different hotel attributes with different hotel environment in the various countries (Toh, Tan, & Yeo, 2016). The 3-star and 4-star hotels are perceived to have the least problems related to comparison necessity in Kuala Lumpur as no negative Trip Advisor review is detected. PE 1d: Account Management The majority of hotel loyalty members have been provided with a separate priority desk. The possible real challenge from the 4-star hotel is allocating a receptionist to mend the priority desk as they have limited number of staffs compared to a 5-star hotel. Hoteliers should attempt to relook at their hotel operations that fit customer s expectations. The 2-star, 3-star and 5-star hotels are perceived to have the least problem related to account management in Kuala Lumpur as no negative Trip Advisor review is detected. Outcome focus A Descriptive analysis on the Trip Advisor Review is done and found that a total of 9 customers have expressed their negative feedback related to outcome focus at Hotels in Kuala Lumpur. Outcome focus includes four measurements OF 2a: Inertia, OF 2b: Result focus, OF 2c: Past Experience, OF 2d: Common Grounding (Khan et al., 2015). Each of the measurement is differentiated to the hotel star rating system. A number of negative customer feedback is provided in each measurement according to hotel star rating system -- 2-star, 3-star, 4-star and 5- star. Table 4: Outcome focus measurement according to hotel star rating system in Kuala Lumpur Outcome focus measurement Kuala Lumpur 2-star hotel 3-star hotel 4-star hotel 5-star hotel Subtotal negative comments OF 2a: Inertia OF 2b: Result focus OF 2c: Past Experience OF 2d: Common Grounding Total of negative comments of outcome focus OF 2a: Inertia Two customers who have stayed in 3-star hotels have expressed their negative feedback about their hotel stay. They perceived that changing to other hotel is worth doing if given a choice. Hoteliers should be cautious although certain customers have the behavior of inertia of not switching to other hotels. However, there is the possibility of switching if no justifiable benefits are motivating them to continue staying at the same hotel. 4-star and 5-star hotels are perceived to have the least problem related to Inertia behaviour in Kuala Lumpur as no negative Trip Advisor review is found. 418

423 OF 2b: Result focus Two customers who have stayed in 3-star hotels have expressed their negative feedback on poor result focus. Hoteliers should attempt to implement an improved hotel policy and continuous employee training to track customer expectation on result focus. This policy is a guideline for employees. Employees should be courteous, friendly, and helpful. Guests are happier when satisfied employees respond to their needs swiftly. 2-star, 4-star and 5-star hotels are perceived to have the least problem related to result focus in Kuala Lumpur as no negative Trip Advisor review is found. OF 2c: Past Experience One customer who has stayed in a 2-star hotel decided to shorten stay because their sought expectation of standard service from the previous stay was not met. Two customers who have stayed in a 5-star hotel have experienced a drop in standard of service. Hoteliers should attempt to be more cautious when attending to returned customers. The attention towards delivering a consistent standard of service or exceeding expectation is important for returned customers. As there is no negative Trip Advisor review focusing on 3-star and 4-star hotels, there is a perception that they have the least problem related to past experience in Kuala Lumpur. OF 2d: Common Grounding Two customers who have stayed in a 3-star hotel express the difficulty in finding car parking lots in a busy city of Kuala Lumpur. Hoteliers from 3-star hotels should attempt to understand that hotels should provide proper parking lots for customers. Most of these customers who stay in a 3-star hotel perceived to be local budget business travellers. 2-star, 4-star and 5-star hotels are perceived to have the least problems related to common grounding in Kuala Lumpur as no negative Trip Advisor review are found. Moments-of-truth A Descriptive analysis on Trip Advisor Review is done and found that a total of 26 customers have expressed their negative feedback related to moments-of-truth at Hotels in Kuala Lumpur. Moments-of-truth includes five measurements MOT 3a: Flexibility, MOT 3b: Pro-activity, MOT 3c: Risk perception, MOT 3d: Interpersonal skills and MOT 3e: service recovery (Khan et al., 2015). Each of the measurement is differentiated to the hotel star rating system. A number of negative customer feedback is provided in each measurement according to hotel star rating system -- 2-star, 3-star, 4-star and 5-star. Table 5: Moments of truth measurement according to hotel star rating system in Kuala Lumpur Moments of truth measurement Kuala Lumpur 2-star hotel 3-star hotel 4-star hotel 5-star hotel Subtotal negative comments MOT 3a: Flexibility MOT 3b: Pro-activity MOT 3c: Risk Perception MOT 3d: Interpersonal skills MOT 3e: Service Recovery

424 Total of negative comments of Moments of Truth MOT 3a: Flexibility Three customers who have stayed in 2-star hotels and one customer who has stayed in a 3-star hotel have expressed their negative feedback related to flexibility. Customers perceived that hoteliers from budget hotels (2-star and 3-star) have the attitude of take it or leave it character. Hoteliers from budget hotels should attempt to create operation solution (s) by providing nonroutine transaction training to front-line employees. The non-routine transaction involves providing additional service to solve problems or handle unexpected events. 4-star and 5-star hotels are perceived to have the least problems related to flexibility in Kuala Lumpur as no negative Trip Advisor review is found. MOT 3b: Pro-activity One customer who has stayed in a 3-star hotel and three customers who have stayed in 4-star hotels have expressed their negative feedback about pro-activity. Hoteliers should attempt to train front-line employees that even though a customer s request cannot meet immediately, a follow-up arrangement can be done later. Front-line employees should not keep quiet if a customer s preference of choice cannot meet. The right choice to do is providing choices /solutions to customers. 2-star and 5-star hotels are perceived to have the least problem related to pro-activity in Kuala Lumpur as no negative Trip Advisor review is found. Customers who have stayed in 2-star hotels are perceived as not having high expectation towards pro-activity. On the other hand, staffs from 5-star hotels are well-trained to meet customer pro-activity sought expectations. MOT 3c: Risk Perception Hoteliers tend to face challenges of risk perception if customers perceived that service recovery measure was not justifiable. Customers' have higher expectations towards higher star-rated hotels. The logic is that customer expectation increases when the charged room rate increases. As expectation increases, risk perception increases when there is a service failure. Even though, if service failure is rectified through service recovery measures, as a customer s emotion is difficult to be rectified immediately. The descriptive analysis results show clearly that there is risk perception towards 3-star hotels (with two negative reviews), 4-star hotels (with one negative review) and 5-star hotels (with two negative reviews). 2-star hotels are perceived to have the least problems related to risk perception in Kuala Lumpur as no negative Trip Advisor review is found. MOT 3d: Interpersonal skills Hoteliers from 2-star to 4-star hotels are facing problems in sustaining knowledgeable and skilled service staff. Customer negative feedback towards frontline employees from 2-star to 4- star hotels is the lack of interpersonal skills in frontline employees. Skilled service staffs are motivated to join 5-star hotels because of attractive economic and social benefits. The majority of staffs in 5-star hotels are well trained not only in basic service skills but also interpersonal skills. This shows that 5-star hotels have the least problems related to frontline employees interpersonal skill. 420

425 MOT 3e: Service Recovery Lacking expertise in service recovery process is revealed through the negative feedback from customers who have stayed in 2-star to 5-star hotels. Hoteliers from 2-star to 5-star hotels should attempt to be creative in service recovery process. Hoteliers should examine how perceived justice affects a customer s emotional response during the process of service recovery. Peace of Mind A Descriptive analysis on the Trip Advisor Review is done and found that a total of 20 reviews are related to poor peace of mind at Hotels in Kuala Lumpur. Moments-of-truth includes 5 measurements MOT 4a: Expertise, MOT 4b: Process ease, MOT 4c: Relationship/Transaction, MOT 4d: Convenience retention and MOT 4e: familiarity (Khan et al, 2015). Each of the measurement is differentiated to the hotel star rating system. Some negative customer feedback is provided in each measurement according to hotel star rating system -- 2-star, 3-star, 4-star and 5-star. Table 6: Peace of Mind measurement according to hotel star rating system in Kuala Lumpur Peace of Mind measurement Kuala Lumpur 2-star hotel 3-star hotel 4-star hotel 5-star hotel Subtotal negative comments POM 4a: Expertise POM 4b: Process Ease POM 4c: Relationship POM 4d: Convenience retention POM 4e: Familiarity POM 4f: Independent Advice Total of negative comments of Peace of Mind POM 4a: Expertise The Trip Advisor s negative reviews on hotel s expertise is related to two customers who have stayed in 2-star hotel, two customers who have stayed in 3-star hotel, two customers who have stayed in 4-star hotel and one customer who has stayed in a 5-star hotel. The reviews show that customers lost their peace of mind towards the hotel expertise because hoteliers have failed to deliver sought functional and emotional benefits to them. The reviews indicate that the lowerrated (2-star and 3-star) hotels are facing more challenges from customers who have tried functional benefits compared to higher-rated (4-star and 5-star) hotels. On the other hand, higher star rating (4-star and 5-star) hotels are facing more challenges from customers who sought emotional benefits compared to lower-rated (2-star and 3-star) hotels. POM 4b: Process Ease The Trip Advisor s negative reviews on hotel s process ease are related by two customers who have stayed in 3-star hotel, four customers who have stayed in 4-star hotel, and two customers who have stayed in 5-star hotel. The reviews show that 3-star to 5-star hotels are facing hotel 421

426 operation problems related to unfriendly hotel s processes perceived by customers. Hotel operators should attempt to learn how to turn vulnerability of challenges -- hotel process ease -- into a competitive advantage. The challenge is training employees to practice the hotel's vision (e.g. Yes I Can! service philosophy) -- when the necessity arises to bend rules to take care of customers. The group of 2-star hotel is perceived to be owned by local entrepreneurs. They tend to be easy on hotel s processes in their daily hotel operations when dealing with customers. POM 4c: Relationship The only negative Trip Advisor review is from a customer who has stayed in a 5-star hotel. The review reflects that customer expects some degree of relationship formality between guests and staff. Less negative reviews show that hoteliers have been performing a great deal in maintaining a relationship. Hoteliers have the ownership of taking care of customers for a long time. POM 4d: Convenience retention A frequent-returned traveller who has stayed in a 3-star hotel expresses one negative feedback in the Trip Advisor review relating to convenience retention. Detail attention to frequent-returned travellers sought expectation and meeting the loyalty membership benefits are important. Customer retention rate is high when these customers have experienced convenience staying in the same hotel brand. Hoteliers should attempt to hire or retrain frontline employees who are knowledgeable, skillful and able to focus on detail individual customer s preference to motivate them to feel convenience retention. POM 4e: Familiarity The negative Trip Advisor s reviews on familiarity are related by one customer who has stayed in a 4-star hotel and two customers who have stayed in 5-star hotels. These customers who have posted negative reviews have the feeling of unfamiliarity because their sought benefits are not met. Hoteliers should attempt to focus on educating customers about the hotel attributes and their entitlement benefits upon hotel registration. Feeling of unfamiliarity to a hotel environment reduces if customers have the confidence in getting what they need easily. Budget hotels (2-star and 3-star) are perceived to have the least problems related to familiarity in Kuala Lumpur as no negative Trip Advisor review is found. POM 4f: Independent Advice No problem is detected related to independent advice as no negative feedback from Trip Advisor review is found. The assumption is that the measurement of independent advice has the least problems for hoteliers in Kuala Lumpur as there is no negative feedback in Trip Advisor review. Conclusion Based on the Trip Advisor s popularity index, the more popular the hotel is the higher service that is offered. The most or moderately popular hotels typically are ranked with at least threestar, while the least popular hotels are either 1 or 2-star establishments. In particular, guests evaluations of hotel offerings on the hotel attributes are significantly lower for 1 or 2 star-rated hotels. Hotel attributes of 3-star hotels are lower than their 4 or 5-star counterparts. These findings implied that most upscale and luxury hotels indeed performed better than lower rated hotels. It also indicates that the popularity index coincides with the hotel star rating system. 422

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430 The Impact of Reward and Transformational Leadership on the Intention to Quit of Generation Y Employees in Oil and Gas Industry: Moderating Role of Job Satisfaction Junaimah Jauhar* Graduate School of Business, Universiti Sains Malaysia naimah@usm.my Chan Soo Ting Graduate School of Business, Universiti Sains Malaysia Noor Fareen Abdul Rahim Graduate School of Business, Universiti Sains Malaysia * Corresponding author Abstract Purpose: This paper study on the impact of reward and transformational leadership on the intention to quit of Generation Y employees in the oil and gas industry as well as the moderating effect of job satisfaction. Design/methodology/approach: Data was collected via online surveys. The self-administered questionnaires were sent to 350 respondents from the oil and gas sector in Malaysia. However, only 107 were usable due to the rest being incomplete or invalid responses Findings: Based on the survey results, transformational leadership has a significant negative relationship with intention to quit. Moderating effect of job satisfaction, however only impacted the relationship between reward and intention to quit but not transformational leadership and intention to quit. Research limitations/implications: Based on the data gathered, the respondents are only coming from 13 different oil and gas companies which are based in Klang Valley. Practical implications: This study suggests that oil and gas industry should look at Generation Y employees retention from a holistic perspective. This is based on the results from the structural and measurement models. With reference to the results, oil and gas industry should focus on job satisfaction, followed by rewards and then transformational leadership. The management of oil and gas industry must ensure that their human resource plans focus on the retention of Generation Y employees throughout their career. Originality/value: This study contributes to the knowledge and insights towards oil and gas companies management in terms of intention to quit among Generation Y employees. Keywords: Rewards, Transformational Leadership, Job Satisfaction, Intention to Quit, Generation Y, Oil and Gas Industry 426

431 Introduction The millennial generation or better known as Generation Y has been entering the workforce in substantial numbers and changing the landscape of the working environment in coming years. Gen Y are those who were born from 1980 onwards. Currently, Malaysian Generation Y constitute to 40-50% of the workforce (PWC, 2012). More than 51% of employees in oil and gas industry belong to Generation Y. The oil, gas and energy industry is vital to Malaysia s economic growth and has contributed to one-fifth of the national GDP over the years. With new opportunities for investment in the sector, this National Key Economic Areas (NKEA) is set up to achieve an annual growth rate of 5% in the sector up to year 2020, transforming Malaysia into a regional oil trading and storage hub while ensuring long-term energy supply security to the domestic market. Collectively, the 13 entry point projects (EPP) for this NKEA are projected to generate GNI of RM131.4 billion and create 52,300 new jobs by 2020 (Economic Transformation Programme, 2015). Since, oil and gas companies are increasingly investing in new projects, growth is being held back by due to loss of young talent particularly Generation Y because this group has the inclination to switch jobs (Wan Yusuf, Queiri, Zakaria & Hisham, 2013). Besides, attractive job offers from other organization or lifestyle transformation that is beyond the employers control to retain those employees and unhappy with current situation, lead them to leave their job (Jefri & Daud, 2016). As one of the most dynamic and volatile industry, the oil and gas company needs to retain talents regardless of new or experienced one. Based on a study conducted by National Research Council, USA (2013), the oil and gas industry workforce is aging and the average age is 50 years old. Thus, within the next 10 years, 40-60% of the employees will retire. According to Gursoy, Maeier and Chi (2008), Generation Y is a firm believer of collective action, have positive outlook about the future, and confidence on the centralized authority. Besides, they wanted to be recognized and respected for the efforts in their work and believes managers should try to get to know everyone and give personal attention to each employee. Hence, oil and gas companies should focus on retaining the Generation Y employees in the organizations by understanding their needs and desires and come out with policies and procedures accordingly. Generation Y employees have different attitudes toward job satisfaction. This characteristic is important because job satisfaction is found to be a great retention tool for the Generation Y employees to stay in the organization. Job satisfaction caters to different aspects for Generation Y employees, as they give importance to personal life in work life balance, high salaries, immediate reward, and instant satisfaction (Aruna & Anitha, 2015). Moorthy (2014) emphasized that Generation Y prefers leaders that are knowledgeable, hardworking, determined, and responsible for their action. These traits are in accordance to the high preference for idealized influence under the transformational leadership style. Hence, the degree of reward and the existence of transformational leadership can lead to the change of behaviors of Generation Y employee and the extend of job satisfaction that moderates the relation of the intention to quit. Therefore, this study focused on expanding the horizon on intention to leave among the Generation Y in relation to rewards, transformational leadership and moderating effect of job satisfaction. This scope of this study focuses on the intention to quit among the Generation Y employees in oil and gas industry in Kuala Lumpur. Many researches have been conducted to study on the intention to quit but there has been limited research to discover the intention to quit amongst Generation Y especially in the oil and gas industry in Malaysia. By exploring and understanding the relationship between variables and Generation Y employee s intention to quit, this study will serve as the literature for oil and gas 427

432 industry s management to better manage their Generation Y employees and hence able to retain these talents. This study serves a better understanding on the relationship and effects of rewards and transformational leadership towards the intention of quit for Generation Y in oil and gas industry. In addition, this study investigates the moderating effect of job satisfaction on rewards and transformational leadership towards Generation Y intention to quit in oil and gas industry. Literature Review Generation Y Over the years, workforce in the world has been changed especially in terms of age. Parus (2002) states that, demographic and skills of the workforce will change and it might cause shortage when the baby boomers leave the workforce. On top of that Spiro (2006) stated that generation Y will become one of the greatest assets for most organization. Hence, it is important for an organization to have solid approach and strategy to recruit and more importantly to retain the Generation Y talents. Based on the explanation by Codrington and Grant-Marshall (2005), Generation Y are individuals born between the years of 1980 to However, other publications defined generations that were born after year 2000 are known as Millennial which is the proceedings of Generation Y. Hence, for this study, Generation Y is defined as the generation that were born during 1980 to The characteristics of Generation Y in according to Codrington and Grant- Marshall (2005), is generally impatient, expressive, adaptive, efficient, innovative, committed. In workplace, Generation Y is generally more technologically advanced and they are daring to test and trying new technologies (Botelho, 2008). Generation Y are always looking to develop new skills and eager to embrace challenge by constantly seeking for next instruction or approaches in workplace (Herbison & Boseman, 2009). Besides that, Generation Y have generally higher standards compared to other generations and perform well in a team (Lower, 2008). Generation Y also has higher self-confident and able to multitask due to having plenty of energy in workplace (Gilbert, 2011). Furthermore, Generation Y prefer direct communication among co-workers including superior to receive timely feedback, encouragement and recognition (Irvine, 2010). Guided by managers who are willing to handle their challenges and meeting their expectations, Gen Y have the potential to become the highest performers in history (Martin, 2005). Intention to quit Intention to quit is an employee s persuasion to leave their job. The intention will eventually lead to the actual turnover. High turnover can be dangerous to an organization performance if talented employees regularly leave the organization. Furthermore, the employees that remain in the organization also experience lower satisfaction due to their co-workers leaving the organization (Kanwar, Singh & Kodwani, 2012). Besides, working environment, peer pressure, rewards system and organizational culture are some of the reasons that may influence an employee intention to quit. One of the earliest researches on intention to quit is from Mobley (1977) in which the study define intention to quit as a continuous and cumulative decision process. In the beginning, an employee starts by evaluating his or her current working situation. The employee will also assess the working situation and working environment before undertaking the decision to quit (Mobley, 1977). Oehley (2007) explored the talent management mindset and ability to identify and differentiates talented employees intention to quit. The study also identifies the talent management mindset of a supervisor as well as the supervisor s capabilities and how does it result in outcome of different 428

433 variables such as job satisfaction and organization commitment contributes towards the intention to quit. The study concluded that organization job satisfaction brings significant negative effect on the intention to quit. Another model on intention to quit is from Dhladhla (2011) where it was used to determine the relationship between the behavior of leader, psychological empowerment, job satisfaction as well as organizational commitment and intention to quit. The result of the study has been unexpected where it stated that high transformational leadership behavior will bring very little or no impact towards the level of job satisfaction which eventually leads to no impact on intention to quit. Besides, Berry (2010) found that employee engagement and compensation fairness brings significant negative impact to intention to quit. However, the result shows the job satisfaction did not bring any mediating effect towards the relation between employee engagement and intention to quit or between compensation fairness and intention to quit. Rewards Rewards that encourage extrinsic motivation among employees are known as extrinsic rewards. These types of rewards include financial incentives such as bonus and incentive pay, and nonfinancial incentives such as acknowledgment and appreciation, as well as good career prospects such as future promotion opportunities (Malik, Butt & Choi, 2015). Monetary or Non-monetary which includes recognition will influence the retention of employees in an organization (Parker & Wright, 2001). According to Social exchange theory, when employees understand that their organizations fulfil their needs in the workplace, they will show total obligation by responding with an increased willingness to perform the tasks and demonstrating desired service values, behaviors, and attitudes. The extent to which employees believe that their organizations value and reward service behavior will have a strong impact on an employee performance (Chiang & Birtsch, 2011). Thus, employees will consider reward as an experience of a sense of accomplishment (Mercer, 2003). This statement is agreed by Davies (2001) that employees will remain in an organization longer when they feel that they are being compensated for their capabilities, performance, contribution and efforts. On the other hand, Curran (2004) stated that although monetary rewards are important, employers should not neglect true appreciation towards the employees. Burton (2012) confirm that, other than money or material, employers must treat all employees equally in the workplace. Equally important, employees also want to have good and lasting relationships with their colleagues. According to Irvine (2010), one of the most useful and powerful mechanisms for employees engagement is strategic recognition. Furthermore, employers should always stay engaged to their employees and keep them challenged and motivated (Parus, 2002). Transformational Leadership One of the most influential individual for employees in an organization is the leader (Arakawa & Greenberg, 2007). Leadership can be categorized into four different main tasks which include providing direction to the team, alignment of team assurance, commitment building among the team members and facing adaptive challenges with the team (Risher & Stopper, 2002). Furthermore, leaders must provide clear vision on empowering, motivating the team and encouraging individual and group to perform to the highest level (Dixon & Hart, 2010). Previous study has discovered that different types or styles of leadership has been applied in different 429

434 organizations, cultures and working frames. Some leaders incorporate situational leadership styles or leadership style in accordance to their feelings at a given situation, while others adhere to the same style regardless of the situation they should face (Girma, 2016). With the changes in the business environment, organizational leadership also has gone through several changes with the emergence of transformational leadership. Transformational leaders have the capability to encourage and inspire followers to achieve results that are beyond expectations. This ability is generally based on three personality characteristics which include charisma; individual attention; and intellectual stimulation (Bertocci, 2009). According to Bass and Avolio (1994) there are four distinct characteristics for Transformational Leader; idealized influence, inspirational motivation, intellectual simulation and individualized consideration. i) Idealized influence - The leader nurtures the sense of pride and faith within the subordinates. The leader also provides a vision and mission which will gains respect and trust by setting high standards for rivalry. This action will encourage emotions and bonding among leader and the team members. ii) Inspirational motivation - The leader will encourage the team members to create and accept goals which are challenging and engage the team with shared goals. This will increase the team spirit to include enthusiasm and optimism. The leader will communicate effectively with the team through vision or uses symbols to focus on team s efforts and modelling their behaviors. These actions will increase the intrinsic motivation of the team as the task objective are similar to the team s interest and values iii) Individualized consideration - The leader will recognize every team member s uniqueness individually. The leader will link the individual s need with the organization s need and provide suitable mentoring and growing opportunities. This also means that the leader provides guidance, encouragement and coaching to the team members. iv) Intellectual stimulation - The leader will encourage the subordinate to try new approach towards a problem and to think in a creative manner while carrying out their daily tasks. Hence, the leader can increase the awareness of the subordinates towards and problem and encourage the team member to see problems from another angle (Mester et al., 2003, Engelbrecht, 2005). Job satisfaction Job satisfaction is one of the most important factors for the function of an organization and it is prone to be influence by the organization s corporate culture and leadership (Girma, 2016). Job satisfaction of an employee is defined by Silverthorne (2005). a pleasurable or positive emotional state resulting from the appraisal of one s job including facets of that job. Hence, it is a very complicated situation where satisfaction can come from many perspectives such as the pay, promotion opportunities, supervision, colleagues and others. According to Winterton (2004), motivation theories from Maslow s hierarchy of needs and Herzberg two factor theory can be used to analyze job satisfaction. Based on Maslow (1954) s theory, there are five levels of satisfaction in life but if one does not feel one level of satisfaction has been achieved, the demand for the second or third level will not be achieved. Maslow s five hierarchy of needs are the physiological needs, safety needs, love and belonging, self-esteem and self-actualization. Another research done by Gibson et al. (2000) stated that job satisfaction is an individual expression of personal well- 430

435 being relative from doing the job requested. Whereas Robbins (2003) defined job satisfaction as a general attitude towards the job, which is apart from the rewards that employees think they deserved. In a study done by Ganesan (2010), it was suggested that there are four elements that are important determinants of job satisfaction for an employee that includes pay, promotion, work itself and supervision. Rewards and Intention to quit Based on Irvine (2010) in earlier research, strategic recognition should be done in a timely manner and frequent enough to meet Generation s Y employees expectation. Besides, management should always explore the best reward and on how to recognize the employee s achievement because employees will see it as sign of appreciation of their contribution. Tulgan (2009) states that Generation Y prefer to be rewarded by communicating clearly how rewards are tied to their action or contributions which are within their control. In a study done by Rani and Samuel (2016), it was found that as the intrinsic and extrinsic rewards provided by the organization increased more than the expectations of a Generation Y employee, intention to quit will decrease. Hence, this study links rewards which include of monetary and non-monetary to intention to quit. Thus, this study hypothesizes the following: Hypothesis 1: Acceptable rewards have a significant negative impact on intention to quit. Transformational leadership and Intention to Quit Many scholars have realized that transformational leadership bring positive impact towards the organizational growth and performance. These also include organizational commitment, satisfaction, employee effectiveness, low turnover intent, trust, effective leadership and overall employee performance (Schlechter, 2005). According to Farahani, Taghadosi, and Behboudi (2011), transformational leadership positively affects organizational commitment by creating employees loyalty and the realization of the various needs of the employees through the encouragement to contemplate critical issues, the application of innovative procedures, and involvement in decision making. Their study further suggested that to conserve organizational stability and retain employees with high organizational commitment, the selections of transformational leaders with an emphasis on individuals with high emotional intelligence could assist in achieving this organizational goal. Ennis, Gong and Okpozo (2016) found that transformational leadership have an indirect effect on an employee s intention to quit through affective and normative commitment. Thus, it is implied that transformational leadership practices could be identified as a vital tool for transferring and retaining the valuable institutional knowledge from one generational cohort to another by inducing the individual s organizational commitment as a strategy for assisting organizational leaders in overcoming the human capital challenges soon. Thus, this study hypothesizes the following: Hypothesis 2: Positive transformational leadership has a significant negative impact on intention to quit Job Satisfaction Moderates the relationship between Rewards and Intention to Quit Job satisfaction is always tied to employee s productivity, creativity and commitment in their workplace and it is believed to be the major factor related to intention to quit (Robyn, 2012). Based 431

436 on Yaseen (2013), efficient rewards and compensation programs implemented on the employees will increase their job satisfaction and in return of retention of the employees. Thus, this study hypothesizes the following: Hypothesis 3: Job satisfaction has moderating effect on the significant negative relationship between rewards and intention to quit Job Satisfaction Moderates the relationship between Transformational Leadership and Intention to Quit Based on Bycio et al. (1995) studies, transformational leadership can mitigate the intention to quit compared to other leadership style. This study has been further enhanced by Fatima et al. (2011) stating that transformational leadership has a positive relationship with job satisfaction which will lead to lesser intention to quit. However, in this study, the objective is to measure how does job satisfaction moderates the relationship between transformational leadership and intention to quit. Thus, this study hypothesizes the following: Hypothesis 4: Job satisfaction has moderating effect on the significant negative relationship between transformational leadership and intention to quit Theoretical Framework Rewards Intention to Quit Transformational Leadership Job Satisfaction Figure 1: Theoretical Framework 432

437 Based from the Figure 1, rewards and transformational leadership are the independent variables while intention to quit is the dependent variable. Job satisfaction acts as a moderator to the relationships between; rewards and intention to quit and; transformational leadership and intention to quit. Method Currently there are more than 240 oil and gas related companies in Malaysia. Based on the PWC report (2015), the top oil and gas companies in Malaysia are PETRONAS Carigali Sdn Bhd, ExxonMobil Exploration Sdn Bhd, Nippon Oil, Sarawak Shell, Murphy Oil and CARIGALI HESS. Hence, for this research paper, the focus was for the top companies in oil and gas industry. The data collection was carried out by using which required the respondents to answer through online surveys. Self-administered questionnaires were sent to at least 350 respondents within the oil and gas sector in Malaysia and 107 responses were received. According to Hair et al. (2005), the acceptable ratio of ten-to-one of the number of variables to be tested as sample size and minimum of 100 to conduct reliability test. The only restriction is the age group where only respondents who are born from 1980 to 2000 are selected to answer the questionnaire as they are our target group of study, which is the Generation Y. There are different scales exist in the questionnaire for the measure of rewards, transformational leadership, job satisfaction and intention to quit. These variables were then investigated in terms of reliability and validity. A total of 107 questionnaires were selected and rests of them were not included in the further analysis due to incomplete or invalid responses. All responses were coded and entered to SPSS sheet for further analysis. Descriptive Analysis were performed to analyze the profiles of every respondent, particularly on variables that are continuous in nature. For reliability test, this study follows the guideline of alpha more than 0.70 based on Nunnally and Bernstein (1994). Confirmatory factor analysis (CFA) The variance extracted (VE) and construct reliability (CR) for each variables and different dimension were being calculated. According to Hair et al (2006), the standard criteria for VE is at >0.5 and standard criteria for CR is at >0.7.PLS path modelling were being used to determine the reliability of measurement and structural models of the data collected. Regression of Analysis This analysis was performed using SPSS to find the equation that represents the linear relationship between independent variables (Reward and Transformational Leadership) and dependent variable (Intention to quit). This analysis has also been performed to determine the strength of the relationship between independent variables and dependent variables are significant enough. Multicollinearity was also analyzed in this paper. The variance inflation factor (VIF) and tolerance were used for diagnosing collinearity in multiple simultaneous regression analysis. 5 has been recommended as the maximum level for VIF (Rogerson, 2001). Findings Descriptive Analysis The most age group of respondents is having age of 25 which has the highest percentage of 34.6%. The second highest are age is age of 26 which consist 20.6%. Result showed that most of the respondents are male which is 58.9% and female 41.1%. It also showed that 92.5% of the 433

438 respondents possess degree certification as their highest qualification followed by Master s Degree of 5.6% and STPM level of 1.9% only. The study revealed that majority of the respondents are having 0 3 years of service in the oil and gas industry which contributes to 48.6%. This is followed by 3 5 years of service (43.9%), 3 5 years of service (5.6%) and the least of 9 years above (1.9%). Reliability Test The value of Cronbach Alpha ranges from 0 to 1, in which the higher the value, the greater the reliability is (Pallant, 2003). The result shows that all the variable is having the Cronbach s Alpha value of more than 0.7. Composite Reliability has been measure for all the variables as well. The data indicates the measures are robust in terms of their internal reliability as shown in composite reliability. The composite reliabilities of the different variable s measures range from 0.82 to 1.0, which exceed the recommended threshold value of Based on both Cronbach s Alpha and Composite Reliability test, it can be deduced that the data is reliable. In our analysis, it shows that only Intention to quit is having 70% of R-square value is the deemed reliable. Measurement Model Evaluation A negative path coefficient in this case meaning that an increase of either reward, transformational leadership or job satisfaction, intention to quit is predicted to be decreased. Path Coefficient For samples more than 100, the path coefficient must be greater than 0.2 to show significance. Job satisfaction shows the most significant on Intention to Quit since the path coefficient is the highest which is However, the path of job satisfaction and intention to quit is not covered in this study. The existence of job satisfaction is only for the moderating role purposes. Reward has the path coefficient of and Transformational leadership of The two-moderating effect of job satisfaction on reward and job satisfaction on transformational leadership towards Intention to quit is having less significant towards the intention to quit. The result shows that the moderating effect of job satisfaction on rewards towards intention to quit is while the moderating effect of job satisfaction on transformational leadership towards intention to quit is Discriminant Validity For the Heterotrait-monotrait (HTMT) criterion test, the acceptable is limit is 0.85 on the SmartPLS software. Linear Regression Analysis Linear Regression analysis has been performed to identify the linear relationship and strength between independent variables (Reward and Transformational Leadership) and dependent variable (Intention to quit). Based on the Coefficients results, it provides the information to whether the independent variable (Rewards and Transformational Leadership) statistically significant to the model. The tables show that the Significant value is all less than p-value of 0.05, indicates all the independents variable are statistically significant towards the regression equation as below: Intention to Quit = R 0.355R 434

439 Moreover, based on the table above, the check for multicollinearity for the multiple linear regression model has been performed. The result has shown VIF of l.736 which is appropriate. Structural Model Figure 2: Structural Model Testing of Hypothesis As hypothesis is supported at significant level of p-value less than 0.05, the following Table 1 summarizes the result: Based from the results, while the rest of the hypotheses are supported, it was found that moderating effect of job satisfaction on transformational leadership towards intention to quit is not significant. These results are like the assumptions made comparing to the path coefficient earlier. Thus, H4 hypothesis is rejected due to its insignificance. All the other hypothesis has been shown to be significant and accepted. 435

440 Table 1: Hypothesis Testing Hypothesis p-value Results H1: Reward -> Intention to Quit Supported H2: Transformational Leadership -> Intention to Quit Supported H3: Reward moderated by Job Satisfaction -> Intention to Quit Supported H4: Transformational Leadership Moderated by Job Satisfaction - > Intention to Quit Not Supported Discussion The result of reward has significant negative relationship with Intention to Quit among Generation Y employee in oil and gas industry is being supported by Parus (2002). The study states that employees who are interested in values that organization create for them in terms of reward will affect how they perceived the company to keep them engaged and motivated. Furthermore, based on Irvine (2010) states that the best way of engaging employees and retain talent is on strategic recognition and reward system. However, the results show that job satisfaction do have moderating effect between the negative relationship between reward and intention to quit among generation Y in oil and gas industry. This would mean that, some of the Generation Y employee in oil and gas industry will have the tendency to stay in the company even though the reward is not attractive if the job satisfaction is high. This finding has been supported by Gilbert (2011) mentioning that money and salary is not the priority for Generation Y in work force. Job satisfaction has been one of an important factor for Generation Y employee to stay in their current work environment instead of reward. This finding of significant negative relationship between transformational leadership and intention to quit has been supported by Schlechter (2005), Farahani et al, (2011) and Ennis et al, (2016). These studies posit that transformation leadership bring positive impact towards the talent retention and leads to lower intention to quit among employees. The study further states that transformational leadership will help an organization in terms of organizational commitment, satisfaction, employee effectiveness, low turnover intent, trust, effective leadership and overall employee performance. Based on the results obtained from the survey, transformational leadership has a significant negative relationship with intention to quit whereby proving the hypothesis is right. By having a positive transformation leadership practiced in the workplace, Generation Y in oil and gas industry will have lower intention to quit. However, it was quite surprising that job satisfaction has bring no moderating effect towards the negative relationship between transformational leadership and intention to quit. Employees will stay if their leader is practicing transformational leadership even though the job satisfaction might be low. Thus, it is clearly shown that leadership leads to job satisfaction and eventually help to retain employees in the organizations. This finding has been supported by Schlechter (2005) that transformational leadership will bring growth and performance improvement towards an organization and eventually leads to lower intention to quit. Also, many researchers have been linking transformational leadership and job satisfaction as positive relationship. One of the researchers were done by Fatima et al. (2011) stating that transformational leadership has a positive relationship with job satisfaction which will lead to lower intention to quit. This study has developed a model which integrates the variables impacting the Generation Y intention to quit in oil and gas industry. This contribution is useful as there is limited study in the relationship of independent variables (reward, transformational leadership and job satisfaction and 436

441 the intention to quit for Generation Y employees in oil and gas industry). The findings identified that job satisfaction, reward and transformation leadership has negative relationship towards Generation Y intention to quit. By introducing the moderating effect of job satisfaction between the relationships, the findings show that job satisfaction moderates the relationship between reward and intention to quit but do not have moderating effect on the relationship between transformational leadership and intention to quit. However, this study have several limitations. Firstly, data gathered from respondents coming from 13 different oil and gas companies which are based in Klang Valley. Secondly, due to the time limitation of the study, only three variables were included in the study. Lastly, there are other variables that are not being investigated in this study such as organization commitment, organizational culture, job security and many others. For future research, a more representative sample of all oil and gas company and other variables should be included to get further understanding on Generation Y intention to quit. This study suggests that oil and gas industry should look at Generation Y employees retention from a holistic perspective. This is based on the results from the structural and measurement models. Furthermore, oil and gas industry should focus on job satisfaction, followed by rewards and then transformational leadership. The management of oil and gas industry must ensure that their human resource plans focus on the retention of Generation Y employees throughout their career. To develop effective strategy for oil and gas industry, communication must be made among Generation Y and human resources department so they can receive the same message. In this study, job satisfaction involved several factors such as satisfaction with work itself, pay, supervisor, promotional opportunities and colleague. The management of oil and gas should evaluate the current working environment to determine the factors that might cause the Generation Y to be dissatisfied. Continuous improvement on the working environment, better pay, equal opportunity of promotion and conducive co-worker will improve the satisfaction of the Generation Y employees. Management in oil and gas industry can always provide continuous learning for the Generation Y and foster the positive interpersonal relationship between colleagues. Supervisors and managers must go through trainings for better interpersonal relationship with the subordinates. Promotional opportunities should be given based on the deliverables of the job instead of any other personal factor. Regular feedback sessions can be held with Generation Y employees to discuss on improving their performance and growth. Generation Y employees are goal oriented and appreciates feedbacks. To retain Generation Y employees, oil and gas companies can consider refining their vision, mission, goals and values to be like minded with the Generation Y. Creating a strong system that emphasizes more on Generation Y can influence the retention levels of the Generation Y employees. In addition, salary adjustment based on the competitive rate must be performed to meet the requirement of the Generation Y employees. By saying that, other form of rewards can also be performed such as provide recognition towards the Generation Y employees. Referring to Irvine (2010), Generation Y prefer direct communication among co-workers including superior to receive timely feedback, encouragement and recognition. Hence, oil and gas companies should promote such exemplary behavior in the culture to retain the Generation Y employees. Transformational leadership must be nurtured among the existing leaders as well as the potential leaders. All superiors and managers should be sent for more collaborative training and interactive session to enhance their leadership style. All potential leaders such as those employees who are due for promotion to be a manager 437

442 should be actively participating in transformational leadership training to prepare themselves in becoming a leader where Generation Y find it more conducive to work with. When it comes to comparing the job satisfaction and transformational leadership, management of oil and gas companies should always emphasize on job satisfaction. This is due to the finding of the study showing that the job satisfaction will moderate on the relationship of rewards and intention to quit. Dissatisfied employees will still have the intention to quit even with the presence of acceptable rewards exist in their working environment, hence management in the oil and gas industry should put more emphasis in job satisfaction. Conclusion This study contributes to knowledge of intention to quit among Generation Y employees in oil and gas industry. It provides the evidence on the relationship between the variables and the moderating effect towards the intention to quit. It is evident that job satisfaction contributes the most in keeping the Generation Y in oil and gas industry compares to rewards and transformational leadership. Job satisfaction can moderate the relationship of transformational leadership and intention to quit. Meaning even if transformational leadership is present, job satisfaction is the main considering factor for a Generation Y employee to quit in oil and gas industry. The findings of the study can provide human resources department ideas in refining the policies and procedures to retain the Generation Y employee in oil and gas industry. This, will also ensure the sustainability of oil and gas industry in Malaysia given the bad current economic situation. References Arakawa, D., & Greenberg, M. (2007). Optimistic managers and the influence on productivity and employee engagement in a technology organization: Implications for coaching psychologists. International Coaching Psychology Review, 2(1), Aruna, M., & Anitha, J. (2015). Employee retention enablers: Generation Y employees. SCMS Journal of Indian Management, 12(3), 94. Bass, B.M., & Avolio, B.J. (1994). Improving organizational effectiveness through transformational leadership. Thousand Oaks, California: Sage. Berry, M.L. (2010). Predicting turnover intent: Examining the effects of employee engagement, compensation fairness, job satisfaction, and age. Doctoral dissertation. University of Tennessee, Knoxville. Bertocci, D. I. (2009). Leadership in organizations. There Is a Difference between Leaders and Managers, Lanham UA: University Press of America. Botelho, B. (2008). The new work force of Generation Y or Millennials need special handling. The Journal of New England Technology. Retrieved from Generation-Y-or-Millenials-need-special-handling.html. Burton, K. (2012). A study of motivation: How to get your employees moving. Management, 3(2), Bycio, P., Hackett, R.D., & Allen, S.J. (1995). Further assessment of Bass s (1985) conceptualization of transactional and transformational leadership. The Journal of Applied Psychology, 80, Chiang, F. F., & Birtch, T. A. (2011). Reward climate and its impact on service quality orientation and employee attitudes. International Journal of Hospitality Management, 30(1),

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446 Antecedents of Behavioural Intention to Adopt Internet of Things in the Context of Smart City in Malaysia Gan Wee Leong Graduate School of Business, Universiti Sains Malaysia Teoh Ai Ping* Graduate School of Business, Universiti Sains Malaysia Rajendran Muthuveloo Graduate School of Business, Universiti Sains Malaysia *Corresponding author Abstract Purpose: Smart city is an urban development vision to integrate multiple information and communication technology and Internet of Things (IoT) solutions. This paper examines the relationship between determinants and behavioural intention to adopt IoT as well as the role of experience as a moderator in this relationship in the context of Smart City in Malaysia. Design/methodology/approach: Quantitative study approach and survey methodology was adopted in this research. Data was collected via online questionnaires to potential respondents in Malaysia. Findings: A total of 289 valid responses were received and analysed. Performance expectancy, effort expectancy, hedonic motivation, price value, and smart perceived trust were found to have significant relationship with behavioural intention to adopt IoT in the context of Smart City in Malaysia. In addition, experience significantly moderates the relationship between the constructs and behavioural intention to adopt IoT. Research limitations/implications: The findings from this study deliver further understanding in terms of technology acceptance on new emerging technology IoT in the context of Smart City in an emerging market such as Malaysia. Hence, IoT technology ecosystem players such as planners, implementers, policy makers, solution vendors could determine how they should position and promote the IoT solutions to the general public in Smart City. Originality/value: This study provides insights on the determinants of behavioural intention to adopt IoT in the context of Smart City in an emerging market. A significant contribution of this study was the development of a model that explained factors influencing behavioural intention to adopt IoT whereby 2 additional constructs namely smart perceived security risk and smart perceived trust were examined. These variables complement to the lacking of existing UTAUT2 model in a smart environment. Interestingly, experience was tested as a moderator and was found to be significant in the relationships between the determinants and behavioural intention to adopt. Keywords: Behavioural intention, Internet of Things, Unified Theory of Acceptance and Use of Technology 2 (UTAUT2), Smart city, Malaysia. 442

447 Introduction In the world scene, it is estimated that by the year 2050, 70% of people on Earth will be living in cities (United Nation, 2014). Major activities such as education, governance and business will be concentrated at the city as the urbanization progressed. The ability to manage the cities well will determine the success or failure of the nation. The concentration of population in the city will increase the challenge of the city to provide sufficient fresh water, universal access to cleaner energy, the ability to travel efficiently in the city, a sense of safety and security, and sufficient food supply in the cities. Smart City is an urban development vision to integrate multiple information and communication technology (ICT) and Internet of Things (IoT) solutions in a secure fashion to manage the city s assets. The city assets could include transportation systems (eg: smart traffic light system, real time bus scheduling), power plants (eg: smart TNB meter and power grid system), security management (eg: crime monitoring and alert), and waste management (eg: waste tracking and recycling system). The goal of building a smart city is to improve the quality of life and help to ensure the sustainability of the city. As the smart city projects spreading across the world, Nikkei Business Publications projected that this sunrise market will contribute RM124.1 trillion for the by 2030 (DeWitt, 2013). Cisco s estimated the emerging market of smart cities to worth RM120 billion in the next decade. In Malaysia, Iskandar Malaysia smart city which was launched in 2006 targets to attract an economic investment of RM227 billion by 2020 (Ahmad, 2014). This city promotes 2 main industries which are services and manufacturing, matching to the key contributors of Malaysia GDP. Economy focus on the economic growth and value creation while ensuring equitable wealth distribution. The environment aspect of the smart city framework focus on creating smart environment where a green infrastructure is built create clean and protected environment. The environment aspect of the smart city also ensure efficient transportation system and ICT infrastructure that improve the accessibility of its residents. The third focus of the smart city on social aspect aims to create a caring community where people from different cultures and race live harmoniously. The safety and security of the city is placed in high priority where residents has easy access to education, health care and cultural facilities. The Iskandar Malaysia smart city framework is similar to the smart world or smart city model proposed by Abdoullaev (2011) which unifies the ecological principles of the eco world development, the technological principles of the information world development, and the social principles of the human world development. In building the digital community component of smart city, technology always is the foundational layer of the smart city implementation. One of the important technology building blocks that enables smart city is Internet of Things (IoT) technology. The development of technologies that produce low energy and high computation power electronics has enabled wide range of objects to be connected together. From the business perspective, IoT will generate high business value especially when the right solutions are being developed by its ecosystem. It is estimated that the adoption IoT could generate $11.1 Trillion a year globally (Bughin, Chui & Manyika, 2015). The IoT market size was at USD Billion in 2016 and estimated to grow to USD Billion by 2021, at a Compound Annual Growth Rate (CAGR) of 33.3% from 2016 to 2021 (Wood, 2016). 443

448 Smart City is found to rank second after connected industry in the application of IoT (Bartje, 2016). Within the smart city segment, it is found that smart traffic, smart utilities and city safety are the popular applications. Though America is dominating the IoT market in 2016 due to technological advancements and early adoption of IoT in the region, Asia Pacific market growth is expected to accelerate and overtake North American IoT market by 2021 (Wood, 2016). The main driving forces for the acceleration of APAC region is forecast to be increasing technological adoption and huge opportunities across industry verticals especially in India, China and Japan. In Malaysia, IoT has been the key driving technology that enables the vision of smart city. The smart city projects that requires the support of IoT that has been ongoing in Cyberjaya smart city includes smart traffic analytics and recognition system where traffic lights were connected and optimized to reduce traffic congestion in the city. Besides the effort to increase wireless coverage is underway to ensure that devices could be connected to Internet. Cashless society that emphasize on hassle free yet save payment system is introduced. Electric tram is proposed to be completed in 2019 to improve the public transport system (Cyberview, 2016). Thus far in Malaysia, the smart city players are still focusing on the initial stage of the vision to build infrastructure that could enable the smart city. Effort are ongoing to convince the agencies and corporate to adopt the integrated solutions of smart city especially in infrastructure and facility control and monitoring. The aim to achieve full embrace of smart city and its application through IoT by all the community are in the pipeline, by 2020 onwards for Cyberjaya smart city case (Cyberview, 2016) and 2025 in Iskandar Johor smart city (IRDA, 2016). IoT technology only has its value when there is an adoption of the technology. There are 3 crucial elements in the success of smart city vision, which are people wanting to live in the city, people wanting to participate and a better life through the usage of technology (Clerck, 2016). Adoption of IoT technology which could largely use to help realize the smart city vision is imperial. Ability to identify the driving forces of the behavioural intention to adopt IoT in the smart city context hence is paramount to help smart city players to accelerate the growth of IoT usage that enriches the life of the users. Taking accounts of the issues mentioned earlier, this research aims to: i. examine the relationship between determinants and behavioural intention to adopt Internet of Things (IoT) in the context of Smart City in Malaysia. ii. examine the effect of experience as a moderator to the relationships between determinants and behavioural intention to adopt Internet of Things (IoT) in the context of Smart City in Malaysia. Literature Review Unified Theory of Acceptance and Use of Technology (UTAUT) As technology evolve in different forms and usage, the journey to explore and determine user acceptance of technology becomes an ongoing management challenge (Schwarz, 2007). The Unified Theory of Acceptance and Use of Technology (UTAUT) (Venkatesh, 2003) argued that by examining the presence of each constructs namely performance expectancy (PE), effort expectancy (EE), social influence (SI) and facilitating conditions (FC) and moderators of gender, age and experience in the acceptance of IT of these constructs in an environment of the testing subject, researchers and practitioners will be able to asses an individual s intention to use a specific system, thus allowing for the identification of the key influences on acceptance in any given 444

449 context. UTAUT model is found to be practical in the organizational context and was developed primarily based on the acceptance of technology within the internal users of the organization. Technology adoption outside the workplace differs on a number of dimensions such as differences in types of tasks and complexity of interactions (Brown, 2006). On the basis of UTAUT, a new model UTAUT2 (Venkatesh, 2012) was built and applied in the context of consumer technologies to address the lacking in UTAUT. Three new determinants are added namely hedonic motivation (HM), price value (PV), and habit (HB). However UTAUT2 still has the limitation in describing new emerging technology that has more diverse and complex characteristic such as massive connectivity, mobility, and smartness. Determinants of Behavioral Intention To Adopt IoT in context of Smart City Performance expectancy, derived from the perceived ease of use in Technology Acceptance Model, refers to the degree to which an individual believes that using the system will help an individual to attain gains in a job while effort expectancy is the degree of ease associated with the use of the system (Venkatesh, 2003). Both performance expectancy and effort expectancy were found to be significant predictors of the intention to use several technologies, such as Web Based Questions and Answers Services (Deng, 2011). As smart city residents could perceived the importance of others believe that they should use IoT, social influence refers to the degree to which a user perceives that significant persons believe technology use to be important (Diaz, 2010). Facilitating condition is the perception of consumers in the resources and support available to perform a behaviour (Nair, 2015). In this research, it is refer to the perception of consumers in receiving the support they could when they use the IoT in a smart city. The underlying construct of facilitating condition is operated to include aspects of the technological and/or organizational environment that are designed to remove barriers to use (Keong, 2012). Price value is the consumers cognitive trade-off between the perceived benefits of the application and the monetary cost of using them. The price value is positive when it is more beneficial to use a technology than the monetary cost and gives a positive impact to the intention of using the technology (Venkatesh, 2012). Hedonic motivation refers to the enjoyment or pleasure derived from using a technology, and habit is the extent to which people tend to perform behaviours automatically because of learning, both factors have been shown to play an important role in determining technology acceptance and use (Nair, 2015). Smart Perceived Security Risk refers to the perception of protection against risk associated with IoT applications in a smart environment (Ooi & Tan, 2016) and is a crucial construct to study in the smart environment where data are collected and sent over the air, and decisions are made in replacement of human intervention. Close context of this situation found by Zupanovic (2015) in the application of near field communication for ticketing system conclude that the risk of losing confidential data which leads to financial losses would present. Smart Perceived Trust refers to a psychological expectation that others will be sincere in keeping promises and will not behave opportunistically in expectation of a promised service derived from mobile transactions (Ooi & Tan, 2016). If the vendors show benevolence, integrity and competence, consumers are more likely to engage with the services they provide (Leong, 2013). In the operation of IoT, data are constantly being sent to central server for processing and the objects interacts among themselves seamlessly. Without the face-to-face interaction, trust is harder to be built compares to an offline trust (Yang & Lin, 2014). Hence SPT is an important factor to 445

450 study that would influence the behavioural intention to adopt the IoT technology in smart city context. Experience is measured through self-assessment of one s general computer and Internet knowledge and has been found to significantly moderating the relationship between the factors and DV in UTAUT2 model (Venkatesh, 2012). Theoretical Framework The theoretical framework of this study (Figure 1) is formulated based on the UTAUT2. The fundamental of UTAUT2 theory consists of seven independent variables namely performance expectancy, effort expectancy, social influence, facilitating conditions, hedonic motivation, habit and price value while Behavioural intention (BI) is the dependent variable. To further investigate factors that would influence the behavioural intention, 2 new constructs namely smart perceived security risk (SPSR) and smart perceived trust (SPT) adapted from Mobile Technology Acceptance Model (Ooi & Tan, 2016) were introduced. Use Behaviour in the original UTAUT2 model was not included in this study as IoT in smart city context are still in its infancy in Malaysia. Experience was adopted to study its moderating effect on the relationship between the constructs and BI. The moderating effect of age and gender were not included in study as this study is meant to focus more on the potential property buyers of smart city who are the younger group and the effect of gender are generally consistent with other study. Figure 1: Theoretical Framework Method Quantitative study approach was adopted in this study as it can systematically identify the significant factors that are affecting the behavioural intention to adopt the IoT technology in the context of smart city. Survey methodology was used to validate the research model. Survey research is useful for measuring attitudes and characteristics of a particular group of individuals 446