A peer reviewed journalproed.edu.np/gcm/wp-content/uploads/2020/05/JOURNAL2019.pdf · technology, entrepreneurship, human resource management, and good governance. The print and digital

A peer reviewed journal

(Tribhuvan University Affiliate)

Mid-Baneshwar, Kathmandu, NepalTel: 977-4488312 | 4472083 | Fax: 977-1-4472083

Email: [email protected] | URL: www.globalcollege.edu.np

Published by

Journal of Management & Development EconomicsDec. 2019 Vol. 9 Issue No. 1 Print ISSN 2392-4551 Online ISSN 2505-0672


Journal Management Committee

Advisory Team

Prof. Dr. Prem Raj Pant

Prof. Dr. Puskar Bajracharya

Prof. Dr. Radheshyam Pradhan

Dr. Tilak Rawal

Dr. Khagendra P. Ojha

Dr. Nar B. Bista

Dr. Gangadhar Dahal

Dr. Karan Singh Thagunna

Editors Team

Dr. Dev Raj Paneru – Chief Editor

Mr. Biraj Ghimire – Editor

Executive Committee

Dr. Drona Lal Puri

Mr. Amba Datt Joshi

Mr. Nabaraj Bhandari

Mr. Dharma Raj Ojha

Mr. Rajendra Dahal

Design & Layout

Dev Nandan Chaudhary


EditorialJournal of Management and Development Economics-JMDE is an institutional publication of

Global College of Management (GCM) affiliated to Tribhuvan University, Kathmandu, Nepal. Global College is a nationally recognized academic institution that serves management education offering the NEB through bachelor to master’s degree or university programs. The academic programs at GCM are processed to deliver in conducive learning environment that too incorporates a myriad of actions of mentoring guidance dedicated by commendably experienced senior faculty having a national and international repute in their respective subject of teaching. Each scholarly member deputed at GCM bears a high level of competence as required to offer students an individualized mentorship and the best academic experience. The College stands disti nct for its academic legacy materialized in teaching that is majorly framed under the modern philosophy of progressive education.

As a quality benchmarked academia, GCM is recognized nationwide and enjoys as being the first-choice institution for higher studies together with school education delivered at all of its entities. The entitlement acquired by GCM constitutes at the synergy of academic excellence maintained within its academic systems qualified with interactive student centric educational patterns, procedures and endeavors that yield quality educational outcomes. The other important aspect of quality prevalence in the system is due to its robust study results maintained at GCM upon integrating research as key tool to constructing knowledge combined with publication of scientific journal that contributes spreading a knowledge dissemination and outreach. The publication of Journal of Management and Development Economics is an example of research treasury in its place added to academic rigor that GCM promises. The publication of JMDE contributes primarily to lending research integration compressive speed with the academic system due to which the College enjoys a privilege to be a distinct but most esteemed quality education center. The publication of JMDE also helps GCM assert research as being the only innovative channel for generating new knowledge at the nexus of theory or academic discourse and practice. As research dissemination, the JMDE is assumed to be very impactful publication in culminating new zeal in GCM’s knowledge communities toward learning in ongoing practice of research that too promotes critical thinking, creativity and academic skills toward excellence.

This edition of the journal is phenomenal in succeeding the mission of the College to impart contemporary and result-based knowledge that addresses unlimited needs and issues relating business, non-government and government policy levels concerning the role of management for economic development. Giving space to empirical papers, literature-backed findings, systematic reviews, and university degree research and theses, JMDE illuminates evidence-based realities and understandings that make a significant contribution for practitioners to get a picture and thereon successfully cope with globalization as well as get along with rapidly happening technological innovations with that come associated changes and challenges, nonetheless also opportunities. The enlisted research papers imply their scope in varying strands and areas of management, business-governance, and economic development. The publications as well make recommendations upon how to make changes in the functional areas of management, governance, leadership, economy etc. meaningful and be able to convert the challenges into opportunities.

JMDE is an institutional research platform integrated with the publications of GCM for the scholarly people to showcase their professional skills in developing and thereon writing to publish their research paper. Research degree students, researchers, academic professionals of national and international repute along with the ones on job at GCM are given an opportunity to have their research work peer reviewed and when deemed appropriate, published in the JMDE within the year of submission. GCM adopts the journal also as a tool to fostering multimodal academic and research collaborations with the esteemed educational institutions, universities, and their professors of academic stature. Together, policy and research experts involved in business management and the field of economics too are invited to make research contribution by submitting their professional research work published in the JMDE with priority.

This issue of JMDE includes the papers in different categories; empirical and secondary data-based research works originally authored and co-authored by the faculty, research degree students and academic practitioners in the field of management. All submissions in this issue are peer reviewed and also academically merited and thereon approved for publication. The articles are thematic in content representing different areas of management and development economics. The works fall within the broad strands of sustainable economic development, leadership, information, communication and technology, entrepreneurship, human resource management, and good governance. The print and digital version of the issue consists of twelve articles whose empirical finds are backed by data driven, carefully developed, designed and tested statistical analyses.

In the first article, Bal Ram Chapagain investigates the nature of the relationship between firm’s corporate social responsibility (CSR) practices and its financial indicators. Based on qualitative analyses, the findings reveal positive association of CSR with financial performance specifically with perceptual measure of financial performance and market-based measure when compared to accounting-based measure of financial performance.

The second paper authored by Bharat Singh Thapa reports on historical review of microfinance concerning its performance to describe the recent trends of development in the field. In view of the commercialization of microfinance at the present state, the study asserts a paradigm shift in the analysis of microfinance system, approach and strategies as fundamental changes are taking place in the system.

The author Binod Shah analyzes the impact of remittance in the Nepalese economy taking Gross Domestic Product (GDP) as dependent variable. The study treats exchange rate, market capitalization and money supply along with government spending as independent variable that show intervening role. Backed by times series data available from 1998 to 2018 using qualitative analyses, the study presents a finding that increase in remittance signals positive growth in the GDP in both short and long run.

In their qualitative research paper, Biraj Ghimire and Lalita Shrestha highlight the effect of communication satisfaction in determining job satisfaction among services sector employees in Kathmandu. Using the Communication Satisfaction Questionnaire (CSQ), the study presents that dimensions of communication satisfaction feedback, supervisor communication, communication climate, coworker communication, and media quality are significant in steering perceptions of job satisfaction in the workplace. As such, the study recommends a need to improve communication practices among lower level employees.

Considering cross border contexts of business, Gautam Maharjan brings on surface a multitude of issues related to customs duty evasion in Nepal. The study backed by 819 responses representing government and business officials of Nepal analyses quantitatively reasons as accountable for customs duty evasion. Among others, the study lists out difficulties created by the open border with India, unclear customs policy, inadequate logistical support and inconvenient location as some reasons of customs duty evasion in case of Nepal. The study also delineates private sector as being more serious than government sector officials when it comes to operationalizing custom duty practices. To its objective, the study recommends issues of customs duty evasion and automating customs handling procedures as an input to framing customs policy and improve customs revenue.

In his article, Kapil Khanal, using both quantitative and qualitative measures among 400 women-led ventures prone to financial challenges along with managerial and human resources competence, analyses the issues and challenges of women entrepreneurs in Kathmandu. The study concludes that some of the broader factors that impede success of women entrepreneurship are political instability, financial problems and lack of support.

The author Krishna Prasad Paudel observes and using the quantitative measures analyses the knowledge management practices differentiated by demographic factors among four university faculty members of Nepal. The study acknowledges integration of Information, Communication and Technology (ICT) with knowledge management as a tool to enriching teaching, learning and academic discourses. As a key finding, the study argues that knowledge management practice resonates learning behavior of faculty member, the leadership of educational institution, organizational culture, environment,



technological infrastructure and knowledge creation process of individual, group and institution impact to enhance the intellectual capital of individual.

Makshindra Thapa in his paper analyses standards of service quality among commercial banks of Nepal. Using SERVQUAL model for quantitative analysis, the study figures out dimensions of service quality and that include e.g., tangibility, reliability, responsiveness, assurance and empathy. The study poises significant perception of service quality in the privately owned commercial banks as among others, three dimensions of service quality are found higher in them while compared to publicly owned commercial banks.

Nazrul Islam and colleagues assess factors impeding small start-ups in Bangladesh. The study recognizes the development of small business such as, food processing, rice farming, freight forwarding, tea production, barbing salon, water refill station, grocery, fish selling, cattle farming as fundamental to rendering socio-economic benefits. Based on the qualitative and quantitative analyses, the findings reveal deficiency of local support for starting and running business. Different factors e.g. lack of knowledge of information technology, business experiences, and entrepreneurship training as important are reported to have been barriers for the development of small entrepreneurial businesses in Bangladesh.

In their secondary source-based review paper, Himalacham Dasaraju and Himal Bhattarai assess qualitatively the ways to nurture women entrepreneurship for an inclusive economic development in the emerging economies, bringing evidences from India and Nepal. The authors demand that small business creation should be given access to finance, decision making and basic needs, leading to overall socio-economic transformation particularly women which can be some ways to galvanize inclusion. As such the study advocates to support women entrepreneurship as the instances suggest that financial inclusion, of women has contributed significantly to the inclusive growth and sustainable economic development in Nepal and India.

The paper authored by Sumitra Bhandari Ghimire examines relationship between knowledge management and psychological empowerment in service sector of Nepal. The study examined four industries i.e. Health, Telecommunication, Airlines and Education under which 12 organizations from both public and private sectors were selected for the study. Based on the factor analysis and structural equation modeling, the findings reveal that organizations studied in the sample are good in managing knowledge in the grounds of explicit and tacit knowledge. The author stresses the need of agile employees to cope with the competition arising from disruption in the business models and customer needs.

Set under the theme of human resource management, the final paper contributed by Sushma Manandhar examines relationship between workplace support, work-life balance and employees’ commitment among professional working mothers employed in the academic sector, financial institutions and corporate sector in Kathmandu. Based on the quantitative analyses, the findings reveal positive relationship between workplace support and work-life balance and employees’ commitment.

In conclusion, the articles included in this journal have gone through careful selection process as that should qualify for the academic dissemination as this. All the submissions in process were put through peer review prior to the final selection. The selection of papers through review depended basically on whether the research matched with any of the streams relating management and development economics the journal was lay upon. To the extent possible, the selected submissions were ensured for accuracy and validity in their research design, analysis, and results. For the sake of maintaining uniformity, credibility and academic compliance, the papers were referred with the latest APA style as standardized for JMDE. Nevertheless, all the editing requisites have been comprised, the concerned author/s are still accountable for validity, reliability measures and legitimacy of the research and content upon any subjective evaluation. Thus, the team of editors assert that the article is an intellectual property of the respective author who is therefore exclusively responsible for any shortcoming presented.

Dev Raj PaneruChief Editor JMDE, Global College of Management

NotesArticles are subject to editorial by referees from the community of management and econom-ics. Comments or notes regarding articles are welcome and will be considered for publication to the extent possible. The opinions and the interpretations expressed in the articles are the personal opinions of the authors and reviewers and do not necessarily reflect the views of the publisher and editors, or of any institution with the information with which the author may be associated. The editorial board does not guarantee the accuracy of the data and the informa-tion included in the articles and accepts no responsibility, whatsoever, for any consequences of their use.

Subscription informationJournal of Management and Development Economics (JMDE) is a journal published annually by Global College of Management. The publication is for the benefit of the management ex-perts, economists, planners, professionals as well those interested in the field of management and development. Copies of the journal may be from Global College of Management. The subscription rates are as follows:

Individuals Library and Institution Per Copy Per Copy

Nepal Rs. 500 Rs. 900

SAARC Countries US$ 10.0 US$ 15.0

Other Countries US$ 15.0 US$ 22.0

Mailing Charge to be paid extraClaims for the missing numbers should be made within the month following the regular month of publication. The publisher will supply the missing numbers free of cost only when it is confirmed and when the reserve stock permits.

Global College of Management, Mid-BaneshworKathmandu, Nepal

014488312, 014472083


Format for subscription request........................................................................................................................................................................................................................................................................................................

I would like to subscribe to Journal of Management and Development Economies, an annual publication of Global College of Management, Mid Baneshwor, Kathmandu. Nepal.

Subscription type: Personal Institutional Vol. ............... Issue ..............

For: 1 Year 2 Years ............................. Years

Mode of payment: Cash/Cheque/Draft Total amount NRs / US$:....................................................................................................................................................

Name & Designation:........................................................................................................................................................................................................................................................................................................

Institution:........................................................................................................................................................................................................................................................................................................

Mailing Address:........................................................................................................................................................................................................................................................................................................

Telephone: ............................................... E-mail: .....................................................................

Fax:........................................................................................................................................................................................................................................................................................................

Please transfer the amount to Global College of Management, Mid-Baneshwor, Kathmandu

• Citizens Bank International Ltd., New Road, Kathmandu• Account No: 0070000179 CC, SWIFT: CTZNNPKT• Please do not send cash by mail.• Only cheques drawable in Kathmandu Will be accepted.



Page number ContentsDoes Corporate Social Responsibility Pay Off? A Verification of the North American Postulation in the Nepalese ContextBal Ram Chapagain

Paradigm Shift in Microfinance System: Status Review and Agenda for Future ResearchBharat Singh Thapa

Remittance Productivity in Nepalese Economy Binod Sah

Organizational communication practices and job satisfaction among service sector employees in KathmanduBiraj Ghimire, Lalita Shrestha

Customs Duty Evasion Issues in NepalGautam Maharjan

Emerging Issues and Challenges of Women Entrepreneurship (A case study of Kathmandu Valley)Kapil Khanal

Knowledge Management Matters by Demographic Variables of Faculty Members in the Context of Nepali Higher Educational InstitutionsKrishna Prasad Paudel

Comparative Service Quality Status in the Commercial Banking Sector of NepalMakshindra Thapa

Factors Impede the Creation of Small Entrepreneurial Businesses in BangladeshNazrul Islam, Senjuti Barua, Tahia Islam Hridi, Talukder Mohammad Shafait, Chowdhury Misbah Hossain, Timsal Akhter, & Mehedi Hasan Omi

Nurturing Women’s Entrepreneurship for Inclusive Economic Development in Emerging Economies: Present Status & Global Challenges (A Case of India & Nepal)Himachalam Dasaraju, Himal Bhattrai

Relationship between Knowledge Management and Psychological Empowerment in Service SectorSunita Bhandari Ghimire

Impact of Workplace Support on Work-Life Balance and Employees’ Commitment to Professional Working Mothers in Kathmandu Valley Sushma Manandhar

th la1

re ch18

tt29

rs

39

m51

ou

61

ext

78

Co91

hul

100

iin

114

t S

129

ento

145

1

Does Corporate Social Responsibility Pay Off? A Verification of the North American

Postulation in the Nepalese ContextBal Ram Chapagain *

[email protected]

Abstract

The nature of the relationship between firm’s corporate social responsibility (CSR) practices and its financial performance has been a major concern among scholars during the last few decades. However, limitations with most of the extant literature include the lack of comprehensive measures of CSR practices as well as financial performance. Further, there is dearth of robust research studies in this issue in the least developed country context like Nepal. Against this backdrop, this study examines the relationship between firm’s CSR practices and its financial performance by using comprehensive measures in the Nepalese context. Data on CSR practices and financial performance were collected from 168 companies listed in the Nepal Stock Exchange (NEPSE). The data were analyzed by using Pearson correlation and hierarchical multiple regression analyses. Results indicate that the relationship between CSR practices and the firm’s financial performance is positive when confounding effects of firm’s size and firm’s age are statistically controlled. However, the firm’s CSR practices are more strongly positively correlated with a perceptual measure of financial performance and market-based measure of financial performance compared to accounting-based measure of financial performance. In this way, this study largely substantiates the postulation made in the North American context in the distinct socio-economic and political context of Nepal.

Keywords: Corporate social responsibility, CSR practices, Financial performance, Nepal.

Does Corporate Social Responsibility Pay Off? A Verification of the North American Postulation in the Nepalese Context

* Assistant Professor at Central Department of Management, Tribhuvan University, Kathmandu, Nepal.

1. IntroductionThe principal role of business in society is to produce goods & services that consumers need and want and to make an acceptable level of profit in the process. Without profit various responsibilities of business become moot considerations (Carroll, 1991). Thus, whether socially responsible business behavior pays off has become an important questionfor both business and society (Adegebite, Guney, Kwabi & Tahir, 2019). But, the relationship between CSR practices and financial performance is always debatable (Hou, 2018). Some scholars (Karnani, 2011; Kim, Nurunnabi, Kim & Jung, 2018) assert that cost incurred in CSR activities

2 Does Corporate Social Responsibility Pay Off? A Verification of the North American Postulation in the Nepalese Context

outweighs the total benefits derived from these activities whereas some other scholars believe that there is a positive relationship between CSR and financial performance of firms (Aguilera, Ruth, Rupp, Williams & Ganapathi, 2007; Carroll & Shabana, 2010). Studies conducted during the last few decades have produced conflicting results showing positive (Waddock & Graves, 1997; Salvi, Petruzzella & Giakoumelou, 2018), negative (Hirigoyen & Poulain-Rehm, 2015), mixed (Sweneey, 2009; Schreck, 2011), U-shaped (Barnett & Salomon, 2012), inverted U-shaped (Barnett & Robert, 2006) and no relationships (Alexander & Buchholz, 1978; Soana, 2011). This is mainly attributed to the contextual differences as well as different measures of CSR practices and financial performance. Therefore, it is highly essential to use comprehensive measures of CSR as well as financial performance with robust methodology before making any generalizations in a given context.

Due to the lack of consensus and complexity of the concept, it is not surprising that many different approaches have been used in the literature to measure CSR practices (Galant & Cadez, 2017). Some studies have used even one-dimensional measures of CSR such as charitable contributions (Lev, Petrovits & Radhakrishnan, 2010) or environmental ratings (Russo & Fotus, 1999; Lech 2013), which is theoretically problematic as the CSR concept is clearly multidimensional (Carroll, 1979). Likewise, many studies have used only accounting-based measures of financial performance (Waddock & Graves, 1997; Mishra & Suar, 2010; Matuszak & Rozanska, 2019), which hinge simply on historical data and hence fail to explain future prospect. Some studies have been done in the area of CSR in Nepal particularly in recent years such as Adhikari (2012), Pant and Piansoongnern (2017) and Chapagain (2019). But, there is lack of robust studies examining the relationship between CSR practices and firm’s financial performance and hence managers, policy makers and other stakeholders are bound to rely on subjective judgment or intuition rather than on objectively verified evidence while making CSR related decisions.

Against this scenario, the article herein aims to verify the North American postulation regarding ‘CSR-financial performance relationship’ in the distinct business environment of Nepal. It is noteworthy to mention that theoretical perspectives developed in the North American context (Freeman, 1984; Visser, 2010; Porter & Kramer, 2011) as well as the overwhelming empirical evidence in the North American as well as European contexts (Waddock & Graves, 1997; Erhemjamts, Li, & Venkateswaran, 2013; Kim, Kim & Qian, 2015; Salvi et al., 2018) suggest that there is generally a positive relationship between CSR practices and firm’s financial performance. But, compared with those in developed and even emerging economies, institutional arrangements and legal frameworks in least developed country context like Nepal are not yet well developed, which can limit the extent to which firms can benefit from their CSR practices. In addition, an extensive body of literature argues that values and attitudes of managers as well as other stakeholders in a given context are likely to have a strong influence on the outcomes of such practices (Hay & Gray, 1974; Hemingway & Mclagan, 2004). Thus, this study builds a case for CSR practices and financial performance relationship in the least developed country context of Nepal.

The structure of the article is as follows: The article starts by the review of selected empirical studies regarding the relationship between CSR practices and firm’s financial performance across contexts. Then the conceptual framework and hypotheses of the study are presented. This is followed by research methodology, results and discussions. Finally, conclusion and implications of the study are provided.

3Does Corporate Social Responsibility Pay Off? A Verification of the North American Postulation in the Nepalese Context

2. Literature Review and Statement of HypothesisSignificant efforts have been made to understand the impact of CSR activities on financial performance of companies. Scholars have examined the relationship between CSR efforts and financial performance directly (Aupperle, Carroll & Hatfield, 1985; Waddock & Graves, 1997; Choi, Kwak & Choe, 2010; Hirigoyen & Poulain-Rehm, 2015) and/or via non-financial performance routes (Sweeney, 2009; Branco & Rodriguez, 2006). However, studies have produced mixed results, which could be attributed to the diversity of ways in defining CSR practices and financial performance (Carroll, 1979; Orlitzky, Schmidt & Rynes, 2003), to the lack of appropriate statistical controls (Margolis & Walsh, 2003), or to the contextual differences of studies (Rettab, Brik & Mellahi, 2009).

Ullman’s (1985) meta-analysis of thirty studies found seventeen reported a positive relationship, six reported a negative, and seven reported a neutral relationship. Likewise, Margolis and Walsh’s (2001) meta-analysis found that 55% of the 160 studies examined identified a positive relationship between CSR and financial performance, 22 percent reported no relationship, 18 percent found a mixed relationship, and 4 percent a negative relationship. Most recently, Busch and Friede (2018) have conducted a second-order meta-analysis combining 25 previous meta-analyses yielding a sample size of one million observations. Their results demonstrated a highly significant positive and bilateral relationship between CSR and financial performance. Yet, the relationship between CSR and financial performance represents the most questioned area of CSR (Angelidis, Massetti & Magee-Egan, 2008) and the debate surrounding the financial impact of CSR continues (Park & Lee, 2009; Matuszak & Rozanska, 2019).

Waddock and Graves (1997) found a positive relationship between CSR and firm’s financial performance measured in terms of ROA, ROE and return on sales. Similarly, Rajput, Batra and Pathak (2012) found that there is a significant positive relationship between CSR and financial performance as measured by sales revenue and profits of five hundred Indian companies. But, Swneey (2009) found mixed results in the context of Irish companies. Most recently, Sinha, Sachdeva and Yadav (2018) found a weak positive relationship between CSR and financial performance in the context of Indian SMEs.

However, a study of Balabanis, Phillips and Lyall (1998) revealed that activities towards women and minority have positive impact in the long-term whereas environment related activities have negative impact on financial performance and there is no any effect of philanthropic activities. Lev, Petrovits and Radhakrishnan (2010) used charitable contributions as a proxy of CSR and found a positive relationship between CSR and firm’s sales growth. Likewise, Mishra and Suar (2010) found that CSR practices have positive impact on firm performance in the context of Indian firms. But, Fogler and Nutt (1975) found a neutral relationship between CSR and financial performance. Interestingly, Schreck (2011) found positive, negative, and no relationship between different aspects of CSR and financial performance.

Similarly, Mwangi and Jerotich (2013) found an insignificant positive relationship between corporate social responsibility practices and financial performance. Ofori, Nyuur and S-Darko (2014) also found a positive relationship between CSR and firm performance in the context of Ghanaian banks but it is noteworthy to mention that control variables like size of the firm, sales growth, debt ratio etc. have much stronger relationship with financial performance

4

compared to that between CSR practices and financial performance. Likewise, a study conducted in top 100 Malaysian listed companies revealed the fact that CSR practices in terms of community, environment, workplace and marketplace have positive impact on firm’s financial performance in terms of earning per share and return on equity (Yusoff & Adamu, 2016).

However, there are some interesting findings in contrast to the findings of many other studies. For instance, Matuszak and Rozanska (2019) conducted a study in the context of Poland’s banking industry and found a U-shaped relationship between CSR towards human resources and financial performance and an inverted-U-shaped relationship between CSR vis-à-vis product &customers as well as community and financial performance. In the similar vein, Barnett and Robert (2006) found a curvilinear relationship between CSR and financial performance. Singer (cited in Lantos, 2001) has obtained similar findings. He found a curvilinear relationship, with moderately socially responsible firms being more profitable than very high CSR and very low CSR organizations. Likewise, Gherghina, Ventila and Dobrescu (2015) found that CSR activities could add value to firm under certain conditions, that is, if they are wisely managed and implemented, as well as sufficiently disclosed and reported. More interestingly, a study conducted by Yip, Van Staden and Cahan (2011) in the context of publicly listed firms in the US found that CSR reporting and earnings management is affected by the political environment and not by ethical considerations.

Karnani (2011) argue that CSR is inherently unprofitable and, therefore, there is little need to study this relationship empirically. A study by Aupperle et al. (1985) and a recent study by Hirigoyen and Poulain-Rehm (2015) have supported the arguments put forwarded by Karnani. Aupperle et al. (1985) found a negative relationship between CSR and return on assets. Interestingly, the results of Hirigoyen and Poulain-Rehm’s (2015) study showed not only that greater social responsibility does not result in better financial performance, but also that financial performance negatively impacts corporate social responsibility. This indicates that there is also a chance of both-ways negative relationship between CSR and financial performance.

Some researchers have argued and provided the evidence that there can be a reverse causality between CSR practices and financial performance. For instance, Balabanis et al. (1998) found that past financial performance can explain variation in certain elements of corporate social responsibility. Specifically, philanthropic activity seems to be affected by gross profit to sales ratio and excess market valuation in the past. Likewise, Waddock and Graves (1997) and Sun (2012) found that better financial performance leads to better CSR performance and vice versa. However, Malhotra and Dash (2010) argue that we can never prove causality (i.e., demonstrate it conclusively); we can only infer a cause-and-effect relationship. Moreover, we cannot generally identify all causal factors. But, it is possible to control for some other causal factors by incorporating control variables in the model.

All these evidences indicate that acting in a socially responsible manner can have various performance implications to firms. While vast majority of research literature support the idea that CSR pays off to the firm, some studies indicate the mixed, neutral, negative, curvilinearand conditional relationships. As shown in the Table 1, it may be attributed to diverse measures of CSR as well as financial performance. It may also be attributed to the contextual differences as well as the different types of data collection instruments and methodologies. Thus, it


5

should be empirically tested in a particular context by employing appropriate measures as well as using best possible data collection instrument(s) and methodology before making any generalizations.

Table 1 summarizes the findings of selected empirical studies regarding the relationship between CSR practices and firm’s financial performance (FP).Table 1Summary of Selected Empirical Studies on CSR-FP Relationship

Authors Sign Measure(s) of CSR Measure(s) of FPFogler and Nutt (1975) Neutral CEP Index P/E ratio

Aupperle et al. (1985) Negative Carroll’s (1979) CSR construct

ROA

Waddock and Graves (1997)

Positive KLD index ROA, ROE, Return on Sales

Barnett and Robert (2006) Curvilinear(Inverted-U)

Socially responsible invest-ing (SRI) funds

Risk-adjusted financial performance

Sweneey (2009) Mixed Perceptual data on CSR with respect to stakeholders & environment

Perceptual FP via. NFP routes and directly

Lev et al. (2010) Positive Charitable contributions Sales Growth

Mishra and Suar (2010) Positive Perceptual data on CSR with respect to stakeholders & environment

Industry-adjusted ROA

Schreck (2011) Mixed Oekom’s CSR ratings on stakeholders, environment, governance and aggregate CSP

Tobin’s Q (and ROE for robustness check)

Rajput et al. (2012) Positive CSR ratings by Karamyog Profit Before Taxes, Sales

Mwangi and Jerotich (2013)

Insignificant positive

CSR score based on the content analysis of annual reports

ROA

Hirigoyen and Pou-lain-Rehm (2015)

Negative Vigeo’s CSR ratings on six categories and overall CSP

ROE, ROA and Market to Book Ratio

Gherghina et al. (2015) Conditional positive

CSR index developed by Boston College, USA

Sector-adjusted Tobin’s Q

Yusoff and Adamu (2016) Positive CSR practices with respect to environment, community, workplace and marketplace

ROE and EPS

Sinha et al. (2018) Weak Pos-itive

CSR toward customers, employees, environment and community

Perceptual FP in terms of long-run benefits, Profitabili-ty, Sales Revenue and ROI

Matuszak and Rozanska (2019)

U- and invert-

ed-U-shaped

CSR disclosure indices: en-vironment, human resourc-es, product & customers, and community involvement

ROA, Net Interest Margin (NIM)

Source: Author’s summary based on the literature review.

Considering the inconclusive results found in the extant literature regarding relationship between CSR practices and financial performance, narrow conceptualization of CSR practices as well as financial performance, and the lack of adequate research in the Nepalese context,


6

a conceptual framework has been developed. Figure 1 depicts the conceptual framework for examining the relationship between firm’s CSR practices and itsfinancial performance by controlling the confounding effects of firm’s size and firm’s age in the Nepalese context.Figure 1: Conceptual Framework for Examining the Relationship between Firm’s CSR Practices and its Financial Performance in the Nepalese Context

Financial Performance vis-a-vis Profitability

(perceptual measure of FP)

Return on Assets (accounting-based

measure of FP)

Market to Book Ratio (market based measure

of FP)

Control Variables:Firm’s Size, Firm’s Age

CSR toward Employees

CSR toward Shareholders & Other Investors

CSR with respect to Environment

CSR toward Customers

CSR toward Community

CSR with respect to Corporate Governnance

The various hypotheses, thus, stated are as follows.H1 : There is a positive relationship between firm’s CSR practices and its financial

performance vis-à-vis profitability.H2 : There is a positive relationship between firm’s CSR practices and its return on assets

(ROA).H3 : There is a positive relationship between firm’s CSR practices and its market to book

ratio.

In the above stated hypotheses, positive relationship between the two variables generally indicates cause and effect relationship between CSR practices and firm’s financial performance since substantive theories and approaches (e.g., stakeholder theory, CSV approach etc.) assert that CSR can be regarded as means to achieve performance ends (Garriga & Mele, 2004). But, Renneboog, Horst and Zhang (2008) and many other scholars including Malhotra and Dash (2010) contend that relationship does not necessarily imply causation particularly in cross-sectional studies. Despite some theoretical underpinnings, thus, the above hypotheses simply state the “positive relationship” between CSR practices and firm performance rather than CSR practices “cause better” financial performance.

3. MethodologyDespite the availability of alternative measurement approaches for CSR practices, this study uses questionnaire-based survey using multi-stakeholder items mainly becase of three reasons. First, there are no independent CSR rating agencies in Nepal. Second, corporate reports are


7

unavailable or insufficient for meaningful content analysis. Third, CSR is essentially a multi-dimensional concept (Carroll, 1979) and hence CSR practices measured in terms of multi-stakeholder items as well as environment and corporate governance can be regarded superior than one dimensional measures such as reputation indicies or charitable contributions as proxy of CSR practices. Likewise, this sudy uses accounting-based, market-based, and perceptual measures of financial performance to complement the limitation of alternative measurement approaches in measuring the firm’s financial performance. Aditionally, control variables have been added in the model as shown in Figure 1 in order to statistically control the confounding effects of such variables in the relationship between CSR practices and firm’s financial performance.

The population of the study consists of 201 firms listed and traded in the Nepal Stock Exchange (NEPSE) representing commercial banks, development banks, finance companies, insurance companies, manufacturing and processing firms, hydropower companies, hotels, trading companies and others. Though the initial plan was to do census, it became possible to hand over questionnaires to only 190 companies based on their willingness to participate in the study. Of which, 168 questionnaires were dully filled in and returned. Thus, the overall response rate is 88.4%. Note that, the unit of analysis in this study is organization represented by its executive or manager.

This study uses primary as well as secondary data. Primary data were collected by usining structured questionnaire whereas the secondary data were collected through published annual reports of selected compaines. The survey questionnaires were developed after extensive review of literature and finalized only after pretesting with actual respondents (i.e., managers), experienced academics and experts in the field. After collecting the data, the missing values and monotone responses were handled. Thereafter, data files were created in SPSS 23.0 for getting data ready for analysis. Finally, extreme outliers were winsorized to a desirable limit instead of removing cases from the dataset.

Then, Shapiro-Wilk Test (S-W Test) was run for data on all CSR practices as well as financial performance constructs to see whether they are normally distributed and most of them were found to be normal. Since the data on ROA, market to book ratio and firm size are positively skewed, logarithmic transformation was used as suggested by Tabachnik and Fidell (2001) and approximately normal distributions were achieved. Likewise, assumptions of linearity, homoscedasticity and independence of residuals were tested by looking at variance inflation factors (VIF), correlation coefficients, and the scatterplots and all the assumptions of hierarchical multiple regression analysis were found to be met. Finally, the stated hypotheses were tested by examining the outputs of hierarchical multiple regression analysis.

Note that he sample size in this study is 168, which confirms the sample size requirement: N > 50 + 8m (where m = number of independent variables) for regression analysis as suggested by Tabachnick and Fidell (2001, p. 117). Additionally, Inter-item consistencies of constructs used in the study were tested by Cronbach’s Alpha coefficient. The values of Cronbach’s alpha for all constructs fell within the range of 0.70 to 0.90. Thus, all constructs used in the study are reliable and no construct has redundant items. Note that, the value of Cronbach’s alpha is considered to be good if it is 0.70 or higher (Nunnally, 1978). Conversely, a high value of alpha (>0.90) may also suggest redundancies (Tavakol & Dennick, 2011).


8

4. ResultsDescriptive statistics and Pearsoncorrelation coefficients among studied variables are presented in Table 2. It clearly indicates that there is a positive relationship between firm’s CSR practices and various measures of firm’sfinancial performance. Likewise, firm’s age is also positively correlated with its financial performance variables. Interestingly, firm’s size is positively correlated with perceptual measure of financial performance and market-based measure of financial performance (i.e., market to book ratio) but negatively correlated with accounting-based measure of financial performance (i.e., return on assets).

Table 2

Descriptive Statistics and Pearson Correlation Coefficients among Studied VariablesS.N. Variables 1 2 3 4 5 6 7 8 9 10 11

1 Size (Log10 of Total Assets) 1

2 Age of the firm .227** 1

3 CSR practices toward employees .333** .184* 1

4 CSR practices toward customers 0.131 0.125 .500** 1

5 CSR practices toward share-holders & other investors .208** .153* .444** .414** 1

6 CSR practices toward community .281** 0.087 .566** .364** .334** 1

7 CSR practices w.r.t. envi-ronment .281** .184* .507** .337** .362** .575** 1

8 CSR practices w.r.t. corpo-rate governance .238** 0.044 .450** .493** .399** .536** .362** 1

9 Financial performance (perceptual) .207** .182* .447** .334** .455** .382** .388** .331** 1

10 ROA (Log10) -0.028 0.15 .170* 0.08 .302** 0.074 .239** 0.078 .355** 1

11 Market to Book Ratio (Log10) .369** .200** .376** .217** .293** .193* .238** .212** .413** .239** 1

12 Mean 10.05 14.86 3.24 3.55 3.30 2.94 2.79 4.00 3.15 0.51 0.47

13 SD 0.27 5.93 0.49 0.47 0.52 0.49 0.52 0.39 0.76 0.24 0.23

N = 168; *p<0.05; **p<0.01.

It is noteworthy to mention that all CSR practices variables are significantly positively correlated with perceptual as well as market-based measures of financial performance whereas the case is different for return on assets. Only the CSR practices toward shareholders, employees and environment are significantly positively correlated with return on assets (ROA).

The correlation coefficients in the Table 2 simply measurethe bidirectional relationshipamong studied variables that are unreserved in regression analysis. To examine the relationship between CSR practices and different measures of firm’s financial performance by controlling the confounding effects of control variables (i.e., firm’s size and firm’s age), hierarchical multiple regression analyses were carried out.


9

Table 3

Results of Hierarchical Multiple Regression Analyses for Different Measures of Financial Performance (FP)

CSR practices and FP (perceptual)

CSR practices and ROA CSR practices and Market-to-Book Ratio

VIF

Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2

Constant -2.156 -0.735 0.997 1.348 -2.563 -2.332 - -

Firm‘s Size 0.501* 0.025 -0.058 -0.136 0.295*** 0.222** 1.054 1.208

Firm‘s Age 0.018 0.009 0.007* 0.004 0.005 0.003 1.054 1.097

CSR-Employees - 0.261* - 0.041 - 0.115* - 1.967

CSR-Customers - 0.069 - -0.051 - 0.007 - 1.589

CSR-Share-holders & Other Investors

- 0.388** - 0.129** - 0.056 - 1.406

CSR-Community - 0.143 - -0.059 - -0.047 - 2.018

CSR-Environment - 0.164 - 0.102* - 0.011 - 1.68

CSR-Corporate Governance - 0.065 - -0.004 - 0.014 - 1.715

R2 0.062 0.314 0.027 0.156 0.150 0.341 - -

∆R2

F-test-

5.450**0.252

9.116 ***-

2.2560.129

3.682**-

14.603***0.191

6.096***--

--

N = 168; *p<0.05; **p<0.01; ***p<0.001.

Table 3 reports the key results of the hierarchical multiple regression analyses for different measures of financial performance. In the regression analyses for different measures of financial performance, two control variables were entered in the first step (Model 1) and control variables as well as independent variables were entered in the second step (Model 2). Inspection of Table 3 shows that perceptual measure of financial performance is significantly positively correlated with CSR practices towards shareholders & other investors as well as CSR practices towards employees. Likewise, return on assets (ROA) is significantly positively correlated with CSR practices towards shareholders & other investors as well as CSR practices with respect to environment. Finally, market to book ratio is significantly positively correlated with CSR practices towards employees.

As per the stated hypothesis, result showed that there is a positive relationship between CSR practices and firm’s perceptual measure of financial performance vis-à-vis profitability (R2 = 0.314, p<0.001). Likewise, result also indicated that there is a positive relationship between CSR practices and firm’s return on assets (R2 = 0.156, p<0.01). However, it is worth pointing out here that although the model is statistically significant, the R2 is very small. Finally, in order to see whether results change when market-based measure of financial performance is used, hierarchical multiple regression analysis for market to book ratio was performed against various CSR practices by controlling the effects of firm’s size and firm’s age. Again result showed that there is a positive relationship between firm’s CSR practices and its market to book ratio (R2 = 0.341, p<0.01).

Table 3 also reveals that all the VIF (variance inflation factor) values are less than 10. Thus, it is also clear that there is no problem of multicolinearity in the regression models (Pallant,


10

2005). Similarly, absence of clear or systematic pattern of residuals (e.g., curvilinear, or higher on one side than the other) in the scatterplots with most of the scores concentrated around the center, i.e., along the 0 point (see Appendix A) indicate that the assumptions of normality, linearity and homoscedasticity of the data are met (Pallant, 2005).

5. DiscussionsWhile a lot of research studies point out in favor of a positive relationship (Orlitzky et al., 2003), this connection has not been fully established (Prado-Lorenzo, Gallego-Alvarez, Garcia-Sanchez & Rodriguez-Dominguez, 2008; Park & Lee, 2009). This study found that all the aspects of CSR practices are positively correlated with various measures firm’s financial performance. However, all relationships are not statistically significant. Likewise, the testing of hypotheses revealed that there is a positive relationship between firm’s CSR practices and its various measures of financial performance. This finding corroborates with most of the past research evidences (Waddock & Graves, 1997; Rettab et al., 2009; Mishra & Suar, 2010; Ofori et al., 2014; Yusoff & Adamu, 2016; Cho, Chung, & Young, 2019), but contradicts with some others (Aupperle et al., 1985; Barnett & Robert, 2006; Schreck, 2011; Hirigoyen & Poulain-Rehm, 2015). Inconsistent results from study to study are not surprising given that the diverse measures of CSR and financial performance, methodological dissimilarities, and contextual differences (Steiner & Steiner, 2016). For instance, some studies have used stakeholder related aspects of CSR (Sinha et al., 2018) while some others have used content analysis of annual reports (Mwangi & Jerotich, 2013) or even simply the charitable contributions as a proxy of CSR practices (Lev et al., 2010).

But, it is noteworthy to mention that CSR practices better explain market-based measure of financial performance (∆R2 = 0.191) than accounting-based measure of financial performance (∆R2 = 0.129) when confounding effects of firm’s size and age are statistically controlled. It implies that CSR practices better explain subsequent firm performance than past firm performance. It is because market based measure of financial performance (such as market to book ratio) hinges on growth prospects and sustainability of profits whereas accounting based measure of financial performance (such as ROA) hinges on the historical performance of firms (Rust, Lemon & Zeithami, 2004).

Results also indicate thatthere are different sets of significant variables for each hypothesis. Among six CSR practices variables, CSR practices towards shareholders & other investors, CSR practices towards employees and CSR practices with respect to environment have significant positive relationship with firm’s financial performance in the Nepalese context. This finding closely resembles to the argument that the employees and shareholders are strategically very important stakeholders of the firm (Berman, Wicks, Kotha & Jones, 1999). However, despite the importance of customers for any kind of business, ‘CSR practices towards customers’ is not significantly positively correlated with firm’s financial performance in the Nepalese context. This may be attributed to the fact that some customer related CSR activities, such as post-sales services, are costlier in the short-run and may take time to fully realize their business benefits.


11

6. Conclusion and ImplicationsResults of this study demonstrate that there is a positive relationship between CSR practices and firm’s financial performance in the Nepalese context. Findings also indicate that CSR practices towards shareholders & other investors, CSR practices towards employees and CSR practices with respect to environment are the significant variables contributing to the positive relationship. However, there is no significant positive impact of CSR toward customers, CSR toward community and CSR with respect to corporate governance on firm’s financial performance. In this way, this study verifies the postulation made in the North American context in distinct business environment of Nepal and addresses the concern often expressed by skeptics about the value generated by CSR practices in the least developed country context of Nepal.

It has a number of implications for academics, managers and policy makers. The improved understanding of CSR-FP relationship in the Nepalese context fills the knowledge gap in the empirical literature. Positive relationship between CSR practices and firm’s financial performance suggests that Nepalese managers can consider CSR as one of the mainstream business issues without any hesitation. Managers may convince the Board to allocate more resources to those CSR practices that have significant positive relationships with financial performance and less to others, thereby creating a win-win situation between business and society. Government and policy makers can consider giving tax exemptions or any other clearly spelled out incentives for those CSR practices that do not have significant positive impact on firm’s financial performance.

This study also has several implications pointing to interesting avenues for future research. First, future studies may include wide array of firms beyond listed companies. Second, future research studies may use multi-informant research design instead of simply executives & managers in assessing firm’s CSR practices. And, finally, future research studies may focus on assessing the impact of CSR practices on broad social goals such as the various sustainable development goals (SDGs) endorsed by the government of Nepal.

AcknowledgementsThis article is an extract from the PhD thesis entitled “Corporate Social Responsibility and Firm Performance in Nepal”. The author would also like to extend special thanks to Prof. Dr. Pushkar Bajracharya and Prof. Dr. Dev Raj Adhikari for their scholarly guidance during the entire study. Similarly, the author would like to express utmost gratitude to Prof. Dr. Prem Raj Pant for his valuable feedback and suggestions for its improvement.


12

References

Adegbite, E., Guney, Y., Kwabi, F., & Tahir, S. (2019). Financial and corporate social performance in the UK listed firms: The relevance of non-linearity and lag effects. Review of Quantitative Finance and Accounting, 52, 105-158. https://doi.org/10.1007/s11156-018-0705-x.

Adhikari, D. R. (2012). Status of corporate social responsibility in selected Nepalese companies. Corporate Governance, 12(5), 642-655. https://doi.org/10.1108/14720701211275578.

Aguilera, R., Ruth, V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836-863. https://doi.org/10.5465/amr.2007.25275678.

Alexander, G. J., & Buchholz, R. A. (1978). Corporate social responsibility and stock market performance. Academy of Management Journal, 21(3), 479-486. https://doi.org/10.2307/255728.

Angelidis, J., Massetti, B., & Magee-Egan, P. (2008). Does corporate social responsibility orientation vary by position in the organizational hierarchy? Review of Business,Spring, 23-32. https://doi.org/10.2139/ssrn.1737940.

Aupperle, K., Carroll, A., & Hatfield, J. (1985). An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal, 28(2), 446-463. https://doi.org/10.2307/256210.

Balabanis, G., Phillips, H. G., & Lyall, J. (1998). Corporate social responsibility and the economic performance in the top British companies: Are they linked? European Business Review, 98(1), 25-44. https://doi.org/10.1108/09555349810195529.

Barnett, M., & Robert, S. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27(11), 1101-1122. https://doi.org/10.1002/smj.557.

Barnett, M. L., & Salomon, R. M. (2012). Does it pay to be really good? Addressing the shape of the relationship between social and financial performance. Strategic Management Journal, 33(11), 1304-1320. https://doi.org/10.1002/smj.1980.

Berman, S. L, Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42 (5), 488-506. https://doi.org/10.2307/256972.

Branco, C. M., & Rodrigues, L. L. (2006). Corporate responsibility and resource-based perspectives. Journal of Business Ethics, 69(2), 111-132. https://doi.org/10.1007/s10551-006-9071-z.


13

Busch, T., & Friede, G. (2018). The robustness of the corporate social and financial performance relation: A second-order meta-analysis. Corporate Social Responsibility and Environmental Management, 25, 583-608. https://doi.org/10.1002/csr.1480.

Carroll, A. B. (1979). A three dimensional conceptual model of corporate social performance. Academy of Management Review, 4, 497-505. https://www.jstor.org/stable/257850.

Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39-48. https://doi.org/10.1016/0007-6813(91)90005-g.

Carroll, A. B., & Shabana (2010). The business case for corporate social responsibility: A review of concepts, research and practice. International Journal of Management Reviews, 85-105. https://doi.org/10.1111/j.1468-2370.2009.00275.x.

Chapagain, B. R. (2019). Role of the government in promoting corporate social responsibility in Nepal. SEBON Journal, 7, 130-139. https://www.sebon.gov.np/uploads/uploads/X5rp6kG6JsAGPN7MvqHQ9YvEPF4MIe OmnRCwQ4SC.pdf.

Cho, S. J., Chung, C. Y., & Young, J. (2019). Study on the relationship between CSR and financial performance. Sustainability, 11, 343. https://doi.org/10.3390/su11020343.

Choi, J-S, Kwak, Y-M, & Choe, C. (2010). Corporate social responsibility and corporate financial performance: Evidence from Korea. Australian Journal of Management, 35(3), 291-311. https://doi.org/10.1177/0312896210384681.

Erhemjamts, O., Li, Q., & Venkateswaran, A. (2013). Corporate social responsibility and its impact on firms’ investment policy, organizational structure, and performance. Journal of Business Ethics, 118 (2), 395-412.https://doi.org/10.1007/s10551-012-1594-x.

Fogler, H. R., & Nutt, F. (1975). A note on social responsibility and stock valuation.Academy of Management Journal, 18(1), 155-160. https://doi.org/10.5465/255635.

Galant, A., & Cadez, S. (2017). Corporate social responsibility and financial performance relationship: A review of measurement approaches. Economic Research- EkonomskaIstrazivanja, 30 (1), 676-693. https://doi.org/10.1080/1331677X.2017.1313122.

Garriga, E., & Mele, D. (2004). Corporate social responsibility theories: Mapping the territory. Journal of Business Ethics, 53 (1/2), 51-71. https://doi.org/10.1023/b:busi.0000039399.90587.34.

Gherghina, S. C., Vintila, G., & Dobrescu, D. (2015). An empirical research on the relationship between corporate social responsibility ratings and U.S. listed companies’ value. Journal of Economics Studies and Research, 2015, 1-11.https://doi.org/10.5171/2015.260450.

Hay, R., & Gray, E. (1974). Social responsibility of business managers.Academy of Management Journal, 17, 135-143. https://doi.org/10.5465/254777.


14

Hemingway, C. A., & Maclagan, W. P. (2004). Managers’ personal values as drivers of corporate social responsibility.Journal of Business Ethics, 50, 33-44. https://doi.org/10.2307/25123191.

Hirigoyen, G., & Poulain-Rehm, T. (2015). Relationship between corporate social responsibility and financial performance: What is the causality? Journal of Business & Management, 4 (1), 18-43. https://doi.org/10.2139/ssrn.2531631.

Hou, T. C. (2018). The relationship between corporate social responsibility and sustainable financial performance: Firm-level evidence from Taiwan. Corporate Social Responsibility and Environmental Management, 1-10. https://doi.org/10.1002/csr.1647.

Karnani, A. (2011). CSR stuck in a logical trap. California Management Review, 53 (2), 105-111. https://doi.org/10.1525/cmr.2011.53.2.105.

Kim, B., Nurunnabi, M., Kim, T., & Jung, S. (2018). The influence of corporate social responsibility on organizational commitment: The sequential mediating effect of meaningfulness of work and perceived organizational support. Sustainability, 10, 2208. https://doi.org/10.3390/su10072208.

Kim, K. H., Kim, M., & Qian, C. (2015). Effects of corporate social responsibility on corporate financial performance: A comparative-action perspective. Journal of Management, 44 (3), 1097-1118. https://doi.org/10.1177/0149206315602530.

Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility.Journal of Consumer Marketing, 18(7), 595-630. https://doi.org/10.1108/07363760110410281.

Lech, A. (2013). Corporate social responsibility and financial performance: Theoretical and empirical aspects. Comparative Economic Research, 16 (3), 49-62. https://doi.org/10.2478/cer-2013-0018.

Lev, B., Petrovits, C., & Radhakrishnan, S. (2010). Is doing good good for you? How corporate charitable contributions enhance revenue growth. Strategic Management Journal, 31, 182-200. https://doi.org/10.1002/smj.810.

Malhotra, N. K., & Dash, S. (2010). Marketing research: An applied orientation (6th ed.). New Delhi: Pearson Education, Inc.

Margolis, J., & Walsh, J. (2001). People and profits? The search for a link between a company’s social and financial performance. Lawrence Erlbaum Associates: London.

Margolis, J., & Walsh, J. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268-305. https://doi.org/10.2307/3556659.

Matuszak, L., & Rozanska, E. (2019). A non-linear and disaggregated approach to studying the impact of CSR on accounting profitability: Evidence from the Polish banking industry. Sustainability, 11(1), 183. https://doi.org/10.3390/su11010183.


15

Mishra, S., & Suar, D. (2010). Does corporate social responsibility influence firm performance of Indian companies? Journal of Business Ethics, 95, 571-601. https://doi.org/10.1007/s10551-010-0441-1.

Mwangi, C. I., & Jerotich, O. J. (2013). The relationship between corporate social responsibility practices and financial performance of firms in the manufacturing, construction and allied sector of the Nairobi Securities Exchange. International Journal of Business, Humanities and Technology, 3(2), 81-90.

Nunnally, J. C. (1978). Psychometric theory (2nd ed.). NY: McGraw-Hill.

Ofori, D. F., Nyuur, R. B., & S-Darko, M. D. (2014). Corporate social responsibility and financial performance: Fact or fiction? A look at Ghanaian banks.ActaCommercii, 14 (1). Art. #180, 11 pages. https://doi.org/10.4102/ac.v14i1.180.

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403-441. https://doi.org/10.1177/0170840603024003910.

Pallant, J. (2005). SPSS survival manual (2nd ed.). Sydney, Australia: Allen & Unwin.

Pant, D. R., & Piansoongnern, O. (2017). Impact of corporate social responsibility on sustainable competitive advantage: A case study of leading noodle companies in Nepal. International Journal of Social Sciences and Management, 4(4), 275-283. https://doi.org/10.3126/ijssm.v4i4.17940.

Park, S., & Lee, S. (2009). Financial rewards for social responsibility: A mixed picture for restaurant companies. Cornell Hospitality Quarterly,50 (2), 168-179. https://doi.org/10.1177/1938965509331814.

Prado-Lorenzo, J., Gallego-Alvarez, I., Garcia-Sanchez, I., & Rodriguez-Dominguez L. (2008). Social responsibility in Spain: Practices and motivations in firms. Management Decision, 46(8), 1247-1271. https://doi.org/10.1108/00251740810901417.

Renneboog, L., Horst, J., & Zhang, C. (2008). Socially responsible investments: Institutional aspects, performance and investor behavior. Journal of Banking & Finance, 32(9), 1723-1742. https://doi.org/10.1016/j.jbankfin.2007.12.039.

Rettab, B., Brik, A. B., & Mellahi, K. (2009). A study of management perceptions of the impact of corporate social responsibility on organizational performance in emerging economies: The case of Dubai. Journal of Business Ethics, 89, 371-390. https://doi.org/10.1007/s10551-008-0005-9.

Russo, M., & Fotus, P. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40, 534-559. https://doi.org/10.2307/257052.

Rust, R., Lemon, K., & Zeithaml, V. A. (2004). Return on marketing: Using customer equity to focus marketing strategy. Journal of Marketing, 68(1), 109-124. https://doi.org/10.2307/30161978.


16

Salvi, A., Petruzzella, F, & Anastasia, G. (2018). CSR and financial performance: Trick or treat? A longitudinal study on holistic CSR practices. International Journal of Business and Management, 13(6), 43-71. https://doi.org/10.5539/ijbm.v13n6p43.

Schreck, P. (2011). Reviewing the business case for corporate social responsibility: New evidence and analysis. Journal of Business Ethics, 103, 167-188. https://doi.org/10.1007/s10551-011-0867-0.

Sinha, N., Sachdeva, T., & Yadav, M. P. (2018). Investigating relationship between corporate social responsibility and financial performance using structural equation modeling. Management and Labour Studies, 43(3), 175-191. https://doi.org/10.1177/0258042x18759866 .

Soana, M. G. (2011).The relationship between corporate social performance and corporate financial performance in the banking sector. Journal of Business Ethics, 104, 133-148. https://doi.org/10.1007/s10551-011-0894-x

Steiner, J. F., & Steiner, G. A. (2016). Business, government, and society: A managerial perspective (13th ed.). Chennai: McGraw Hill Education (India) Private Limited.

Sun, L. (2012). Further evidence on the association between corporate social responsibility and financial performance. International Journal of Law and Management, 54(6), 472-484. https://doi.org/10.1108/17542431211281954.

Sweeney, L. (2009). A study of current practice of corporate social responsibility (CSR) and an examination of the relationship between CSR and financial performance using structural equation modeling (SEM). Unpublished doctoral thesis, Dublin Institute of Technology, Dublin.

Tabachnick, B. G., & Fidell, L. S. (2001). Using multivariate statistics (4th ed.). NY: HarperCollins.

Tavakol, M., & Dennick, R. (2011). Making sense of Cronbach’s alpha. International Journal of Medical Education, 2, 53-55. https://doi.org/10.5116/ijme.4dfb.8dfd.

Ullman, A. (1985). Data in search of a theory: A critical examination of the relationships among social performance social disclosure and economic performance of US firms. Academy of Management Review.10 (3), 540-557. https://doi.org/10.5465/amr.1985.4278989.

Waddock, S., & Graves, S. (1997). The corporate social performance – financial performance link. Strategic Management Journal, 18(4), 303-319. https://doi.org/10.1002/(sici)1097-0266(199704)18:4<303::aid-smj869>3.0.co;2-g.

Yip, E., Van Staden, C., & Cahan, S. (2011). Corporate social responsibility reporting and earnings management: The role of political costs. Australasian Accounting, Business and Finance Journal, 5(3), 17-34. https://ro.uow.edu.au/cgi/viewcontent.cgi?referer=https://scholar.google.com/&httpsredir=1&article=1206&context=aabfj.


17

Yusoff, W. F. W., & Adamu, M. S. (2016). The relationship between corporate social responsibility and financial performance: Evidence from Malaysia. International Business Management, 10(4), 345-351. https://docsdrive.com/pdfs/medwelljournals/ibm/2016/345-351.pdf.

Appendix A

Scatter Plots of Regression Standardized Residuals

Financial Performance (Perceptual) Log10 (Return on Assets)

Log10 (Market to Book Ratio)


18

Paradigm Shift in Microfinance System: Status Review and Agenda for Future Research

Bharat Singh Thapa * [email protected]

Abstract

Microfinance has a tremendous potential to fight against poverty while many of the recent evidences suggest its modest impacts only. This paper brings a historical perspective to ex-plain the recent development in the field of microfinance. After systematic review of litera-ture on microfinance for more than 40 years, few insights on microfinance system have been extracted: a) microfinance is not only limited to small loans provided to poor households for self-employment but it has been emerging as a financial inclusion, b) the original idea of microfinance as an entrepreneurial finance has been changing over time due to household finance and provision of liquidity for poor, c) sustainability of microfinance is becoming pop-ular among the MFIs, Donors and Government. Therefore, commercialization of MFIs with minimum subsidy and decline in proportion of poorest segment is recent day phenomenon, d) due to dynamism in the social capital in developing countries, lending model of individual liability is becoming more popular over joint liability, e) in regards to impact assessment methodology, significant of improvement has been observed over the period with the suc-cessful implementation of Randomized Control Trail (RCT) in measuring effectiveness of microfinance policies and subsequently its pioneers; M. Kremer, A. Benarjee and E. Duflo recently been awarded with Noble Prize. Hence, some fundamental changes are taking place in microfinance system and the paper concludes with the possibility of a ‘paradigm shift’ in microfinance system, approach and strategies. Moreover, it also provides directions for future researches in microfinance. A fresh thought and a strenuous combined effort are needed to propel microfinance to the next level to meet the changing requirements.

Keywords: Microfinance, Paradigm Shift, Commercialization, Household Finance and RCT.

* Lecturer at Central Department of Management, Tribhuvan University, Kathmandu, Nepal and pursuing Ph.D. in Microfinance.

1. IntroductionModern microfinance started back in 1976 in Bangladesh by Noble Laureate Professor Mohammad Yunus with the idea of providing small loan to poor women to involve in income generating activities, thereby supposedly helping facilitate an escape from poverty. While the starting date of the global microfinance movement is debated, the modern microfinance movement dates to Yunus’s work (Cull & Morduch, 2017; and Bateman & Chang, 2012). Building upon existing microcredit models Yunus was able to attract significant funding from the international development community to operationalize his own plans for a ‘bank for the


19Paradigm Shift in Microfinance System: Status Review and Agenda for Future Research

poor’, which further known for iconic Grameen Bank. Positioned as the role model local financial institution for poverty reduction, the Grameen Bank was soon joined by ‘Grameen clones’ in many other developing countries.

Yunus (1997) claimed that “Poverty will be eradicated in a generation and our children will have to go to the poverty museum to see what all the fuss was about”. This claim created a lot of excitement among development partners and economists. Yunus further hoped that his microcredit model would legitimize and promote self-help and individual entrepreneurship as the way out of poverty for the poor began to stimulate the international donor community and a number of US foundations into financially supporting his idea (Bateman, 2014).

The most basic underlying theories of microfinance assume that a microfinance client is a sole operator of an income generating activity, with an output that is constrained by either a high marginal credit cost relative to marginal returns or by lack of capital. Thus, access to ‘cheap’ capital which eases the constraints allows for the increase of output, profits, net income and subsequently, the welfare of the borrower (de Mel et al., 2008, Duvendack et al., 2011). This process of acquiring capital involves the group formation and some other types of social interventions; therefore along with economic upliftment social transformation of clients is also expected from microfinance. Figure 1 provides important insights into how microcredit programs works by the help of Theory of Change. First, MFIs must create microfinance products such as credits, savings, insurance, payments and remittances. When clients take up these services, they make investments in their enterprises through a variety of different channels, from restructuring or making capital investments in a current enterprise, to expanding inventory, hiring staff, or starting a new business altogether. These investments may in turn lead to increased sales and potentially increased profits. With additional income, they can increase spending on food, health care, housing, education, their businesses, leisure, or any number of other goods and services. In turn, these spending increases may lead to increases in educational attainment, health outcomes, and greater life satisfaction. Access to these services could also potentially improve borrowers’ decision-making power and social capital.

• Microfinance products

• Enterprise development

• Business Activities

• Increase household income, savings and consumptions• Credits

• Savings• Insurance• Payment and

remittance

• Start new business

• Improve current business

• Increase sales

• Increase profits

• Improved social capital

• Improved human capital

Inputs Outputs Outcomes Impacts

Figure 1: Theory of Change for MicrofinanceSource: Loiseau and Walsh (2015). Povert Action Lab (J-PAL)

Many changes in theories and practices of microfinance have been observed over past four decades of modern history of microfinance (Cull & Morduch, 2017). The premise of microfinance has been changed-which we called ‘Paradigm Shift’ in microfinance system. This paper aims at explaining the fundamental changes in microfinance system over the period of time and put forward some agendas for future researches. By thoroughly surveying literature in microfinance, major changes have been observed in five building blocks of microfinance. They include: a) Concept of microfinance, b) Purpose of microfinance, c)

20Microfinance business model, d) Lending approach and, e) Microfinance impact evaluation method. This paper tries to address two issues: How these changes occurred in microfinance system? And caused by these changes, what are the possible research agendas in microfinance that would be helpful in making good policies? The remainder of this paper discusses each of these changes and finally concludes with future research agendas.

2. Concept of MicrofinanceMicrofinance has evolved from initial focus on microcredit to microfinance, to access-to-finance, and most recently to financial inclusion. Quickly after its successful experiment as Grameen Bank, many developing countries around the world imitated this model for poverty alleviation. This movement of providing credit only (microcredit) was particularly appreciated by practitioners, donors, academics and policymakers till mid-1990s. Originally, microfinance and microcredit were essentially interchangeable terms. However, with the increasing focus on financial inclusion as an important development goal in its own right, microfinance has come to include other financial services, such as savings, remittances and insurance, although credit is still the primary focus (Loubere, 2019).

In the late 1990s and early 2000s, the industry realized the importance of wide range of financial needs of poor households and moved speak and work more broadly on microfinance. Many poor families in the informal economy are producers and consumers at the same time. Their micro business activities and household needs are intermingled. As producers, they need access to financial services to invest, generate income, and build assets. As households, they need to smooth consumption in the face of irregular income and expense streams and manage risks. The field started to work towards providing a broader range of required services, such as savings and insurance. While some expansion of the product range was achieved in the mid-2000s, it became increasingly clear that the cost of service for the typically very low ticket sizes of financial transaction of the poor was a major hurdle, in particular for remote areas. The field started to focus on the challenge of expanding lower-cost access-to-finance. In particular the advent of the cell phone and technology-based solutions promised the possibility to significantly increase reach and lower delivery costs. In recent years, the movement has increasingly shifted away from the original claims of poverty alleviation by providing credit towards the discourse of financial inclusion (Haring, 2017). Figure 2 presents the time line of evolution of microfinance concept over the period.

2010 onwardsFinancial inclusion

Access to useful and affordable financial products and services delivered in a

responsible and sustainable way that meet the needs of individuals and businesses

(World Bank, 2018)

1990sMicrocredit plus

In addition of credit, poor also needs other financial services

such as savings, insurance payments etc.

1976Microcredit

Prof. Yunus started experiment by giving small loan to poor women for engaging self-employment activities.

2000sMicrofinance

Financial intervention is not enough for poverty alleviation. Non-financial interventions such as business support

trainings and more.

Figure 2. Evolution of microfinance concept


21In the late 2000s, the microcredit with its focus on short-term loans reached market saturation in a first set of high-growth markets and led to episodes of over-supply and over-indebtedness. The narrower microfinance community realized the need to re-focus on clients and for consumer protection and financial literacy. Poor people do not need only access to financial services, but also quality services with knowledge of their effective utilization. Along with credit and savings, insurance, remittance and payments needs of clients were also addressed by microfinance providers. This broadening of the aperture is captured by the more recent language around financial inclusion with more linkages to the mainstream financial system and mainstream players. The Alliance for Financial Inclusion (AFI) was established in 2008 by developing country central banks to focus exclusively on financial inclusion. The financial diaries show that the connection between finance and poverty is more fundamentally connected to the ability to borrow and save and insure for a wide range of purposes, a vision that is at the heart of new approaches to financial inclusion (CGAP, 2010). World Bank (2018) defined financial inclusion as access to useful and affordable financial products and services delivered in a responsible and sustainable way that meet the needs of individuals and businesses. These products includes credits, savings, payments, transactions and insurance. Financial inclusion is one of the systems through which inclusive growth can be achieved in developing countries like Nepal where large portion of the population is excluded from formal financial system. An inclusive financial system mobilizes more resources for productive purposes leading to higher economic growth, better opportunities and reduction of poverty. Thus, concept of microfinance has changed with insights and expanded horizons, though fundamental idea has remained the same: help poor families in the informal economy realize their economic potential and give them the financial services means to manage their lives.

3. Purpose of MicrofinanceMicrofinance was first trumpeted as a way to unleash the productive capacities of poor people dependent on self-employment (Hulme & Mosley, 1996). Dunford (2012) describes the underlying idea of microfinance in following words: “A poor person goes to a microfinance provider and takes a loan (or saves the same amount) to start or expand a microenterprise which yields enough net revenue to repay the loan with major interest and still have sufficient profit to increase personal or household income enough to raise the person’s standard of living”. This clearly indicates the entrepreneurship development through microfinance among financially excluded people.

However, recent evidences show that microfinance does not lead to transformative impacts on income or long-term consumption on average, rather it helps households better manage financial choices (Banerjee, Karlan & Zinman, 2015). It is often observed that some borrowers use microloans for consumption and/or risk mitigation rather than investment, suggesting that there are high non-entrepreneurial returns to credit. Poor need money for consumption smoothing and easing the unpredictability of daily life. Microfinance is more of household financing than entrepreneurial financing in developing countries (Cull et al, 2017; Collins et al, 2009; and Deaton, 1992). Hence, poor people need money for seasonal fluctuations, uncertainty and emergencies. Billions of wage workers have no interest in self-employment rather they need finance for their wellbeing. They repay their loan from household income rather than revenue from business.


22Morduch and Schneider (2017) provides a more close-up view, looking at the financial transactions of households on a monthly and even weekly basis to reveal financial uncertainty of low-to-middle-income households in USA. Their study portrayed fluctuation of the average household’s income varied over the year. They found that over the year, households experienced an average of 2.2 months when income spiked above the 25 percent level and 2.4 months when it dipped below. Moreover, poorer households experienced more volatility, but it significantly affected even households with incomes of more than 200 percent of the poverty level. People try to cope with the shortfalls in income by borrowing money, often from friends and relatives; manage to build small pools of savings; work extra jobs or hours; and persuade their creditors to extend the due dates of bills. In general, these sources of borrowings are highly expensive. Therefore, microfinance may be helpful to these types of wageworkers who do not like to become entrepreneur but need to cope with uncertainty.

These analyses point out that microfinance is extremely important in terms of smoothing consumption through the year. Microfinance does not address the poverty alleviation in sustainable way rather it addresses the seasonal poverty. Thus, even if it turns out that microfinance does not enhance investments and or reduce poverty; it may play a vital role in terms of providing funds for immediate emergencies, such as health crises and famine. It is imperative to explore the liquidity needs of poor and how microfinance can be helpful to address their funding needs.

4. Microfinance Business Model Commercialization is the process of adopting principles of free market and orientation towards the profit. De Silva and Charitonenko (2002) illustrated MFI commercialization as progress shown in Figure 2. It starts with adoption of cost recovery measures and achieving OSS and FSS. Similarly, MFIs following commercialization use market based sources of fund, for example, loans from commercial banks, mobilization of voluntary savings, or other non-subsidized sources. In complete commercialization, MFIs operate as for profit, formal financial institutions that are subject to prudential regulation and supervision, and to attract equity investment.

Operation as a for-profit MFI as part of formal financial system

Increassed cost recovery

Achivement of operating self-sufficiency

Achievement of financial self sufficiency

Utilization of market based sources of fund

Figure 3. The microfinance commercialization continuumSource: De Silva and Charitonenko (2002).


23The debate of commercialization of microfinance peaked in World Microfinance Forum in Geneva conference in October 2008 when Michael Chu, the former President of ACCION argued that microfinance providers cannot meet the worldwide demand for financial services without private, profit-oriented capital. On the other hand, Prof. Yunus argued that making money off the poor is immoral, and the only kinds of investors needed in microfinance are ones who are willing to accept very limited profits for the sake of keeping as much money as possible in the pockets of the clients (Rosenberg, 2008). Commercialization has raised fundamental questions about whether the dual social and financial missions of microfinance can coexist.

Grameen Bank’s journey towards commercialization started with Grameen II model, which offered a range of different services (other than just credit) and also downplayed the importance of the original methodology (e.g. targeting women, joint-liability loan groups, etc.) in favor of experimenting with techniques that would allow for financial sustainability and increased financial inclusion. Yunus also supported the commercialization moves that got underway in the 1990s through the ‘Grameen II project’ in 2001 (Hulme, 2008; and Rutherford, 2006).

Recent studies have shown a correlation between commercialization and a decline in the percentage of female clients and poor borrowers as a share of total clients (see Cull & Morduch, 2017). Until 2010, there was steady increase in the amount of poor customers served. However, from 2010 onwards the trajectories of total borrowers and the poorest borrowers diverge – indicating an increase in focus of MFIs on the relatively well-off (Microcredit Summit Campaign, 2015). In 1997, when Microfinance Summit Campaign was launched, there were only 13 million microfinance customers globally, of which 8 million (62%) were among the poorest. This number increased to 211 million in 2013, of which 114 million (54%) were among the poorest. A large number of NGOs and not-for-profit microfinance organizations transformed into for profit MFIs. A study shows that for the transformed set, the percentage of women clients served decreased from an average of 88 percent two years before transformation to 78 percent at transformation and 60 percent five years after transformation. In contrast, the non-transformed institutions increased their fraction of women clients from 72 percent to 77 percent over a parallel five year period (Cull & Morduch, 2017). This change in focus of MFIs from poor and women to non-poor and man can be explained by commercialization.

Subsidy to MFIs and commercialization are related. In general, negative relationship between these two is expected. Little subsidy is expected by highly commercialized MFIs. They emphasize on sustainability by reducing costs and adjusting interest rate with costs. Cull, Demirguc-Kunt, and Morduch (2016) calculated the subsidies given to different types of microfinance institutions. They compared subsidies per borrower of commercialized MFIs focusing on financial sustainability with NGOs mostly focusing on poor and women. Interestingly, it was found that subsidies per borrower are higher for most commercialized MFIs than for NGO type MFIs. This evidence supports the argument that donors/government with the goal of supporting poverty reduction do not finance or subsidize traditional microcredit lending, rather support to MFIs that bring innovations in targeting, product design, and consumer protection.

Concerns with “mission drift” from commercialization of microfinance institutions are often voiced and need to be taken seriously. In many countries, these types of MFIs are regulated in interest rates when their profitability and stock prices in market sky rocketed. Therefore,


24major issue here is: whether commercialized MFIs can deliver social and economic impacts which were originally claimed by microfinance?

5. Lending Approach Modern microfinance movement rely heavily on group-lending system combined by joint liability. Borrowers self-select into groups to discuss issues related to borrowing, savings and repayment, and entire group of borrowers is liable for any default of individual group members. The theoretical models based on the concept of joint liability have generally viewed it as the single most important feature responsible for the widespread success of microcredit. Stiglitz (1990) stated that joint liability helps to improve loan repayment by overcoming moral hazard. Under joint liability, small groups of borrowers are responsible for the repayment of each other’s loans. All group members are treated as being in default when at least one of them does not repay and all members are denied subsequent loans. Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Because co-borrowers act as guarantors they screen and monitor each other and in so doing reduce agency problems between the MFI and its borrowers. Hence, joint liability enables the MFI to leverage social capital in order to reduce credit management costs.

Among established MFIs, an important trend has been observed with increased scale and professionalization; moving from group or joint-liability lending to individual lending. Karlan and Zinman (2010) call this movement as ‘second generation’ microfinance movement. It has distinguished by for-profit lenders, extending individual liability credit, in increasingly urban and competitive settings. A potential downside to joint-liability lending is that it often involves frequent and time-consuming repayment meetings and exerts strong social pressure, making it potentially tedious for borrowers. This is one of the main reasons why MFIs have started to move from joint to individual lending (Attanasio et al., 2015).

Grameen Bank II also shifted focus from the group to individual liabilities and relationship between borrowers and loan officers. Large MFIs such as ASA in Bangladesh and BancoSol in Bolivia have also moved towards individual lending (Cull, Demirgüç-Kunt, & Morduch, 2009). Indicating future direction of microfinance, Chirchill (1999) stated that while most programs serving poorer households remain committed to group lending practices, programs serving less poor households are abandoning group lending in favor of individual loan contracts.

Giné and Karlan (2014) described three major reasons on this shift from group liability to individual liability loans in microfinance community- i) clients dislike the unnecessary tension such as threat of punishment, caused by group liability, ii) bad clients can “free ride” off of good clients causing default rates to rise, and iii) group liability is more costly for clients that are good risks because they are often required to repay the loans of their peers. In measuring performance of individual liabilities versus group liabilities, Cull et al. (2007) analyzed 124 institutions from 49 countries employing a range of individual and group liability models. They reported higher profitability and lower outreach measures of MFIs offering individual versus group liability loans. However, in a study from Mongolia, Attanasio et al. (2012) found that repayment rates of loan was unaffected resulting from both individual and group liabilities. The above discussion opens many questions for further enquiry. Most


25importantly, how does individual lending affect social capital, repayment rate and outreach of microfinance? How can MFIs bring trade-off among sustainability, outreach and impact with individual liability lending system?

6. Impact Assessment Method A rigorous impact evaluation has to answer “How are the lives of the participants different relative to how they would have been had the program, product, service, or policy not been implemented?” This requires the comparison of two potential outcomes, such as income, business profits, or physical and human capital investment, of the same individual, i.e., one with the treatment and the other without it (see Karlan & Goldberg, 2007). Impact assessment by itself is not an objective for the stakeholders rather it is a way to monitor the performance of MFIs in targeting their socioeconomic objectives.

Quasi-experimental and parametric approaches are major techniques used in early stage of the impact assessment. They include Propensity Score Matching (PSM), Difference-in-Difference (Diff-in-Diff) and Regression-Discontinuity Design. These approaches are suffered from self-selection bias in either program placement or in participation of women. In general, microfinance institutions select the location to establish new branch based on availability of electricity, transportation, securities and communication. Similarly, relatively better off people of rural areas select microfinance programs. To address this selection bias, in 2005, an alternative approach was used in assessing impact of microfinance which is called Randomized Control Trail (RCT). Introducing RCT is the milestone in developments of microfinance impact assessment methodology. In 2009, the first studies employing the randomized controlled trial (RCT) methodology were released (Banerjee et al., 2009; Dupas & Robinson, 2009; and Karlan & Zinman, 2010). RCT eliminates the problem of selection bias, where clients of microfinance institutions (MFIs) may be systematically different from non-clients. RCTs are often considered as the gold standard of impact evaluation in microfinance. RCTs results are known for their high internal validity in terms of cause linkages. Nowadays, prestigious economic journals refrain from publishing non-RCT empirical studies due to endogeneity concerns. The growth of RCTs has, in part, been a reaction to concerns around the quality and validity of initial microcredit impact evaluations.

The leading economic journals prefer RCTs for publishing articles, advocates of RCTs in development and leading American universities including Harvard, MIT, and Yale, and the London School of Economics provide modules in RCTs in their curriculum (Bédécarrats, Guérin, & Roubaud, 2018). The use of RCTs in development economics and, particularly, in the microfinance arena continues to increase in popularity. Recent initiatives such as the Abdul Lateef Jameel Poverty Action Lab (J-PAL), Innovations for Poverty Action (IPA) and the International Initiative for Impact Evaluation (3ie) have promoted the use of RCTs as the best way of assessing impact in development (3ie, 2016; Innovations for Poverty Action, 2014; J-PAL, 2016). Recently, three economists, Harvard Professor Michael Kremer, and MIT professors both Abhijit Banerjee and Esther Duflo have been awarded with Noble Prize for their contribution in RCTs for effective development policy feedback.

Randomized controlled trials are the most promising means to allow MFIs to assess reliably the effectiveness of their operations on poverty alleviation and for investors and donors to learn which types of programs produce the strongest welfare improvements (McHugh,


26Biosca & Donaldson, 2017). Karlan, Goldberg and Copestake (2009) claimed RCT as the best method for measuring impact. They allow to estimate what would have happened without the intervention under study. Measuring the counterfactual is essential for establishing causality (see Kono & Takahashi, 2010). Without it, it is not possible to find whether changes in participants’ lives are caused by the program, by outside factors, or, by unobservable characteristics of the participants themselves. Esther Duflo, who won Noble Prize in 2019 pointed out that in 2000 the top-5 journals published 21 articles in development (including microfinance), of which 0 were RCTs, while in 2015 there were 32, of which 10 were RCTs (McKenzie, 2016). In the effectiveness of IA method, a study of Khan, Bahari, and Hassan (2014) concluded RCT as the best approach in terms of scientific robustness to resolve the selection bias problem but found weakness in its objectively. RCTs are often not generalizable due to the tightly controlled environment in which they are carried out. Therefore, external validity of RCTs is always questionable. Randomized Control Trails (RCTs) places program and clients randomly without taking any deliberate socioeconomic criteria therefore, this method is taken as scientifically robust but socially and objectively weak. The debate over the use of the RCT as an evaluation tool in development economics is ongoing (see, Cartwright, 2011; Deaton, 2010; Shaffer, 2011; and Eble et al., 2013). Major issues raised in RCTs are: Can the results of RCT be replicable in broader social context? How do we minimize the ethical implications of RCTs of socio-economic interventions where one group receives treatment and another does not in the same location?

7. Conclusion and Agendas for Future ResearchSince inception of modern microfinance some 43 years back, a number of changes have been observed in microfinance system. There is a fundamental change in theories and practices of microfinance which may be called ‘Paradigm Shift’ in microfinance system. They include: concept of microfinance, lending approach, business model of microfinance, purpose of microfinance and microfinance impact evaluation method. At present, microfinance has been practiced as commercial business with focusing more on individual lending for financial inclusion rather than social business focusing group lending for poverty alleviation. The scope of microfinance is not limited to financial interventions, it also covers non-financial interventions such as business support trainings, social services and human capital development initiatives. Financing daily needs of workers and poor households has become popular practice of microfinance than developing and financing micro-enterprises. Thus from microfinance as narrowly construed entrepreneurial finance has been shifted toward microfinance as broadly construed household finance. Similarly, conventional non-experimental impact evaluation methods have been replaced by experimental approach such as Randomized Control Trails (RCTs). This shift in microfinance system raised a number of research agendas that academia, policy makers and donors should think about. They are as follows:

• How does microfinance affect the financial inclusion in developing countries?• What is the level of depth and breadth of financial inclusion in developing countries?• How does individual lending affect the sustainability, outreach and impact of

microfinance?• Does commercialization of microfinance lead to higher sustainability and outreach?• Is microfinance Household finance or Entrepreneurial finance?


27• Does microfinance reduce poverty in sustainable way or is it just a tool to address

seasonal poverty?• In evaluating impact of microfinance, are Randomized Control Trails (RCTs) better

than conventional non-experimental methods?

ReferencesAttanasio, O., Augsburg, B., De Haas, R., Fitzsimons, E., & Harmgart, H. (2015). The

impacts of microfinance: Evidence from joint-liability lending in Mongolia. American Economic Journal: Applied Economics, 7(1), 90-122.

Attanasio, O., Augsburg, B., De Haas, R., Fitzsimons, E., & Harmgart, H. (2012). Group lending versus individual lending in Mongolia. Working paper.

Banerjee, A., Karlan, D., & Zinman, J. (2015). Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied Economics, 7(1), 1-21.

Bateman, M. (2014). The rise and fall of Muhammad Yunus and the microcredit model. International Development Studies, Working Paper Series #001.

Bédécarrats, F., Guérin, I., & Roubaud, F. (2018). The gold standard for randomised evaluations: from discussion of method to political economy.

Brau, James C. and Woller, Gary M. (2004) “Microfinance: A Comprehensive Review of the Existing Literature,” Journal of Entrepreneurial Finance and Business Ventures, 9, 1-28.

Collins, D., Morduch, J., Rutherford, S., & Ruthven, O. (2009). Portfolios of the poor: how the world’s poor live on $2 a day. Princeton University Press.

Cull, R., Demirgu‐Kunt, A., & Morduch, J. (2007). Financial performance and outreach: A global analysis of leading microbanks. The Economic Journal, 117(517), F107-F133.

De Silva. D., & Charitonenko, S. (2002). Commercialization of microfinance: Sri-Lanka. Asian Development Bank, Manila, Philippines.

Deaton, A., & Cartwright, N. (2018). Understanding and misunderstanding randomized controlled trials. Social Science & Medicine, 210, 2-21.

Ehrbeck, T. (2012). More than Semantics: From “Microcredit” to “Financial Inclusion. CGAP

Field, E., Hollander, A. J., & Pande, R. (2014). Micro finance: Points of Promise.

Field, E., Pande, R., Papp, J., & Rigol, N. (2013). Does the classic microfinance model discourage entrepreneurship among the poor? Experimental evidence from India. American Economic Review, 103(6), 2196-2226.


28Giné, X., & Karlan, D. S. (2014). Group versus individual liability: Short and long term

evidence from Philippine microcredit lending groups. Journal of development Economics, 107, 65-83.

Häring, N. (2017). Modi, Yunus, and the Financial Inclusion Mafia. Money and More.

https://www.povertyactionlab.org/sites/default/files/publications/where-credit-is-due.pdf

Hulme, D. (2008). The Story of the Grameen Bank: From Subsidised Microcredit to Marketbased Microfinance, BWPI Working Paper 60, Institute for Development Policy and Management, University of Manchester, November.

Karlan, D., Goldberg, N., & Copestake, J. (2009). Randomized control trials are the best way to measure impact of microfinance programmes and improve microfinance product designs. Enterprise development and microfinance, 20 (3), 167-176.

Khan, Z., Bahari, Z., & Mahnaz Hassan, S. (2014). SWOT Analysis of Contemporary Microfinance Impact Assessment Approaches. Pakistan Journal of Social Sciences (PJSS), 34(2).

Loiseau, J., & Walsh, C. (2015). Where credit is due. J-PAL and IPA Policy Bulletin, 1-16.

Loubere, N. (2019). Development on Loan: Microcredit and Marginalisation in Rural China. Amsterdam University Press.

McHugh, N., Biosca, O., & Donaldson, C. (2017). From wealth to health: Evaluating microfinance as a complex intervention. Evaluation, 23 (2), 209-225.

McKenzie, D. (2016). Have RCTs taken over development economics?. World Bank Blog on impact evaluations, 13.

Morduch, J., & Schneider, R. (2017). The financial diaries: How American families cope in a world of uncertainty. Princeton University Press.

Odell, K. (2010). Measuring the impact of microfinance: Taking another look. Grameen Foundation.

Rosenberg, R. (2008). Muhammad Yunus and Michael Chu debate commercialization. CGAP Microfinance Blog, October 14.

World Bank (2018). Financial inclusion. Retrieved from: https://www.worldbank.org/en/topic/financialinclusion/overview.

Yunus, M. (1997). Remarks from Dr. Muhammad Yunus’s acceptance speech given on the occasion of his receiving the help for self-help prize of the Stromme Foundation, September 26, 1997 in Olso, Norway. See Vol 1 (2), November/December. Newsletter of the Microcredit Summit Campaign, 1(2).


29Remittance Productivity in Nepalese Economy

Remittance Productivity in Nepalese Economy

Binod Sah * [email protected]

Abstract

This paper examines the impact of international remittances on the Nepalese economy in Nepal and therefore, analyzes the relationship between remittances on the Nepalese economy (GDP) in aggregate level. To examine the relationship between remittance and economic growth proxied by GDP in aggregate level, the study employs explanatory research design considering remittance as independent variable and GDP as the dependent variable in ag-gregate level, along with exchange rate, market capitalization, money supply (M1, M2), and government spending as intervening variables. In order for the specification of a model of cointegrated regression model with a time series data of the variables are employed for the study period of 20 years from 1998/99 to 2017/18. The values of all variables are converted into real price (constant price) by GDP deflator. The GDP deflator and CPI year 2013/14 have been assumed equivalent to the base year 2013/14 according to Nepalese fiscal year. Since it is observed that residuals are not normally distributed, autocorrelation and multicollinearity problem in the model, it is necessary to improve the non-normal distribution, autocorrelation and multicollinearity problem in the model. Therefore, the data are transposed into first differ-ence and run the model with error correction model (ECMt–1).

The R2 shows that the explanatory power of the model is 0.789 indicating that 78.9 % of the variation of GDP is explained to the extent of 78 percent variation of the independent variable included in the model. The estimated coefficient of remittance in error correction model shows that one percent point rise in remittance has led to 0.427 percent point increase in real GDP in short run, whereas it is found 0.064 percent point in the long-run. It means that the short-run marginal productivity of remittance is 0.427 percent point, whereas its long run percent point is 0.064. This is supported by (World bank, 2003) using a large sample of developing countries observed over the period 1980-2006, and even after factoring in the endogeneity of remittances.

Keywords: Productivity, GDP, Contribution, Economy, Error correction

* Central Department of Management, Tribhuvan University, Kathmandu, Nepal

1. IntroductionInternational remittances have been considered as backbone for the economic growth of the developing countries in different periods of their history due to dependence on remittances they are able to create better economic conditions (World Bank, 2003). Most of the European

30countries in the past were dependent on the inflow of remittances from abroad in 19th and 20th century.

Nepal has also the long tradition of overseas employment which started particularly after the people started migrating to neighboring Indian cities (NRB, 2007). The trend now, however, has shifted and the overseas employment has become one of the attractive options for many leaving the country to work abroad. According to the World Bank Migration and Remittances Fact Book 2016, global remittance flows are estimated to have exceeded US $580bn, of which developing countries are estimated to receive above US $ 441 bn. Remittances have been a relatively stable source of external capital – more stable than foreign investment or development aid (World Bank, 2003). A number of studies have analyzed the macroeconomic impact of remittances in terms of growth, poverty, competitiveness and macroeconomic instability in receiving countries. The result showing that remittances significantly reduce poverty rates is largely accepted among scholars (Adams, 2005; Gupta et al., 2009). However, the role played by remittances in enhancing economic growth is still an open debate.

If the direct and linear contribution of remittances to economic growth seems difficult to conclude (Chami et al., 2009b), their positive effect on economic growth conditioned upon some factors (the quality of governance and the financial development) is now recognized (Catrinescu et al., 2009). Despite the positive contribution of remittances to household welfare, most studies have found that international remittances do not have a positive effect on economic growth at the macro-level. Part of the reason for this finding may lie in the difficulty of disentangling the complicated links between remittances and economic growth.

In the literature it is sometimes argued that international remittances may harm economic growth by leading to real currency appreciation and a loss of competitiveness in tradable goods (Dutch disease) (Acosta, Lartey & Mandelman. 2009). In a cross-national study of 8 Latin American countries over the period 1990 to 2003, Lopez et al (2007) find that large-scale remittances do lead to significant real exchange rate appreciation. Controlling for endogeneity and potential reverse causality, the authors find that a 1 percent increase in the remittances to GDP ratio would lead to a real effective exchange rate appreciation of between 18 and 24 percent. Focusing on the country-level, (Amuedo-Dorantes and Pozo, 2006) use household survey data from the Dominican Republic to examine the impact of international remittances on family business ownership. Using an instrumental variables approach to control for endogeneity, they find that households receiving international remittances are not more likely to own a family business than households not receiving remittances. According to the authors, one reason for this outcome may be that remittances increase the reservation wage of household heads, making them less likely to invest in business. In another country-level study, Mishra (2007) examines the impact of international migration on wages in Mexico. Using an instrumental variables approach, the author finds that emigration has a positive and significant effect on Mexican wages: a 10 percent decrease in the number of Mexican workers due to emigration in a skill group increases the average wage in that skill group by 4 percent. However, the impact of emigration on Mexican wages varies dramatically across schooling groups, with the greatest wage increase being for high wage earners. In a study covering up to 113 countries over the period 1970 to 1998, Chami et al. (2005) find that international remittances actually have a negative and significant effect on economic growth. Using a variety of fixed effects models, the authors find a negative and significant relationship


31between international remittances and economic growth for different groups of countries over various sets of years (Chami, 2005).

2. Methodology To examine the relationship between remittance and economic growth proxied by GDP in aggregate level, the study employs explanatory research design considering remittance as independent variable and GDP as the dependent variable in aggregate level, along with exchange rate, market capitalization, money supply (M1, M2), and government spending as intervening variables. In so doing, it is hypothesized that there is significant positive impact of remittance on GDP. Similarly, it is also hypothesized that the intervening variables government spending and money supply have positive relationship, while exchange rate and market capitalization have negative. In the process of using and testing the relationship between remittance and GDP with other intervening variables, error correction model (ECM) is used. Various other tests such as unit root test, DF and ADF, autocorrelation, partial correlation, correlogram test, Durbin Watson, HDW, Jarque-bera normality test, serial correlation test, heteroscedasticity, Glejser test, specification test, test of Exogeneity, structural break test, multicollinearity test, Ramsey test and Chow-test have also been used to justify the model.

The quantitative data used in the study have been collected from the Economic Survey published annually by MOF, Annual Reports of IRD, annual customs statistics, various publications of NRB and CBS, and other published sources.

The data points for these variables include annual observation from the fiscal year 1998/99 to fiscal year 2017/2018. The values of all variables are converted into real price (constant price) by GDP deflator. Particularly, real GDP, real Remittance, real money supply, real market capitalization, and real exchange rate are calculated as nominal exchange rate (i.e. NPR to USD) multiplied by GDP deflator or CPI of USD divided by CPI of Nepal (i.e. base year 2013/14=100) over 20 years period. The GDP deflator and CPI year 2013/14 has been assumed equivalent to the base year 2013/14 according to Nepalese fiscal year. The simple linear model has been converted into natural log linear model. In order for the specification of a model of cointegrated regression model with a time series data of the variables are employed for the study period of 20 years from 1998/99 to 2017/18. Econometrically, the modeling of such behavior requires a stationary data process which is absent in many of the economic variables (Wood, 1995).

Model I: GDP as dependent, Remittance and other intervening variables as independent variables.

In order to examine the impact of Remittance on national economic development (GDP) as dependent variable, and exchange rate, market capitalization, money supply , and government spending, the following model has been employed considering Remittance as independent variable and GDP as dependent and others as intervening variables. The relationship between the variables has been specified as under:

GDPct = f (Remitct, Exrct, GSPDct, MCtc, MSct, )


32The relationship and impact of Remittance on GDP has specified as:

InGDPct = b0 + b1 InRemitct + b2 InEXRct + b3 GSPDct + b4 InMCct + b5InMSct + ... ... + ei ... (I)

InGDPct = b0 + b1 InRemitct + b2 InEXRct + b3 GSPDct + b4 InMCct + ... ... + ei ... ... ... ... ... (II)

InGDPct = b0 + b1 InRemitct + b2 InEXRct + b3 GSPDct + b4 InMSct + ... ... ... + ei ... ... ... ... (III)

Where,

InGDPct, Represents log linear Gross Domestic Products at constant price at time‘t’.

InRemitct, Represents log linear Remittance at constant price at time‘t’.

InEXRct, Represents log linear Exchange Rate at constant price at time ‘t’.

In Consct, Represents log linear Consumption at constant price at time ‘t’.

InMCct, Represents log linear Market capitalization at constant price at time, ‘t’.

InMSct, Represents log linear Money Supply at constant price at time ‘t’.

H03 : Remittance has significant impact on GDP at aggregate level with other intervening variables.

3. Analysis and ResultsMany of the economic variables do not possess the characteristics of stationary, it is necessary to keep in mind the type of data series used in the model. Valid estimation and inference is not possible when a set of non-stationary variables is cointegrated. After the estimation of three different equations to find out appropriate variables for the estimation, an Error Correction Model (ECM) is employed to measure the emittance productivity with the use of lagged dependent variable also facilitates to obtain short and long-term effect of remittance on the GDP. The first difference data is used for ECM. The cointegration of a set of variables provides sufficient ground for specifying a corresponding error correction or dynamic equation for these variables and is compatible with long-run equilibrium behavior.

3.1 Unit Root TestA unit root test verifies whether a time series variable is non-stationary using an autoregressive model. A well-known test that is valid in large samples is the augmented Dickey–Fuller test. The optimal finite sample tests for a unit root in autoregressive models are developed. Dickey and Fuller (1979) developed a procedure for testing whether a variable has a unit root or, equivalently, that the variable follows a random walk. Hamilton (1994) described the four different cases to which the augmented Dickey–Fuller test could be applied. In the process of checking whether the variables has a unit root or not. If the absolute test statistics is more than critical value then null hypothesis that the series is non-stationary cannot be accepted. That is the guidelines. However, if the absolute test statistics is less than critical value, null hypothesis can be rejected and the alternative hypothesis will be accepted.

H0 : The variables log linear at constant price has not stationarity or unit root.

H1 : The variable log linear at constant price has stationarity or no unit root.


33Table 1

Dickey Fuller, Augmented Dickey Fuller and Unit Root Test

Variables Test Dickey- fuller

Augmented Dickey-fuller p-value

CoefficientAt lag

Unit root t-stat ( ) p-value

InGDPct

At level-1.9662

(-3.029) -3.0299 (-1.4044) 0.5581 -0.0471

1.238(812.40) 0.000

At first difference

-1.9628(-4.125)

-3.0521(-3.9937) 0.0081 -1.4106

1.6245(309.399) 0.000

InRemitct

At level -1.9601 (-1.4005)

-3.0299 (-3.1243) 0.0417 -0.01874

1.2948(159.197) 0.000

At first difference

-1.9614 (-3.5551)

-3.0403 (-3.4501) 0.0226 -0.8662

1.8292(56.0503) 0.000

InMCct

At level -1.9601 (-0.5294)

-3.0299 (-0.9999) 0.7312 0.0746

1.2805(144.245) 0.000

At first difference

-1.9644 (-3.7019)

-3.0655 (-3.6319) 0.0174 -1.3269

1.7718(51.8051) 0.000

InGSPct

At level -1.9601 (0.3886)

-3.0299 (0.2740) 0.9701 0.0140

1.2857(401.905) 0.000

At first difference

-1.9614 (-4.1423)

-3.040 (-4.0708) 0.0065 -1.0714

1.7992(143.491) 0.000

InEXRct

At level -1.9601 (-0.5063)

-0.30299 (-0.4639) 0.8783 -0.0614

2.1073(113.8986) 0.000

At first difference

-1.9614 (-5.4741)

-3.0403 (-5.3507) 0.0005 -1.2857

-12.910(-6.2871) 0.000

InMSct

At level -1.9601 (-1.5863)

-3.0299 (-1.7535) 0.3903 -0.2887

1.2420(375.850) 0.000

At first difference

-1.9614 (-6.8129)

-3.0403 (-6.6097) 0.000 -1.4639

1.6378(142.2958) 0.000

It is evident from Table: 1 that the variable InGDPct has the p-value that is 0.5581 ˃ 0.05 so it cannot reject the null hypothesis, meaning that the variable InGDPct at level has a unit root. The test statistics guidelines indicate that if test statistics is more than critical value at 5%, it cannot reject null hypothesis but the test statistics -1.404466 and critical value at 1%, 5% and 10% is less than the test statistics. So it cannot reject null hypothesis, meaning that, InGDPct, has a unit root and all the other variables InRmitct, InMCct, InRct, InEXRct, InGSPDsct and InMSct, have the P-value >0.05, so it cannot reject null hypothesis, meaning that all the variables have a unit root at level. In addition, the coefficient at lag one is also negative i.e. -0.047171of all the variables, so the model is viable. When the Variables are converted into first difference: After the first differences level of the probability or the p-value that is 0.0081˂0.05. So, it can reject the null hypothesis, meaning that has no unit root or stationary after the first difference, including all variables in the model.


34

3.2 Correlogram TestA stationary time series is one whose statistical properties such as mean, variance, autocorrelation, etc. are all constant over time. In various times lag the probability value or p-value < 0.05 indicates the null hypothesis cannot be rejected, which means that the variables have autocorrelation at level. By checking all the variables including variables InGDPct, In Remit Tct, InEXRct, InRct, InMCct, and InMSct. In various times lag the probability value or p-value < 0.05 indicates the null hypothesis cannot be rejected, meaning that the variables have autocorrelation at level. At first difference level correlogram an image of correlation statistics is ups and downs and highs and lows changes indicate very low changes and ups and downs, which means there is no presence of autocorrelation. This randomness is ascertained by computing autocorrelations for data values at varying time lags. In various times lag, the probability value or p-value > 0.05 indicates the null hypothesis can be rejected which means that the variables have no autocorrelation at first difference level. All the inclusion variables have checked its autocorrelation by using correlogram.

3.3 Regression results: GDP as dependent, Remittance and other intervening variables as independent variable.

The results of regression equations I, II and III specified for economic development as dependent variables and remittance as independent variable and other intervening variables. This represents the second model of the specified model. The results are presented in Table: 2

Table 2

Regression of Remittance and Other Intervening Variables on GDPParameters/variables Equation: I Equation: II Equation: III

Constant (b0) 2.652246* 2.635947* 2.771718*[0.191693] [0.182130] [0.135467]

{13.8358} {14.4728} {20.46051}

Remittance (b1) 0.110797* 0.110175* 0.105494*[0.020076] [0.019452] [0.019030]{5.518759} {5.66393} {5.543649}

Exchange rate (b2) -0.125490* -0.12589* -0.113037[0.075067] [0.072939] [0.073218]{-1.67171} {-1.726013} {-1.5438}

Market Capitalization (b4) -0.021248 -0.02432[0.023947] [0.022070]

{-0.887275} {-1.10214}

Money Supply (b5) -0.013270 -0.02248[0.032744] [0.030834]{-0.40524} {-729081}


35

Government Spending (b6) 0.05481930* 0.540559* 0.51066*[0.073197] [0.068733] [0.0.05931]{7.489262} {7.864639} {8.609383}

Adjusted R2 0.9868 0.987596 0.987Durbin –Watson 1.310847 1.307095 1.23

F-statistics (286.4874)* (379.1963)* (363.0616)*Jarque-Bera statistic 0.34566 0.5049 0.98013

Breusch-Godfrey LM Observed R2 : 1.521 2.3014 6.3975c2 : 0.467 0.416 0.146

Breusch- pagon observed R2 : 5.134 9.633 8.641c2 : 5.930.467 0.086 0.124

Glejser test Observed R2 : 1.28 6.2179 3.806c2 : 0.313 0.1835 0.577

RAMSEY TEST: F - statistics (1, 12) : 2.758 1.17677 3.959ARCH Observed R2 : 1.40785 1.5083 1.05083

Chow test F - statistics (7, 6) : (211.62565)* (209.3484) (214.1074)

Figures in parentheses [ ], { } indicates standard error and t-statistics of the concerned variables and p-values(*) Significant at (0.01) 1% level (**) Significant at (0.05) 5% level (***) Significant at (0.10) 10% level

The regression results of all the three different equations provide equation I as an appropriate model. It is because the sign of the coefficient of all the variables are as per the expectations. Moreover, the coefficient of the variable including in the equation I also provides more satisfactory results as compared to rest other two equations II and III. It is also because the coefficient of all the variables is significant. This indicates the inclusion of appropriate and relevant variables in the model. The regression coefficient also shows the presence of regression as the F-test is significant at more than 98 percent confident limit. Similarly, the coefficient of determination is 0.9868 indicating that 98.68 percent of the variations in GDP are explained by the variation of the regressors’ included in the model.

Durbin Watson test: The result of DW test has been reported with the tabulated upper and lower bound of d at 5 percent level. The econometric theory points out that the d-statistics has to lie between (dU) and (4 - dU) to confirm autocorrelation in the model. From the result, it shows that d-statistics 2.417, 2.3636 and 2.0338 lie between upper bound (dU) and (4 - dU) [i.e. dU < d < 4 - dU]. Thus, it confirms the absence of auto correlation in the entire model. But the value of DW d statistics lies in indecisive area.


36

Error correction model (ECM)From the above three equations I, II and II, the first equation is being employed for the error correction model. The time series data is in the model involves at first difference. The residual of the equation I is taken as independent variable as shown in equation IV as (ECMt-1). Since it is observed that residuals are not normally distributed, autocorrelation and multicollinearity problem in the model, it is necessary to improve the non-normal distribution, autocorrelation and multicollinearity problem in the model. Therefore, the data are transposed into first difference and run the model with error correction model (ECMt-1).

Δ (InGDPct) = b0 + b1 DInRemitct + b2 DInEXRct + b3 DInMCct + b4 DInMSct + b5 DIn GSPDct + b6 DInECMt-1 + b7 DInGCPbt-1 ... ... (IV)

Table 5

Cointegrated Regression Results

D (InGDPct) = b0 + b1 DInRemitct + b2 DInEXRct + b3 DInMCct + b4 DInMSct + b5 DInGSPct + b6 DInECMt-1 + b7 DInGDPbt-1

0.0074 + 0.04270* DInRemitct - 0.0405 DInEXRct - 0.056*** DInMCct + 0.036*** DInMSct

[0.004017] [0.02520] [0.09327] [0.027790] [0.0.20001] {0.186332} {1.29894} {-0.49184} {-0.253441} {0.181.23}

+ 0.377*** InDGSPDi + 1.037 InDECMt-1 – 0.0027 InDGDPbt-1 [0.092796] [0.503341] [0.196456] {4.065728} {1.845} {0.138900} F-statistics (7, 10) : (5.00796)* Adjusted R2 : 0.7984 DW : 1.8975

Normality test: Jarque-Bera = J-B stat: 13.2955 (p-value: 0.001297)Serial correlation test: Breusch-Godfrey LM = Obs. R2 : 2.1875 (P- c2 : 0.8422)Heteroskedasticity test: Breusch- pagon = Obs. R2 : 2.1875 (P- c2 : 0.9487)Heteroskedasticity test: Glejser test = Obs. R2 : 3.4518 (P- c2 : 0.8403)Specification test: RAMSEY TEST = F-statistics(2, 7) : 4.4826 (sig: 0.02304)Autocorrelation: ARCH = Obs. R2 : 0.4549 (P-value: 0.0023)Structural break test: Chowtest = F-statistics (7, 6) : 4.43201(sig: 0.352)

Multicollinearity test: Variables VIF REMITLOGC_1 1.30 EXRLOGC_1 1.53 RLOGC_1 1.84 MCLOGC_1 1.83


37 MSLOGC_1 1.54 RES_1 1.02 GDPLOGC_2 1.03

Figures in parentheses [ ], { } indicates standard error and t-statistics of the concerned variables and p-values(*) Significant at (0.01) 1% level (**) Significant at (0.05) 5% level (***) Significant at (0.10) 10% level

The use of first difference lagged GDP facilitates to obtain long-run and short run impact of the variable included in the model. The first order condition of econometrics as shown by F-statistics, t-statistics, and are satisfactory. The F value is 5.00796 indicating higher than the table value of F, at 0.01 level. It means the null hypothesis that the elasticity coefficient of remittance, exchange rate, market capitalization, money supply and government spending, error and lagged GDP are simultaneously and jointly equals to zero is rejected in favor of the alternative hypothesis they are not equal. The shows that the explanatory power of the model is 0.789 indicating that 78.9 % of the variation of GDP is explained to the extent of 78 percent variation of the independent variable included in the model.

The estimated coefficient of remittance in error correction model shows that one percent point rise in remittance has led to 0.4270 percent point increase in real GDP in short run, whereas it is found 0.064 percent point in the long-run. It means that the short-run marginal productivity of remittance is 0.427 percent point, whereas its long run percent point is 0.064.

4. Conclusion The study sought to examine the impact of international remittance on the economic growth in Nepal during FY1998/99 and FY2017/2018 using regression analysis. Unit root, cointegration, Correlogram test, Durbin-Watson test, error correction model, and cointegration techniques have been used in the econometric procedure. The results of the study suggest that international remittance has significant impact on the economic growth both in the short and long run. This implies that the government should develop and implement such policies which could utilize the remittance to further the economic development of the country.

5. Recommendations The main challenge is to realize the fact that over dependence on remittance is serious issues and harm for the economy and even in the Nepalese economy in the long run. In a long run most of the studies reveled that the international remittance has negative and significant impact on economy. Therefore, we need to devise policies and strategies focused on managing migrant work-force and channelizing remittance into productive use for the economic development.


38

References

Acosta, P.A., Lartey, E.K.K. and Mandelman, F.S. (2009). Remittances and the Dutch disease. Journal of International Economics, 79(1), 102-116.

Adams, R. and Page, J. (2005). Do international migration and remittances reduce poverty in developing countries? World Development, 33, 1645-1669.

Chami, R., Barajas, A., Montiel, P., Fullenkamp, C. and Gapen, M. T. (2009b). Do workers’ remittances promote economic growth?, IMF Working Papers 09/153, International Monetary Fund.

Chami, R., Fullenkamp, C. and Jahjah, S. (2005). Are immigrant remittance flows a source of capital for development? IMF Staff Papers, 52, 55-82.

Gupta, S., Pattillo, C. A. and Wagh, S. (2009). Effect of remittances on poverty and financial development in Sub-saharan Africa, World Development, 37, 104-

Hamilton, J. D. (1994). “Autoregressive Conditional Heteroskedasticity and Changes in Regime,” Journal of Econometrics, September/October 1994 (coathored with Raul Susmel).

Lopez, S., David, J., and Pau, R. (2007). “Government Spending and ConsumptionHours Preferences.” Working paper, Federal Reserve Board.

Nepal Rastra Bank. (2017). “Macro economic indicator of Nepal.” NRB Economic Review, Vol. 11, Research Department.

World Bank (2003). World Development Indicator (December, 2003), Retrieved from http://data.worldbank.org/data-catalog/world-development-indicators

World Bank (2015). World Development Indicator (December, 2015), Retrieved from http://data.worldbank.org/data-catalog/world-development-indicators.

World Bank. (2016). Fiscal Indices Studies in Developing Countries: Survey and Cririque, 21 (3).


39Organizational communication practices and job satisfaction among service sector employees in Kathmandu

Organizational communication practices and job satisfaction among service sector

employees in KathmanduBiraj Ghimire *

[email protected]

Lalita Shrestha * [email protected]

AbstractOrganizational communication practices like daily job interaction, communication among colleagues, superiors, reporting relationship with managers and supervisors, exchange of information with the team is vital in organizations as they predict the level of productivity and satisfaction among employees. The study explored the relationship between communication and job satisfaction among service sector employees in Kathmandu. Data were collected from 320 service sector employees across 23 industries. The quantitative data was gathered through self-administered questionnaire using an adapted version of Communication Satisfaction Questionnaire (CSQ).

qregression analysis, feedback, supervisor communication, communication climate, coworker communication and media quality predicted the dimensions of communication satisfaction. The study presented the importance of effective communication and organizational communication practices to improve the performance in the workplace. The study particularly pointed the need to improve communication practices among lower level employees.

Keywords: Organizational communication, Internal communication, Communication satisfaction, Job satisfaction

* Faculty, Global College of Management, Kathmandu * Master of Business Studies (MBS) scholar Global College of Management

1. IntroductionCommunication in organization is characterized by exchanging day to day work information along with reporting assignments. Effective communication in organization is believed to enhance productivity, achieve predetermined goals and maintain relationship among peers. Organizational communication is significant in any organization ranging from nonprofit, government to pure business oriented organizations. Miller (2015) mentioned that the method of communication in organization is changing at present times due to development of technology. Moyer (2011) noticed that effective internal communication in the organization

40 Organizational communication practices and job satisfaction among service sector employees in Kathmandu

transpires level of motivation, confidence, creativity and innovation among employees. On the other hand, improper internal communication is associated with miscommunication and lag in result delivery. People in the organization engage in three levels of communication: 1) communication among coworkers, 2) communication with supervisors, and 3) communication with other stakeholders of organization in verbal, non-verbal and written mode of delivery (Ober, 2011).

1.1 Objectives of the Study• To analyze the level of communication satisfaction among service sector employees of

Kathmandu • To evaluate the role of communication satisfaction in determining job satisfaction among

service sector employees of Kathmandu

1.2 Statement of the ProblemEffective internal communication is often associated to escalate productivity, creativity and innovation in employees. Perception of communication satisfaction, particularly internal communication is often overlooked in Nepal. At present context, management theorists advocate for promotion of human values in the workplace. It is necessary that managers should consider needs and wants of the employees (Spector, 1997). Off many indicators of job satisfaction interpersonal communication or communication is a powerful tool to communicate values, deliver expectations, enhance team work, repair damaged relationship and resolve conflict in a cordial manner. When employees are treated with respect and dignity, it is likely that they are more satisfied in the workplace.

Increasing trend of employee’s turnover, reluctance to perform and dissatisfaction is often associated with improper internal communication practices. The service sector in general is intensely competitive in nature. Often overlooked by the organizations, there is a need to evaluate contribution of organizational communication practices in maintaining job satisfaction among employees.

1.3 Hypotheses of the StudyBacked by literature review and result obtained from the similar studies hypotheses developed for the study is stated as under:

H1 : There is a significant relationship of communication climate with job satisfaction.

H2 : There is significant relationship between communication structures within the organization and job satisfaction.

H3 : Affective communication has significant relationship with job satisfaction.

2. Literature Review Positively perceived communication environment substantially contributes to organizational effectiveness (Pincus, 1986). Effective communication is very important for any type of relationship, whether it is for personal, for social, or for business purposes. Organizations become more complex with the changing times, mainly because of technical advances and

41Organizational communication practices and job satisfaction among service sector employees in Kathmandu

globalization, effective communication is becoming even more important in the workplace (Sharma, 2018).

Employees regularly communicate with each other’s. With widespread media facilities and access, most workplaces have been transformed to multicultural environments, which led to a significant increase in the expectations of workers. From the employer’s viewpoint, it is important that the information is being transferred to the employees in order to meet their needs, as well as their happiness with this information flow. Favorable employee communication has an effect on the increase of job satisfaction and employee performance (Jo & Shim, 2005).

Goldhaber identified two major research perspectives for organizational communication; process and perception. The perspective dimension evaluates information flow whereas the dimension of perception reflects attitude towards internal communication (Pincus, 1986; Gray & Laidlaw, 2002). The prespective dimension deals with downward, upward or horizontal exchange of information inside the organizational (Mount & Back, 1999). The direction of communication flow depends on the structure of the organization and external customer orientation (Pincus, 1986).

Research on the perception of communication is based on the assumption that an individual’s cognitive and affective perceptions of the organization will influence that individual’s behavior in the organization (Goldhaber et al., 1978).

Generally, organizational communication is described as the sending of messages or information through formal and informal networks that assists in constructing meaning and influencing individuals and groups in an organization (Hoy & Miskel, 1991). Deetz (2001) described internal communication process aid in information sharing, building relationships, and constructing meaning, culture, and values in the organization. Communication is crucial for smooth operation in the organization. Often when there is poor communication among coworkers, this might result in resentment and misunderstandings (Ober, 2001).

Internal communication is understood as exchange of formal and informal information between supervisors and subordinates. Jo and Shim (2013) found that prosperous internal communication helps to develop a harmonious relationship between managers and employees. Internal communication includes e mail, newsletter, directive, circular surveys and suggestions. Organizational communication is believed to connect workforce at individual, group and as members of organization as a whole towards common goal with seamless cooperation (Hatch, 1996). De Ridder (2004) suggested that organizational communication is one of the tools to facilitate employees. Internal communication not only fosters sharing of information but also flourishes sense of community and mutual trust among employees.

Goldhaber identified two major research perspectives for organizational communication; process and perception. Information flow is the main concern for the process perspective, although attitude or perception is the main concern for the perception perspective (Pincus 1986, Gray & Laidlaw, 2002).

Communication satisfaction is a state where an employee perceives his or her expectation being fulfilled during the process of exchange of message and aspirations (Muller & Lee, 2002). Communication satisfaction is defined as gratification associated with communication among employees of different job positions (Mount & Back, 1999). Multidimensional nature

42

of communication satisfaction investigates exchange of information and transmission of meaning in the organization. Hence, the study of communication satisfaction determines nature of organizational culture, work environment and level of employees’ engagement in workplace. (Gray & Laidlaw, 2004).

Managers at times tend to diminish role of employees in organizational performance. Argenti (1998) opined thatwhen employees do not extend faith and goodwill for organization; it is likely that credibility of organization tampered. One of the reasons an organization not being able to gain trust from employees is dissatisfaction in organizational communication practices.

According to Spector (1997) job satisfaction refers to individual’s level of contentment with his or her job. Hulin and Judge (2003) expressed job satisfaction as psychological response towards the dimensions of job. Locke (1976) stated that job satisfaction is a pleasant emotional state derived from work. Spector (1977) aligned job satisfaction with the psyche of employees towards work environment. Hence, job satisfaction in general is a positive feeling about the job and job related tasks. On the other hand, job satisfaction can also be linked with the fulfillment of expectations from the job. Job satisfaction has been studied under the domain of satisfaction-dissatisfaction, positive-negative feeling, and intrinsic-extrinsic perspective.

In the words of Hoppock (1935) job satisfaction is accumulation of psychological, physiological and environmental circumstances in order to be satisfied from the job. Job satisfaction also predicts positive or negative about the work. State of employee satisfaction helps an employee to satisfy the expectation from the job. Job satisfaction is closely linked to that individual’s behavior in the work place (Davis et al., 1985).

2.1 Evaluation of Job SatisfactionThe Job Descriptive Index (JDI) is believed to be developed bySmith, Kendall, and Hulin (1969). The JDI evaluates job satisfaction on the basis of pay, promotion, coworkers, supervision and work itself (Bowling Green State University, n.d). The statements also consider overall satisfaction generated from the job. In order to increase validity of statements Sharma (2015) expressed the use of consolidated version of Job Descriptive Index. Evaluation of job satisfaction is often paired with The Minnesota Satisfaction Questionnaire (MSQ) (Weiss et al., 1967). Unlike JDI, the MSQ evaluates perceptions of job satisfaction for a specific job. Both the original and consolidated version of MSQ consist of intrinsic and extrinsic contributors of job satisfaction in the statements (Hancer & George, 2003).

Figure 1 Conceptual Framework

Source: Literature review, 2019

Communication Climate

Organizational Characteristics of Communication

Communication Structure

AffectiveCommunication

Job Satisfaction

Organizational communication practices and job satisfaction among service sector employees in Kathmandu

43

3. Research Methodology3.1 Research DesignIn order to examine the relationship between dimensions of communication satisfaction with job satisfaction, the researcher initially developed theoretical model based on similar studies. The questionnaires were adapted from dimensions Communication Satisfaction Questionnaire suggested by Downs and Hazen (1977 and constructs of job satisfaction was adapted from Job Descriptive Index (JDI) (Smith et al., 1969)

3.2 Sample SizeThe researcher considered the employees who were working in service sector in Kathmandu developing a self-administered questionnaire distributed across online and social media platforms in which 320 samples were obtained and all questions hand complete information. Therefore, the nature of the data for analysis purpose was primary data. A convenience sampling technique was used.

3.3 InstrumentationThe study was based on CSQ developed by Downs and Hazen (1977) which happens to be widely used; both valid and reliable in many studies. Nine questions were related with demographic profile of the respondents. All together there were 48 questions. Organizational integration dimension had 5 questions, personal feedback 3, supervisor communication 5, communication climate 4, coworker communication 5, corporate information 4, media quality had 5 questions.

The survey was based on 7-point Likert- scale, with value ranging from 1 to 7. 1 being strongly dissatisfied and a 7 being strongly satisfied. The questions were slightly modified in terms of wordings and no additional questions were added.

3.4 Data Analysis ProcedureThe researcher coded the variables using Statistical Package for Social Sciences (SPSS) version 22. All 320 responses were entered into SPSS. Inorder to find out perceptions of the level of communication satisfaction, the researcher used co relation coefficient and regression analysis. Similarly, to find out the difference of different demographic factors in predicting job satisfaction the researcher used descriptive one way ANNOVA. Likewise, the researcher used Cronbach’s Alpha to evaluate reliability of internal consistency of the constructs. An exploratory factor analysis was initially conducted to evaluate the factor structure of the scale.The study was tested with Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy and Bartlett’s Test of Sphericity. The researcher used Principal Component Analysis using a Varimax Rotation method. No Communialities was found in the data. Six factors had Eigenvalue more than 1.0 and explained 72% of variation. Factor analysis showed that the data had no issues of cross loadings.


44

3.5 Validity and ReliabilityCronbach’s Alpha was used to evaluate the reliability and internal consistency of the questionnaires. The reliability of an instrument or questionnaire is concerned with the consistency, stability, and dependability of the empirical investigation. If the alpha value is higher than 0.9, the internal consistency is believed to be excellent, and alpha value greater than 0.7 is acceptable in research (Blunch, 2008).

Validity in research is concerned with the extent to which the constructs actually measure what they were intended to evaluate. Validity can be established when the constructs are established and developed from a tested or a proven theory and the constructs actually measure what they were supposed to (Carmines & Zeller, 1979).

4. Results and Discussion4.1 Results

Among all the respondents 186 (58%) were male and 134 (49%) were female. Majority of the respondents (50%) belonged to age group 26-31 years. Respondents between age group 16-25 were 98 (37%). While 49 (15%) respondents were from mid-30s to mid-40s. Only 13 respondents (4%) were more than 46 years of age. Majority of the respondents (59%) were married. As to the education status there were more respondents with an undergraduate degree (51%) than graduate degree (46%). Significant larger number of respondents (59%) was found to be in mid-level job position. While there were more respondents with senior level job position (23%) than in lower level job position (17%). More respondents (44%) earned between Nepali Rupees (Rs) 25,001 to Rs 75,000 per month. Most of the respondents were undertaking responsibility in marketing and sales department (30%), operations and administration (24%), finance (17%), human resources (14%).

Banking and Financial institutions was found to be the most preferred sector for the respondents as 50 respondents (16%) were from the industry. Information Communication and Technology (ICT) sector employed 40 respondents (12). The third preferred industry was human resources and management consulting representing around 8% of respondents. Other industries comprised of Fast Moving Consumer Goods (FMCG) and retail 8%, hospitality 6%, automobile 6%, e-commerce 5%, media and advertising 5%, International Non-Governmental Organization (INGO) 5%.

Table 1

KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .973

Bartlett‘s Test of SphericityApprox. Chi-Square 10763.297Df 741Sig. .000

The model was tested with KMO measure of sampling adequacy and data was found to be suitable for factor analysis. Similarly, Bartlett’s Test of Spericity was found to be significant (p≤.001) and variances were found to be equal for all samples.


45

Table 2Factor Analysis Table

Factors Factor Values

Cronbach Alpha

Mean Standard Deviation

Organizational Integration

Information about my progress in job .762 .868 6.04 0.714

Information about other employees .765 5.40 0.984

Information about benefits and play .752 5.84 0.813

Information about departmental policies and goals .775 5.93 0.913

Information about requirements of my job .763 5.88 0.829

Personal FeedbackInformation about how my job compares with others .570 .840 5.73 .986

Information about how I am evaluated .705 5.84 1.272

Recognition about my efforts .683 5.34 1.316Supervisor Communication

Extent to which my supervisor/s know and understand the problems faced by the staffs .726

.930 5.32 1.269

Extent to which my supervisor listens and pays attention to me .661

5.17 1.428

Extent to which my supervisor offers guidance for solving job related problems .714

5.15 1.338

Extent to which my supervisor is open to ideas .743 5.1 1.394

Extent to which the amount of guidance given to me by my supervisor is about right .661

5.22 1.422

Communication Climate

Extent to which my organization‘s communication system makes me feel, I am a vital part of it .558

.898 4.97 1.409

Extent to which people in my organization communicate effectively .564

5.11 1.500

Extent to which I receive information needed to do my job in a timely manner .591

4.75 1.446

People in my organization have greater ability as communicators .495 5.07 1.513

Coworkers CommunicationExtent to which communication through informal and unofficial channel occurs in my organization .591

.874 4.57 1.533

Extent to which I receive information on how problems in my organization are being handled .600

4.63 1.482

Extent to which conflicts are handled appropriately through proper communication channels .596 5.02 1.544

Extent to which horizontal communication with members from other department is accurate and free flowing .504

5.03 1.537

Extent to which my work group is compatible .502 5.53 1.459


46

Corporate InformationInformation about institutional policies and goals .661 .854 5.68 1.201

Information about changes in my organization .731 5.51 1.164

Information about accomplishments and/or failures about my organization .742

5.68 1.190

Information about government policies/actions affecting my organization .722

5.88 1.104

Media QualityExtent to which meetings are well organized .595 .874 5.78 1.00

Extent to which written directives/notices/reports are clear and concise .743

5.78 0.959

Extent to which communication channels used in my organization are appropriate .763

5.72 0.969

Extent to which communication in my organization is accurate .671 5.65 1.063

Extent to which the amount of Face-to-Face communication occurs in my workplace is sufficient .707 5.65 1.708

Job SatisfactionExtent to which I am given opportunities to use my skills and abilities .675

.962 5.50 1.392

Current Pay .745 4.98 1.791

Extent to which my supervisor provides me effective supervision .675

5.19 1.564

Extent to which I feel confident about the security of my job .666 5.07 1.652

Extent to which work I do in my current work position is enjoyable .730

5.11 1.709

Extent to which working with my coworkers is comfortable .757 4.86 1.762

Extent to which work environment is healthy .747 5.23 1.708

Extent to which my job in general is pleasant .732 5.45 1.606

Factor analysis using Varimax rotation and Principal Component Analysis revealed that there was a difference between dimensions perceived to explain communication.

The data were found to be highly reliable organizational integration had (α=.868), personal feedback (α=.840), supervisor communication (α=.930), communication climate (α=.898), coworker communication (α=.874), corporate information (α=.854), media quality (α=874) and job satisfaction (α=.862).Table 3Correlation Analysis

Pearson Correlation Sig. (2-talied)*Organizational Integration .561 .000Personal Feedback .747 .000Supervisor Communication .764 .000Communication Climate .859 .000


47

Coworker Communication .794 .000Corporate Information .634 .000Media Quality .639 .000

Note. * denotes correlation significant at .001.

Pearson correlation was used to find out the relationship and answer the research question. It was confirmed that job satisfaction was significant related with communication satisfaction. A positive and strong correlation (r =.859, p≤.001) was observed between communication climate and job satisfaction. Similarly, there was a strong and positive relationship between job satisfaction and coworker communication (r =.794, p≤.001), supervisor communication (r =.764, p≤.001) and personal feedback (r =.747, p≤.001). Slightly moderate relationship was found between job satisfaction and media quality (r =.639, p≤.001), corporate information (r =.634, p≤.001) and organizational integration (r =.561, p≤.001). Table 4Regression Analysis

Hypothesized Relationship Std Error Beta t Sig Hypotheses

(Constant) .335 -6.023 .000iv1 dv .072 .006 .174 .862 Rejected iv2 dv .068 .095 1.948 .003 Acceptediv3 dv .072 .171 2.856 .032 Acceptediv4 dv .066 .423 7.372 .000 Acceptediv5 dv .064 .105 1.958 .008 Acceptediv6 dv .066 .052 1.193 .234 Rejectediv7 dv .077 .181 4.178 .000 Accepted

Dependent Variable: Job Satisfaction

Note. organizational integration is iv1, personal feedback iv2, supervisor communication iv3, communication climate iv4, coworker communication iv5, corporate information iv6, media quality iv7 and dv denotes job satisfaction.

Regression analysis was used to find the degree of relationship and to test the hypothesis. The model used in the study was found to a good predictor of relationship (F (7,312) =188.76, p≤.001,R2 = .809). The independent variables organizational integration (iv1), personal feedback (iv2), supervisor communication (iv3), communication climate (iv4), coworker communication (iv5), corporate information (iv6) and media quality (iv7) explained 80.9% in the variation for the dependent variable job satisfaction (dv).

There was a significant relationship between job satisfaction and personal feedback β=.006, t (313) =.173, p=.003. Similarly, supervisor communication β=.171, t (312) =2.85, p=.032, communication climate β=.423, t (313) =7.37, p≤.001, coworker’s communication β=.105, t (313) =1.95, p=.008, and media quality β=.052, t (313) =.181, p≤.001 significantly predicted job satisfaction. Meanwhile, there was no relationship between organizational integration β=.006, t (313) =.174, p=.862 and corporate information β=.052, t(313) =.193, p=.234 with


48

job satisfaction. communication climate (β=.423) and media quality (β=.171) dimension of communication satisfaction was found to have significant impact in determining job satisfaction. Job satisfaction was significant related with personal feedback, supervisor communication, communication climate, coworker climate and media quality dimension of communication satisfaction.

There was significant difference between in job satisfaction caused by communication satisfaction in male and female and female respondents F (1,319) = 11.72, p≤.001, age group, F (4,316) = 5.57, p≤.001, marital status F (1,319) = 29.04, p≤.001, education level F (3,317) = 7.97, p≤.001 and different job position F (2,318) = 7.97, p≤.001.

4.2 DiscussionThe finding of the study suggested that there was a significant relationship between communication satisfaction and job satisfaction. As to the objectives, coworker communication, supervisor communication and media quality were the significant predictors of communication satisfaction. On the other hand, personal feedback, supervisor communication, communication climate, coworker communication and media quality dimension of communication satisfaction predicted the level of job satisfaction.

The study pointed that published dimension of communication satisfaction namely organizational integration and corporate information did not confirm perceived level of job satisfaction. Hence it can be argued that generally interpersonal dimension of communication is more significant towards predicting job satisfaction in the workplace. Most strikingly, the published dimension which can be improved in the workplace through training and developmental intervention. Moreover, the study referred a stringent finding that interpersonal communication dimension showed a significant relationship with job satisfaction. Thus, the leaders of the organization who strive to make their organization as the most preferred workplace have a relatively difficult task to enrich internal communication experience among others to keep the workforce engaged. High level of communication satisfaction is likely to promote sound emotional and moral state of employees (Picnus, 1986). One way of improving organizational communication practice could be the use of communication plan in the departments like open-door-policy, feedback, appreciation, allowing review meetings and reflections. Supervisors can even encourage a mechanism to induce clear and consistent information flow in the organization. The tampered work relationship can be repaired with active listening and feedback.

5. ConclusionThe objective of the study was to find out level of communication satisfaction among service sector employees in Kathmandu. Eventually, the study figured out a strong and positive relationship between communication and job satisfaction. Communication among the coworkers and communication between coworkers and supervisors was deemed to the most important factor in enriching a satisfactory communication experience. It is important for employees to understand on what basis they are being compared on standard and actual performance. Interpersonal communication is still one of the significant predictors of work engagement and job satisfaction. The study poised a difficult task for supervisors and coworkers to improve interpersonal communication practices.


49

References

Blunch, N. J. (2008). Introduction to structural equation modeling using SPSS and AMOS. California: SAGE Publications.

Carmines, E. G., & Zeller, R. A. (1979). Reliability and validity assessment. Sage Publications.

Deetz, S. (2001). Conceptual Foundations. In F. M. Jablin. & L.L. Putnam. (Eds.), The new handbook of organizational communication: Advances in theory, research and methods, 45. Thousand Oaks, CA: Sage.

De Ridder, J. A. (2004). Knowledge sharing in context: the influence of organizational commitment, communication climate and CMC use on knowledge sharing. Journal of Knowledge Management, 8(6), 117-130.

Goldhaber, G. M., Porter, D. T., Yates, M. P., & Lesniak, R. (1978). Organizational Communication (state of the art), Human Communication Research, 5, 76-96.

Gray, J., & Laidlaw, H. (2002). Part-time employment and communication satisfaction in an Australian retail organization. Employee Relations, 24 (2), 211-228.

Gray, J., & Laidlaw, H. (2004). Improving the measurement of communication satisfaction. Management Communication Quarterly, 17 (3), 425-448.

Hancer, M., & George, R. T. (2003). Job satisfaction of restaurant employees: An empirical investigation using the Minnesota Satisfaction Questionnaire. Journal of Hospitality & Tourism Research, 27 (1), 85-100.

Hecht, M. L. (1978). Measures of communication satisfaction. Human Communication Research, 4 (4), 350-368. doi: 10:1111/j.1468-2958.1978.tb00721.x

Hoppock, R. (1935). Job satisfaction. Harper and Brothers, New York.

Hoy, W. K., & Miskel, C. G. (1991). Educational administration: Theory, research and practice (4th ed.). New York, NY: McGraw-Hill.

Hulin, C. L., & Judge, T. A. (2003). Job attitudes. Handbook of psychology: Industrial and organizational psychology, 12, 255-276.

Jo, S., & Shim, S. W. (2005). Paradigm shift of employee communication: The effect of management communication on trusting relationships. Public Relations Review, 31 (2), 277-280.


50

Locke, E. A. (1976). The nature and causes of job satisfaction. In M.D. Dunnette (Ed.), Chicago, IL: Rand McNally.

Miller, K. (2012). Organizational communication: Approaches and practices (6th ed.). Boston, MA: Cengage Learning

Mount, D. J., & Back, K. (1999). A factor-analytic study of communication satisfaction in the lodging industry. Journal of Hospitality & Tourism Research, 23(4), 401-418.

Moyer, J. (2011). Employee/organizational communications. Institute for Public Relations. Retrieved on October 05, 2018 from http://www.instituteforpr.org/employeeorganizational-communications/

Mueller, B. H., & Lee, J. (2002). Leader-member exchange and organizational communication satisfaction in multiple contexts. The Journal of Business Communication, 39 (2), 220-244.

Ober, S. (2001). Contemporary business communication (4th ed.). Boston, MA: Houghton Mifflin.

Pincus, J. D. (1986). Communication satisfaction, job satisfaction, and job performance. Human Communication Research, 12 (3), 395-419.

Ramirez, D. L. (2012). Organizational communication satisfaction and job satisfaction within university foodservice (Kansas State University, Manhattan, Kansas). Retrieved from https://krex.k-state.edu/dspace/bitstream/handle/2097/14123/DanielRamirez2012.pdf

Sharma, P. R. (2015). Organizational communication: Perceptions of staff members’ level of communication satisfaction and job satisfaction. Electronic Theses and Dissertations. Paper 2481. http://dc.etsu.edu/etd/2481.

Spector, P. E. (1997). Job satisfaction: Application, assessment, causes and consequences. Thousand Oaks, CA: Sage.

Smith, P. C., Kendall, M., & Hulin, C. L. (1969). The measurement of satisfaction in work and retirement. Chicago, IL: Rand McNally.

Weiss, D. J., Dawis, R. V., England, G. W., & Lofquist, L. H. (1967). Manual for the Minnesota Satisfaction Questionnaire. Minneapolis: University, Industrial Relation Center.


51Customs Duty Evasion Issues in Nepal

Customs Duty Evasion Issues in NepalGautam Maharjan *

[email protected]

Abstract

The main objective of this study is to identify the magnitude of issues related to customs duty evasion in Nepal. Total 819 respondents including 421 from business communities and 398 from government officials are taken as a sample for this study. Judgmental sampling technique was employed to collect the data using five-point Likert scale through questionnaire. Descrip-tive statistics, compare mean test, percentage analysis and ranking method were used for data analysis. Compare mean test confirms that business communities are more serious than gov-ernment officials on each issue. Being mean scores of each issue are greater than 3 (i.e., fairly agree), respondents are highly serious on the issues related to customs duty evasion in overall. From the ranking analysis, it is concluded that respondents are more serious on the issue of ‘difficulties in managing open border’, ‘ambiguous customs policy’ and ‘poor infrastructure and inconvenient location’ which are ranked first, second and third respectively. However, the respondents become less serious in the issue of ‘poor technology adoption’ which is ranked last (seventh). Identification of the seriousness on the issues of customs duty evasion in this study could be advantageous for the revenue planner to make newer customs policy.

Keywords: Customs duty evasion, Open border, Customs policy, Infrastructure and location, Technology

* Faculty at Public Youth Campus, Tribhuvan University. This paper was presented in 1st Global International Conference dated 13-14 December 2019.

1. IntroductionCustoms duty is defined as duty chargeable on goods to be exported or imported in accordance with laws (DoC, 2007). In other words customs revenue is a tax imposed on imports and exports of commodities through country boundaries (Singh, 2010). Tax evasion in customs occurs mainly through misclassification and undervaluation of imports in developing countries. This in fact also occurs due to threat of higher valuation and lengthy time for customs clearance, thus encouraging importers to engage in illegal settlement. King (2003) indicated a practice of under-invoicing and lack of effective valuation process in developing countries. The study highlighted the necessity of capacity development for implementation of customs valuation system. In the same fashion, Ghimire (2005) identified the discretionary power of customs authorities in Nepal as a major issue with customs valuation process.

52Finger and Schuler (2000) also observed that the customs valuation agreement provides neither appropriate diagnosis nor appropriate remedy for least developed countries problems with customs administration. They suggested capacity building in the form of introduction of IT systems and database to customs for sound implementation of agreement as proper administrative environment does not exist in many developing countries. Trade liberalization showed negative association with total tax revenue and international trade tax revenues (Khattry & Rao, 2002). Bhagwati (1964) argued that the discrepancies between reported imports and corresponding exports by trading partners could be explained by undervaluation and misclassification of imports to reduce the burden of tariff.

Rege (2002) accounted the resentment of developing countries for the application of transaction values as it would supposedly decrease the customs revenue due to undervaluation. The study on effect of technology on revenue collection by Embu County Government, Kenya, concluded that the technological advancements positively affect revenue collection (Karimi, Kimani, & Kinyua, 2017).

Amin, Nadeem, Parveen, Kamran and Anwar (2014), in their empirical investigation on factors affecting tax collection in Pakistan, concluded that the tax collection reduced due to corruption, inflation and political instability; whereas, trade openness and real per capita income increase the revenue.

Awan (2014) highlighted six main causes of tax evasion: unproductive expenditures / misuse of funds, anti-tax culture, corrupt tax administration, multiple & higher tax rates, complex tax system and amnesties and incentives for tax evaders.

Wei (2013) found that inefficient knowledge management, misuse of trade facilitation standards or misunderstanding of multilaterally acknowledged trade rules on the part of both policymakers and administrators might create distortions to Customs’ mandate. The traders in Bangladesh faced delays due to excessive official formalities, inefficiencies and arbitrary discretion in conducting their trade, especially in Customs and the Port Authority (Uzzaman & Yusuf, 2011).

The average size of informal economy in Nepal was found to be about 40 percent of official economy during the period of 2001/02-2009/10. Further, it also showed a significant impact on total revenue loss for Nepalese customs (Paudel, 2010).

Taneja and Pohit (2004) reported that Raxaul, Naxalbari, Jogbani, Nautanwa Barhni in India emerged as the important centers of informal trade in India whereas Kankkadvita, Biratnagar, Birgunj, Bhairahawa, and Nepalgunj are noted as the important informal trading centers in the Nepalese territory.

Ghimire (2006) estimated evasion was more than 40 percent of taxable capacity. The study found that the penalty provisions of the Customs Act 1962 could not be implemented perfectly. Informal and unauthorized part covered a large volume which was around 38.9 percent of the formal import from India to Nepal (MountDigit Technology, 2006). German Development Cooperation (2015) also found tax evasion is the function of high tax rate, low penalty rate, low possibility of detection of the fraud, weak administration and its behaviour towards taxpayers.

The major reasons as identified by the past studies are the presence of poor technology

Customs Duty Evasion Issues in Nepal

53adoption, weak customs administration, poor human resource base, and the poor customs infrastructure. The past studies also do not provide the evidence on the aggregate responses of business communities and government officials about importance of several factors associated with customs duty evasion. Similarly, none of the past studies have done cross sectional analysis and identified issues in the order of seriousness.

It has been well understood that customs duty evasion negatively affects the customs revenue. The most common problem in a developing country like Nepal is the difficulty in achieving the desired economic growth primarily due to the lack of adequate revenue generation.

Following the problems and research gap as outlined, this study is designed to assess the level of perception of stakeholders (business communities and government officials) on each issue related to customs duty evasion in Nepal. This study also attempts to identify the degree of seriousness of the stakeholders on the issues. The issues associated with customs duty evasion system are: (1) Poor technology adoption (PTA), (2) Political disturbance (PD), (3) Difficulties in managing open border (OB), (4) Poor human resource base (PHR), (5) Ambiguous customs policy (ACP), (6) Poor infrastructure and inconvenient location (PIIL), and (7) Lengthy customs clearance procedure (LCCP).

2. Data and MethodologyDescriptive and analytical research design were used in this study to identify the seriousness of stakeholders on the issues related to customs duty evasion in Nepal. Data was obtained from opinion survey. It was collected from major customs points and concerned stakeholders of different places of Nepal through questionnaires. The responses are measured in a 5 point Likert scale for various sorts of problem statements. The scale of responses are numbered as 1 for ‘not agree’, 2 for ‘somehow agree’, 3 for ‘fairly agree’, 4 for ‘agree’, and 5 for ‘strongly agree’. The data focuses on seven different issues related to customs duty evasion determines from past studies. The perceptions of stakeholders have been collected to determine the most serious and the least serious factors on customs duty evasion among the seven issues. The seven issues on customs duty evasion [ie., poor technology adoption (10), political disturbance (06), difficulties in managing open border (06), poor human resource base (10), ambiguous customs policy (10), poor infrastructure and inconvenient location (10), and lengthy customs clearance procedure (11)] were evaluated for the seriousness on the issues. Total 819 respondents, including 421 from business communities and 398 from government officials, were taken as a sample for this study. Independent sample mean test was employed to compare the perception of both groups- business communities and government officials on the issues of customs duty evasion. The percentages of total mean score were also distributed and ranked to identify the degree of seriousness on each issue related to customs duty evasion.

3. Study Results and DiscussionResponses were collected from the opinion survey. The opinion survey of various stakeholders (business communities and government officials related to customs revenue) shows the average scores on seven issues. Table 1 depicts that distribution of respondents on the basis of mean scores and standard deviation obtained in various categories of issues. Each of the issue categories contains six to eleven statements. The result reveals that the respondents are experiencing more problems on the seven different issues.


54

Descriptive StatisticsAccording to business communities’ views, the highest mean score (3.876) lies in ‘ambiguous customs policy’ whereas the lowest mean score (3.609) lies in ‘poor technology adoption’. But the lowest standard deviation (0.569) and the highest standard deviation (0.705) lie in ‘ambiguous customs policy’ and ‘difficulties in managing open border’ respectively. Similarly, from the point of view of government officials, the highest mean score of 3.642 lies in ‘difficulties in managing open border’ whereas the lowest mean score (2.925) lies in ‘poor technology adoption’. But the highest standard deviation of scores (0.881) lies in ‘poor technology adoption’ and the lowest (0.616) lies in ‘ambiguous customs policy’. The structure of mean and standard deviation of both groups are also similar with total respondents.

From the analysis of business communities’ perception on the basis of mean scores, the respondents are more serious on the issue of ‘difficulties in managing open border’ but the corresponding standard deviations reflects the views on the issue are seen as ups and downs. Similarly, the view of government officials as well as in total respondents are more serious in ‘difficulties in managing open border’ but less serious in ‘poor technology adoption’. But the highest standard deviation of the scores in ‘poor technology adoption’ reveals the perceptions of the respondents on this issue are not consistent among the seven issues. However the standard deviations of scores of all groups are low in ‘ambiguous customs policy’. This indicates that the respondents’ views on the issue of ‘ambiguous customs policy’ have more consistency. Eventually, the average views of total respondents are similar with the views of government officials.

Table 1Responses of Stakeholders on the Issues of Customs Duty Evasion

Issues of Customs Duty EvasionBusiness Com-munities (421)

Government Officials

(398)

Total (819)

Mean SD Mean SD Mean SDPoor technology adoption 3.609 0.681 2.925 0.881 3.276 0.855

Political disturbance 3.733 0.670 3.334 0.811 3.539 0.768

Difficulties in Managing open border 3.776 0.705 3.642 0.698 3.711 0.704

Poor human resource base 3.782 0.662 3.366 0.787 3.579 0.754

Ambiguous customs policy 3.876 0.569 3.442 0.616 3.665 0.631

Poor infrastructure and inconvenient location 3.868 0.594 3.419 0.724 3.650 0.697

Lengthy customs clearance procedure 3.836 0.599 3.299 0.674 3.575 0.690

Source: Author’s calculation from Survey 2015Levene’s Test Table 2 reports Levene’s test for equality of variances for both groups of business communities and government officials. Among seven different issues, Levene’s F-Statistic shows that all the issues are significant at 1 percent and 5 percent level except two issues- (1) difficulties in managing open border and (2) ambiguous customs policy. So, equality of variances is not assumed for all issues except for ‘difficulties in managing open border and ambiguous customs policy for independent samples test (t-Test for two sample mean). So, equality of variances is assumed for these two issues to test the compare means of both groups.


55Table 2Levene’s Test for Equality of Variances

Issues of Customs Duty Evasion F-Statistic p-val-ue

Sig.Level

Equality of Variance

Poor technology adoption 43.030 0.000 < 0.01 Not assumed

Political disturbance 16.630 0.000 < 0.01 Not assumed

Difficulties in managing open border 0.010 0.920 > 0.10 Assumed

Poor human resource base 15.749 0.000 < 0.01 Not assumed

Ambiguous customs policy 1.926 0.166 > 0.10 Assumed

Poor infrastructure and inconvenient location 23.478 0.000 < 0.01 Not assumed

Lengthy customs clearance procedure 4.656 0.031 < 0.05 Not assumed

Source: Author’s calculation from Survey 2015

Compare Mean TestTable 3 demonstrates the deference mean-scores and corresponding t-statistics of each issue of customs duty evasion between two groups of stakeholders (Business communities and Government officials). The result reported that all corresponding p-values of each issue are less than 0.01 (1%). This indicates that the mean differences of both groups are significant at 1 percent level in all issues. This means that there is a significant difference of mean-scores between two groups. Therefore, it is clearly understood that the perception between business communities and government officials are different in each issue.

Table 3

t-Test for Equality of Means

Issues of Customs Duty Evasion dfMean Differ-ence

t-Sta-tistic

p-val-ue

Sig. Level

Poor technology adoption 746.748 0.684 12.377 0.000 < 0.01

Political disturbance 771.020 0.399 7.654 0.000 < 0.01

Difficulties in Managing open border 817.000 0.135 2.742 0.006 < 0.01

Poor human resource base 777.268 0.416 8.161 0.000 < 0.01

Ambiguous customs policy 817.000 0.434 10.470 0.000 < 0.01

Poor infrastructure and inconvenient location 768.584 0.448 9.655 0.000 < 0.01

Lengthy customs clearance procedure 793.310 0.537 12.025 0.000 < 0.01


Seriousness of Business Communities on the Issues of Customs Duty Evasion

Based on the responses of the business communities for the issues on customs duty evasion, an attempt has been made to present the mean score of each issue. Rounding the mean scores, Table 4 depicts that the mean score of each issue of customs duty evasion is nearly 4 which lie in ‘agree’ scale of response.


56 Customs Duty Evasion Issues in Nepal

Table 4Perception of Business Communities on the Issues of Customs Duty Evasion with Scale of Responses

Issues of Customs Duty Evasion Mean Score

Rounding Scores

Scale of Response

Poor technology adoption 3.61 4 agree

Political disturbance 3.73 4 agree

Difficulties in Managing open border 3.78 4 agree

Poor human resource base 3.78 4 agree

Ambiguous customs policy 3.88 4 agree

Poor infrastructure and inconvenient location 3.87 4 agree

Lengthy customs clearance procedure 3.84 4 agree

Average 3.78 4 agreeSource: Author’s calculation from Survey 2015

In this process, average scores of business communities are computed as percentage and ranked in order of seriousness. As presented in Table 5, the level of responses of the business communities shows that ‘ambiguous customs policy’ has captured 14.64 percent of total scores and ranked as the number one issue. Similarly, ‘poor infrastructure and inconvenient location’ (14.61%) and ‘lengthy customs clearance procedure’(14.49%) are ranked two and three respectively while poor technology adoption has captured only 13.67 percent and ranked as the least serious issue among the seven related issues of the customs duty evasion. Therefore, from the view point of business communities, ‘ambiguous customs policy’, ‘poor infrastructure and inconvenient location’ and ‘lengthy customs clearance procedure’ are the more serious issues of customs duty evasion.

Table 5Rank of Various Issues Related to Customs Duty Evasion in the View of Business Communities

Issues of Customs Duty Evasion Mean Score % RankPoor technology adoption 3.61 13.63 7

Political disturbance 3.73 14.10 6

Difficulties in Managing open border 3.78 14.26 5

Poor human resource base 3.78 14.28 4

Ambiguous customs policy 3.88 14.64 1

Poor infrastructure and inconvenient location 3.87 14.61 2

Lengthy customs clearance procedure 3.84 14.49 3

Total 26.48 100


Seriousness of Government Officials on the Issues of Customs Duty EvasionAccording to perception of government officials, mean scores of each issue related to customs duty evasion have been also presented. Table 6 shows that the mean score of the issue of ‘difficulties in managing open border’ is nearly 4. According to distribution of scale, response at 4 lies in ‘agree’ scale of response. However, all other scores related to customs duty evasion are nearly 3 which indicate ‘fairly agree’ scale of response. However, on an average mean


score of the total issues reaches at 3.35 that is nearly 3. This result also indicates that the average perception of government officials is observed as ‘fairly agree’ on the issues of customs duty evasion.

Table 6Perception of Government Officials on the Issues of Customs Duty Evasion with Scale of Responses

Issues of Customs Duty Evasion Mean Score

Rounding Score

Scale of Response

Poor technology adoption 2.92 3 fairly agree

Political disturbance 3.33 3 fairly agree

Difficulties in Managing open border 3.64 4 Agree

Poor human resource base 3.37 3 fairly agree

Ambiguous customs policy 3.44 3 fairly agree

Poor infrastructure and inconvenient location 3.42 3 fairly agree

Lengthy customs clearance procedure 3.30 3 fairly agree

Average 3.35 3 fairly agreeSource: Author’s calculation from Survey 2015

As presented in Table 7, mean scores of government officials are computed and ranked in order of seriousness. The responses of the government officials shows that issues on ‘difficulties in managing open border’ covers 15.45 percent of total mean scores and has been ranked first, then, ‘ambiguous customs policy’ (14.69%) and ‘poor infrastructure and inconvenient location’ (14.60%) ranked second and third respectively while ‘poor technology adoption’ which covered only 12.49 percent which has been ranked as the least serious issue of the customs duty evasion among the seven issues. As government officials’ point of views, ‘difficulties in managing open border’, ‘ambiguous customs policy’ and ‘poor infrastructure and inconvenient location’ are the major issues for customs duty evasion among seven issues.

Table 7Rank of Various Issues on Customs Duty Evasion in the Views of Government Officials

Issues of Customs Duty Evasion Mean Score % RankPoor technology adoption 2.92 12.49 7







Total 23.43 100Source: Author’s calculation from Survey 2015

Seriousness of Overall Respondents on the Issues of Customs Duty EvasionFrom the point of view of overall respondents on the issues related to customs duty evasion, order of seriousness has been presented in Table 8 by ranking the mean scores of seven


different issues. The table shows that the mean score of the ‘poor technology adoption’ is nearly 3. According to distribution of scale, response at 3 is ‘fairly agree’ scale of response. However, each of all other issues related to customs duty evasion is nearly 4 scale of response. The scale of response at 4 indicates ‘agree’. However the average of the total mean score is 3.57 (ie., nearly 4). This result also reports that the perception of total respondents is eyeballed as ‘agree’ on the issues of customs duty evasion.

Table 8Perception of Total Respondents on the issues of Customs Duty Evasion with Scale of Responses

Issues on Customs Duty Evasion Mean Score

Rounding Scores

Scale of Response

Poor technology adoption 3.28 3 fairly agree

Political disturbance 3.54 4 Agree

Difficulties in Managing open border 3.71 4 Agree

Poor human resource base 3.58 4 Agree

Ambiguous customs policy 3.67 4 Agree

Poor infrastructure and inconvenient location 3.65 4 Agree

Lengthy customs clearance procedure 3.57 4 Agree

Average 3.57 4 AgreeSource: Author’s calculation from Survey 2015

As presented in Table 9, average scores are computed and ranked in order of seriousness. According to seriousness of the total respondents on each of the issues, ‘difficulties in managing open border’ (14.85%), ‘ambiguous customs policy’ (14.66%) and ‘poor infrastructure and inconvenient location’ (14.60%) have been ranked first, second and third respectively, while ‘poor technology adoption’ (13.11%) has been ranked seventh as the least serious issue of the customs duty evasion. So, the average views of total respondents points out that ‘difficulties in managing open border’, ‘ambiguous customs policy’ and ‘poor infrastructure and inconvenient location’ are the more influencing factors for the customs duty evasion.

Table 9Rank of Various Issues on Customs Duty Evasion in the Views of Total Respondents

Issues on Customs Duty Evasion Mean Score % RankPoor technology adoption 3.28 13.11 7







Total 25.00 100Source: Author’s calculation from Survey 2015

4. ConclusionFrom the compare mean test, it is concluded that the views of both groups (business communities and government officials) on different issues related to customs duty evasion


are significantly different. From the average views of total respondents on the issues related to customs duty evasion, the average scores lies in “agree” scale of response whereas average views of business communities lies “agree” and views of government official lies ‘fairly agree’. These scale of responses evaluated that most respondents consented with the statements under each issue related to customs duty evasion. It was also observed that issues on ‘difficulties in managing open border’, ‘ambiguous customs policy’ and ‘poor infrastructure and inconvenient location’ are seen to be the major issues in customs duty evasion, but respondents are observed to be less serious in the issue of ‘poor technology adoption’ among the seven issues related to customs duty evasion. Awan (2014) also reported that complex tax system causes tax evasion. Similarly, Karimi, Kimani & Kinyua, (2017) proved that technological advancements positively affect the revenue collection. However, above result attempts to prove the seriousness of stakeholders on the issues related to customs duty evasion.

From the result, it is observed that the most serious issue is ‘difficulties in managing open border’. In order to improve this serious issue, the border management agencies should work together and integrate their respective information seamlessly within the requirements of data protection and privacy legislation. They should develop a common vision and an inter-agency approach for implementation of the service delivery. However, the concerned department of government sector, policy maker and planner should pay attention to these major issues to make a good decision for the control in customs duty evasion.

In case of tax administration, if it is efficient and honest, its dealing with taxpayer would be fair. Instead, if it is inefficient and corrupt, it will create unnecessary complexity to taxpayer and affects tax reporting and tax collection as well.

The study also recommends for the valuation systems, legal provision, infrastructure, coordination between government agencies, coordination between Nepalese and Indian customs officials, and unanimous use of 8 digit HS code between government revenue agencies for controlling customs duty evasion.

References

Aisen, A., & Francisco Jose Veiga, F. J. (2011). How does political instability affect economic growth? (IMF Working Paper 11/12). International Monetary Fund.

Amin, A., Nadeem, A. M., Parveen, S., Kamran, M. A., & Anwar, S. (2014). Factors affecting tax collection in Pakistan: An empirical investigation. Journal of Finance and Economics, 2(5), 149-155.

Awan, A. G. (2014). The determinants of tax evasion in Pakistan: A case study of southern Punjab. International Journal of Development and Economic Sustainability, 2(4), 50-69.

Bhagwati, J. (1964). On the underinvoicing of imports. Bulletin of the Oxford University Institute of Economics and Statistics, 26, 389-397.

Department of Customs (DoC). (2007). Customs Act 2007 (2064 BS). Kathmandu: Government of Nepal (GoN).


Finger, M., & Schuler, P. (2000). Implementation of uruguay round commitments: the development challenge (Policy Research Working Papers 2215). Retrived from World Bank website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=623972l dated 2009, June 5.

Ghimire, D. (2005). The legislative review study on customs policies of HMG Nepal. Kathmandu: Centre for Public Policy Dialogue.

Ghimire, B. (2006). Study for the Measures of Tax Compliance Habit and Leakage Control (Policy Paper 32). Kathmandu: Economic Policy Network, Ministry of Finanace, GoN and Asian Development Bank, Nepal.

Karimi, H., Kimani, E. M., & Kinyua, J. M. (2017). Effect of technology and information systems on revenue collection by the county government of Embu, Kenya. International Academic. Journal of Information Systems and Technology, 2(1), 19-35.

Khattry, B., & Rao, M. (2002). Fiscal Faux Pas? An Analysis of the Revenue Implications of Trade Liberalization. World Development, 30, 1431-1444.

King, J. (2003). Next steps in tax reform-preliminary report Nepal. Washington D.C.: International Monetary Fund.

MountDigit Technology (2006). An estimated of informal and unauthorised imports from India. Kathmandu: FNCCI Anti-Corruption Project.

MountDigit Technology (2006). An estimated of informal and unauthorised imports from India. Kathmandu: FNCCI Anti-Corruption Project.

Paudel, D. B. (2010). Do informal economic activities matter for loss of customs revenue in Nepal? In S. P. Dahal, A. P. Shiwakoti, K. R. Jnawali, N. Regmi, & D. B. Prajapati (Eds.), Customs: 58th International Customs Day Special Issue (pp. 19-24). Kathmandu: Department of Customs, MoF/GoN.

Rege, V. (2002). Custom Valuation and Customs Reform. In B. Hoekman, A. Mattoo, Philip (Eds.), Development, Trade and the WTO: a Handbook (128-138). Washington D.C.: World Bank.

Singh, R. M. (2010). Customs administration: Theory and practice. Kathmandu: Nhooja Guthi.

Singh, R. M. (2010). Customs administration: Theory and practice. Kathmandu: Nhooja Guthi.

Taneja, N., & Pohit, S. (2004). India’s informal trade with Nepal. EGDI and UNU-WIDER Conference, Unlocking Human Potential: Linking the Informal and Formal Sectors, Helsinki, Finland.

Uzzaman, M. A., & Yusuf, M. A. (2011). The role of customs and other agencies in trade facilitation in Bangladesh: hindrances and ways forward. World Customs Journal, 5(1), 29-42.

Wei, L. (2013). A perspective on the impact of trade friction on customs performance. World Customs Journal, 7(1), 81-91.

61Emerging issues and challenges of women entrepreneurship

Emerging Issues and Challenges of Women Entrepreneurship

(A case study of Kathmandu Valley) Kapil Khanal *

[email protected]

Abstract

The objective of the study was to identify and measure the impact of various issues and challenges faced by these women in doing their businesses. Based on the primary research, the data were collected by means of personal interview, questionnaire and observation of 400 women’s entrepreneurship ventures in Kathmandu Valley. Judgmental and purposive sam-pling techniques were used in this procedure. Demographic analysis, percentages, measures of central tendency, measures of dispersion, Karl Pearson’s correlation coefficients and multiple regression equations were used to analyze and interpret the data. Analysis showed that more than 50% women entrepreneurships are 30 years and above. More than 60% women entre-preneurs are married. It was noted that financial problems have highest mean values whereas managerial and human resource related problems are more consistent. Among various issues and challenges faced by women entrepreneurs, education and training became insignificant and remaining were significant at 5 percent level of significance. In this way, the survey re-sults indicated that the problems created by political instability, financial problems and lack of support from their family are major challenges during the start-up of their businesses. Sim-ilarly, bureaucratic problems are experienced by women entrepreneurs in Kathmandu, Nepal.

Keywords: Women entrepreneurs, Business success, Challenges and issues, Kathmandu valley.

* Associate Professor at Shanker Dev Campus, Tribhuvan University.

1. Background of the StudyWomen, for many decades in Nepal and all over the globe have been understated in business in comparison to men, because of the boundaries circled on them by ethnic opinions and spiritual ideologies. Women entrepreneurs, even in USA meet restraints such as insufficient access to sponsorship, information, training and education as well as latent discernment that sets a brake on their growth and achievement (Nyc.gov, 2015). In Europe, men are richer than women since women have less approach to education, training, finance and are discriminated severely (Jong, 2013). In most of the Asian countries, women are regarded as inferior to men

62and do not have same freedom with respect to career choice. Women are supposed to be a housekeeper, a partner and are limited in the stereotypical roles which discourage women from entrepreneurial activates.

Women who attempt to establish business ventures in Asian countries also face several challenges such as lack of start-up capital, lack of technological knowledge, lack of family support, male dominance and many more. The same condition is also noticeable in most of the Muslim countries all over the world (Tambunan, 2009). Social discrimination against women is the most severe problem in South African counties which depresses them from chasing entrepreneurship (Chinomona & Maziriri, 2015).

In Nepal, the circumstances are no difference. Over the times, Nepalese women have been susceptible and undefended. For more than a decade, women were forcefully involved in Maoist insurgents which pushed them backward from engaging on productive activities. Nepalese women are undervalued by their men since Nepalese society carry on to view women as scrawny and suitable to doing housework activities such as raising children, looking after domestic animals and doing unproductive stuffs (Acharya, 2013).

Similarly, women in Nepal are not free like men to choose to start a business because they must depend on their husband’s or family decision due to the patriarchal society. Women are still not frontward in risk bearing position, decision making position and women entrepreneurs still lag behind so that our society forces them to do stereotypical gender role (My Republica, 2017). The roles of women are restricted within the household chores and women have given smallest priority then men over economic, social and cultural aspects. Similarly, the business women hold are mostly involved in home based industries such as food processing, garment and craft which are progressively dying due to globalization and being replaced by organized corporations (Acharya, 2013).

1.1 Problem StatementEntrepreneurship generates employment, brings novelty, expand socio-economic wellbeing and crafts economic progress in both advance and evolving countries (Iwu, Tengeh, & Choto, 2014). However, women in Kathmandu, Nepal are undervalued in entrepreneurial activities since most of the businesses are ruled by males. Numerous studies have been piloted on various aspects of women but no acknowledged studies have observed precisely at the issues and challenges to women entrepreneurship in Kathmandu, Nepal.

So, the purpose of this study is to find the challenges experienced by women entrepreneurs in Kathmandu. Any concerned people, organization or government with women entrepreneurs can use the results and recommendations of this study to discourse and maybe resolve the challenges facing women entrepreneurship in Kathmandu, and thus advance the prosperities of ventures run by females.

1.2 Research QuestionsThe main research questions are:

• What are the common issues and challenges women entrepreneurship are currently facing in Kathmandu, Nepal?

• How the changing socio-cultural factors of Nepal are affecting on the performance of

Emerging issues and challenges of women entrepreneurship

63women entrepreneurs in Nepal?

• What are the relationships among various issues and challenges faced by women entrepreneurship in Nepal?

• What is the impact of various issues and challenges on the success of women entrepreneurship business in Nepal?

1.3 Research Objectives• To determine the issues and challenges encountered by women entrepreneurs in

Kathmandu, Nepal.

• To identify the relationship among various issues and challenges faced by women entrepreneurs in Nepalese business context.

• To measure the impact of challenges and issues of women entrepreneurships on the success of business.

2. Literature ReviewThe term “entrepreneur” is derived from a French word “entreprendre” that means “to take on” or “to undertake an initiative” which first seemed in the writings in 1253 in various form such as “empreneur” (Kuratko, 2016). The explanation of entrepreneur varies according to the prototype of writers and academics have always been fascinated to define it in various ways since it emerged into practice but the literature on the topic was most copious in the 1970s, 1980s and 1990s. It was the time when increasing amounts of scholars from various disciplines, including lots of emerging disciplines in the humanities and administrative sciences began to take an interest in entrepreneurs (Filion, 2011). In addition to the role of entrepreneurs in economic growth and social inclusion, entrepreneurs create employment opportunities. Barringer and Ireland (2005) report that more than 600,000 new business ventures are launched in USA every month also, roughly 17 million small companies without farms represent 99 % of all USA employers, engaging 52% of the labor force and generating 52% of all incomes. Similarly, the United Kingdom acknowledges the critical role that entrepreneurship play in job creation and economic growth; the 3.7 million SMEs total 99% of UK business, with 53% of revenue generation and providing 67% employment to the UK citizens (Howitt & Aghion, 1998).

In India, it is expected that 50 million job opportunities will be added through the 3 million new entrepreneurial projects by 2020 whereas 70 million new jobs are expected to be created across Africa in the same period (Entrepreneur India, 2015). In context of Nepal, the trend of entrepreneurship has just emerged and taking a rocketed move in terms of job creation and social inclusion.

The economic growth of a country usually involves a sustainable long-term plan that enables the county to achieve a stable economy, avoiding recession and keep inflation low. Entrepreneurship is the engine of economic growth. Government policies and regulations should be flexible to allow entrepreneurs to operate their business without hindrance, to develop new products, services, technology and to spot opportunities (Siemon, 2007).

In recent age, the influence of women entrepreneurs in job creation, invention, poverty reduction and global competitiveness is gradually acknowledged universally and the rising


64numbers of women entrepreneurs are supposed to be an encouraging factor of business evolution in next generation (Dwibedi, 2016). Entrepreneurship for women is repeatedly seen as a puller out of scarcity and driving factor toward the impartiality (Bushell, 2008). Women entrepreneurs play progressively vigorous role socially, professionally and economically in revolving emerging nations into more modernization determined nation.

Regardless of the huge influence of women entrepreneurs in world economy, it is still called for that there are huge dissimilarities between men and women entrepreneurs. According to (United Nations, 2015), only 50% of women of working age are in the labor force as compared to 77% of men in the world. In India for example, women entrepreneurs account for only about 14% of business in the micro, small and middle enterprises sector being enterprises run and/or organized by females. A similar situation can be seen in Nepal and Bangladesh where women entrepreneurs in the Small and Medium Enterprise (SME) sector account for just 10% of the economically active population (United Nations ESCAP, 2013). Though, women entrepreneurs are facing intensified amount of several issues and challenges and are not fully enjoying their entrepreneurial potentials. So, attention in women entrepreneurs from the ranges of circumstances has directed to intensify journals of literature about the issues of women entrepreneurship (Ahmad, 2011). However, in spite of high involvement of women in self- engagement and job creation process, very few research and study is done to identify the challenges of women entrepreneurs (Davidson & Burke, 2011).

Research conducted by Aslam et al. (2013) in Pakistan also found the same issues women entrepreneurs of Sri Lanka are suffering from. The problems of proper management system, marketing and hiring sustainable employee for business, social and personal problems such as role conflict, discouraging family, unfavorable marketing behavior, and gender based discrimination and technical problems such as non-availability of raw materials, un-skilled group members, and shortage of working capital. Above all, the major problem Pakistani women entrepreneurs are facing are the shortage of electricity. The explicit research conducted by Daniyan-Bagudu et al. (2016) in Lagos state of Nigeria resulted that women entrepreneurs of Nigeria are facing the same challenges as facing by Pakistan’s women entrepreneurs.

Jamali (2009) adopted a multi-level research design and an interpretive research methodology, conducted detailed interviews with ten women entrepreneurs in Lebanon and found that they face different problems which are categorized in three groups as micro, meso and macro. In micro level group, problems like opportunity identification, motivation, performance and financing are major. At meso levels, unwritten rules of conduct and behaviors based on norms, values, social roles, family values, religious beliefs and legitimacy of self-employment and at macro level they have to face legal, environment and economic environmental problems. Lack of female role model, lack of education and training, gender roles to play at home such as responsibility of having children, home duties and older dependent family member, discrimination are the predominating issues of women entrepreneurs in King William town of South Africa (Mandipaka, 2014).

In the context of Nepal, it is one of the poorest countries not only in terms of per capita but also in socio-economic conditions. Agriculture is the primary economic activities which employ 65% of manpower providing 31.7% of GDP which is followed by the remittance with 29. 1% contribution to the GDP (Shrestha, 2014). The country is predominately occupied by the diverse and difficult topographical and environmental settings which is also accountable


65for the sluggish economic growth and development. Nepal is situated in between two biggest economic of world India and China however, Nepal is still suffering from poverty, high unemployment, slow economic growth and political instability. According to World Bank (2015) the total population of Nepal is 28.98 million and out of them, 14,536,095 are women. Even though women represent more than half of the total population of Nepal but they signify arithmetically less in terms of socio-economic aspects such as schooling, healthiness, public safety, employment, poverty rights and involvement and contribution in political and non-political mechanism such as economy and business. Only 33% quota is given to women on candidate list for parliament and 40% women participation is given for local government (World Bank, 2015). However, the rate of active women labor force has increased slightly from 79.2% in 1990 to 79.7% in 2015 (UNDP, 2016). The concept of women entrepreneurship in Nepal emerged only after 1970s and since then most of women are engaging themselves in various sort of business ventures country wise and establishing themselves as pioneer entrepreneurs along with promoting economic growth by creating jobs (Shrestha, 2014). However, the business state for women in Nepal reflects the convoluted interchange of various factors such as societal, traditional, ethnical and spiritual components which are followed by legitimate arrangement, rules and regulations, governing procedure and organizational mechanism (Baniya, 2017). So, women entrepreneurs in Nepal are struggling and have been suffering from several sort of challenges and issues regarding their business initiations, growth and development and getting to the market.

The published literatures and information about the difficulties of women entrepreneurs they encounter in Nepal are relatively hard to gather due to the lack of up-to-date statistical data and absenteeism of comprehensive research by scholars (Bushell, 2008). The problems of women entrepreneurs in Nepal are quite comparable to the difficulties of women entrepreneurs of other South Asian countries. The quite old research conducted by Tambunan (2009) revealed that not having sufficient amount of confident level and high threat of sexual harassment are the major problems women entrepreneurs encounter in everyday business life in Nepal.

A research conducted by Zivetz (1992) in Nepalese context identified numerous issues such as unreliable of government practices, absence of administration governs over unlawful importation and distribute of merchandises from India, deficiency of harmonization among government agencies and offices for permitting, levy, credit along with enticement and fraud practices by government representatives. The same sort of problems was identified by (KC, 2004) after twenty years which explicitly obstructed the entrepreneurial activities of not only women but also the men. Similarly, lack of schooling and teaching, minimum of return on trade investment, absence of sufficient security to investors, the traditional landing practice of banks and financial institutions were also dominant issues for women entrepreneurs in Nepal in 2004 (K.C, 2004). Lack of adequate supply of raw materials, poor transportation facilities, poor marketing of the products and lack of managerial skills were also blamable challenges of women entrepreneurs (Acharya, 2000). In context of rural areas of Nepal, limited social and business networks, lack of information, lack of proper infrastructures and managerial skills, gender based disparities are highlighted issues for women entrepreneurs (Kumar, 2014).

A report published by (Biruwa Ventures Pvt. Ltd., 2015) in the collaboration with Non Residents Nepalese Association (NRNA) and Foreign Employment Promotion Fund revealed the major problems of women entrepreneurs in Nepal. Male-controlled cultural standards


66restrain females to culturally designed roles that authorize significantly low scope for entrepreneurial objectives in our society. In context of Nepal, we say men and women have given equal prospect to access to credit but in exercise women are yet again at an inadequacy due to racial and societal hurdles. The Global Gender Gap Report 2017 put out by (World Economic Forum, 2017) ranked Nepal at 111 out of 144 countries in terms of gender gap index which validate the argument.

Table 1Theoretical Framework

General issues and challenges • Lack of Access to Capital• Male dominated society• Lack of Education and Training• Less approach to Information And technology • Lack of managerial skills• Low return from industrial Investment• Lack of approach to raw materials

• Low risk bearing ability • Role Conflict • Gender based discrimination• Cultural and legal constraints • Political Instability• Lack of Favorable policy • Discouraging family • Poor marketing strategy

Although there are numerous challenges, engagement of women in entrepreneurial activities have certainly opened vast opportunities for men and women. It has the budding potential to support economic freedom, societal appreciation, gratification, flexibility, individual autonomy, and safety for women (Álvarez et al., 2014). In most of the unindustrialized nations, the contribution of women entrepreneurs for the economic development, social inclusion and overall growth of individual, society and country is considered as an imperious and noteworthy (De Vita et al., 2014).

2.1 Conceptual FrameworkBased on the Theoretical framework drawn above, the conceptual framework can be drawn accordingly:

Table 2: Conceptual framework

Conceptual Framework: Issues and Challenges of women entrepreneurs in Nepal• Access to Capital• Patriarchal Society • Risk bearing ability • Education and training• Political Stability• Governmental trade policy

Success of Business

In above diagram, independent variables are access to capital, patriarchal society, risk bearing ability, education and training, political stability and encouraging governmental trade policy and dependent variable is the success of business.


67The socio-economic status of women in Nepal has by tradition been weak. The possibility for women to participate in decision-making, both within the family and in society, has been limited. Land ownership, capital, education and technology have been beyond the reach of women. Entrepreneurial activities run by women are typically, on a micro-scale and invisible. In consequence they frequently go unnoticed by both national and development organizations (Acharya, 2000).

As mentioned, Nepalese women entrepreneurs have been facing so many obstacles in the way of making of new endeavors and flexible operation of the existing ones. Nepalese businesswomen and entrepreneurs have viewed that their central barriers include limited access to capital, political unpredictability, and low level of confidence and lack of encouraging policy of the government. Researchers beheld the low access to capital, political instability, reluctance to take risk, patriarchal society and unfavorable trade policies are the key roots accountable for deprived entrepreneurial motivation in Nepal (Baniya, 2017). It can thus, be concluded that political instability, low level of confidence and limited access to capital are the main problems of Nepalese women entrepreneurs which has drastically affected the overall entrepreneurial activities along with economic growth of nation.

3. Research MethodologyThe major objectives of this study were to identify the issues and challenges faced by women entrepreneurs in socio-economic landscape of Nepal and explore the standings of women entrepreneurs in Nepalese business and economy. The present study has applied a descriptive and inferential survey designs.

This study used a quantitative as well as qualitative method. The study was conducted in the capital city of Nepal, Kathmandu. The target population of this study was the women entrepreneurs in various sectors of business such as SMEs, agriculture, crafts, trades, manufacturing, services, and so on. Most of their businesses are small- scaled business and struggling to thrive. A purposive sampling method was used to select women entrepreneurs from designed location to participate in the study.

Since the total number of women entrepreneurs in these three cities are unidentified. So, the sample size is 400. A set of questionnaire was used to gather the data from the target sample of women entrepreneurs in this study. In this research, a questionnaire/ survey form is a list of questions modeled to examine the respondent’s perception towards the circumstances under study. Data is attained via respondents’ completing questionnaire by responding the questions. Attributes and opinion variables of questionnaire are used to gather information from respondents’. The data was gathered over a period of 30 days. 400 copies of survey form were distributed in various places of Kathmandu. SPSS-20 and MS excel were used to analyze the data.

4. Data Presentation and Findings4.1 Demographic AnalysisThis section presents the demographic characteristics of the respondents. The information was gathered in order to know the age of participants, level of academic qualification, marital status, which could have an impact on their entrepreneurial activities.


68

Table 3Percentage Distribution of Respondents by Economic and Demographic Characteristics

Variables Respondents PercentAgeBelow 20 years 65 16.2520-30 years 132 3330-45 years 160 40Above 45 years 43 10.75Total 400 100Academic Qualification

SLC or below 106 26.50Higher secondary 155 38.75Bachelor & above 139 34.75Total 400 100Marital Status

Married 244 61Unmarried 156 39

Total 400 100Category of business

Manufacturing 20 5Trading 246 61.5Service 118 29.5Agriculture 16 4Total 400 100

Table 3 shows that the age of the participant ranged from below 20 to above 45 years. the age group from 20- 45 years jointly (73%) are more likely to participate in entrepreneurial activities than the age group of below 20 years (16.25%) and above 45years (10.75%).

The level of academic qualification of the majority of women entrepreneurs in Kathmandu, Nepal falls into the categories of Secondary School (65.25%). It indicates the most of women entrepreneurs in Kathmandu have good level of academic background and entrepreneurial ambitions. 34.75% respondents have completed bachelor and above. The majority of respondents (61%) are married while (39%) are unmarried.

The women entrepreneurs of Kathmandu primarily engage on the sector of trading business (61.50%) and service business (29.5%). These sectors are followed by the business of manufacturing (5%) and by agricultural business (4%). The number of women entrepreneurs in manufacturing business indicates their potentiality for any sort of business.


69

4.2 Descriptive analysisTable 4Summary of Issues and Challenges Experienced by Women Entrepreneurs

Variables Mean Std. DeviationPersonal and social problems 3.27 0.57461Financial problems 4.17 0.66777Raw material and marketing problems 3.58 0.68504Managerial and human resource related problems 3.18 0.41574Technological and infrastructural problems 3.61 0.50651Bureaucratic problems 3.21 0.67385

Table 4 shows the various challenges experienced by women entrepreneurs. The problems and challenges of women entrepreneurs related with their businesses include six different statements to collect responses from them.

It is noted from Table 4 that financial problems had the highest mean score i.e. 4.17 followed by Technological and infrastructural problems (mean score 3.61), Raw material and marketing problems (mean score 3.58) respectively, which indicates that most of the respondents are facing financial problems as a major factor to get success in their own business. The least standard deviation is 0.41 of managerial and human resources related problems, which is more consistent than others.

4.3 Correlation analysisTable 5Karl Pearson‘s Correlation Coefficient Among Challenges Experienced by the Women EntreprenuersVariables Personal

and social problems

Financial problems

Raw material and market-ing problems

Managerial and human re-source related problems

Technological and infrastruc-tural problems

Bureaucratic problems

Personal and social problems 1

.351**

.001.465**

.000.155.164

.192

.083.397**

.000Financial problems

1.704**

.000.534**

.000.532**

.000.697**

.000Raw material and marketing problems

1.607**

.000.608**

.000.826**

.000Managerial and human resource related problems

1.528**

.000.617**

.000Technological and infrastructural problems

1.478**

.000Bureaucratic problems

1

**. Correlation is significant at the 0.01 level (2-tailed).From the above table 5, it can be seen that there is a positive and significant relationship among Personal and social problems, Financial problems, Raw material and marketing


70problems and bureaucratic problems at 1% level of significance. Similarly, there exists a positive and insignificant relationship among Personal and social problems, Managerial and human resource related problems and Technological and infrastructural problems at 1% level of significance.

4.4 Regression analysisTable 6Regression equationSummary of Issues and Challenges Experienced by Women Entrepreneurs

SBOit = β0 + β1ACit + β2PSOit + β3RBAit + β4ETit + β5PSit + β6GTPit +…+etit

= 5.42* + 0.12AC* + 0.15PSO* + 0.08RBA** + 0.17ET + 0.32PS* -0.58 GTP*

S.E. = (1.32) (0.05) (0.18) (0.01) (0.09) (0.14) (0.21)

t = (17.24) (11.32) (9.68) (2.02) (0.87) (6.75) (9.21)

R2 = 0.78 F(6,393)=114.27 D.W.=2.08

Number of obs = 400 d.f. = 393

Where, • SOB = Success of Business• AC = Access to Capital• PSO = Patriarchal Society • RBA = Risk bearing ability • ET = Education and training• PS = Political Stability• GTP = Governmental trade policy et = Error term i = 1, 2, 3 … commercial banks t = 1, 2, 3… year.

Note: * Significant at 0.01 levels ** Significant at 0.05 levels

The explanatory power of the model (R2) is reasonably high as it is at 78% for the business success model. The F statistic is also statistically significant at 1 percent. The value of DW 2.08 indicates that there is no autocorrelation. The regression result shows that out of six independent variables, the sign of five independent variables namely AC, PSO, RBA, ET, and PS are as per expectation. The sign of GTP shows a negative impact on business success which is just the opposite as per priori. It means that other variables keeping constant one percent ratio increase in Patriarchal Society ratio increases by 0.15 percent ratio in business success. It is found that, keeping other variables constant, one unit ratio increase in political stability leads 0.32 percent ratio in business success. Similarly, it is noted that one unit (percent) increase in government trade policy decreases by 0.58 percent ratio in business success, other variables keeping constant. Among six variables, only education and training ratio does not have a significant relationship with the success of business.


71

5. ConclusionFirstly, political instability and financial obstacles like lack of collateral securities, limited financial capital are the major challenges during the start-up for women entrepreneurs in Kathmandu, Nepal. The government should be flexible and make suitable policies and should mitigate political chaos such as political strike, blockage and other disturbing deeds to encourage and support such aspiring entrepreneurs for overall economic growth of Nepal. Similarly, women entrepreneurs should approach and take benefit of the organizations made for them to encourage their companies such as micro-finances, banks and other financial institutions.

Secondly, women entrepreneurs suffer from the domination from male counterparts and contradicting roles in home and business. To alleviate such issues, government should work effectively on such gender discrimination, work discrimination and make policies favorable to women entrepreneurs. The family of women entrepreneurs should understand and give more priority to their profession rather than home role so they can concentrate on their work.

Similarly, the cut-throat competition, time consuming process on procurement of raw-materials and discontinue supply of raw-materials, price variation and unavailability of raw-materials are other sort of challenges that women entrepreneurs experience in Kathmandu, Nepal. The problems of technology acquisition and lack of technological skills are also the major challenges of women entrepreneurs. The problems created by bureaucratic and legal constraints have severely impacted the entrepreneurial activities of women entrepreneurs. These can be considered as the biggest burden for women entrepreneurs and to a nation as a whole. The government and concerned organizations should work together to bring massive change in such scenario. First and foremost, the whole governmental systems should work to stop corruption, nepotism and socio-economic cripples. Nepal government should introduce the education based on technology and should launch formulation programs which can bring positive changes on skills and knowledge of women entrepreneurs. In context of high brain-drain, government should encourage women to participate in innovative work and give hand to sustain within our nation. The gender based discrimination, corruption, the unending political unrest and other factors should be stopped for empower women entrepreneurs, their potential and their businesses.

The main aim of this study was to determine the issues and challenges experienced by women entrepreneurs in Kathmandu, Nepal. This research has disclosed that women entrepreneurs experience many issues and challenges in doing businesses. Though, we can find solutions for them. But, it requires substantial amount of time and combined efforts of female entrepreneurs themselves, their family, society, government, public and scholars. The government should impose laws to exterminate corruption based on sex, origin, preference and perfidy. The future studies should examine women entrepreneurs in countryside areas as well, should compare data for men entrepreneurs, and inspect the environment of foreign women entrepreneurs in Kathmandu Nepal. With the inclusion of control variables, access to capital, patriarchal society, risk bearing ability, education and training, and political stability showed a positive impact on business success whereas, governmental trade policy showed a negative impact on business success.


72

References

Acharya, M. (2013). Women and the Economy: The Key Issues. [Online] Nepaldemocracy.org. Available at: http://www.nepaldemocracy.org/gender/women_economy.htm [Accessed 3 Jan. 2018].

Acharya, V. (2000). Women entrepreneurship in Nepal: problems and their remedies. The Economic Journal of Nepal, 23(2), 91-96.

Ahmad, S. (2011). Evidence of the characteristics of women entrepreneurs in the Kingdom of Saudi Arabia. International Journal of Gender and Entrepreneurship. 3(2), 123-143.

Álvarez, C., Amorós, J., & Urbano, D. (2014). Regulations and entrepreneurship: Evidence from developed and developing countries. Innovar, 24 (1Spe), 81-89.

Aslam, S., Latif, M., & Aslam, M. (2013). Problems faced by women entrepreneurs and their impact on working efficiency of women in Pakistan. Middle-East Journal of Scienctific Researc. 18(8). 1204-1215.

Baniya, N. (2017). Exploring the Lived Experience of Opportunities and Challenges Faced by Entrepreneurial Women of Nepal. Post graduate. Auckland University of Technology- School of Business.

Barringer, B., & Ireland, R. (2005). Ireland, R. (2005). Entrepreneurship: Successfully Launching New Ventures. 2nd ed. New Jersey: Pearson.

Bushell, B., (2008). Women entrepreneurs in Nepal: what prevents them from leading the sector?. Gender & Development. 16(3), 549-564.

Chinomona, E. & Maziriri, E. (2015). Women in action: Challenges facing women entrepreneurs in the Gauteng province of South Africa. International Business & Economics Research Journal (IBER), 14(6), 835.

Daniyan-Bagudu, H., Khan, S., & Roslan, A. (2016). The Issues and Challenges Facing The Female Entrepreneurs In Lagos State, Nigeria. Post Graduate. Universiti Sains Malaysia, Penang.

Davidson, M., & Burke, R. (2011). Women in Management Worldwide: Progress and Prospects. 2nd ed. Aldershot: Gower Publishing Ltd.

De Vita, L., Mari, M., & Poggesi, S. (2014). Women entrepreneurs in and from developing countries: Evidences from the literature. European Management Journal. 32(3), 451-460.

Dwibedi, L. (2016). Women entrepreneurship and innovations: A critical analysis. Academic Voices: A Multidisciplinary Journal. 5, 16.

Entrepreneur India (2015). 3 million new entrepreneurs to accelerate job creation in India & Africa. [online] Entrepreneur India. Available at: https://www.entrepreneur.com/article/252233 [Accessed 23 Jun. 2018].

Filion, L. (2011). Defining the entrepreneur: Complexity and multi-dimensional systems some reflections. HEC Montréal, 41-52.


73Howitt, P., & Aghion, P. (1998). Capital accumulation and innovation as complementary

factors in long-run growth. Journal of Economic Growth. 3(2), 111-130.

Iwu, C., Tengeh, R., & Choto, P. (2014). Daring to survive or to grow? The growth aspirations and challenges of survivalist entrepreneurs in South Africa. Environmental Economics, 5(4), 93-101.

Jamali, D. (2009). Constraints and opportunities facing women entrepreneurs in developing countries. Gender in Management: An International Journal. 24(4), 232-251.

Jong, W. (2013). Women‘s entrepreneurship in the EU. [online] Eige.europa.eu. Available at: http://eige.europa.eu/docs/2041_LDM_BRI (2013)130517_REV1_EN.pdf [Accessed 17 Jun. 2018].

K.C., F. (2004). Entrepreneurs in Nepal: An empirical study. Nepal Commerce Campus, Tribhuvan University, 1-6.

Kumar, A. (2014). Rural female entrepreneurship in the eastern himalayan region of South Asia. Tech Monitor., 1-6.

Kuratko, D. (2016). Entrepreneurship: Theory, Process, and Practice. 10th ed. Cincinnati OH: Cengage Learning.

Mandipaka, F. (2014). An investigation of the challenges faced by women entrepreneurs in developing Countries: A case of King Williams’ town, South Africa. Mediterranean Journal of Social Sciences. 7(27), 1187-1190.

My Republica. (2017). Your take on the changing role of women in Nepal’s workplaces. [online] Available at: http://www.myrepublica.com/news/15981/ [Accessed 3 Jan. 2018].

Nyc.gov. (2015). The State of Women Entrepreneurs in NYC: The Landscape and the Opportunity.

Shrestha, I. (2014). Socio economic status of women entrepreneurs in Kathmandu Metropolis. Ph.D. Tribhuwan University.

Siemon, C. (2007). Entrepreneurship and Economic Growth. ORDO, 58(1).

Tambunan, T. (2009). Women entrepreneurship in Asian developing countries: Their development and main constraints. Journal of Development and Agricultural Economics, 1(2), 027-040.

United Nations ESCAP (2013). Overview of the environment for Women’s Entrepreneurship in South Asia and Report on the South Asia policy dialogues on women’s entrepreneurship. New Delhi: United Nations South and South-West Asia Office.

United Nations (2015). The World’s Women 2015. New York: Department of Economic and Social Affairs.

World Economic Forum (2017). The Global Gender Gap Report 2017. Geneva: World Economic Forum.

Zivetz, L. (1992). Private enterprise and the state in modern Nepal. Madras: Oxford University Press.


74

AppendicesA. Questionnaire

1. Name: ………………………………………………………………………………

2. Age: Below 20 20-30 30-45 45 or above

3. Academic Background: SLC or below Higher Secondary Bachelor and above

4. Marital Status: Married Unmarried

5. Do you have child/children? (The reply to this question is optional).

Yes No

6. Name & address of your business enterprise:

Name: ……………………………………………………………………………

Address: …………………………………………………………………………

7. Location of business enterprise (Geographical areas):Rural Urban Semi-urban

8. Is your family business?Yes No

9. Hoe old your business enterprise is? (in years)Up to 5 years Up to 10 years

Up to 20 years Above 20 years

10. What is the size of your business?

Micro (1-9 employees) Small (10-49 employees)

Medium (50-249 employees) Large (250 or above)

11. Sectors of activities of business. Categories:Manufacturing Trading Services

Garments Fancy & General Stores Nursing Home

Food Products Clothes & Garments Beauty Parlors

Engineering Ladies Accessories School

Agriculture Dealers & Hole sellers Training Institutes

Others: ………... Others: ………... Others: ………...


7512. Types of ownership

Sole Proprietorship Partnership Company

13. Capital rose for the business through

Own Investment

Friends & Relatives

Through government support (please mention)

Banking and Financing

14. When you started your first business venture? What were the obstacles you faced?

(Note: please mark accordingly. No problem at all: 1, minor problem: 2, moderate problem: 3 and serious problem: 4)

Variables Not a problem

Minor Problem

Moderate Problem

Serious Problem

Financial Obstacles

Patriarchal Society

Low risk bearing ability

Lack of information and monitoring

Political instability

Finding the right contract for your business

15. To what extent do you face Personal and Social Problems considering the following variables?

Variables No prob-lem at all

Minor Problem

Moderate Problem

Serious Problem

Lack of self-confidence and initiatives

Lack of risk bearing ability

Absence of need of achievement

Lack of family support

Male dominance

Dual Role in home and business

16. To what extent do you face Financial Problems considering the following variables?


Minor Problem

Moderate Problem

Serious Problem

Limited working capital

Lack of collateral security


76

Negative attitude of bank towards Women

Poor knowledge of financial management

Lack of trust among friends and relatives for loans

17. To what extent do you face Raw materials and Marketing Problems considering the following variables?

Variables No problem at all

Minor Problem

Moderate Problem

Serious Problem

Unavailability of raw-materials

Lack of continue supply of raw-materials

Variations in prices of raw materials

Time consuming process during supply and procurement of raw materials

Inadequate advertising & publicity

Cut throat competition

Poor knowledge of marketing management

18. To what extent do you face the Managerial and Human Resource related Problems considering the following variables?

Variables No problem at all

Minor Problem

Moderate Problem

Serious Problem

Lack of proper planning

Lack of decision making skills

Lack of communication skills

Poor knowledge of Business Management

Non-availability of skilled employees

Non-cooperative attitudes of employees

Males do not want to work under women entrepreneurs

Skilled man power leave job after getting experience

Poor knowledge of Human Resource Man-agement

19. To what extent do you face the Technological and Infrastructural Problems considering the following variables?


Minor Problem

Moderate Problem

Serious Problem

Lack of technological skills

High cost of technology acquisition


77

Inadequate space for work

Lack of proper land/plot/shed

Insufficient supply of water

Insufficient supply of electricity

Inadequate transportation facilities

20. To what extent do you face the Bureaucratic Problems considering the following variables?

Variables No problem

at all

Minor Problem

Mod-erate

Problem

Serious Prob-lem

Non- cooperative attitudes of government em-ployees

Discrimination with women entrepreneurs

Harassment by government employees

Corruption in sanction of funding, incentives and loans

Lack of co-ordination among different govern-ment agencies

Delay on execution and implementation of work

Non supportive governmental practices and policies

Poor knowledge of government support scheme

21. How the changing socio- cultural factors of Nepal are affecting the performance of women entrepreneurs in Nepal?

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22. How women entrepreneurs are contributing to the economic growth of Nepal?

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


78

Knowledge Management Matters by Demographic Variables of Faculty Members in the Context of

Nepali Higher Educational InstitutionsKrishna Prasad Paudel * [email protected]

AbstractWith the growing advancement of the information and communication technology the usage and practices of knowledge management in higher education institutions is increasing day by day. Particularly, the knowledge management in academic institutions is linkage with academic activities. The changing global context of educational system demands the novel change in the teaching, learning, and innovative process of university and it is directly linked with knowledge management. The usage of knowledge management in academia matters for to enhance the academic performances of faculty members by conducting academic activities and promoting academic discourses.

This research adopts quantitative methodology to conduct research. The data was collected from four universities of Nepal. Factor analysis was used to identify the factors of knowledge management. The factor explored seven dimensions of knowledge management. The significance of the knowledge management practices along with demographic variables of faculty members was tested by using ANOVA test.

The test statistics showed significant relationship of academic position with knowledge acquisition and dissemination; age with knowledge acquisition and dissemination, qualification with knowledge utilization, acquisition, generation and dissemination; and experiences with knowledge acquisition and dissemination; university with knowledge acquisition and creation; department with knowledge generation; participation in conferences with knowledge acquisition and dissemination; and engaged in other university with knowledge generation. It shows that the learning behavior of faculty member, the leadership of educational institution, organizational culture, environment, technological infrastructure and knowledge creation process of individual, group and institution impact to enhance the intellectual capital of individual and it directly impacts to the knowledge economy of a country.

Keywords: Knowledge management, Faculty members, Significance, Demographic variables, Higher educational institutions

* PhD graduated from KUSOED 2020

Knowledge Management Matters by Demographic Variables of Faculty Members in the Context of Nepali Higher Educational Institutions

79

1. IntroductionWith the growing importance of knowledge economy, knowledge management (KM) has been recognized as a tool for sharing and utilizing knowledge in educational institutions particularly in universities and colleges. KM in higher education has been prioritized for a long time, seeking for the educational productivity and performance. To explain the importance of knowledge management, Petrides and Nodine (2003) state that KM is an integration of theory and practices in Higher Education (HE) and all stakeholders of universities. Here, I believe that the statement describes the importance of KM for stakeholders of higher educational institutions and universities to run their academic activities and enhance the performance; the major stakeholders include faculty members, management team, students, government bodies, and society around us.

The majority of the organizations recognize knowledge as a major resource to obtain and sustain competitive advantage. In this context, knowledge has become an organizational asset that increases an organization’s productive and adaptive capabilities (Marquardt, 2011). The knowledge management is used to enhance the competitiveness of any institutions. Patel and Patil (2016) emphasize that the provision of high-quality education and related services is the main engine that improves the excellence, competitiveness, importance and popularity of any higher educational institution. For this Baptista-Nunes, Kanwal and Arif (2017) argue that the concerned authorities and personnel are aware of the importance of knowledge management in the higher educational, academic institutions.

2. Knowledge ManagementKnowledge management is the process of conversion of tacit knowledge into explicit and sharing it with the organizations. Based on the context and situation, either we follow technology focused process or process focused process to convert tacit knowledge into the explicit one. Knowledge management needs to study the three elements of people, processes and technology (Edwards, 2011). The people or users from the different institutions use some types of technological tools either to generate or transfer or to solve any problems. According to Mao, Liu and Zhang (2015), people implement organizational changes to enable knowledge sharing culture. Literature has revealed that knowledge management is composed of 80% people and 20% technology (Girard & Girard, 2015), thus the people must be motivated to share what they know. People with high technical skills are very innovative and are needed in the most organizations (Bassi, 1998). In the same line, Bassi (1998) defines the knowledge management as the process of creating, capturing and using knowledge to enhance organizational performance, while Parlby (1997) defines it as the discipline of capturing knowledge-based competencies, storing and disseminating them for the benefit of the organization as a whole.

KM has been broadly applied not only for the business sector, but also for the higher education arena. The goal of KM in academic institutions also relates to the management of knowledge to achieve an institution’s advantages (Coukos-Semmel, 2002; Mohayidin, Azirawani, Kamaruddin, & Margono, 2007; Yusoff, Mahmood, & Jaafar, 2012). These advantages cover the achievement of higher education missions (teaching, conducting research, and community servicing) and improvement of organization management (developing strategic plans and improving decision making processes).


80

The review of the existing KM literature in higher education suggests that various KM definitions can be categorized into three distinct perspectives: economic, cognitive, and information management (Lee, 2007; McCarthy, 2006; Wiig, 1993). Each perspective leads to the underlying assumptions of each KM definition. The economic perspective was originated from the traditional notion of economic resources, including land, labour, and capital (Wiig, 1993). The economic capital includes knowledge, which is recognized as an integral part of intellectual capital. From the viewpoint of the economic perspective, KM definitions involve the management of intellectual capital (Dalkir, 2005; Wiig, 1993). Intellectual capital is an intangible organizational resource that represents an individual’s insight and experiences owing to its emphasis on actionable knowledge and know-how (Dalkir,2005; Wiig, 1993). Tan and Noor (2013) emphasizes knowledge management in the higher education institutions as; a key facility that a research university requires in order to provide a conducive environment for research and innovation (Tan & Noor, 2013). The economic perspective views KM as a key element for increasing an institution’s productivity and efficiency. Consequently, KM has become one of the strategic solutions to achieve effective organizational performance.

The cognitive process of knowledge creation resides at individual, group, and organizational levels. Watcharadamrongkun (2012) focuses on the knowledge management as it is a systematic process of gathering, organizing, sharing and analyzing knowledge in terms of resources, documents and people’s skills within and across an organization. Lee (2007) emphasizes that all the personnel, facilities, and services are associated with the creation, procession, and distribution of knowledge that an organization or its members possess and obtain. Likewise, APO (2000) focuses on the KM as; a conscious strategy of putting both tacit and explicit knowledge into the action by creating infrastructure and learning cycles that enable people to collectively use the knowledge of the enterprise. The research investigates how knowledge is created, shared, and used between and among the individuals within an organization. Individuals and their interactions become focal points of managing knowledge. The KM definitions of these studies highlight that knowledge depends on organizational members who create, share, and use it (Lee, 2007). The main objective of the knowledge management in the organization is to use it and enhance the organizational performance with efficiency.

The information management perspective assumes that the KM enhances the use of organizational knowledge through the management of information (Lee, 2007). An organization is responsible for cultivating usable knowledge and making it readily accessible across an organization (McCarthy, 2006). Likewise, Golden (2009) focuses on the knowledge management as the process of creating, capturing, and using knowledge to enhance organizational performance, such as documenting and codifying knowledge and disseminating it through databases and other communication channels to the organization. McCarthy (2006) focuses on the KM as; organizational processes that seek synergetic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of the human beings. With the information management perspective, knowledge refers to a set of transformed information that is made available in a usable form. Then, knowledge enables an organization to learn and adapt to its changing environment.


81

3. Demographic VariablesThe different demographic variables used to conduct this research are: variables; academic position, gender, age, ethnicity, qualification, experiences, university, department, participation on conferences, publication, thesis guidance, engaged in other university, and study hour per day in relation with the seven dimensions of knowledge management, i.e., knowledge utilization, acquisition, generation, dissemination, transfer, creation, and presentation.

4. MethodologyBoth the descriptive and inferential statistical analyses were performed to describe the demographic variables in relation with knowledge management. Initially, descriptive statistics was applied to analyze the thirteen background variables; academic position, gender, age, ethnicity, qualification, experiences, university, department, participation on conferences, publication, thesis guidance, engaged in other university, and study hour per day. Descriptive statistics were then computed for the seven outcome variables; knowledge utilization, acquisition, generation, dissemination, transfer, creation, and presentation consisting of the frequencies, means and standard deviations. To know whether there exists a significant difference between mean scores of the demographics variables and knowledge management practices by the faculty member of higher education institution in Nepal, a t-test (for gender, participation on conferences, publication, thesis guidance, and engaged in other university) and ANOVA (for academic position, age, ethnicity, qualification, experiences, university, department, study hour per day) was performed in each outcome variable, and the output is presented along with the mean and standard deviation of their outcome variables.

All the inferential analyses were performed using two-tailed tests and an alpha level of 0.05 unless otherwise noted accordingly. The hypotheses in the current study related the differences between the different groups (i.e., defined by academic position, gender, age, ethnicity, qualification, experiences, university, department, participation on conferences, publication, thesis guidance, engaged in other university, and study hour per day) on seven outcome variables of knowledge management practices: knowledge utilization acquisition, generation, dissemination, transfer, construction, and presentation.

5. Data Presentation and AnalysisThe responded of the study are the faculty members of HEI of Nepal. The background variables of the study were categorized individual personal characteristics and personal engagement in academia. The individual personal characteristics includes and personal engagement academia. The number of those respondents’ background variables is presented in Table 1 and Table 2. The first categorization of the demographic variable is individual personal characteristics presented in table 1.

The first categorization of the demographic variable of individual personal characteristics is academic position. Among of 445 respondents, the number of professors (n = 19, % = 4.27), associate professor (n = 53, % = 11.91) and assistant professor (n = 373, % = 83.82%) shows that the majority of the respondents from the group of assistant professors. In case of gender; the majority respondent are male faculty members (n = 399, % = 89.7%) comparing to female (n = 46, % = 10.3%) one. Another categorization of this group is age group and categories as;


82

< 40 years, 40 years to 49 years and >=50 years. The total number of respondents whose age is <40 years are, n = 180, which represent 40.4% of total sample size. 252, 56.6 % lies between age 40 to 49 years, 13, 2.9% lies on the age equal to or greater than 50 years.

Similarly, another categorization of the demographic variable of this group is ethnicity. The respondents belong to four different ethnic group of Nepal. It seems that the majority of the faculty member in HEI from the ethnic group of Brahmin and Chhetri (n = 342, 76.86%). Likewise, the representation of Dalit is very low (n = 8, 1.8%). Similarly, the representation of the ethnic group of Madhesi (n = 39, 8.76%) is low than the Indigenous Ethnic (n = 56, 12.58%) grouped. Likewise, another categorization of the demographic variable of this group is qualification of respondents. The qualification of the respondents is categorized as; PhD, MPhil and Master’s degree. It seems that majority of the qualification of the faculty member in Nepalese higher education institution is Master’s degree (n = 344, 77.3%). The number of the PhD (n = 69, 15.51%) holder faculty member more than the respondent having MPhil (n = 32, 7.19%) degree.

Similarly, the categorization of demographic variable of this group is experience. The experiences were categories into four group. The first group is mentioned as experiences in year < 10 years, second group 10 to 19 years, third group, 20 to 29 years, and four group >=30 years. A very few (only 5 out of 445) respondents have their experience more than 30 years in academic activities. Majority of the respondent (183, 41.1%) have their experiences between 10 to 20 years. The respondents whose experience is less than 10 years also more (175, 39.3%) but there is no any professor from this group. The ratio of the professor and associate professors experience belongs to experience group of 3; i.e., their experience is between 20 to 30 years (82, 18.43%).

The second categorization of the demographic variable personal engagement in academia; university, department, participation in conferences, publication, thesis guidance, engaged in other university, and study hour per day presented in table 2.

The first demographic variable of this group is; university where the faculty members belongs to. The names of the university are categories as: A, B, C, and D as explain in the chapter of Methodology and section population and sample. The number of respondents from university A, B, C, and D; are 233, 107, 63, and 42 respectively.

Another demographic variable of this group is Department of the respondents. The different departments of the university are Arts/Humanities, Education, Management and Science. The total respondents of the Arts/Humanities department are 187; 42.02%, likewise 62; 13.93%, 82; 18.43%, 114; 25.62% from the Education, Management and Science department respectively. Likewise, the demographic variable of this group is represented by participation in conferences. It is categorized as; participated to the conferences and not participated to the conferences. Among of 445 respondents only the 81respondents from the group of assistant professors did not get chance to participate to the conferences. In total; 364; 81.8% respondent did participation to the conferences and 18.2 % respondent didn’t participated to the conferences.

Similarly, another categorization of the demographic variable of this group is publication of the respondents. It was categorized whether the respondents do publication of their research


83

work or not. Among of 445 respondents 385; 86.5% of respondents did publication of their research work and 60; 13.5% did not do publication.

Another demographic variable of this group is thesis guidance. Among of 445 respondents 390; 87.6% respondents involve to the activity of thesis guidance and 55; 12.4% did not involve to this activity. Similarly, another categorization of the demographic variable of this group is engaged in other university or involvement of faculty member as visiting faculty to the different university. Among of 445 respondents only 96; 21.6% respondent involve to the other university and 349; 78.4% did not involve to such activities.

The last demographic variable of this group is study hour per day. This variable is grouped into three different groups. The first group is <3 hrs. Second group 3 to 5 hrs., and third group is >5 hrs. Among of 445 respondents 129, 29.0% respondent study less than 3 hours per day. Similarly, 282; 63.4% respondent study 3 to 5 hours per day. In addition, 34; 7.6% respondent study more than 5 hours per day.

The analysis of data collected from the respondents of faculty members of the different universities of Nepal to assess the faculty members’ knowledge management practices has been presented in this section. Knowledge management practices have been presented to the indicators of knowledge utilization, acquisition, generation, dissemination, transfer, creation, and presentation. The basis of analysis was the mean and standard deviation. Further t-test/f-test was also applied to know the significant difference of the knowledge management practices. The summary of the result has been presented in table 3.

The knowledge management practices by the faculty members of the higher education institutions were analyzed from the perspectives of: (a) individual personal characteristics, and (b) personal engagement in academia. The study found significant differences in academic position, age, qualification and experiences of individuals’ personal characteristics while as; university, department, participation in conferences and engagement in other university of personal engagement in academia.

6. Relationship between KM and Demographic VariablesAmong thirteen demographic variables, the test statistics identifies significance of; academic position with knowledge acquisition and dissemination; age with knowledge acquisition and dissemination; qualification with knowledge utilization, acquisition, generation and dissemination; experiences with knowledge acquisition and dissemination; university with knowledge acquisition and creation; department with knowledge generation; participation in conferences with knowledge acquisition and dissemination; and engaged in other university with knowledge generation in the context of faculty members. The summary of the significances of knowledge management with demographic variables is presented in table 3. According to Boondao (2013) there exist certain effects of these personal factors on managing knowledge in organizations and this implies to this study as well. The personal attitude, feelings, behavior, and characters implies on the knowledge management processes in the any institutions. The thought and feeling and behavior of individual is different to each other and that implies on the usage and access behavior of in search of knowledge is differ.

Since the result found that; there is significance difference between knowledge acquisition


84

and knowledge dissemination process among professor, associate professor and assistant lecturer. This may cause due to the interaction behavior among different academic groups; maybe they will have engaged in the discussion differently; the ways of using technology is different between different groups. In other hand the engagement in the training may affect to the knowledge acquiring process of different academic groups. Likewise, the usage and engagement in social media; involvement in teaching activity and conduction of research causes differ in the knowledge dissemination process of different academic positions. The Nonaka’s learning theory (1994) impacts to the different learning behavior of individual as explained as; The SECI (socialization, externalization, combination and internalization) theory views the interaction processes of tacit and explicit knowledge as an essential feature in knowledge management.

It is found that there is a significant difference between male faculty members and female faculty members in the process of knowledge acquisition and dissemination in the context of higher education institutions of Nepal. The social construct of Nepal is different, the female should engage in the activities and task related with family like as; preparing foods, preparing child for school, caring of parents, etc. while as male do engage in the seeing television, reading newspaper etc., in the family activities and this impacts to acquire and disseminate the knowledge in the institutions where they belong to. There is significant difference among the means of the rate of creativity among faculty members in terms of scientific degree and gender in the university faculty members (Rahimi, Arbabisarjou, Allameh, & Aghababaei, 2011). In this regard, the socio-cultural theory impact to the learning behavior of male and female faculty members in the context of higher education institutions.

This study found that there are significance differences among the faculty member who have different academic qualification mainly in the knowledge utilization, acquisition, generation and dissemination process in the context of higher education institution. As established by Ismail and Yusof (2009), the lower the level of education, the less likely persons are to appreciate knowledge creation and sharing. The staff surveyed during this study, seem to have staff with the appropriate qualifications and educational backgrounds to enable them appreciate and manage knowledge effectively. Gibbon and Kabaki (2002) suggest that Doctoral degrees be the indicator of capacity in universities and Master’s degrees as the primary indicator for teaching. However, this differs from faculty to faculty and across disciplines. The academic staff for undergraduate programs has relevant academic qualifications higher than the exit level of the program, but at minimum a degree (HEQC 2004). Staff qualifications provide a guide to institutional capacity. Amongst others, the numbers and qualifications of full-time lecturing staff are important inputs that have an impact on QHE (Mammen, 2003). As established by Ismail and Yusof (2009), the lower the level of education, the less likely persons are to appreciate knowledge creation and sharing. The staff surveyed during this study, seem to have staff with the appropriate qualifications and educational backgrounds to enable them appreciate and manage knowledge effectively. The learning behavior of the faculty member having different educational level impacts to their knowledge management practices behaviors.

Knowledge acquisition and dissemination process is affects by the experiences of the faculty member in the context of university. Yusof and Ismail (2009) indicated, the positions of employees have some impact on knowledge creation and sharing, such as senior staff who


85

often serve as mentors and coaches to junior and less experienced staff. The experiences of the human make them to analyze the situation effectively and that situation helps to acquire the knowledge to themselves and disseminate the required knowledge for the audience as well. The internalization process of the SECI model help to analyze being individual and to contextualize the required knowledge.

The faculty member association in the university plays significance role in knowledge creation and acquiring process in the context of Nepali universities. Institutions in urban areas have the ability to attract and retain highly qualified staff than rural areas (Gibbon & Kabaki, 2002). The social context of the organization, and environment plays vital role to create and acquire knowledge for individual. The physical resources mainly IT track KM and People track KM may be different to each other and that impacts for the KM behavior of faculty member of HEI. IT track KM enables to access the IT resources like as e-Journals, e-sources, databases, etc. to access at any time and People track KM provides wider platforms for the researcher and practitioners to enhance KM activities within institutions.

The study found that there is significance relationship between department of the university and knowledge generation process. A research done by the Ismail and Yusof (2009) identified there is significance difference between knowledge sharing behavior with workplace or department of government employee in Malaysia. Departmental evaluation in HE can be defined as a practical effort to determine the worth and merit of an academic department, by judging, among other things, whether it has been successful in attaining its fundamental objectives (Hugo 1994). Departmental evaluation is also suggested by Al-Turki and Duffuaa (2003); Bornman (2004). For this IT track KM enables groupware, intranets, and extranets to access required knowledge by the faculty member of HEI and people track KM guided them as per requirements.

Participating in International conference is extremely important, especially for the academicians. This is because it serves as an excellent platform to learn from one another as we present, share and disseminate the findings of studies undertaken in country-specific cases or situations. This is necessary because no one head is a repository or fount of all knowledge. Attendance of academic conferences is very useful for researchers to communicate with others from all over the world, communicate, discuss and exchange views and experiences with them and to know the latest scientific developments in the same field of your specialization, in addition to the benefit obtained through the presentation of your research and discuss the results reached with researchers before publishing Research in a prestigious international scientific journal. The SECI model of Nonaka’s impacts to convert the tacit and explicit knowledge as per requirement. From academic holiday, to networking, to meeting the keynote speakers for advice, to create connections with researchers of similar interests, to enjoy the extra-curricular conference program, etc. Therefore, the joy of attending conferences brings with its improvement and incremental growth in our approach to do things, in the broader manner to see things, and the beauty to live international diversity. Carry out research, write and publish, present at conferences (Grobgeld, 2016).

The research shows that there is significance relation between knowledge generation process and engagement in other university. It is found that be engaging to other university it helps to enhance individual work performance, helps to enhance professional networks. The external


86

environment plays vital role to enhance the KM initiatives with in organizations. Wenger et al. (2002) believe that Communities of Practice play an important role in knowledge management by connecting isolated pockets of expertise across an organization.

7. Conclusion The relationship between dimensions of knowledge management and the major determinants of faculty members; individual personal characteristics and personal engagement in academia by chi square test. In general, the finding showed significance relationship of academic position with knowledge acquisition and dissemination; age with knowledge acquisition and dissemination, qualification with knowledge utilization, acquisition, generation and dissemination; and experiences with knowledge acquisition and dissemination; university with knowledge acquisition and creation; department with knowledge generation; participation in conferences with knowledge acquisition and dissemination; and engaged in other university with knowledge generation in the context of faculty members of HEI in Nepal.

References

Al-Turki, U., & Duffuaa, S. (2003). Performance measures for academic departments. International Journal of Educational Management, 17 (7), 330-338.

Asian Productivity Organization. (2000). Knowledge management: From brain to business. Tokyo: Author.

Baptista-Nunes, B. J. M., Kanwal, S., & Arif, M. (2017). Knowledge Management Practices in Higher Education Institutions: a Systematic Literature Review.

Bassi, L. (1998). Harnessing the power of intellectual capital. The Journal of Applied Manufacturing Systems, 9, 29-35.

Boondao, R. (2013). Factors affecting knowledge management of organisations in Thailand. Culture, 3, 1-26.

Bornman, G. M. (2004). Programme review guidelines for quality assurance in higher education: A South African perspective. International Journal of Sustainability in Higher Education, 5 (4), 372-383.

Coukos-Semmel, E. D. (2002). Knowledge management: Processes and strategies used in United States research universities (Doctoral dissertation). ProQuest Dissertations and Theses database (UMI No. 3041780). Retrieved from pareonline.net/pdf/v10n7.pdf

Dalkir, K. (2005). Knowledge management in theory and practice. Burlington, MA: Elsevier Butterworth–Heinemann.

Edwards, J. S. (2011). A process view of knowledge management: It ain’t what you do, it’s the way that you do it. Electronic Journal of Knowledge Management, 9 (4), 297–306.


87

Gibbon T., & Kabaki, J. (2002). Staff. In N. Cloete, R. Fehnel, P. Maassen, T. Moja, H. Perold, & T. Gibbon (Eds.), Transformation in higher education: Global pressures and local realities in South Africa (pp. 186-229). Lansdowne: Juta and Company.

Girard, J., & Girard J. (2015). Defining knowledge management: Toward an applied compendium. Online Journal of Applied Knowledge Management, 3 (1), 1-20.

Golden, C. (2009). Knowledge management and historically black colleges and universities (Doctoral dissertation). ProQuest Dissertations and Theses database (UMI No.3355016).

Grobgeld, E., Teichman-Weinberg, A., Wasserman, E., & Barchilon Ben-Av, M. (2016). Role perception among faculty members at teacher education colleges. Australian Journal of Teacher Education, 41(5), 78-98. doi: 10.14221/ajte.2016v41n5.6

HEQC. (2004). A good practice guide and self-evaluation instruments for management of the quality of service-learning. Pretoria: CHE.

Hugo, W.M.J. (1994). Evaluating the academic department. South African Journal of Higher Education, 8 (2), 84-91.

Ismail, M. B., & Yusof, Z. M. (2009). Demographic factors and knowledge sharing quality among Malaysian government officers. Communications of the IBIMA, 9(1), 1-8.

Lee, H. Y. (2007). Department chairs’ perceptions of knowledge management strategies in colleges of education: Measurement of performance and importance by organizational factors (Doctoral dissertation). Retrieved from Dissertation Abstracts International. (AAI3292171)

Mammen, K. J. (2003). A study of quality dimensions in the faculty of science of a selected university (DEd thesis). University of Transkei, Mthatha.

Mao, H., Liu, S., & Zhang, J. (2015). How the effects of IT and knowledge capability on organizational agility are contingent on environmental uncertainty and information intensity? Information Development, 31(4), 358–382.

Marquardt, M. J. (2011). Building the learning organization: Achieving strategic advantage through a commitment to learning (3rd ed.). Boston, MA: Nicholas Brealey.

McCarthy, A. F. (2006). Knowledge management: Evaluating strategies and processes used in higher education (Doctoral dissertation). Retrieved from ProQuest Dissertations and Theses database (UMI No. 3221289).

Mohayidin, M.G., Azirawani, N., Kamaruddin N., & Margono, M. I. (2007). The application of knowledge management in enhancing the performance of Malaysian universities. Electronic Journal of Knowledge Management, 5(3), 301-312. Retrieved from http://www.ejkm.com

Nonaka, I. (1994). A dynamic theory of knowledge creation. Organisational Science, 5(1), 14–37.


88

Parlby, D. (1997). The power of knowledge: A business guide to knowledge management. KPMG Management Consulting.

Patel, T. R., & Patil, A.N. (2016). Review of knowledge management in higher education. International Journal of Science and Research (IJSR), 4(11), 2062–2065. doi: 10.21275/v4i11.nov151609

Petrides, L. A., & Nodine, T. R. (2003). Knowledge management in education: Defining the landscape. Half Moon Bay, CA: Institute for the Study of Knowledge Management in Education.

Rahimi, H., ArbabiSarjou, A., Allameh, S.M., & Aghababaei, R. (2011). Relationship between knowledge management process and creativity among faculty members in the university. Interdisciplinary Journal of Information, Knowledge, and Management, 6, 17-33.

Tan, C. N. L., & Noor, S. (2013). Knowledge management enablers, knowledge sharing and research collaboration: A study of knowledge management at research universities in Malaysia. Asian Journal of Technology Innovation, 21 (2), 251- 276. doi: 10.1080/19761597.2013.866314

Watcharadamrongkun, S. (2012). Predictors and effects of knowledge management in US colleges and schools of pharmacy (Doctoral dissertation). Retrieved from ProQuest Dissertations and Theses database (UMI No. 3543736).

Wenger, E., Robert, M., & William, S. (2002). Cultivating communities of practice. Cambridge, MA: Harvard Business School Press.

Wiig, K. M. (1993). Knowledge management methods: Practical approaches to managing knowledge. Arlington: Schreiner Press.

Yusoff, M. Y. M., Mahmood, A. K., Jaafar, J., & Salak, K. K. P. (2012). A study of KM process and KM enabler in a Malaysian community college. Journal of Knowledge Management Practice, 13(1).

Tables of Demographic VariablesTable 1Demographic of Individual Personal Characteristics

Individual Personal Characteristics (n = 445) Total Percentage

Academic PositionProfessor 19 4.27Associate Professor 53 11.91Assistant Professor 373 83.82GenderMale 399 89.7Female 46 10.3


89

Age Group30 to 39 Years 180 40.4540 to 49 Years 252 56.63>=50 Years 13 2.92EthnicityBrahmin/Chhetri 342 76.85Indigenous Ethnic 56 12.58Madhesi 39 8.76Dalit 8 1.80QualificationPhD 69 15.51MPhil 32 7.19Masters 344 77.30Experience<10 Years 175 39.3310 to 19 Years 183 41.1220 to 29 Years 82 18.43>=30 Years 5 1.12

Table 2Demographic of Personal Engagement in Academic

Personal Engagement in Academia (n = 445)

Total PercentageUniversityA 233 52.36B 107 24.04C 63 14.16D 42 9.44DepartmentArts/Humanities 187 42.02Education 62 13.93Management 82 18.43Science 114 25.62Participation in ConferencesYes 364 81.80No 81 18.20PublicationYes 385 86.52No 60 13.48


90

Thesis GuidanceYes 390 87.64No 55 12.36Engaged in Other UniversityYes 96 21.57No 349 78.43Study Hour Per Day<3 Hours 129 28.993 to 5 Hours 282 63.37>5 Hours 34 7.64

Table 3Significance of KM and Demographic Variables of Faculty Members

Demographic Variable KM Construct F Value Signifi-cance

Academic PositionKnowledge Acquisition 66.186 0.000Knowledge Dissemination 30.227 0.000

Age GroupKnowledge Acquisition 6.737 0.001Knowledge Dissemination 4.295 0.014

Qualification

Knowledge Utilization 3.372 0.035Knowledge Acquisition 8.053 0.000Knowledge Generation 7.428 0.001Knowledge Dissemination 3.23 0.041

ExperiencesKnowledge Acquisition 9.096 0.000Knowledge Dissemination 3.28 0.021

University Knowledge Acquisition 3.925 0.009 Knowledge Creation 4.317 0.005 Department Knowledge Generation 6.659 0.000

Participation in ConferencesKnowledge Acquisition 4.551 0.033Knowledge Dissemination 6.935 0.009

Engagement in other University Knowledge Generation 5.995 0.015


91Comparative Service Quality Status in the Commercial Banking Sector of Nepal

Comparative Service Quality Status in the Commercial Banking Sector of Nepal

Makshindra Thapa * [email protected]

Abstract

This study aims in revealing service quality being provided by some Nepalese commercial banks from public and private sectors. Customer perceptions about service quality within five dimensions; tangibles, reliability, responsiveness, assurance and empathy obtained through a questionnaire survey consisting the SERVQUAL instrument with 22 items used for the survey originated by Parashuranman et. al (1988). Altogether 216 usable responses were collected and analyzed. The descriptive analysis revealed strong status of private banks in contrast of the public banks in all five dimensions of service quality and ANOVA test has shown significance differences of most three of the dimensions out of five between those bank types.

Keywords: Service quality, SERVQUAL model, Nepalese commercial Banks, service quality dimensions

* Lecture at Patan Multiple Campus, Lalitpur.

1. IntroductionQuality is an inherent factor to achieve customer satisfaction and loyalty. It provides a concrete basis for long term success by quality and customer focused approaches. Crosby (1979) has defined quality as conformance to requirement. In every product or service some technical, legal and market related requirements are inherent and effective maintenance of such requirements express presence of quality. Garvin (1983) has stated quality by counting the incidence of internal (before product leaves the factory) and external failure (after the product is installed). Organization those fail to maintain customer requirements and quality standards loose market and business at all. Many studies are evident of positive return of quality management. Quality helps firms in gaining more market share and return on equity, lowering production cost, improving productivity and achieving more competitive advantages.

Bhat (2012) has pointed that today service industries dominate economy and it accounts for more than 70 percent of jobs and it is on the rise and expected to reach 85 percent in the near future. In the view of Bedi (2014) quality in a service organization is a measure of the extent to which the service delivered meets the customer expectations. The services sector has

92received a substantial growth during the last three decades in Nepal too. Due to the pressure of globalization and liberalization, Government of Nepal adopted liberal policies in relation to financial institutions including commercial banks especially after the democratic movement of 1990s. With the change in government policy, many private and joint venture banks were established. At present 28 commercial banks are in operation with modern and sophisticated banking products. The banking industry of Nepal characterizes ever increasing competition and the central bank has been adopting various mechanisms like mergers and monetary policies. Due to intensified competition for customers and market shares, the banking firms take service quality as strategic issue.

As Nepalese banking industry is composed of two groups of firms-public banks and private banks. Whereby, public banks with substantial resources and nationwide networks have been achieving better performance during last decade. Similarly the private sector banks including joint venture banks are credited to modernization in banking service. Both of these banking setting are dependent on their service quality to achieve competitiveness and sustainability. This study therefore, aims to reveal existing service quality status of the banks and their comparative service quality.

2. Review of the Literature2.1 The service qualityIn recent decades, due to rise of service sectors as dominant in global economy, the concept of service quality has received a great deal of attention from both academicians and practitioners. Service quality has been defined variously as per diverse nature of services. Gronroos (1984) defined service quality as the outcome of the comparison that consumers make between their expectations and perceptions. In addition, Parasuraman, Zeithaml and Berry (1985) have conceived service quality as the difference between customer expectations and perception of actual service. Both of these definitions suggest service quality as meeting customer expectations and requirements.

Service quality is provided to the customer is determined by many factors. Gronroos (1983) has stated that service quality perceived by customers has two dimensions as; technical quality which emphasizes ‘what’ customer actually receives from service and functional quality emphasizes ‘how’ service is delivered. Similarly, behaviour of employees and speed of service delivery are examples of other important functional qualities.

Measuring and managing service quality is little complicated task than of product quality. In the case of tangible goods, the measurement of quality is an easy task due to maintenance of the uniform quality standards consistently to all units of production as per the industry or legal requirements. In contrast, service quality is an elusive and abstract construct that is difficult to measure (Cronin et al. 1992). The three basic characteristics of service that create a challenge for service providers are; intangibility, heterogeneity and inseparability. Service quality therefore covers broad area concerned with managing quality elements in services provided to the consumers.


93

2.2 Measurement of service qualityMeasurement of service quality itself is a challenging task which seeks careful analysis and understandings of customer expectation. It is assumed that quality is high when performance exceeds expectation and quality is low when performance does not meet expectation. The most common model for measuring service quality is the SERVQUAL model. It was developed by Parasuraman and his associates in 1985 and was later refined. Initially the SERVQUAL model had 10 dimensions of service quality, which were later reduced to five dimensions including reliability, assurances, tangibles, and empathy and responsiveness elements in the service provided.

These five dimensions of SERVQUAL model are common in determining and evaluating service quality inherent of organizations. In this context, reliability denotes to the ability of a service provider to provide accurate and dependable service to the customers. Assurance is concerned with the quality of firm employees to inspire trust and confidence of the customers towards the firm and its services. Tangibles represent the general outlook of the firm in terms of its physical surrounding and appearance of employees. Empathy as a quality dimension denotes to the individualized attention provided to customers by the firm and finally responsiveness is the willingness of the firm staff to help customers by providing prompt service.

2.3 Service Quality in Banking SectorBanking business globally is one of the dominant sectors offering various services and adopting sophisticated technologies in order to make their services more customers driven. Many studies have been conducted to reveal various facets of service quality in this sector. In this context, Van and Lee (2012) carried on a study with objectives of assessing the service quality dimensions (tangibility, reliability, responsiveness, assurance, and empathy) and to examine the relationship between service quality and customer satisfaction in the retail banking sector in Vietnam. The result of their study indicated that the five quality dimensions were existed as satisfactory and were significantly interrelated. The service quality was found to be positively correlated with customer satisfaction in the retail banking sector in Vietnam.

Ahemad (2017) studied level of service quality in Islamic and Conventional banks of Pakistan based on SERVQUAL model using questionnaire survey. It is found that Islamic banks have Service Quality gap as compared to Conventional banks on the five dimensions i.e. Tangibility, Reliability, Convenience Competence and Satisfaction. His result revealed that the customers were found satisfactory on all five dimensions of service quality.

Ashraf and Venugopalan (2018) carried a study with the aim of comparing the quality of service between public and private sector banks in Kerala, India applying SERVQUAL model introduced by Parashuranman et.al (1988). By using a standardized questionnaire, they collected 150 responses from the banks chosen on random basis from banks in Kerala. The results of this study indicated that there is no significant difference between public sector and private sector bank in service quality dimensions and level of customer satisfaction.

This study has applied the SERVQUAL model to evaluate existing service quality of some selected Nepalese banks as evaluated by the consumers within five dimensions.


94

3. Methods 3.1 Research Design and data collection procedureThe basic purpose of this study is to reveal service quality status prevailing in public and private commercial banks of Nepal. The descriptive research design thus has been employed. A questionnaire survey has been conducted to collect opinions from customer of the bank from both private and public sector. A standardized set of questionnaire was distributed through mail after conducting pilot study. The questionnaire included various 22 service related items within the five dimensions of SERVQUAL model; where items within tangibles dimension was 4, reliability-5, responsiveness-4, assurance-4 and empathy-5. The items in the questionnaire were constructed using 5-point Likert like scale that ranging from 1 = “Strongly Disagree” to 5 = “Strongly Agree”.

The respondents were bank customers in the form of loan seekers and depositors selected randomly from two categories of altogether six banks consisting two from public and four from private banks of Nepal. The mail administered (internet based) survey achieved 216 usable responses with 86.4 percentage response rate from the respondents however 250 requests were sent. The entire data collection was done during three months period of January- March 2019.

Regarding the reliability of instruments applied, the calculated Cronbach’s alpha for 22 items of measures within 5 dimensions is .852. The result has suggested that the service quality dimensions and their independent measures pose quality of stability and consistency as the computed value of alpha is the commonly accepted measurement technique with a generally agreed lower limit of 0.7.

3.2 Data analysisThe collected data from the survey were processed and presented in tables for the purpose of analysis. With use of SPSS, reliability analysis was done measure reliability of the research instruments. Descriptive statistics used to measure level of service quality divided into five dimensions of tangibles, reliability, responsiveness, assurance and empathy of these banks. To analyze differential service quality between public and private commercial banks analysis of variance has been applied.

3.3 Study hypothesisThe basic objective of this study was to reveal comparative service quality status of two distinctive groups-public and private banks of Nepal, following five hypothesis were formulated as;

H1A : There is a significant difference in tangibles dimension of service quality between public and private sector banks of Nepal.

H1B : There is a significant difference in reliability dimension of service quality between public and private sector banks of Nepal.

H1C : There is a significant difference in responsiveness dimension of service quality between public and private sector banks of Nepal.


95H1D : There is a significant difference in assurance dimension of service quality between

public and private sector banks of Nepal.

H1E : There is a significant difference in empathy dimension of service quality between public and private sector banks of Nepal.

4. Results and Discussions4.1 Descriptive analysis of the SERVQUAL dimensions Table 4.1 depicts comparative scores of 22 study items constructed to analyze service quality status of public and private banks of Nepal within five SERVQUAL dimensions. The results have been extracted from the responses received from 216 customers of the banks; 130 of public and 113 from private sectors.

Table 4.1Descriptive Statistics of the Study Items

SEVQUAL dimensionsPublic Banks Private Banks

Mean Std. Deviation Mean Std.

Deviation

Tangibles dimension

My bank has all modern equipment 2.94 1.008 3.44 1.052

The physical facilities of my bank are visually appealing 2.77 1.059 3.33 1.114

Staffs of the bank are well dressed and appealing neat 2.72 1.070 3.52 .946

The materials and tools associated with the service are visually appealing

2.73 1.002 3.48 .867

Reliability dimension

The bank always keeps its promises 3.63 .852 3.65 .933

The bank shows great concern about customer complaints 3.25 .987 3.27 1.102

The bank performs the service right the first time 3.55 .915 3.72 .986

The bank provides the service at the right time agreed on 3.28 .857 3.31 .974

The bank emphasizes on error free records 3.68 .921 3.85 .868

Responsiveness dimension

Staffs of my bank inform customers exact time of service delivery

2.74 1.146 3.49 .937

Bank staffs give prompt service to customers 2.94 1.251 3.75 .797

Bank staffs of my bank are always willing to help customers 2.78 .779 3.81 .797

My bank staffs are never be busy to help customers immediately 2.58 1.332 3.50 .946

Assurance dimension

Behavior of my bank staff impress customers with reliability of service and instill confidence

3.24 1.020 3.34 .893


96

Customers feel safe and confidence when transacting with staffs of my bank

3.04 .977 3.48 .907

Staffs of my bank always are friendly and courteous 3.13 .793 3.97 .725

Staffs of my bank possess knowledge to answer questions of customers

3.21 .841 4.06 .759

Empathy dimension

My bank pays attention to each customer individually. 2.72 1.309 3.92 .746

The opening hours of my bank is convenient to all its customers 2.60 1.141 3.77 .756

My bank has staffs who give personal attention to each customer

3.35 .915 3.83 .767

My bank has customer‘s best interest at heart 2.60 1.132 3.81 .751

The staffs of my bank understand the specific needs of their customers

2.80 1.097 3.68 .794

Valid N (listwise) 103 113

All the results displayed in Table 4.1 show customer opinions about their perceived service quality from theirs banks. The results in tangibles dimension indicate that mean values all four items of private banks have mean values more than 3 and public banks score less than 3. However standard deviations are competitive in the cases of both bank types. The outputs of five items within reliability dimensions are very competitive in both bank types as all mean values exceed 3 and more. Responsiveness dimension also has shown strong status of private banks than of public banks. Private banks have earned high mean scores (more than3.50) than of the public banks who have scored below than 3 mean score. The fifth dimension of service quality-empathy also has been scored more by private banks in all five items. Public banks have less than 3 mean scores in four items. Table 4.2 indicates mean and standard deviations of five dimensions.Table 4.2Descriptive Statistics of the SERVQUAL Dimensions

Dimensions and descriptive Bank type

Private Banks Public banksTangibles dimension N 113 103 Mean 3.4425 2.7888 Std. Deviation .76474 .57390

Std. Error Mean .07194 .05655

Reliability dimension Mean 3.5593 3.4796 Std. Deviation .58442 .53014


Responsiveness dimension Mean 3.6372 3.0097 Std. Deviation .61145 .79669



97

Assurance dimension Mean 3.7124 3.1555 Std. Deviation .55322 .60114


Empathy dimension Mean 3.8035 2.8332 Std. Deviation .56694 .70283


The results have indicated that the customers of private bank agree with existence of all five dimensions of service quality as mean scores. However the customers of public banks are not satisfied with Tangibles, empathy and more or less responsiveness dimension of service quality they get from those banks. Similarly, there are remarkable differences between private and public sector banks in service quality scores. There is strong position of private sector banks in all five dimensions of service quality than of public banks. However, out of five dimensions, three dimensions of both bank types have competitive scores. In general, private banks have been rated by the customers more effective in two SERVQUAL dimensions; tangibles and empathy than of public banks.

Table 4.1 displays results obtained from test of analysis of variance of the public banks and private banks with view to test study hypotheses postulated to test if there are significant difference between scores of private and public banks in five SERVQUAL dimensions.

Table 4.3ANOVA Results of SERVQUAL Dimensions of the Banks

Sum of Squares

df Mean Square

F Sig.

Tangibles dimension Between Groups 23.022 1 23.022 49.717 .000

Within Groups 99.096 214 .463

Total 122.118 215

Reliability dimension Between Groups .342 1 .342 1.094 .297


Total 67.262 215

Responsiveness dimension Between Groups 21.215 1 21.215 42.583 .000


Total 127.829 215

Assurance dimension Between Groups .423 1 .423 1.273 .261


Total 71.560 215

Empathy dimension Between Groups 44.655 1 44.655 110.623 .000


Total 131.038 215


98

The results of ANOVA have accepted three of alternative hypotheses; tangibles, responsiveness and empathy. However two alternative hypotheses of reliability and assurance dimensions have been rejected. As per test statistics, in tangibles dimension there is a significant differences between private and public banks. There is significant differences in responsiveness and empathy practices while providing service to their customers as both dimensions have shown statistically significant test statistics. The results have confirmed that there are no significant differences in reliability and assurance dimensions amongst five used dimensions of SERVQUAL in this study.

5. Conclusions This study intended to have a comparative study of service quality of two clusters of Nepalese commercial banks; public and private banks. This study examined status and differences of services quality being offered by the banks using the SERVQUAL model. The findings have suggested that private sector banks of Nepal are leading in providing more quality services than of public banks. The customers of private banks are satisfied with service qualities of all five dimensions; tangibles, reliability, responsiveness, assurance, and empathy as findings of Van and Lee (2012) which indicated that the five quality dimensions were existed as satisfactory and were significantly interrelated. In contrast, the customers of public banks are not satisfied with tangibles, responsiveness, and empathy dimensions of the banks. However they perceive that these banks are satisfactory in assurance and reliability dimensions.

The findings from test of analysis of variance of all five SERVQUAL dimension have clearly indicates to significant and remarkable differences in tangibles, responsiveness and empathy dimensions of service quality between private and public banks. However, there are no significant differences between these two bank types in reliability and assurance dimensions. These findings from Nepalese evidence is supportive to the study results of Ahemad (2017) who found that Islamic banks have Service Quality gap as compared to Conventional banks in Pakistan but opposes the findings of Ashraf and Venugopalan (2018) who concluded that there is no significant difference between public sector and private sector bank in service quality dimensions and level of customer satisfaction.


99

References

Ahmed, M. (2017). Service quality measurement regarding banking sector. International Journal of Business and Social Science, 8 (6), 116-127.

Ashraf, E., & Venugopalan, K. (2018). Service quality and customer satisfaction: A comparison between public and private sector banks in Kerala. International Journal of Research and Analytical Reviews, 5 (3), 567-572.

Bedi, K. (2014). Quality management (11th ed.). Oxford University Press, New Delhi.

Bhat, K.S. (2012). Total quality management. Himalayan Publishing House, Mumbai.

Cronin, J. J., & Taylor, S. A. (1992). Measuring service quality: A re-examination and extension. The Journal of Marketing, 56, 55-67.

Crosby, P. B. (1979). Quality is free: The art of making quality certain. New York: New American Library.

Garvin, D. A. (1983). Quality on the line. Harvard Business Review, 61 (5), 64-75.

Gronoos, C. (1984). A service quality model and its marketing implications. European journal of Marketing, 18 (4), 36-44.

Gronroos, C. (1978). A service-oriented approach to marketing of services. European Journal of Marketing, 12(8), 588-60.

Gronroos, C. (1983). Strategic management and marketing in the service sector. Cambridge, MA: Marketing Science Institute.

Gronroos, C. (1990). Service management and marketing: Managing the moments of truth in service competition. Lexington, MA: Lexington Books.

Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64 (1), 12− 40.

Parasuraman, A., Zeithaml, Valarie .A., & Berry, Leonard. L. (1985). A conceptual model of service quality and its implication for future research. Journal of Marketing, 49, 41-50.

Van, D., & . Lee, P. (2012). examining service quality and customer satisfaction in the retail banking sector in Vietnam. Journal of Relationship Marketing, 11,199–214.


100 Factors Impede the Creation of Small Entrepreneurial Businesses in Bangladesh

Factors Impede the Creation of Small Entrepreneurial Businesses in Bangladesh

Nazrul Islam *[email protected]

&Senjuti Barua *

&Tahia Islam Hridi, Talukder Mohammad Shafait, Chowdhury Misbah

Hossain, Timsal Akhter, & Mehedi Hasan Omi *[email protected]

AbstractThe creation of small entrepreneurship in a developing country like Bangladesh has paramount importance in socioeconomic development of the country. The reasons can be attributed by the balanced growth and the inclusion of general masses in the development process of the country. However, this development process is hindered by a number of unfavorable factors which are primarily concerned with personal, economic, social, environmental, political, and legal in nature. Access to the resources of the small entrepreneurs of the country should be ensured to initiate and run the small business in Bangladesh. Hence, this paper aims at exploring the factors that hinder the development of small business entrepreneurs in Bangladesh. This study follows both qualitative and quantitative research methods. Two hundred ten small entrepreneurs in different business sectors of Bangladesh such as, food processing, rice farming, freight forwarding, tea production, barbing salon, water refill station, grocery business, fish selling, cattle farming, etc. were interviewed with a structured questionnaire. Factor analysis was conducted to identify the factors impede the small entrepreneurial businesses in Bangladesh. Regression analysis was carried out to examine the relationships between the hindering factors and the overall development of small business entrepreneurship in Bangladesh. The results show that the lack of local support for starting and running business, lack of knowledge on information technology, lack of business experience, and lack of entrepreneurship training are important factors or barriers for the development of small entrepreneurial businesses in Bangladesh. This study suggests that the policy makers should focus more on stimulatory, supporting and sustaining activities to develop small business entrepreneurship in Bangladesh.

Keywords: Small Entrepreneurship, Balanced Growth, Sources of Fund, Entrepreneurial Training, Sustaining Activities.

* Professor at Canadian University of Bangladesh, Dhaka, Bangladesh* Lecturer at Bangladesh University of Professionals, Mirpur Cantonment, Bangladesh* Students at Bangladesh University of Professionals, Mirpur Cantonment, Bangladesh

101Factors Impede the Creation of Small Entrepreneurial Businesses in Bangladesh

1. IntroductionThere is a paramount importance of small business entrepreneurs in Bangladesh who are ensuring balanced growth in the country. Small and medium sized enterprises of Bangladesh, account for 99% of all industrial units and create 85% of industrial employment in the country (Zaman & Islam, 2011). Although, these small businesses have been received attention and importance by the policymakers in recent years, it is still suffering from some acute problems and barriers for functioning well. The problems and barriers usually faced by the small businesses are access to finance, access to land or business location, licensing and permits for business, corruption of the government offices, theft, customs and trade regulations, inadequacy of electricity, inadequately educated workforce, tough labor regulations, political instability, wrong practices of the informal sector, tax rates and transportation. Study also shows that lack of infrastructure, sound political environment, access to market and capital are the major factors that positively hinder the success of the small business entrepreneurs (Chowdhury, Alam, & Arif, 2013). The background factors like strong education and training, desire to achieve target, acceptance of responsibility, hard working, and risk orientation of the entrepreneurs are sometimes barriers for developing small entrepreneurial businesses in Bangladesh (Khan, Mohammad Khan, & Nur Alam, 2005).

It is opined by the experts that if the companies enjoy favorable business environment, small business sector will be able to contribute more in the economic development in Bangladesh. Research also shows that the success of the small enterprises is determined by the entrepreneur’s authority on business and the market strategy followed, nature and type of business and financial supports, management know-how, use of modern technology, market accessibility and the networking, government policy and support, favorable external environment, and the owner’s personal qualities (Islam & Muktadir-Al-Mukit, 2016). Studies also identified factors which are primarily responsible for the success of entrepreneurs of small businesses in Bangladesh such as, relationship and organization factors. Sometimes, some specific constrains that are concerned with personal, environmental-situational, judicial, economic and political in nature are impossible to overcome by the small business entrepreneurs in Bangladesh (Chowdhury, 2017). Hence, this study has been designed to identify the factors which are sometimes also barriers that can help in creating small business entrepreneurs in Bangladesh.

2. Literature ReviewThe importance of SMEs role in terms of the growth of developing nations is vital. As in the developing Asian economies, the small entrepreneurs create the major portion of industry and constitute fifty to eighty percentage of total employment (Chowdhury, 2007). The small and medium enterprises are sacred with some exclusive natures such as smaller investment, flexible operation system, progressive yield and instant compliance to market changes. They can only attain rapid development if the government follows the right laws of the market economy. The government also needs to bring the role of the market in allocating resources. The resources should be employed into full play considering the development needs of the entrepreneurs and guide them to the soundtrack thus centering on the light and tertiary industries. Government corruption is the major problem affecting to the creation of small entrepreneurs. (Shah et al, 2011).

102On the other hand, ADB (2008) published that, one of the major problems for the development of the small entrepreneurs is the limited access to financial credit. Additionally, Jamali (2010) said that the main factors for the limited access in the credit markets are (i) high interest rates, (ii) high collateral requirements& (iii) lack of proper coordination. Shah et al. (2011) also added in another research that the main reason for the limited development of small entrepreneurs is not accessing credit only but the strict government tax policy after considering the corruption of the government. Naqvi (2011) highlighted that the high-risk fee returns attached to small and medium enterprises results into higher cost of debt financing through financial credit. Jamali (2010) also added that, training facilities need to be built up to provide knowledge about different issues like management, quality controls and also marketing issues. The investigation from the firm owners found out that most of them lack the skills and knowledge to manage and run the enterprises. In another research in Nigeria, Okpara (2011) said that lack of skills for managing business is the major constraint in the creation of small entrepreneurs.

The study done by Chowdhury in Bangladesh in 2007 also found that infrastructural issues, financial problems, government support, legal support, political instability, cultural difference, education and lack of training were the main constraints to develop the small and medium enterprises. So, Chowdhury (2007) has suggested a framework to overcome these development constraints. The study also suggested that it is very important to minimize the corruption. As a result, it will be possible to build a positive environment for the small entrepreneurs to work and grow in a stable market economy. There was a similar study done in Indonesia. There, Tambunan (2011) has identified the following factors as the demotion factors for the small entrepreneurs. They are, business knowledge, technological support, lack of skilled human resource, corrupted government regulations, insufficient capital and marketing challenges. The findings of Tambunan’s study are also important for the other developing countries like Bangladesh because SMEs provide inevitable growth to the economy of any developing country. The results from this study will also help policy makers to develop policies that would boost the development of the small entrepreneurs.

If a small business entrepreneur has decision making problems and does not get the basic management ideologies, then it is likely that managerial challenges in the long run will take place if not ultimate failure (Griffin & Ebert, 2006). For many small businesses, choosing the location is the primary objective. Many a time, business locations are chosen without proper study and planning. Location is very much critical to be left to fate. Some entrepreneurs, in their initial stage choose a particular location just because they have found out a vacancy (Scarborough & Zimmerer, 2008; Lambing & Kuhl, 2007). Roomi (2009) concluded that, the creation of small entrepreneurs was impeded by the lack of four different factors: i) Professional Behavioral traits ii) Planned Business Structure iii) Ignorance of external factors and iv) Wrong location. Therefore, it is worthy to conduct study on the factors that hinder the creating of small business entrepreneurs in Bangladesh.


103Table 1 Variable Matrix

Influ

enci

ng F

acto

rs

Auth

or

Nam

e(s)

Ye

ar E

con

omy

Indu

stri

al

Fact

ors

Unem

ploy

abili

ty Go

ver

nmen

t Co

rrup

tion

Lack

of

lega

l su

ppor

t

Mar

ket

Reso

urce

Al

loca

tion

Lim

ited

Fina

ncia

l Cre

dit

High

m

arke

t in

tere

st

rate

High

Co

llate

ral

Requ

irem

ents

Lack

of

prop

er

coor

din

atio

n

Tax

Polic

y Lack

of

Trai

nin

g

Illite

rac

y La

ck

of

Skill

s

Poor

tra

nspo

rtatio

n

Polit

ical

im

bala

nce

Lack

of

tech

nolo

gic

al s

uppo

rt

Loca

tion

Lack

of

prop

er

plan

ning

Igno

ran

ce

Cho

wdh

ury

2007

√

√ √

√ √

√

√ √

√

√

Shah

etal

. 20

11

√

√

√ √

√

√

ADB

20

08

√

√

Jam

ali

2010

√

√ √

√

√ √

√

Naq

vi

2011

√

√

√ √

√

√

Okp

ara

2011

√

Tam

buna

n 20

11

√

√

√ √

√ √

√

√ √

√

Giff

in &

Eb

ert

2006

√ √

√

Scar

boro

ugh

& Z

imm

erer

20

08

√

√

√

Lam

bing

&

Kuh

l 20

07

√

√

√

Roo

mi

2009

√

√ √


104

3. Methodology3.1 Respondents ProfilesTable 2 shows that 72.40% of the respondents are at the age of 18-23 years followed by 20.50% at the age of 24-29 years, 5.20% at the age of 30-35 years, 1.40% at the age of 36-41 years and 0.50% at the age of 41 years and above. This indicates that the small entrepreneurs are created at the young age.

Table 2 Age Distribution of the Respondents in Small Entrepreneurs

Age Frequency Percent Valid Percent Cumulative Percent

18 to 23 152 72.4 72.4 72.4

24 to 29 43 20.5 20.5 92.9

30 to 35 11 5.2 5.2 98.1

36 to 41 1 .5 .5 98.6

41 to above 3 1.4 1.4 100.0

Total 210 100.0 100.0

The majority of the respondent small entrepreneurs are unmarried (80%) and 19% were married and 1% are widow (Table 3).

Table 3 Marital Status of the Small Entrepreneurs

Marital Status Frequency Percent Valid Percent Cumulative Percent

Married 40 19.0 19.0 19.0

Unmarried 168 80.0 80.0 99.0

Widow 2 1.0 1.0 100.0

Total 210 100.0 100.0

Table 4 shows that the majority of the entrepreneurs are at the 1st order of birth (41.4%) followed by 2nd in order (38.6%), 3rd in order (11.4%), 5th and last in order (4.8%), and 4th in order (3.8%) (Aktar, 2015).

Table 4 Birth Order of the Respondent Entrepreneurs

Birth Order Frequency Percent Valid Percent Cumulative Percent

1st 87 41.4 41.4 41.4

2nd 81 38.6 38.6 80.0

3rd 24 11.4 11.4 91.4

4th 8 3.8 3.8 95.2

5th / last 10 4.8 4.8 100.0

Total 210 100.0 100.0

Educational background of the respondents shows that the majority of them have HSC and bachelor degrees (87.6%) followed by SSC and equivalent (38.1%), Class V-IX (2.4%) and I-V (1.90%) (Table 5).


105Table 5 Respondents Completed Highest Level of School and Received Highest Degree

Educational Quali-fications Frequency Percent Valid Percent Cumulative Percent

Class I - V 4 1.9 1.9 1.9

Class V - IX 5 2.4 2.4 4.3

SSC 17 8.1 8.1 12.4

HSC 92 43.8 43.8 56.2

Bachelor and Above 92 43.8 43.8 100.0

Total 210 100.0 100.0

Business experience of the sample respondents shows that 56.2% respondents have below one year followed by 27.1% have 1-3 year, 10.5% have 4-6 years, 4.3%% have above 10 years, and 1.90% have 7-9 Years (Table 6).

Table 6 Involvement of Respondents in Small Entrepreneurs in Business

Years Frequency Percent Valid Percent Cumulative Percent

< 1 Years 118 56.2 56.2 56.2

1 to 3 Years 57 27.1 27.1 83.3

4 to 6 Years 22 10.5 10.5 93.8

7 to 9 Years 4 1.9 1.9 95.7

> 10 Years 9 4.3 4.3 100.0

Total 210 100.0 100.0

3.2 Sample Design and Determination of Sample Size The total number of SMEs in Bangladesh is estimated to be 79,754 establishments. Of them, 93.6 percent are small and 6.4 percent are medium1. Now, it is more than one lac. The sample size of this study was determined by using the following formula suggested by Yamane (1967).

Where, n is the sample size, N is the population size, and e is the level of precision. For this study, level of precision is presumed as 0.08 and the population size is 1,00,000. Putting these values in the above equation, the required number of sample size becomes approximately 204. This study interviewed 210 entrepreneurs who are engaged in small entrepreneurial businesses in Bangladesh. This figure is well above the critical sample size of 210 for employing multivariate analysis (Hair et al., 1998). Taking the accessibility and willingness of the employees to respond to this study into account, Convenience Sampling Method was used to draw the sampling units (Malhotra, 2007).

1 https://www.google.com.bd/search?source=hp&ei=uDitXYvxCYqo9QOdqKK4Dg&q=to-tal+number+of+small+entrepreneurs%2C+bangladesh&oq=total+number+of+small+entrepre-neurs%2C+bangladesh&gs_l=psy-ab.3...27712.37752..38150...0.0..0.242.6986.0j44j3......0....1..gws-wiz.......0i131j0j0i22i30j33i22i29i30j33i21j33i160j33i10.iI_sX7r9qzk&ved=0ahUKEwiLreC1xq-zlAhUKVH0KHR2UCOcQ4dUDCAU&uact=5


106

3.3 Questionnaire Design The structured questionnaire developed by Dabholkar (1996) was used in this research to collect information from the literature review on the factors that influence the development of small entrepreneurs in Bangladesh. Responses to all the statements in the questionnaire were measured on a five-point scale ranging from 1 to 5 with 1 indicating strongly disagree and 5 indicating strongly agree. One of the relative advantages of using this scale is its suitability for the applications of multifarious statistical tools used in marketing and social research study (Malhotra, 1999). The collected data were statistically processed subsequently to get the useful information. The reliability statistics show that the internal consistency of the questionnaire is under the acceptable limit (Nunnally, 1978). The reliability statistics are at the acceptable level (Table 7).Table 7 Reliability Statistics

Cronbach‘s Alpha N of Items

.948 32

3.4 Data Collection & AnalysisData were collected from both primary and secondary sources. Primary data were used for identification of the factors that influence the development of small entrepreneurs of Bangladesh. The survey was conducted among the small entrepreneurs of Bangladesh. The survey was conducted in September, 2019. The interviewers were properly trained on the items included in the questionnaire for data collection before commencing the interview. Along with descriptive statistics2, inferential statistical3 techniques such as, Factor Analysis and Multiple Regression Analysis were used to analyze the data. A Principal Component Analysis (PCA) with an Orthogonal Rotation (Varimax)4 using the SPSS (Statistical Package for Social Sciences) was performed on the survey data. Multiple Regression Analysis5 such as, Multiple Regression was conducted by using SPSS to identify the relationships between the dependent and independent variables and the significant factors.

2 Descriptive statistics includes statistical procedures that we use to describe the population we are study-ing. The data could be collected from either a sample or a population, but the results help us organize and describe data. Descriptive statistics can only be used to describe the group that is being studying. That is, the results cannot be generalized to any larger group.

3 Inferential statistics is concerned with making predictions or inferences about a population from obser-vations and analyses of a sample. That is, we can take the results of an analysis using a sample and can generalize it to the larger population that the sample represents.

4 Varimax rotation is an orthogonal rotation of the factor axes to maximize the variance of the squared loadings of a factor (column) on all the variables (rows) in a factor matrix, which has the effect of dif-ferentiating the original variables by extracted factor. Each factor will tend to have either large or small loadings of any particular variable. A varimax solution yields results which make it as easy as possible to identify each variable with a single factor. This is the most common rotation option.

5 In statistics, regression analysis is a statistical process for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables. More specifically, regression analysis helps one understand how the typical value of the dependent variable (or ‘Criterion Variable’) changes when any one of the independent variables is varied, while the other independent variables are held fixed.


107

4. Analysis and Interpretations4.1 Results of Factor AnalysisThe results of factor analysis show that all the variable concerning the creation of small entrepreneurship in Bangladesh are very high indicating the variables are important in this area of study (Table 8).

Table 8Communalities of the Variables

S.N. Variables Extraction

1. My education helped me to start this business .582

2. have enough experience to do a business .595

3. I have management skills to run a business organization .627

4. Interest on bank loan is very high for sourcing starting capital .798

5. I faced lengthy procedure in getting loan .794

6. Unavailability of long and medium term credit in Bangladesh .756

7. Collateral requirements is a barrier for starting a new business .652

8. I have access to IT .677

9. I have enough computer knowledge to do this business .741

10. I have internet facilities at my area of business .794

11. I have access to websites for getting help in doing business .726

12. I have the knowledge of the formal market of my business .600

13. Raw materials of my business are available .561

14. I have a very good connectivity to markets/customers .720

15. I have the scope to exchange information with others for doing business .694

16. Bureaucratic administration of taxes .707

17. Government offices have corruptions that barred my business .851

18. Political influence is a barrier for this business .848

19. Availability of power supply is a favorable support of my business .797

20. I enjoy good and proper transport facilities .795

21. Telecommunication in my area is available and efficient .671

22. My family supported my business while I started it .604

23. Availability of entrepreneurship development consultation services in my locality .688

24. I got training on entrepreneurship and small business development .726

25. Business location was availability when I started my business .574

26. Local support for starting and running the business is very important .728

27. Social respect for doing small business is essential to run and become success of this business

.724

28. Market demand of the products of my business is very high .659

29. I am ready to take risk for starting and running this business .673

30. Does character of the entrepreneur is needed for starting a new business .652

31. Innovativeness of the entrepreneur is essential for this business .725

32. Entrepreneur’s inner drive to do the business has got impact on the success of the business

.776


108Extraction Method: Principal Component Analysis.Table 9 shows the factors related to the creation of small entrepreneurship in Bangladesh. It shows that local support for starting and running business, knowledge on information tech-nology, difficulty in sourcing fund, business experience, entrepreneurship training, bureaucra-cy and corruptions at govt. office and transport and other facilities factors are important for creating the small entrepreneurs in Bangladesh. The variance of factor named local support for starting and running business is the highest (40.11%) followed by knowledge on informa-tion technology (7.30%), difficulty in sourcing fund (6.17%), business experience (4.94%), entrepreneurship training (4.68%), bureaucracy and corruptions at govt. office (3.61%), and transport and other facilities (3.54). The total variance of the data set is 70.36% indicates that major portion of the data set is included in the analysis.

Table 9 Total Variance of the Factors Explained

S.N.

Factors

Initial Eigenvalues

Total% of

VarianceCumulative

%

1. Local Support for Starting and Running Business 12.835 40.111 40.111

2. Knowledge on Information Technology 2.335 7.295 47.406

3. Difficulty in Sourcing Fund 1.975 6.173 53.579

4. Business Experience 1.582 4.944 58.523

5. Entrepreneurship Training 1.499 4.684 63.207

6. Bureaucracy and Corruptions at Govt. Office 1.157 3.614 66.821

7. Transport and Other Facilities 1.133 3.542 70.363

Extraction Method: Principal Component Analysis.

Table 10 shows the factor loadings of the variables constituted the factors. It shows that the factor loadings of all the variables are very high indicating that the variables constituted the factor(s) have higher level of relationships with them.

Table 10 Rotated Factor Matrixa

Variables / FactorsComponent

1 2 3 4 5 6 7

Factor 1 Local Support for Starting and Running Business

Local support for starting and running the business is very important

.715

Innovativeness of the entrepreneur is essential for this business

.654

Social respect for doing small business is essential to run and become success of this business

.622


109

Market demand of the products of my business is very high

.620

Entrepreneur’s inner drive to do the business has got impact on the success of the business

.618

I am ready to take risk for starting and running this business

.590

Does character of the entrepreneur is needed for starting a new business

.431

Factor 2 Knowledge on Information Technology

I have enough computer knowledge to do this business

.782

I have access to websites for getting help in doing business

.766

I have access to IT .705

I have internet facilities at my area of business .674

Factor 3 Difficulty in Sourcing Fund

I faced lengthy procedure in getting loan .824

Interest on bank loan is very high for sourcing starting capital

.784

Unavailability of long and medium term credit in Bangladesh

.771

Collateral requirements is a barrier for starting a new business

.625

Factor 4 Business Experience

I have enough experience to do a business .735

I have a very good connectivity to markets/customers

.690

Raw materials of my business are available .605

I have management skills to run a business organization

.523

I have the knowledge of the formal market of my business

.481

I have the scope to exchange information with others for doing business

.478

Factor 5 Entrepreneurship Training

I got training on entrepreneurship and small business development

.782

Availability of entrepreneurship development consultation services in my locality

.758

My education helped me to start this business .578


110

Business location was availability when I started my business

.556

My family supported my business while I started it

.526

Factor 6 Bureaucracy and Corruptions at Govt. Office

Government offices have corruptions that barred my business

.879

Political influence is a barrier for this business .844

Bureaucratic administration of taxes .760

Factor 7 Transport and Other Facilities

I enjoy good and proper transport facilities .809

Availability of power supply is a favorable support of my business

.711

Telecommunication in my area is available and efficient

.637

Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 7 iterations.

4.2 Results of Multiple Regression AnalysisAnalysis of variance shows that all the four factors concerning the creation of small entrepreneurs in Bangladesh are significantly related to the overall criteria. The results of regression analysis show that the seven factors can explain the dependent variable by 41.60% (R Square) indicating that the model is important (Table 11). The other factors might be in the greater environment like political, economic, social, technological, environmental and legal (PESTEL) of the small business in Bangladesh.

Table 11Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .645a .416 .392 .656

a. Predictors: (Constant), REGR factor score 7 for analysis 1, REGR factor score 6 for analysis 1, REGR factor score 5 for analysis 1, REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for analysis 1

b. Analysis of variance (ANOVA) shows that four factors are significantly related to the overall development of small entrepreneurship in Bangladesh (Table 12). All the factors together are significantly related to the overall development of the entrepreneurs in Bangladesh.


111Table 12 ANOVAb

Model Sum of Squares df Mean Square F Sig.

Regression 51.912 7 7.416 17.216 .000a

Residual 72.800 169 .431

Total 124.712 176

a. Predictors: (Constant), REGR factor score 7 for analysis 1, REGR factor score 6 for analysis 1, REGR factor score 5 for analysis 1, REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for analysis 1

b. Dependent Variable: Overall [Considering all the factors mentioned above, I have initiated and running my business successfully.]

The individual factor relationships with the overall development of small entrepreneurship in Bangladesh show that four factors such as, are significantly related (Table 13). This indicates that the factors such as, local support for starting and running business, knowledge on information technology, business experience, and entrepreneurship training are significantly connected to the dependent variable of overall development of small entrepreneurship in Bangladesh. That means that if there is a change in these factors there will be the change in dependent variable of the model. Factors like difficulty in sourcing fund, bureaucracy and corruptions at govt. office and transport and other facilities are not significantly related to the development of small entrepreneurship in Bangladesh.

Table 13 Coefficientsa

Factors

Unstandardized Coefficients

Standard-ized Coef-

ficients

B Std. Error Beta t Sig.

(Constant) 3.593 .049 72.836 .000Local Support for Starting and Running Business .257 .049 .305 5.192 .000

Knowledge on Information Technology .198 .049 .236 4.008 .000

Difficulty in Sourcing Fund .097 .049 .115 1.963 .051Business Experience .362 .049 .430 7.309 .000Entrepreneurship Training .202 .049 .240 4.084 .000Bureaucracy and Corruptions at Govt. Office .061 .049 .072 1.229 .221

Transport and Other Facilities .070 .049 .084 1.423 .156

a. Dependent Variable: Overall [Considering all the factors mentioned above, I have initiated and running my business successfully.]


112

5. Conclusions and RecommendationsThis study was conducted to identify the factors related to the creation of small entrepreneurship in Bangladesh. Results of the analysis show that there are seven factors that are instrumental to create small entrepreneurs in the country. The factors are: local support for starting and running business, knowledge on information technology, difficulty in sourcing fund, business experience, entrepreneurship training, bureaucracy and corruptions at govt. office and transport and other facilities factors are important for creating the small entrepreneurs in Bangladesh. The individual factor relationships with the overall development of small entrepreneurship in Bangladesh show that four factors such as, local support for starting and running business, knowledge on information technology, business experience, and entrepreneurship training are significantly related to the overall development of small entrepreneurship in Bangladesh. If the concerned authority focuses on helping to start and run the business, disseminate IT information to the entrepreneurs, gives training on business and entrepreneurs have previous experience there will be a positive environment of creation of small entrepreneurship in Bangladesh.

References

ADB, 2008. Private sector assessment in Pakistan. Retrieved from http://www.adb.org/Documents/Assessments/Private-Sector/PAK/Private-Sector-Assessment.pdf. Analysis of motivations, success factors and problems. Journal of Small Business.

Aktar, S. (2015). Factors influencing entrepreneurs business performance in small and medium businesses: Comparative analysis between demographic and environmental fctors in Bangladesh. Journal of Business and Technology (Dhaka), 10 (2), 1-17.

Chowdhury, F. N. (2017). A study of entrepreneurship development in Bangladesh: Pros and cons. Journal of Asian Scientific Research, 7 (1), 1.

Chowdhury, M.S. (2007). Overcoming entrepreneurship development constraints: The case of Bangladesh. Journal of Enterprising Communities: People and Places in the Global Economy, 1(3), 240-251.

Chowdhury, M. S., Alam, Z., & Arif, M. I. (2013). Success factors of entrepreneurs of small and medium sized enterprises: Evidence from Bangladesh. Business and Economic Research, 3(2), 38.

Chen, J. (2006). Development of Chinese small and medium-sized enterprises. Journal of Small Business and Enterprise Development, 13 (2), 140-147.

Dabholkar, P. A., Thorpe, D. I., & Rentz, J. O. (1996). A measure of service quality for retail stores: Scale development and validation. Journal of the Academy of Marketing Science, 24, 3-16.

Griffin, R. W., & Ebert, R. J. (2006). Business (8thed.). New Jersey: Pearson Prentice- Hall.


113Islam, N., & Muktadir-Al-Mukit, D. (2016). Factors determining the success of SMEs in

Bangladesh. Available at SSRN 2851533.

Jamali, S.K., L.M. Anka, & Khooharo, A. A. (2010). An evaluation of small and medium enterprises development in Pakistan. OIDA International Journal of Sustainable Development, 02 (01), 43-50.

Khan, E. A., Mohammad Khan, S., & Nur Alam, M. (2005). Factors affecting the growth of entrepreneurship in small-scale business. Business Review, 5 (1), 33-37.

Malhotra, N. K. (1999). Marketing Research: An applied orientation. London: Prentice-Hall International.

Malhotra, N. and Birks, D. (2007). Marketing research: An applied approach. Prentice Hall.

Naqvi, W.H. (2011). Critical success and failure factors of entrepreneurial organizations: Study of SMEs in Bahawalpur. Journal of Public Administration and Governance, 1, 2.

Nunnally, J.C. (1978). Psychometric theory (2nd ed.). New York: McGraw-Hill.

Lambing, P. A., & Kuhl, C. R. (2007). Entrepreneurship (4th ed.). New Jersey: Pearson Prentice-Hall.

Okpara, J.O., (2011). Factors constraining the growth and survival of SMEs in Nigeria: Implications for poverty alleviation. Management Research Review, 34 (2), 156-171.

Quadir, S. N., & Jahur, D. M. S. (2011). Determinants of success and failure of entrepreneurs of SMEs in Bangladesh-An Explorative Study. European Journal of Business and Management, ISSN, 2222-1905.

Roomi, D. (2019). Factors Affecting the Growth of Small Businesses. [online] Blog.som.cranfield.ac.uk. Available at: https://blog.som.cranfield.ac.uk/bgpblog/factors-affecting-the-growth-of-small-businesses [Accessed 11 Oct. 2019].

Shah, A.A., Mehmood, T., Hashmi, M. A., Shah, S. M., Shaikh, & F. M. (2011). Performance of SMEs in export growth and its impact on economy of Pakistan. International Journal of Business and Management, 6, 7.

Scarborough, N. M., & Zimmerer, T. W. (2008). Essentials of entrepreneurship and small business management (5th ed.). New Jersey: Prentice Hall.

Tambunan, T.T.H., (2011). Development of small and medium enterprises in a developing country: The Indonesian case. Journal of Enterprising Communities: People and Places in the Global Economy, 5 (1), 68-82.

Uz Zaman, A. H., & Islam, M. J. (2011). Small and medium enterprises development in Bangladesh: Problems and prospects. ASA University Review, 5(1), 145-160.


114

Nurturing Women’s Entrepreneurship for Inclusive Economic Development in Emerging

Economies: Present Status & Global Challenges(A Case of India & Nepal)

Himachalam Dasaraju * Himal Bhattrai **

Abstract

The present paper is a theoretical exposition on the need and importance of entrepreneurship development among women for inclusive economic development in emerging economies. The entrepreneurship is a driving force and boosts inclusive growth in all segments through transformation of the economy. It has been assuming immense importance in the economic development of developing nations. The women entrepreneurs have become very important drivers of sustainable economic growth in India and Nepal.

The role the people and their abilities have to play in this stupendous endeavor is supremely important, and any negligence of the human factor would enfeeble the economic prosperity of the country. Therefore, it is dire need to foster the entrepreneurship, particularly women entrepreneurship, for inclusive growth and sustainable economic development.

The paper provides a brief review on the Inclusive growth, women empowerment, women entrepreneurship in India and Nepal, Startups for the inclusive economic development. Further it offers some practicable suggestions to overcome the issues. All possible support-physical, material, technical have to be extended to the women entrepreneurs to enable them to achieve industrial success. It is dire need to encourage and bring the women into the main stream of industrial economy, as they constitute around 50% of the total population, to play their vital role in fostering inclusive growth and sustainable economic development further.

Keywords: Inclusive economic growth, Sustainable economic Development, Nurturing entrepreneurship, Start-ups, Incubators, Start-up ecosystem.

* Senior Fellow & Professor Emeritus, Sri Venkateswara University, Tirupati-517502, India, email: [email protected]

** Consultant, ICARD Pvt, Ltd., Kathmandu, Nepal, [email protected]

1. IntroductionThe economy of any country may be developed or developing has been continuously supported and strengthened by entrepreneurship. No economy can be imagined without entrepreneurship, as the future of any country now and then is dictated and directed by

Nurturing Women’s Entrepreneurship for Inclusive Economic Development in Emerging Economies: Present Status & Global Challenges

115Nurturing Women’s Entrepreneurship for Inclusive Economic Development in Emerging Economies: Present Status & Global Challenges

entrepreneurs. Entrepreneurs are real wealth creators. The entrepreneurship of women is considered to be an effective instrument to the economic development and empowerment of women. Empowerment refers to giving power to individuals in all spheres of life which are essential for the survival and overall development of the mankind. Empowerment of women leads to equipping women to be economically independent, self-reliant, have a positive self-esteem to enable them to face any difficult situation and they should be able to participate in development activities and in the process of decision making. It has been globally recognized that women’s empowerment can be well paying strategy for overall inclusive economic and social development. The more emphasis on developing women entrepreneurs by a country, that results in better living for families as well as the larger the spread of economic power among the people of a country, which leads to Inclusive economic development, which is dire need of the day.

Entrepreneurship is a vital input for development, which depends invariably on entrepreneurial talent and efficiency. It has emerged as a new major force for economic change. The MSMEs sector, which has gained momentum in our country in the context of global economic change, need qualitative and dynamic entrepreneurship as it contributes significantly to the economic development and nation building. The country, which has sound entrepreneurship, can progress in all spheres of the economy, as it can transform all available resources into valuable products. And the resources have to be effectively utilized in manufacturing goods and providing services by applying innovative scientific approaches. Further, to speedup industrial production and augment the economic prospects of our country the young and energetic educated unemployed youth have to be motivated to participate in the great risk. In this endeavor woman also along with men have to be motivated and encouraged to contribute their mite to it, as they have the potential to work hard with diligence and devotion.

The development of entrepreneurship, which is obviously a human activity, has become imperative for all development and prosperity. In this process entrepreneur stands at the centre as an organizer of human beings and material reserves and exchange agent that ensures progress. Without his role the resources of production remain stationary and can never be transformed into products or services (Abosede, A. J., & Onakoya, A. B. (2013). The spirit of enterprise makes him/her a spry entrepreneur. It is this spirit, which has transformed him/her over the centuries progressively from a nomad into a cattle-rearer, an agriculturist, a trader, and an industrialist and many more things. In the realm of business an industry entrepreneurs are persons who intimate, organise, manage and control the affairs of a business unit, which combines the factors of production to supply goods and services.

The entrepreneurs are the nucleus of economic activity and propellers of economic development. Entrepreneurs should be competent to perceive new opportunities, willing to take risks in exploring them and undergo, if necessary, rigorous hardships. The development of right entrepreneurship is one of the most acute problems of the developing countries. In fact a lack of the right kind of entrepreneurs in sufficient numbers invariably hinders economic development (Asian Development Bank (2008). India’s economic progress, as a developing country, is bound up with entrepreneurs who are enthusiastic and committed to maximize production as well as profitability of their respective organiations. Tapping the many hither to unused and locally available resource is what is immediately required. The developed as well as the developing countries today rely much upon rapid industrialisation for their economic development. Accelerating industrial development through rapid industrialisation

116

by exploitation and effective utilisation of the rich natural and physical resources, our country is endowed with, is vital for its economic development. The role the people and their abilities have to play in this stupendous endeavour is supremely important, and any negligence or under estimation of the human factor would only enfeeble the economic prosperity of the country. Consequently, the industrial policies of the Indian Government and the successive Five-year plans have reiterated again and again the Government’s intention to stimulate and promote the human factor in industrial development. Thus the entrepreneur has become very important as the nerve centre of all economic activity.

2. Inclusive Growth“Growth is inclusive when it allows all members of a society to participate in, and contribute to the growth process on an equal basis regardless of their individual circumstances.” Inclusive growth is economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society. The Eleventh Plan of India defined inclusive growth as a “growth process which yields broad-based benefits and ensures equality of opportunity for all” it stands for “equitable development” or “growth with social justice”. The Inclusive growth is where the gap between the rich and the poor is less pronounced and the “growth dividend” is shared in a fairer way that results in “improvements in living standards and outcomes that matter for people’s quality of life (e.g. good health, jobs and skills, clean environment, community support). (OECD, 2013).

Inclusive growth by its pace and pattern – growth that is sufficient to lift large numbers out of poverty and growth that includes the largest part of the country’s labour force in the economy (World Bank, 2009). The International Policy Centre for Inclusive Growth (IPC-IG) places its emphasis on participation – so that in addition to sharing in the benefits of growth, people actively participate in the wealth process and has a say in the orientation of that process. The ADB is of the opinion that tackling discrimination of the most marginalised groups is an intrinsic part of the inclusive growth process, as well as a key outcome. Groups that have suffered discrimination are those that have been left behind in poverty reduction and economic development efforts – helping these groups to participate in and benefit from economic activities is a cornerstone of inclusive growth (Klasen, 2010). The people have not seen their incomes rise for years; the gap between rich and poor has widened inequality in earnings and in wealth is increasing in many countries. Inequality is persisting in every area like education, life expectancy, employment prospects, socio-economic status, wealth and assets and the like.

The global institutions such as the Asian Development Bank and the World Bank have added the objective of attaining inclusive growth to their policy discourse on poverty reduction since 2007 (Asian Development Bank , 2008). By doing this, they acknowledge the widespread sentiment that growth is not benefitting everyone equally. There is a perception that although countries attain relatively high growth rates, many people do not seem to benefit from it. About a decade ago, these same institutions were discussing whether growth was pro-poor or not, that is, whether growth benefited equally all segments of the income per capita spectrum, or whether it benefited more the higher income groups. (Martin Ravallion and Shaohua Chen, 2003). The inclusive growth is imperative for achieving the equity objective, and is considered essential to sustain the growth momentum.


117

2.1 Need for Inclusive Growth in IndiaIn India the majority of the population living in rural areas and depends on the agriculture sector for their livelihood. The unorganized non-farm sector that is increasingly absorbing most of the labour force, and it has huge potential for growth with sufficient investment in infrastructure ensuring linkage to markets and easier access to assets and skills. Adoption of appropriate technology, skills, and easier access to credit, especially start-up capital, apart from facilitating market development, can make this segment an expanding base for self-sustaining employment and wealth generation. In this context entrepreneurial development has to be encouraged by having an enabling competitive environment and easy availability of finance for newer projects and enterprises. Recognizing them as resilient and creative entrepreneurs and value conscious consumers, a whole world of opportunity will open up.” (C. K. Prahalad’s, 1995).

Thus, there are several factors to be considered for inclusive growth. Among all, efficient allocation of investment and resource use across different sectors of economy are important to stimulate the economy. This can be done by addressing two basic supply-side issues viz. (i) effective credit delivery system to facilitate productive investment in employment generation impacting sectors especially, agriculture, micro, small and medium enterprises (MSMEs) and (ii) large scale investment in infrastructural facilities like irrigation, roads, railways, communication, ports, power, rural/ urban reconstruction and in social infrastructure such as health care, education and sanitation.

Inclusive growth is essential for sustainable growth and effective and efficient allocation of wealth. The most effective way to attain inclusive growth is through developing basic skills of the people. Since Indian independence (1947), economic and social development has been made the nation to develop strongly in the 21st century in different dimensions.

The following are the need for India to focus more on inclusive growth.1. India is the 7th largest by area and 2nd by population and 12th largest economy at

market exchange rate. But still India is away from the comprehensive development.2. Low agriculture development, low quality employment growth, low human development,

wide rural-urban gaps, gender and social inequalities, and regional disparities etc. are the daunting problems for the nation.

3. Reducing poverty and inequality and increasing economic growth are the main aim of the country through inclusive growth.

4. Political leadership plays a vital role in the overall development of the country which is not sustainable.

5. Rampant corruption is one of the problems that prevent inclusive growth.6. Literacy levels should be increased to provide the required skills to the workforce

required for higher growth.7. Accomplishment of highest GDP growth for country is one of the boosting factors

which give the impetus to the Inclusive Growth in India.

2.2 Inclusive Growth and DevelopmentThe ultimate objective of national economic performance is broad-based and sustained progress in living standards, a concept that encompasses wage and non-wage income as well


118

as economic opportunity, security and quality of life. This is the bottom-line basis on which a society evaluates the economic dimension of its country’s leadership. Many countries have had difficulty in satisfying social expectations in this regard. For example, in the last five years, annual median incomes declined by 2.4% in advanced economies, while GDP per capita growth averaged less than 1%. To borrow from a business concept, growth can be thought of as the top-line measure of national economic performance, with broad-based or median progress in living standards representing the bottom-line. Inclusive growth can be thought of as a strategy to increase the extent to which the economy’s top-line performance is translated into the bottom-line result society is seeking, i.e., broad-based expansion of economic opportunity and prosperity. However, inclusive growth is more than that. The extent to which it is a virtuous circle is influenced by a diverse mix of structural and institutional aspects of economic policy, going well beyond the two areas most commonly featured in discussions about inequality: education and redistribution.

The Gender-related Development Index (GDI) and the Gender Empowerment Measure (GEM) were introduced in 1995 in the Human Development Report written by the United Nations Development Program. The aim of these measurements was to add a gender-sensitive dimension to the Human Development Index (HDI). The first measurement that they created as a result was the Gender-related Development Index (GDI). The GDI is defined as a “distribution-sensitive measure that accounts for the human development impact of existing gender gaps in the three components of the HDI”. Distribution sensitive means that the GDI takes in to account not only the average or general level of well-being and wealth within a given country, but focuses also on how this wealth and well-being is distributed between different groups within society. The HDI and the GDI (as well as the GEM) were created to rival the more traditional general income-based measures of development such as Gross Domestic Product (GDP) and Gross National Product (GNP). The UN Human Development Index is a summary measure of key dimensions of human development: life expectancy, education, and standards of living.

Today, more women are breaking free from the traditional, gender-specific roles and venturing into the business world. Not only are they holding high corporate positions but they are also successful women entrepreneurs who own almost half of all businesses in the United States.

The steady rise in female entrepreneurs can be due to many different reasons, most of which share the same rational as their male counterparts—passion for their ideas, the desire to become their own boss, and the need to address philanthropic causes. A recent study indicated that 1 out of every 11 adult women is an entrepreneur in the United States. Women business owners contribute to the overall employment of 18 million workers and generate anywhere from $2 to $3 trillion in U.S. economy revenues.

2.3 Performance MetricsIn addition to the Policy and Institutional Indicators (PIIs), a set of performance metrics, or National Key Performance Indicators (KPIs), is presented below in the form of a dashboard for each country. This set of KPIs provides a more complete picture of national economic performance than that provided by GDP alone, particularly if the ultimate objective of development is understood to be sustained, broad-based advancement of living standards rather than increased production of goods and services, per se.


119

Virtuous Circle of Inclusive Growth and DevelopmentPillar 1

Education and Skills Development

Equitbletaxation and

social protection

Sound institutions,

business and

political ethics

Productiveallocation of

financialresources

Good jobs,wages andlivelihoos

Building blocksof human

potential andopportunity

Pillar 7Fiscal

Transfers

Pillar 4Financial Intermediation

of Real EconomyInvestment

Pillar 5Asset Building

and Entrepreneurship

Pillar 6Employment and

Labour Compensation

Pillar 2Basic Servicesand DigitalInfrastructure

Pillar 3Corruptionand Rents

Source : The Inclusive Growth and Development Report 2017 is published by the World Economic Forum.

India, with a score of only 3.38, ranks 60th among the 79 developing economies on the IDI, despite the fact that its growth in GDP per capita is among the top 10 and labor productivity growth has been strong. Poverty has also been falling, albeit from a high level. On the other hand, its debt-to-GDP ratio is high, raising some questions about the sustainability of government spending. With regard to Framework indicators, educational enrollment rates are relatively low across all levels, and quality varies greatly, leading to notable differences in performance among students from different socioeconomic backgrounds. While unemployment is not as high as in some other countries, the labor force participation rate is low, the informal economy is large, and many workers are in vulnerable employment situations with little room for social mobility. A more progressive tax system would help raise capital for expenditure on infrastructure, healthcare, basic services, and education. India scores well in terms of access to finance for business development and real economy investment. However, new business creation continues to be held back by corruption, underdeveloped infrastructure, and the large administrative burden involved in starting and running companies (World Economic Forum Report, 2017).

3. Women EmpowermentEmpowerment is a multi-faceted, multi-dimensional and multi-layered concept. Women’s empowerment is a process in which women gain greater share of control over resources - material, human and intellectual like knowledge, information, ideas and financial resources like money - and access to money and control over decision-making in the home, community, society and nation, and to gain `power’. According to the Country Report of Government of India, “Empowerment means moving from a position of enforced powerlessness to one of Power”.


120

The role of women entrepreneurs in the process of economic development has been recognized form nineties in various parts of the world. Today, in the world of business, women entrepreneurship has become an essential movement in many countries and has been accepted in all areas of working. The United Nations report has also concluded that economic development is closely related to the advancement of women. In nations where women have advanced, economic growth has usually been steady. By contrast, in countries where women have been restricted, the economy has been stagnant. By recognizing entrepreneurship as a key driver for economic development, nurturing and promoting entrepreneurship has become dire need of the day. Both as drivers and main beneficiaries of this growth, women especially have been identified as vital and the ‘new heroes of the developing economy’. As a result they are an important target group in private sector development programmes in general and entrepreneurship promotion in particular. Towards this end more resources are being directed to develop the entrepreneurial potential of women and support their micro and small enterprises, little evidence is available on how entrepreneurship promotion in developing countries actually leads to economic growth that benefits women.

The development practitioners and policy-makers anecdotally admit that such virtuous development rarely happens and only have intuitive answers to the critical questions: ‘what works’ and ‘what does not’ in entrepreneurship promotion and private sector development programmes, and whether interventions actually contribute to gender-just inclusive economic growth in developing countries. There are undoubtedly programmes that benefit a number of individual women but when the actual problem is left intact – which is that entrepreneurs, men and women alike, operate in patriarchal economies and societies that are biased against women over men, and as a result constrain women’s position and entrepreneurial success– efforts will remain in vain and without any significant macroeconomic or social impact. Serious change and real reform has yet to be demonstrated and with a persisting gender bias in entrepreneurship, we need to temper our expectations of entrepreneurship promotion to establish Inclusive Economic Growth through Women’s Entrepreneurship Promotion-ECDPM.

4. Women entrepreneurship in India Waves of liberalization, privatization, and globalaisiton are sweeping across the world. Those who had talked about “market failure” and “exclusion of the poor by the market” are now advocating a greater role for the market forces and a market friendly economy. The growing needs of the public, on the one hand and the inability of the government machinery to provide for the ever growing needs of the people efficiently and effectively on the other hand, have speeded up the process of marketisation. Apart from this, the increase in public expenditure and the sources crunches also has strengthened the bounds of privatization. This trend could be clearly seen in the field of industry and business where potential entrepreneurs have come forward to take up industrial ventures. It is worthwhile considering what roles women entrepreneur in India can play in this context. Entrepreneurship involves taking risks and coordinating factors of production towards prosperity especially when the environment is uncertain as a matter of fact entrepreneurs and their entrepreneurial qualities make all the difference between the success and failure of an organization. The need to bring out the latent energies and talents of prospective entrepreneurs and mould them into active entrepreneurs who are daring and prepared to take risks and in situations of uncertain earnings is so great at present that it has to be repeatedly stressed.


121

The government of India has undertaken a number of programmes to impart all the necessary technical, managerial and other related training to prospective industrial entrepreneurs, so that they enter the field confidential and competently, and manage their units significantly. It is in this context the necessity and importance of entrepreneurship development among prospective women entrepreneurs, has to be considered seriously for more than one valid reason women have all the potential for efficient entrepreneurship. They are a match to men in their mental, moral and intellectual abilities. Women can play a significant and valuable role in our economy and there is every compelling need to bring them into the main stream of the nation’s economic development in general and industrial development in particular. Generally speaking Indian women are accustomed to having their activities confined to the family and house hold and they are generally not in favour of venturing out to assume new roles for themselves. Masculine prejudice against women potential has been partly responsible for it. Times have been changing fast and there should be motivated, persuaded and encouraged to free themselves from inhibiting customs and traditions, feel proud of their talent and abilities and enlarge their field of activities. Their capacity for patience hard work their devotion to duty and sense of responsibility has been proverbial. But they have to be urged, prevailed upon, properly motivated and their innate talents and ability are nurtured and canalized into newer and fruitful activities including entrepreneurship. They must be convinced that they are regarded as equal partners with men in all respects.

In the developed countries women’s participation in various economic activities including industries is a familiar fact. They are no longer male prerogatives. In the interest of the nations all-round the development that it is essential that Indian women, both urban and rural, be drawn into it without delay. They have now many profitable openings to exercises their talents and potentials, if only they venture out. In the industrial field the small scale sector in fact provides many opportunities for their entrepreneurship, especially for those who may hesitate about big venture.

4.1 Women Entrepreneurship Development in India -Present Status India, which is yet to step up overall conditions conducive to the success of women entrepreneurs, has ranked among the lowest ‘Women Business Ownership’ index, a survey has revealed. “Women entrepreneurs have been carving out a niche for them across the globe including India especially in niche and unconventional businesses. However, there is significant potential to harness the untapped potential of women’s entrepreneurship in India” according to Mastercard Index of Women Entrepreneurs. According to the index India scored an overall 41.7 points, ranking 49 among 54 economies globally with comparatively low in Women Business Ownership percentages. The index uses 12 indicators and 25 sub-indicators in 54 economies across Asia Pacific, Middle East and Africa, North America, Latin America and Europe, representing 78.6 percent of the world’s female labour force. It said India presents lower opportunities for women to assume leadership roles, participation in the workforce or engagement in entrepreneurial activities - a disparity that explain the low scores for Business Ownership by Women in the country. “While necessity and grit are often important to foster women entrepreneurship, strong supporting conditions are an imperative for ensuring a high business ownership by women. While India is yet to travel a long road for scaling up opportunities that foster women entrepreneurship, the potential presented by the country is vast,” said Mastercard Advisors Senior Vice President and Group Head - South


122

Asia/ Advisors CoE Sukanyya Misra. She said, lack of education, technological know-how and cultural bias coupled with stringent business and government regulations are some key impediments that happen to undermine women’s ability to rise to positions of leadership and take advantage of entrepreneurial opportunities in India. Overall developed markets top the index, led by New Zealand (74.4), Canada (72.4) and the United States (69.9). These countries have the strongest conditions that support women business ownership, such as robust small- and mid-sized business communities, a high quality of governance and ease of doing business, the survey said (Economic Times, 2018). On the other hand, lower-income economies like Uganda (34.8 per cent), Bangladesh (31.6 per cent) and Vietnam (31.4 per cent) have some of the highest percentages of women entrepreneurs, driven mostly by necessity as opposed to being inspired by business opportunities, it added.

4.2 Women Entrepreneurship- Some barriersIt would be wrong to assume that it is all smooth sailing for women’s entrepreneurship. Merely became a number of bodies have come forward to help them. There are several challenges and problems to be faced internal as well as external in managing their units. Indian women entrepreneur belonging to trade, industry and profession have been mainly confined to making representations to the decision- making machineries of the central and the state government in our country. Despite the measure taken by the government and others to help them, the problems are many. The list some of them at random:-

i. Severe competition from the units managed by the male entrepreneurs, ill-treatment from their male counterpart,

ii. Non–availability of raw material. This is very difficult problem to all entrepreneurs, women in particular. To get raw material in time is not easy in our country. The prices of raw material also are high,

iii. Financial constrains getting required financial support is one of the big and first hurdles that women entrepreneurs have to overcome. They do not get they require financial assistance at reasonable rate of interest. It goes without saying that without the necessary financial resources, they cannot function at all,

iv. Problems of managerial efficiency are another bridge they have to cross. Women entrepreneurs require managerial assistance in all the functional management areas of the industry, and they have to be provided with it.

v. Technical know-how is another problem women entrepreneurs have to tackle. Technical advancement alone in the industrial sector, which is highly technologised, enables progress in production, cost minimization, and profit maximisation. Therefore, women entrepreneurs should be facilitated with the latest technology in their respective areas of working. A fact that they (and men to) have to bear in mind that these days technological development takes place vary fast, and one has to keep oneself barer of them.

vi. Women entrepreneurs have yet to get use to economic and social risks. In industry or business, entrepreneurs are constantly exposed to many risks and uncertainty. The success of women entrepreneurs depends on her capacity to observe additional risks arising out of her business activity. The higher the risk-bearing capacity and confidence in meting the uncertainties, the higher will be the profitability and the progress of the venture. Women will have to learn to extend their innate capacity to face risks and


123

uncertainties’ in the domestic sphere to the spear of industry and business.vii. The sense of inferiority in women fostered by custom and tradition is a great barrier to

their entrepreneurs. They ill have to overcome it by determine efforts.viii. Lack of specialized training women entrepreneurs particularly in rural areas handicapped

for the lack of it which hinders the progresses of units managed by them.ix. Lack of sufficient infrastructure facilities is also a discouraging factor for women who

enter the industrial sector.x. Lack of proper encouragement from the agencies by way of sufficient special incentive

packages meant exclusively for women entrepreneurs, is also a factor they have to reckon with.

5. Startup India – A driving force for Inclusive Growth Startup India Scheme“A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed,” says Neil Blumenthal, co-founder and co-CEO of Warby Parker.As per the Startup India Scheme, the Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding Rs. 25 crore in any preceding financial

year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. Startup India means an entity, incorporated or registered in India with some specific features as detailed below:

1. Not prior to seven years, however for Biotechnology Startups not prior to ten years,

2. With annual turnover not exceeding INR 25 crore in any preceding financial year, and Working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

3. The entity is not formed by splitting up, or reconstruction, of a business already in existence.

4. The Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

The Prime Minister of India Mr.Narendra Modi has initiated and launched the ambitious Startup India movement. This programme aims to bridge the gaps in the economy for the growth and development of startups. It aims to boost the digital entrepreneurship at the grassroot level. The government is expected to earmark around Rs 2,000 crore for this initiative to stimulate the entrepreneurship and to generate employment opportunities to the youth. The much awaited unveiling of Start-up India by Prime Minister of India has brought lots of positive provisions among the entrepreneurs in India. The Startups India have elevated to the position of third largest number of start-ups globally. The IESA (Indian Electronics and Semiconductor Association) applauds the government on being a facilitator to build the startup nation.


124

With the Government’s support, a startup can be built in a day which will definitely motivate many young entrepreneurs to turn ideas into action thereby increasing the jobs in India as well,”says M N Vidyashankar, President, IESA. Mr. UmeshSachdev, CEO & Co-Founder, Uniphore Software Systems: “Over the past few years, the startup ecosystem has witnessed exponential growth within the country. With Prime Minister NarendraModi’s direct involvement in promoting startups with ‘Start-up India Stand up India’ initiative, we can expect a positive impact on the ecosystem as well as the economy. The government needs to play a pivotal role in various dimensions of the startup ecosystem, and the main focus should revolve around the 3P’s (Promotion, Policy and Pravasi Indians (NRI)). The government should help to provide a voice to the startups, by promoting them across the world which will help them emerge internationally. Secondly, creating startup friendly policies, this will nurture their growth by preventing hurdles like red tapism etc.”

The country has more than 19,000 technology-enabled startups, led by consumer Internet and financial services startups, the report said. “Indian startups raised $3.5 billion in funding in the first half of 2015, and the number of active investors in India increased from 220 in 2014 to 490 in 2015. As of December 2015, eight Indian startups belonged to the ‘Unicorn’ club (ventures that are valued at $1 billion and upwards).”

5.1 Incentives and Exemptions under Start-up India and Stand-up India The eligible Startups will get various Incentives and Exemptions:

1. Easy availability of Seed Funding2. Income Tax Exemptions for 3 years3. Around 80% Patent fee will be refunded4. Labour and Environment laws exemptions for 3 years.5. The Capital Gain Tax exemption for investment in eligible Startups6. Exposure to best startup mentorship7. Easy Exit from the Startup within 90 days

The main aim of Start-up India, Stand-up India action plan is to give impetus to innovation and encourage the talent among young people and remove onerous government regulations and red tapism.

6. Women Entrepreneurship in Nepal The women population of Nepal constitutes 50% of the total population. Their contribution to its national economy is remarkable and considerable. The whole segment of women is informally and indirectly contributing to the National economy. This needs to bring out the women and their contribution to the stream of the economic development. The practice of women entrepreneurship in Nepal is such that the women segment themselves is backed by the self-limiting beliefs. Similarly, the social, cultural factors and family attitude towards women entrepreneurship is not supportive and encouraging. It is very difficult for women entrepreneur to meet both of their entrepreneurial and family responsibility. This has resulted in various conflicts within the family which can sometimes result in many women giving


125

up their entrepreneur role and devoting themselves to family responsibility alone (Adhikari, 1997). An initiative being carried out by women entrepreneurs to address the financial and non-financial needs of the women entrepreneurs is interesting and overwhelming. Business development and support, access to market and technology, R&D and innovation are the critical factors for the sustainable growth of the women entrepreneurs and their business. A support backup encourages women to take the initiative to take more risk and progress in the journey of an entrepreneur for inclusive economic growth.

6.1 Problem of Women Entrepreneurship in Nepal The women entrepreneurship in developing countries like Nepal is not viewed significantly. The cultural influences, self-limiting belief of women itself, lack of finance and multiple roles of women are the major problems of women entrepreneurship in Nepal. These include:

Socio-cultural influence, Low level self-confidence of women, multidimensional roles and responsibilities, Low Education, Training and Professional Development, Difficulty to raise capital for business, No effective Institutional efforts to promote women entrepreneurship in Nepal, Various national, international and governmental organization working towards bringing women of the country in to the main stream of the business is not so conducive (Mathew and Panchanatham, 2011).

6.2 National agencies working to promote Women Entrepreneurship in Nepal • Department of Cottage and Small Industries (DCSI) • Cottage and Small Industry Development Board (CSIDB)• Industrial Enterprise Development Institute (IEDI)• Women Entrepreneurs Association of Nepal (WEAN)• Federation of Women Entrepreneur’s Associations of Nepal (FWEAN)• WEAN Multipurpose Co-operative• Women Co-Operative Society (WCS) Ltd. • Poverty Alleviation Fund (PAF)• Micro Enterprise Development Program (MEDEP)• Federation of Nepalese Chambers of Commerce and Industry (FNCCI)• Federation of Nepal Cottage and Small Industries (FNCSI)• Centre for Self-help Development (CSD)• Department of Women Development (DWD)• Women for Human Right, Single Women Group (WHR)• Federation of Business and Professional Women Nepal (FBPWN)

6.3 National agencies working to promote Women Entrepreneurship in Nepal• SNV Nepal• HELVETAS Nepal


126

The first and the foremost problem of Nepalese women is that they are finding it difficult to raise startup capital for business. Similarly, they also lack operating capabilities to run the business. Hence, the government, umbrella organizations and private sector should come up with the capacity development program to women entrepreneur. For this, a mechanism has to be developed to finance women entrepreneurship in making them capable towards business and entrepreneurship.

Enough has been said so far about these steps taken by the government and other agencies to encourage and promote entrepreneurship among women, particularly in the SMEs sector. It has also been seen how certain pressuring problems persist which are not easy to solve. It is necessary to take realistic view of their situation and consider how best entrepreneurship of women can be fostered. Both the government and the entrepreneurs have fallen short of expectations in this regard. In spite of the many measures taken by the government for creating congenial atmosphere to encourage women entrepreneurs, the development of their entrepreneurship in the country has still belied expectations.

7. ConclusionThe industrial sickness is quite a serious problem in India for the last some decades. It is only natural prospective of entrepreneurs, particularly women, feel hesitant and discouraged. Therefore, it is absolutely necessary that the entrepreneurs are not only properly motivated, encouraged, trained in technical and managerial skills, but also provided with adequate financial resources for their successful functioning. It may be taken as axiomatic that there can be no industrial development at all particularly in the small sector without a commensurate development of entrepreneurship among women especially. While the government having become aware of the need to develop women’s entrepreneurship has taken several steps to promote it, they have not yet yielded the results so far. Part of the blame for it should lie with the prospective entrepreneurs themselves and part with their milieu.

If lack of will power, self-confidence, proper motivation, foresight, lack of awareness of opportunities, managerial skills, technical and financial support, and want of family and community support, policy support from the government, financial and other agencies etc, discourage them from entrepreneurship. This situation has to be remedied if there should be a ready response from women. If women can enter with courage and confidence to the industrial scene, nothing can foil their efforts to succeed in their industrial venture. The Start-up India and subsequent Start-up India & Stand-up India programme will bring laudable change in Indian industrial scene by creating more employment opportunities to the youth and enhancing economic prosperity of our country. Hope it will meet the aspirations of youth in terms of employment and higher standard of living. The Start-up India mission should move forward towards this end. Let us hope for the best.

All possible support-physical, material, technical have to be extended to the women entrepreneurs to enable them to achieve industrial success, especially in the small-scale sector. The assured success of the small entrepreneurs, whose importance is necessary for the growth of nations’ economy by no means small, would certainly attract others to their fold. Thus, they would contribute their mite to the common endeavour of the nations’ economic development. Today it is dire need to encourage and bring the women to the main stream of industrial economy. The women entrepreneurship needs all means of comfort and encouragement as


127

they constitute around 50% of the total population in India.

All these suggestions are workable and when implemented would certainly improve the performance of the enterprises and the spirit of women entrepreneurship. The success in this endeavour ultimately depends upon the commitment, willpower and spirit of entrepreneurship among women. Women entrepreneurship alone would change the living conditions of the women and contribute their mite to the inclusive growth and national development. They should come to the main stream of Indian economy through entrepreneurial activity. Certainly this would change the Indian economy in general and women status in particular. Let us hope for the nurturing and fostering of women entrepreneurship further for the empowerment of women and inclusive growth for sustainable development in Nepal and India as well.

ReferencesAbosede, A. J., & Onakoya, A. B. (2013). Entrepreneurship, economic development and

inclusive Growth. International Journal of Social Sciences and Entrepreneurship, 1 (3), 375-387. Retrieved from https://www.academia.edu/3778156/Entrepreneurship_Economic_Development_and_Inclusive_Growth.

Adhikari, M. (1997). Women Entrepreneurship in Small Scale Industries in Nepal, Master Degree thesis submitted to Tribhuvan University, Kathmandu, Nepal. Retrieved from http://202.45.147.21:8080/jspui/bitstream/123456789/659/1/00%20Final%20Thesis%402015_updated_v2_CD.pdf.

Asian Development Bank (2008). Strategy 2020: The Long-term strategic framework of the Asian Development Bank 2008–2020. ADB. Retrieved from https://www.adb.org/sites/default/files/institutional-document/32121/strategy2020-board-doc.pdf.

Dupriez, L., (1955). Economic progress. Papers and Proceedings of a Round Table Held by the International Economic Association (Louvin: Institute de Researches Economiques et Sociales, International Economic Association, held at Santa Margherita), Italy, 22-24. Retrieved from https://biblio.co.uk/book/economic-progress-dupriez-l/d/692214299.

ECLAC (2011). Poverty, Inequality and Perceptions of Work in Latin America. Santiago de Chile: CEPAL. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---ed_protect/--- protrav/---travail/documents/publication/wcms_248029.pdf.

George, H. E. Jr., (1949). The entrepreneur and economic theory. American Economic Review, 338.

Hull (2009). Understanding the relationship between economic growth, employment and poverty eduction. Development Co-Operation Directorate Development Assistance Committee, DCD/DAC (2009)16/ADD, April 2009, Pages 30-52. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.462.6060&rep=rep1&type=pdf#page=30.

Jesus, F. (2012). Inclusive growth: Why is it important for developing Asia? Cadmus, 1 (4), 36-58. Retrieved from http://cadmusjournal.org/article/issue-4/inclusive-growth-why-it important-developing-asia.


128

Mathew, R. V., & Panchanatham, N. (2011). An Exploratory Study on the Work Life Balance of Women Entrepreneurs in South India, Asian Academy of Management Journal, 16 (2), 77- 105. Retrieved from http://eprints.usm.my/36565/1/AAMJ_16.2.4.pdf.

Minu Sigdel (2015). Women entrepreneurship in Nepal. Thesis, Submitted to Tribhuvan University, Kathmandu. Retrieved from http://202.45.147.21:8080/jspui/bitstream/123456789/659/1/00%20Final%20Thesis%402015_updated_v2_CD.pdf.

OECD. (2009). Promoting Pro-Poor Growth. Employment. Paris: OECD. Retrieved from https://www.oecd.org/greengrowth/green-development/43514554.pdf.

OECD. (2013).Together We stand: Inclusive growth. A Speech by OECD Secretary General Angel Gurria at OECD Workshop on Inclusive Growth. Paris. Retrieved from https://www.oecd.org/inclusivegrowth/events/Proceedings_Inclusive%20Growth%20for%20Shared%20Prosperity_03.04.13.pdf.

Prahalad, C. K. (2005). The fortune at the bottom of the pyramid - eradicating poverty through profits. Pearson Education, Inc, Wharton School Publishing, 2005. Retrieved from http://ptgmedia.pearsoncmg.com/images/9780137009275/samplepages/0137009275.pdf.

Ravallion, M., & Chen, S. (2003). Measuring Pro-Poor Growth, Economics Letters, 78(1), 93-99. Advance online publication. https://doi.org/10.1016/S0165-1765(02)00205-7.

Stephan Klasen (2010). Measuring and Monitoring Inclusive Growth: Multiple Definitions, Open Questions and Some Constructive Proposals. ADB Sustainable Development Working Paper Series,12, Retrieved from https://www.adb.org/sites/default/files/publication/28492/adb-wp12-measuring-inclusive-growth.pdf.

Tiwari, N. S. (2013). Shared prosperity: Links to growth, inequality and inequality of opportunity. Washington DC: World Bank. Retrieved from http://documents.worldbank.org/curated/en/844911468180241137/Shared-Prosperity-links-to-growth-inequality-and-inequality-of-opportunity.

Verma R. B. S. et al., (2012). Shades of inclusion and exclusion in India. Lucknow: New Royal Book Company, ISBN: 978-93-80685-48-9.

Vijay Kumar S (2012). Challenges Ahead for Inclusive Growth in India. IJRDMS, 6 (1).

World Bank (2009). What is inclusive growth? Washington DC: World Bank. Website: https://economictimes.indiatimes.com/small-biz/entrepreneurship/india-ranks low-among-countries-with-women-entrepreneurs-survey/articleshow/57520712.cms.

World Economic Forum (2017). The Inclusive Growth and Development Report (January 2017). Http://www3.weforum.org/docs/WEF_Forum_IncGrwth_2017.pdf (last accessed on January 15, 2018).


129

Relationship between Knowledge Management and Psychological Empowerment in Service Sector

Sunita Bhandari Ghimire * [email protected]

AbstractService sector industries are increasing nowadays as there are lots of opportunities for these industries resulting on higher degree of competition. This has led organizations seeking for more knowledgeable and empowered employees as the involvement of employees in providing services ensures organizational survival to large extent in service sector. Based on these, this study has been carried out to find the real situation of psychological empowerment and knowledge management in the service sector for the purpose of exploring the relation between these variables. The study has used well-grounded theories to measure the relationship between psychological empowerment and knowledge management. Menon’s (2001) three component model of psychological empowerment and Rashid et al., (2015) three component model has been used for measuring knowledge management. Besides the model of Rashid et al., items developed by Hansen et al., (1999); Cohen and Levinthal (1999); Alavi and Leidner (2001); Holts house (1998) has been used to develop the instrument for measuring knowledge management. 15 items for measuring psychological empowerment and 28 items for measuring knowledge management has been used for finding the situation of knowledge management and psychological empowerment as well as the relationship between knowledge management and psychological empowerment in service sector. Four industries i.e. Health, Telecommunication, Airlines and Education are the industries under which 12 organizations from both public and private sectors have been selected for the study. Altogether 640 employees have been defined as samples and equal number of questionnaires has been distributed to all selected organizations. Among the selected samples, 437 respondents have responded completely which are taken for the further analysis. Convenient and Judgment sampling has been followed for the study. Confirmatory factor analysis has been done to confirm the items taken into consideration. Descriptive, correlational and regression analysis has been used to achieve research objectives and to test the proposed research hypotheses. Chronbach’s alpha for testing reliability has been calculated with the help of SPSS 18. Structural equation modeling has been conducted to examine the relationship between studied variables and to identify the strength of that relationship using AMOS.

Keywords: Psychological empowerment, Knowledge management, Empowered employees, Knowledgeable employee

* Lecturer, Central Department of Management T.U.


130

1. Background of the StudyServices have unique characteristics of intangibility, heterogeneity, perishability and inseparability which demands the unique service each time the service is delivered to them and for the satisfactory address from the employees it is necessary that employees should be knowledgeable as well as empowered. Knowledgeable as well as empowered employees play a vital role in the success of the service sector. What the customer perceives about a service highly depends on the skills and competencies as well as the interest of the employees. Resource based approach to employees argues that they can create a competitive advantage by making the resources rare, capacity to add value, inimitable and non-substitutable (Barney, 1991; Wright et al., 1994; Gautam and Ghimire, 2017) where knowledge management and psychological empowerment could play a vital role.

Organizations with good knowledge management and psychologically empowered employees in this competitive global environment possess power which is critically important to today’s service providing organizations. Service is that sector where high level of involvement of employees is essential for delivering the required service and service quality highly depends upon the competencies of the employees of an organization which is heavily influenced by knowledge as well as psychological status of the employees. Talking about the customer perceived value in the service oriented organizations, it is essential to link it with the core competencies of the person who provides these services to the customer. Hence, it is essential that employees should be developed in an organization taking them as the resource of the organization in order to increase the competitive advantage of the organization through the effective management of knowledge and empowering employees in the right way.

Going through researches, some variables that play significant role in the service sector are extracted as empowerment (Kruja and Oelfke (2009) and Knowledge management (Fernandez and Moldogaziev, 2011; Chang and Liu, 2008). Customers will not remain unaffected by the competencies and skills of the employees who provide services to customers mostly in the service sector organizations where the competencies and skills of the employees are affected by knowledge management and psychological empowerment (Cong and Pandya, 2003; Yeboah et al., 2014; Masdek et al., 2011; King and Grace 2009). Due to the quality of heterogeneity linked with the human resources, customer will be affected by the competencies of the employees who are providing those services (Mangold and Miles, 2007; Natrajan et al., 2016; Tam and Wong, 2001). In this context, study is needed to find out the relationship between knowledge management and psychological empowerment in service sector and this study has tried to study the relation between these two variables to some extent.

2. Review of the literatureMuhammad (2006) stated that people, who feel competent, tend to share more information than do people who feel they are not competent. It has been seen that such people generate more knowledge. They try to have access to more information and apply it more than others. The results of Muhammad’s studies show that psychological empowerment leads people towards knowledge management activities (Salajeghe et al., 2013). Ahmadi et al. (2012) studied the relationship between psychological empowerment and knowledge management and found significant relationship between psychological empowerment and knowledge transfer, organization and application activities but found no significant relationship between


131psychological empowerment and knowledge creation and assimilation.

Empowerment begins with a change in beliefs, thoughts and attitudes of employees. This means that they should believe they have the abilities and competencies required to perform successfully and that they have freedom and independence to carry out their activities. They should believe in their own ability to influence and control over their work results, they follow meaningful and valuable career goals and they are treated honestly and fairly (Salajeghe et al., 2013). Given the fact that the role of human resources is very important in knowledge management, researchers’ attention has shifted to increasing empowerment in organizations (Salajeghe et al., 2013).

Empowered employees have a thorough knowledge of their work so that they can thereby plan and schedule their work and are capable of identifying and resolving any obstacles to their performance (Kang et al., 2017). Thus, empowered employees perform their roles perfectly and sometimes exceed their customary job duties to achieve better performance and outcomes at work (Kirkman and Rosen, 1999) in addition to improve the functioning of the organization (Menon, 2001).

Empowerment is positively correlated with employees’ knowledge sharing behavior. It can be said that empowered employees are more willing to share their knowledge. Sharing knowledge involves users’ willingness to codify and share their knowledge in the knowledge management system, while also seeking out and reusing the codified knowledge jointly from a virtuous cycle (Usoro et al., 2007). Previous researches (Cabrera and Cabrera, 2002) explained that an individual is reluctant to contribute his or her own knowledge while he or she enjoys others’ knowledge in terms social dilemma.

A better understanding of proactive knowledge sharing requires taking into account an active motivational orientation that can project an individual self-governing influence on proactively sharing knowledge (Meyer et al., 2002). Psychological empowerment theory proposes psychological empowerment as an active motivational orientation that occurs when one’s motivational orientation is combined with the authority necessary to tap the full potential of a work system (Thomas and Velthouse, 1990).

Psychological empowerment is necessary to examine the degree of knowledge sharing behavior in the context of Knowledge Management System (Kang et al., 2017). Psychological empowerment raises individuals’ conviction of their self-efficacy, determines their initiation of an activity, and increases their persistence in task performance (Bandura, 1997) being active in knowledge sharing. Some researchers have stated that psychologically empowered employees have a high sense of self-efficacy to receive authority as well as responsibility required to finish tasks assigned to them. This may happen due to high sharing of knowledge between the employees and can be derived from different researches.

When talking about proactive knowledge contribution, previous researchers have explored that individuals who are highly confident due to their competence level are motivated in higher degrees to contribute knowledge in comparison to other people (Kankanhalli et al., 2005, 2011; Wasko and Faraj, 2005). This perception of enhanced self-efficacy can motivate employees to contribute their knowledge to others (Yilmaz, 2016). Therefore, it can be said that self-motivated knowledge contributors are likely to be proactive in sharing their knowledge to support their tasks. In the case of knowledge seeking, knowledge seekers need the skills and


132capability to search for knowledge they deem valuable and useful. Employees can learn from the experience of others and improve their expertise (Wasko and Faraj, 2005) regarding this aspect. This is related to the motivation for knowledge growth (Gray and Meister, 2004). An empowered individual should proactively perform his or her work and overcome the obstacles in performing tasks (Spreitzer, 1995) which also explains about the relationship between knowledge management and psychological empowerment.

Competency in seeking knowledge is heavily influenced by self-efficacy and self-determination of an individual as the dimensions of psychological empowerment which makes them likely to perform well (Quigley et al., 2007, Bock et al., 2006; Wang and Hou, 2015). If the degree of empowerment is strong, knowledge seekers may be convinced of the value of seeking knowledge which ultimately leads them to proactively seek knowledge in a Knowledge Management System for performing their task (Kang et al., 2017; Bowen and Lawler, 1992 a,b ; Haghighi,et al., 2014). So why, nowadays Knowledge management and its application have become important challenge to be successful in organization as well as for organizations. It needs perquisites (Shariati and Samani, 2013) regarding management methods, organization factors as well as employees’ perceptions on empowerment (Shariati and Samani, 2013).

Ghorbanzadeh and Khaleghinia (2009) underwent the study with the title, “The role of tacit knowledge transfer in employee empowerment”. The results of this study showed that tacit knowledge transfer plays an underlying role in the employees’ empowerment of the employees of University which was taken as a sample. That also showed that more increase in tacit knowledge transfer leads to the more increase in employees’ empowerment. The results of research showed that management support, providing information needs, participation in decision making; organizational culture and competitive job atmosphere along with friendship are the effective factors on empowerment of knowledge workers of Petroleum Industry Institute (Ravanpykar et al., 2014).

The key presumption regarding psychological empowerment is that empowered people are more active and productive than people who are not (Thomas and Tymon, 1994) due to their thorough knowledge of their work so that they can thereby plan and schedule their work and are capable of identifying and resolving any obstacles to their performance (Kang et al., 2017).

3. Research Design This research has followed the deductive approach to research and is basically quantitative in nature. Analytical and Descriptive research design is used for analyzing data. Descriptive research is used to obtain information concerning the current status of the phenomena and to describe “what exists” with respect to variables or conditions in a situation. Analytical research is conducted to find supporting evidence to current research being done in order to make the work more reliable and also to form new ideas about the topic being studied. So far the population of this study is concerned; customers and employees of four service industries within Kathmandu Valley are taken into consideration. Four service industries are Hospital industry, Education industry, Industry of Telecommunication and Industry of Airlines. Both the Private and Public service sectors are considered as samples for study. All data are analyzed by using the Excel, SPSS 18.0, and Amos 20. Filled-in questionnaires are used to get required information.


133

4. Instrumentation The three component of psychological empowerment developed by Menon (2001) is represented by 15 items to measure psychological empowerment. Five items to measure goal internalization, five items to measure perceived competence and five items to measure goal internalization. Seven items to measure knowledge management culture, seven items to measure tacit to explicit knowledge conversion, Seven items to measure tacit knowledge and seven items to measure explicit knowledge are used for this study and the instrument is developed on the basis of the work of Rashid et al. (2016); Hansen et al.(1999); Cohen and levinthal (2001); Alavi and Leidner (2001); Holts house (1998) reviewed by Wang and Ahmed.,(2008). Altogether 43 items are used for the study. The purposive sampling technique is used in this research to make this study more inclusive and representative. Two stage sampling method is used for selecting the samples systematically. In the first stage organizations are selected on the convenient basis and in the second stage employees related to those organizations are selected randomly. Altogether 12 organizations from 4 industries are selected. As 385 is the minimum required samples, to get more accurate results and represent the more organizations 640 questionnaires are distributed to employees. Twenty two questionnaires in total from respondents are discarded as they were not aligned with the researcher demand due to incompletion, not clear, two or more than two choices. Some respondents did not responded so why the analysis is done by taking 437 respondents in total. Confirmatory Factor analysis is done in order to do the further analysis. Reliability test is performed by using Cronbach’s alpha coefficient for primary data. Various Software packages such as SPSS 18.0 and MS-Excel are used for data entry and analyses. Different descriptive statistical tools such as simple average, standard deviation, coefficient of variation and structural equation modeling is done to get the results.

For the model to be accepted in structural equation modeling, Probability level, chi-square value, GFI, AGFI, NFI, CFI, RMR and RMSEA are taken as assessment criterion for goodness of fit. The goodness of fit of a statistical model describes how well it fits a set of observations. Items confirmed_ goal internalization-3; perceived control-4; perceived competence-3; knowledge management culture-4; knowledge conversion-4; tacit knowledge-4 and explicit knowledge-3 and the chronbach alpha for all the factors are above o.7.

5. Descriptive analysisTable no. 1.1 shows the descriptive data related to variables used in this article. Variables are denoted by their initial letters in the table which are as follows: GI - Goal internalization PC- Perceived control PCOM - Perceived competence KMC - Knowledge management culture KC - Knowledge conversionTK - Tacit knowledge EK - Explicit knowledge


134Table 1.1Descriptive Analysis of Different Variables

S. N.

Name of the organization Mean GI

Mean PC

Mean PCOM

Mean KMC

Mean KC

Mean TK

Mean EK

1 Ace College 3.82 3.98 4.52 3.55 3.38 3.39 3.492 Apex College 3.98 3.59 4.50 3.89 3.47 3.54 3.793 Bir Hospital 3.68 3.69 4.31 3.06 2.54 2.70 2.774 Buddha Air 4.40 3.85 4.42 4.07 3.85 3.97 3.955 Central department of

management 3.65 3.39 4.28 3.02 2.17 2.77 2.70

6 Model Hospital 4.07 4.09 4.43 3.81 3.44 3.44 3.287 Nepal Airlines 4.24 3.52 4.53 3.43 2.74 2.91 3.138 Ncell 3.82 3.88 4.28 3.75 3.42 3.79 3.319 Nepal Medical college 3.91 3.94 4.49 3.60 3.07 3.31 3.1510 Nepal Telecom 4.26 3.87 4.47 3.79 3.59 3.61 3.7011 Shanker Dev Campus 4.22 4.12 4.52 3.26 2.84 3.22 3.2512 Teaching Hospital 4.36 4.13 4.44 4.04 3.43 3.65 3.6413 Total 4.07 3.84 4.44 3.63 3.17 3.34 3.3514 Private Organizations 4.05 3.89 4.45 3.79 3.43 3.55 3.4915 Public Organizations 4.08 3.78 4.43 3.48 2.94 3.16 3.23

Goal internalization which is the factor of psychological empowerment and confirmed the items as that of the Menon, seems to be quiet good in all organizations as all the values are greater than 3.5 supporting the results by Gautam and Ghimire(2017), Ghimire and Gautam(2016). Public organizations show nearly equal mean value in comparison to private organizations unlike results of the research done by Kaur and Lomash (2015). By interpreting these values it can be said that employees of all the organizations taken into consideration internalize the organizational goals while doing their works. Meaning that dissemination and sharing of goals is good in private organizations as well as public organizations which show that employees try to achieve the organizational goals as their own goals. Data exhibits that dissemination and sharing of goals is more in other sectors (highest value, 4.40) in comparison to education sector (lowest value, 3.65).

Perceived Control which is the factor of psychological empowerment which confirmed four items that is one more item than that of Menon’s research, seems to be quiet good in all organizations as all the values are greater than 3.5 except in Central Department of Management. By interpreting these values it can be said that employees of all the organizations taken into consideration except Central Department of Management have high degree of perceived Control. Private Organizations show greater mean value of perceived control in comparison to Public Organizations which is different from the result of Kaur and Lomash(2015) as they have argued that self- determination which resembles autonomy or control is found to be high in public organization. But this result confirms the findings of Ghimire and Gautam(2016) and Gautam and Ghimire(2017). Higher perceived control in private organizations may be due


135to the gap between the employees and the policy makers as well as the structural hierarchy present in public organization. Generally in public organization the hierarchy is quiet complex as well as the structural complexity is high in public organization. Spatial distance may be the reason for this, which may also be responsible for creating red-tapism. In comparison to Menon model, here one more item which is ‘important responsibilities are part of my job’ is also confirmed. Data exhibits that perceived control depends on the organization but the ownership of the sector i.e. being public or private does not affect it as the higher values (4.13, 4.12) are found in health sector as well as education sector and lower values (3.39, 3.52) are found in telecommunication sector and airlines sector respectively.

Perceived Competence which is the factor of psychological empowerment also confirms the three items as that of Menon but one item ‘I can do my work efficiently’ is confirmed in the place of ‘I have the competence to work efficiently’ in the Menon model. Psychological competence seems to be quiet good in all organizations as all the values are greater than 3.5 and supports the findings of Kaur and Lomash (2015) as they have argued that public and private sector employees do not differ in impact and competence whereas contrast the findings of Ghimire and Gautam (2016) and Gautam and Ghimire (2017). By interpreting these values it can be said that employees of all the organizations taken into consideration perceive that they have high degrees of competence. On comparing the three factors it is seen that the employees perceive that they have high degree of competence as well as they have internalized the organizational goals but they have quiet low degree of control while doing their work.

Psychological empowerment which is the sum of goal internalization, perceived competence and perceived control seems to be quiet good in all organizations as all the values are greater than 3.5 aligning the previous studies. By interpreting these values it can be said that employees of all the organizations taken into consideration have high degree of psychological empowerment that means employees perceive that they are highly empowered. Data exhibits that psychological empowerment differ from organization to organization showing higher value of 4.31 and the lowest value of 3.77. When comparing between private and public organizations employees of private organizations are only slightly empowered in comparison to public organizations contrasting the findings of Kaur and Lomash (2015). Public organizations should focus in training and other empowering tools and techniques to maintain their image mainly for the development of the competence.

Knowledge management culture consists of the items which deal with the management of the available knowledge in organizations (Nonaka and Takauchi, 1995; Merwick, 2001; Salajeghe et al., 2013). Here most of the organizations have values greater than 3.5 with teaching hospital showing the highest value (4.04) and central department showing the lowest (3.02). On making the comparison between private and public organizations mean value of private organizations is high but that of public organizations is below 3.5. From this it can be stated that there is weak mechanism of knowledge management culture in the public organizations. Keeping records, sharing the information, informal and formal talking about the ways in which works are done between the employees is below the standard in public organizations. More formal and informal meetings, discussion programs, conferences, brainstorming programs are necessary to be held in the organizations to strengthen the status of knowledge management in Nepalese organizations.


136Knowledge conversion consists of items which deal with converting tacit knowledge into explicit knowledge (Omotayo, 2015; Nonaka and Vonkrogh, 2009). Mean value of all the organizations except Buddha Air is below 3.5 which show that the state of knowledge conversion is low in all organizations taken into consideration except Buddha Air. On making the comparison between private and public organizations mean value of private organizations is greater but both have mean value less than 3.5. Level of knowledge conversion is low in both types of service organizations. Again talk programs, discussion programs are to be organized for the knowledge conversion in organizations. Culture of knowledge conversion has to be developed so that employees show keen interest in sharing what they know and the organizations allow them to make it applicable in developing services. May be the culture of rewarding employees could be developed (Cohen and Levinthal, 2001; Wanjau et al., 2012).

Tacit knowledge is the knowledge which a person gains and utilizes while he works but cannot be easily expressed in words and transferred to others (Puusa and Eerikainen 2007). Mean value of tacit knowledge is also below 3.5 in other organizations except 4 organizations mentioned here. On comparing between public and private organizations mean value of private organizations is greater. Culture of accepting the expertise and knowledge of an individual seems to be low in all organizations. Culture of Learning from the seniors and experts not by position but by the real experience and knowledge should be emphasized in the organizations as tacit knowledge is an inimitable competitive advantage held by an organization and this needs to be turned into organizational competence through knowledge sharing(Lubit,2001;Wagner et al.,1999; Abdullah et al., 2015).

Explicit knowledge is the knowledge which can be easily transferred to others (Klein, 2008; Bhagat et al., 2002). Mean of most of the organizations is below 3.5 except four organizations. Private and public organizations both have mean value less than 3.5 but mean value of private organizations is greater than that of public organizations. Culture of recording and dissemination of information regularly in the organizations are must. Organizations or the management level are not focusing on the regular discussion of the organizational activities with the employees.

Knowledge management in total is the sum of knowledge management culture, knowledge conversion, tacit knowledge and explicit knowledge. Mean value of all organizations except 5 are less than 3.5 which shows that state of knowledge management in total is not good in most of the organizations. On comparing private and public organizations position of private organization is good in comparison to public organizations. Sharing and dissemination of information is knowledge is better in private organizations in comparison to the public organizations.

6. Inferential analysis Inferential analysis of the responses of the different variables provided by the employees in structured form is done. Relations between these factors are analyzed so that some conclusions could be drawn.


137Table 1.2Correlation Table Showing Relations Between Variables and Sub Variables Related to Psychological Empowerment, Knowledge Management, Resource Based Approach and Competitive Advantage

Correlations

PC PCOM PE KM KC TC EK KMT

GI .408** .394** .785** .358** .314** .330** .404** .409**

PC .399** .794** .309** .323** .346** .287** .368**

PCOM .743** .299** .186** .229** .241** .276**

PE .417** .360** .394** .405** .458**

KM .594** .576** .586** .795**

KC .714** .671** .874**

TC .741** .884**

EK .877**

**. Correlation is significant at the 0.01 level (2-tailed).

From the table 1.1 it could be analyzed that there is significant correlation between the factors of knowledge management and psychological empowerment.

e7

e6

e5

e4

e3

e2

e1

.46GI

PC

PCOM

KM

KC

TK

EK

KM_T

P_E.44

.32

.68

.60

.66

.57

.51

.72.82

.87

.85.72

.76

.67

Figure 1. Relationship between psychological empowerment and knowledge management


138Table 1.3Criterion Values of Model Fit for the Relation Between Psychological Empowerment and Knowledge Management

Chis-quare

DF Probabilitylevel

Chi-square /DF

GFI AGFI NFI CFI RMR RMSEA

15.639 13 0.110 1.203 .990 .971 .943 0.978 0.015 0.036

Psychological empowerment with knowledge management

Probability level of 0.110 is greater than 0.0, which allows for the acceptance of the model. All the other values (GFI, AGFI, NFI, CFI, RMR and RMSEA) also do not go for rejecting the model. Values of standardized loadings are good in explaining the factor. R2 Values also depicts that the factors are noticeably explained by their respective variables. Value of co-relation (.60) shows the relation between psychological empowerment and knowledge management in total. Value of co-variance (0.176) indicates that two variables tend to move 18% in the same direction that is affecting one another. The findings are supported by the notions of different researchers (Wang and Noe, 2010; Salajeghe et al., 2013; Ahmadi et al., 2012; Yi, 2009; Kang et al., 2017; Kankanhalli et al., 2011; Spreitzer, 1995; Shariati and Samani, 2013).

7. Discussions From the descriptive as well as inferential analysis it is found that there is a significant relationship between the variables as well as they affect each other. Psychological empowerment through goal internalization, perceived control and perceived competence seems to be prevailing well in both types of organizations that is; public (4.10) as well as private organizations (4.13). Mainly the condition of perceived competence (4.44) seems to be high in the Private organizations whereas prevailing of goal internalization is quiet good in public organization (4.08). The situation of knowledge management seems to be quiet weak (3.37) in the organizations taken into consideration for the study. Organizations were found to be quiet good in managing the knowledge that prevails in organization like knowledge culture (3.63) for the use of knowledge that they are familiar with or sharing of these knowledge and so on but the status of knowledge conversion seems to be very weak (3.17) in these organizations so as the situation of tacit knowledge (3.34) as well the status of explicit knowledge also does not seem to be good (3.35) in the organizations. From this it seems to be dangerous for the organizations as the employees are perceiving themselves empowered without being strong in knowledge conversion, tacit knowledge and explicit knowledge. Organizations should develop a conducive environment in the organizations so that employees could freely exercise on knowledge development, transfer and assimilation. Significant relationship has been found between the psychological empowerment and knowledge management showing that they move in the same direction up to 18%. It reveals that knowledge management is supportive in increasing the psychological empowerment and psychological empowerment is supportive in increasing the knowledge management.

Psychological empowerment and knowledge management are effected by each other as the covariance between two variables is significant confirming the notions of other researchers


139(Wang and Noe, 2010; Salajeghe et al., 2013; Thomas and Velthouse, 1990; Kang et al., 2017).

Service providing organizations should focus on making employees knowledgeable as well as psychologically empowered for increasing the organizational competitive advantage and customer based brand equity. To make the employees knowledgeable, organization should give the importance to the knowledge available in organization and their sharing with the concerned employees. To share the knowledge where an individual is concerned, the organization should identify that knowledge as well as the knowledge holder. Tacit knowledge is within the mind of the employees but they can be transferred to others through the apprenticeship which may be long in duration but this will be much more effective. So, organizations should create the environment where apprenticeship can be carried out for employees. Another necessary thing for making employees knowledgeable is the sharing of the knowledge through brainstorming, seminar, meetings, trainings and so on. These programs are to be held by organizations regularly. Another thing that is to be focused by organizations is the explicit knowledge and that is also to be carried out from level to level through sharing of knowledge.

Another important thing to be given emphasis by the service providing organization is psychological empowerment. Feeling of being capable in doing something is necessary to deliver the service to the customers as they are sole responsible for the development of the services. For this it should be clear to them why they are providing those services to the customers and what would be their role in providing those services to customers by them. If employees are clear in their role and the capacities necessary to carry out their roles, services provided by them would be much more effective. To make these things effective; trainings, formal and informal meetings, formal and informal networks among the employees, seminars, conferences, talk programs would be fruitful. And another important thing is that they should have the power of making the decision at the time of service production and service delivery. They should not be in dilemma for the work and its related activities while developing the service and its delivery. There should be clear policy, rules and regulations so that they are not in dilemma for the service production and delivery. As well the organizations should provide them the trainings and apprenticeship regularly so that they could feel that they are capable in developing the best service which can be the rare because they have added sufficient value to it and the service is unique that cannot be imitated by others or substituted by others.

8. Conclusion All the variables under the analysis are significantly correlated with each other which depicts that the psychological empowerment, knowledge management are significantly correlated with each other explaining that one variable have the good relation with other variable. Employees of Nepalese service sector are psychologically empowered with the mean of 4.11 but the status of knowledge management does not seem to be so much strong with the mean of 3.63 although 18% of co-variance shows that there is a two way relationships between these two factors. Another important finding to be concluded here is that psychologically empowered employees with low level of knowledge management may create the problem in the service sector in the days to come. The status of knowledge conversion and tacit knowledge is very low in the organizations with the mean values 3.17 and 3.34 respectively which may be responsible for the poor service delivery by the service organizations.

Knowledge management strengthens the psychological empowerment and psychological


140empowerment strengthens the knowledge management in the service providing organizations. Knowledge management and psychological empowerment plays a vital role in the service production and delivery of the service providing organizations for increasing the competitive advantage of the service providing organizations. Service organizations should focus on strengthening the knowledge conversion process more so that employees become more knowledgeable.

References

Abdullah, M. R., Zainuddin, B. H., & Ali, T. A. (2015). Investigation of tacit knowledge measurement in large Croatian enterprises. Journal of Universal Computer Science, 10 (6), 712-722.

Ahmadi, A. A., Daraei, M. R., Khodaie, B., & Salmanzadeh, Y. (2012). Structural equation modeling of relationship between psychological empowerment and knowledge management practices (A case study: Social security organization staff of Ardabil province, Iran). International Business Management, 6(1), 8-16.

Alavi, M., & Leidner, D. E. (2001). Review: Knowledge management and knowledge management systems: Conceptual foundations and research issues. MIS Quarterly, 25(1), 107-136.

Bandura, A. (1997). Self-efficacy: The exercise of control. Macmillan

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.

Bhagat, R. S., Kedia, B. L., Harveston, P. D., & Triandis, H. C. (2002). Cultural variations in the cross-border transfer of organizational knowledge: An integrative framework. Academy of Management Review, 27(2), 204-221.

Bock, G. W., Kankanhalli, A., & Sharma, S. (2006). Are norms enough? The role of collaborative norms in promoting organizational knowledge seeking. European Journal of Information Systems, 15(4), 357-367.

Bowen, D. E., & Lawler, E. E. (1992 a). Total quality-oriented human resources management. Organizational Dynamics, 20(4), 29-41.

Bowen, D. E., & Lawler, E. E. (1992 b). The empowerment of service workers: What, why, how, and when. Sloan Management Review, 33(3), 31.

Cabrera, A., & Cabrera, E. F. (2002). Knowledge-sharing dilemmas. Organization Studies, 23(5), 687-710.

Chang, L.C., & Liu, C. H. (2008). Employee empowerment, innovative behavior and job productivity of public health nurses: A cross sectional questionnaire survey.


141International Journal of Nursing Studies, 45(10), 1442-1448.

Cohen, W. M., & Levinthal, D. A. (2001). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 34(4), 128-152.

Cong, X., & Pandya, K. V. (2003). Issues of knowledge management in the public sector. Electronic Journal of Knowledge Management, 1(2), 25-33.

Fernandez, S., & Moldogaziev, T. (2011). Empowering public sector employees to improve performance: Does it work? The American Review of Public Administration, 41(1), 23–47.

Gautam, D. K. & Ghimire, S. B. (2017). Psychological empowerment of employees for competitive advantage: An empirical study of Nepalese service sector. International Journal of Law and Management, 59(4), 466-488.

Ghimire, S.B., & Gautam, D.K. (2016). Psychological empowerment for Competitive advantage: A resource based approach to human resource management; Management in hospital industry of Nepal. Japan Forum of Business and Society, 1, 207-247.

Ghorbanzadeh, V., & Khaleghinia, S. (2009). The role of tacit knowledge transfer in employee empowerment. Journal of Research in Human Resource Management (University of Imam Hasan, AS), 1(2). 108-85.

Gray, P.H., & Meister, D. B. (2004). Knowledge sourcing effectiveness. Management Science, 50(6), 821-834.

Haghighi, M. A., Tabarsa, G. A., & Kameli, B. (2014). Investigating the relationship between knowledge management processes and empowerment of human resources. Global Journals of Management Studies and Researches, 1(2), 122-130.

Hansen, M. T., Nohria, N., & Tierney, T. (1999, April). What’s your strategy for managing knowledge? Harvard Business Review, 106-116.

Kang, Y.J., Lee, J.Y., & Kim, H.W. (2017). A psychological empowerment approach to online knowledge sharing. Computers in Human Behavior, 74(1), 175-187.

Kankanhalli, A., Lee, O.K.D., & Lim, K.H. (2011). Knowledge reuse through electronic repositories: A study in the context of customer service support. Information and Management, 48(3), 106-113.

Kankanhalli, A., Tan, B.C., & Wei, K.K. (2005). Contributing knowledge to electronic knowledge repositories: An empirical investigation. MIS Quarterly, 113-143.

Kaur, G., & Lomash, H. (2015). Do public and private sector employees differ in empowerment perceptions? A comparative study. International Journal of Social Science and Humanity,5(11), 907-911.

King, C., & Grace, D. (2009). Employee based brand equity: A third perspective. Service Marketing Quarterly, 30(2), 122-147.


142Kirkman, B. L., & Rosen, B. (1999). Beyond self-management: Antecedents and consequences

of team empowerment. Academy of Management Journal, 42(1), 58-74.

Klein H. J. (2008). Some directions for research in knowledge sharing. Knowledge Management Practice and Research, 6, 41 – 46.

Kruja, D., & Oelfke, T. (2009). The levels of empowerment impact on the level of employee job satisfaction: The case of Albanian hotels. TMC Academic Journal, 4(2), 91-106.

Lubit, R. (2001). Tacit knowledge and knowledge management: The keys to sustainable competitive advantage. Organizational Dynamics, 29(1), 164-178.

Mangold, W. G., & Miles, S. J. (2007). The employee brand: Is yours an all-star? Business Horizons, 50(5), 423-433.

Masdek, N. R. N. M., Aziz, A., & Awang, K. (2011). Potential antecedents and outcomes of frontline employees’ service recovery performance. International Journal of Economics and Management, 5(1), 114-139.

Menon, S. (2001). Employee empowerment: An integrative psychological approach. Applied Psychology, 50(1), 153-180.

Merwick, A. D. (2001). KM Technology. System Journal, 40(1), 814-840.

Meyer, J. P., Stanley, D. J., Herscovitch, L., & Topolnytsky, L. (2002). Affective, continuance and normative commitment to the organization: A meta-analysis of antecedents, correlates and consequences. Journal of Vocational Behavior, 61(1), 20-52.

Natarajan, T., Balasubramaniam, S.A., & Srinivasan, T. (2016). Relationship between internal branding, employee brand and brand endorsement. International Journal of Business and Management, 12(1), 95-110.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation? New York, NY: Oxford University Press.

Nonaka, I., & Von Krogh, G. (2009). Tacit knowledge and knowledge conversion: Controversy and advancement in organizational knowledge creation theory. Organization Science, 20(3), 635-652.

Omotayo, F. O. (2015). Knowledge Management as an important tool in Organizational Management: A Review of Literature. Library Philosophy and Practice (e-library).

Puusa, A., & Eerikainen, M. (2007). Is tacit knowledge really tacit? Electronic Journal of Knowledge Management, 8(3)307 – 318.

Quigley, N. R., Tesluk, P. E., Locke, E. A., & Bartol, K. M. (2007). A multilevel investigation of the motivational mechanisms underlying knowledge sharing and performance. Organization Science, 18(1), 71-88.


143Rashid, M. A., Hassan, B. Z., & Al-Asadi, A. H. (2016). Development of tacit knowledge

measurement model for academic staff activities. American Journal of Computer Science and Information Engineering, 3(6), 37-44.

Ravanpykar, Y., Fyzi, J., & Pashazadh, Y. (2014). Examine the relationship between knowledge management with organizational learning and employee empowerment in national companies of South oil producing (Case study: Oil welfare service companies). Indian Journal of Science and Research, 5(1), 284-295.

Salajeghe, S., Rashidi R. P., & Mousaei, M. (2013). Analysis of psychological empowerment and its relationship with knowledge management (The case of Jam petrochemical company located in south pars area, Iran). International Journal of Academia Research in Accounting, Finance and Management Sciences, 3(4), 245-253.

Shariati, M., & Samani, A. (2013). The study of relationship between knowledge management in Tejarat Bank. Journal of Applied Science and Agriculture, 8(4), 399-404.

Spreitzer, G. M. (1995). Psychological empowerment in the workplace: Dimensions, measurement and validation. Academy of Management Journal, 38(5), 1442-1465.

Tam, J. L. M., & Wong, Y. H. (2001). Interactive selling: A dynamic framework for services. Journal of Services Marketing, 15(5), 379-396.

Thomas, K. W., & Tymon, W. G. (1994). Does empowerment always work: Understanding the role of intrinsic motivation and personal interpretation. Journal of Management Systems, 6(2), 1-13.

Thomas, K.W., & Velthouse, B. A. (1990). Cognitive elements of empowerment: An interpretive model of intrinsic task motivation. Academy of Management Review, 15, 666-681.

Usoro, A., Sharratt, M. W., Tsui, E. & Shekhar, S. (2007). Trust as an antecedent to knowledge sharing in virtual communities of practice. Knowledge Management Research and Practice, 5(3), 199-212.

Wagner, R. K., Sujan, H., Sujan, M., Rashotte, C. A., & Sternberg, R. J. (1999). Tacit knowledge in sales. In Sternberg, R. J., & J. A. Horvath (Eds.). Tacit Knowledge in Professional Practice, 155-182. Mahwah, NJ: Lawrence Erlbaum Associates.

Wang, S., & Noe, R. A. (2010). Knowledge sharing: A review and directions for future research. Human Resource Management Review, 20(2), 115-131.

Wang, W.T., & Hou, Y. P. (2015). Motivations of employees’ knowledge sharing behaviors: A self-determination perspective. Information and Organization, 25(1), 1-26.

Wanjau, K. N., Muiruri, B. W., & Ayodo, E. (2012). Factors affecting provision of service quality in the public health sector: A case of Kenyatta national hospital. International Journal of Humanities and Social Science, 12(1), 114-125.


144Wasko, M. M., & Faraj, S. (2005). Why should I share? Examining social capital and

knowledge contribution in electronic networks of practice. MIS Quarterly, 35-57.

Wright, P., McMahan, G., & McWilliams, A. (1994). Human resources and sustained competitive advantage: A resource-based perspective. International Journal of Human Resource Management, 5, 301-326.

Yeboah, J., Ewur, G. D., Adigbo, E. D., & Asirifi, E. K. (2014). Internal branding in a service industry: The case of banks in Ghana. European Scientific Journal, 10(7), 218-238.

Yi, J. (2009). A measure of knowledge sharing behavior: Scale development and validation. Knowledge Management Research and Practice, 7(1), 65.

Yilmaz, R. (2016). Knowledge sharing behaviors in e-learning community: Exploring the role of academic self-efficacy and sense of community. Computers in Human Behavior, 63, 373-382.


145Impact of Workplace Support on Work-Life Balance and Employees’ Commitment to Professional Working Mothers in Kathmandu Valley

Impact of Workplace Support on Work-Life Balance and Employees’ Commitment to Professional

Working Mothers in Kathmandu Valley Sushma Manandhar *

[email protected]

Abstract

The paper aims at providing empirical evidence on the relationship between the variables; workplace support, work-life balance and employees’ commitment to professional working mothers working in the schools representing academic sector and commercial and develop-ment banks representing banking sector in Kathmandu valley. For the purpose of quantitative data, a total of 120 professional working mothers of age 28 years to 46 years were included dividing 60 professional working mothers from each sector for data sources. Cronbach’s al-pha, reliability analysis, Pearson correlation and Regression analyses were carried on to test the proposed hypothesis. The Cronbach’s alpha also showed reliability of the given variables under the study. Results showed significant positive associations between the variables work-place support and work-life balance and employees’ commitment and the significant impact of workplace support on work-life balance and employees’ commitment. Workplace support explained employees’ commitment more than work-life balance indicating the aspects to pro-vide attention for improvement.

Keywords: Workplace support, Work- life balance, Employees’ commitment, Professional working mothers

* Lecturer at Public Youth Campus, Tribhuvan University, Dhobichaur, Kathmandu, Nepal.

1. IntroductionWork life balance is that state of equilibrium in which the demand of both person’s job and person’s life are equal (Lockwood, 2003). Work-life balance, in its broadest sense, is defined as a satisfactory level of involvement or ‘fit’ between the multiple roles in a person’s life (Hudson, 2005). Demographic changes as seen in the increasing number of women in the workplace and dual career families have generated an increasingly diverse workforce and a greater need of employees to balance their work and non-work lives (Bharat, 2003; Rajadhyaksha & Bhatnagar, 2000; Sekharan, 1992).The knowledge economy has created

146

greater access for women coupled with factors such as changes in marital patterns and smaller families. This has led to an increase in the number of working women and, hence, working mothers (Grossman, 1981). Balancing work and family is often more difficult for women than for men because of the disproportionate burden of the family responsibilities (Bird, 2006). Women still remain the same, i.e., women may be a top executive, still the nurturing or care giving roles are considered much a part of feminine roles (Malhotra & Sachdeva, 2005). In addition to working outside of the home, women continue to devote more time to domestic duties and caring for the children when compared to men (Alger & Crowley, 2012). Mani (2013) explored the major factors which influenced the work-life balance of women professionals in India such as role conflict, lack of recognition, organizational politics, gender discrimination, and elderly and children care issues, quality of health, problems in time management and lack of proper social support. Thus, the issue of work-life balance was earlier raised by the working women during the 1960s and 1970s in the UK. In 1990, US confirmed the recognition of work-life balance as a main human resource management issue (Bird, 2006).

A good mother is often defined as one who is a traditional stay-at-home mother (Giele, 2008; Johnston & Swanson, 2006). According to them she is a child-centered, full-time, stay-home mother. Mothers are a key factor in the home environment and are said to possess a maternal caretaking instinct (Perez, & Torrens, 2009). Working mother is defined as one works outside the home for income in addition to the work they perform at home in raising their children. The working mothers are continuously struggling to find the balance needed to deal and handle the demands of both work life and home life (Backett-Milburn et al., 2008); (Perrakis & Martinez, 2012). The work based support to women is required more than ever before as it has been positively associated with job satisfaction, organizational commitment and career accomplishment (Marcinkus et al., 2007).

Workplace support: The role of human resource management is to create a good working environment by inspiring people at work (Adhikari, 2009). According to Organ (1988) the employees who are correctly treated or supported by their employers would respond with extra effort, which affects their performance as well as their extra role behavior. The workplace support may come from the coworkers, immediate supervisors, and organization at the large. It includes convenience services, on-site childcare, and fitness programs; mental health and information and referral services; and more recently, massage, car care, and laundry services on site etc. If the employees feel that their coworkers, supervisors, and/or organization support them, they are can develop a sense of commitment. Coworker support and supervisor support refer to emotional, instrumental, and/or informational support that comes from co-workers and supervisors respectively (Greenglass et al.,1997). Organizational support refers to individuals’ perceptions about how much the organization values the employees’ contributions and care about their well-being (Eisenberger et al., 1986). According to Thomas and Ganster (1995) the employees whose supervisors supported their efforts to integrate work and family roles were less likely to experience work family conflict. Hammer et al. (2009) defined supervisor work family support as perceptions that one’s supervisor cares about an individual’s work–family well-being, demonstrated by supervisory helping behaviors to resolve work–family conflicts.

Generally, women may have difficulties managing their own work/life balance, especially in work settings where they do not receive much formal support from their employer (Powell

Impact of Workplace Support on Work-Life Balance and Employees’ Commitment to Professional Working Mothers in Kathmandu Valley

147

and Greenhaus, 2006). In order to gain control over work and their identity in the workplace, women need to clarify with their bosses’ the expectations about the workload that they can handle (Wrzesniewski & Dutton, 2010). According to Roebuck and Smith (2011), the support from employers toward working women varies on a boss-by-boss basis. According to them, the female bosses with families and young children tend to be more familiar with having to juggle many different roles and are generally more flexible.

Varatharaj & Vasantha (2012) revealed that majority of the women employees feel comfortable in their work place irrespective of their trivial personal and work place irritants and also able to balance their duties & responsibilities both in job as well as families. Tamang (2008) also found the positive association between social support and work life balance and the positive relationship of supervisor alone in social support at workplace.

Employees’ commitment: commitment is a psychological state that binds the individual to the organization (Allen & Meyer,1990). Mowday et al (1982) have defined the organizational commitment as a relative strength of an individual’s identification with and involvement in a particular organization. It focuses on the extent that individuals identify with organizational goals, value organizational membership, and plan to work diligently towards achieving the organizational mission (Mowday et al., 1979; Welsch & LaVan, 1981). When people feel that their organization values and appreciates them, it is a sign of organizational respect for them or of their high status within the organization (Fuller et al., 2003) and the feeling of high status increases employees’ social identity which, in turn, strengthens their commitment to the organization (Tyler, 1999). Bartlett’s (2001) found that the employees were more affectively committed to the organization when they received supervisor and coworker support. According to Ko et al. (1997) the perceived supervisor support and coworker support were antecedents of affective commitment while supervisory support was highly related with continuance commitment. The organizational support increased the employees’ feeling for and caring about the organization’s welfare and goals, and this feeling led to the increase of their commitment to the organization (Eisenberger et al., 2001).

Shrestha (2015) revealed that the significant effect of the role of supervisor and training programme of organization on organizational commitment and for married employees role of supervisor and for single employees training programme is also found on their commitment.

According to Mathieu and Zajac (1990) the women were more committed than men and the married employees usually showing more commitment because to have greater financial and family responsibilities, which increases their need to remain with the organization. Zilli and Zahoor (2012) also found that the females had significantly higher level of organization commitment than men in higher education teachers.

2. Research MethodologyThe study followed descriptive research design. Questionnaire survey was used for the collection of primary data. The survey was conducted during July 2017. The research was conducted with a convenience sample. The study considered academic (162 higher secondary schools) sector and banking (“A” class 28 commercial and “B” class 22 development banks) sector in Kathmandu valley as its population. Total 140 questionnaires were distributed to full time employees of sample organizations. Total 120 responses were collected, in which 60


148

respondents were included from each sector. Cronbach’s alpha was used to test the reliability of the data and has been reported in table 2. The correlation and regression analyses were also carried on to test the hypotheses.

The variables under the study are workplace support (WPS), work-life balance (WLB) and employees’ commitment (EC). The independent variables WPS deals on support from management, managers, supervisors and coworkers, who help to maintain work-life balance of working mothers. WLB describes on managing of personal and family life, and work life with proper pan and cooperation, and balancing time for family and jobs. Similarly, EC explains on filling sense of belongingness and work long run as best workplace, contribute for organizational success, changes and its difficulties.

Conceptual Framework

Independent Variable Dependent Variables

Work-Life Balance(WLB)Workplace

Support(WPS)

Employees’ Commitment(EC)

Figure 1: Impact of Workplace Support on Work-Life Balance and Employees’ Commitment to professional working Mothers

The following hypotheses are tested in the study:

Hypothesis 1: Workplace support positively associates with work-life balance

Hypothesis 2: Workplace support positively associates with employees’ commitment

3. Presentation and Analysis of Data Descriptive Analysis: The table 1 represents profile of 120 respondents from schools and banks. The minimum age of respondents were 28 years in both the sectors and the maximum age 46 years and 40 years were in the schools and banks respectively. Below 30 years the total 15 respondents are included (schools: 4 and banks: 11). The more respondents were lies between age 30-40 years (schools: 40 and banks:). and 40-50 years respectively. Only 15 respondents (schools: 4 and banks: 11) were below 30 years and 16 respondents from schools were age above 50 years was found. The total respondents had 153 children in which 103 (Respondents: 39, 30 and 34) respondents have children below 5 years, 5 to 10 years and above 10 years respectively. Only 7, 5 and 5 respondents have more than one child below 5 and above 10 years, below 5 and above 10 years and 5-10 and above 10 years respectively.


149

Table 1Profile of Professional Working Mothers

Age of Respondents Schools Banks Total Age of

Respondents Schools Banks Total

Minimum age 28 Years 28 Years

Age status of ChildrenN N N

Maximum age 46 Years 40 Years

N N N

Below 30 years 4 11 15 Below 5 years 11 28 39

30-40 years 40 49 89 5-10 years 13 17 30

40-50 years 16 - 16 Above 10 years 24 10 34

Total 60 60 120 Below 5 and 5-10 years 3 4 7

Child Size Below 5 and above 10 years

4 1 5

Single Child 36 53

More than one child 24 7 5-10 and Above 10 years 5 5

Total 60 60 120 Total 60 60 120

* These estimates are based on 150 responses.

Source: survey 2017

Table 2Descriptive Analysis

SN VariablesMean

RankSD Reliability

AnalysisHighest Lowest Highest Lowest

1 EC 4.08 3.50 1 0.770 0.495 0.781

2 WLB 4.06 3.81 2 0.781 0.639 0.723

3 WPS 4.03 3.33 3 0.778 0.641 0.711

* These estimates are based on 150 responses.

Source: survey 2017

Table 2 presents the different mean values under the observations of variables WPS, WLB and EC. The mean values were found highest to lowest in the variable EC, WLB and WPS were 4.08, 4.06 and 4.03 respectively. Likewise, the standard deviation shows the deviation from the average condition of respondents. The less deviation was found in the statements of variables WPS (0.641), WLB (0.639) and EC (0.695) respectively. The Cronbach’s alpha coefficients were 0.781, 0.723 and 0.711 in the variables EC, WLB and WPS respectively and found higher internal consistency in the variable EC. WPS deals on support from management, managers, supervisors and coworkers, which help to maintain work-life balance of working mothers. WLB describes on managing of personal and family life, and work life with proper pan and cooperation, and also for balancing time for family and jobs. Similarly,


150

EC explains on filling sense of belongingness and work long run as best workplace, contribute for organizational success, changes and its difficulties. Researchers on work family also indicate that a supportive climate and supportive supervisors allow greater balance between work and family roles (Allen, 2001; Thompson et al., 1999). The supervisors or co-workers of the working organization provide the work or job social support and reduce WIF (work interfere family) conflict. According to Marcinkus, et al. (2007) the women generally received more personal social support than work based social support and more instrumental than expressive support from all sources and both types of social supports positively associated to the organizational commitment.

Relationship between WPS and WLB and WPS and EC: The correlation analysis is used to find out the correlation between observable variables WPS and WLB and WPS and EC.

Dependent Variables: WLB and EC

Independent Variable: WPS

Table 3 Pearson Correlation Coefficient Between Dependent and Independent Variables

SN Dependent VariablesIndependent Variable

WPS

1 WLB 0.338**

2 EC 0.509**

(*) significance at 5% level and (**) significance at 1% level

Table 3 has shown the statistically significant positive association between WPS and WLB (coefficient: 0.338) and WPS and EC (coefficient: 0.509) at 1% level of significance. The study supports the hypothesis. Manandhar (2010) also found significant positive relations between social support from workplace and work-life balance in the television and hospital sectors. Haslam et al. (2015) revealed on the challenges working mothers endure and concluded that not having enough personal time due to the long list of duties on their daily routine, which in the end had negative effects on their relationship with their families, especially their children and spouses. According to them, the main support system should consider to balancing family life. The recent research by Kim and Kim (2017) found no significant differences in the level of WLC (work- life conflict) and the organizational commitment of married and childless single female workers. According to them, the WLC was negatively related to organizational commitment and the mentoring support mitigated the negative effect of WLC on organizational commitment.

Effect of WPS on WLB and EC: The regression is used to observe relationship between the variables and to test the proposed hypothesis. The following two models are developed to study the effect of independent variable on dependent variables:

Model 1 : WLB = f (WPS)

Model 2 : EC = f (WPS) where,


151

WPS = workplace support (Independent variable)

WLB = Work-Life Balance (Dependent variable)

EC = Employees’ commitment (Dependent variable)

Table 4Impact of Workplace Support on Work-Life Balance and Employees’ Commitment

ModelsIndependent

variablesCoefficient

with t- value Std. ErrorProbability R2 F-stat Sig.

1:WLB=f (WPS)

Constant 4.575*(t=5.375)

0.851 0.000

0.114 15.203 0.000

WPS0.180*

(t=3.899)0.046 0.000

2: EC=f (WPS)

Constant 11.909*(t=7.039)

1.692 0.000

0.259 41.177 0.000

WPS0.589*

(t=6.417)0.092 0.000

Parentheses (*), (**) and (***) represent significant level of coefficients at 1, 5 and 10 percent (2-tailed)

The table 4 has explored effect of WPS on WLB and EC of working mothers in the sectors. In the models 1 and 2 (table 4), the F-statistic and p-value of the model shows that model is goodness of fit. The 11.4 % and 25.9% of the total variance of the dependent variable WLB and EC is explained by independent variable WPS respectively. The statistically significant positive relation of WPS is found in WLB (coefficient: 0.180) at one percent level of significance. Similarly, the WPS statistically positively associated with EC (coefficient: 0.589) at one percent significant level. Both the results matched with the hypotheses. The study revealed that the professional working mothers have significant impact of their workplace support on work-life balance and commitment in the working sectors. According to Thompson et al. (2004) the social support received from the supervisors and perceived organizational ardor can be often linked to lower levels of work family conflict. Similarly, Nelson and Quick (1991) found that supervisor support and coworker support had a positive impact on organizational commitment among newcomers to the organization while it had a negative impact on their intent to leave the organization. Bartlett (2001) concluded that employees were more affectively committed to the organization when they received supervisor and coworker support. The researchers also revealed that increase in pressure at workplace negatively affects the work-life balance, job satisfaction and organizational commitment (Kossek, 2005; Bragger et al., 2005; Anderso et al., 2002). Thus, the results of the current study of professional mothers match with the past researches.

4. Conclusion and RecommendationsThe current study considered how workplace support impacts work-life balance and commitment to professional working mothers in their working organizations schools and


152

banks. The study only limits to the variables taken under the study. The results of this study revealed the professional working mothers have significant impact of their workplace support on their work-life balance and commitment. The results revealed significant effect of WPS on WLB (coefficients 0.180) and EC (0.589) respectively at 1 percent level.

This may be demonstrated by the indication that workplace support helps to support the feeling of having work-life balance. The workplace support includes support from management, managers, supervisors and coworkers and showed positive association in their work-life balance. Similarly, workplace support helps them for commitment in the workplace and feeling of sense of belongingness and working long run as best workplaces, contributing for organizational success, change them on difficulties. The findings of this study help to expand the literature to include the impact of the supportive factor workplace support on work- life balance and commitment of working mothers. As a result, it helps to increase in working mothers working out side of the home, work commitment in the organization and also reduce absenteeism from work. According to McFarland Sweeney (1992) the employees’ commitment to the organization might be shaped, in part, by their perception of how fairly they are treated by the organization. The organization also has to take initiations on flexible work arrangements, childcare, time off policies, elderly care, healthcare, information and counseling; and convenience services to increase employee commitment. The women experience less progression, engage in short-term promotion plans rather long-term goals, pursue career strategies focused on individual learning and growth than organizational rewards and bear greater family responsibilities and work-family conflict than male. The working mothers also contributed more for caring their child than males (Manandhar Bajracharaya et al., 2014).

Finally, In Nepalese context, with increasing trend of involvement of working women in all types of professions in developed cities, the issue of the work-life balance should be considered well. The supportive working environment should be created to them for maintaining their work-life balance and commitment in the workplace. It is also responsibility of every understanding citizen of the country to support aspiring women workforce so that the society and the nation as a whole can march its way towards prosperity. The information provided from this study also impacts social change by increasing the awareness around the need to support working mothers to maintain their work-life balance and future working mothers to better understand how to balance work and family life. It becomes a positive development model that women are making their presence in different walks of life.


153

References

Adhikari, D. R. (2009). Human Resource Management (4th ed). Kathmandu: Buddha Academic Publishers and Distributers Pvt. Ltd.

Alger, V. M., & Crowley, J. E. (2012). Aspects of workplace flexibility and mothers’ satisfaction with their husbands’ contributions to household labor. Sociological Inquiry, 82(1), 78-99. doi:10.1111/j.1475-682X.2011.00403.x

Allen N, & Meyer, J. (1990). The measurement and antecedents of affective, continuance, and normative commitment to the organisation. Journal of Occupational Psychology, 63, 1-18.

Allen, T. D. (2001). Family-supportive work environment: The role of organizational perceptions. Journal of Vocational Behavior, 58(3), 414-435.

Anderson, S. E., Coffey, B. S., & Byerly, R. T. (2002). Formal organizational initiatives and informal workplace practices: Links to work-family conflict and job-related outcomes. Journal of Management, 28(6), 787-810.

Backett-Milburn, K., Airey, L., McKie, L., & Hogg, G. (2008). Family comes first or open all hours? How low paid women working in food retailing manage webs of obligation at home and work. Sociological Review, 56(3), 474-496.

Bartlett, K. R. (2001). The relationship between training and organizational commitment: A study in the health care field. Human Resource Development Quarterly, 12, 335-352.

Bharat, S. (2003). “Women, work, and family in urban India, Towards new families?” in J. W. Berry, R. C. Mishra, & R. C. Tripathi ed., Psychology in human and social development, Lessons from diverse cultures (page no. 155-169). New Delhi, India, Sage.

Bird, S.R. (2006). Theorizing masculinities: recent trends in the social sciences. Gender Studies Journal of Eastern Europe, 14(1), 1-21.

Bragger, J., Rodriguez-Srednicki, O., Kutcher, E.J, Indovino, L., &Rosner, E. (2005). Workfamily conflict, work-family culture, and organizational citizenship behavior among teachers. Journal of Business and Psychology, 20(2), 303-324.

Eisenberger, R., Huntington, R., Hutchison, S., & Sowa, D., (1986). Perceived organizational support. Journal of Applied Psychology, 71, 500-507.

Eisenberger, R., Armeli, S., Rexwinkel, B., Lynch, P., & Rhoades, L. (2001). Reciprocation of perceived organizational support. Journal of Applied Psychology, 86, 42–51.

Fuller, J. B., Barnett, T., Hester, K. & Relyea, C. (2003). A social identity perspective on the relationship between perceived organizational support and organizational commitment. The Journal of Social Psychology, 143, 789-791.


154

Giele, J. Z. (2008). Homemaker or career woman: Life course factors and racial influences among middle class Americans. Journal of Comparative Family Studies, 39(3), 393-411.

Greenglass, E. R., Burke, R. J., & Konarski, R. (1997). The impact of social support on the development of burnout in teachers: Examination of a model, Work and Stress, 11, 267-278.

Grossman, A. S. (1981). Working Mothers and Their Children. Monthly Labor Review: Special Labor Force Reports – Summaries, 49 -54.

Hammer, L., Kossek, E., Yragui, N., Bodner, T., & Hansen, G. (2009). Development and validation of a multi-dimensional scale of family supportive supervisor behaviors (FSSB). Journal of Management, 35,837–856.

Haslam, D., Patrick, P., & Kirby, J. (2015). Giving Voice to Working Mothers: A Consumer Informed Study to Program Design for Working Mothers. Journal of Child & Family Studies, 24(8), 2463-2473. doi:10.1007/s10826-014-0049-7.

Hudson (2005). 20:20 series The Case For Work Life Balance: Closing The Gap Between Policy and Practice, Hudson Highland Group Inc., 4-5.

Johnston, D. D., & Swanson, D. H. (2006). Constructing the ‘good mother’: The experience of mothering ideologies by work status. Sex Roles, 54(7-8), 509-519. doi:10.1007/s11199-006-9021-3.

Kim, H. K., & Kim, Y. H. (2017). Work-life conflict of married and childless single female workers. International Journal of Manpower, 38 (8), 1157-1170,

Ko, J. W., Price, J. L., & Mueller, C. W. (1997). Assessment of Meyer and Allen’s three-component model of organizational commitment in South Korea. Journal of Psychology, 82, 961-973.

Kossek, E. E. (2005). Workplace policies and practices to support work and families. In S. Bianchi, L. Casper, & R. King (Eds.), Work, family health and well-being (pp. 97–116).Mahwah, NJ: Lawrence Erlbaum Associates.

Lockwood, N.R. (2003). Work Life balance: Challenge and solutions. Research Quarterly Society of Human Resource Management, USA. Retrived from www. shrm. Org/research.

McFarlin, D. B., & Sweeney, P. D. (1992). Distributive and procedural justice as predictors of satisfaction with personal and organizational outcomes. Academy of Management Journal, 35(3), 626-637.

Malhotra, S., & Sachdeva, S. (2005). Social roles and role conflict: An inter professional study among women. Journal of the Indian Academy of Applied Psychology, 31(1-2), 37-42.

Manandhar, B., S., Chalise, S., Bhandari, D. S., & Ghimire, S. (2014). Factors affecting Work


155

Life Balance: a study of Tribhuvan University Teachers (Faculty Research), University Grants Commission Nepal, Sano Themi, Bhaktpur, Nepal.

Manandhar, S. (2010), Work life balance and employees’ Career Success among different occupational groups, M. Phil., Faculty of Management, Tribhuvan University, Nepal.

Mani, V. (2013). Work Life Balance and Women Professionals. Global Journal of Management and Business Research Interdisciplinary,13(5).

Marcinkus, W. C., Whelan-Berry, K. S., & Gordon, J. R. (2007). The Relationship of Social Support to the Work – Family Balance and Work Outcomes of midlife Women. Women Management Review, 22 (2), 86-111.

Mathieu, J., & Zajac, D. (1990). A review and meta-analysis of the antecedents, correlates, and consequences of organizational commitment. Psychological Bulletin, 108, 171-194.

Mowday, R.T., Porter, L.W., & Steers, R.M. (1982). Employee- organization linkage: The psychology of commitment, absenteeism, and turnover. New York: Academic Press.

Mowday, R., Steers, R., & Porter, L. (1979). The measurement of organizational commitment. Journal of Vocational Behavior, 14, 224-47.

Nelson, D. L., & Quick, J. C. (1991). Social support and newcomer adjustment in organizations: Attachment theory at work? Journal of Organizational Behavior, 12, 543-554.

Organ, D.W. (1988). A restatement of the satisfaction-performance hypothesis, Journal of Management, 14(4), 547-57.

Perez, J. C., & Torrens, A. J. (2009). The myth of motherhood and the role of stepmothers: An outlook of women who have delayed their motherhood. Journal of Divorce & Remarriage, 50 (3), 206-219.

Perrakis, A., & Martinez, C. (2012). In pursuit of sustainable leadership: How female academic department chairs with children negotiate personal and professional roles. Advances in Developing Human Resources, 14 (2), 205-220.

Powell, G., & Greenhaus, J. (2006). Managing incidents of work-family conflict: A decision-making perspective. Human Relations 59(9), 1179–1212.

Rajadhyaksha U., & Bhatnagar, D. (2000). Life role salience, A study of dual career couples in the Indian context. Human Relations, 53, 489-511.

Roebuck, D., & Smith, D. (2011). Wisdom from executive female leaders: What can organizations, executive education programs, and graduate students learn? Journal of Executive Education, 10 (1), 43-74.

Sekaran U. (1992). Middle-class dual-earner families and their support systems in urban India,


156

in S. Lewis, D. N. Izraeli, and H.Hootsmans ed., Dual-earner families, International perspectives (pp. 46–61). Newbury Park, CA, Sage.

Shrestha, I. (2015). Organizational commitment of female employees of Nepalese financial institutions. The Journal of Nepalese Business Studies, 9 (1), 126-136.

Tamang, G. B. (2008). Work life balance and organizational commitment in hospitality industry in Nepal. M. Phil. Dissertation. Faculty of Management-Tribhuvan University, Nepal.

Thomas, L. T., & Ganster, D. C. (1995). Impact of family-supportive work variables on work-family conflict and strain: A control perspective. Journal of Applied Psychology, 80, 6-15.

Thompson, C. A., Jahn, E. W., Kopelman, R. E., & Prottas, D. J. (2004). Perceived organizational family support: A longitudinal and multilevel analysis. Journal of Managerial Issues, 16, 545-565.

Thompson, C.A., Beauvais, L.L., & Lyness, K.S. (1999). When work-family bene ts are not enough: The in uence of work- family culture on benefit utilization, organizational attachment, and work- family con ict. Journal of Vocational Behavior, 54, 392-415.

Tyler, T. R. (1999). Why people cooperate with organization: An identity-based perspective, In R. I. Sutton and B. M. Staw (Eds.), Research in Organizational Behavior (pp. 201-247). Greenwich. CT: JAI Press.

Varatharaj, V., & Vasantha, S. (2012). Work Life Balance: A source of job satisfaction: An exploratory study on the view of women employees in the service sector. International Journal of Multidisciplinary Research, 2(3), 450-458.

Vijayalakshmi, & N. (2013). Work life balance of women faculty working in educational institutions: Issues and problems. International Journal of Research in Commerce, Economics and Management, 3(4), 73-75.

Welsch, H. P., & LaVan, H. (1981). Inter-relationships between organizational commitment and job characteristics, job satisfaction, professional behavior, and organizational climate. Human Relations, 34, 1079-89.

Wrzesniewski, A., & Dutton, J. (2010). Perceiving and responding to challenges in job crafting at different ranks: When proactivity requires adaptivity. Journal of Organizational Behavior, 31, 158–186.

Zilli, A. S., & Zahoor, Z. (2012). Organizational commitment among male and female higher education teachers. Indian Journal of Psychology and Education, 2(1), 55-60.
