Journal of Reviews on Global Economics

EISSN 1929-7092

Special Issue Retailing from Consumers’ Perspective

Guest Editor A.K.M. Ahasanul Haque

Special Issues Editor: Badar Alam Iqbal Special Issues Assistant Editor: Fulufhelo Netswera

Journal Homepage: www.lifescienceglobal.com/jrge

Journal of Reviews on Global Economics

Contents

Volume 8, 2019 Special Issue Retailing from Consumers’ Perspective Page Nos.

Editorial: Retailing from Consumers’ Perspective i A.K.M. Ahasanul Haque

Diagnosing The Dynamic Drivers of Healthcare Expenditure in 873 Organisation of Islamic Cooperation (OIC) Countries Abdul Azeez Oluwanisola Abdul Wahab, Nurhazirah Hashim and Zurina Kefeli

Risk Reduction in Online Flight Reservation: The Role of 886 Information Search Kwee-Fah Lee, Ahasanul Haque, Suharni Maulan, Kalthom Abdullah and Arun Kumar Tarofder

The Impact of HOT Skills on Enhancing Professional 900 Communication Strategies among Malaysian TESL Students Ali Sorayyaei Azar, Norhisham Binti Mohamad, Rusyaizila Binti Ramli and Chin Si How

Malaysian’s Young Consumer Preferences of Hijab 916 Amily Fikry and Mohd Rozi Ahmad

The Impact of Transformational Leadership Effects on Innovative 925 Work Behavior by the Moderating Role of Psychological Empowerment Arif Md. Khan, Amer Hamzah Bin Jantan, Lailawati Binti Mohd Salleh, Zuraina Dato’ Mansor, Md Asadul Islam and Sharif Hosen

Acceptance of Islamic Banking in New Zealand: Perspectives from 939 Potential Customers Geetha Subramaniam, Ismah Osman, Amirul Afif Muhamat, Ershad Ali and Saadiah Mohamad

The Impact of Technological and Marketing Innovations on 948 Retailing Industry: Evidence of India Amgad S.D. Khaled, Salma Ahmed, Mosab I. Tabash, Eissa A. Al-Homaidi and Mohammad Imtiaz Hossain

Assessing of Customer Perception on Innovation of Food Service 958 Norfadzilah Abdul Razak, Zaidi Mohd Aminuddin, Ayu Rohaidah Ghazali and Nini Hartini Asnawi

Bank Stability Index for Selected Countries with Dual Banking 963 Systems Norzitah Abdul Karim, Amirul Afiff Muhamat and Mohamad Nizam Jaafar

Measuring Conspicuous Consumption Behavior Using Partial 981 Least Square Nur Liana Kori, Azmi Mat, Norliza Saiful Bahry and Zarina Abdul Munir

Effects of Subjective Knowledge and Religious Motives on Malay 988 Muslims’ Receptiveness of Non-Muslim Country’s Halal Food Products Hasman Abdul Manan, Shahira Ariffin and Tengku Sharifeleani Ratul Maknu

Relationship between Website Determinants and Customer 998 Switching in a Hypermarket Online Shopping: Customer Trust as a Mediator Shereen Noranee, Muhammad Azlan Shah Badar, Rozilah Abdul Aziz, Zarina Abdul Munir and Veera Pandiyan Kaliani Sundram

Entrepreneurship and Facebook Engagement: A Case Study of the 1006 Online Community in Malaysia Sri Fatiany Abdul Kader Jailani, Syukrina Alini Mat Ali, Nur Atiqah Rochin Demong, Noor’ain Mohamad Yunus and Erne Suzila Kassim

The Role of Neighbourhood Satisfaction in Mediating Social- 1013 Physical Attributes and Urban Quality of Life in Malaysia Siti Nurul Munawwarah BT Roslan, Fatimah BT Kari, Nurulhuda BT Mohd Satar and Wan Nor Azriyati BT Wan Abd Aziz

Adoption of Instant Messenger: An Empirical Investigation 1024 Arun Kumar Tarofder, Umme Salma Sultana, Siti Khalidah Binti Md Yusoff and Sultan Rehman Sherief

Editorial Journal of Reviews on Global Economics, 2019, Vol. 8 i Editorial: Retailing from Consumers’ Perspective

INTRODUCTION

This Special Issue is dedicated to retailing from consumers’ perspective. Despite all the research around retailing considered the main theoretical and practical importance of this special issue is the focus on research oriented to the critical issues related with respect to all aspects of retailing, its management, evolution, and current theory. The arena of retailing includes both products and services, the supply chains and distribution channels that serve retailers, the relationships between retailers and members of the supply channel, and all forms of direct marketing and emerging electric markets to consumers or households. Articles may take an economic or behavior approach, but all reflect rigorous analysis and a depth of knowledge of relevant theory and existing literature. Empirical work is based upon the scientific method, modern sampling procedures and statistical analysis.

The world economy has greatly revolutionized due to the pressure of current business environment coupled with the underlying forces of free market policies. The ever increasing competition has restructured the overall appearance of recent business world through shrinking industrial and regulatory barriers, diffusing innovation and building a technology driven society. One of the sectors of the economy that has been extensively impacted through such occurrences is perhaps retailing. Retail can be considered as one of the most customer centric industries covering a wide spectrum of businesses.

Retailing encompasses all the businesses and people involved in physically moving and transferring ownership of goods and services from producer to consumer. In a distribution channel, retailers perform valuable functions as the contact for manufacturers, wholesalers, and final consumers. They collect assortments from various suppliers and offer them to customers. They communicate with both customers and other channel members. They may ship, store, mark, advertise, and pre-pay for items. They complete transactions with customers and often provide customer services. They may offer multiple formats (multi-channel retailing) to facilitate shopping.

WHY A SPECIAL ISSUE?

This special issue of Retailing from Consumers’ Perspective is focused an international and interdisciplinary forum for research and debate in retailing and services from consumers’ point of view. It also focused on contributions to theory development. Intended both for academics and practitioners in this fast-developing field, it focuses particularly on consumer behaviour, and on decision-making by managers and policymakers. The wide range of subject areas covered by the journal includes: the distribution and selling of goods; the retailing of professional services such as health and law; and the retailing of such consumer services as transportation, tourism, leisure, and personal financial services.

Finally, the objective of this Special Issue was to draw together scholars who are working at the forefront of this research domain. This includes strong theoretical, conceptual and empirical papers using quantitative or qualitative approaches to retailing from consumers’ perspective.

ABOUT THE RESEARCH PAPERS

There are 15 research papers in this special issue which are distinct and well documented in their respective research areas.

In the article Diagnosing the dynamic drivers of healthcare expenditure in Organization of Islamic Countries (OIC), the authors (Wahab et al., 2019) examined the dynamic drivers of healthcare expenditure in OIC countries from 1990 to 2015 using dynamic panel system Generalized Method of Moments (GMM) technique. Through their findings, the study proves that healthcare expenditure in OIC countries is a luxury.

In the article Risk reduction in online flight reservation: The role of information search by Lee et al. (2019), the authors examined the influence of perceived risk and risk-relievers on intention to reserve flight tickets online in ii Journal of Reviews on Global Economics, 2019, Vol. 8 Editorial

Malaysian context. The two risk-relievers investigated are information type and personal sources of information. The study offers some valuable suggestions for airlines industry to gain better profits in a competitive market.

The article The Impact of HOT Skills on Enhancing Professional Communication Strategies among Malaysian TESL Students by Azar & How (2019) emphasized on effective professional communication strategies for university students using Higher Order Thinking (HOT) skills. The authors used qualitative content analysis with 41 Bachelor of TESL (BTESL) students and 13 Diploma of TESL (DTESL) students to come up with the importance of HOT skills in student’s carrier.

The article Malaysian’s Young Consumer Preferences of Hijabby (Fikry & Ahmad, 2019) articulated the understanding of young consumers’ purchasing preferences and decision-making styles by zooming on hijab. The authors used qualitative methods to obtain data from 13 Malaysian female respondents aged from 20 to 25 years. The factors identified were very appealing and will help marketers to differentiate their product categories.

In the article The Impact of Transformational Leadership Effects on Innovative Work Behavior by the Moderating Role of Psychological Empowerment, the authors (Khan et al., 2019) studied transformational leadership (TFL) and innovative work behavior (IWB) of bank employees in commercial banks in Bangladesh. Data were collected from 372 bank employees and the results indicated that the employees who are highly psychologically empowered, like to work under TFL and it impacts IWB positively.

In the article Acceptance of Islamic Banking in New Zealand: Perspectives from Potential Customers by Subramaniam et al. (2019), the authors described the increasing number of Muslim population in New Zealand and examined the demand for Islamic financial services among them. A quantitative approach using purposive sampling of 285respondents were used to come up with the decisions which may help the entrepreneurs to setting up Islamic banking system in New Zealand.

The article The Impact of Technological and Marketing Innovations on Retailing Industry: Evidence of India (Khaled et al., 2019) offered to study the impact of marketing and technological innovations on the retail industry in India. Sample respondents were taken from the city of Aligarh in India. The authors concluded that technological innovation is more important than marketing innovation with respect to World of Mouth (WOM) referral and satisfaction. Furthermore, the study suggested many other dimensions for the retail industry.

In their article Assessing of Customer Perception on Innovation of Food Service, the authors (Razak et al., 2019) assessed the perception of the customers toward several elements of innovation in the food retail business industry. The study was conducted among 235 restaurant customers and the finding revealed that healthier food, modification of menu items, food service options, technology advancement, environment sustainability inclination towards global cuisines and focus on customer of new generations are highly demanded by the customers.

In the article Bank Stability Index for Selected Countries with Dual Banking Systems by Karim et al. (2019), the authors tried to develop a comprehensive measurement index of bank stability for selected OI Ccountries with dual banking systems. The authors used annual data from 1999 to 2015 from the Bank scope database for analysis and suggested some considerable policy interventions which may help the regulatory bodies.

In the article Measuring Conspicuous Consumption Behavior Using Partial Least Square the authors (Kori et al., 2019) investigated the influence of attitude, brand image, patron’s status and quality toward conspicuous consumption behavior among 400 customers from top shopping malls in Kuala Lumpur, Malaysia. The study used PLS algorithm to statistically prove the arguments.

In the article Effects of Subjective Knowledge and Religious Motives on Malay Muslims’ Receptiveness of Non-Muslim Country’s Halal Food Products by (Manan et al., 2019), the authors examined the effects of subjective knowledge and religious motives on receptiveness toward non-Muslim country’s Halal food products in Malaysian context. A convenience sampling of 450 Malay Muslims in the major metropolitan area of Kuala Lumur were used to collect data and the authors suggested some essential guidelines for global Halal food marketers. Editorial Journal of Reviews on Global Economics, 2019, Vol. 8 iii

In the article Relationship between website determinants and customers witching in a hypermarket online shopping: Customer trust as a mediator, the authors (Noranee et al., 20119) developed their understanding for website design, website security/privacy, and website shopping service which influenced customers witching in a hyper market online shopping and the effect of customer trust acts as a mediating variable. This study will help the online shopping retailers to better design the website marketing strategies.

In the article Entrepreneurship and Facebook Engagement: A Case Study of the Online Community in Malaysia by Jailani et al. (2019), the authors explored the nature and degree of the social media usage that captures online business activities. Data was collected via FB Insight based on top post of sales for the year 2018. The authors revealed many interesting findings including customer preferences of different range of products such as food, gadgets and different services related to health and fitness.

The article The Role of Neighbourhood Satisfaction in Mediating Socio-Physical Attributes and Urban Quality of Life in Malaysia by (Roslan et al., 2019) offered a wide range of factors contributed to quality of life in urban areas which has become an important matter for sustaining any urban living. The authors suggested that accessibility to public community space for all races and free barriers for disabilities and elderly people should be enhanced to make sure that they can access to the facilities provided in their neighborhood area and thereby can increase their quality of life.

The article Adoption of Instant Messenger: An Empirical Investigation by (Tarofder et al., 2019) offered an empirical study on the viability of IM over the globe, which in the end urges this examination to explore more inside and out. The authors shared that knowledge creation is the most vital driver for IM adoption followed by organizational pressure and relative advantage. Additionally, this study revealed that the organizational pressure is moderately more imperative in Corporation than SMEs.

Being the Guest Editor, It is my pleasant duty to acknowledge the services and contributions made out by the authors, reviewers and publisher without their respective help and cooperation the special issue could not have seen the light of the day. I am grateful to Emeritus Professor Dr. Badar Alam Iqbal who has invited me for Guest Editor for this special Issue.

Dr. A.K.M. Ahasanul Haque, FCIM UK Professor of Marketing Department of Business Administration International Islamic University Malaysia Box No. 10, 50728 Kuala Lumpur Malaysia Tel: +603-6421 4719 (O) +6-0133548284 (Mobile) Google Scholar 3942 | Publons (WOS) 0-1658-2019 503 h-index 13 Scopus ID: 46461377600 | ORCHID ID: 0000-0002-8084-7724

Journal of Reviews on Global Economics, 2019, 8, 873-885 873 Diagnosing The Dynamic Drivers of Healthcare Expenditure in Organisation of Islamic Cooperation (OIC) Countries

Abdul Azeez Oluwanisola Abdul Wahab1, Nurhazirah Hashim2,* and Zurina Kefeli1

1Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Nilai, Negeri Sembilan, Malaysia 2Faculty of Business and Management, Universiti Teknologi MARA, Puncak Alam, Selangor, Malaysia Abstract: The foremost impact of healthcare system is for the individuals to have the right and privileges to access enhanced healthcare services. The demand for health, innovation and sustainable healthcare systems has also been gaining better prominence and consideration in numerous countries, and it is perceived as one of the major contributors to the economic growth and development. This paper looks at the dynamic drivers of healthcare expenditure in Organisation of Islamic Cooperation (OIC) countries from 1990 to 2015. The dynamic panel system Generalized Method of Moments (GMM) technique was used for the study analysis. The findings show that the income, life expectancy, share of population between the age group of 65 years and above, share of population age under 15 years, out-of-pocket payment, research and development (technology) in healthcare and consumer price index were the drivers of healthcare expenditure in OIC countries. In view of this, the study differs from recent and previous studies, because the study offers novel empirical findings as the income per capita is above one, which is about 1.90 and inelastic. This proves that healthcare in OIC countries is a luxury goods. Keywords: Healthcare expenditure, OIC countries and Generalized Method of Moments.

INTRODUCTION cointegration, unit root, static and dynamic models, and ARDL and arrived at diverse regression outcomes (Xu The importance of healthy individuals cannot be et al., 2011). Thus, the growing cost of expenditure on over emphasized for the growth and development of healthcare in OIC countries and the surge in chronic any country. Therefore, healthcare is a relatively and non-chronic illnesses is worrisome especially for imperative tool for high economic achievement that can OIC governments, and this requires urgent attention. In result in attainment of fruitful undertakings on the part view of this, the incorporation of this research is of both individuals and governments and tax rate return necessary as it will enhance the understanding of the improvements. But, the recent growth in healthcare major drivers of the healthcare expenditure. Hence, this expenditure has been a source of economic challenges scholarly work balances the literature as it unties the to many countries (Wahab and Kefeli, 2016). emphasis on the Organisation for Economic Co- Government healthcare expenditure is the main root of operation and Development (OECD) countries to OIC health finance worldwide. Globally, the healthcare countries. Furthermore, the previous researches on this expenditure by various countries amounted to about theme stereotypically focused on a selection of 59.7% in 2015 (Micah et al., 2019). Also, one of the countries but then this study considered the 57 OIC main obstacles for the U.S and several other countries. The rest of the paper is further divided into developed and developing countries is the rapid literature review, method, findings and discussion, upsurge in yearly amounts of healthcare expenditures then, the concluding remarks. compared to the yearly GDP growth rates (Murthy and Okunade, 2016; Martin et al., 2016). LITERATURE REVIEW

On the other hand, there are several factors that The drivers of healthcare expenditures according to contributed to the increase in healthcare expenditure in past findings conducted mostly in the OECD regions various countries according to the past literature, and and other countries comprising of GDP per capita as a several approaches have been employed in proxy of income, life expectancy, infant mortality, determining the factors that drive the healthcare medical progress, technological improvement, public expenditure. Some researchers used household data financing, population aging, incidence of tuberculosis while some used aggregated macroeconomic data with per 100,000 people, alcohol consumption and tobacco different methods such as cross-sectional, panel data, consumption (Gerdtham et al., 1998; Gerdtham & Jönsson, 2000; Martin et al., 2011; Xu et al., 2011;

*Address correspondence to this author at the Faculty of Business and Baltagi & Moscone, 2010; and Murthy & Okunade, Management, Universiti Teknologi MARA, Puncak Alam, Selangor, Malaysia; Tel: +60332585090; Fax: +60332587111; 2016). In recent times, various studies estimated the E-mail: [email protected], [email protected] drivers of healthcare expenditure, for instance, Hauck JEL classification: H51, O47, O57.

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 874 Journal of Reviews on Global Economics, 2019, Vol. 8 Wahab et al.

& Zhang (2016) used dynamic analysis for 34 OECD that individual healthcare expenditure has a tendency countries between 1980 and 2012 and based on the to rapidly upsurge as patients are near to death (Breyer analysis, country-specific regressors are presumed to & Felder, 2006; Seshamani & Gray, 2004; Felder et al., be static and exogenous. Besides, few other studies 2000). Also, the mortality rates increase with age but that used dynamic analysis to determine the drivers of due to improvements in medicine, life expectancy is healthcare expenditure were included (Xu et al., 2011; increasing as well (Feng et al., 2017). A basic Khan et al., 2016; Feng et al., 2017). On the other representation such as ordinary age, share of the hand, some scholarships on healthcare expenditure by population under 15, or share of the population over government have observed elements like national 65, might not completely serve as a measurement of income, fiscal policy, population age, healthcare healthcare expenditure. As a result, demographic problem, disease incidence, and healthcare scheme structures are seldom established to be statistically features. But, the outcome of these literatures show significant in regression models of per capita that national income and fiscal policy are significant healthcare expenditure (Hitiris & Posnett, 1992; Di contributing factor to healthcare expenditure (Behera Matteo & Di Matteo, 1998; Leu, 1986). and Dash, 2018). In contrast, recent findings by Murthy and Okunade Besides, the multifaceted set of elements powering (2016) indicates that population age structure above 65 healthcare expenditure growth comprise ageing years are cointegrated and shows positive effects on populace, consumer demand prospects for expensive U.S. healthcare expenditure per capita. More so, aging high-quality care, increasing incomes, increasing prices population has been identified as a causative factor of of the medical personnel and hospital services, medical accumulating healthcare expenses and it has a innovation diffusion and the inefficient disjointed significant contributing element to elucidate differences healthcare system such as the structure of financing in healthcare expenditure (Ogura & Jakovljevic, 2014 (Murthy & Okunade, 2016). On the other hand, the and Khan et al., 2016). Likewise, population structure determinants of healthcare expenditure can then be was found to be key determinants for the healthcare divided into demographic and non-demographic demand and an aggregate source of healthcare elements (de la Maisonneuve et al., 2016). expenditure (Reinhardt, 2003). Besides, Hosoya (2014) Demographic aspect of healthcare expenditure is discovered that the ageing population was positive and associated with the age and health status of the significant, and it is a vital element that cannot be population, whereas non-demographic determinants overlooked and may offer a fresh signal for determining comprise of income and other variables such as price health expenditures.In addition, the epidemiological of healthcare, technology and characteristics of a prerequisite is occasionally included as a covariate healthcare system (Feng et al., 2017). from different representations. Lu et al. (2010) employed HIV seroprevalence as a substitution for Demographic Structures demography and established no significant relationship with government healthcare expenditure as a share of Demography (especially population age structure) is GDP. Likewise, a study conducted in African countries frequently incorporated as a driver of healthcare shows that maternal mortality rate has no relationship expenditure and it is customarily measured by the with healthcare expenditure (Murthy & Okunade, 2009). share of the population of young (such as under 15 years) and the share of the population of an elderly age Non-Demographic Structures group, (such as over 65 years old), or by the average age of the population (Xu et al., 2011; de la Income (with GDP per capita as proxy) has been Maisonneuve et al., 2016 and Feng et al., 2017). Thus, considered to be the primary determinant of healthcare these variables are usually insignificant when expenditure according to the past studies and the incorporated in the regression models to interpret per- elasticity of income in healthcare expenditure has been capita healthcare expenditure (Leu, 1986; Hitiris & extensively deliberated with a diverse outcome (Martin Posnett, 1992; Di Matteo & Di Matteo, 1998). et al., 2011; Lago-Penas et al., 2013; Khan et al., 2016; Murphy & Okunade, 2016 and Feng et al., 2017). However, few studies have presumed that nearness Some literature recommended that the income to death is the crucial demographic determinant of elasticity assessment is subject to the countries healthcare expenditure, not population age. This studied, the period of time and the method of assumption is on par with some studies which show estimation (Feng et al., 2017). Martin et al. (2011) Diagnosing the Dynamic Drivers of Healthcare Expenditure Journal of Reviews on Global Economics, 2019, Vol. 8 875 surveyed twenty (20) articles and found that only two established to be both a “luxury” good with an income out of 11 articles from the 20 articles estimated that elasticity greater than one (Liu, et al., 2011; Mehrara, et income elasticity of demand was able to obtain a value al., 2010; Getzen, 2006; Parkin, et al., 1987; Leu, 1986; greater than one, hence, labelling healthcare Newhouse, 1977; Moscone, & Tosetti, 2010), this expenditure as a “luxury good” while others obtained a cluster of literature stressed on determining the value lesser than one, which shows that healthcare magnitude of income elasticity of healthcare expenditure is a “necessity good”. expenditure, and the policy implications for the financing and conveyance of healthcare resources. On Moreover, cross-section regressions of aggregate the other hand, some literature established that healthcare expenditure on GDP per capita consistently healthcare is a “necessity” with an income elasticity showed an income elasticity significantly greater than less than one (Baltagi & Moscone, 2010; Chakroun, one from OECD countries ranges from 1.20 to 1.50 2009; Sen, 2005; Gerdtham et al., 1998; Gerdtham, (Kleiman, 1974; Newhouse, 1977; Leu, 1986; Getzen, 1992; Khan et al., 2016; Baltagi et al., 2017). Likewise, 2006). In addition, aggregate time-series regressions the authors acknowledged some studies (such as for different countries usually displayed same Gerdtham, 1992; Hitiris & Posnett, 1992) which outcomes but with a substantial difference between suggested that the income elasticity for government countries. Equally, past studies like Musgrove et al. healthcare expenditure could be near to one. (2002) established that income elasticity of healthcare expenditure was between 1.133 and 1.275 through Conversely, the factions that considered healthcare cross-section data from 191 countries. The studies expenditure as a luxury good claimed that it is a found that income elasticity for out-of-pocket commodity that is similar to other goods and ought to expenditure was between 0.884 and 1.033, and for be positioned for market forces. But, the promoters of government health expenditure it was ranged from healthcare expenditure as a necessity supported the 1.069 to 1.194 (Musgrove et al. 2002). A related study role of government regulation and involvement in the indicated that income elasticity for health expenditure conveyance of healthcare (Culyer, 1989; Di Matteo, was 1.09 through cross-section data from 175 2003; Haque, Farzana & Anwar, 2018). Though, countries. They also displayed the outcomes by previous literature could have the problem of variables geographical area and established that income omission and transformation issue techniques or elasticity was between 0.830 in the Middle East to specific methodological difficulties (Khan et al., 2016). 1.197 in OECD countries (van der Gaag & Stimac, However, despite the fact that some studies found the 2008). income elasticity to be positive, there is no compromise on the healthcare as a necessity or luxury good. In the same manner, Okunade and Murthy (2002) surveyed cross-sectional data from 44 African Other Non-Demographic Structures countries and revealed an income elasticity between 1.089 and 1.121, subject to the specification applied. Besides income, there are other important non- On the contrary, income has been shown to determine demographic structures that drive healthcare the variation in healthcare expenditure as concluded by expenditure according to past reviews, such as Xu et al. (2011) in a survey of 143 countries for 14 research & development expenditure in healthcare, years through panel data. Also, healthcare expenditure, technological progress, medical progress and health in particular, does not grow quicker than GDP when system characteristics. According to OECD report, the other factors are considered, and income elasticity of relative price of health services, technological progress healthcare expenditure is in the range of 0.75 and 0.95 and underlying health policies and institutions are which shows that healthcare is a necessity. Similarly, conceivable to be the key factors other than non- Khan et al. (2016) surveyed the determinant of demographic drivers of healthcare expenditure (de la healthcare expenditure for Malaysia from 1981 to 2014 Maisonneuve & Oliveira Martins, 2013). But, due to and discovered that income elasticity for healthcare insufficient of applicable data to characterize various expenditure was 0.99 which was less than one non-demographic drivers, these variables are seldom displaying healthcare was a necessity. used.

In the same disposition, Lago-Penas et al. (2013) Firstly, in healthcare division, prices, similar to other emphasized their argument from both sides by showing areas of the economy are obviously a determinant of that healthcare in the past studies has been healthcare. In case inflation in whichever division goes 876 Journal of Reviews on Global Economics, 2019, Vol. 8 Wahab et al. higher than the rest of the economy, at that point, the expenditure on health and healthcare, as new folks are real expenditure in that division rises, ceteris paribus. being treated (Lubitz, 2005). Progresses and flows in Specifically, prices for healthcare services will increase, medical care technology into the healthcare systems similar to other prices for the reason that earnings in were the key accountable elements for rising low productivity divisions must be on par with wages in expenditure in healthcare (Newhouse, 1992). high productivity divisions. Given a price-inelastic demand, the percentage of healthcare expenditure in Yet, there was a contradictory and multifaceted GDP would incline to rise over time. This rise is mainly association between medical technology and driven by popularly known “Baumol effect” or “cost- healthcare (Sorenson et al., 2013). There has been an disease” (i.e. there is a penchant for relative prices of increase in survival rates as a result of healthcare certain services to escalate as a result of other goods technology on one hand, but then, it has swiftly and services in the economy) (Xu et al., 2011). Thus, upsurged the cost relating to healthcare as a proportion the Baumol effect or price index may be a significant to GDP (Chandra and Skinner, 2012). Numerous risk element for the development of healthcare factors such as obesity and disparities in the expenditures.Nevertheless, the Baumol effect is an occurrence of the chronic disease revolved to be incident that upsets mostly developed economies. The significant in the long term estimation (Thorpe et al., need for the inclusion in this study might not be 2004). Likewise, different innovative technologies necessary. added more to progress in the medium term as was the case with focused biologicals (Jakovljevic, 2015), Secondly, few literature have deliberated on diagnostic radiology (Rankovi´c et al., 2013) and technological progress as a variable since the study of radiation therapy of cancer (Jakovljevic et al., 2014). Newhouse which considered technological progress as a significant driver of healthcare expenditure Thirdly, healthcare system characteristics are (Newhouse, 1992). This is as a result of inadequate considered as one of the drivers of healthcare data on medical technological progresses and the expenditure. Some health policies and institutional problem of finding a suitable proxy for variations in indicators were used in de la Maisonneuve et al. (2016) technology. In few studies that highlighted study on OECD, from both supply-side aspects (e.g. technological progress, numerous proxies have been provider payment, provider competition) and the used, such as the number of specific medical demand-side aspect (e.g. gatekeeping, cost-sharing) equipment and surgical procedures (Baker & Wheeler, (de la Maisonneuve et al., 2016). Structural 1998; Weil, 2007; Mohan & Mirmirani, 2008). R&D characteristics of the healthcare system like health expenditure in healthcare division was used as a proxy financing, the number of physicians, and the number of for technological change (Okunade & Murthy, 2002). In hospital beds per capita have been included in prior this work, they demonstrate that real aggregate research. Also, the involvement of government in healthcare expenditure per capita does react to R&D healthcare financing has aroused various disagreement expenditure. As R&D expenditure increases at in the earlier few decades. Leu (1986) contended that historical rates and real income increases, health the percentage of public healthcare financing had a insurance would probably be more expensive and then positive effect on total health expenditures and further increase healthcare expenditure. Additionally, life indicated that healthcare expenditure should rise with expectancy at birth and infant mortality are often used the proportion of public finance, under the conjecture as variables for both technological change and medical that this proportion will minimize the price to users. progress (Dreger, 2005). Also, Gerdtham et al. (1992) stated that the impact of public financing in healthcare cannot be dogged as In addition, time index has been used as a proxy for countries with a bigger proportion of public financing do the impact of technology change (Gerdtham and not appear to be described by larger healthcare Löthgren, 2000); time-specific intercepts (Di Matteo, expenditure. 2004). Modernizations in technology together with frail cost restraint policy were acknowledged as an On the other hand, another institutional feature of essential instrumental factor for rising healthcare cost. healthcare systems that may affect healthcare Particularly, main progresses in the health-connected expenditures is the fee-for-service or out-of-pocket technologies upsurge healthcare (Bodenheimer, 2005). payment scheme which levies a higher cost on The inclusion of low cost per patient per year healthcare spending than other levy arrangements technology to the healthcare scheme surges (Gerdtham et al., 1992). Therefore, a transformation Diagnosing the Dynamic Drivers of Healthcare Expenditure Journal of Reviews on Global Economics, 2019, Vol. 8 877 from financing hospitals with budgets to fee-for- METHOD services or out-of-pocket payment methods is connected with surges in both public and private The study used panel data of 57 OIC countries as mechanisms of healthcare expenditure. the population, and the sample size of the study are the time series and cross section of OIC member countries Moreover, the use of physicians or general healthcare parameters for the time period of 1990 to practitioners as gatekeepers of the healthcare system 2015. The data are collected and sourced from the tends to lead to higher healthcare expenditure. If the World Bank (2015) World Development Indicators stock of physicians upsurges and the workload (WDI) and the Statistical, Economic and Social reduces, physicians appear to persuade the patients to Research and Training Centre for Islamic Countries consume more services at higher prices (Gerdtham et (SESRIC). The study variables are selected based on al., 1992). Furthermore, a rise in remunerated the literature review and data availability for the main physicians can lead to higher per capita healthcare variables as shown in Table 1 below. expenditures. Still, the study also indicated that an upsurge in the number of physicians might not have In this paper, wediagnose the dynamic drivers of much effect on health costs under a fee-for-service healthcare expenditure in Organisation of Islamic system when there is traffic of patients from current to Cooperation (OIC) countries and the researcher new medical practitioners (Sen, 2005). Conversely, per employed panel data of 57 OIC countries using capita healthcare expenditures will absolutely increase dynamic panel system Generalized Method of when there is a surge in the number of appointments Moments (GMM) technique, which was defined by for current physicians. Arellano and Bover (1995) and completely advanced by Blundell and Bond (1998).The method produced an Fourthly, another proxy for health resources is the added supposition which resulted in the first differences number of hospital beds per 1000 of population. This of instrument variables to be uncorrelated with the fixed exogenous variable captures developments in patient effects. With this, it permits the inclusion of other care admittance in healthcare. Although fewer studies instruments and can vividly increase efficiency of the in the past have used this variable as a structural output. This method pooled the first differencing characteristic of the healthcare supply, there exists technique with a levels regression via lagged first evidence on restrictions on hospital bed supply as a differences as instruments. As a result of this, the factor of reducing healthcare expenditures system GMM estimator is better in efficiency as it offers (Vandersteegen et al., 2015). In conclusion, the a more effective set of instruments to adjust the weak exploration for new considerations of the association instruments issue. Likewise, Arellano & Bond (1991) between increasing healthcare expenditure and its and Blundell & Bond (1998) system GMM estimators tenacious determinants motivates the well-timed have one-step and two-step alternatives. But, the two- requirement to examine the importance of these step is asymptotically more efficient (Roodman, 2009). subjects by means of a dissimilar method for this study. As a result, the researcher specified a dynamic log- linear equation for healthcare expenditure to be able to

Table 1: Variable Description, Measurement and Sources

Variables Description Measurement Sources

HCE Healthcare expenditure per capita In Millions (current price US dollar $) WDI/WHO INCOME/ GDP Real gross domestic product per capita In Millions (current price US dollar $) WDI/ SESRIC LE Life expectancy at birth In Years WDI/ SESRIC AGE65+ Percentage of the population age 65 years and above In percentage WDI/ SESRIC AGEU15 Percentage of the population age under 15 In Percentage WDI/ SESRIC OOP Out-of-pocket healthcare expenditure Percentage of GDP WDI/SESRIC R&Dhce Research and development in healthcare In Millions (current price US dollar $) WDI/ SESRIC PINDEX Consumer price index Annual percentage changes WDI/ SESRIC

Sources: Authors Computation, 2018. 878 Journal of Reviews on Global Economics, 2019, Vol. 8 Wahab et al. interpret the estimated results in elasticities. The study tendency to increase over time with a price-inelastic empirical approach undertook maximum usage of both demand (Xu et al, 2011). However, α1 is a vector of time and cross-country dimensions of obtainable data constants, the error term Ԑit, is assumed to be sets which comprisedof a dependent variable and independent and normally distributed and the independent variables. Therefore, the study subscripts i&t are the individual effects and time datacovered the period of 1990 to 2015 and the periods. The coefficients β1, β 2, β 3, β 4, β 5, β 6, and β7 empirical model of the study wastransformed to natural respectively, are the elasticities of healthcare logarithm, and specified as follows: expenditure per capita with reference to the explanatory variables. Nevertheless, Eqn. (1.1) is + lhceit = α1 + β1lincomeit + β2lleit + β3lage65 it + further specified to followthe procedure proposed by β4lageu15it + β5loopit + β6lrdhceit + β7lpindexit + Ԑit (1.1) Arellano and Bond (1991); Arellano & Bover, (1995); Blundell & Bond, (1998) as follows: Where in Eqn. (1.1), lhce is a control variable and serve as a function of income (lincome),life expectancy + lhceit = α1lhceit-1 + β1lincomeit + β2lleit + β3lage65 it + (lle), population age 65 (lage65+) and above, β4lageu15it + β5loopit + β6lrdhceit + β7lpindexit + Xβ8it population age under 15 years (lageu15), out-of-pocket +Ԑit (1.2) expenditure (loop), research and development in healthcare (lrdhce) and consumer price index (lpindex). Ԑit= μi+ vit

According to the standard economic theory, β1> 0; β 2> E (μ ) = E (v ) = E (μ v ) = 0 0; β 3> 0; β 4> 0; β 5> 0; β 6> 0 and β7> 0 they are i it i it adjustment parameters that could be gathered for the whereby, the error term has two orthogonal equilibrium level when there is slightly shock to the components: the fixed effects, µ , and the idiosyncratic system, and its value equals to 0. As stated by the i shocks, v . Eqn.(1.2) above can be re-written as economic theory, as the real per capita income rises, it the expenditure on healthcare is anticipated to Δlhceit = (1α -1)lhceit-1 + β1lincomeit + β2lleit + increase. Hence β2 & β6 > 0 which means, growing life + β3lage65 it + β4lageu15it + β5loopit + β6lrdhceit + expectancy and improved research and development in β7lpindexit + Xβ8it +Ԑit (1.3) healthcare specifies amplified broad health conditions of the overall public of an economy which could be as a where µi are unobserved individual level effects that result of the research and development and capture the individual heterogeneity, and vit are establishment of innovative technologies in the unobserved specific error, where by µi and vit, are healthcare area, which have an encouraging effect on independent of each other and among themselves. healthcare expenditure. ∆lhceit is exogenous variable, lhceit-1 is vector of strictly exogenous covariates and Xi,t-1 is the explanatory The β3 and β4 signify the group of the population variable (which may include the lag of y) and between the age group of 65 years and above and endogenous covariates. α and β are vectors of population age under 15 years; and as the percentages parameters to be estimated. Thus, Eqn. (1.3) contains of these two groups rise the expenditure on health and a lagged dependent variable and dynamic panel data healthcare is expected to rise due to additional demand approaches. for healthcare services. The β5> 0 suggests that the increasing in out-of-pocket payment percentage would RESULTS AND DISCUSSION permit enhanced access to better service which in turn might have effect on healthcare expenditureand also The data was sourced from the World Bank (2015) provide more opportunity to control expenditures as World Development Indicators (WDI) and the one of healthcare system characteristics. Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC). The data set Consequently, β7 > 0 implies that rise in consumer for the observation as shown in Table 2 below is 1482, price index would cause “Baumol effect” or “cost- But there is missing values reported in consumer price disease” (Baumol 1967; Baumol 1993), such that, the index (lpindex) (N=1367). The individual descriptive prices of healthcare services could increase relatively statistics shows that the data and all the variables to other prices since wages in low productivity sectors follow a normal distributions. The highest mean value is must rise up with wages in high productivity sectors. income (lincome) with the corresponding mean and So, the share of healthcare expenditure might have a standard deviation of 7.33 million USD and 1.41 million Diagnosing the Dynamic Drivers of Healthcare Expenditure Journal of Reviews on Global Economics, 2019, Vol. 8 879

Table 2: Descriptive Statistics of Variables

Variable Mean St. Dev. Min Max Skewness Kurtosis Obs.

lhce 4.31 1.23 1.10 7.94 0.53 2.58 1482 lincome 7.33 1.41 4.53 11.49 0.64 2.69 1482 lle 4.14 0.16 3.58 4.38 -0.76 2.95 1482 lage65 1.24 0.40 -0.36 2.52 -0.29 4.47 1482 lageu15 3.61 0.25 2.59 3.95 -1.14 4.33 1482 loop 3.91 0.48 1.81 5.43 -0.77 3.95 1482 lrdhce 2.56 0.38 0.77 3.28 -0.75 2.97 1482 lpindex 1.68 1.23 -3.22 6.42 0.06 4.29 1367

Note: lhce: denotes logarithm of healthcare expenditure per capita in Millions (current price USD $); lincome: denotes logarithm of Real gross domestic product per capita in Millions (current price USD $); lle: denotes logarithm of Life expectancy at birth in Years; lage65: denotes logarithm of the population age 65 yrs. & above in percentage; lageu15: denotes logarithm of the population age under 15 in percentage; loop: denotes logarithm of Out-of-pocket healthcare expenditure (Percentage of GDP); lrdhce: denotes logarithm of Research and development in healthcare in Millions (current price US dollar $); lpindex: denotes logarithm of Consumer price index in Percentage

USD, while the lowest mean value and standard steps analysis, and the post estimation diagnostic deviation belongs to population age 65 years & above tests. (lage65) with 1.24 % and life expectancy (lle)with a corresponding value of 0.16 years. Also, income This current finding of a higher point estimate of the (lincome) is the highest maximum value with income elasticity of demand for healthcare as 1.91 is 1.41million USD and the minimum value is population consistent with the study of Okunade and Murthy age 65 years and above (lage65) with -0.36 %. Table 2 (2002), with the Johansen and the Fully-Modified below shows descriptive statistics of variables of the ordinary least square (FMOLS) methods. They study. presented income elasticity of healthcare expenditure to be around 1.55 for the time period of 1960 to 1997; Table 3 comprises of the results for the one-step the study concluded that income was a luxury goods in and two-steps system GMM estimators of the U.S. Alike, the findings also was consistent with the healthcare expenditure, i.e. model (1) and model (2), Newhouse (1977) outcome which showed that estimated using system GMM estimators. The healthcare was a luxury goods with coefficients income estimation was executed using the xtabond2 command elasticity ranges from 1.13 to 1.31. However, this study in Stata 13 as suggested by Roodman (2009). From outcome is about 0.35 higher than that of Okunade and the result as shown in Table 3, it is clearly indicated Murthy (2002), and 0.6 higher than that of Newhouse that in the one-step analysis the lagged dependent (1977) studies. Again, while the two studies used FMOLS and panel cross-sections methods, this study variable is insignificant to the model while it has a used a better method of analysis i.e. GMM, that is significant relationship to the model in two-steps considered reliable in controlling for endogeneity analysis which shows its reliability and consistency issues. Likewise, aggregate healthcare expenditure over the latter. Meanwhile, the estimated coefficients of consistently showed an income elasticity significantly the income was positive and significantly determined greater than one from OECD countries (Kleiman 1974; the healthcare expenditure at 1% level, also the income Newhouse 1977; Leu 1986; Gerdtham et al., 1992; elasticity was greater than one for both one-step and Getzen, 2006).Hence, this research outcome is two-steps i.e. (1.84 and 1.91) suggesting that consistent with the previous studies as well, which healthcare in OIC countries is a luxury goods, which shows that income was the primary determinant of indicate that, healthcare in OIC’s country is regarded healthcare expenditure, but, the study is in contrary as a commodity like other goods and services and with their opinion that healthcare is a necessity (Martin should be determined by the forces of market and et al., 2011; Lago-Penas et al., 2013; Getzen, 2014; supply. This suggests that a unit increase in real Khan et al, 2016; Murphy & Okunade, 2016 and Feng income per capita determines the increase in expected et al., 2017). healthcare expenditure per capita by approximately 1.8-1.9 million USD. Table 3 below shows the Next, the estimated coefficients of the life estimated result of the equation with one step and two expectancy was negative and significantly determined 880 Journal of Reviews on Global Economics, 2019, Vol. 8 Wahab et al.

Table 3: Dynamic Panel System GMM Estimation of Healthcare expenditure

One-Step System GMM Two-Step System GMM VARIABLES (lhce) (lhce)

L.lhce 0.220 0.154*** (0.238) (0.0335) lincome 1.844*** 1.907*** (0.271) (0.0593) lle -8.748*** -7.751*** (3.146) (0.574) lage65 -2.694*** -3.235*** (1.021) (0.251) lageu15 3.708** 3.921*** (1.861) (0.290) loop -1.221*** -1.200*** (0.133) (0.0645) lrdhce 0.931*** 0.815*** (0.313) (0.0888) lpindex -0.0546 -0.0615*** (0.0570) (0.00995)

Specification tests Sargan Test (Chi-sq) 130.83 130.83 (p-value) (0.00) (0.00) Hansen Test (Chi-sq.) 48.28 (p-value) (0.46) Diff.-in-Hansen/ Sargan tests of exogeneity 2.32 0.33 (p-value) (0.13) (0.95) Autocorelation AR(2) 0.19 0.44 (p-value) (0.85) (0.66) Observations 784 784 Number of countries 57 57

Notes: All modes are estimated with Arellano and Bond (1991) dynamicpanel GMM, Arellano and Bover (1995), and Blundell and Bond (1998)system GMM estimations (using Stata xtabond2 command). Figures inthe parentheses are Standard errors, except for Sargan/Hansen and AR(2) tests, which are p-values. ***, **, and * indicates significance at 1%, 5% and 10% respectively. the healthcare expenditure at 1% level for both one- suggested that the healthcare expenditure per capita, step and two-steps i.e. (-8.75 and -7.75). This on average, will be reduced for a year change in life submitted that the healthcare expenditure per capita, expectancy. The outcome was not abnormal as a non- on average, will reduce by 8.8 to 7.8 % for a year demographic drivers of healthcare expenditure, change in life expectancy. The outcome was not because, if there is a decrease in life expectancy the strange because if there is a decrease inlife budget of expenditure on healthcare will be minimized. expectancy it will lessen the cost of expenditure on healthcare. Subsequently, the estimated coefficients of Again, decreasing life expectancy shows that there the share of population between the age group of 65 was a deterioration in the general healthcare conditions years and above was negative and significantly of the OIC countries and this had a negative impact on determined the healthcare expenditure at 1% level for the growth of the economy. On the other hand, a both one-step and two-steps i.e. (-2.69 and -3.24). This growing life expectancy specifies improvement in Diagnosing the Dynamic Drivers of Healthcare Expenditure Journal of Reviews on Global Economics, 2019, Vol. 8 881 general healthcare system and could positively bring was incorporated to explain the variations in the positive changes in the economy. This outcome is healthcare expenditure per capita (Grossman, 1972; reliable and persistent with the preceding studies which Leu, 1986; Di Matteo and Di Matteo, 1998). indicates that, a variation in the intensities of life expectancy has specifically affected human behavior, Moreover, the estimated coefficients of the out-of- in terms of fertility, human capital and growth pocket payment was negative and significantly development (Coile et al., 2002). Equally, Kefeli and determined the healthcare expenditure per capita at 5 Zaidi (2014) established that life expectancy is well- % level for one-step (i.e. -1.22) and at 1 % level for thought-out to be good representations to evaluate the two-steps i.e. (-1.20). This implies that a percentage healthcare standing of a country and acquiesced that change in the percentage share of out-of-pocket noticeable enhancements have ensued in life payments will lead to a 1.2 % decrease in foreseeable expectancy in some OIC states specifically in the high- healthcare expenditure per capita. This suggests that, income OIC countries over the previous years. In a higher percentage of out-of-pocket payment would addition, Day et al. (2008) shows that life expectancy is permit improved accessibility to healthcare services, one of the determinants of healthcare expenditure, as which might successively escalate patronisation and they identified 12 clusters of nations with normal life aggregate healthcare expenditure in OIC regions. Yet, expectancy stretching from 81.5 years to 37.7 years the outcome indicates that there will be a lot of and established that the three highest ranked clusters improvement in healthcare services. In the same way, were controlled by western European nations while the a higher percentage of out-of-pocket payment would as four bottommost placed clusters were dominated by well provide additional opportunity for OIC’s diverse African nations. government to regulate healthcare expenses. Nevertheless, out-of-pocket expenditure is an Then, the estimated coefficients of the share of indispensable determinant of healthcare expenditure as population age under 15 years was positive and posited by Glied, 2008; Crystal et al, 2000; Litwin & significantly determined the healthcare expenditure at Sapir, 2009 and Bremer, 2014. 1% level for both one-step and two-steps i.e. (3.71 and 3.92). This implies that a percentage increase in Furthermore, the estimated coefficients of the population age under 15 will determine the increase in research and development in healthcare was positive predictable healthcare expenditure per capita by nearly and significantly determined the healthcare expenditure 3.7 to 3.9 %. The outcome was expected because an at 1% level for both one-step and two-steps i.e. (0.93 increase in population age under 15 will lead to a rise and 0.82). This infers that an increase in research and in healthcare expenditure per capita due to additional development in healthcare relatively determines the demand for healthcare services.Besides, the impact of increase in anticipated healthcare expenditure per the population age on healthcare per capita sometimes capita by virtually 0.9 to 0.8 million USD. The result perform contrarily and may have negative shows that research and development in healthcare will consequence on the economy (Khan et al, 2016). This result in innovations, discovery of new technology and is because the more the population age group assist in intensifying wide-ranging health conditions of increases, the higher the dependency percentage is the overall populace of OIC countries. For that reason, and that will have impact on the individuals and key enhancements in the overall healthcare linked national income, along with the total level of the technological novelties and machineries will improve expenditure on healthcare. the OIC countries healthcare service delivery. As a matter of fact, the outcome of the study is persistent Nevertheless, the population age structure will with the previous studies that indicated improvements enhance the economy of the OIC countries if the and flows of medical care technology in the healthcare proportions of the population age above 65 are in good schemes as the main accountable elements of physical shape and contributing energetically to the increasing expenditure in healthcare (Newhouse, 1992; economy. As a result of this, the outcome is consistent Chandra and Skinner, 2012; Rankovi´c et al., 2013; with the past reviews which reveals that, age structure Jakovljevic, 2015; Okunade and Murthy, 2002; Murthy of the population was identified as an important and Okunade, 2016). determinant to describe the differences in healthcare expenditure of a country to another (Leu, 1986; Culyer, Additionally, the estimated coefficients of the 1988). Additionally, the proportion of population age consumer price index was negative and significantly under 15 years and population age above 65 years determined the healthcare expenditure at 1% level in 882 Journal of Reviews on Global Economics, 2019, Vol. 8 Wahab et al. two-steps estimator i.e. (-0.06). This concludes that a study offers novel empirical findings as the income per percentage change in consumer price index reasonably capita is above one and inelastic. This proves that determines the decrease in predicted healthcare healthcare in OIC countries is a luxury goods, expenditure per capita by nearly 0.06 %. This resolves specifying that healthcare in OIC’s country is regarded that a percentage change in consumer price index as a commodity that is similar to other goods and reasonably determines the decrease in predicted services and should be determined by the forces of healthcare expenditure per capita. The outcome means market and supply. Once more, the decreasing life that the prices of healthcare services could decrease expectancy shows that there was a reduction in the relatively to other prices of goods and services (for general healthcare conditions of the OIC countries and instance, a decrease in inflation rate in OIC region this had a negative impact on the growth of the might boost consumers demand for healthcare services economy. Thus, an improvement in general healthcare and vice-versa). Above all, the result supports that the system is needed;it could positively impact changes in cost of wages of the healthcare specialists can also the economy. instigate the rise or decrease in healthcare service prices in OIC regions, as this is subject to the changing Then, the population age structure will enhance the rate of inflation. economy of the OIC countries, if the sizes of the population age are in good physical shape and In the light of this, the result of the study is steady contributing actively to the economy. Also, the higher with the past studies which point out that, prices in the proportion of out-of-pocket payment would provide healthcare area comparative to the other areas of the extra opportunity for OIC governments to regulate economy are obviously the drivers of healthcare healthcare expenses. Besides, more effort should be expenditure (Feng et al., 2017). In the same way, the geared to further improve research and development in consumer price index or comparative price of healthcare sector because it will result in innovations healthcare services, technological progress and core and discovery of new technology for the OIC countries. healthcare policies and establishments were the Also, the prices of healthcare services should be taken possible key determinants of healthcare expenditure into cognizance as it could be decreased relatively to (de la Maisonneuve et al., 2016). Lastly, the post other prices of goods and services; and the study estimation analysis as shown in Table 2 indicate that shows that it has significant effects on the spending on the estimated regression confirmed both specification healthcare in OIC regions. In view of this, future studies tests. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.75

© 2019 Wahab et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

886 Journal of Reviews on Global Economics, 2019, 8, 886-899 Risk Reduction in Online Flight Reservation: The Role of Information Search

Kwee-Fah Lee1, Ahasanul Haque2,*, Suharni Maulan2, Kalthom Abdullah2 and Arun Kumar Tarofder3

1Faculty of Accountancy and Management, University Tunku Abdul Rahman (UTAR), Malaysia 2Department of Business Administration, International Islamic University Malaysia, Box No. 10, 50728, Kuala Lumpur, Malaysia 3Faculty of Business and Professional Studies, Management and Science University Malaysia Abstract: The air industry is very competitive. Operating costs are high. To survive and earn profits, it is imperative for airlines to save substantial costs. This can come from selling tickets online. However, in many developing countries including Malaysia, a lot of consumers still refuse to buy flights online. Perceived risk of the internet is a key likely reason. To overcome this resistance, reducing perceived risk is crucial. This study examines the influence of perceived risk and risk-relievers on intention to reserve flight online. The two risk-relievers investigated are information type and personal sources of information. Using data collected online, PLS-SEM analysis was conducted to examine the relationship between type of information, personal sources of information, perceived risk, and intention to reserve flight online. Information type is found to relieve perceived risk and increases online reserve intention. Surprisingly, the results for personal sources of information show otherwise. In addition, perceived risk is empirically supported as being multidimensional. The findings suggest the importance of managing information to relieve risk perceptions so that airlines can stimulate higher online reservations. Thus, better profits can be made in spite of a competitive business environment. Keywords: Perceived risk, risk-relievers, online, air tickets, flight, information.

1. INTRODUCTION The literature reveals limited studies on risk- relievers despite its clearly crucial role in overcoming Globally, online air ticket sales has been growing consumer resistance to purchasing. Since the seminal steadily over time coming mostly from advanced work of Roselius (1971), few research has focused on countries like the United States and Europe (Jacobsen risk-relievers. These studies mostly used a simple & Munar, 2012). In many other countries, online method to rank the relievers used by consumers (e.g. reservations are substantially lesser due to lower Cases, 2002; Griffin & Viehland, 2010; Zheng, Favier, penetration of home computers, and doubts about Huang, & Coat, 2012). Most research had also internet security of credit card payments (Belobaba, conceptualized perceived risk as comprising of just a Barnhart, & Swelbar, 2016). few items (i.e. multifaceted) although consumers’ risk perceptions are likely to be more complex. Specific The air industry is very competitive, and profits are travel studies indicate that consumers search for thin, if any. One way to save costs and improve profits information during trip planning (Jacobsen & Munar, effectively is to sell tickets directly to consumers online. 2012). Usually air tickets are among the top three Indeed, the International Air Transport Association information most searched by consumers online to (IATA) made it compulsory for all its members to adopt facilitate decision making (Xiang, Wang, O’Leary, & electronic ticketing from 2008 onwards to stem the Fesenmaier, 2015). However, the literature is silent on huge losses of the industry since 2001 (SITA, 2009). the specific role of this search behaviour as a risk- Savings come from bypassing travel agents to avoid reliever. high commission fees, and downsizing of costly physical ticketing office. To stimulate more online Malaysia is fundamentally different from many other reservations, airline managers need to better countries culturally, due to its Asian collectivistic, multi- understand risk perceptions, and how consumers try to ethnic and multi-religious population. Although internet relieve perceived risk. access is quite high, user penetration is only 11.6% for online flight reservations (Statista, 2017). Consumers living in Asia tend to have different behaviour from their individualistic western counterparts (Zheng, 2017).

*Address correspondence to this author at the Department of Business Being a developing nation, findings of this Malaysian Administration, International Islamic University Malaysia, Box No. 10, 50728, Kuala Lumpur, Malaysia; Tel: +603-61964719; Fax: +603-61964644; study help to shed light on perceived risk and risk- E-mail: [email protected] reducing strategies for similar emerging markets.

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 887

Accordingly, this study aims to address the following technology. One has to surf the internet to check research questions: How do Malaysian consumers various websites using multiple search engines to perceive risk of online flight reservations? What compare air fares, travel dates, routes, and to key-in information search behaviour is displayed by the correct details (Cunningham, Gerlach, & Harper, consumers? What is the effect of consumers’ 2008). Any mistakes made falls solely on the information search behaviour in relieving perceived risk consumer, who generally face much difficulties to of reserving flights online, and intention to make online rectify errors. Thus, consumers perceive higher risk reservations? First, a literature review on perceived risk with reservations made online than offline from travel and information search as risk-reliever is presented. agencies and airline ticketing offices. Next, the methodology used is described, followed by the findings. Finally, there is a discussion on the 2.3. Multidimensionality and Dimensions of Perceived Risk study’s implications, and directions for future research.

2. LITERATURE REVIEW Perceived risk is the consumers’ belief that potential negative outcomes will result from internet transactions 2.1. Perceived Risk (Kim, Ferrin, & Rao, 2008). Some past online studies examined perceived risk from a multidimensional Bauer (1960) first described perceived risk as being perspective. Forsythe et al. (2006) developed three unavoidable due to uncertainties about the purchase perceived risk dimensions described as financial, consequences before purchasing. As some buying product and time (convenience) risks. Significant outcomes will be bad, consumers tend to perceive risk inverse relationships were found between these risk for any items under purchase consideration. Taylor dimensions and online shopping behaviour. (1974) noted that the basic problem in consumer Subsequently, Crespo et al. (2009) expanded behaviour is choice. Since choices made will lead to consumer perceived risk into six dimensions unknown future outcomes, consumers must deal with comprising of financial, performance, time, the uncertainty or risk. Risk is generally perceived as psychological, social and privacy risks. Their findings painful because it inflicts anxiety, forcing consumers to on both online and offline shoppers showed that manage risk in some ways. Mitchell (1999) supported perceived risk is reflected significantly by all the this argument by asserting that people are generally measured dimensions. Limited studies on online flight conservative in that they are more prone to avoid reservations had also investigated perceived risk as mistakes than trying to maximize utility in purchasing being multidimensional consisting of security, privacy, decisions. When faced with uncomfortable risk, financial, performance, and psychological risks (Kim, consumers may simply switch sellers. Qu, & Kim, 2009; Ruiz-Mafé et al., 2009). 2.2. Perceived Risk of Online Flight Reservations Security risk is among the top concerns of individuals who hesitate to shop online. Consumers Perceived risk of the internet as a purchase channel fear that unknown third-parties may infringe one’s has been identified as a key reason for consumers’ personal, financial or transactional record by violating refusal to reserve air tickets online. Ruiz-Mafé and data protection systems (Pappas, 2016) as credit card collegues (2009) described perceived risk as details must be given to the seller over the internet to consumers’ expectation of loss from reserving flights make payment. Travel studies found that consumers’ online. They found that Spanish travellers’ risk refuse to shop online due to worries about web security perceptions negatively influenced intention to buy air (Wolfe, Hsu, & Kang, 2004). Similarly, studies on online tickets online. Another study comparing flights reserved flight reservations showed security risk to be via traditional service and the web revealed that risk consistently of utmost concern to consumers intending perceptions are consistently greater for online than to make a purchase (Kim et al., 2005, 2009). offline reservations throughout all five stages of the consumer buying process (Cunningham, Gerlach, & Consumers are also highly sensitive about privacy Harper, 2004). Similarly, Kim, Kim, and Leong (2005) intrusion in online travel shopping (Ruiz-Mafé et al., found that perceived risk negatively affects the 2009). Privacy can be violated through the unapproved willingness to reserve flights online. sharing of consumers’ personal data, sending consumers junk emails, and snooping on shopping Like any online shopping, purchasing air tickets behaviour by online retailers (Miyazaki & Fernandez, online entails the same usage of self-service 888 Journal of Reviews on Global Economics, 2019, Vol. 8 Lee et al.

2001). For flight reservations, consumers have been deemed low enough to proceed with the actual found to be reluctant to provide personal details due to purchase. Her study found that different risk relievers fears that their life will become fully exposed (Ruiz- are most relevant for different sources of risk. Griffin Mafé et al., 2009). and Viehland (2010) replicated Cases’ (2002) study for the purchase of air tickets, clothing and consumer Financial risk refers to the potential of losing money electronics. Some relievers were found to occupy the in online transactions. Price dispersions for similar same ranking as Cases’ (2002) results. More recently items sold online pose financial risk to consumers who Zheng et al.’s (2012) research on online shopping for do not actively search for bargains on the internet. For clothing also found that Chinese consumers indicated flights sold online, wide price dispersions still exist in several methods as useful risk-relievers. Overall, these some markets (Chen & Yuan, 2014) even though studies utilized simple ranking to examine the various studies indicate that higher price and product risk-relieving ways used for online purchases. In transparency in the internet has led to lower fares over contrast, this study aims to enrich explanation of risk- time (Brunger, 2010). Typically air fares fluctuate daily relievers by investigating the direct impact of two even within the same airline website, hence there could specific risk-relievers’ on perceived risk and intention to be perceived financial risk involved. buy online.

Performance risk refers to consumers’ evaluation of Information Search as a Risk-Reliever possible performance problems, malfunctions, Consumers may cope with product choice processing errors, reliability and/or security issues, uncertainty by searching for more pre-purchase causing the e-service to not perform as expected information. In travel planning, some studies examined (Featherman & Wells, 2010). Studies revealed the consumers’ search behavior for the type or content of presence of perceived performance risk for online flight information (Marchiori & Cantoni, 2015) while others reservations (Kim et al., 2009; Ruiz-Mafé et al., 2009). focused on sources of information (Money & Crotts, Consumers worry that air tickets bought online will not 2003; Xiang et al., 2015) separately. However, most meet expectations such as non-receipt of the paid likely both factors are considered. Thus, this study airfares, not permitted to board a plane, or does so investigates both the information type and source used under unexpected travelling conditions (Ruiz-Mafé et to reduce perceived risk of the internet, as well as the al., 2009). effect on online purchase intention. Kim et al. (2005) described psychological risk as Type of Information consumers’ disconcerting thoughts of purchasing flight online, and found it to be the second most important It has been argued that flight information provided risk dimension. Other studies similarly showed that online can be complex including those for low cost consumers perceive psychological risk for online flight carriers (CBS New York, 2015). Price is a type of reservations (Kim et al., 2009; Ruiz-Mafé et al., 2009) information searched to help relieve perceived possibly due to the rather costly air fares, adding to the purchase risk (Cases, 2002; Griffin & Viehland, 2010; complexity and difficulty of making purchase decisions. Zheng et al., 2012). To relieve risk perceptions for Overall, these studies showed that not all risk online flight reservations, several studies revealed that dimensions exert the same level of influence on consumers search for price information such as intention to book flights online. As consumers face cheapest air fares (Kim et al., 2009) and special offers perceived risk before purchase, it is hypothesized that: (Griffin & Viehland, 2010). Online shopping studies also found that consumers use product H1: Consumers’ perceived risk negatively influences information to relieve perceived purchase risk for intention to reserve flight online. various items (Cases, 2002; Griffin & Viehland, 2010; Nepomuceno et al., 2014; Zheng et al., 2012). Limited 2.4. Risk-Relievers studies suggest that consumers attempt to read product information prior to reserving flight online Roselius (1971) described risk-relievers as an (Griffin & Viehland, 2010; Kim et al., 2009) presumably action by the buyer or seller to strategize how to to help reduce perceived risk. Comparison shopping resolve purchase risk. In online shopping, Cases can be easily done over the internet. Some studies (2002) asserted that consumers will use those risk- found that consumers check multiple websites to relievers capable of reducing perceived risk to a level compare various products and services to reduce Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 889 perceived purchase risk. It has been shown that H4: Type of information has a positive influence on consumers search around the internet to reduce risk of intention to reserve flight online. buying clothes, consumer electronic items and computers (Cases, 2002; Griffin & Viehland, 2010). In travel planning, consumers commonly refer to Thus, it is proposed that: information sources before making a decision. Family and friends have been shown to be among the most H2: Type of information lessens perceived risk of used sources of information for hotel bookings reserving flight online. regardless of the type of technological device used for the search process (Murphy, Chen, & Cossutta, 2016). Sources of Information Specifically for air tickets purchases, information from Vast literature indicates that consumers attempt to close others such as family and friends was also found reduce purchase uncertainty by referring to various to be significantly related to intention to reserve flights sources. Consumers are more prone to rely on online (Escobar-Rodríguez & Carvajal-Trujillo, 2014). In personal than impersonal sources of information. Malaysia, majority of internet users were found to be Historically, family and friends strongly influence influenced by their friends to purchase air tickets online purchase decisions, and help to ease perceived buying (Sulaiman et al., 2008; Lee et al., 2019) Thus, it is risk (Roselius, 1971). Similarly, online shopping studies hypothesized that: worldwide show that consumers still depend on information from close others as a way to relieve H5: Personal sources of information positively influence perceived risk of buying clothes (Cases, 2002; Zheng intention to reserve flight online. et al., 2012) and air tickets (Griffin & Viehland, 2010). 2.6. The Mediating Effect of Perceived Risk Scant research on online flight reservations in Malaysia suggest that family and friends assured hesitant Past studies on perceived risk as a mediator consumers to buy flights online (Shah Alam & Mohd between information and purchase intention show Yasin, 2010). Thus, it is postulated that: mixed results. Several research examined the effect of information type on perceived risk, and purchase H3: Personal sources of information lessen perceived intention (Suwelack, Hogreve, & Hoyer, 2011; Yeung, risk of reserving flight online. Yee, & Morris, 2010). Information on brand, price and 2.5. The Effect of Information Search on Purchase money-back guarantees was studied. The overall Intention findings indicate that perceived risk mediates the relationship between information type and purchase Generally consumers pass through five-stages intention, but price discount had no effect on perceived during the buying process from need recognition to risk, which was an insignificant mediator between price information search, evaluation of alternatives, purchase and purchase intention (Yeung et al., 2010). Thus, it is decision, and finally post-purchase behaviour (Kotler & suggested that: Armstrong, 2016). Thus, information search plays a role in influencing the buying decision. This relationship H6: Perceived risk is a mediator between information between information search and purchase intention has type and intention to buy flight online. been widely supported by the marketing literature both offline and online. In contrast, the mediating effect of perceived risk between information source and purchase intention has Ukpabi and Karjaluoto's (2017) extensive review of been under-researched. Mitra, Reiss and Capella travel studies indicates that information may affect (1999) investigated the effects of personal and intention to shop online. Studies show that consumers impersonal sources of information on perceived risk commonly seek the relevant type of information before and consumers’ behavioral intention for services. They purchasing travel items. Tourists to Hong Kong found that information sources affect perceived risk of indicated that price information is among the top two the service. Personal sources of information such as attributes that influenced their intention to buy travel family and relatives are preferred by consumers for all online. More recently, Escobar-Rodríguez and types of services. Bieger and Laesser's (2004) travel Carvajal-Trujillo (2014) found that price information study also indicates that information from friends and positively affected travelers’ intention to buy air tickets relatives are most used to lessen pre-purchase from the websites of low-cost carriers. Hence, it is perceived risk, and help to increase consumers’ suggested that: 890 Journal of Reviews on Global Economics, 2019, Vol. 8 Lee et al.

Figure 1: The research framework. Source: own research. intention to travel. Likewise, Sulaiman et al.'s (2008) 3.3. Data Analysis research on Malaysians imply that close sources like friends help to relieve risk perceptions of the internet SPSS version 20 was used for the descriptive which in turn lead to the intention to buy e-tickets. analyses. Next, partial least squares structural equation Hence, modelling (PLS-SEM) with SmartPLS 3 program (Ringle, Wende, & Becker, 2015) was utilized to H7: Perceived risk is a mediator between personal validate the measures developed and test the sources and intention to buy flight online. hypotheses. PLS is considered to be a robust technique that imposes minimal demand on sample 3. METHODOLOGY size, measurement scales, and data distribution patterns (Hair et al., 2017). It can measure complex 3.1. Sampling and Data Collection higher-order models, thus enabling many behavioral factors to be captured. In this study, Perceived Risk Data was collected online due to the aim of the has been conceptualized as a higher order construct. study. In theory, the population consists of all internet Moreover, PLS can be suitably used to explore, predict users who are at least 18 years old since they are more and develop theory (Hair et al., 2017). Since the prone to reserve flight online than non-internet users. current study newly operationalize both information As a list of internet users is nonexistent, convenience type and source as risk-relievers in the context of e- sampling was used to collect data from Malaysians. ticketing, the usage of the PLS procedure is particularly 3.2. Questionnaire and Measurements relevant. 4. RESULTS A self-administered survey with 3 parts was developed for this study. In part one, Likert-style In total, there are 231 usable responses which questions were posed to measure the constructs. The conforms with Hair et al.'s (2012) 30-year review of questions were adapted from several past studies. A 7- past research on PLS-SEM applications that showed point Likert scale was followed, from 1 (Strongly the average sample size to be 230. Table 2 displays Disagree) to 7 (Strongly Agree). Part two covered the respondents’ demographic profile. Most are in the questions on the demographics of the respondents. In 30 to 39 age group (33.3%), followed by the 18 to 29 this study, the reflective-reflective hierarchical (24.7%), 40 to 49 (15.6%), 50 to 59 (15.6%) and over component model (HCM) type was applied (Ringle, 59 age group (10.8%). Since 69.7% of the total Sarstedt, & Straub, 2012). The higher-order construct Malaysian population are aged 15-64 years, the study (HOC) and lower-order constructs (LOCs) have a respondents largely fall into this majority age category. reflective measurement, where the LOCs are More females (64.1%) than males (29.9%) responded. manifestations of their corresponding HOC. Similarly, The sample is also skewed towards females, and more the indicators reflect their underlying LOCs (Hair, Hult, highly educated people. Most respondents are also Ringle, & Sarstedt, 2017). middle income earners who make between RM 3,000 and RM 6,999 per month. Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 891

Table 1: Question Items. Source Shown Below

Construct Construct Source Item/Indicator dimension

Perceived Privacy risk If I use the internet to buy air tickets: Adapted from Ruiz- Risk (Lower-order 1. my personal details could be used without my consent Mafe et al. (2009) (Higher-order construct) 2. my personal details could be used without my knowledge construct) PR 3. I would receive a lot of spam in the future

4. my personal details could be improperly used (e.g. sold to a third-party) Security risk 1. it would be insecure to send sensitive information over the Internet Adapted from Kim et (Lower-order 2. my credit card details are likely to be stolen al. (2005, 2009) construct) 3. my personal details could be accessed by an unknown third-party S 4. I would feel insecure sending sensitive information over the internet Financial risk Adapted from Kim et 1. I would not get my money’s worth from the tickets (Lower-order al. (2005) 2. it would lead to a financial loss to me construct) 3. it would be unwise as I can get a better deal elsewhere F Performance risk 2. it would be difficult to find out about the flight characteristics (time Adapted from Ruiz- (Lower-order schedule, routes, etc.) Mafe et al. (2009), construct) 3. I am not confident about the ability of the online seller to perform as Kim et al. (2005, 2009) PE expected 4. considering the possible problems associated with the online seller’s performance, there is a lot of risk involved Psychological risk Adapted from Ruiz- 2. I would feel anxious (Lower-order Mafe et al. (2009) 3. I would feel unnecessary stress construct) 4. I would feel it does not match my self-image (the way I think of myself) PS Type of I would choose the following ways to ensure that it is all right to buy air Adapted from Information tickets using the internet: Ramkissoon and TI 1. I would search for price information from the internet Uysal (2011), Kim et al. (2009), 2. I would search for flight information (e.g. date, time, routes, seats, airports, …) from the Internet Adapted from Ramkissoon and 3. I would look up a few websites to compare information before making a Uysal (2011) decision to buy Source of 1. I would get information from my family / relatives information 2. I would get information from my friends SI Online Adapted from Davis Reserve 1. I will probably use the internet to buy air tickets in the future (1989) Intention 2. I plan to buy air tickets online sometime in the future INT

4.1. Model Evaluation discriminant validity (Hair et al., 2017). In Table 3, all values of composite reliability and Cronbach’s alpha In PLS-SEM analysis, the research model are well over the lower bound threshold of 0.70. assessment comprise of two steps (Chin, 2010). First, Moreover, all indicator outer loadings are above 0.80, the measurement model is assessed for the reliability except PR3 with a value of 0.743. Overall, the values and validity of the constructs. Second, there is an considerably exceed 0.70 indicating high levels of assessment of the structural model and the internal consistency reliability of each construct. To relationships between the constructs as specified in the establish convergent validity, the outer loadings of the research model. indicators should exceed 0.70 and be statistically significant (Hair et al., 2017) at p<0.05. From Table 3, Measurement Model Evaluation all outer loading values and p-values meet these Reflective constructs should be assessed for criteria. Additionally, the average variance extracted internal consistency reliability, convergent validity, and (AVE) for each construct should be examined (Fornell 892 Journal of Reviews on Global Economics, 2019, Vol. 8 Lee et al.

Table 2: Demographic Profile of the Respondents. Online Survey (2016)

Variables Category Frequency Percentage (%)

Age 18-29 57 24.7% 30-39 77 33.3% 40-49 36 15.6% 50-59 36 15.6% 60 and above 25 10.8% Gender Male 69 29.9% Female 148 64.1% Educational level Secondary school 37 16.0% Vocational school 1 0.4% Diploma 25 10.8% Undergraduate 53 22.9% Postgraduate 92 39.8% Professional 22 9.5% Monthly income Below RM1,000 43 18.6% RM1,000 – RM2,999 31 13.4% RM3,000 – RM4,999 56 24.2% RM5,000 – RM6,999 47 20.3% RM7,000 – RM9,999 30 13.0% RM10,000 and above 19 8.2%

& Larcker, 1981). All AVE values in Table 3 are more tradition, this research used the repeated indicators than 0.50 ranging from 0.712 to 0.914. Collectively, the approach to assign all LOC indicators to the HOC (Hair results support convergent validity within each et al., 2017). In Table 5, most outer loadings exceed construct. 0.70 indicating convergent validity. Since the few other values are quite close to 0.70 and significant at p<0.05, Next, discriminant validity between constructs was all items are retained in the model. Moreover, all AVE evaluated using cross loadings and the Fornell-Larcker values are above 0.50 supporting convergent validity of criterion. Due to issues with cross loadings, three items the HOC, Perceived Risk. Table 6 presents the (PE1, PS1 and F4) were removed from further relationship between the HOC, Perceived Risk and its analyses in order to attain an adequate level of corresponding LOCs. The results show that Perceived discriminant validity between constructs. Then, the Risk has significant associations (p<0.05) with its Fornell-Larcker criterion (1981) was applied to test for LOCs. Next, the HOC and the other constructs in the discriminant validity. To establish that the model model were evaluated for discriminant validity. From constructs are conceptually distinct from one another, a Table 7, using the Fornell-Larcker guideline, each construct should have stronger correlations with its own construct’s √ AVE on the diagonal is greater than its measures than with other constructs (Chin, 2010). correlations with other constructs. Thus, the results Table 4 presents the correlations between constructs, support discriminant validity between the HOC and where the diagonal elements are the square root of the other constructs in the research model. AVEs (√AVEs). As seen, each construct’s √AVE is higher than its correlations with other constructs. Structural Model Assessment Hence, each construct shares more variance with its The structural model was assessed for collinearity own group of indicators than with other constructs, issues, model relationships, and predictive relevance supporting adequate discriminant validity between (Chin, 2010; Hair et al., 2017). First, the inner variance constructs. inflation factor (VIF) values were checked for Hierarchical Component Model Evaluation collinearity problem. In Table 8, all VIF values are far below the threshold of 5, indicating no critical The HOC and LOCs should also be assessed for collinearity issues among the predictor constructs in the convergent and discriminant validity. Following structural model. Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 893

Table 3: Construct Reliability and Convergent Validity. Own Research

Construct/Indicators Mean Standard Outer p-value Composite Cronbach’s AVE Deviation loading reliability alpha

Privacy Risk 4.06 1.789 0.908 0.863 0.712 PR1 1.801 0.879 0.000 PR2 1.842 0.871 0.000 PR3 1.716 0.743 0.000 PR4 1.772 0.874 0.000 Security Risk 4.29 1.755 0.941 0.916 0.799 S1 1.755 0.899 0.000 S2 1.759 0.904 0.000 S3 1.691 0.880 0.000 S4 1.798 0.893 0.000 Financial Risk 3.44 1.509 0.906 0.845 0.764 F1 1.479 0.904 0.000 F2 1.571 0.879 0.000 F3 1.455 0.838 0.000 Performance Risk 3.43 1.634 0.914 0.858 0.780 PE2 1.519 0.849 0.000 PE3 1.643 0.897 0.000 PE4 1.614 0.902 0.000 Psychological Risk 3.37 1.542 0.909 0.849 0.769 PS2 1.550 0.912 0.000 PS3 1.606 0.896 0.000 PS4 1.457 0.821 0.000 Type of Information 5.97 1.101 0.910 0.851 0.772 TI1 1.012 0.920 0.000 TI2 1.012 0.883 0.000 TI3 1.250 0.830 0.000 Source of Information 5.25 1.313 0.934 0.858 0.876 SI1 1.299 0.932 0.000 SI2 1.325 0.940 0.000 Online Reserve Intention 5.02 1.454 0.955 0.906 0.914 INT1 1.429 0.952 0.000 INT2 1.474 0.960 0.000

Table 4: Analysis of Correlations Using the Fornell-Larcker Criterion. Own Research

Construct INT PriR SecR FinR PerR PsyR TI SI

INT 0.956 PriR -0.402 0.844 SecR -0.448 0.708 0.894 FinR -0.525 0.584 0.690 0.874 PerR -0.568 0.586 0.666 0.784 0.883 PsyR -0.568 0.560 0.602 0.720 0.773 0.877 TI 0.118 0.035 0.291 -0.039 -0.090 -0.113 0.878 SI -0.216 0.227 0.089 0.275 0.308 0.238 0.294 0.936

894 Journal of Reviews on Global Economics, 2019, Vol. 8 Lee et al.

Table 5: Convergent Validity between the HOC with its Related Indicators. Own Research

Higher-order construct/Indicators Outer loading p- value AVE

Perceived risk 0.558 PR1 0.644 0.000 PR2 0.662 0.000 PR3 0.683 0.000 PR4 0.733 0.000 S1 0.762 0.000 S2 0.792 0.000 S3 0.788 0.000 S4 0.785 0.000 F1 0.793 0.000 F2 0.782 0.000 F3 0.715 0.000 PE2 0.739 0.000 PE3 0.766 0.000 PE4 0.824 0.000 PS2 0.786 0.000 PS3 0.769 0.000 PS4 0.646 0.000

Table 6: The Relationship between the HOC and its Related LOCs. Own Research

Higher-order construct/ Indicators Lower-order construct Outer loading p-value

Perceived risk Privacy risk 0.811 0.000 Security risk 0.874 0.000 Financial risk 0.874 0.000 Performance risk 0.880 0.000 Psychological risk 0.840 0.000

Table 7: Analysis Using the Fornell-Larcker Criterion. Own Research

Construct Intention Perceived risk Type of Information Source of Information

Intention 0.956 Perceived risk -0.581 0.747 Type of Information search 0.118 -0.019 0.879 Source of Information -0.216 0.314 0.295 0.936

Model relationships were assessed via the a significant negative relationship with intention to standardized path coefficients and significance levels, reserve flights online (β=-0.54, p<0.001). This finding is to test the proposed hypotheses. Figure 2 displays the consistent with past research on website shopping path model results. H1 is supported. Perceived risk has (Dai, Forsythe, & Kwon, 2014) as well as several Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 895 studies regarding online flight bookings (Kim et al., sources of information have no significant relationship 2005, 2009; Ruiz-Mafé et al., 2009). with intention to book flights online (β=-0.09, p>0.05). Unlike past research (e.g. Shah Alam & Mohd Yasin, Table 8: Inner VIF Values. Own Research 2010; Zheng et al., 2012), family and friends do not affect intention to book air tickets online. Construct Intention Perceived risk To test for the mediating effects as proposed in H6 Perceived risk 1.004 and H7, the direct and indirect effects were evaluated. Type of Information 1.033 1.033 From Table 9, type of information has both direct and Source of Information 1.037 1.033 indirect effects on intention i.e. perceived risk partially mediates the relationship between type of information The results also support H2. Like past studies and intention, thus validating H6. It indicates that (Zheng et al., 2012), type of information is found to consumers search for information type partly to help reduce perceived risk of online flight reservations (β=- relieve perceived risk, which then influence the 0.14, p<0.05). In contrast, the results for H3 indicate a intention to reserve flight online. Although similar significant positive relationship between personal results were found previously for other products, others information source and perceived risk (β=0.34, demonstrated mixed findings depending on the type of p<0.001). This finding is totally different from past product bought online (Lee & Stoel, 2014; Suwelack et studies (Escobar-Rodríguez & Carvajal-Trujillo, 2014; al., 2011). Sulaiman et al., 2008) which showed that personal sources of information help to decrease consumer As for personal sources of information, it has no perceived risk. significant direct effect on intention but there is a significant indirect effect through perceived risk. Hence, The statistical results show a significant positive H7 is supported. This result suggests distrust of advice relationship between type of information and intention from close others. To assess the model’s predictive 2 (β=0.14, p<0.05), thus supporting H4. This finding is power, explained variance R and predicted relevance congruent with past studies (Ukpabi & Karjaluoto, Q2 were observed. The R2 values for intention and 2017) which found that travelers search for various perceived risk are 0.35 and 0.15 respectively. In 2 types of information to increase their purchase consumer behaviour studies, R values of 0.20 are intention. Surprisingly, H5 is not supported. Personal considered high (Hair et al., 2017). Moreover, Cohen's

Figure 2: PLS analysis results. Source: Own research.

Table 9: The Direct and Indirect Effects. Own Research

Direct 95% CI of the Significance Indirect 95% CI of the Significance t-value t-value Effect Direct Effect (p < 0.05)? Effect Indirect Effect (p < 0.05)?

TI à INT 0.14 [0.09,0.20] 2.46 Yes 0.08 [0.07, 0.08] 2.39 Yes SI à INT -0.09 [-0.14,-0.04) 1.67 No -0.18 [-0.19,-0.18] 4.766 Yes 896 Journal of Reviews on Global Economics, 2019, Vol. 8 Lee et al.

(1988) guideline describes R2 values of 0.26, 0.13 and online as perceived risk is greater for purchases made 0.02 as substantial, moderate and weak respectively. online than offline and for the procurement of services Therefore, this research model is capable of explaining than products (Mitra et al., 1999). Seeking information intention substantially and perceived risk moderately. from personal sources such as friends and family to

2 help relieve perceived risk of buying flight online has Another evaluation approach applied was Q which been found in scarce studies in Malaysia (Shah Alam & utilizes the sample reuse technique (Geisser, 1974; Mohd Yasin, 2010; Sulaiman et al., 2008) and Stone, 1974). The Q2 values of the endogenous elsewhere (Griffin & Viehland, 2010). However, the lack constructs were computed in SmartPLS 3 with the of support from the study findings implies that the blindfolding procedure, and found to be 0.30 (intention) behaviour of younger Malaysian consumers may have and 0.08 (perceived risk). As the Q2 values exceed evolved to become more similar to those of the zero, predictive relevance for the endogenous developed world. constructs is supported.

5. DISCUSSIONS AND IMPLICATIONS Second, the empirical results support the multidimensionality of consumers’ perceived risk. This study has contributed to the perceived risk Perceived risk is reflected almost equally by the five theory and the buying decision model in several ways. measured. This indicates that all five dimensions are First, it extends understanding of how consumers react considered by consumers in their assessment of to perceived risk before actual purchase. Findings of overall perceived risk of online flight reservations, and the study affirm that consumers search for type of that each dimension is viewed as a distinct type of information as a way to relieve perceived risk of purchase risk. Moreover, limited research on reserving flight online. Unexpectedly, personal sources multidimensional risk perceptions for online flight of information do not affect intention to buy air tickets bookings (e.g. Kim et al., 2005, 2009; Ruiz-Mafé et al., online. Most of the respondents are from gen Y and 2009) had mostly excluded the link with purchase well educated. Gen Y perceive less risk with web intention. By contrast, this study provides statistical shopping and rely greatly on technical information to evidence that the relevant, current dimensions of make buying decisions (Rahulan et al., 2015). This perceived risk are the five risk dimensions investigated. may be the likely reason why personal sources of The findings corroborate past studies on other types of information are not important to the study respondents. online transactions (e.g. Crespo et al., 2009; Nepomuceno et al., 2014), which collectively offer Although Gemunden (1985) asserted the need for better explanations of consumer risk perceptions via improved operationalization of information search to analyses of multidimensional risk. address perceived risk, limited studies have been conducted thus far. Most researchers have focused on Practically, airlines should be cognizant of either information sources (Money & Crotts, 2003) or information search behaviour as a way to reduce less extensively on information type (Marchiori & perceived risk of reserving flights online. The findings Cantoni, 2015) used by consumers. Limited research imply that consumers would appreciate clear and incorporating both factors failed to employ any relevant type of information from airlines. Although statistical procedure to compare the effects of the two recent research on travel behaviour shows that constructs (e.g. Bruch & Bellgran, 2013). By contrast, consumers still refer to close personal sources of this study provides statistical evidence to differentiate information (Murphy et al., 2016), the current study information type from source. Thus, it improves found otherwise. This implies that airlines need not rely explanation that consumers consider both type and on favorable word-of-mouth from satisfied close others. source of information in purchase decisions. This Clearly, consumer perceived risk has a substantial research also newly adds to the literature on the buying impact on intention to reserve flight online. The findings decision process, by underpinning the significant role imply that airlines need to pay closer attention to the played by information type in reducing perceived risk of distinct types of risk perceived by consumers. As found purchasing services online as opposed to few past by Cunningham et al. (2005), consumers perceive studies on physical products (e.g. Lee & Stoel, 2014) or various types of risk for online flight reservations, which stores (e.g.Yeung et al., 2010). Research on relieving significantly influenced their final decision from where risk perceptions is more crucial for services bought Risk Reduction in Online Flight Reservation Journal of Reviews on Global Economics, 2019, Vol. 8 897 to buy. Supporting results of this study imply that CBS New York. (2015). Experts warn of hidden costs of bargain airfare. Retrieved December 4, 2015, from managers need to appropriately address each risk http://newyork.cbslocal.com/2015/10/09/bargain-airfare- dimension in order to increase intention to reserve flight hidden-costs/ online. Chen, H.-T., & Yuan, J. (2014). Blind savings or unforeseen costs? How consumers perceive the benefits and risks of using opaque travel selling web sites. Journal of Vacation 6. LIMITATIONS AND FUTURE RESEARCH Marketing, 20(4), 309–322. https://doi.org/10.1177/1356766714527966 As in all research, this study has some limitations. Chin, W. W. (2010). How to write up and report PLS analyses. In V. Esposio Vinzi, W. W. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.76

© 2019 Lee et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

900 Journal of Reviews on Global Economics, 2019, 8, 900-915 The Impact of HOT Skills on Enhancing Professional Communication Strategies among Malaysian TESL Students

Ali Sorayyaei Azar1,*, Norhisham Binti Mohamad1, Rusyaizila Binti Ramli2 and Chin Si How1

1Department of Education, School of Education and Social Sciences (SESS), Management & Science University, 40100 Shah Alam, Selangor, Malaysia 2Faculty of Information Sciences and Engineering (FISE), Management & Science University, 40100 Shah Alam, Selangor, Malaysia Abstract: Effective professional communication is required for the university students, particularly studying Education, to achieve their career goals. Perhaps a set of the most important skills for enhancing professional communication strategies among the university students and practitioners are to use Higher Order Thinking skills (HOTs). This research was conducted to investigate the Malaysian students’ attitude towards HOTs in their professional communication strategies at two private universities in Malaysia. It tried to analyse the implementation of HOTs to indicate if these skills are able to enhance the university students’ professional communication strategies in academic and professional settings. This study involved 54 respondents which consisted of 41 Bachelor of Teaching English as a Second Language (BTESL) students and 13 Diploma of TESL (DTESL) students already done their internship. The research instruments were questionnaire and interview. The researcher-designed questionnaire was distributed through online to all the respondents. Moreover, the interviewees were randomly selected by the researchers. Data were analyzed by using descriptive statistics and a comparative study. Overall, the findings showed that only a few trainee Malaysian BTESL students fell under the category of good background knowledge in HOTs. However, in the comparative study, it surprisingly showed that Malaysian DTESL students had a better understanding of HOTs compared to Malaysian BTESL trainee students. Therefore, it is suggested that HOTs are significant required thinking and creative skills which all Malaysian university students need to obtain during their education in the university level so that they can communicate effectively in this competitive world to achieve their career objectives. Keywords: Higher Order Thinking Skills, Creativity, Analysis, Evaluation, Communication strategies.

1. INTRODUCTION The cognition here is not only dealt with the ability to think logically, but being able to control the cognitive Recently, there has been wide interest in enhancing process to enable one to think critically and creatively creative and thinking skills among Malaysian university when it comes to problem solving in any organization. students and their classification into lower order To achieve the aspiration, there has been significantly thinking skills (LOTs) and higher order thinking skills a focus on the importance of HOTs. This importance (HOTs). Although, the effect of HOTs on students’ lies on not only in the Education subjects at the language skills and academic achievement have been university level, but also on other disciplines and their studied extensively in recent years (Michael & Jones, subjects. The successful teachers/ lecturers/ or leaders 2015; Chinedu, Kamin & Olabiyi, 2015; Philips, 2004; need to gain the knowledge of thinking process that Venville, Adey, Larkin & Robertson, 2003), there is a required analysis, evaluation and synthesis. These scant attention to its impact on enhancing the TESL skills can be considered as higher order thinking skills. students’ professional communication strategies in their It is very important for each leader to be equipped with careers and administrative level. the proper technique of HOTs before proceeding his/ her administration in any organization. According to Lewis & Smith (1993), HOTs include critical thinking, problem solving, decision making, and Effective communication needs accurate creative thinking. These are the major elements communication skills and attempting to perceive required in teaching and administration, either in public systematically. Communication in various settings with organizations or private sectors. Each successful different topics is a complex process. It involves teacher/ lecturer/ or manager needs to gain these skills different purposes and varying processes which needs in order to cover the objectives of his/ her job. As it has different capabilities. It seems that effective leaders been suggested HOTs are concerned with cognition. may infer more information from their addressee’s

discourse and interact with them. In other words, they *Address correspondence to this author at the Department of Education, need to be able to perceive, infer, analyse and create School of Education and Social Sciences, Management & Science University, 40100 Shah Alam, Selangor, Malaysia; Tel: +60355216943; their intended communication purposes. These Fax: +60355113526; E-mail: [email protected] processes are very close to Bloom’s (1956) taxonomy

E-ISSN: 1929-7092/19 © 2019 Lifescience Global The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 901 for HOTs. It seems to the researchers that teachers more level which is creating (as cited in Anderson et and managers are familiar with HOTs can be involved al., 2013). in effective interactions in their administrative settings. Effective communication in the English language is the Lewis and Smith (1993) both are wondering most significant strategy in educational and whether there is a difference between LOTs and HOTs. administrative settings. HOTs have been extensively According to Newman (1990), in order to differentiate studied; however, less attention has been paid to its between the two categories of skills, concludes that impact on Malaysian TESL students. To this end, the Lower Order Thinking skills require simple application current research focused on introducing HOTs to the and routine steps while higher order thinking skills Malaysian students of TESL at the university level and challenge students to interpret, analyze or manipulate analyzing their perception and attitude towards making information. However, Newman argues that the term use of the skills in their professions. higher and lower skills are relative, a specific subject might demand higher skills for a particular student, Therefore, the main objectives of this research are whereas, another one requires lower skills. Divide to find out Malaysian TESL students’ background and thinking skills into two categories will help educators in attitude towards HOTs in constructing questions, developing activities that can be done by slow learners analyse the participants’ perception pertaining of before they can move to skills that are more practical. applying HOTs in their communication skills, and investigate the implementation of HOTs in enhancing Malaysian curriculum stresses on developing highly- English professional communication strategies among skilled and knowledgeable individuals which one Malaysian TESL university students. Accordingly, the should acquire critical and creative thinking skills. Although the concept of HOTs was introduced as far following research questions are formulated based on back as the 1980s, it has not been fully accomplished our objectives: in the curriculum of universities and school system. The 1. What is Malaysian TESL students’ attitude success of HOTs implementation depends on the level towards HOTs in constructing questions? of students’ autonomy and interaction (Hillocks, 1986). Lack of pedagogical knowledge among lecturers in 1.1 Do they have any background knowledge? innovating their practices by integrating HOTs in their lessons has also been found to be problematic. 2. What is Malaysian TESL students’ perception According to Yee et al. (2012), students should be towards the effectiveness of HOTs in enhancing taught to acquire HOTs so that they will be equipped communication strategies? with the thinking skills and they can interact and 3. What are the challenges for Malaysian TESL converse with their addressees effectively. Later when students to implement HOTs in practicing they involve in their careers, they may be able to professional communication strategies? communicate professionally to achieve their intended objectives. 1.1. Review of Related Literature Frangenheim (2006) constructed a model based on Back to the origin of HOTs, in 1936, Piaget came Bloom’s taxonomy to promote strategies for out with cognitive development stages. Piaget related pedagogical practices by integrating HOTs which has age with learning style and gave adulthood as mental the thinking skills framework for students. This model picture of being logical, reasoned and understanding of helps the lecturers and students of different disciplines self-reflection and critical thinking. Later on, Jerome in understanding the importance of using HOTs and Bruner (1960) supported it with a new concept ‘Spiral equip them with creativity and innovative strategies in Curriculum’. According to ‘Spiral Curriculum’, learners their professional communication. The students can reflect the previous learned topic in new context become more engaged in their learning through the and new information interface. The HOTs got implementation of HOTs and they are able to practise outstanding value when Bloom’s (1956) taxonomy their critical and thinking skills effectively through came with the three domains as cognitive, affective and various activities prepared by the lecturers. Results psychomotor. Bloom also introduced HOTs which from various studies illustrated that the students’ consist of five level of thinking such as knowledge, interest and engagement in the classroom impacts on comprehension, application, analysis and evaluation. positive learning outcomes which even motivates them However, in 2001, Bloom’s taxonomy got revised by to pursue challenging tasks in the classroom Anderson and Krathwohl (2002) with addition of one environment (Ames, 1992; Kaplan et al., 2002). 902 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Yet, Michael and Jones (2015) in their studies randomly selected 7 (based on their interest and analysed the influence of HOTs and lower order availability) out of the total of respondents to conduct thinking skills on the students’ academic achievement the interview session. These 54 participants were from in the history class. The participants of their research BTESL and DTESL programs at two international consisted of eleven males and females. The research universities in Malaysia. They were selected to be a tool was the teacher-made quizzes to collect the data. part of this research because they had already done There were certain instructions for both the lower and with their internship at primary schools and with the higher order thinking skills based on Bloom’s experiences they gained, it definitely provided sufficient taxonomy. The findings revealed that there was a amount of accurate data to this study. significant difference between the students’ performance instructed by lower and higher order 2.2. Research Instruments methods. In addition, the results indicated that A set of questions in the questionnaire were instructing higher order thinking skills was more designed by the researcher and given to the informative and constructive for the students in the respondent. This questionnaire is to gather data different disciplines. pertaining their background knowledge on HOTs and Although many researchers have discussed and perception toward the implementation of Higher order investigated HOTs broadly, it has been misunderstood. thinking skills in learning Writing skills. Face-to-face Many researchers and educators considered higher interview with the respondent that randomly picked by order thinking the same as the complexity of the the researcher was conducted after collecting data with questions raised or given to the learners. The the questionnaire. The purpose to have this interview is complexity might be one of the aspects in HOTs, but it to strengthen the data that were given by the is not the only one and it needs for the further research. respondent while answering the questionnaire. During It should also be stated that there are only few papers the interview session, the researcher asked some of paid attention to the impact of HOTs on enhancing the the questions that stated in the questionnaire again to managers’ professional communication strategies in the respondent just to make sure that they answer it their careers and administrative level. based on their understanding. 2.3. Data Analysis 2. METHODOLOGY The questionnaire is divided into two parts for the For the current study, two type of methods were researchers to analyze and gather the data. The first used to collect the data which were Survey research part has been considered for answering the first and Quantitative design. The researchers prepared a research question: “How much background knowledge questionnaire to collect data from the participants and a of HOTs in constructing questions do trainee teachers few of them were randomly selected for the interview. have?” Ten questions were constructed for this The quantitative method is used to quantify the particular part. The respondents were asked to label collected data through the questionnaire, the data can the level of bloom’s taxonomy for each question or be transformed into usable descriptive statistics. In this situation. The researchers categorized the respondents study, we distributed the questionnaire for more than according to their score in order to find out their level of 50 students and 7 of them were randomly picked for understanding of HOTs in constructing questions the interview session. based on the table below. Table 1 demonstrates the norms. Evaluation of the internal consistency of the questionnaire was carried out by calculating the Table 1: Range of Scores and Scales Cronbach Alpha coefficient. The authors consistently assessed the validity and reliability of the Score Scale questionnaire. This coefficient ranged 0.83, showing 1 - 3 Poor that the research instrument is reliable. 4 - 5 Average 6 - 7 Good 2.1. Participants 8 - 10 Excellent For this study, 54 participants were selected to be part of this research and they were given the For the second part, the focus is on the second questionnaire to answer. Later on, the researchers research question, which is “What are the perceptions The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 903

Table 2: Respondents from BTESL Programm (Codified Data)

NO NAMES Q.1 Q.2 Q.3 Q.4 Q.5 Q.6 Q.7 Q.8 Q.9 Q.10 Total

C W 1 Student 1 1 0 1 0 1 1 1 1 1 0 7 3 2 Student 2 0 1 1 1 0 0 0 0 0 1 4 6 3 Student 3 0 0 0 0 1 0 0 0 0 0 1 9 4 Student 4 0 0 0 1 1 1 0 0 1 0 4 6 5 Student 5 1 1 0 0 1 0 0 1 0 1 5 5 6 Student 6 1 0 0 1 1 0 0 0 0 0 3 7 7 Student 7 0 0 1 1 1 1 0 0 0 1 5 5 8 Student 8 0 0 0 0 0 0 0 1 0 0 1 9 9 Student 9 1 0 0 0 1 0 1 0 1 0 4 6 10 Student 10 0 1 0 1 1 1 0 1 0 1 6 4 11 Student 11 1 1 0 0 0 0 1 0 0 0 3 7 12 Student 12 0 1 0 0 1 1 1 1 1 0 6 4 13 Student 13 0 1 0 0 1 0 1 1 0 0 4 6 14 Student 14 0 0 0 0 0 1 0 0 1 0 2 8 15 Student 15 0 0 0 0 0 0 0 1 1 0 2 8 16 Student 16 1 0 0 1 1 0 0 0 1 0 4 6 17 Student 17 0 1 0 1 1 1 0 1 0 1 6 4 18 Student 18 0 1 0 1 1 1 0 1 0 0 5 5 19 Student 19 1 1 0 0 1 1 1 1 0 0 6 4 20 Student 20 1 1 0 0 1 1 0 1 0 0 5 5 21 Student 21 1 0 0 0 1 0 0 1 0 1 4 6 22 Student 22 1 0 0 1 1 0 0 1 1 0 5 5 23 Student 23 1 0 0 0 1 1 0 1 1 0 5 5 24 Student 24 1 1 0 1 1 1 1 0 0 1 7 3 25 Student 25 1 0 0 0 1 1 0 1 1 1 6 4 26 Student 26 1 0 0 0 0 0 0 0 0 0 1 9 27 Student 27 0 0 0 0 0 0 0 0 1 1 2 8 28 Student 28 1 0 0 1 1 1 1 1 0 1 7 3 29 Student 29 1 0 0 1 1 1 0 0 1 0 5 5 30 Student 30 0 0 0 0 0 0 0 0 0 0 0 10 31 Student 31 0 0 1 0 0 1 1 1 1 0 5 5 32 Student 32 0 0 0 1 1 1 1 1 0 0 5 5 33 Student 33 1 0 0 1 1 0 1 0 1 1 6 4 34 Student 34 0 1 1 0 1 1 1 1 1 0 7 3 35 Student 35 0 1 0 1 1 0 1 1 1 0 6 4 36 Student 36 0 0 0 0 0 0 0 1 0 1 2 8 37 Student 37 0 1 0 0 0 0 1 1 0 0 3 7 38 Student 38 1 1 0 0 1 0 1 1 0 1 6 4 39 Student 39 1 0 1 1 1 0 0 0 1 0 5 5 40 Student 40 0 0 0 0 0 0 0 0 1 0 1 9 41 Student 41 1 0 1 0 1 0 0 1 1 0 5 5 Total (Correct Answers) 20 15 7 16 29 18 15 24 19 13 176 234 904 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Table 3: Respondents from DTESL Program (Codified Data)

NO NAMES Q.1 Q.2 Q.3 Q.4 Q.5 Q.6 Q.7 Q.8 Q.9 Q.10 TOTAL

C W

1 Student 1 0 0 1 0 0 1 1 0 0 1 4 6

2 Student 2 1 0 0 0 0 1 1 1 0 0 4 6

3 Student 3 0 0 0 0 1 1 0 0 1 0 3 7

4 Student 4 0 0 1 1 1 0 0 1 1 0 5 5

5 Student 5 0 0 0 1 1 1 1 1 1 0 6 4

6 Student 6 1 0 0 1 1 0 1 1 1 0 6 4

7 Student 7 1 0 1 1 0 1 0 1 1 0 6 4

8 Student 8 0 0 0 0 1 0 0 0 1 0 2 8

9 Student 9 0 0 1 0 1 1 0 1 0 0 4 6

10 Student 10 0 0 1 1 1 0 0 1 0 0 4 6

11 Student 11 0 0 0 0 0 1 0 1 1 0 3 7

12 Student 12 0 0 1 0 0 1 1 0 1 0 4 6

13 Student 13 1 0 0 0 1 1 0 0 1 0 4 6

Total (Correct Answers) 4 0 6 5 8 9 5 8 9 1 55 75

of trainee teachers towards the effectiveness of HOTs have 2 supporting points”. 12 of the respondents in learning writing skills?” Another 10 questions were answered “Creating” and even there are 8 respondents constructed for this part and it is all rating scale answered “Understanding”. It has clearly shows that questions where they will choose between strongly the word “create” in the questions confused the disagree, disagree, agree and strongly agree. The respondents. For instance, 8 BTESL respondents can’t researcher eliminated “neutral” from the rating scale in differentiate between LOTs and HOTs. order to get a better and accurate result. The researcher will use pie chart to demonstrate the result On the other hand, for DTESL respondents, the as shown below. question no.2 has the higher number of wrong answer among all the questions. Surprisingly, no respondents 3. RESULTS were able to answer this question. Question no.2 “Sketch your favourite superhero from any movies.” is Tables 2 and 3 indicate the total results of the actually categorised as LOTs, specifically the respondents from the participants of this study, BTESL Application skills. 6 respondents answered “Creating” and DTESL. The 41 respondents from BTESL while another 5 respondent chose “Remembering”. managed to answer 176 questions correctly while 13 Again, the word “sketch” confused the respondents respondents from DTESL managed to answer 55 where they think that sketching is considered as questions correctly. However, the number of wrong creating something new but when it comes to this answers are more than correct answers for both particular questions, the students are asked to sketch groups. Therefore, it proved that the trainee students their favourite superhero from any movies, which they from both programs in the two universities were not are expected to draw something that they remember well equipped with the knowledge of Bloom’s taxonomy and understand in term of the colour, shape, story and before they proceeded to their internship. etc.

The highest number of wrong answer that most of Tables 2 and 3 demonstrated the scale for both the BTESL respondents did is question no.3 “Create a groups, the BTESL and DTESL respondents based on mind map with at least 5 main branches and each must their individual scores and total scores. For BTESL, The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 905

Table 4: Respondents from BTESL Program (Score and Scale)

NO NAMES Total Result

C W 1 Student 1 7 3 Good 2 Student 2 4 6 Average 3 Student 3 1 9 Poor 4 Student 4 4 6 Average 5 Student 5 5 5 Average 6 Student 6 3 7 Poor 7 Student 7 5 5 Average 8 Student 8 1 9 Poor 9 Student 9 4 6 Average 10 Student 10 6 4 Good 11 Student 11 3 7 Poor 12 Student 12 6 4 Good 13 Student 13 4 6 Average 14 Student 14 2 8 Poor 15 Student 15 2 8 Poor 16 Student 16 4 6 Average 17 Student 17 6 4 Good 18 Student 18 5 5 Average 19 Student 19 6 4 Good 20 Student 20 5 5 Average 21 Student 21 4 6 Average 22 Student 22 5 5 Average 23 Student 23 5 5 Average 24 Student 24 7 3 Good 25 Student 25 6 4 Good 26 Student 26 1 9 Poor 27 Student 27 2 8 Poor 28 Student 28 7 3 Good 29 Student 29 5 5 Average 30 Student 30 0 10 Poor 31 Student 31 5 5 Average 32 Student 32 5 5 Average 33 Student 33 6 4 Good 34 Student 34 7 3 Good 35 Student 35 6 4 Good 36 Student 36 2 8 Poor 37 Student 37 3 7 Poor 38 Student 38 6 4 Good 39 Student 39 5 5 Average 40 Student 40 1 9 Poor 41 Student 41 5 5 Average Total (Correct Answers) 176 234 Average

906 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Table 5: Respondents from BTESL Programm (Score and Scale)

NO NAMES TOTAL Result

C W 1 Student 1 4 6 Average

2 Student 2 4 6 Average 3 Student 3 3 7 Poor 4 Student 4 5 5 Average 5 Student 5 6 4 Good 6 Student 6 6 4 Good 7 Student 7 6 4 Good 8 Student 8 2 8 Poor

9 Student 9 4 6 Average 10 Student 10 4 6 Average

11 Student 11 3 7 Poor 12 Student 12 4 6 Average 13 Student 13 4 6 Average Total (Correct Answers) 55 75 Average

there are only 11 respondents managed to score Table 8: Overall Marking System (DTESL) between 6-7, 18 respondents with score between 4-5, and 12 respondents with score lower than 3. The Score Scale overall score for BTESL is average. In contrast, for DTESL respondents, there are 3 respondents scored 41 - 123 Poor between 6-7, 8 respondents with score between 4-5, 164 - 205 Average and 3 respondents with score lower than 3. The overall 246 - 287 Good score for DTESL is average. The respondents from 328 - 410 Excellent both programs only acquired the knowledge of bloom’s taxonomy in an average level where actually most of 3.1. THE COMPARATIVE STUDY the educators are expected to master the skills of bloom’s taxonomy before starting their teaching career. In order to make a comparison between both groups of respondents, 13 respondents from BTESL Table 6: Individual Marking System were randomly picked from the website, Stattrek with the help of random number generator. The numbers Score Scale that were randomly picked are 24, 11, 19, 21, 30, 03, 1 - 3 Poor 14, 20, 29, 06, 02, 26 and 27. Exceptionally, DTESL respondents performed better compared to BTESL 4 - 5 Average respondents based on the Table 5 It is clearly stated 6 - 7 Good there that 13 respondents from BTESL group mostly 8 - 10 Excellent achieved with the poor result while DTESL group only have 3 respondents fall under the “poor result” Table 7: Overall Marking System (BTESL) category. By looking at the total score, BTESL only managed to reach the score of 43 which it is Score Scale considered as Poor result. However, this outcome is not 100% accurate due to the randomized respondents 41 - 123 Poor from BTESL in order to have a balance number 164 - 205 Average between both groups. 246 - 287 Good 328 - 410 Excellent The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 907

Table 9: Comparative Scores between BTESL And DTESL

BACHELOR IN EDUCATION TESL PRORAMME

NO NAMES Total Result

C W 1 Student 24 7 3 Good 2 Student 11 3 7 Poor 3 Student 19 6 4 Good 4 Student 21 4 6 Average 5 Student 30 0 10 Poor 6 Student 3 1 9 Poor 7 Student 14 2 8 Poor 8 Student 20 5 5 Average 9 Student 29 5 5 Average 10 Student 6 3 7 Poor 11 Student 2 4 6 Average

12 Student 26 1 9 Poor 13 Student 27 2 8 Poor Total (Correct Answers) 43 87 Poor

DIPLOMA IN EDUCATION TESL PRORAMME NO NAMES Total C W Result 1 Student 1 4 6 Average 2 Student 2 4 6 Average 3 Student 3 3 7 Poor 4 Student 4 5 5 Average 5 Student 5 6 4 Good 6 Student 6 6 4 Good 7 Student 7 6 4 Good 8 Student 8 2 8 Poor 9 Student 9 4 6 Average 10 Student 10 4 6 Average 11 Student 11 3 7 Poor 12 Student 12 4 6 Average 13 Student 13 4 6 Average Total (Correct Answers) 55 75 Average

3.2. Perspectives and Challenges 3.2.1. Perspective towards HOTs Based on the all figures below (Figures 1-5), it is In this part of the results, it will be divided into two obvious that majority of the respondents agreed to categories which are perspective towards HOTs and implement HOTs in their writing lessons, students can challenges that trainee teachers encountered when implementing this particular technique in their actually learn writing better. According to Figure 1, 36 pedagogical practices. of the respondents from both groups agree that they 908 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Figure 1: Line chart for Questionnaire Part C, Question 1.

Figure 2: Line chart for Questionnaire Part C, Question 2.

Figure 3: Line chart for Questionnaire Part C, Question 3. The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 909

Figure 4: Line chart for Questionnaire Part C, Question 4.

Figure 5: Line chart for Questionnaire Part C, Question 5. have noticed their students actually enjoy learning actually discourage students to learn. In overall, the writing with HOTs questions compared to LOTs result is still considered as positive because most of questions. This showed that these 36 trainee teachers the respondents showed that they are really confident believe that by integrating HOTs in their writing lesson, with the technique itself, their perspective, and their it can actually attract student’s interest and motivate answers. It proves that they all had been applying such them to write in an enjoyable environment. However, technique in their classroom and the significant fact is there are 18 of the respondents from both groups didn’t that the outcome was great. agree that their students enjoy to learn writing with HOTs questions. During the interview, one of the 3.2.2. Challenges in Implementing HOTs interviewee mentioned that his/her students have According to Figure 6, 48 of the respondents from difficulties in generating ideas and this is the reason both groups prefer to teach writing with HOTs why this particular trainee teacher didn’t implement questions rather than LOTS questions. Surprisingly, HOTs questions while teaching them. Besides, another there are 6 respondents from both groups do not prefer interviewee also mentioned that their students will not to teach writing lesson with HOTs questions. This participate in writing activities when he/she integrating question is to see whether the trainee teachers have a HOTs questions. He/she believes that HOTs questions positive or negative view on this particular technique. It 910 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Figure 6: Line chart for Questionnaire Part C, Question 6.

Figure 7: First challenge of HOT SKILLS: Students’ Language Proficiency. was surprisingly noticed that 6 of the respondents lower language proficiency student would have a didn’t agree teaching writing with HOTs questions. One higher possibility of encountering problems in of the respondents mentioned during the interview answering HOTs questions compared to an advanced session that HOTs questions were difficult for students language proficiency student due to the lack of to answers. The interviewee believed that learning knowledge in the linguistic area. In term of should always start from the easiest and move slowly vocabularies, low language proficiency students would to the difficult question. have difficulties in putting their ideas into words and form sentences that people can understand. As stated in Figure 7, 52 of the respondents from Furthermore, some of the respondents quoted that the both groups, BTESL and DTESL agreed that their interference between mother tongue and second students’ language proficiency level was one of the language also made students have difficulties in reasons why they can’t handle HOT skills questions answering HOTs questions. Students would tend to while 2 respondents disagreed that students’ language directly translate their mother tongue to second proficiency level was the factor that led to issues in language and write based on the translation which it handling HOTs skills questions. The word “language caused confusions to the readers. This problem might proficiency” is referred to the ability of an individual to lead to a major learning difficulties due to the imprudent speak or perform in a particular language. During the way of learning the language. interview session, one of the interviewees stated that a The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 911

Figure 8: Second challenge of HOTs: Students’ Cognitive Level.

As reported in Figure 8, 47 of the respondents from mental process will not be able to perform critical and both groups agree that their students’ cognitive level is creative thinking at the same time. one of the reason why they can’t handle HOT skills questions while 7 of the respondents were disagree on Based on Figure 9, about 37 respondents from both the statement above. Cognitive level is relating to the groups agreed that their student’s background was one mental process of perception, memory, judgement and of the reasons why they can’t handle HOTs questions reasoning, as contrasted with emotional and volitional whilst 17 of them believed that student’s background processes. When the researcher had the interview got nothing to do with HOTs questions. Students’ session with the selected respondents, one of them background is referred to their culture, race, religion specified that students with lower intelligence quotient and etc. In the interview, some of the respondents said will have difficulties to answer HOT skills questions due that most of their Malay students had difficulties in to their reasoning ability. They will not be able to solve answering HOTs questions. When these particular a problem when the questions are beyond their thinking trainee teachers tried grouping Malay students with ability. For instance, HOTs questions also required one other races, it helped them to understand the HOTs to think critically and creatively which both are equally questions better. The answer does not represent as important in thinking skills. Students that have a slower overall due to the most of trainee teachers went to Government Schools (i.e. “Sekolah kebangsaan”)

Figure 9: Third challenge of HOTs: Students’ Background. 912 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

Figure 10: Fourth challenge of HOTs: Schooling System. during their internship where majority of the students 4. DISCUSSION are Malay. Furthermore, one respondent also The findings from the questionnaire and interviews mentioned that family issues can actually affect the presented sufficient amount of data pertaining the way of students’ thinking. He/she believed that parents research questions as in the Introduction section. In the played an important role in educating their children in following sections, the important points in terms of terms of way of thinking and life style. “Single parent gaining background knowledge of HOTs in constructing will have problem in spending time to guide their questions, the participants’ perception about the children”, he/she added. effectiveness of HOTs, and the challenges of this study Pursuant to Figure 10, about 41 respondents from were discussed. both groups agreed that the school where they went for 4.1. How much Background Knowledge of HOTs in internship had got its own certain system, its schooling Constructing Questions were Gained by Trainee system was one of the reasons why the students can’t Teachers? handle HOTs questions whilst 13 of them from both groups believed that the schooling system had nothing As reported before (see section 3.1), we can get an to do with handling HOTs questions. The schooling overall picture of how much background knowledge of system referred to the way of teaching by teachers in HOT skills that these respondents, also known as the school, syllabus, curriculum planning and etc. One trainee teachers acquired. From the result itself, we of the respondents said that the school he/she went can see that out of 54 respondents, only 14 during internship; it focused more on the LOTS respondents fall under the category of GOOD because everyone should be treated equally. All in all, background knowledge of HOT skills. It is surprise that the way of teaching should focus on the whole instead most of the trainee teachers that already done their of individual. Besides, another respondent mentioned internship didn’t well equipped with this technique that the trainee teachers were lacking of creativity in before proceeding their internship. It is also shock that creating teaching materials. This actually led students to discouragement level so that they had been on the in the comparative study, Diploma students that boring way of teaching by the teachers. Teachers already done their internship have a better background working in the school still applied the traditional way of knowledge compared to Degree students. This result teaching in classrooms. Furthermore, one of the implied that those trainee teachers proceeded to respondents also stated that the senior teachers didn’t bachelor program didn’t continue practicing HOT skills agree on the 21st century education. They think that the in their daily life or for educational purposes. As a exam result is all that matters. All these problems matter of fact, HOT skills are rarely taught in bachelor actually lead to the deficiency of implementing HOTs in classroom because the faculty assumed that the daily classroom because the teachers didn’t play as a bachelor students should already mastered it before good role model and have a bad aspect of this progress to bachelor. particular technique. The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 913

4.2. What are the Trainee Teachers’ Perception when they integrated HOT skills questions, they also Towards the Effectiveness of HOTs in Learning believe that by using HOT skills questions can actually Writing Skills? help students to generate more ideas. For instance, they see some improvement in their students’ writing Based on the finding, the data showed that most of when applying HOT skills in their writing classroom. the trainee teachers have a positive perspective toward The HOT skills lesson also helped to motivate and the effectiveness of Higher Order Thinking Skills in encourage students to write more and participate teaching writing skills for their learners. Although a few actively in the lesson. It proved that the language of the trainee teachers didn’t support well on this teachers play an important role to promote HOT skills technique, in overall it is still conceded as positive when it comes to language skills (Dong’s 2014). feedback from most of them. We can see that mostly are positive feedback by the respondents where they The respondents in this study felt that HOTs are all agree that by integrating feedback into writing difficult to implement due to the challenges that they lesson can actually benefits their students. encountered during the writing lesson. According to 4.3. What are the Challenges for Trainee Teachers Soo, Nor Haniza, Rohani & Siti Nuur-ila Mat (2015), to Implement HOTs in Teaching Writing Skills? some of the teachers are having bad impression towards incorporating thinking skills into English As stated before, the results indicated the language lesson because they assume that thinking challenges that most of the respondents encountered skills are often associated with science and in implementing HOTs are as follows: Students’ mathematical subjects. They also mentioned that language proficiency, cognitive level, schooling system teachers have been found to lack creativity in and students’ background. 52 out of 54 respondents innovating their lessons. Teachers also are in voted for Student’s language proficiency as the most confusion on how to include higher order thinking skills challenge that they faced while integrating this with the content subject because they are having technique. Especially when it comes to ESL learners, troubles in explaining about HOTs and ways to access the interference between their mother tongue and them (Schulz, 2016). The findings proved that although second language are affecting the students to form this technique has been introduced in the past decades sentences based on their ideas. Most of the but educators are still don’t see it as important as it respondent believe that one is required to have a better should be. They tend to find excuses for not language proficiency in order to answer HOTs incorporating HOTs in their lessons. The challenges questions because thinking the answer is easier then should not become the reasons for educators to writing it down. From the overall result, it implied that promote HOTs to their students. most of the teachers that trying to integrate HOTs into 5. SUGGESTIONS AND CONCLUSIONS their lesson are facing difficulties due to the list of challenges that required a long duration to solve it. 5.1. Suggestions

4.4. Discussion of the Findings The authors have provided a few suggestions based on the findings if this project. They are as The findings illustrated that most of the trainee follows: Teachers have not been able to learn and apply the techniques of HOT skills in their interaction and 1. The researchers suggest that it is better to communications. Teachers’ professional development create an application in the future about Higher especially in the field of teaching experience and Order Thinking skills. This application will design qualification give an impact on the use of higher order specifically for educators especially young thinking skills in classroom. (Shukla, D. 2016) Trainee educators. It will provide a detailed information of teachers should master this particular technique in Higher Order Thinking skills together with order to provide good teaching experience keywords, examples, and questions. This incorporating HOT skills in classroom. application aims to help young educators to acquire HOTs before starting their teaching The findings from the questionnaire and interviews career. Najah Saud et al. (2018, p. 1) highlights also indicate that trainee teachers perceived their roles that “an interactive digital environment triggers in the writing classroom as follows: they felt that their the student’s imagination and understanding of students are engaged actively in the writing activity the course”. The interactive digital environment, 914 Journal of Reviews on Global Economics, 2019, Vol. 8 Azar et al.

technology acceptance model (Mohd Shukri Ab. usefulness of implementing HOTs in teaching writing Yajid et al., 2017), and Mobile Apps help for ESL learners. According to Rajendran (2001), he teachers, learners and businessman to gain stated that teachers were confident in teaching the experience how to use professional strategies in subject but were not ready to incorporate HOTs in their their communications and academic writing. As classroom due to lacking of activities that have been Azar (2014, p. 1836) emphasizes the future of introduced to language classroom for HOTs. This learning and education is enhanced by mobile research was conducted with the purpose of learning (M-learning). investigating trainee teachers’ attitude towards the implementation of HOTs in teaching writing skills for 2. The researchers suggest that it is better to ESL learners and identifying the challenges in create a new HOTs framework that will fits into incorporating HOTs in the classroom settings. 21st century education and can be easily incorporate into language classroom. A list of Throughout the findings, we were able to find out task will be suggested based on the level of the real challenges that nowadays teachers facing HOTs and teachers can refer it as a guidebook while integrating HOTs in their language classroom. while planning their lesson. Besides, the findings also managed to show how much background knowledge of HOTs those respondents 3. The researchers suggest to add on HOTs acquired. Together with the data that we collected, it subjects into education program especially for will definitely benefit teachers to have a clear picture of language courses such as TESL, TEFL and etc. implementing HOTs and how to prepare and plan for This is to help the future educator to master the HOTs activities. It also encourages teachers to have a technique, not only understanding the ways of positive attitude while trying out this particular applying it but at the same time, they will know technique. how to access their students based on HOTs. From this study, we are positive to tell that 4. The researchers suggest to make HOTs as a implementing HOTs in teaching academic writing and compulsory element for all educational organiza- professional communication skills for ESL learners is tion such as primary school, secondary school, highly recommended and it is able to improve student’s college and university. Each educator must at performance in their writing and communication tasks. least incorporate one or two HOTs questions in HOTs should be put as the priority in our education their lesson every day and should be written system and all educators should always be in line with down in a form of lesson plan to make sure the the government’s long term goal of becoming a Ministry of Education can keep it on record. developed nation and developing thinking individuals as human capitals for the 21st century. 5. The researchers suggest to educate parents and the society with the importance of HOTs. Parents However, this study is not representing as an and the society play an important role in the overall view of HOTs in language classroom due to the students’ life. Parents and society that are well small scale of the research. A further investigation or equipped with HOTs knowledge will produce study in the same topic will surely strengthen the better generation by integrating HOTs in their findings and proving that implementing HOTs in daily lifestyle. For e.g. Parents can find enhancing professional communication strategies and sometimes to discuss with their children about teaching writing skills is beneficial for TESL programs. the current issues. ACKNOWLEDGEMENTS 6. The researchers suggest to have HOTs test before letting any trainee teachers to proceed to We would like to thank the two anonymous their internship. This is to make sure that all the reviewers for their thoughtful and helpful comments on trainee teachers are qualified to carry out lesson earlier drafts of the paper. The authors would like to incorporating with HOTs. appreciate and thank Management and Science University, Malaysia for the support of this study. This 5.2. Conclusion study was supported by MSU RESEARCH SEED GRANT (MSRG) [Project Code: SG-040-012019-SESS In conclusion, although this study was done in a 20190521005]. small scale but it provided supportive intuition to the The Impact of HOT Skills on Enhancing Professional Communication Journal of Reviews on Global Economics, 2019, Vol. 8 915

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.77

© 2019 Azar et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

916 Journal of Reviews on Global Economics, 2019, 8, 916-924 Malaysian’s Young Consumer Preferences of Hijab

Amily Fikry1,* and Mohd Rozi Ahmad2

1Faculty of Business and Management, Universiti Teknologi MARA, UiTM Shah Alam, 40450 Shah Alam, Selangor, Malaysia 2Textile Research Group, Faculty of Applied Sciences, Universiti Teknologi MARA, UiTM Shah Alam, 40450 Shah Alam, Selangor, Malaysia Abstract: Researchers have long been interested in understanding young consumers’ purchasing behaviour, especially in terms of their purchasing preferences and decision-making styles. Zooming to hijab preferences, different angles of hijab have been studied. Out of 32.4 million of total population, Islam is the most widely professed religion in Malaysia. Thus, this research aims to obtain young consumer preferences of hijab. It was conducted through focus group interviews in one of the public university located in Selangor, Malaysia. The focus group interviews were audio taped and transcribed. There were 13 Malaysian female respondents; students of aged 20 to 25 years old. The findings thus far revealed that young consumer’s selection of hijab to wear and attend lectures is highly influenced by easiness to wear hijab, boost confidence as well as their moods and face shape. These factors make them feel more comfortable to move around with their active lifestyle as university students. Limitations and recommendations for future studies are discussed. Keywords: Hijab, Malaysia, Muslim, young consumers, preference.

1. INTRODUCTION 2012; Grant and Stephen, 2005; Shoham and Dalakas, 2005). Researchers have long been interested in understanding young consumers’ purchasing Zooming to clothing apparel preferences, different behaviour. Various aspects have been investigated to types of clothing apparel have been studied (Alhabeeb, understand their purchase preferences such as who 1996; Grant and Stephen, 2005; Taylor and Cosenza, influence them to purchase and where they will 2002). Alhabeeb (1996) provides a profile on female purchase the products (Levy and Lee, 2004; Lee and teenagers spending on clothing apparel and found that Marshall, 1998; Batounis-Ronner, Hunt and Mallaliue, with the increase in age, female teenagers with higher 2007; Shoham and Dalakas, 2003) as well as decision income will spend more on buying clothes as compared making styles. Besides understanding young with their male counterpart. Taylor and Cosenza (2002) consumers based on their purchasing preferences and also attempted to provide a profile and segment female decision making styles, the behaviour of these young teenagers, focusing on female teenager’s choice of lucrative consumers (Brazil, 1999; Tootelian and shopping mall to purchase clothing apparel. Looking at Gaedeke,1992; Loussaief and Haque, 2018) also tweenaged girls (aged 12 and 13 years old) buying differs across cultures such as countries, ethnicity and behaviour of clothing apparel, Grant and Stephen religion (Shoham and Dalakas, 2003; Ganesh, 1997; (2005) found that majority of them relies on peers and Stafford, Ganesh and Garland, 1996; Hopper, 1995; parents in making decision for purchases of their Martinez and Polo, 1999; Fikry and Jamil, 2010) and clothing apparel. In spite of all these findings on young product types (Fikry, 2009) such as television, furniture consumer preferences, research that specifically and food and beverages that may require interferences focuses on young consumer preferences of hijab is still from other family members in making such decision lacking. Although Alhabeeb (1996) and Taylor and (Shoham and Dalakas, 2003; Davis, 1976). Besides Cosenza (2002) focused on profiling female clothing relying on families to make purchase decision for them, apparel preferences, the hijab preferences among normally, with regards to items for their self- female young consumer were basically ignored. consumption such as clothing apparel, mobile phone and game console, young consumers will rely on the On the other hand, it is worth noted that Malaysia a mass media, parents and friends to assist in their Muslim country, having a rising population (estimated decision making (Alhabeeb, 1996; Fikry and Bustami, at 32.4 million population with annual population growth rate of 1.1%) comprised of those in the age of 15 to 64 years old which includes the youth population (69.7%

*Address correspondence to this author at the Faculty of Business and or 22.58 million) and of Bumiputra ethnicity (69.1% or Management, Universiti Teknologi MARA, UiTM Shah Alam, 40450 Shah Alam, Selangor, Malaysia; Tel: +60355448042; 20.07 million). Majority of this Bumiputra ethnicity are E-mail: [email protected], [email protected] Muslims (Department of Statistics Malaysia, 2018) who

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Malaysian’s Young Consumer Preferences of Hijab Journal of Reviews on Global Economics, 2019, Vol. 8 917 are potentially to wear hijab, as wearing hijab is part of international competitions. However, Shafaei and the Islamic requirements and also a trending culture in Mohamed (2015) and Shakona, Backman, Backman, Malaysia. Therefore, in an attempt to further tap these Norman, Luo and Duffy (2015) believed that wearing lucrative young Malaysians’ Muslim consumer markets, hijab limits body movements in travelling and sport this paper aims to explore Malaysian’s young activities. The negative views of hijab has gone to the consumer preferences of hijab. extent of perceiving that those who wear hijab is feeling suffocated (Hamzah, Ismail, Mustari and Basiron, 2. LITERATURE REVIEW 2014), advocating a ban on those who wear hijab (anti- hijab antigations) (Razick, Long and Salleh, 2015). Hijab is defined and viewed in different perspectives. Wilson and Liu (2011) described hijab as From a different perspective, past studies such as a headscarf used to cover and conceal a female’s by Albrecht, Jacobs, Retief and Adamski (2015) chest area and all of the hair on her head. Everett, focused on young consumer preferences of Muslim Schellhaas, Earp, Ando, Memarzia, Parise, Fell and dress where in general, the subject on hijab is slightly Hewstone (2015) viewed hijab as modest styles of touched, with a great concern on cross culture Islamic dress, referring to the common headscarf, comparison between Western and Islamic beliefs that covering the hair and shoulders but not the face. influenced the preferences of female Muslim dress. In Women who wear hijab are deemed to be modest; another study, the study of Shah and Tabassum (2015) hijab being associated with submission to Allah SWT, covers on Malaysia, but specifically focus on religious moral deterrent and peace of mind (Jackson and Monk- affiliation among women academicians in Malaysia’s Turner, 2015). Wearing of hijab (or the so-called veil) universities, thus differ from the current study in this can safeguard the wearer from any harm or danger. paper. Similarly, studies by Dhanda (2008) focused on This is further supported by verses in Al-Quran that public challenges faced by women’s wearing veil, thus mention: directly ignoring the concern of researchers on consumer preferences of hijab. The study by Rabolt “O Prophet! Tell thy wives and daughters, and Forney (1989) covered on the impact of and the believing women, that they should demographic and socioeconomic characteristics on cast their outer garments over their Saudi Arabian female preferences of dress with hijab persons (when abroad): that is most slightly covered in their study. In spite of the many convenient, that they should be known (as studies concerning female Muslim’s dress in general, such) and not molested. And Allah is Oft- covering on different perspectives ranging from Forgiving, Most Merciful.”(Surah Al- managerial, social and political aspects, very limited Ahzab:59). studies specifically focus on young consumer preferences of hijab. Past research on Hijab mainly focused on the impact of wearing hijab among working women (Omar 3. METHODOLOGY and Davidson, 2001 and Omair, 2009) of which different viewpoints have been revealed based on Focus group interviews are the best method to different perceptions among managers having explore what individuals believe or feel as well as why subordinates wearing hijab. Omar and Davidson (2001) they behave in the way they do (Rabiee, 2004). and Omair (2009) insisted that wearing hijab is only a Therefore, for the purpose of this study, focus group woman’s clothing that is linked to local tradition. It does interviews are being used as a means of qualitative not limit the capabilities of woman in doing her job data collection to capture young individual consumer properly, as it is only a reflection of a woman’s behaviour i.e. preferences of hijab. The focus group commitment to Islam. setting and format are discussed in the next section.

Looking at different angles, other researchers have Focus Group Setting debated on the challenges of wearing hijab for sports (Azizi and Hassan, 2014) and travelling activities Malaysia is a country with an area of 330 803 (Shafaei and Mohamed, 2015 and Shakona, Backman, square kilometres, covering 16 states. In the first Backman, Norman, Luo and Duffy, 2015). Azizi and quarter of 2019, Malaysia’s total population was Hassan (2014) emphasized that wearing hijab does not estimated at 32.66 million, an increased by 1.1 percent restrict sports women to excel in both national and as compared to the first quarter of 2018 (32.29 million). 918 Journal of Reviews on Global Economics, 2019, Vol. 8 Fikry and Ahmad

Out of the 32.66 million total population, Selangor 4. FINDINGS (6541.7 million) recorded the highest population Respondents Profiling followed by Sabah (3932.0 million) and Johor (3776.2 million). Based on these population distributions, Based on Table 1 below, it can be seen that Selangor is clearly the most populous state thus majority of the respondents are in the age of 21 years making it suitable and relevant to choose respondents old (4 respondents), followed by respondents in the for focus group from one of the public universities age of 20 years old (4 respondents), while the located in Selangor (Department of Statistics Malaysia, remaining respondents (5 respondents) in the age 2019). between 22 years old to 25 years old. All of them are of Noting that Islam is the most widely professed single marital status, with one of the respondent religion in Malaysia (61.3%), followed by other religions studying for Master Degree and the remaining (12 embraced by Malaysians, including Buddhism (19.8%), respondents) are studying for Bachelor’s Degree. Christianity (9.2%) and Hinduism (6.3%) (Department Table 1: Detail Profiles of Respondents of Statistics Malaysia, 2019), it is high time to focus research related to the religion of Islam i.e. hijab. Respondent Age Marital Status Qualification Zooming into Muslims’ women in Malaysia, it is believed that majority of Malaysian’s women will dress Respondent Y1 22 Single Degree modestly, covering from head to feet. It is further Respondent Y2 23 Single Degree observed that these women usually wear long skirts, Respondent Y3 21 Single Degree shirts with sleeves (Razick, Long and Salleh, 2015) and Respondent Y4 21 Single Degree hijab. Respondent Y5 24 Single Master Focus Group Interview Format Respondent Y6 25 Single Degree Respondent Y7 21 Single Degree The focus group interviews were held using a Respondent Y8 21 Single Degree structured format consisting of two areas, focusing on Respondent Y9 20 Single Degree hijab preferences that they will wear for daily lectures. The structured format of the focus group interviews Respondent Y10 25 Single Degree covered on the following two key areas: Respondent Y11 20 Single Degree Respondent Y12 20 Single Degree • Demographic Profiles of the respondents – Respondent Y13 20 Single Degree determining the general profile of respondents

such as age, education level and marital status. Hijab Preferences • Consumer preferences of hijab – identifying consumer preferences of hijab by covering Types of Hijab Articles questions such as brand, price range and types There are different types of hijab articles namely of hijab article. head scarf, Turban, Telekung, Mini Telekung, The discussion with the respondents for each Selendang, Coats, Abaya and Niqab (Shah and segment lasted approximately between 30 minutes and Tabassum, 2015), haik and chador (Dhanda, 2008), of 60 minutes. All interviews were audio taped and which caters to different needs and time of wearing transcribed. Since some of the respondents answered such hijab article. In Table 2 below, when asked on the the questions in both English and Malay languages, types of hijab that respondents prefer to wear for lectures, it was found that majority of the respondents therefore the recording and the field notes were prefer to wear Bawal hijab to go to class (twelve transcribed using both languages. There were 13 respondents), while the remaining one respondent Malaysian female respondents selected for this study, prefer to wear either shawl or express hijab to attend students of aged 20 to 25 years old. The main reason lectures. More than half of the respondents (seven for selecting this segment of respondents is to identify respondents) prefer to wear shawl to attend lectures, the similarities and differences of Hijab preferences followed by five respondents who preferred to wear among them. express hijab. Besides, one respondent highlighted her Malaysian’s Young Consumer Preferences of Hijab Journal of Reviews on Global Economics, 2019, Vol. 8 919 preferences of wearing satin and Syria hijab to go to respondents) do not have specific brand of hijab that class respectively. they will purchase to attend lectures, while the remaining five respondents prefer Kangaroo or Respondent Y2 affirmed that “I would Aidijuma brand of hijab to wear whenever they go to wear shawl when I am happy. When I am classes. not happy, I would prefer to wear Bawal hijab to boost my confidence. When I am Table 2: Types of Hijab Articles and Brand Selected in a hurry, I would prefer to wear express hijab because it is easy to wear it….”. Respondent Types of Hijab Articles Brand

Respondent Y3 added that “Bawal hijab is Respondent Y1 Shawl/Bawal NS easy and fast to wear, and less time Respondent Y2 Shawl/Bawal/Express Hijab NS consume to iron it as compared to shawl Respondent Y3 Bawal NS because shawl hijab is wider and lengthy, Respondent Y4 Bawal NS making it consume more time to iron and Respondent Y5 Syria/Express Hijab Kangaroo wear it..”’. Respondent Y6 Shawl/Bawal Kangaroo Respondent Y8 further added that “I would Respondent Y7 Satin/Bawal/Shawl Kangaroo wear Bawal hijab when I am lazy because Respondent Y8 Bawal/Shawl NS Bawal hijab is easy to wear....”. Respondent Y9 Bawal/Express NS Respondents Y4 further mentioned that “I Respondent Y10 Bawal NS would wear hijab that suits my face Respondent Y11 Shawl/Bawal NS shape.....wearing Bawal hijab can easily Respondent Y12 Bawal/Express Aidijuma be adjusted according to my round face Respondent Y13 Shawl/Bawal/Express Kangaroo shape as compared to shawl type hijab”. *NS= Not specified. The abovementioned statements indicate that most of the respondents share similar thoughts regarding the Respondent Y1 mentioned that “I don’t types of hijab article. The selection for types of hijab to care about brands, as long as the hijab wear to attend lectures, depend on several factors such looks beautiful on me, I would purchase as easiness to wear hijab, boost confidence, as well as it.....” and Respondent Y4 further added their mood, and face shape. Apparently, hijab fit seems that “I don’t mind about brands, as long as to be one of the matters of concern among hijab the hijab is suitable with my clothes, I will consumers, especially in terms of how the hijab buy it, disregard of whether it is cheap or garment looks on the body (Ashdown and DeLong, expensive”. 1995). In line with that, focusing on different types of clothing i.e. jacket, Alexander, Connell and Presley In contrast, respondent Y3 mentioned that (2005) discovered that body parts such as face has ”...no specific brand of hijab. As long as it significant difference across body cathexis. is affordable, I would buy it. After all, I am Surprisingly, none of the respondents is particularly still a student”. concerned with the syariah compliance aspect of the hijab article. This is somewhat contradicted with the In another, respondent Y5 mentioned that study of Tawfiq and Ogle (2013) where respondents “I would prefer to buy Kangaroo brand of highlighted that the selection of their clothes must be hijab since it is affordable for me as a modest and fulfil minimum guidelines of aurat. In line student’. Respondent Y6 further added with that, one can conclude that students tend to follow that ‘...I would prefer to buy Kangaroo the norms (Workman and Freeburg, 2000) and trends hijab because the material is quite heavy (Rabolt and Forney, 1989). and nice”.

Hijab’s Brand Preferences Respondent Y9 further affirmed that “I don’t mind about brand, but usually I Referring to preferred brand of Hijab as illustrated in would buy Kangaroo brand because it is Table 2 below, majority of the respondents (eight affordable and within my budget.” 920 Journal of Reviews on Global Economics, 2019, Vol. 8 Fikry and Ahmad

The above statements indicate that majority of the because of the affordable price offered. I respondents do not have any specific brand of hijab, would never purchase hijab through online while some prefer to buy the Kangaroo or Aidijuma means as I can’t look and feel the texture hijab brand. The Kangaroo brand is affordable to these of the hijab material before I purchase it”. young consumers, with the price ranging between RM 10 and RM20 per piece. On the other hand, the price of This is further supported by respondent Y9: Aidijuma hijab is slightly higher, in the price of RM50 “I prefer to purchase hijab at night market and above. and kiosk booth because I can feel the Ironically, despite of being young consumers, these hijab material before I purchase it. I am respondents do not care much about fashion when it not familiar of purchasing hijab comes to purchasing hijab for daily wear. Noting that online,mainly because I do not know the these respondents are young consumers, in the age types of material sold online, and I cannot range of 20 to 25 years old, who are still studying and feel the hijab material before I purchase do not have permanent income, it is of no surprise it”. when their main concern in selection of hijab brand is Respondent Y6 further affirmed by stating that: purely based on affordability, heavy material, beautiful and suits with their apparel attire. This may be due to “I am hijab collector. I would purchase the nature of the respondents who are students in a hijab in large quantity, various types of university that requires them to wear hijab that is color. So, I would prefer to purchase it at comfortable and practical for their daily student’s street market such as at Jalan Tunku activities (Albrecht, Jacobs, Retief & Adamski, 2015). Abdul Rahman.I can get cheap price of hijab when I buy in large quantity there”. The finding of this study contradicted with the study of Taylor and Cosenza [20] and O’Cass, Lee and Respondent Y5 on the other hand, prefer to Siahtiri (2013). Taylor and Cosenza (2002) found that purchase hijab through online means due to the female teenagers is brand conscious who are willing to convenience offered. Respondent Y5 stated that: pay high price to purchase clothing apparel that reflects their social status. Zooming into young Muslim “I prefer to purchase hijab at shopping consumer market, O’Cass, Lee and Siahtiri (2013) complex, night market and online. Most of discovered that fashion conscious young Muslim the time, I would purchase hijab through consumers are also willing to pay high price for clothing online since it is more convenient to me”. consumption that reflects status. Indeed, only those of high income earners young consumers can afford to be Indirectly, the selection of location to purchase hijab fashion conscious nowadays. among these respondents reflects the character of young consumers that enjoy shopping, following latest Location to Purchase Hijab apparel trends but at the same time are price and time When asked about location of purchasing hijab, (convenience) conscious (Zhang, Carpenter and majority of them preferred to purchase hijab at the night Brosdahl; 2011). However, Rabolt and Forney (1989) market, followed by kiosk booth and online (refer Table discovered that those who are in the age of 20 to 35 3 below). Majority of the respondents prefer to years old would prefer to purchase hijab at boutiques purchase at night market and kiosk booth due to the and departmental stores. This may be due to high affordable price offered and the ability to feel the socioeconomic status of the said respondents in their texture of the hijab material beforehand. This will study, as compared to respondents in this study, who definitely increase their satisfaction after the purchase only comprised of students with limited income to of such hijab. Only some of the respondents (3 purchase hijab. respondents) prefer to purchase hijab through online Hijab Purchases Influencers means due to the convenience offered. There are various factors that have influenced According to respondent Y4: young consumer purchases of hijab. Based on the “I would purchase hijab at night market or focus group interviews, majority of the respondents kiosk booth available in the university area purchase hijab due to the influence of their friends as Malaysian’s Young Consumer Preferences of Hijab Journal of Reviews on Global Economics, 2019, Vol. 8 921

Table 3: Location, Influencer and Price Range of Hijab

Respondent Where Purchase Who Price Range Influence (RM)

Respondent Y1 Night Market No influence, sometimes Below RM50 social media Respondent Y2 Night Market /Boutique Concept Media (TV-Hijabista) RM 50 Store Respondent Y3 Night Market No influence RM15 Respondent Y4 Night Market /Booth Friends Below RM30 Respondent Y5 Night Market /Online/Shopping Fashion (trends), sister, Online Below RM50 Complex (Youtube) Respondent Y6 Street Market Fashion/online (instagram) Below RM20 Respondent Y7 Night Market /Booth/Online No influence Below RM20 Respondent Y8 Night Market /Booth Friends Below RM25 Respondent Y9 Night Market /Booth No influence Below RM20 Respondent Y10 Night Market No influence Below RM20 Respondent Y11 Online/ Night Market /Supermarket Mother/Friend Below RM20 Respondent Y12 Night Market Friends Below RM15 Respondent Y13 Street market/ Night Market Sister/Friends RM 5- RM 10 /Supermarket well as fashion trends shown in mass media and social and will purchase hijab following trends media such as Youtube and Instagram (refer Table 3). showed in Youtube”.

According to Respondent Y9: Besides family members, friends and mass media also play important roles in giving ideas on what types “No one influences me to purchase hijab. I of hijab is suitable to young consumers, as confirmed would make decision to purchase hijab by by respondent Y3, respondent Y1 and respondent Y2. myself’. For example, Respondent Y3 emphasized that:

However, family members also have high influence “Usually, I would ask my friends to follow for the purchase of hijab, as being emphasized by me whenever I want to purchase Hijab. My respondent Y11, respondent Y13, and respondent Y4. purchases of hijab would be influence by According to respondent Y11: them. I’d ask my friend’s opinion first before I decide to purchase the hijab. If “My mother and friends will give they say it’s beautiful, looks good on me, I suggestion on types of hijab that suitable would purchase it”. with me”. Respondent Y1 further supported by adding that: Respondent Y13 further affirmed that: “For some of my hijab, I would decide to “My sister will influence me to purchase purchase it by myself. But I would also hijab. My friends will give suggestion on look at what types of hijab that looks good what types of hijab and hijab design that is on my friends. If the hijab looks good on suitable to me”. them, I would consider to try it as well’.

Respondent Y4 added that: Respondent Y2 added that:

“My family and Youtube influence me a lot. “I would look at television programme If my family suggest a certain design of such as Hijabista to learn new trends, and hijab for me, I’d buy it. I’d also look at will purchase based on what is shown in Youtube to discover new trends of hijab, television”. 922 Journal of Reviews on Global Economics, 2019, Vol. 8 Fikry and Ahmad

Looking at the findings above, it is further influenced by peers and fashion trends shown in mass discovered that opinions from friends can affect media and social media. consumer’s purchases of hijab (Workmand and Freeburg, 2000; Bachleda, Hamelin and Benachour, Noting that majority of these young consumers are 2014). Noting that these respondents are in the age still studying and do not earn a steady income, they group of 20 to 25 years old, it is of no surprise to find would prefer to purchase hijab at the night market and out that friends have significant effect on these young kiosk booths. Purchases of hijab at these places consumers. In making purchase decision for clothes enable them to look for hijab offered at a lower price. including hijab, what their friends say seems to be Besides, these young consumers are able to feel the more reliable as compared to their family members. texture of the hijab material beforehand, indirectly This is further supported by the study of (Albrecht, reduce purchasing risk and feeling of disappointment Jacobs, Retief and Adamski, 2015) who revealed that resulted to purchasing of hijab that does not fulfil their purchasing of clothes may be influenced by peers. satisfaction.

However, the findings of this study contradict with 6. LIMITATION OF THE STUDY that of the study by Najarporyan (2014). Najarporyan This study was limited to the context of Muslim (2014) found that families have more influence on university students in metropolitan area in Malaysia. students’ decision to wear hijab. Noting that the Future researchers could compare the purchasing respondents covered in the study of Najarporyan preferences of students from different campuses (2014) resides in rural area where family strictly around Malaysia as well as students studying abroad. controlled the socialization activity of these students; family influence in student’s decision to wear hijab is as Another limitation is that only undergraduate and expected. postgraduate students were used as the focus of the study. Future researchers could focus on other 5. CONCLUSION population groups such as school students, women The findings of this study thus far reveal that young athletes and working women, which would result in consumers aged between 20 to 25 years old shared a different purchasing preferences of hijab. Also, it is number of similar preferences with regards to further suggested that future researchers expand this purchasing hijab for daily activities. Out of 13 university study using quantitative methods and covering on a students in a metropolitan area in Malaysia interviewed larger population in order to gain better insights on in two different sessions of focus groups, it was found young consumer preferences of hijab. This method of that the selection of wearing hijab article to attend research would provide the full pictures of the lectures will be highly influenced on easiness to wear purchasing preferences among Islamic female. hijab, to boost confidence, mood, and face shape. These university students or the so-called young 7. CONTRIBUTION OF THE STUDY consumers prefer to wear Bawal hijab, shawl or express hijab, does not care much on brands of hijab to This study provides a new insight in understanding buy but will opt for hijab that is affordable, made of the youth market preferences of hijab, of which is heavy material, beautiful and suits with their apparel lacking in the youth market research. As been attire. This will make them feel more comfortable to highlighted earlier, past studies on youth focuses more move around with their active lifestyle as university on other types of consumer products such as electrical students. and electronic items and other types of clothing apparel (Shoham and Dalakas, 2003; Fikry, 2009; Davis, 1976; Apart from that, these young consumers placed Alhabeeb; 1996) except for hijab. Thus, this study greater concern on hijab fit as compared to syariah provides new insights for future researchers who are compliance. The question of how the hijab looks on interested to tap these lucrative youth market. their body seems to be of more important than whether the hijab is syariah compliance, covering women’s The findings of this study will also contribute to aurah. Noting that peers play great influence in these those future researchers who are interested to focus on young consumers, it is expected that the way they research in the area of Asian Muslim’s youth decision dress need to be socially accepted by their peers. In making, as they can utilize the findings of this study fact, the findings of this study further confirmed that and further apply it in the consumer decision making purchases of hijab among young consumers are highly process. Malaysian’s Young Consumer Preferences of Hijab Journal of Reviews on Global Economics, 2019, Vol. 8 923

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.78

© 2019 Fikry and Ahmad; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

Journal of Reviews on Global Economics, 2019, 8, 925-938 925 The Impact of Transformational Leadership Effects on Innovative Work Behavior by the Moderating Role of Psychological Empowerment

Arif Md. Khan, Amer Hamzah Bin Jantan, Lailawati Binti Mohd Salleh, Zuraina Dato’ Mansor, Md Asadul Islam* and Sharif Hosen

University Putra Malaysia (UPM), Malaysia Abstract: The study is an endeavor to analyze the relationship between transformational leadership (TFL) and innovative work behavior (IWB) of bank employees in commercial banks of Bangladesh. This paper examines whether psychological empowerment influences the above causal relationship. Data from 372 bank employees were analyzed using Structural Equation Modeling and Partial Least Squares (SMART PLS). Our key findings suggest that there is a significant positive relationship between TFL and IWB. The results also indicate the employees who are highly psychologically empowered, like to work under TFL and this shows that when the level of psychological empowerment of employees is high, TFL impact IWB positively. From the leadership perspective, our findings suggest that the role of psychological empowerment in the relationship between TFL and IWB should not be underestimated by the leaders or the managers of the commercial banks. Keywords: Transformational leadership, Psychological Empowerment, Innovative Work Behavior, Commercial Banks of Bangladesh.

INTRODUCTION It has been noted from the previous study, leaders who have a transformational mind is more effective to The business environment is rapidly changing and it enhance subordinates innovative behavior compared to is really critical for an organization to survive without a transactional leadership (Chen, 2016; Lee et al. 2016; degree of innovation (Slater, 1994; Epstein, 2018). Afsar et al. 2017). For this reason, most of the Edmondson, (2018) postulates that innovation is an organizations have shifted the paradigm of their important priority for an organization as it helps to leadership from a transactional to transformational style achieve a competitive advantage. In line with the study (Rosenbach, 2018). The definition of transformational carried out by Damanpour & Schneider, (2008), an leadership indicates that the leaders who tend to follow individual employee innovative work behavior plays an transformational leadership are knowledgeable, able to important role in contributing to the overall lead themselves and their followers in an effort to bring organizations' innovation. changes in the organization (Northhouse, 2018). Moreover, transformational leaders are exerting extra The innovative behavior of employees refers to the efforts to meet the increasing demands of global development of useful ideas and implementation of competition (Asrar ul-Haq et al. 2016). Leaders with a those ideas into improved or new products or services transformational mindset tend to change individuals, (Shanker, 2017). Petrou, (2018) points out that teams or organizations by communicating and innovative work behavior of employees does not modeling a vision and motivate their followers to happen automatically. Bushra, (2011) discovers that achieve the vision (Sosik, 2018). Han et al., (2016) one of the most affecting factors which may enhance expose that transformational leadership is known as employee innovative work behavior is leadership. the main driver of innovative work behavior of Leaders may create a willingness in the minds of employee individual innovation which enhance overall individuals to perform in order to achieve organizations organizations innovation (Wallace et al. 2016). goal and objectives (Cashman, 2017). Moreover, leadership also creates a bond where employees can There is also a need to understand the mechanism comfortably work together with their leader (Jung et al., through which transformational leaders enhance 2003; Shibru and Darshan, 2011). Transformational subordinates innovative work behavior, since there is leadership theories expose that its core leadership no previous study to understand how transformational function is stimulating innovation (Aga, 2016). leaders enhance innovative work behavior of subordinates relating to banks. One particularly

*Address correspondence to this author at the Faculty of Economics and promising psychological mechanism which may Management, University Putra Malaysia (UPM), Tel: +60177009906; moderate the relationship between transformational E-mail: [email protected]

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 926 Journal of Reviews on Global Economics, 2019, Vol. 8 Khan et al. leadership and innovative work behavior is of an individual (Den Hartog & De Jong, 2010), most of psychological empowerment (Deci et al, 1989; Pieterse the organizations mention that the main source of et al, 2010). Psychological empowerment can be innovation is nothing rather than the innovative defined as the cognitive state of employees behavior of the employees in the company (Bason, characterized by increased intrinsic task motivation. 2018). According to Joo et al., (2017) an individual’s perception of autonomy and power which he/she De Spiegelaere, Van Gyees, and Van Hootegem, instigate novel and innovative positive changes is (2014) postulate that the most widely accepted known as psychological empowerment. Pieterse (2010) definition of innovative work behavior concept has been stresses that leaders are bound by some factors within developed by West & Farr, (1989) who mentioned that an organization, for example, HRM policies, innovative work behavior represents actions of an organizational settings and the rules and regulations of individual that involve the organization. These can lead to a great extent ”intentional introduction and application influence a follower sense of psychological (within the individual, group or empowerment independent of leadership. In this organization) of ideas, processes, present study, we, therefore, argue that psychological products or procedures which are relevant empowerment is an important moderator of the to the new unit of adoption, designed to influence of transformational leadership. significantly benefit the individual, the Transformational leadership and the followers' group, organization or wider society (p.9)" innovative work behavior have attracted most of the scholars from past years (Yahaya, 2016, Sosik 2018). Most of the researchers agreed upon the fact that The research idea actually comes up from the previous innovative work behavior is a multi-stage process. literature which tells us that the transformational However, due respect to the different authors, the leadership affects the innovative behavior of dimensions of innovative work behavior could also employees in both ways directly and indirectly (Choi, vary. 2016; Afsar et al. 2017; Sosik 2018). Based on this background and the research gap, the present study Table 1: Dimensions of Innovative Work Behavior by endeavors to explore the relationship between TFL and Different Authors IWB as well as the role of psychological empowerment from the employees of commercial banks in Authors Dimensions of Innovative work behavior

Bangladesh. The paper is organized into several Kanter (1988) 1) Idea generation sections. Section 2 presents a review of related 2) Coalition building studies. Section 3 highlights the empirical strategy and 3) Idea realization data used in the analysis. Section 4 presents the 4) Transfer/Diffusion empirical results. Finally, Section 5 discusses the Scott & Bruce 1) Problem recognition/Idea generation findings and policy implications. (1994) 2) Coalition building 3) Implementation of innovation THEORETICAL FOUNDATION AND HYPOTHESIS DEVELOPMENT BASED ON LITERATURE Jannsen (2000) 1) Idea generation 2) Idea promotion Innovative Work Behavior (IWB) 3) Idea realization De Jong & Den 1) Opportunity exploration For the last two decades, the field of innovative Hartog (2010) 2) Idea generation work behavior has been attracting scholars attention as 3) Idea championing it helps to develop overall organization innovation 4) Idea implementation (Tahsildari, Hashim & Normeza Wan, 2014). Based on the findings in previous studies, without some degree of innovation in the company's operation, it may not Innovative work behavior is a multistage process able to survive in the competitive market (Scarbiriugh, (Feng, 2016; Sethibe, 2017). Moreover, creativity is 2016). In line with Cainelli, (2004) in comparing to zero also known as an important part of employees innovative companies, the innovative company proved innovative work behavior (Wallace, 2018). Innovative to have higher levels of productivity and economic work behavior is argued to be largely a motivational growth. However, new ideas may be born in the minds issue (Bammens, 2016) besides being influenced by The Impact of Transformational Leadership Effects on Innovative Journal of Reviews on Global Economics, 2019, Vol. 8 927 knowledge, skills, and abilities, which make it of (Srivastava, 2016). Meaning is experienced by an considerable interest to leadership researchers (Wu, individual when he/she put greater responsibilities 2017). towards the work and think of the work is meaningful to him (Khany, 2016). Competence indicates the level of Transformational Leadership confidence which an individual feels as he/she accomplishes the work successfully (Shogren, 2016). In the field of management, transformational Self-determination refers to individual flexibility to leadership has attracted most of the researchers’ perform his/her tasks with comfort and impact refers to attention because of its motivational spirit to the the extent to which an individual believes that his or her followers (Bottomley, 2016; Caillier et al. 2016). work contribute significantly (Schermuly, 2016). In Transformational leadership concept has been addition, the impact also makes the individual developed by Burns (1978), who distinguishes between employee believes that organizational outcomes are transformational and transactional leadership influenced by him/her (Islam, 2016). characteristics. The leaders who tend to have a transformational mind, motivate their followers by Transformational Leadership and Innovative Work creating a friendly environment whereby employees Behavior may comfortably express their idea which is really important to enhance innovative work behavior (Choi et Leadership research proposes transformational al. 2016; Bai et al. 2016). Transformational leaders leadership as a driver for facilitating innovative work motivate their followers to work for a long time and take behavior among employees (Sosik, 2018). Moreover, out from them more than expected (Rosenbach, 2018). leaders may help their followers by creating a friendly Moreover, transformational leaders treat their followers environment where they can exhibit higher levels of equally, help them in all kinds of situation and make the innovation (Bai, 2016). In line with Masa’deh, (2016) employees feel they are the most important assets to finding, the impact of transformational leadership is them (Descahmp, 2016). Such treatment makes emulated motivation and empowerment which in turn employees feel proud and unite them to work together influence positively employee innovative work behavior. even in a dramatically changing environment (Shamir Mumford et al., (2002) argue that leaders with a et al. 2018). The work of Burns has been advanced by transformational style have a vision that increases their Bass and Avolio, (1995) and they divide employee willingness to perform beyond expectations transformational leadership into four components. The (Asrar ul-Haq, 2018). The increased level of inspiration brief discussion about these components is presented is likely to upgrade organizational development. in Table 2. Transformational leaders use higher order Psychological Empowerment constructs dimension which results in positively innovative work behavior. Empirical finding exposes a Psychological empowerment is known as an positive association between innovative work behavior increased intrinsic task motivation towards individual of employees and transformational leadership (Li, orientation to his or her role in the workplace (Chiniara, 2016). For example, the manager's gender moderated 2016). Moreover, psychological empowerment the latter relationship, indicating that under the female manifested in a set of four cognitions namely; meaning, managers, employees show less innovative work competence, self-determination, and impact behavior compared to the male managers.

Table 2: Components of Transformational Leadership and Their Definition

Components of Definition Transformational leadership

Idealized influence The leader acts as a role model and self-gain sacrificed for collective gain (Masa’deh, 2016). Inspirational motivation The component inspirational motivation indicates the ways leaders take to motivate and inspire their followers to achieve both personal and organizational goals with a compelling and energizing vision (Bottomley, 2016). Intellectual stimulation Intellectual stimulation encourages followers to question the status quo (Susan, 2016). Individual consideration Individual consideration exposes that the leaders take care and support each employee individually to bring out their best for the organizations (Ginter, 2018). 928 Journal of Reviews on Global Economics, 2019, Vol. 8 Khan et al.

Furthermore, in 164 Taiwanese pharmaceutical firms, dynamic introduction towards work role. It is in this Victor et al., (2008) found a positive correlation particular way, the concept of empowerment as a set of between transformational leadership and innovative administrative hones enter in the designation of duties work behavior. It has been discovered from the study of (Shorgen, 2016). Moreover, psychological Shin and Zhou, (2003) who investigated 46 Korean empowerment supports motivational development. companies and successfully draw out with the positive Starting and directing activities, having the capacity to findings of the relationship between transformational perform the work well, being able to have an effect on leadership and organizational innovation. In Taiwanese the environment, and the seriousness of the work are electronics and telecommunication companies, examples of motivational development among the scholars also found a positive association between employees (Morin, 2016). Psychological empowerment CEOs' transformational leadership and individual has been given a significant sum of consideration for a innovation. long time (e.g, Carless, 2004; Ergenli et al. 2007).

In Bangladesh, only a few numbers of studies have According to Spreitzer, (1995) psychological been conducted to examine transformational empowerment includes different predecessors namely, leadership. For example, Soleman et al., (2016) found organization, peers and various sources within the positive impacts of bank managers on employee environment or individuals. In spite of the fact that engagement. In a similar study, Perry has reported that leaders can have a significant effect on the work transformational leadership is an essential factor to environments of their subordinates, numerous factors improve the followers level of confidence and work are bounded by them within the organizations. The outcomes compared to transactional leadership. rules and regulations of the organization, HRM policies, and social settings can be an example of this. These The findings of previous literature clearly exposed contribute an extraordinary impact as the subordinates that the relationship between transformational sense psychological empowerment is strengthening the leadership and innovative work behavior is positively leadership (Shalley, 2004). associated. Therefore, the first hypothesis for this study is: Therefore, in this study, we focus on empowerment as a psychological state which will be generally H1: Transformational leadership is positively autonomous of transformational leadership. Moreover, associated with innovative work behavior we believe that psychological empowerment is an important moderator which influences transformational Psychological Empowerment as a Moderator Between Transformational Leadership and leadership. Innovative Work Behavior In short, we propose that transformational Psychological empowerment can be defined as a leadership is more effective in increasing innovative psychological state dwelling inside people, reflecting a work behavior of the followers who are highly

The Impact of Transformational Leadership Effects on Innovative Journal of Reviews on Global Economics, 2019, Vol. 8 929 psychologically empowered than those with lower data are collected from two cities namely Dhaka and psychologically empowered followers. Chittagong commercial banks.

H2: Psychological empowerment moderate the Using SPSS software, descriptive data analysis is relationship between transformational leadership and carried out. SMART-PLS 3.2.7 is adopted to assess the innovative work behavior of employees among measurement of the study. In this present study, every commercial banks of Bangladesh. construct in the questionnaire has three or more items where responses would be elicited using the Five-Point METHODOLOGY Likert Scale. The main reason for using the five-point scale format instead of the seven-point scale is to The quantitative research design is applied as a follow the originality of the scales in which the framework for this study, as it is typically used in questionnaire items are adapted from. The original science for theory verification and hypotheses testing questionnaire uses the PANAS scale (Watson et al, (Cresswell, 2017). The survey instrument for the study 1988), a five-point scale. The questionnaire includes is a questionnaire. It is used because it is the most the five sections where Section A collects the suitable process for collecting information from the information regarding the demographic profile of the enormous numbers of employees (Brace, 2018). respondents. Section B includes items regarding Respondents in this study are the employees from innovative work behavior, while section C includes items on transformational leadership. Finally, section D the selected commercial banks in Bangladesh. There includes items on psychological empowerment. are 48 commercial banks in Bangladesh, and more Respondents are required to rate the effectiveness of than 250,000 employees work in different departments the transformational leadership with innovative work (Bangladesh Central bank, 2017). Cohen et al, (2000) behavior as well as moderating psychological in their study, suggest that if the population is more than 100,000, the sample size will be 370. In tandem to empowerment on the relationship between TFL and innovative work behavior. ensure the sample size and the achieved sample size is sufficient to be a representative of the population, a RESULTS sample size calculator from https://www.surveysystem. com/sscalc.htm are used and the results indicate that As the data is collected through the questionnaire, for the population of 250,000 of employees working in the researcher faces challenges when gathering the the banks in Bangladesh, the study needs 372 raw data. In this study, the data is not above the set responses for the confidence level of 95%. Based on mark of 5%. Whereas the additional characteristics of the 372 responses, 600 respondents have been SMART-PLS 3.2.7 suggest it would fit automatically selected after taking consideration of some returned and fill in the missing data with the appropriate mean questionnaire might be invalid, unfulfilled, and could not (Hair et al. 2016). The sample profile of respondents is be used for analysis purposes or some respondents indicated in Table 3. may not return the questionnaire. An employee becomes permanent after 6 months of working in the As shown in Table 3, the largest single age group organizations in Bangladesh, therefore, only permanent (45.43%) is "below 25". Moreover, the group also employees are selected for the study. We have chosen indicates that the majority of the respondents are male. five private banks for this study since they are identified The second largest group (18.54) is also in the same as the innovative banking organizations in Bangladesh category of "Below 25" which comprised of females as based on their innovative offers and improving services the majority respondents. Besides, it has been (Bangladesh Bank, 2018). The permanent employees observed that only four respondents fall under the age are selected because they naturally have a vast group of "35-44", which is evenly divided by gender. knowledge regarding their leaders, hence, they can provide more reliable information to evaluate their Furthermore, half of the respondents have more leaders rather than the new employees. In the than 1 year to 5 years' working experience and this questionnaire, the followers/employees are asked to group of respondents comprised mainly of those who evaluate their individual psychological empowerment. aged below 25 years (40%) which means that the In addition, they are also asked to measure the level of majority of the employees are youngsters and fresh transformational leadership of their leaders. Cluster graduates. This indicates that a high interest of new and purposive sampling method are adopted as the graduates in the banking sector. 23.38% of the 930 Journal of Reviews on Global Economics, 2019, Vol. 8 Khan et al.

Table 3: Profile of Respondents (N=372)

Age Group Percentage Variable Description Below 25 25-34 35-44 45-60 (%)

Gender Male 169 63 2 25 70 Female 69 31 2 11 30 Total 238 94 4 36 100.00 Status Single 137 0 0 0 36.82 Married 101 94 4 36 63.17 Total 238 94 4 36 100.00 Tenure of Service Less than 1 Year 75 12 0 0 23.38 1-5 Years 163 28 0 0 51.34 More than 5 Years 0 54 4 36 25.26 Total 238 94 4 36 100.00 respondents have the working experience of less than variables ranges from 4.25 to 4.89 with the standard 1 year. deviation ranging from 0.499 to 0.565 on a five-point Likert scale. The authors have calculated the mean and standard deviation of the first 30 and the last 30 respondents To apply inferential statistics, PLS-SEM version based on the nonresponse bias method of Wallace and 3.2.7 has been used which allows for the simultaneous Cooke's (1990). In addition, it has been observed that analysis of both the measurement model (relationships there is no significant difference in the data. between latent constructs and measurement items) and the structural model (the relationship between The author uses the SPSS version 23.0 to examine latent constructs PLS-SEM analysis is conducted to the mean, standard deviation, minimum and maximum examine the item reliability. value for each item in the major constructs. Table 5 illustrates the descriptive studies for all major The following table displays the convergent validity indicators. of this study.

In Table 5, the summary of descriptive statistics has As described in Table 6, CA values of all constructs been calculated and the mean value of all three latent ranged from 0.89 to 0.91, above 0.7 recommended by

Table 4: Nonresponse Bias

First 30 Responses Last 30 Responses Variable Mean Standard Deviation Mean Standard Deviation

Innovative Work Behavior 1.875 0.540 1.620 0.604 Transformational Leadership 1.550 0.510 1.566 0.549 Psychological Empowerment 1.822 0.650 1.711 0.599

Table 5: Descriptive Statistics

Constructs N Minimum Maximum Mean Std. Deviation

Innovative Work Behavior 372 1.00 4.88 1.681 .5659 Transformational Leadership 372 1.00 4.25 1.561 .4992 Psychological Empowerment 372 1.00 4.89 1.747 .5745 Valid N (listwise) 372 The Impact of Transformational Leadership Effects on Innovative Journal of Reviews on Global Economics, 2019, Vol. 8 931

Table 6: Achievement Criteria of Convergent Validity

Constructs Items Loadings Cronbach's rho_A Composite Average Variance Alpha Reliability Extracted (AVE)

Innovative Work Behavior IWB1 0.753 0.906 0.907 0.924 0.605 IWB2 0.781 IWB3 0.750 IWB4 0.764 IWB5 0.797 IWB6 0.723 IWB7 0.800 IWB8 0.845 Psychological Empowerment PE1 0.780 0.916 0.918 0.930 0.598 PE10 0.770 PE2 0.850 PE3 0.764 PE5 0.742 PE6 0.760 PE7 0.777 PE8 0.768 PE9 0.740 Transformational Leadership TFL1 0.798 0.898 0.900 0.918 0.584 TFL2 0.751 TFL3 0.793 TFL5 0.725 TFL6 0.750 TFL7 0.745 TFL8 0.763 TFL9 0.787 the study of Hair, Ringle, and Sarstedt (2013). 0.5) and this is parallel to Hair et al., (2013) description Meanwhile, CR values range from 0.918 to 0.985, and the range between 0.584 and 0.605 is shown in which is higher than 0.7 and this indicates adequate Table 6. Based on the results it can conclude that convergence or internal consistency (Hair et al., 2016). convergent validity has been achieved.

Next, the Average Variance Extracted (AVE) of the Discriminant validity explains the phenomenon of variables are assessed. The AVE criterion is defined as distinction on one construct from the other constructs; it the grand mean value of the squared loadings of the explains the correlation between the constructs, as well indicators associated with the construct. An AVE value as how many indicators represent only a single of at least 0.5 and higher indicates a latent which the construct (Hair et al., 2013). It is assessed using the variable can explain more than half of the variance of cross loading (Chin, 1998), second Fornell- Lacker‟s its indicators on average is considered as sufficient criterion (Fornell & Larcker, 1981). The loadings of an (Hair et al., 2013; Henseler, Ringle, & Sinkovics, 2009). indicator on its assigned latent variables should be In the current study, the AVE score for each construct higher than its loadings on all other latent variables. is found to be above the minimum threshold (more than

Table 7: Fornell and Lacker Criterion for Discriminant Validity

S. No Constructs 1 2 3 4

1 Innovative Work Behavior 0.778 2 Psychological Empowerment 0.874 0.773 3 Transformational Leadership 0.844 0.822 0.765 932 Journal of Reviews on Global Economics, 2019, Vol. 8 Khan et al.

Table 8: Cross Loadings Criterion for Discriminant Validity

Items Innovative Work Psychological Transformational Transactional Behavior Empowerment Leadership Leadership

IWB1 0.753 0.653 0.652 -0.035 IWB2 0.781 0.699 0.681 -0.122 IWB3 0.750 0.642 0.631 -0.299 IWB4 0.764 0.653 0.622 -0.157 IWB5 0.797 0.678 0.645 -0.170 IWB6 0.723 0.657 0.683 -0.126 IWB7 0.800 0.742 0.645 -0.223 IWB8 0.845 0.704 0.687 -0.159 PE1 0.674 0.780 0.672 -0.102 PE10 0.651 0.770 0.666 -0.126 PE2 0.722 0.850 0.650 -0.104 PE3 0.645 0.764 0.626 -0.052 PE5 0.800 0.742 0.645 -0.223 PE6 0.663 0.760 0.601 -0.033 PE7 0.673 0.777 0.596 -0.065 PE8 0.607 0.768 0.624 -0.032 PE9 0.602 0.740 0.634 -0.079 TFL1 0.627 0.612 0.798 -0.195 TFL2 0.613 0.647 0.751 -0.154 TFL3 0.738 0.658 0.793 -0.318 TFL5 0.610 0.603 0.725 -0.030 TFL6 0.639 0.606 0.750 -0.031 TFL7 0.609 0.598 0.745 0.002 TFL8 0.666 0.649 0.763 -0.299 TFL9 0.642 0.650 0.787 0.087

As shown in Table 7, the calculated square root of The alternative approach which is based on the the AVE ranges from 0.765 to 0.778. The values multitrait-multimethod matrix is applied to assess exceeded the inter-correlations of the construct with the discriminant validity known as the Heterotrait-Monotrait other constructs in the model, indicating adequate (HTMT) ratio of correlations which is shown in Table 9. discriminant validity. The discriminant validity is established when the The theorized concept of constructs can be solved construct is within the range of -1 to 1, and when the by assessing through convergent and discriminant results are otherwise, discriminant validity is not validity. This can be achieved using the cross-loading achieved. The results reveal that as per the HTMT approach, by looking at the respective loadings and criterion mentioned in the study of Henseler et al., cross-loadings, the evaluation can be made and (2015) are achieved and it is presented in Table 9. The whether there are problems with any items. Hair et al., results reveal that the discriminant validity has been (2016) suggests the cut-off value for loading at a established among the construct as the relationship minimum of 0.5 as significant. The cross loading is a falls within the standard range. significant problem if any item which has a loading of higher than 0.5 on two or more factors. Table 8 shows With 5000 subsamples, a bootstrapping procedure the assessment of discriminant validity through cross- is performed after assessing the measurement model loadings. as suggested by Hair, Tatham, (1998) in order to The Impact of Transformational Leadership Effects on Innovative Journal of Reviews on Global Economics, 2019, Vol. 8 933

Table 9: Heterotrait Monotrait (HTMT) Criterion for Discriminant Validity

S. No Constructs 1 2 3 4

1 Innovative Work Behavior 2 Psychological Empowerment 0.953 3 Transformational Leadership 0.933 0.906

Table 10: Direct Relationship Results

Hypotheses Relationships Std Beta Std Error T-Value P Values Decision

H1 Transformational Leadership -> Innovative 0.820 0.811 17.070 0.000*** Accepted Work Behavior

*p< 0.05, **p<0.01***p<0.001.

Table 11: Moderating Effect

Hypothesis Relationship Standard Beta Standard Error T Values P Values Outcomes

H2 TFL X PE -> IWB 0.270 0.021 12.974 0.000 Accepted examine the statistical significance using a t-test of Figure 1 shows that the high psychological each hypothesis relationship. Based on the direct effect empowerment strengthens the positive relationship on the one-tail test, a 95% level significance is between transformational leadership and innovative achieved as mentioned in the hypothesis, and all the work behavior. relationships are in the right direction.

Table 10 shows that H1 hypotheses of this study are accepted and the relations between the constructs are positive and significant.

In the case of moderating effect the study the following hypotheses are postulated:

H2: Psychological empowerment moderate the relationship between transformational leadership and innovative work behavior of employees among commercial banks of Bangladesh.

To test the above hypotheses, PLS-SEM 3.2.7 is Figure 1: The Interaction Between Transformational used to analyze the conditional effect in the two-level Leadership and Employee Psychological Empowerment on analysis. First, the interactive effect is created between Innovative Work Behavior. the independent variable and the moderating variable DISCUSSION (Hair et al., 2014), then the bootstrapping procedure is conducted to determine the moderating effect and its The following section presents the discussion of significance. The result is presented below in Table 11 empirical research findings with respect to the current and Figure 1. body of knowledge. This section focuses on theoretical as well as managerial implications of discovered results The analysis shows the psychological with respect to the hypotheses raised in the study. The empowerment moderates the relationship between chapter is finalized by a discussion of limitations of the transformational leadership and innovative behavior current study as well as suggestions for further with a beta value (0.270), t-value (12.974) and p-value research. (0.000) respectively. 934 Journal of Reviews on Global Economics, 2019, Vol. 8 Khan et al.

Figure 2: Moderating effect of psychological empowerment between TFL and IWB.

THEORETICAL IMPLICATIONS proposition that transformational leadership may engender innovative behavior - a proposition that is a The first two hypotheses (H1 and H2) addressed cornerstone in transformational leadership theory. It the direct relationship between leadership styles on also shows that psychological empowerment plays an innovative work behavior. The results indicate that important role in determining whether this positive transformational leadership has a positive relationship relationship materializes. with IWB. These findings are in line with the findings in the literature review which provide evidence of both The results of the present study show that direct (Crawford, 2001; Khan, Aslam & Riaz, 2012) and Transformational leadership seem to be influential only indirect (Sharifirad, 2013; Kroes, 2015) positive impact with high psychological empowerment. Indeed, on IWB, and on the overall organizational innovation psychological empowerment seems to be a (Jung, Chow, and Wu, 2003). However, the result of precondition for innovative behavior. With low this study deviates from findings of Crawford, (2001) psychological empowerment, innovative behavior is low who identifies in the analysis of five organizational irrespective of leadership behavior. With high sources (educational, medical, manufacturing, sales psychological empowerment, leadership influences the and service), that all four elements of transformational extent to which the action is translated into innovative leadership positively correlate with innovative behavior. behavior. These results are in line with previous The difference in results can be attributed to specifics research which highlighted the importance of of analyzed industry or cultural context. psychological empowerment for innovative behavior (e.g., Jung et al., 2003; Spreitzer, 1995; Thomas & The goal of the present study is to shed more light Velthouse, 1990). The results also qualify these on these relationships by examining the follower findings by demonstrating the influence of leadership psychological empowerment as a moderator. on the innovative behavior of psychologically Psychological empowerment is found to be moderate in empowered individuals. the relationship with the innovative behavior of transformational leadership. An additional implication of the present study shows that a higher psychological empowerment The findings of the present study establish a transformational leadership is more beneficial to boundary condition (i.e., psychological empowerment) innovative behavior. As theoretical and empirical to the effectiveness of transformational leadership in research frequently contrast the (positive) effects of engendering innovative behavior. The results support transformational with the (less beneficial) effects of the argument that followers need to feel empowered to transactional leadership, the present study suggests act on the inspirational appeal of transformational that this is only warranted with elevated levels of leadership. Thus, the present study confirms the psychological empowerment - at least where innovative The Impact of Transformational Leadership Effects on Innovative Journal of Reviews on Global Economics, 2019, Vol. 8 935 behavior is concerned. As indicated in the preceding interesting to replicate the present results in a different paragraph, however, this may also hold for other environment. outcomes (e.g., personal initiative; Frese et al., 1996). Another point that needs to be mentioned is the aim MANAGERIAL IMPLICATION of the study is not to provide a comprehensive model of all antecedents of innovative behavior of employees. The results of the present study imply that The aim of the study is to clarify the relationship transformational leadership can be instrumental in between transformational leadership with the follower increasing employee innovative behavior. However, innovative behavior in particular. In addition, we need organizations should not simply promote to stress that other moderators may affect the transformational leadership but should take follower relationship between transformational leadership and psychological empowerment into account. Through innovative behavior. Our specific focus should by no management development programs leaders could be means be interpreted as arguing against or made aware of the level of psychological downplaying the influence of other moderators or empowerment of followers, indicating when more antecedents of innovative behavior, such as a climate attention should be paid to stimulating psychological supportive of innovation (West & Anderson, 1996). empowerment versus stimulating transformational Finally, the present study does not focus on the leadership. In general, it seems most beneficial to underlying influence processes. Therefore, based on stimulate both followers' psychological empowerment the present data we cannot conclude that the current and transformational leadership. Through findings are obtained through the underlying processes empowerment programs, organizations may set the as assumed. stage for the more effective use of transformational leadership in engendering innovative behavior. CONCLUSION Furthermore, research has shown that transformational and transactional leadership can be learned and As innovation is becoming more important for training programs should be developed. Barling, organizations, the study which focuses on the effect of Weber, & Kelloway, (1996); Dvir, Eden, Avolio, & innovative behavior of employees is increasingly Shamir, (2002), suggest that efforts should be made to important. The study of antecedents that are under increase follower psychological empowerment as managerial control is of substantial value for the complemented by leadership development efforts to organizations. The rise in research on transformational increase transformational leadership. leadership over the past decades holds the promise of uncovering transformational leadership as an important LIMITATION AND SUGGESTION FOR FUTURE determinant of follower innovative behavior. However, RESEARCH evidence to this effect has been scarce and inconsistent. The present study is aspired to uncover a Some limitations of the present study must be possible reason for the inconsistent findings of considered. One limitation is using the cross-sectional research into this relationship and identifying survey which does not allow conclusions regarding psychological empowerment as a prerequisite to causality nor does it fully capture the dynamic nature of strengthening the transformational leadership. The the relationship between leader and follower behavior. relationship is only associated with the increased of the Replication of our findings in studies using different follower innovative behavior when psychological methods, for instance, laboratory or field experiments, empowerment of followers is high. as well as longitudinal designs would be highly valuable. REFERENCES

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.79

© 2019 Khan et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

Journal of Reviews on Global Economics, 2019, 8, 939-947 939 Acceptance of Islamic Banking in New Zealand: Perspectives from Potential Customers

Geetha Subramaniam1,*, Ismah Osman1, Amirul Afif Muhamat1, Ershad Ali2 and Saadiah Mohamad1

1Faculty of Business and Management, Universiti Teknologi MARA, Selangor, Malaysia 2Auckland Institute of Studies, Auckland, New Zealand Abstract: The Islamic banking system stems from an interest free economic transaction model, which was introduced well in the early days of Islam. Even though the development of Islamic banking in the southern hemisphere is not as rapid as in the northern hemisphere, this does not imply that small western countries such as New Zealand are not interested in this niche sector. The increasing number of the Muslim population in New Zealand, which grew to 70,000 by 2018, shows that there may be a potential demand for Islamic financial services. This perception study which is part of a larger feasibility study uses a quantitative approach to examine the perception level of New Zealand residents towards their intention to use Islamic banking. Using purposive sampling technique, 300 questionnaires were distributed to potential banking customers, irrespective of religion, residing in New Zealand. Multiple regression analysis was conducted to capture whether the variables based on the theory of reasoned action including knowledge, religious values, subjective norms and attitude had an effect on the New Zealand residents’ intention to use Islamic banking. It was interestingly noted that only attitude had a significant effect on how New Zealand residents perceive their intention to use Islamic banking in their daily lives. Overall, this study has ascertained the level of perception towards their intention to use Islamic banking among potential customers in New Zealand. The results of this study can be used as a framework for the setting up of an Islamic banking system in New Zealand. Keywords: Islamic banking, New Zealand, perception, economics, finance, western economy, Malaysia.

1. INTRODUCTION instruments like the Islamic bonds (Sukuk) the halal industry (Nalar, 2012) and halal food outlets. Pollard The Islamic banking system is an interest-free and Samers (2007) have studied the demand for economic transaction model currently practised by Islamic banking, which is seen as religious (for the many Muslim populated countries in the world. It Muslims) and moral banking services (for the non- recognises a stakeholder-centric transaction that Muslims). ensures justice for both the lending and receiving parties through the abandonment of interest-based Therefore, this study aims to assess the perception transactional philosophy. The principles of this banking level of potential customers in New Zealand on the system are based on seeking social justice, and the potential demand for Islamic banking. Potential banks operate as a party to investment schemes customers who are New Zealand residents comprising sharing the risks of this investment on an agreed upon Muslims and non-Muslims answered a self- share. Even though the development of Islamic administered questionnaire on their perception of their banking in the southern hemisphere is not as rapid as intention to use Islamic banking. A multiple regression in the northern hemisphere (Ernst & Young, 2016), this analysis was done to capture whether identified does not imply that countries such as New Zealand are determinants such as knowledge, religious values, not interested in this niche sector. subjective norms and attitude affected the New Zealand residents’ intention to use Islamic banking. A notable trend in New Zealand is that there is an increase in the migrant population, especially Muslims 2. LITERATURE REVIEW in the last ten years. As a significant number of the Muslim population is needed for the retail banking The theory of reasoned action (TRA) introduced by products and services to be offered, there is a potential Fishbein and Ajzen (1975) established a relationship demand for Islamic banking products in New Zealand. among belief, attitude, intentions, and behaviours (Md Currently, residents in New Zealand are familiar with Taib, Razak and Ramayah 2008). TRA is the Islamic products such as Islamic capital market fundamental theory used to explain human behaviour (Venkatesh, et al., 2003). Based on the theory of TRA and Theory of Planned Behaviour, the variables which

*Address correspondence to this author at the Faculty of Business and influence the intention to use Islamic banking were Management, Universiti Teknologi MARA, Selangor, Malaysia; Tel: +6012 3191363; E-mail: [email protected] identified. The independent variables identified were

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 940 Journal of Reviews on Global Economics, 2019, Vol. 8 Subramaniam et al. knowledge/awareness, religious values, subjective regarded as an alternative banking system that is norm and attitude. The dependant variable was the socially responsible, and at the same time intention to use Islamic banking. commercially viable (M. Khan & Bhatti, 2008; Muhamat, Jaafar, & Basri, 2017). Therefore, from the 2.1. Demographic Variables religious point of view, Islamic banking is a universal banking system since it is built on the universally In terms of demographic variables, men are always accepted principles and the institutions do not perceived as more techno-savvy especially with propagate the Islamic teachings to the customers complicated banking and financial products (Bliss & although the banks are required to adhere to the Potter 2002) and seen as more risk-takers with regards Shariah rulings, which are primarily on the business to financial decisions as clarified by Jianakoplos and transactions and not on the religious rituals such as Bernasek (1998), Barber and Odean (2001) and Huang prayer, etc. The Shariah committee which oversees the and Kisgen (2013). In terms of age, Khan et al., (2007) management of Islamic banking is another governance and Rashid et al., (2009) in their studies revealed that organ which is established to ensure the compliance those in the age between 25 and 35 years old were the aspect of the business with regards to Shariah main patrons of Islamic banks in Bangladesh, and requirements is adhered, as well as to ensure the rights similar results were also displayed for the Islamic of the depositors and borrowers are protected (Hasan, banks in Malaysia as shown by Muhamat, Jaafar, and 2011). Azizan (2011) and Islamic banks in the United Kingdom (Dar, 2004). Amongst the earliest studies that measure In another perspective, in Western countries such Islamic banks patronage pattern is Metawa and as the United Kingdom and France, Islamic banking is Almossawi (1998) on their findings from the bank always promoted as the socially responsible banking customers in Bahrain who remarked that the most system that operates on a high moral standard. The important factor in determining the intention of Islamic population in these countries have commendable bank customers was religion compared to profitability. awareness on human rights, environmental issues and This is consistent with findings by Ahmad et al., (2008) protection of wildlife. Therefore, the Islamic banks in and Khan et al., (2007) in determining banking these countries position themselves according to high selection, especially for the Muslims. For the non- moral expectations, which is the basis of establishment Muslims, this is not the main pull factor (Gait & for Islamic banks. Thus, the proposed hypothesis: Worthington, 2008). H2: Religious or moral values positively influence the 2.2. Knowledge and Awareness behavioural intention to use Islamic banking.

Knowledge and awareness are two components 2.4. Subjective Norm Towards Islamic Banking that are related to each other, especially for distinct products like banking products, which is quite technical In TRA, it is postulated that subjective norm (SN) (Ahmad, 2010). Knowledge can create awareness and affects behavioural intention (Ajzen & Fishbein, 1980; awareness is someone’s ability to make an informed Fishbein & Ajzen,1975). This is where Fishbein and decision based on the knowledge that the person has Ajzen (1975) found that subjective norm is a function of (Abdullah and Wahab, 2015). Nevertheless, awareness the perceived expectation by an individual or a group and knowledge about banking products offered by any who are important to the person and by the persons’ bank are important and suggested by previous motivation to comply with the expectations. researchers as a critical factor in decision making on using banking products and services (Crossan, Feslier, The results on the influence of subjective norm on & Hurnard, 2011). Hence, the proposed hypothesis: behavioural intention by Ramayah et al., (2003), Ma’ruf et al., (2003), Ramayah, Noor, Nasurdin, and Sin H1: Knowledge and awareness positively influence the (2004), Eri (2004), Ramayah, Ling, Norazah, and behavioural intention to use Islamic banking. Ibrahim (2005), May (2005), and Gopi and Ramayah (2007) found that subjective norm has a positive direct 2.3. Religious or Moral Values relationship towards behavioural intention. In the context of Islamic finance, subjective norms have a Islamic banking which is established on the direct impact on the intention (Amin et al., 2011). precepts of Islamic finance that rejects usury, Hence the proposed hypothesis is: excessive speculation and gambling in its operation, is Acceptance of Islamic Banking in New Zealand Journal of Reviews on Global Economics, 2019, Vol. 8 941

H3: Subjective norm positively influences the Data was analysed using descriptive and inferential behavioural intention to use Islamic banking. analysis. Multiple regression analysis was used to test the hypotheses and obtain the perception level on the 2.5. Attitude Towards Islamic Banking behavioural intention to use Islamic banking among Muslim and non-Muslim customers in New Zealand. To Dusuki and Abdullah (2007) in their findings based safeguard the confidentiality of respondents, no names on their study in a dual banking system (Islamic banks were mentioned. All respondents were informed that and conventional banks operate side by side under the answering the questionnaire was voluntary, and they surveillance of the central bank) signified that attitude had a choice to decline to answer. of the customers towards the Islamic banks are influenced by mostly the combination of Islamic values The conceptual framework of the study based on and financial reputation, followed by quality of the literature review is as shown in Figure 1 below:- services offered, social reputation of the Islamic banks, convenience and lastly, the product price. Nevertheless, this study is significant in the context of Malaysia being a multi-religious country which is similar to most English-speaking countries like New Zealand, Australia, the United Kingdom and the United States of America, to name a few. Haron, Ahmad, and Planisek (1994) who surveyed nearly an equal percentage of Muslims and non-Muslims respondents in Malaysia signified that both groups emphasised the features of the Islamic banks’ products even for the Muslims respondents. Figure 1: Conceptual Framework of Study.

In another interesting study by Erol and El-Bdour 4. FINDINGS AND DISCUSSION (1989), one of the earliest studies assessing the customers’ patronising attitude towards Islamic banks, 4.1. Demographic Profile of Respondents it was found that that religious factor is not the only significant element that the customers consider when Table 1 below shows the profile of the respondents they decide which banks to bank with. They also gave in this survey. It is noted in terms of educational level, a priority to Islamic banks’ products features such as the majority of the respondents (50%) possessed a basic percentage of return that they can earn from the degree. This means that all the respondents were savings or investment accounts or the rate of borrowing qualified to understand the survey questionnaire and that they will have to bear. Their respondents were the issues relating to Islamic banking products and from Jordan, a predominantly Muslim country. services in New Zealand. In terms of religion, 48 per Consequently, the proposed hypothesis is: cent of the respondents were Muslims, 34 per cent from other religions and 18 per cent categorised H4: Attitude negatively influences the behavioural themselves as “no religion”. There were more males intention to use Islamic banking. (65%) compared to females. In terms of marital status, a majority (51%) were married while 35 per cent of the 3. METHODOLOGY respondents were never married. This study used a primary survey whereby a sample of 300 respondents were given a self-administered The age group of the respondents shows a questionnaire throughout New Zealand. Only 285 Generation Y majority where 45 per cent of the usable questionnaires were analysed. Questionnaires respondents were young and were in the 21-30 years were distributed using both print and online medium age group and 24 per cent came from the 31-40 years using Google Doc. The non-probability sampling age group. A major portion (46%) of the respondents method of convenience and purposive sampling had a household size of more than four persons. As the techniques were used in a non-contrived setting and study tried to capture the perception of potential unit of analysis was individuals. The respondents must customers, students, working people and non-working have an account in a bank and can be a Muslim or a people, as long as they had a bank account, they were Non-Muslim currently residing in New Zealand. given a questionnaire. A majority of the respondents 942 Journal of Reviews on Global Economics, 2019, Vol. 8 Subramaniam et al.

Table 1 – Demographic Profile of Respondents

1NZD = RM2.8

Variables Description/Values Percentage

Educational Level High School Certificate 15 Bachelor Degree 50 Postgraduate Degree 29 Others 6 Religion Christian 15 Muslim 48 Hindu 12 Buddhist 7 Others (No religion) 18 Gender Male 65 Female 35 Marital Status Never Married 35 Married 51 Partner/Living Together 6 Separate/Divorced 3 Others 5 Age 18-20 years 6 21-30 years 45 31-40 years 24 41-50 years 13 51-60 years 6 Above 60 years 6 Household Size Single 23 Couple 13 3 persons 16 4 persons 25 More than 5 persons 23 Are you working? Yes 71 No 29 Annual Personal Income Below NZD 35,000 29 NZD $35,001- NZD $45,000 13 NZD $45,001- NZD $55,000 10 NZD $55,001- NZD $65,000 11 NZD $65,001- NZD $80,000 16 NZD $80,001- NZD $100,000 11 Above NZD $100,001 10 Industry Banking/ Finance 8 Manufacturing 7 Construction 3 Education 17 Legal 2 Healthcare 7 Others 56 Acceptance of Islamic Banking in New Zealand Journal of Reviews on Global Economics, 2019, Vol. 8 943

(71%) were working, while 29 per cent were not intention to use Islamic banking in New Zealand (t = working. 1.664, p= 0.114), but it is not significant and does not conform to most literature, although for this part, mixed When the sample was categorised based on yearly findings were gathered in the past studies. Aysan et al., income, it showed that a majority (37%) of the (2018) remarked that the Muslims depositors were not respondents earned an annual income above NZD hesitant to withdraw their deposits if the Islamic banks 65,000. A majority of the respondents were working in that they patronised perform badly. However, most of the education sector and also in the private sector. the past studies pointed out that religiosity is amongst the critical factors that “spark” the Muslims to engage 4.2. Perception of Respondents Towards the Intention of Using Islamic banking with the Islamic banks (Dusuki, 2007; Suhartanto, 2019). Hence Hypothesis 2 is not supported. Earlier The objective of the research was to investigate the studies show that religion defines the ideas for life, relationship between knowledge, religious values, which are reflected in the values and attitudes of subjective norms and attitude towards Islamic banking societies and individuals (Fam, Waller, & Erdogan, and the intention to use Islamic banking in New 2004). Consequently, religiosity is known as one of the Zealand. Regression analysis was conducted, and R- important cultural forces and a key influence on square was found to be 74%, which means that the behaviour whether good or immoral (Delener, 1994; selected variables explained 74% of the intention Essoo & Dibb, 2004; Sood & Nasu, 1995). Perhaps, towards Islamic banking in New Zealand. the reasons for them to use Islamic banking is due to the benefits or economic value they gained, rather than Tables 2, 3 and 4 show the results and the the religious or moral values embedded in the adoption summary of hypotheses tested. of Islamic banking. Hidayat and Al-Bawardi’s (2012) study concluded that non-Muslim customers in Saudi Accordingly, the first hypothesis testing shows there Arabia used the Islamic banking services because of is a negative relationship between knowledge and the the cost factor, quality of services and the nature of intention to use Islamic banking in New Zealand (t = - services provided by the Islamic banks. 0.88, p= 0.931 but it is not significant and does not conform to the past studies of Dar (2004) and Aysan et The third hypothesis testing shows there is a al., (2018). Nevertheless, the influence of country negative relationship between subjective norms and specific factors such as banking regulation and intention to use Islamic banking in New Zealand (t = - population size are amongst the factors that need to be 1.669, p= 0.112); hence, the results did not support considered before a generalisation can be made Hypothesis 3. This finding is not consistent with many between findings in the past studies and in this study. previous studies in the banking field (Fauziah et al., Hence, Hypothesis 1 is not supported. This study shed 2008; Md-Nor et al., 2008; Zolait, 2010) as well as new light on the banking industry as customers who Agarwal et al., (2009) who explored that subjective are not familiar with Islamic banking would be more norms have a significant direct influence on consumers’ cautious in their intention to use Islamic banking. intention to use banking systems. However, this study Hence, customers may only adopt Islamic banking if has similar results to the study of Abdullah and Wahab consumers have adequate knowledge that could shape (2015), whereby social influence was found to have no their perception of risks and benefits towards the significant influence on the intention to use Islamic adoption of Islamic banking, as mentioned by Hassan, personal financing. This could imply that social John and Harun (2016) about Muslim consumers’ influence did not have a certain amount of impact on perception and intention to purchase genetically the intention to use the Islamic banking system in New modified food. More importantly, this implies that Zealand. It is suggested that individuals in New individuals who have an understanding of Islamic Zealand may not attempt to adopt Islamic banking banking products and services are more likely to since they have no motivating factors or support from practise Islamic banking rather than those who do not the members of the family or friends. Consequently, possess the knowledge (Mehtab, Zaheer, and Ali, this finding is not congruent to the theory of reasoned 2015). action, which suggests the construct of subjective norms and conduct of certain behaviours is a result of The next hypothesis testing shows that there is a the subjective assessment of events that occur in the positive relationship between religious values and environment (Alqasa, Isa, Othman and Zolait, 2014). 944 Journal of Reviews on Global Economics, 2019, Vol. 8 Subramaniam et al.

Finally, the H4 hypothesis testing shows there is a banking is somewhat beneficial for them since it is very negative relationship between attitude towards different from conventional banking. Findings in this intention to use Islamic banking in New Zealand (t = - study show that although the customers may consider 3.464, p= 0.03) and the results support Hypotheses 4 patronising Islamic banks, due to convenience or since it has a significant relationship. This finding is switching costs they may prefer to adopt the present similar to the results of the earlier Malaysian conventional banking. customers’ acceptance-based studies (Ramayah et al., 2003, 2004, 2005; Ramayah and Mohd. Suki, 2006; 5. CONCLUSION AND POLICY IMPLICATION Gopi and Ramayah, 2007). However, the negative relationship denotes that awareness and the In the context of Islamic banking in New Zealand, usefulness of Islamic banking, as well as Shariah the country does not have a significant Muslim compliance, substantially influence the formation of a population and at this point of time there is no bank that positive or negative attitude (Ali and Hassan, 2017). offers purely Islamic banking products. To date, none Lack of product knowledge and employees having of the banks in New Zealand offer Islamic banking religious values may affect employees’ attitude towards services because they argue that the Muslim Islamic banking (Ali and Hassan, 2017). Consequently, population is not big enough for the banks to provide individuals in New Zealand may not have the such facility (Shaw, 2017). Nevertheless, there is an necessary information about the advantages of Islamic institution referred to as Amanah Ethical New Zealand banking. Nevertheless, they may adopt and use Islamic that offers Shariah compliant fund management banking when they understand and believe that Islamic services to the public in the country

Table 2: Items Reliability Score

Items Component 1 2 3 4 5

Knowledge .931 I am truly aware of the existence of Islamic banking as part of a banking system. I understand that Islamic banking products and services are offered to both Muslims and non-Muslims. If I put my money in Islamic banks, I am happy that my money will not be invested in ventures like alcohol, gambling, etc. Religious values .840 My religion is one of the most important part of my philosophy of life. My moral values are one of the most important parts of my philosophy of life. My religion forms an important basis for the kind of person I want to be. I often think about religious matters. I often think about doing good for others. Subjective norms 0.945 My parents think that I should bank with an Islamic bank. My friends support my decision to patronise an Islamic bank. It is generally expected that I should choose Islamic banking. Attitude towards Islamic Banking 0.937 Patronising, an Islamic bank is a good idea. Patronising an Islamic bank is something pleasant for me. Choosing Islamic banking is beneficial for me.

Intention to use Islamic banking 0.934 I am interested in using Islamic banking products. I will recommend Islamic banking products to others. I will use Islamic banking when it is made available. Acceptance of Islamic Banking in New Zealand Journal of Reviews on Global Economics, 2019, Vol. 8 945

Table 3: Correlation Analysis between Constructs

Constructs 1 2 3 4 5

Knowledge Religious Values 0.56** Subjective Norms 0.21** 0.24 Attitude towards Islamic Banking 0.29** 0.71 0.73** Intention to use Islamic banking 0.65** -0.26 -.042** -0.61**

** Correlation is significant at the 0.01 level (1-tailed).

Table 4: Results of Hypothesis Testing

Hypo Path Standard t-value Sig. Results Coefficient

H1 Knowledge à Intention to use Islamic banking -.015 -.088 .931 Not supported H2 Religious Valuesà Intention to use Islamic .294 1.664 .114 Not supported banking H3 Subjective Norms à Intention to use Islamic -.318 -1.669 .112 Not supported banking H4 Attitude towards Islamic bankingà Intention to use -.764 -3.464 .003 Supported Islamic banking

(https://www.amanahnz.com/who-we-are-1). The New and product knowledge. Hence, even if the potential Zealand bank, that is the Kiwi Bank, operates its customers in New Zealand do not have the necessary transactions on demand following the Shariah principle. information pertaining to the advantages of Islamic The study revealed a few interesting findings, as banking, if they understand and believe the benefits, mentioned below. they may consider using it.

In terms of awareness and knowledge, the overall Overall, there is an interest in Islamic banking if it is level among the respondents was encouraging, but the made available. This may imply that there is a potential level of awareness among the non-Muslims and the for the Islamic banking system to be implemented in younger generation is low as stated by Bley and Kuehn New Zealand. (2004) due to the fact that religious belief has an influence on consumers’ attitude towards Islamic The major recommendations suggested based on banking (Souiden and Marzouki, 2015). Hence, the findings of the study are as follows: customers may only adopt Islamic banking if consumers have adequate knowledge, particularly i. In the context of New Zealand, the Islamic banks when they have a strong conviction of religious belief need to position themselves according to the that could shape their perception of risks and benefits “taste” and demand of the New Zealand towards the adoption of Islamic banking. population. The best is for them to market themselves as an ethical banking provider, which With regards to religious or moral values, even is parallel to the Shariah objectives as well as in though religiosity is known as one of the important tandem with the sophisticated New Zealand cultural forces and a key influence on behaviour, it was population, which is an environmental and not significant in this study. human rights empowered community.

Social norm or subjective norm was found to have ii. As the Muslim population in New Zealand is not no significant influence on the intention to use Islamic as big as in the United Kingdom, proper personal financing. marketing strategies are needed because if the potential customers do not have the basic The most critical finding is that how attitude is understanding about the Islamic banking system, important, and it is substantially framed by awareness then it would be hard for the Islamic banks to sell 946 Journal of Reviews on Global Economics, 2019, Vol. 8 Subramaniam et al.

their products and services, especially with Dar, H. A. (2004). Demand for Islamic financial services in the UK: chasing a mirage? regards to the retail banking sector. Delener, N. (1994). Religious Contrasts in Consumer Decision Behaviour Patterns: Their Dimensions and Marketing Future research should target a larger sample to Implications. European Journal of Marketing, Vol. 28, (5). 36- generalise. A continuous increase in the number of 53. https://doi.org/10.1108/03090569410062023 Muslims in New Zealand has resulted in an increasing Dusuki, A. W., & Abdullah, N. I. (2007). Why do Malaysian customers demand for Islamic banking in the country. Hence, a patronise Islamic banks? International Journal of Bank significant finding is that there is a potential of setting Marketing, 25(3), 142-160. https://doi.org/10.1108/02652320710739850 up a non-conventional bank in this western economy. Ernst & Young. (2016). World's Islamic banking competitiveness report 2016. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.80

© 2019 Subramaniam et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

948 Journal of Reviews on Global Economics, 2019, 8, 948-957 The Impact of Technological and Marketing Innovations on Retailing Industry: Evidence of India

Amgad S.D. Khaled1, Salma Ahmed1, Mosab I. Tabash2,*, Eissa A. Al-Homaidi3 and Mohammad Imtiaz Hossain4

1Department of Business Administration, Aligarh Muslim University, Aligarh, India 2College of Business, Al Ain University of Science and Technology, Al Ain, UAE 3Department of Commerce, Aligarh Muslim University, Aligarh, India 4Universiti Putra Malaysia, Malaysia Abstract: Innovation is usually linked with technology-based change. Retailers form a significant sector in the developed economies and also are picking up in the developing economies. There have been few studies in the area of innovation in the retail industry in both conceptual as well as empirical points of view. The objective of this study is to study the impact of marketing and technological innovations on the retail industry. The sample of the study was drawn from the customers who live in the city of Aligarh in India. The study is conclusive, descriptive and is based on a single cross- sectional research design. Quantitative data was generated on the basis of the research instrument (a questionnaire). The study concluded that technological innovation is more important than marketing innovation with respect to World of Mouth (WOM) referral and satisfaction. Furthermore, the study revealed that technological innovation has an impact on store image, customer value, brand store equity, satisfaction, WOM referral, and WOM activity. The study also recommended that a retailer can take some advantages of introducing new technologies. This means investing in technologies would help in increasing market share and competitiveness of the retail sector in the long-run. Keywords: Technologies, Innovation, Marketing, Satisfaction, Retailing, Brand Equity.

1. INTRODUCTION delivering services is catching up fast, thereby making available many interactive and innovative systems The structure of retailing can be represented by four capable of updating information on market dynamics segments along a continuum, namely, innovative, big and trends, and supporting consumers while shopping middle, and low-price “in trouble”. Retailers in the and retailers in scaling heights in business. innovative segment set their long term plans towards quality-conscious markets and quest for premium These innovations not only pose challenges for the offerings. Low-price retailers find price-conscious retail industry but also create new effective solutions markets are the best environment for their activities. bound to enhance the experience of consumer and Big middle retailers prosper in value offering markets, retail management. The level of innovation possible whereas “in trouble” retailers are unable to deliver high may differ among firms functioning in the same industry levels of value in comparison with their competitors in terms of nature and number of innovation that (Levy et al., 2005). Usually, innovation in services is succeed (Cao, 2014). According to Boeck & Fosso normally not technology based and has received a Wamba (2010), retailers conducted diverse innovation limited effort in Research and Development (R & D) strategies, such as inventing and introducing self- (Trigo, 2013). For this reason, retail industries’ R & D service technologies for shifting traditional tasks efforts are devoted mainly towards the development of executed by employees to an automated machine. new products rather than towards development of new Other retailers introduced technologies by offering new means for ameliorating the services deliverable to exciting shopping experiences to involve more customers. Thus, retailers usually adopt innovations consumers (Hristov and Reynolds, 2015). Hence, their developed by other parties, as they are lacking the study encompasses a multiple-case analysis across capability of creating their own. Therefore, they tend to firms, including many cases from fashion of retail outsource all the activities devised in R & D. Despite setting. these reverse conditions, the wave of innovative technologies available for channelling merchandise and There have been a number of research studies in retail pertaining to store attributes and level of satisfaction of customer, like quality of goods, retail

*Address correspondence to this author at the College of Business, Al Ain atmospherics, product display, price charged, University of Science and Technology, Al Ain, UAE; Tel: +971 3 7024805; Fax: +971 3 7024777; E-mail: [email protected] assortment of goods provided by store and level of

E-ISSN: 1929-7092/19 © 2019 Lifescience Global The Impact of Technological and Marketing Innovations on Retailing Industry Journal of Reviews on Global Economics, 2019, Vol. 8 949 satisfaction. There is a dearth of studies on innovation reflection of the store’s identity and is a reflection of in retail particularly pertaining to technological what consumer perception and beliefs is about the innovation which brings satisfaction of customers. The store and as such also their expectation from the stores present study attempts to fill this gap. The main (King et al., 2014). Traditionally brand equity as a objectives of this study are: concept focuses on the product (Rust et al., 2000), the increase in value derived from the existence of the 1. To study the impact of marketing innovation on brand (Yoo et al., 2000) and takes place often when satisfaction, store image, brand store equity, customer show a positive association with a known consumer value WOM referral, and WOM brand. activity. 2.4. WOM Referral and Activity 2. To study the impact of technological innovation on brand store equity, store image, satisfaction, More recent work had been identified for consumer value WOM referral, and WOM dimensions of WOM. Sweeney et al. (2012) included activity. the cognitive element that refers to what is said and the emotional component that reflects the emotions in how 2. LITERATURE REVIEW AND RESEARCH they are said to be (Mazzarol et al., 2007). Activity and HYPOTHESES Referral are also considered to be dimensions of WOM 2.1. Technological and Marketing Innovation (Gelbrich, 2011). It has discussed that “both dimensions may become salient when customers The studies on innovation focus on two major experience particular emotions (Gelbrich, 2011). Some dimensions, marketing and technological innovation of the most important literature are summarized in the (Musso, 2010). Innovation in service including retailers’ Table 1. services is an on-going problem and very difficult to This study focuses on marketing and technological define and measure (Tether, 2005). An innovation in innovations. It identifies various variables of marketing service of a retailer is a marketing innovation (MI). The and technological innovations and assesses its impact advantage of information and communication on level of satisfaction of consumers in the context of a technologies has influenced and charged market retail set up. The study hypotheses are formulated condition by giving access to new tools which add below. value to costumer experience (Thiesse, 2009). There are number of benefits that a retailer enjoys by use of Ho1: There is no significant impact of marketing & such technologies like the reduction in cost, increasing Technological innovations (MI&TI) on WOM Referral. in the level of satisfaction of consumers, introductions of flexible job and ultimately in the areas of market Ho2: There is no significant impact of marketing & share and improving the competitive advantages of the Technological innovations (MI&TI) on WOM Activity. firms (Gil et al., 2014). Technological innovation (TI) is recently come to the surface with promising benefits; Ho3: There is no significant impact of technological & but it has such challenges which need to be tested marketing innovations (MI&TI) on satisfaction. (Renko & Druzijanic, 2014). Ho4: There is no significant impact of marketing & 2.2. Consumer Value and Customer Satisfaction Technological innovations (MI&TI) on store image.

Consumers expected to find more supporting and Ho5: There is no significant impact of marketing and interactive tools that increase the knowledge of technological innovations (MI&TI) on brand store shopping (Pantano, 2014). The satisfaction of the store equity. indicated a self-assessment that the store exceeds or meets expectations (Helgesen et al., 2010). The theory Ho6: There is no significant impact of marketing and of expectation had the extensive acceptance in the technological innovations (MI&TI) on consumer values. literature. 3. RESEARCH METHODOLOGY 2.3. Store Image and Store Brand Equity Experimental research has been developed in the In retailing industry, store image plays a very context of shopping experiences in electronic products, important role (Jayawardhena et al., 2016). It is a clothing, grocery and furniture stores. Information had 950 Journal of Reviews on Global Economics, 2019, Vol. 8 Khaled et al.

Table 1: Summary of Prior Research Studies

Concept Citation Sampling Type of data Outcomes

Application of different ideas which Hristov and Retail Primary Innovation in retailing possesses a range stimulate the performance of the Reynolds (2015) executives and of sector specific meanings and retailer other industry measurement approaches that are experts distinct from more generic understandings of the phenomenon Forms of modern technology used Gil et al. (2014) Retail stores Secondary ICTs develop store capability and to exchange, create, manipulate , (grocery, competiveness capture, connect, present & use textile, information electronics and furniture) Creation of modern Mihajlović Travel agencies Secondary ICTs develop efficiency, facilitate Technologies (2012) activities and offer added value for Transactions. Implementation of a modern Bomfim et al. Industrial, trade Secondary Marketing innovation has ability to concept (2012) and services provide a sustainable competitive firms Benefit Study in Strategic perspective Musso (2010) Marketing Review of Marketing innovation classification: focus on competitive advantage Channels Literature Structural, technological and relational. along distribution channel Study in Operational perspective: offer of new services Concentrated on the usage of the Thiesse et Apparel retail Secondary ICTs could provide competitive RFID Technology al.(2009) advantage by creating value to consumer Variations in processes and Ganesan et al. Retailers Review of Three trends: relationship-based products which decreases cost or (2009) Literature Innovation, Multichannel routes to increases efficiency, and improve market and global sourcing practices customer satisfaction modern common of Methods and Anselmsson and Household Secondary An important connection found between ideas Johansson (2009) growth in the level of innovativeness in the group and the retailer market share in a group been collected using quantitative research method 3.2. Data Collection based on structured questionnaire. The survey had been developed with a cautiously selected collection The sample of the study was drawn from those metrics, tested in the latest literature, adapted to the customers who live in Aligarh city. Questionnaires were retail context. The 5-point Likert scale was used to electronically mailed to the respondents. The measure all variables. SPSS version 22.00 is used for questionnaires were distributed physically among the the analysis. respondents at different retail set up in Aligarh. Respondents were randomly selected at the retail There are two independents variable which they are canters as shown in Table 3. technological innovation and marketing innovation. There are six dependent variables (store image, 3.3. Sample Size consumer value, brand store equity, satisfaction, WOM referral and WOM activity. The variables of study have The sum total of questionnaires which were been described in brief in Table 2. distributed online and offline was three hundred and forty-one (341). The completed collected 3.1. Scope of Study questionnaires were two hundred and seventy-six (276) (offline) and forty-one (41) online which means 317 The study utilized both Technological Innovation questionnaires were collected. 10 questionnaires are and Marketing Innovation. It studies these variables excluded due to incompleteness information. with reference to WOM referral and activity, brand Therefore, the response rate was ninety percent (90%) equity, store image, consumer value and satisfaction. and is suitable for the study. The study was conducted in the city of Aligarh, India. The Impact of Technological and Marketing Innovations on Retailing Industry Journal of Reviews on Global Economics, 2019, Vol. 8 951

Table 2: Study Variables

Variable names No. of Interpretation Evidence items

Technological Four Measures the perception of consumers of retail use and ICT Wu et al. (2006) innovation items development. Marketing Three Representing one of the centennial attempts. This limitation is Homburg et al. (2002) innovation items studied. This idea has new ideas about marketing or services, which provides a benchmark includes number of approved innovations Store image Four Organization, comfort facilities and retaining access features,. Chowdhury et al. (1998) items Consumer value Four Adopted the economic concentration using the economic (Sullivan et al., 2012) items measurement value proposed by Sweeney, (2001). Brand store equity Four Evaluated from the purchase, intention or preference of a given (Hartmann and Spiro, 2005) items store compared to a fictional store. Satisfaction Five Reverses the cognitive component, and empathy component based (Gelbrich, 2011) items on Oliver. WOM Referral and Six items The behavior of WOM Referral and Organization activity (Harrison Walker, 2001) WOM activity

Table 3: Number of Respondents and Response Rate

No. of questionnaire distributed

Online 41 Offline 300 Total No. of questionnaire distributed 341 No. of Questionnaire returned Online 41 Offline 276 317 No of incomplete questionnaire Online 2 Offline 8 10 Total of usable questionnaires 307 Response Rate 90%

4. DATA ANALYSIS result in Table 5 shows that the outcomes of the skewness values are within the range of +3 and -3. 4.1. Respondents Profile Table 6 provides the reliability analysis to assess the level of internal consistency among multiple All the demographics about the study sample of 307 measurements. Cronbach's Alpha was used to assess respondents are shown in Table 4 with interpretations the reliability. The score of Cronbach's Alpha for all for each item. variables is greater than 0.70 which assures the 4.2. Normality Test and Checking the Reliability reliability of the data. Analysis 4.3. Descriptive Analysis Normality of data has been checked by skewness and kurtosis and it was found that all variables are Table 6 presents the results of a descriptive statistic normally distributed. If skewness values fall in the for variables of the study. A descriptive statistic in the range +3 to -3, it means the normality of the data. The form of means, standard error and standard deviation 952 Journal of Reviews on Global Economics, 2019, Vol. 8 Khaled et al.

Table 4: Respondents Profile

Respondent profile Items Frequency Percent Interpretation

Gender Male 185 60.3 68 out of 100 respondents were males while 122 respondents were females. Female 122 39.7 Total 307 100 Age 15-25 131 42.7 131 respondents belonged to 15-25 yrs 126 respondents belonged to 25-35 yrs 43 respondents belonged to 35-45 25-35 126 41 yrs 35-45 43 14 7 respondents belonged to above 45 yrs above 45 7 2.3 Total 307 100 Education 10+2 54 17.6 Majority of respondents were graduate 126 respondents were post graduate Graduate 123 40.1 85 respondents were under graduates Post graduate 85 27.7 45 respondents were Ph.D students Ph.D. 45 14.7 Total 307 100 10+2 54 17.6 Occupation Student 150 48.9 Majority of respondents were students Unemployed 100 32.6 100 respondents were unemployed 49 respondents were in service and 8 respondents are in service 49 16 housewife. Housewife 8 2.6 Total 307 100 Retail store Food 99 32.2 38% of the respondents choose textile store, 32% choose food store and 19%, 10 of the respondents choose Textile 117 38.1 electronic and household respectively. Electronic 60 19.5 Household 31 10.1 Total 307 100

Table 5: Normality Test and the Reliability

Variables N Skewness Kurtosis Cronbach's Alpha Statistic Statistic Std. Error Statistic Std. Error

MI 307 0.434 0.139 0.159 0.277 0.898 TI 307 0.816 0.139 0.549 0.277 0.889 SI 307 1.131 0.139 2.042 0.277 0.888 CV 307 1.068 0.139 1.113 0.277 0.88 BSE 307 1.089 0.139 1.797 0.277 0.891 S 307 1.242 0.139 1.481 0.277 0.888 WOMR 307 1.083 0.139 1.628 0.277 0.887 WOMA 307 1.838 0.139 3.009 0.277 0.895

were computed. All the constructs in the study were five which the maximum value. The results were shown measured using a five Likert scale anchored by the in Table 6 reported that the mean value for 307 value of (1) which represent the minimum value and respondents which ranges from1.8 to 2.3, revealing The Impact of Technological and Marketing Innovations on Retailing Industry Journal of Reviews on Global Economics, 2019, Vol. 8 953

Table 6: Descriptive Statistics

Variables N Mean Std. Deviation Statistic Std. Error Statistic

MI 307 2.2248 0.03486 0.61079 TI 307 2.3453 0.04271 0.74842 SI 307 2.373 0.0419 0.73414 CV 307 2.2378 0.04615 0.80863 BES 307 2.158 0.03752 0.65732 S 307 2.2463 0.04154 0.72784 WOMR 307 2.3485 0.03887 0.68104 WOMA 307 1.8111 0.0518 0.90756

Note: MI=marketing innovation , TI=technological innovation, SI=store image, CV=consumer value, BES=brand store equity, S=satisfaction, WOM referral, WOM activity. that most of the respondents where either strongly 4.6. Regression Analysis agree or disagree that innovation on retail sector has a significant impact. Further, there are no variations Table 8 illustrates the regression results between between the mean score for the variables of the study. dependent and independent variables. It is clearly seen from the results of Table 6 that all models are fit (sig. 4.5. Correlation Analysis less than 0.01).

Table 7 present correlation matrix and Regarding model (1) which examines the impact of multicollinearity diagnostics. As shown in panel A there marketing innovation on store image, it is clear from is a positive correlation among the independent Table 8 that the model is significant (P. value0.002). variables. There is no variable which has a correlation Further, the adjusted R square is 0.56, which means more than 0.80. All variables have correlation less than that the independent variables marketing innovation 0.80. Furthermore, as shown in panel B, VIF is less contribute only 0.56 to the total variation in the than 3 and the tolerance is not less than 0.20 which is dependent variable. Moreover, the model reveals that considered good values and indicates the absence of marketing innovation positively and significantly multicollinearity problem. impacts store image; the coefficient is 0.22 which

Table 7: Correlation Matrix

Panel A: Spearman Correlation MI TI SI CV BES S WOMR WOMA

MI 1 TI .628* 1 SI .475* .558* 1 CV .511* .557* .525* 1 BES .393* .372* .319* .641* 1 S .384* .498* .466* .473* .545* 1 WOMR .422* .446* .363* .434* .440* .486* 1 WOMA .223* .320* .264* .364* .333* .400* .587* 1 Panel B: Multicolinearity Diagnostics VIF 1.723 1.723 Tolerance 0.58 0.58

*correltion is significant at the level of 0.01. Note: MI=marketing innovation , TI=technological innovation, SI=store image, CV=consumer value, BES=brand store equity, S=satisfaction, WOM referral, WOM activity. 954 Journal of Reviews on Global Economics, 2019, Vol. 8 Khaled et al.

Figure 1: Model of the study. indicates that when marketing innovation increase by as shown in Table 8. The adjusted R square of the one unit, store image will increase by 0.22 unit. This models applied is 0.27, 0.31 and 0.19, for model 4,5 result consistent with Fuentes-Blasco, et al., (2017) and 6 respectively which suggests that marketing and who found that marketing innovation has a positive technological innovation are contributing and explaining impact on store image (P. value0.002). Similarly, the about 56% of the variability of 27% to satisfaction as model demonstrates that technological innovation has the case of model 4 and 31% and 19% to WOM referral a positive and significant impact on store image (P. and WOM activity as shown in model 5 and 6 value 0.00). The coefficient values suggest that an respectively. increase in technological innovation by one unit results in 0.507 increase in store image. With regard the impact of MI and TI, the results of the study affirm statistically both Marketing Innovation Concerning the impact of technological innovation and Technological Innovation on satisfaction, WOMR on customer value in model 2, Table 8 shows that the and WOM A (p‹0.010). Concerning the impact of adjusted R square is 0.41, which means the marketing innovation and technological innovation on technological innovation contributed only 0.41 to the WOM activity and satisfaction, the result shows that total variation in the consumer value. Furthermore, the only technological innovation has a significant impact model reveals that technological innovation has a on both satisfaction and WOM activity (p‹0.01). But positive and significant impact on consumer value (P. there is no significant impact of marketing innovation value 0.00). The coefficient is 0.32 which indicate that on satisfaction and WOM activity (p›0.05). Finally, the when technological innovation increases by one unite results of this study reveal a significant impact of consumer value will increase by 0.32 units. These Marketing Innovation and Technological Innovation on outcomes consistent with (Christofi, et al., 2015, Djellal retail. This leads the study to reject the null hypothesis et al., 2013; Musso, 2010) who found that technological as value of all variables is less than 1%. The outcomes innovation has a positive impact on consumer value. of this study indicate that marketing and technological innovation help to develop image of the consumer Similarly, the model demonstrates that marketing store. The findings of this study is consistent with innovation positively and significantly impacts on (Fuentes-Blasco, et al., 2017) who found that consumer value (P. value 0.00). The coefficient values marketing and technological innovation impacts the suggest that an increase in technological innovation by image of the store and also has influence on consumer one unit results in 0.32 increasing in consumer value. value and satisfaction. Further, technologies also The adjusted R square of the models 3 is 0.24 which improve customer satisfaction and consumer value with suggests that marketing and technological innovation the store. The results of this study contradicts the study are contributing and explaining about 56% of the of Fuentes-Blasco, et al., (2017) which find that variability of, 24% to brand store equity as shown in marketing innovation has an impact on WOM activity model 3, the results of the study show that marketing and satisfaction. The study is relevant to retailers in innovation has an impact on brand store equity (p. India who are in a dilemma about the role of technology value 0.001). Similarly, technological innovation has s in the retail sector. The summary of accepted/rejected significant impact on brand store equity (p. value 0.000) hypotheses is shown in Table 9. The Impact of Technological and Marketing Innovations on Retailing Industry Journal of Reviews on Global Economics, 2019, Vol. 8 955

Table 8: Regression Analysis

Variable SI MI TI (1) CV MI TI (2) BES MI TI (3) = !0 + !1 + !2 +" = !1 + !2 +" = ! + !1 + !2 +" SI CV BES C Sig. C Sig. C Sig.

C 0.695 0 0.32 0.021 0.968 0 M. I. 0.22 0.002 0.384 0 0.247 0.001 T. I. 0.507 0 0.454 0 0.273 0 Adjusted R Square 0.55954 0.414 0.237 Prob. .000a .000a .000a

Note: MI=marketing innovation , TI=technological innovation, SI=store image, CV=consumer value.

Variable S MI TI (4) WOMR MI TI (5) WOMA MI TI (6) = ! + !1 + !2 +" = ! + !1 + !2 +" = ! + !1 + !2 +" S WOMR WOMA C Sig. C Sig. C Sig.

C 0.946 0 0.981 0 0.002 0.002 MI 0.117 0.127 0.209 0.003 0.851 0.851 TI 0.444 0 0.385 0 0 0 Adjusted R Square 0.271 0.312 0.187 Prob. .000a .000a .000a

Note: BES=brand store equity, S=satisfaction, WOM referral, WOM activity.

Table 9: Summary of the Hypothesis Testing

Variables Model 1 (SI) Model 2 (CV) Model 3 (BSE) Model 4 (S) Model 5 Model 6 (WOM R) (WOM A)

MI Sig. (Rejected) Sig. (Rejected) Sig. (Rejected) Insig. (Accepted) Sig. (Rejected) Insig. (Accepted) TI Sig. (Rejected) Sig. (Rejected) Sig. (Rejected) Sig. (Rejected) Sig. (Rejected) Sig. (Rejected)

5. CONCLUSION AND IMPLICATIONS OF THE important than marketing innovation in WOM referral, STUDY and satisfaction. Technological innovation has an impact on store image, customer value, brand store This study aims to go deeply into the innovation of equity, satisfaction, WOM referral and WOM activity. retail industry, both in technological and marketing This explains that behaviour of customer in India is aspects, and their direct and indirect impact on similar to behaviour of consumer in Spain. Therefore, it satisfaction. The study gives recommendation over is recommended that a retailer can take benefit from consumer value, store image and store brand equity. It introducing technologies and therefore invest in is a different line of learning (Fuentes Blasco, 2017; technologies which in the long run would help in Christofi, et al., 2015, Djellal et al., 2013; Musso, 2010). increasing market share and competitiveness. This is This study is in lines with the study undertaken by from the fact that customers have motivations which go Fuentes Blasco, (2017) who has done a study in Spain beyond the purchase of the product. Marketing and found that marketing and technological innovation innovation has no impact on WOM activity and effects the image of the store, satisfaction, consumer satisfaction while it has an impact on store image, value and also WOM activities. Further, technologies customer value, WOM referral and brand store equity. also improve customer satisfaction with the store. The Retailers are at a stage where they are still assessing study concluded that technological innovation is more the impact of Information technology (IT) on the retail 956 Journal of Reviews on Global Economics, 2019, Vol. 8 Khaled et al. set up and need to understand the level of investment Bomfim, T. R., Forny-Germano, L., Sathler, L. B., Brito-Moreira, J., Houzel, J. C., Decker, H., ... & Holscher, C. (2012). An anti- (how much to spend). The study reveals that diabetes agent protects the mouse brain from defective technological innovation has an impact on store image, insulin signaling caused by Alzheimer’s disease–associated Aβ oligomers. The Journal of clinical investigation, 122(4), customer value, brand store equity, satisfaction, WOM 1339-1353. referral and WOM activity. Therefore, it is https://doi.org/10.1172/JCI57256 recommended that a retailer should take benefit of Cao, X., Wei, Y., Wen, F., & Sun, J. (2014). Face alignment by technology and introduce technologies and therefore explicit shape regression. International Journal of Computer Vision, 107(2), 177-190. invest in technologies which in the long run would help https://doi.org/10.1007/s11263-013-0667-3 in increasing market share and competitiveness. This Chowdhury, J., Reardon, J., & Srivastava, R. (1998). Alternative follows from the fact that customers have motivations modes of measuring store image: An empirical assessment of structured versus unstructured measures. Journal of which go beyond the purchase of the product. This Marketing Theory and Practice, 6(2), 72-86. study contributes to the literature on loyalty and https://doi.org/10.1080/10696679.1998.11501797 satisfaction in retailing by studying the impact of Fuentes-Blasco, M., Moliner-Velázquez, B., Servera-Francés, D., & Gil-Saura, I. (2017). Role of marketing and technological innovation. The study found that technological (TI) and innovation on store equity, satisfaction and word-of-mouth in marketing innovation (MI) increase the level of retailing. Journal of Product & Brand Management, 26(6), 650-666. satisfaction indirectly and directly over consumer value, https://doi.org/10.1108/JPBM-07-2016-1279 brand equity, and store image, and that satisfaction Ganesan, S., Chaurasiya, N. D., Sahu, R., Walker, L. A., & Tekwani, motivates suggestions for another consumer. From an B. L. (2012). Understanding the mechanisms for metabolism- academic viewpoint, these outcomes give a broader linked hemolytic toxicity of primaquine against glucose 6- phosphate dehydrogenase deficient human erythrocytes: approach by incorporating new precedents into evaluation of eryptotic pathway. Toxicology, 294(1), 54-60. complacency and loyalty processes. https://doi.org/10.1016/j.tox.2012.01.015 Gallarza, M. G., Ruiz-Molina, M. E., & Gil-Saura, I. (2016). Stretching These outcomes enable us to suggest the value-satisfaction-loyalty chain by adding value dimen- sions and cognitive and affective satisfactions: a causal recommendations for the management of retail model for retailing. Management Decision, 54(4), 981-1003. companies. These recommendations can help the retail https://doi.org/10.1108/MD-07-2015-0323 centres to invest in innovation. Innovation is primarily Gelbrich, K., & Roschk, H. (2011). A meta-analysis of organizational complaint handling and customer responses. Journal of related to the industrial sector, but our work shows that Service Research, 14(1), 24-43. innovation in the service sector can also improve the https://doi.org/10.1177/1094670510387914 competitiveness of the company and assist to meet the Hartmann, H., Kanitz, A., Rogler, W., & Steffen, K. (2005). U.S. necessities of customers better. In particular, it is Patent No. 6,858,729. Washington, DC: U.S. Patent and Trademark Office. mainly important to invest in information and Harrison-Walker, L. J. (2001). The measurement of word-of-mouth communication technology, because consumers easily communication and an investigation of service quality and determine the results and estimate them significantly. customer commitment as potential antecedents. Journal of service research, 4(1), 60-75. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.81

© 2019 Khaled et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

958 Journal of Reviews on Global Economics, 2019, 8, 958-962 Assessing of Customer Perception on Innovation of Food Service

Norfadzilah Abdul Razak*, Zaidi Mohd Aminuddin, Ayu Rohaidah Ghazali and Nini Hartini Asnawi

Faculty Business Management, Universiti Teknologi MARA, Selangor, Malaysia Abstract: In the highly competitive business environment, the restaurant industry critically strives to maintain their services particularly to customer's evaluation, changes in customer preferences and rapid of fast food and international restaurant that make business in Malaysia. As a local entrepreneur of the restaurant, they need several strategies to innovate their services to tackle their customer in highly competitive and make an improvement to another level standing with the international restaurant. Thus, a descriptive study was conducted to explore the perception of the customer towards several elements of innovation which are healthier food, modification of menu items, increase in food service options, technology advancement, environment sustainability, inclination towards global cuisines apply to one of the selected local restaurants. The survey was distributed to 235 of customers who walked into the restaurant and the finding revealed that healthier food, modification of menu items, food service options, technology advancement, environment sustainability inclination towards global cuisines and focus on customer of new generations are highly demand by the customers. The finding of this study also implies the effective practices that will be used in order to make an improvement, being creative and innovative of the restaurant product and services for the future. Keywords: Customer Perception, Innovation in Business, Food Service, Business Competitive.

1. INTRODUCTION how consumer needs and preferences influence innovation particularly in the restaurant. In business nature, innovation views as a mechanism to sustain a highly competitive business in the market The innovation can be based on an idea that comes (Salaman & Storey, 2002). Innovation applies to create from customers, employees at a low hierarchical level a potential of existing resources to improve the or from suppliers (Ivkov, Blesic, Simat, Demirovic, efficiency and potential value to develop new intangible Bozic, Stefanovic, (2016). Customers’ ideas and asset in business. Empirical studies show that the experiences are a vital source of innovation for innovation effect to increase business by eliminating business. Some business already uses customer costs, differentiation and producing high quality of a demand, experience and suggestion to practice how product, services and talented of human capital the innovation in the business capable to bring new (Al-Husseini & Elbeltagi, 2012). More studies also service and product. Hence, customer preferences are emphasize that the innovation effect to increase essential for the successful exploitation of new ideas. business by eliminating costs, differentiation and Without consumer uptake innovations would not be producing high quality of product and services (Utami viable. In a recent trend, the restaurant sector is facing 2013). Business with a great innovation perfectly being enormous and dynamic market changes. It is due to a success to satisfy consumer need and create an many factors that influence and one of the factors is opportunity for a business to achieve high performance customers’ perception of experience are changing. The (Calantone, Cavusgil & Zhao, 2002). In perspective of mainly conditioned to innovation is based on economy, innovation is important to the growth of an customer's food preference and eating habits. In a economy, and successful innovation requires a balance recent of modern life, the customer’s food preference between the demand of customer and supply by the and eating habits are changing. For instance, in the business. Innovation can come from changes in restaurant sector, more and more meals are consumed processes or procedures that can be driven by away from home. Most of the working customers have consumers in their quest for more personalised a limited time to prepare their own food. They prefer products and services. Business with a great the restaurant that can provide food in fast and save innovation perfectly being success to satisfy consumer their time. Thus the concept of a fast food restaurant need and create an opportunity for a business to and go and grab food service are highly demanded by achieve high performance (Razak, Aziz, Rahman & Ali, the customers. In another option, there are busy with 2018). Therefore, the study to better understanding work and home tend them to have an order from own place and demand for delivery service. Those changes

of the customer preferences influence most of the *Address correspondence to this author at the Faculty Business Management, restaurant service to provide and offer product and Universiti Teknologi MARA, Selangor, Malaysia; Tel: 010 260 2334; E-mail: [email protected] services that fulfil the demand of the customer. Here,

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Assessing of Customer Perception on Innovation of Food Service Journal of Reviews on Global Economics, 2019, Vol. 8 959 the innovation plays significant roles to generate a new followed by 1.81 to 2.60 as low level, 2.61 to 3.40 as a idea and many strategies in managing the changes in medium, 3.41 to 4.2 as high level, 4.21 to 5.00 as very customer preferences. high level.

According to Hjalager (2010), innovations classified Table 1: Interval Scale Interpretation into product innovations, process innovations, management innovations and logistics innovations. All Evaluation Criteria Evaluation Interval the innovations can happen and restaurant sector Very high 4.21 – 5.00 needs to strategies the way to practice innovation by adding to the new menu, targeting new customers, High 3.41 – 4.20 linking the menu with the digital services and practice Medium 2.61 – 3.40 on the convenient environment. In the literature on Low 1.81 – 2.60 consumers' restaurant selection behaviour, food quality Very Low 1.00 – 1.80 is identified as the most important feature in selection by customers (Joshi, 2012). The elements that 3. RESULT AND DISCUSSION constitute food quality were unique tastes and ingredients, menu variety, appearance and As showed in Table 2, there were 150 of customers presentation, healthy food options, and familiar food. who group as working and 85 of them were non- Then, the customers are looking forward to the working had participated in the survey. The result restaurant that can offer such as healthy food, low- indicated 57.44 per cent which total of 135 customers calorie food, sugar-free refreshments, organic food and was female and 42.55 per cent of 100 customers were others. Therefore, this study aimed to explore the male. The finding revealed this study dominantly customer’s preference of healthier food, modification of responses by a female. Next, a majority with 51.06 per menu items, food service options, technology cent who responses in this study were aged in between advancement, environment sustainability inclination of 25 to 35 years old with a total of 120 customers. The towards global cuisines and focus on a customer of second higher responses were 29.78 per cent were new generations. aged 35 to 45 years old with a total of 70 customers. there was 10.64 per cent were age 15 to 25 years old 2. METHODOLOGY and only 8.51 per cent with a total of 20 were aged 45 years old and above. The finding revealed that most of The research is based on data collection methods the customers are categorized as young generations of and the study was conducted descriptive analysis. A this study. structured questionnaire designed to gather information on healthier food, modification of menu items, food Table 2: Demographic Analysis service options, technology advancement, environment sustainability inclination towards global cuisines and Demographic Profile Total (n=235) Frequency (%) focus on a customer of new generation Z. A five-point Status Working 150 63.83 multi-item Likert scale (1- strongly agree and 5- Non-Working 85 36.17 strongly disagree.) used for the study. It involved Gender Female 135 57.44 gathering of information from the customers who visit a Male 100 42.55 restaurant. The convenience sampling method used to Aged 15-25 25 10.64 get the responss from the target population. Sample 25-35 120 51.06 size of 235 (working and non-working) respondents in 35-45 70 29.78 the age group of 18 to 25 year and more than 40 years 45 and above 20 8.51 above were considered for the survey. The data collection further analysed using descriptive analysis and measured the mean and standard deviation of the The finding revealed for healthier food, most of the result. A descriptive analysis was conducted to customers were highly preferred for food nutrients to determine the mean and standard deviation values of print on the menu (Mean= 3.957, Std= 0.905) and the items tested. The mean values were interpreted grab-and-go food or snacks (Mean= 3.778, Std= based on the interpretation by Sekaran, (2006) as 0.984). This can be explained the customer preferred presented in Table 1. The mean values that are within to acknowledge on the food nutrients that they have the range of 1.00 to 1.80 is considered very low level, 960 Journal of Reviews on Global Economics, 2019, Vol. 8 Razak et al. taken. The food nutrients may assist them to choose In addition to food service options, most of the and make a decision of the food quality. According to customers were highly preferred to have a home- Joshi (2012), food quality was found as the most prepared paste (Mean= 3.77, Std= 1.081) and food important feature determining patronage intentions to delivery service (Mean= 4.14 Std= 3.427). The any type of restaurant. Meanwhile, the styles of grab- possibility of this happened, most of the customers are and-go food or snacks highly prefer to a customer working and have limited to prepare the food at home. as the customer who walked into the restaurant With the home-prepared paste, the paste may assist might have limited time to dining preference. them to have similar taste as they dine-in at the restaurant. Besides that, the need for food delivery Furthermore, is the criteria modification of menu recently is highly demanded the customers. They items revealed that organic food (Mean= 3.706, Std= preferred to have the delivery for customers convenient 1.107) and specific diet with low-calorie food (Mean= and save of their time to walk-in to the restaurant. 3.613, Std= 1.187) were highly preferred of the customers. The priority of the customer is to trust in the On the other hand, technology advancement such food serve as they love to order healthy options offered as online payment (Mean= 3.809, Std= 1.075) and at a restaurant. payment via mobile payment (Mean= 3.847, Std=

Table 3: Descriptive Analysis

Statements Mean Standard Deviation

Healthier Food Do you prefer food nutrients to print on the menu? 3.957 0.905 Do you prefer grab-and-go food or snacks? 3.778 0.984 Total 3.868 0.8136 Modification of Menu Items Do you prefer organic food? 3.706 1.107 Do you need a specific diet with low-calorie food? 3.613 1.187 Total 3.660 1.054 Food Service options Do you want to have home-prepared paste eg: "Sambal Balado”? 3.771 1.081 Do you want a food delivery service? 4.141 3.427 Total 3.955 1.893 Technology Advancements Do you need an online order? 3.809 1.075 Do you need payment via mobile payment? 3.847 1.047 Total 3.827 .9780 Environment Sustainability Do you prefer a reduction in cooking time? 3.664 1.022 Do you prefer a green environment and equipment? 3.931 1.018 Total 3.798 0.909 Inclination towards Global Cuisines Do you recommend the traditional food service to be promoted in the global market? 4.004 0.972 Total 4.004 0.972 Focus on Generation Z Do you need a Grab and Go service? 3.719 1.081 Do you need memorable tasting experiences: experience home cooking? 3.821 1.098 Total 3.7702 .99913 Assessing of Customer Perception on Innovation of Food Service Journal of Reviews on Global Economics, 2019, Vol. 8 961

1.047) highly demanded by the customers. The new new strategies to attract more customers, and improve trend of digital payment recently influenced a customer on the food and service quality that fulfil the need and to make easy payment while shopping or dine in and demand of the customers. This study also highlights cashless practice. that food experiences away from the home are an important part of modern consumer lifestyles, but it is Next, is environmental sustainability found the essential to recognize the trends that consumers want reduction of cooking time (Mean= 3.664, Std= 1.022) to continue. In addition, the finding aimed the increase and green environment and equipment (Mean= 3.664, the customer satisfaction and loyalty which recommend Std= 1.022) also highly demanded by the customer. in the future, many food service menus will need to This can be explained, most of the customers preferred expand, or give special attention particularly grab-and- for quick and lest time of food service. The faster the go offerings and delivery service. This study also food delivers to them, the more satisfied of the implies to the customer perspective as to have a good customers towards the service in a restaurant. experience that unforgettable and look forward to the Meanwhile, the green environment, layout and clean best restaurant as not only to enjoy the food but more atmosphere of the restaurant may encourage and to self-satisfaction. The customer also can evaluate the influence a customer to visit the restaurant. food and services provided by the restaurant. They can make choice and recommend to other for similar Furthermore, customers also highly recommend the experience and satisfaction. They can spread the food served has a potential and opportunity to be positive value and vibe in order to attract exits or new promoted at the global market (Mean= 4.004, Std= customer to the restaurant. 0.972). The quality of food and variety of menu that provides by the restaurant belief can have a new ACKNOWLEDGEMENT market and expand their product to the global cuisines. So that many customers from local and other countries This research supported by internal research grant may visit and have own experience to the restaurant. of DUCS (600-UiTMSEL (PI. 5/4) (038/2018) by Universiti Teknologi MARA, Puncak Alam, Branch In the final discussion, the finding revealed the Selangor. focus of generation Z was highly recommending for grab and go concept (Mean= 3.719, Std=1.081) and REFERENCES memorable tasting experience home cooking Al-Husseini, S., and Elbeltagi, I. 2012. Knowledge Sharing And (Mean=3.821, Std= 0.999). Nowadays, generation Z Innovation: An Empirical Study In Iraqi Private Higher are the millennial generations that early and frequent Education Institutions, Proceedings of The 4th European Conference On Intellectual Capital, Helsinki, Finland, Arcada exposure to modern lifestyle. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.82

© 2019 Razak et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

Journal of Reviews on Global Economics, 2019, 8, 963-980 963 Bank Stability Index for Selected Countries with Dual Banking Systems

Norzitah Abdul Karim1,*, Amirul Afiff Muhamat1 and Mohamad Nizam Jaafar2

1Faculty of Business and Management, Universiti Teknologi MARA, Kampus Puncak Alam, 42300 Selangor, Malaysia 2AAGBS, Universiti Teknologi MARA, Shah Alam, 43500 Selangor, Malaysia Abstract: A robust and comprehensive measure of bank stability is crucial to identify healthy banks and save troubled banks from deteriorating in order to avoid banking crises, hence prevented a systemic effect on the overall financial system of the country. The study aims to develop a comprehensive measure of bank stability for selected Organization of Islamic Cooperation (OIC) countries with dual banking systems. The measure is in the form of a composite index, comprehensively adopts relevant indicators from the existing literatures based on annual data from 1999 to 2015, obtained from the Bankscope database. The factor analysis method used by the Organization of Economic Co-operation and Development (OECD) is adopted to develop the index. The findings reveal the comprehensive measure of bank stability for all bank models. The policy implication for the regulatory is to use similar measure of bank stability in monitoring and reporting the stability of different bank models. Keywords: Bank stability index, dual banking, Islamic bank, OIC Countries, factor analysis.

1. INTRODUCTION or a dual banking system (International Shari’ah Research Academy (ISRA), 2011). Islamic banking The banking stability is acknowledged to have an systems practice only Shari’ah-compliant financial important role in the stability of the overall financial systems, whereas conventional banking systems system of the developing countries (Hartmann, practices conventional or traditional financial systems Straetmans, & Vries, 2005; Popovska, 2014; Swamy, that allow interest-based transactions. In addition, the 2014). The banking sector, in the developing countries, OIC countries also have adopted the dual banking is the most developed sector in the financial system, systems which allow Islamic and conventional banks to while the other sectors are less developed (Hartmann operate side by side (ISRA, 2011). et al., 2005; Popovska, 2014). Despite its importance, literature reviews on prevalent practices highlight that The overall financial system in dual banking there is no internationally accepted framework and systems, which can have five types of financial uniform measures of banking stability adopted by institutions or banking models: conventional banks, banks around the world (Segoviano and Goodhart, conventional banks with Islamic windows, conventional 2009; Gersl and Hermanek, 2010), specifically for the banks with Islamic subsidiary banks, subsidiary Islamic countries with the dual banking system. banks and Islamic banks (ISRA, 2011). ISRA (2011) defines a full-fledged Islamic bank as a bank that Therefore, there is an urgent need to develop a complies with Shari’ah and is either newly established measurement of the bank stability that could indicate or converted from a conventional bank. Subsidiary the health of the banks, which is hope to highlight the Islamic banks are either newly established or converted healthy bank and warn potentially troubled banks from from existing Islamic windows. further experiencing bank failure. This study, therefore, attempts to fill this research gap by extending its Both Islamic windows and subsidiary Islamic banks discussion to include the measurement of bank stability comply with Shari’ah rules and regulations. However, for selected countries with the dual banking systems. an Islamic window has a single board of directors which consists of directors and Shari’ah advisors, while 2. LITERATURE REVIEW a subsidiary Islamic bank has a board of directors 2.1. Banking Models in Dual Banking System separate from the Shari’ah supervisory board. Conventional banks are defined as financial institutions Most Muslim-majority countries have adopted an that practice interest-based transactions. Conventional Islamic banking system, a conventional banking system banks with Islamic subsidiary banks also engage in interest-based transactions but also are the holding

*Address correspondence to this author at the Faculty of Business and company with a majority share (normally 100%) in its Management, Universiti Teknologi MARA, Kampus Puncak Alam, 42300 Selangor, Malaysia; Tel: +603-32587137; E-mail: [email protected] subsidiary Islamic banks. However, other researches

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 964 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al. simply identify banking models as Islamic banks and produces only report on general indicators for its conventional banks (e.g. Srairi, 2009; Shafique, financial soundness, on its website. From the reports, Hussain, and Hassan, 2013; Shahid, Rehman, Niazi, the countries with available reports, Bangladesh, and Raoof, 2010; Hamza and Kachtouli, 2014; Ashraf, Indonesia and Turkey have all the reports from 2010 to 2013). 2015. The next complete report is Malaysia with the available publication from 2010 to 2014, followed by 2.2. Review of Bank Stability Measures Pakistan and Qatar while Saudi Arabia has only 2015 report available on the website. Table 1 shows the The review of literatures on bank stability measures indicators used by the central banks of selected include review of journal articles and practices by countries in reporting the stability of the financial regulators across jurisdiction i.e. central banks and system in the financial stability report. International Monetary Fund. 2.2.2. Principle-Based Measures: International 2.2.1. Prevalent Stability Measures across Monetary Fund Jurisdictions: Central Bank Practices Historically, according to (Christopoulos, Mylonakis, A survey of prevalent stability measures reveals that & Diktapanidis, 2011; Roman & Şargu, 2013), in 1979, the central banks of 10 countries, namely Bahrain, the bank regulatory agencies used financial ratios Bangladesh, Indonesia, Kuwait, Malaysia, Qatar, based on CAMEL to assess the soundness of banks in Turkey, Pakistan, Saudi Arabia and United Arab the USA. Later, these are extended and used as a tool Emirates, are producing and publishing report(s) of to assess the soundness of banks for the supervisor similar nature (stability), while the central bank of Egypt

Table 1: Survey of Indicators Used in Central Banks Financial Stability Report

Overall Banking System Indicators Islamic Banking System (separate)

ROA Debt service / Income Capital Adequacy Ratio Capital Adequacy Ratio Liquid asset / TA Tier 1 capital Tier 1 capital Liquid asset/total deposit Risk weighted capital ratio Risk weighted assets Debt to equity ratio Asset/Capital Asset/Capital Current ratio Capital / Risk weighted asset NPL / Total loan Liquid asset/ short-term liabilities NPF / Total financing ROA Loan/ deposit NPF as % gross loan Tier 1 capital to risk weighted Deposit from non-bank / total deposit Prov as % NPF assets NPL as % loan Advance to deposit ratio Real estate / construction exposure Prov as % NPL Call money rate ROA NPL to capital Liquid assets / non-core deposits ROE Loan concentration Cost to income ratio Net impaired financing ratio EBIT Real estate / construction exposure Total Asset (% entire banking system) NPL Net income Total financing (% entire banking sys.) ROE Net fees and commission Net fees and commission Growth of credit Operating expense/ Income Operating expense/ Gross Income Deposit growth Gross impaired loan ratio Liquid asset / TA Net interest income Capital base to risk weighted asset Liquid asset/ short-term liabilities Provision Coverage ratio Net mark-up / gross income Short / long term foreign debt Non mark-up income/ gross income financing/ deposit Deposit from non-bank / total deposit

Source: Author’s own tabulation based on central banks’ report. Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 965 authorities from different countries (Roman & Şargu, the IFSB initially, there were five dimensions namely 2013). International Monetary Fund (IMF) measures profitability, financing to deposit ratios, non-performing financial vulnerability and soundness, using handful financing, capitalization and rating comparison (Islamic indicators of Financial System Soundness with Financial Services Board, 2013). The IFSB later acronym CAMELS indicators signifies five major standardised these into seven dimensions namely sections of a bank namely Capital adequacy, Asset profitability, liquidity, financing exposures, asset quality, quality, Management quality, Earnings ability and capitalization, structure funding and leverage (Islamic Liquidity (Roman & Şargu, 2013). Later it includes sixth Financial Services Board, 2014, 2015, 2016). component "S" to capture the sensitivity of market to include interest rate, foreign exchange and inflation risk The first dimension, profitability, is measured by which in overall capture the system risk (Chiaramonte, indicators like return on asset, return on equity, Croci, & Poli, 2015; Poghosyan & Čihak, 2011; Roman average net profit margin and average cost to income & Ş argu, 2013). The IMF and the World Bank (Islamic Financial Services Board, 2014, 2015, 2016). recommends the usage of CAMELS as the indicators The second dimension, liquidity, is measured by for the financial soundness of the banking sector, financing to deposit ratio and lower short-term asset– according to Roman & Şargu (2013) and measures of liability ratios (SALRs) (Islamic Financial Services the current health of financial institution (IMF, 2000). Board, 2014, 2015, 2016). The third dimension is However, many regulatory bodies do not disclose this financing exposures (Islamic Financial Services Board, CAMELS rating to the public nor to the bank itself for 2014, 2015, 2016). The fourth dimension, asset quality, the reason of avoiding systemic bank crisis (Roman & is measured by non-performing financing (Islamic Şargu, 2013). Table 2 lists all these indicators. Financial Services Board, 2014, 2015, 2016). The fifth dimension, capitalization, is measured by average 2.2.3. Principle Based Measures: Islamic Banks capital adequacy ratio (CAR) and tier-1 capital Resilience Indicators by Islamic Financial Services adequacy ratio (CAR) (Islamic Financial Services Board Board, 2014, 2015, 2016). The sixth dimension, The Islamic Financial Services Board (IFSB) structure funding, is measured by foreign currency functions as an international standard-setting body of deposit share to total deposits, net foreign exchange regulatory and supervisory agencies that aims to open position to capital, profit-sharing investment safeguard the soundness and stability of the Islamic account share to total deposits (Islamic Financial financial system including banking, capital market and Services Board, 2014, 2015, 2016). The seven takaful. dimension, leverage, is measured by leverage multiples (Islamic Financial Services Board, 2014, In assessing the resilience of Islamic financial 2015, 2016). system including banking, capital market and takaful,

Table 2: Components of CAMELS

Component Definition

Capital Adequacy Capital adequacy is evaluated on the basis of both the bank’s sizes as well as the composition of its assets and liabilities and used as a measure of its financial strength and stability.

Asset Quality Examiners assess the credit risks in the various loans in the bank’s portfolio and classify these loans as: good, substandard, doubtful, or loss.

Management Efficiency Examiners attempt to gauge not only the bank’s management but also its board of directors. Competence, management acumen, integrity, and willingness to comply with banking regulations are some of the factors assessed.

Earning and Profitability There is an evaluation of the earnings as well as their level relative to peers. One objective is to assess the impact on the bank’s capital of internally generated funds

Liquidity Regulators assess liquidity by examining credit conditions, de- posit volatility, loan commitments, and other contingent claims against the bank, capital, current stock of liquid assets, and the bank’s perceived ability to raise funds on short notice.

Sensitivity to market risks Regulators assess how sensitive the bank’s asset, liability and net worth values are to changes in market condition like interest

Sources: Adapted from (Greenbaum & Thakor, 2007); (Olalekan & Adeyinka, 2013). 966 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al.

2.2.4. Theoretical-Based Measures: Z-Score When the components are aggregated, the latent The theory of bank soundness or stability can be variable or construct is bank stability. Latent variables traced back as early as in 1952. It was developed by are defined as ‘unobserved variables’ or ‘constructs’ A.D. Roy based on a principle called as ‘Safety First’. that are the main focus or interested of a study, in this The principle of ‘Safety First’ was developed based on case, measurements bank stability (Harrington, 2009). Roy’s dissatisfaction over the simple rule of maximizing Seven sub-constructs (latent factors) represent bank return and also his traumatic wartime experience stability and are the components of bank stability (Sullivan, 2011). The application of the principle of identified: the z-score’s minimising risk, capital ade- Safety First means that when having a wide range of quacy, asset quality, management efficiency, earnings possible actions, including disasters, the gross return and profitability, liquidity and sensitivity to the market. should not be less than some quantity (Roy, 1952). In Each latent factors also has observed variables, the application of Principle of Safety First, identified defined as variables that can be measured and referred variable ‘m’ representing the quantity and ‘σ’ to as ‘indicators’ or ‘items’ (Harrington, 2009). representing the standard deviation of m, are the only The literature review identifies 153 indicators used quantities given the individual’s knowledge of past. Roy to measure bank stability. However, from these 153 (1952) identified that there is a functional relationship indicators, 74 indicators are eliminated due to between ‘m’ and ‘σ’, also calculate the probability of similarities in CAMELS indicators, Islamic banks final return, using the calculation of ‘upper bound’ of resilience indicators and prevalent stability measures. this probability. In addition, data are unavailable for 28 indicators (16 Bourkhis & Nabi (2013) and Beck, Demirgüç-Kunt, CAMELS indicators, 9 prevalent stability measures and & Merrouche (2013) used bank’s soundness focusing 3 Islamic bank resilience indicators). on Z-score ratio as the indicator for bank’s soundness. Thus, the present study uses the remaining 51 Hsieh, Chen, & Lee (2013) used z-score and called it z- available indicators, which consist of 41 CAMELS index as one of the proxies for bank stability. The z- indicators including those similar to Islamic bank index is actually calculated manually by the author resilience indicators, 9 prevalent stability measures based on data from Bankscope, using the formula z- including those similar to Islamic bank resilience index=ROA+ E/TA / σ where ROA is the ratio of ROA indicators and 1 indicator from the z-score. Figure 1 return to total assets, E/TA is the equity to total assets, shows the framework for constructing the index based and σROA is standard deviation of return on assets as on the 7 latent factors measured by 51 indicators: 12 a proxy for return volatility, using a 3-year moving indicators of asset quality, 10 indicators of average (Hsieh et al., 2013). The bank-level Z-index management efficiency, 8 indicators of earnings and means a larger value indicates higher stability and less profitability, 10 indicators of liquidity, 4 indicators of overall bank risk (Hsieh et al., 2013). sensitivity to market risk, 6 indicators of capital 2.3. Bank Stability Measures: Bank Stability Index adequacy and 1 indicator of risk-minimising z-scores.

Based on the above literatures, the hypotheses are Seven components of bank stability are aggregated developed in Table 4 while the model for bank stability into an index called Bank Stability Index (BSI). An index is presented in Figure 1. index, or composite indicator, is an aggregate of individual indicators and variables and implies the set 3. RESEARCH METHODOLOGY of properties underlying its aggregation composition (Nardo, Saisana, Saltelli, Tarantola, Giovannini, The samples selected consisted of 11 selected Hoffmann, 2008). countries with dual banking systems with a total of 382

Table 3: Definition of Principle of Safety First’s Z-score

Principle of Safety First Definition

Minimising risk (z-score) The z-score is a measure of the distance-to-default, which measures the market value of a bank’s assets in relation to the book value of its liabilities. Thus, the higher is z-score, the less likely of probability of insolvent and hence, the stable is the bank.

Source: Adapted from (Rajhi & Hassairi, 2013). Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 967

Table 4: List of Hypothesis

Latent Factor / Dimension Hypothesis

Z-score from the Principle of Safety First H1: Z-score is a measure of bank stability. Capital Adequacy H2: Capital Adequacy is a measure of bank stability Assets Quality H3: Asset quality is a measure of bank stability. Management Efficiency H4: Management efficiency is a measure of bank stability. Earnings and Profitability H5: Earning and profitability are the measures of bank stability. Liquidity H6: Liquidity is a measure of bank stability. Sensitivity to Market Risk H7: Sensitivity to market risk is a measure of bank stability.

Figure 1: Model of Bank Stability Index. banks which consists of 85 Islamic Banks, 261 banks for a period from 1999 to 2015, can be conventional banks, 18 conventional banks with considered as good. These 11 countries such as subsidiary Islamic banks and 18 subsidiary Islamic Bahrain, Bangladesh, Egypt, Indonesia, Kuwait, 968 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al.

Malaysia, Pakistan, Qatar, Saudi Arabia, Turkey and 28 indicators are not available in the Bankscope the United Arab Emirates are selected because they database (16 CAMELS indicators, 9 prevalent stability have more than 0.5% of total global Islamic banking measures and 3 Islamic bank resilience indicators). assets (IFSB, 2015). The period of 1999 to 2015 are Thus, 51 indicators are available to construct the BSI: selected as it included many local crises such as 1997 41 CAMELS indicators (including similar indicators), 9 Asian Financial Crisis and crisis in UAE and 2007-2009 from prevalent stability measures and 1 from the Global Financial Crisis (Laeven and Valencia, 2013). safety-first principle (the z-score).

From a review of the literature on the i) theoretical Factor analysis is run several times until the best fit based measures, ii) principles based measures and iii) and most significant model is obtained. Pallant (2005) prevalent measures of bank stability, there is a total of and Tabachnick and Fidell (2007) recommend that 146 variables used in developing the bank stability studies experiment with different numbers of factors index (Karim & AlHabshi, 2017). until a satisfactory solution is found. For data to be considered suitable for factor analysis, the correlation Based on the bank stability index developed by matrix should show at least some correlations of 0.3 or Karim & AlHabshi (2017), the study adapted the greater. Data without any correlations of 0.3 are method as in The Handbook on Constructing eliminated, and the factor analysis is run without that Composite Indicators: Methodology and User Guide, data. According to Tabachnick and Fidell (2007), published by Organization for Economic Co-operation multicollinearity is not a problem in factor analysis, but and Development (OECD), the method of factor singularity or extreme multicollinearity is a problem. analysis reduced to the best indicators (Nardo et al., The present study, therefore, excludes data with 2008). The linear summation of these indicators form singularity or extreme multicollinearity problems and the bank stability index. The main data source is runs the factor analysis again without data with BankScope database produced by the Bureau van Dijk. singularity problems. BankScope reports the data in the original currencies of the respected dual banking countries and provides a The factor analysis results reveal that only 26 choice to convert data in any other currencies, indicators satisfy the correlation of more than 0.3 and including the US Dollar (Hassan, Mohamad and Bader, less than 0.9. The Kaiser-Meyer-Olkin returns a 2009). sampling adequacy score of 0.740, more than the recommended level (0.6), indicating adequate correlations and factorability of the data; therefore, the 4. DEVELOPMENT OF THE BANK STABILITY INDEX factor analysis is adequate. Bartlett’s test of sphericity Four measures of bank stability are used to develop is statistically significant (p=0.000), supporting that the BSI: the z-score, CAMELS, central banks’ factor analysis is appropriate. measures and Islamic banks resilience indicators. First, The method of factor extraction is principal the z-score serves as the one indicator for the component analysis. The results based on scree plots, theoretical-based measures. Second, the principle- as shown in Figure 2, suggest that the shape of the based CAMELS measures have 85 indicators. Third, curve changes direction and becomes horizontal at 8 the prevalent stability measures used by the 11 latent factors. However, the results based on Kaiser’s selected countries have 38 indicators for overall criterion with an eigenvalue of more than 1 (Table 6) banking and 22 indicators for Islamic banking. Fourth, the IFSB uses 7 Islamic bank resilience indicators. indicate that 7 factors explain 68.73% of the variance. This suggests that 7 factors explain BSI. However, These 4 sources use 153 indicators, of which 74 based on the literature review and theoretical indicators are eliminated due to similarities. Of these, development, the number of factors is constrained to 6

Table 5: Kaiser-Meyer-Olkin and Bartlett’s Test

Kaiser-Meyer-Olkin measure of sampling adequacy. 0.740

Bartlett's test of sphericity Approx. Chi-Square 70654.688 df 325 Sig. 0.000 Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 969

Figure 2: Scree plot. latent factors. The results show that the cumulative assets with a normalised squared factor loading of percentage of variance in the top 6 latent factors is 0.176; deposits in relation to monetary aggregates with 63.99%, indicating that these 6 identified factors a normalised squared factor loading of 0.129; deposits explain 63.99% of the variance in bank stability. from non-banks to total deposits with a normalised squared factor loading of 0.126; deposit growth with a Based on the literature, these 6 latent factors are normalised squared factor loading of 0.101; circulating capital adequacy, asset quality, management assets to total assets with a normalised squared factor efficiency, earnings and profitability, liquidity and loading of 0.099; and loans to total deposits with a sensitivity to market risk. For all the constrained 6 normalised squared factor loading 0.079. These latent factors, the eigenvalues are greater than the normalised squared factor loadings are the weightage required level of 1.0. In Table 6, the results show that for the individual indicators that form the intermediate factor 1 (liquidity) has the highest eigenvalue of 5.09, composite index (latent factor) for Liquidity. The model explaining 19.58% of variance. Liquidity, therefore, can for the liquidity (intermediate) composite index, be regarded as the most important factor in bank therefore, is as follows: stability. It is followed by earnings and profitability (eigenvalue: 3.79, variance: 14.58%), asset quality L = 0.176(l26) + 0.129(l25) + 0.126(l46) it it it it (1) (eigenvalue: 2.54, variance: 9.78%), capital adequacy + 0.101(l47)it + 0.099(l24)it + 0.07(l29)it (eigenvalue: 1.96, variance: 7.53%), management efficiency (eigenvalue: 1.72, variance: 6.63%) and, The next highest weight is on earnings and finally, sensitivity to market risk (eigenvalue: 1.54, profitability, which has 5 individual indicators. These variance: 5.90%). The result support that these 6 indicators are ROAA with a weightage of 0.247; net underlying latent factors are relevant in developing the profits to average assets with a normalised squared BSI. factor loading of 0.244; efficiency of operational activity costs to income with a normalised squared factor These latent factors are rotated by applying varimax loading of 0.182; return on average equity with a rotation with Kaiser normalisation. The 26 individual normalised squared factor loading of 0.180; and a z- indicators are grouped with the highest factor loadings score with a normalised squared factor loading of into an intermediate composite index representing the 0.042. According to the literature review, a z-score is latent factors. The factor analysis results in the “rotated assigned to sensitivity to market risk as it measures the component matrix table” are transformed into Table 7 risk of insolvency and instability. However, the results to obtain the weights and later aggregate each latent of factor analysis reassigned this indicator to earnings factor and intermediate composite index. and profitability. This is also consistent with the nature of this indicator that includes the component of ROAA Before aggregation of the 6 intermediate composite (ROAA + Earnings to TA/SD of ROAA). The model for indices, the weights are assigned based on the the earnings and profitability (intermediate) composite calculated sum of the squared factor loadings. Table 7 index, therefore, is as follows. includes 6 individual indicators: liquid assets to total 970 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al.

Table 6: Eigenvalues and Total Variance Explained

Component Initial Eigenvalues Extraction Sums of Squared Rotation Sums of Squared Loadings Loadings Total % of Cumulative Total % of Cumulative Total % of Cumulative Variance % Variance % Variance %

1 5.090 19.578 19.578 5.090 19.578 19.578 4.655 17.905 17.905 2 3.791 14.581 34.159 3.791 14.581 34.159 3.258 12.530 30.435 3 2.542 9.775 43.934 2.542 9.775 43.934 2.525 9.713 40.148 4 1.958 7.529 51.463 1.958 7.529 51.463 2.208 8.492 48.640 5 1.724 6.632 58.095 1.724 6.632 58.095 2.128 8.184 56.824 6 1.535 5.902 63.998 1.535 5.902 63.998 1.865 7.174 63.998 7 1.231 4.736 68.734 8 .888 3.414 72.148 9 .850 3.269 75.416 10 .787 3.026 78.442 11 .724 2.785 81.227 12 .637 2.450 83.677 13 .557 2.144 85.822 14 .497 1.912 87.734 15 .458 1.760 89.493 16 .418 1.608 91.101 17 .411 1.580 92.681 18 .377 1.450 94.131 19 .329 1.266 95.397 20 .278 1.069 96.466 21 .220 .845 97.311 22 .212 .814 98.125 23 .173 .667 98.792 24 .134 .514 99.306 25 .112 .431 99.736 26 .069 .264 100.000

Extraction Method: Principal Component Analysis.

E = 0.247(e21) + 0.244(e19) + 0.182(e17) asset quality (intermediate) composite index, therefore, it it it it (2) + 0.18(e22)it + 0.042(s52)tit is as follows:

A = 0.285(a6) + 0.261(a7) + 0.176(a8) The third highest weight is on the latent factor of it it it it (3) asset quality, which has 5 individual indicators. These + 0.151(a50)it + 0.099(a4)it indicators are net NPA to total assets with a normalised squared factor loading of 0.285; net NPA to net The fourth latent factor, management efficiency, has advances with a normalised squared factor loading of 3 individual indicators: business per employee with a 0.261; total impaired loans to total assets with a normalised squared factor loading of 0.404; profits per normalised squared factor loading of 0.176; NPL to employee with a normalised squared factor loading of capital with a normalised squared factor loading of 0.373; and profit per branch with a normalised squared factor loading 0.151. The model for management 0.151; and the impaired loan ratio with a normalised efficiency (intermediate) composite index, therefore, is squared factor loading of 0.099. The model for the as follows. Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 971

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Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 973

M it = 0.404(m31)it + 0.374(m38)it + 0.151(m37)it (4) loadings divided by the total sum of the squared factor loadings. Fifth, the latent factor of capital adequacy has 4 individual indicators. This latent factor shares the The weightage for the liquidity intermediate loading of equity to total assets with the latent factor of composite index is calculated by summing the squared liquidity. However, according to the literature, the equity factor loadings of all the indicators of liquidity (0.821 + to total assets should be assigned, so in this study, it is 0.60 + 0.587 + 0.469 + 0.463 + 0.369 = 3.31) divided assigned to the latent factor of capital adequacy rather by total sum of all weights (13.836), which equals than liquidity. Thus, the individual indicators for capital 0.239. This weight of 0.239 is the highest weight, giving adequacy are equity to total assets with a normalised importance to liquidity in the construction of the BSI. squared factor loading of 0.064; capital to risk-weighted The total summation of all weights is 13.836, with the assets with a normalised squared factor loading of sum of the weight of liquidity (3.31) added to the weight 0.247; the capital adequacy ratio with a normalised of earnings and profitability (2.913) added to the weight squared factor loading of 0.191; and debt equity with a of asset quality (2.454) added to the weight of capital normalised squared factor loading of 0.181. The model adequacy (1.612) added to the weight of management for the capital adequacy (intermediate) composite efficiency (1.979) added to the weight of sensitivity to index, therefore, is as follow. market risk (1.568).

Cit = 0.064(c12)it + 0.247(c44)it + 0.191(c11)it + 0.181(c15)it (5) The next highest weight is on earnings and profitability, at 0.211. Similarly, this weightage is The least weight is assigned to the latent factor of calculated by summing the squared factor loadings of sensitivity to market risk. It has 3 individual indicators, all the indicators of earnings and profitability (0.804 + ordered by weight: interest expenses to deposits 0.794 + 0.593 + 0.586 + 0.138 = 2.913) divided by total (weight 0.363), deposit interest expenses as a sum of all the weights (13.836), which equals 0.211. percentage of total deposits (weight 0.262) and total Next, the weightage for the asset quality intermediate securities to total assets (weight 0.216). The model for composite index is calculated by summing the squared the sensitivity to market risk (intermediate) composite factor loadings of all the indicators of asset quality index, therefore, is as follows: (0.719 + 0.659 + 0.445 + 0.382 + 0.249 = 2.454) divided by total sum of all the weights (13.836), which Sit = 0.363(m35)it + 0.262(m32)it + 0.216(s41)it (6) equals 0.177.

The weightage for each indicator is multiplied by The weightage for the capital adequacy each indicator from Bankscope to give the value of the intermediate composite index is calculated by summing intermediate composite index for bank i at time t. The of the squared factor loadings of all the indicators of intermediate composite indices are then multiplied with capital adequacy (0.151 + 0.582 + 0.450 + 0.428 = the weight of the intermediate composite index to form 1.612) divided by total sum of all the weights (13.836), the BSI. The weightage for the intermediate composite which equals 0.117. Similarly, the weightage for the indices are obtained by summing the squared factor management efficiency intermediate composite is

Table 8: Factorability of the Data: Measure of Sampling Adequacy and Test of Sphericity

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Earnings and Capital Management Sensitivity to Liquidity Asset quality profitability adequacy efficiency market risk Selection criteria Eigenvalues 5.09 3.79 2.54 1.96 1.72 1.54 Total variance 63.99% explained Test-statistics Kaiser-Meyer-Olkin Measure of Sampling Adequacy. 0.74 Bartlett's Test of Sphericity Chi-Square 70654.688 df 325 Sig. 0.000 974 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al. calculated by summing the squared factor loadings of all 25 individual indicators are grouped together based all the indicators of management efficiency (0.86 + on highest factor loadings to form 6 latent factors. The 0.796 + 0.322 = 1.979) divided by the total summation next process is the summation of weighted and of all the weights (13.836), which equals 0.143. normalised individual indicators using the method of linear aggregation. The 26 individual indicators for Finally, the weightage for market-sensitivity risk 4,901 observations of 373 banks over a 17-year period intermediate composite index is calculated by summing over 17 years are repeated for aggregation to form the squared factor loadings of all the indicators of latent factors and BSI. sensitivity to market risk (0.676 + 0.489 + 0.403 = 5. PARTIAL ILLUSTRATION OF LINEAR 1.568) divided by the total summation of all the weights AGGREGATION OF INTERMEDIATE INDICES AND (13.836), which equals 0.113. The model of the BSI, BANK STABILITY INDEX therefore, is as follows: This section presents a sample to illustrate the BSI = 0.117C + 0.177A + 0.143M + 0.211E it it it it it (7) aggregation of the individual indicators (Table 9) and + 0.239Lit + 0.113Sit the aggregation of latent factors (Table 10). In Table 9, the data for each individual indicator for AB Bank Ltd in BSIit - BSI for bank i and time t. the year 2015 are multiplied with the respective weight of the individual indicator. For example, in the year Cit - capital adequacy intermediate composite index for 2015, the bank’s liquid assets to total assets ratio is bank i and time t (obtained from manual calculation in 0.83, the deposits in relation to monetary aggregates the first-level linear aggregation). ratio is -0.97, the deposits from non-banks to total

Ait - asset quality intermediate composite index for deposits ratio is 1.00, the deposit growth ratio is 0.00, bank i and time t. the circulating assets to total assets ratio is 15.21, and the loans to total deposits ratio is -1.08. Mit - management efficiency intermediate composite index for bank i and time t. From the factor analysis, the weights for these indicators are 0.176, 0.129, 0.079, 0.126, 0.101 and Eit - earnings and profitability intermediate composite 0.099, respectively. Thus, the aggregations are 0.146, - index for bank i and time t. 0.125, -0.085, 0.126, 0.00 and 1.506, respectively. The

Lit - liquidity intermediate composite index for bank i summation of these aggregations is 1.567, which is the and time t. value of liquidity for the year 2015. These aggregation and summation processes are also applicable to and S - sensitivity to market risk intermediate composite it repeated for the other individual indicators to produce index for bank i and time t. the values of the other latent factors: capital adequacy After assigning weights to each individual indicator (0.985), sensitivity to market risk (-0.075), earnings and and thus contributing to the weightage for latent profitability (-7.567), management efficiency (-0.151) factors, the next stage is to aggregate the weightage and asset quality (-0.350). for all six latent factors to construct the BSI. However, before aggregation, 12 indicators need to be Before aggregation of the individual indicators, reinterpreted as more-is-better or more-is-stable type these latent factors are aggregated to form the BSI. In indicators and thus are simply converted into the Table 10, the values obtained in Table 9 are multiplied opposite sign of negative/positive indicators. These 12 with the weight for each latent factor to produce the indicators are deposits in relation to monetary value for each latent factor. For example, the value of aggregates, loans to total deposits, debt equity, interest the aggregated individual indicators for the latent factor expenses to deposits, deposit interest expenses as a of liquidity is 1.567. This value is multiplied with the percentage of total deposits, total securities to total weight of liquidity (0.239) to produce the value of assets, efficiency of operational activity cost to income, liquidity (0.375). This process of multiplying the value of total impaired loans to total assets, net NPA to total the aggregated indicators for each latent factor with the assets, net NPA to net advances and NPL to capital weight of the latent factor to produce the value of latent and impaired loans. factor is repeated for the other latent factors (capital adequacy, sensitivity to market risk, earnings and Upon converting and standardising the data to profitability, management efficiency and asset quality). reflect more-is-better or more-is-stable type indicators, Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 975

Table 9: First-Level Linear Aggregation Forming Intermediate Composite Indices (Latent Factors) for AB Bank Ltd

Individual Indicator / 2015 Weight Aggregation Intermediate Composite Index / Latent Factor (1) (2) (1) X (2)

Liquid asset to TA (l26) 0.830 0.176 0.146 Deposits in relation to monetary aggregates (l25) -0.970 0.129 -0.125 Deposit from non-bank to total deposit (l46) 1.000 0.126 0.126 Deposit growth (l47) 0.000 0.101 0.000 Circulating asset to total asset (l24) 15.210 0.099 1.506 Loans to total deposits (l29) -1.080 0.079 -0.085 LIQUIDITY 1.567 Return on average asset (e21) 0.560 0.247 0.138 Net profit to average asset (e19) 1.200 0.244 0.293 Efficiency of operational activity-cost to income (e17) -53.180 0.182 -9.679 Return on average equity (e22) 6.700 0.180 1.206 Z-score (moving average) (s52t) 11.312 0.042 0.475 EARNINGS AND PROFITABILITY -7.567 Net NPA to TA (a6) -0.010 0.285 -0.003 Net NPA/Net Advances (a7) -0.010 0.261 -0.003 Total impaired loans to TA (a8) -0.020 0.176 -0.004 NPL to capital (a50) -0.310 0.151 -0.047 Impaired Loan ratio (impaired loans/gross loans) (a4) -2.970 0.099 -0.294 ASSET QUALITY -0.350 Equity/TA (c12) 8.350 0.064 0.534 Capital to risk weighted asset (c44) 8.920 0.247 2.203 Capital Adequacy Ratio (c11) 11.300 0.191 2.158 Debt equity (c15) -21.610 0.181 -3.911 CAPITAL ADEQUACY 0.985 Business per employee (m31) 0.404 0.000 Profit per employee (m38) 0.374 0.000 Profit per branch (m37) -0.999 0.151 -0.151 MANAGEMENT EFFICIENCY -0.151 Interest expenses/deposits (m35) -0.080 0.363 -0.029 Deposit interest expenses as a percentage of total deposits (m32) -0.070 0.262 -0.018 Total securities to TA (s41) -0.130 0.216 -0.028 SENSITIVITY TO MARKET RISK -0.075

Next, the values of these latent factors—liquidity From the factor analysis, 26 indicators have (0.375), capital adequacy (0.115), sensitivity to market significant correlations, which can be group into six risk (-0.009), earnings and profitability (-1.597), factors. Based on this analysis, the results of the management efficiency (-0.022) and asset quality (- hypothesis testing are summarized in table. All the 0.062)—are summed to yield the BSI of -1.199 for AB hypotheses are supported. Bank Ltd for the year 2015. These processes are 5. ROBUSTNESS TEST: SENSITIVITY ANALYSIS repeated for the other selected banks in the sample of the sampling period of 1999–2015 for a total of 4,901 According to Nardo et al. (2008), the development observations. of an index and its intermediate composite indices 976 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al.

Table 10: Second-Level Linear Aggregation Forming the Bank Stability Index for AB Bank Ltd

Intermediate Composite Index / Latent factor Composite Index 2015 Weight Aggregation (1) (2) (1) X (2)

Liquidity 1.567 0.239 0.375 Earnings and profitability -7.567 0.211 -1.597 Asset Quality -0.350 0.177 -0.062 Capital adequacy 0.985 0.117 0.115 Management efficiency -0.151 0.143 -0.022 Sensitivity to market risk -0.075 0.113 -0.009 Bank stability index -1.199

Hypothesis No Hypothesis Statements Results H1 Z-score is a measure of bank stability. Supported H2 Capital Adequacy is a measure of bank stability Supported H3 Asset quality is a measure of bank stability Supported H4 Management efficiency is a measure of bank stability. Supported H5 Earning and profitability are the measures of bank stability. Supported H6 Liquidity is a measure of bank stability. Supported H7 Sensitivity to market risk is a measure of bank stability. Supported involves many subjective judgements, including the from 4,901 cases to 111. This result produces the treatment of missing values and the weights of the necessary weights for the index but embeds it with indicators. The assessment of these uncertainties is correlation and factorability problems. Consequently, important to ensure the quality of the index grounded the Kaiser-Meyer-Olkin measure of sampling on sound assumptions. Thus, sensitivity analysis is adequacy, which measures the adequacy of performed to study the variations and uncertainties in correlations and the factorability of the data, cannot be output and quantify the different sources of variations in produced. Neither can Bartlett’s test of sphericity be the assumptions. This sensitivity analysis is aimed at produced. The adequacy and appropriateness of the gauging the robustness of the index and increasing its results from this factor analysis, therefore, cannot be transparency by highlighting cases or samples that are verified. strengthened or weakened under certain assumptions (Nardo et al., 2008). Next, the sensitivity analysis continues without factor analysis, and the data are run as it is. All the Adapting and modifying the sensitivity analysis cases with at least 1 value are included in the analysis, developed by Nardo et al. (2008), this analysis while cases with 100% missing values are excluded. compares the BSI developed in this study (BSI1) with None of the cases has 100% missing values, so all several others, such as the BSI, based on listwise 4,901 cases are retained in the analysis. However, the deletion to eradicate missing values, as well as equal weight for cases with only 1 value is adjusted weightage, z-scores and Bankscope ratings for the compared to cases with no missing values; in other year 2015. In this sensitivity analysis, the graphs for words, the weight is pro-rated based on the number of each method are compared to determine the better completed values. These values are summed using performance. linear summations to form intermediate composite indicators that measure the latent factors. Finally, the The first sensitivity analysis develops a new BSI weights of these latent factors are also linearly (BSI2) without missing values. For BSIW, factor summed for the BSI (BSI2). analysis is run without imputation, in other words, applying the list-wise deletion. The results of this factor Figure 3 shows the graphs comparing the mean of analysis dramatically reduce the total observations the BSI from the factor analysis used in the study Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 977

Figure 3: Sensitivity Analysis of BSI using same weight (BSI2), weight from factor analysis (BSI1), z-score and Bankscope at bank level for year 2015.

(BSI1) to the BSI with the same weight (BSI2), z-score values than BSI1. In the means ranking, BSI1 ranks and Bankscope rating as the measures of bank stability country 3 (Malaysia) the highest, while BSI2 ranks for the year 2015. The sampling period of 1999–2014 is country 9 (Saudi Arabia) the highest rank. BSI1 gives not included as Bankscope ratings are not available for the lowest rank to country 4 (Pakistan), and BSI2 to other years. The results show that BSI1 differs from country 3 (Malaysia). Comparing the z-scores of BSI1 BSI2, as indicated where the black (BSI1) and green and BSI2, BSI1 records better predictions, with more lines (BSI2) separate in the graph, depicting mean countries with similar trends in the z-score: countries 4 BSI1 versus mean BSI2. Comparing the z-scores of (Pakistan), 7 (Kuwait), 10 (Egypt) and 11 (Turkey). In BSI1 and BSI2, it is noted that BSI1 has fewer peak the other comparison between BSI2 and z-scores, a points where the green line is higher than the black number of countries also have similar patterns. When lines. However, both BSI1 and BSI2 are very different comparing bankscope (bscope) with BSI1 and BSI2, from the Bankscope ratings as there are many green BSI1 performs better with more countries with similar lines not accompanied by any black lines. trends to bankscope.

Figure 3 is overcrowded with information but is Another sensitivity analysis scrutinises BSI2 in all meant to show only the trend analysis only. Figure 4 the sampling periods from 1999 to 2015, as in Figure 5. simplifies the BSI at the country level. BSI2 has larger On the bank level, BSI2 has a larger scale than BSI1.

Figure 4: Sensitivity Analysis of BSI using same weight (BSI2), weight from factor analysis (BSI1), z-score and Bankscope at country level for year 2015. 978 Journal of Reviews on Global Economics, 2019, Vol. 8 Karim et al.

Figure 5: Sensitivity Analysis of BSI using same weight (BSI2), weight from factor analysis (BSI1), z-score and Bankscope for year 1999-2015.

Other comparisons between BSI1 and BSI2 are mixed. measures and practices of the central banks in the Some banks exhibit similar trends in BSI1 and BSI2, selected countries with dual banking systems. The BSI while others have opposite trends. The countries with incorporates all the important indicators from three similar trends are Bangladesh (1), Indonesia (2) and different measures of bank stability and thus is a more Pakistan (4), while the countries with opposite trends comprehensive, robust measure of bank stability. It can are Malaysia (3), the UAE (5), Bahrain (6), Kuwait (7) support more meaningful inferences and substantial Qatar (8), Saudi Arabia, Egypt (10) and Turkey (11). conclusions about banks’ overall financial health. The Comparing z-scores in BSI1 and BSI2, the UAE has BSI is intended to provide a tool to distinguish troubled the highest both. banks from healthy ones. Doing so is crucial prior and during global and local crises. Understanding bank 6. CONCLUSIONS health in term of stability could help bank management and regulatory bodies avoiding banking crises such as Earlier researches compare various segregated that in 2007–2009. Various precautionary measures variables but the comparison of CAMELS indicators could be implemented to avoid more serious impact and the z-score do not yield meaningful inferences from crises and systemic risk in the banking industry. about banks themselves. According to Doumpos, Hasan and Pasiouras (2017), it is very difficult to draw The implementation of the BSI to the selected conclusions about banks’ overall financial health using countries with dual banking systems generates a few this approach. The banking industry, therefore, needs a implications for existing banking regulation and more comprehensive and robust, single measure of policies. At the level of regulatory bodies, the central bank stability. The BSI thus enriches the current banks of these selected 11 countries with dual banking literature on the measures of bank stability. The BSI is systems monitor and report on not only conventional a comprehensive measure of bank stability as it banks but also other banking models, including full- merges all the important indicators of bank stability. fledged Islamic banks, subsidiary Islamic banks and The BSI uses the z-score based on the theory of the conventional banks with Islamic subsidiary bank. The safety-first principle, the principles-based CAMELS central banks record their monitoring and reporting in measures and adapts some of the prevalent bank periodically publications of financial stability reports. Bank Stability Index for Selected Countries with Dual Banking Systems Journal of Reviews on Global Economics, 2019, Vol. 8 979

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.83

© 2019 Karim et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

Journal of Reviews on Global Economics, 2019, 8, 981-987 981 Measuring Conspicuous Consumption Behavior Using Partial Least Square

Nur Liana Kori*, Azmi Mat, Norliza Saiful Bahry and Zarina Abdul Munir

Faculty Business and Management, Universiti Teknologi MARA, 42300 Selangor, Malaysia Abstract: It is known that owning luxurious goods gives people huge fulfilment and exclusivity. For the last few years, the luxury goods market has shown incredibly positive growth. Today, it is no surprise that the market growth has truthfully manifold and this is in fact an honest response to society’s accustomed desire and fantasy, associated with one’s wellbeing, comfort, quality and self-image. The aim of the study is to investigate the four factors of attitude, brand image, patrons status and quality influence on conspicuous consumption behavior among 400 customers that visited and shoped at Suria KLCC, Pavilion and Starhill Gallery in Kuala Lumpur, Malaysia. The survey was conducted to collect data and had been analyzed further using Partial Least Square (PLS). The tested factors were found to be statistically significant. The trend and purchasing power could be better comprehended based on the findings obtained from the study. Keywords: Conspicuous Consumption Behavior, Attitude, Brand Image, Patrons Status Quality.

1. INTRODUCTION undergone a great transformation with more and more brands entering the market, and numerous It is known that owning luxurious goods gives international brands have entered within the last few people huge fulfilment and exclusivity. For the last few years as well (Khan and Khan, 2008). In the Protégé years, the luxury goods market has shown incredibly Associates Independent Market Report (2007) the positive growth. Today, it is no surprise that the market apparel industry industry is to now be worth an growth has truthfully manifold and this is in fact an estimated RM 3.26 billion, approximately USD 1.1 honest response to society’s accustomed desire and billion (Khan and Khan, 2008). Brand consciousness fantasy, associated with one’s wellbeing, comfort, among Malaysian society has increased tremendously, quality and self-image (Husic and Cicic, 2009). The especially among youth such as college and university luxury world market worth has grown from $20 billion in students and young working adults (Kamaruddin and 1985 to $68 billion in 2000 (Husic and Cicic, 2009). It is Mokhlis, 2003). Most of young professionals are also estimated that the total value of luxury market is at using their money to purchase luxury products to $840 billion in 2004 and reaching $1 trillion in 2010 designate their status in society (Kamaruddin and (Fiske and Silverstein, 2004; Luxury Institute, 2007; Mokhlis, 2003). Metha, 2006). According to Karen Watson, Chief Communications Officer, ACNielsen Company, many The luxury goods market in Malaysia is growing international brands have considered Asia as a major rapidly at present. Thus, while the country is enjoying sales region, with the improving personal financial collecting luxury tax, those who have been following status of Asian consumers and with the opening up of the trend by spending their money living lavishly might various developing markets, there is a huge room for suffer in the long run. The social pressure to live growth in the luxury sector (Consumer and Designer beyond means among Malaysian, has led to several Brands, April 2008) social problems. In June 2011, a girl was caught prostituting in order to gain fund for luxury shopping. The luxury goods sector in Malaysia has been She collected a whopping RM 30,000 throughout her growing along with the rest of the world over the past school holiday by charging RM 250 to RM 800 for thirteen years (Run, Butt and Nee, 2010). Exclusive every client. The schoolgirl was reportedly not to be the shopping centres such as the Kuala Lumpur City only one who admitted to selling sex in the name of Center (KLCC), Pavilion, The Garden and Star Hills luxury goods (The Star, 2011). Furthermore, according were built over the years and have been fulfilling the to the statistics of the Malaysia Department of society’s growing demand for international luxury Insolvency, 41 Malaysian are declared bankrupt every goods. Moreover, the apparel industry in Malaysia has day with almost 51.9 percent below the age of 44. Of the total 116,379 bankruptcy cases between 2005 and

*Address correspondence to this author at the Faculty Business and April 2012, 32.3 percent were between 35 and 44 years Management, Universiti Teknologi MARA, 42300 Selangor, Malaysia; of age, 26.6 percent were aged 45 to 54, 18.3 percent Tel: +603-32585033; Fax: +603- 32587000 / 7111; E-mail: [email protected] were aged 25 to 34, 12.4 percent were aged 55 and

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 982 Journal of Reviews on Global Economics, 2019, Vol. 8 Kori et al. above and 1.4 percent were aged below 25. The most why people reaction into the action. There are many common reasons for their bankruptcy were outstanding factors related to the conspicuous consumptions and car loans, personal loans, housing loans and credit will further to explain in the literature. Prior to the study, card debts. It is due to these indefinite problems that individual tend to behave as conspicuous consumption this research is conducted, primarily to recognize due to incentive and motivation (Fajr, 2013) but it is not factors influencing luxury consumption of fashion adequate for further discussion. Another factor gain products among Malaysian consumers. interest of conspicuous consumption is brand name and image (O’Cass, 2001). In the study, O’Cass (2001) An individual behaviour is challenging to predict. An mentioned that brand is a symbolic characteristic to individual is having luxury product purposely meet their increase positive emotions to the product and services. satisfaction. But it can also be misled to a conspicuous In a recent study by Nasab, Shojaee and Moshkdanian consumptions behaviour with meaning to get the (2016) explained several factors affecting conspicuous attention of others towards their wealth (Eastman & Liu, consumption among young people such as social 2013). This reaction may form unnecessary gap of comparison information, consumers’ need for status and power among them. Previous reports uniqueness, consumer susceptibility towards reported that there are many factors contributing to the interpersonal influence and lifestyle. behaviour such as recognition, appreciation, visibility and popularity. Hence, this study aims at predicting the 3. METHODOLOGY factors that potentially influence conspicuous consumptions towards luxury fashion products among A quantitative research has been conducted to customer in local shopping malls. Previously, there investigate the influence of attitude, brand image, were numerous literatures defining the factors of patron status and quality towards conspicuous conspicuous consumptions such as demographic consumption behaviour among 400 customers that (Jackson et al., 2011), attitude (Gil, Kwon, Good & mostly visited and shopped at Suria KLCC, Pavilion Johnson, 2012), brand prestige (Li, Li, Kembele, 2012), and Starhill Gallery in Kuala Lumpur, Malaysia. These and quality (Yeoman, 2011). However, the three shopping malls have 111 of luxury fashion inconsistency of the finding motivates this study to boutiques; 26 boutiques in Suria KLCC, 44 boutiques in investigate the most dominant factor of conspicuous Pavilion and 41 boutiques in Starhill Gallery. In this consumptions towards luxury fashion products. The case, the customers were selected based on the investigation was carried out based on the Theory of following criteria; a customer that purchases luxury Leisure Class adapted from Veblen (1899). The products, earns monthly income as they have a objective of this study is to investigate the significant purchasing power and ability to make a decision about relationship of attitude, brand image, patrons status their purchase and aged between 25 years old and and quality influence on conspicuous consumption above assuming that they have a job with stable behaviour among 400 customers that visited and income. The items of brand image, quality and patron shopped at Suria KLCC, Pavilion and Starhill Gallery in status were adapted from Schmelz, Moore, and Goebel Kuala Lumpur, Malaysia. (2000). Meanwhile, the items of attitude towards the conspicuous consumption behaviour. were adapted 2. LITERATURE REVIEW from Kilsheimer (1993) and items of conspicuous consumption behaviour were adapted from O’cass and According to Theory of Leisure Class adapted from Frost (2002) and Truong (2010). Most of the items Veblen (1899), conspicuous consumptions means used were tested using five Likert scales which 1 reputability to the gentleman of leisure. It is purposely present as strongly disagree and 5 strongly agree. to display the wealth that belongs to them. It also represents an individual‘s reputability, differentiation or 4. RESULT AND DISCUSSIONS distinction within the class, honorific, humiliating and on the rank of the person for whom the service is Table 1 shows that 36.5 percent of the customers performed or whose livery is worn (Veblen, 1899). It aged less than 30 years old (n=146). 31.5 percent changes an individual behavior towards the luxury aged between 30 to 42 years old (n=126) and 32 product and the environment. As a result, an individual percent aged more than 42 years old (n=128). This tends to create a gap or distinction with other people. It indicates that majority of the customers that visited and shows the credibility, richness, wealth, status and spent at Suria KLCC, Pavilion and Starhill Gallery were power belongs to them. However, there is a reason young people. The result also revealed that female Measuring Conspicuous Consumption Behavior Using Partial Least Square Journal of Reviews on Global Economics, 2019, Vol. 8 983

(n=285) with 71.2 percent and male (n=115) with 28.8 4.1. Purchasing Pattern of Luxury Fashion percent participated in this study. There was 66.2 Products percent married couples (n=265) and only 33.8 percent single (n=33.8). In a further analysis of the customer's The purchasing patent of the respondents are criteria, there were 45.2 percent of the customers work shown in Table 2. The highest percentage was as technicians and associate professionals (n=181), “Handbag” (77.0%), followed by “Shoe” (70.8%), followed by 16.2 percent of them work as clerical “Apparel” (67.5%), “Watch” (66.2%) and “Jewellery” support (n=16.2) and 12 percent of them work in a (61.7%). These results showed that more than half of professional profession (n=48). There were least of the respondents are indulging themselves with the customers in managerial posts (n=25), services and handbags, shoes, apparel, watches, and jewelry. The sales (n=39), self-employed (n=40) and retiree (n=2). majority of the respondents were female (71.2%) and This explains that the customers have a stable job and preferred handbags likely owing to the fact that income. The result also discovered that the highest handbags are functional, practical and fashionable group with 64.5 percent of household monthly income (Husic and Cicic, 2009). This concludes that most of was found to be between RM 2501 to RM 5000 the young customers with good position participated in (n=258) justifying why and only 5.7 percent of the this survey were willing to spend more on the luxury customer were group in more than RM8000 to product. RM20,000 and above (n=23). Table 2: Purchasing Pattern of Luxury Fashion Products Table 1: Demographic Analysis

Types of Products Yes (n=400) Percent (%) Variables Frequency (n) Percent (%) Handbag 308 77.0 Age (years old) Less than 30 years old 146 36.5 Shoe 283 70.8 30-42 years old 126 31.5 Apparel 270 67.5

More than 42 years old 128 32.0 Watch 265 66.2 Gender Jewellery 153 61.8 Male 115 28.8

Female 285 71.2 Marital Status 4.2. Construct Validity Single 135 33.8 Married 265 66.2 Construct validity was carried out to measure the Occupation consistency of the items tested measurable to the Managers 25 6.2 study. In Partial Least Square (PLS) a construct validity was conducted to identify each item loading that the Professionals 48 12.0 threshold values must exceed 0.5 (Hair, Black, Babin, Technicians & Associate 181 45.2 Professionals & Anderson, 2010). Table 3 showed all the loading for Clerical Support Workers 65 16.2 the item tested exceeded the cut off values of 0.5 and Services & Sales Workers 39 9.8 this indicates that all the items used in this study were loaded highly on the constructs. Then the composite Self Employed 40 10.0 reliability was analyzed and the cut off values as Retiree 2 0.5 recommended by Hair et, al, (2010) was greater than Personal Monthly Income 0.7. The average variance extracted (AVE) measure Below RM1500 8 2.0 the variance captured by the indicator relatives to RM 1501-RM2500 52 13.0 measurement error and the threshold values should RM 2501-RM5000 258 64.5 exceed 0.50 (Barclay et al., 1995). The finding further RM 5001-RM8000 59 14.8 indicated the composite reliability was greater than 0.7 RM 8001-RM15000 20 5.0 and the AVE values exceed 0.50 which was in the RM15001-RM20000 1 0.2 range of 0.659 to 0.843. 33 indicators of five constructs Above RM20000 2 0.5 were validated and reliable used in this study. 984 Journal of Reviews on Global Economics, 2019, Vol. 8 Kori et al.

Table 3: Construct Validity

Composite Average Variance Constructs Item Item Loading Reliability (CR) Extracted (AVE)

ATT1 0.924 0.753 0.74 ATT2 0.93 ATT3 0.929 Attitude ATT4 -0.746 ATT5 0.876 ATT6 -0.735 BI1 0.804 0.939 0.659 BI2 0.666 BI3 0.781 BI4 0.868 Brand Image BI5 0.849 BI6 0.859 BI7 0.774 BI8 0.874 CCB1 0.842 0.977 0.843 CCB2 0.899 CCB3 0.911 CCB4 0.952 Conspicuous Consumption Behaviour CCB5 0.942 CCB6 0.941 CCB7 0.917 CCB8 0.935 PATS1 0.934 0.961 0.833 PATS2 0.834 Patron Status PATS3 0.948 PATS4 0.936 PATS5 0.907 QLT1 0.737 0.916 0.645 QLT2 0.808 QLT3 0.856 Quality QLT4 0.74 QLT5 0.813 QLT6 0.856

4.3. Discriminant Validity shared between the construct and other constructs (Chin, 1998b). To test the discriminant validity, Fornell A discriminant validity was conducted to examine Lacker assessment was conducted and the result as the cross loading between the construct and construct. tabulated in Table 4, found the values on the diagonal The assumption of discriminant validity that items were greater than the corresponding row and column should load more strongly on their own construct and values. This explains that the constructs were the average variance share between each construct discriminants. From the convergent and discriminant and its measure should be greater than the variance validity above showed that there was highly internal Measuring Conspicuous Consumption Behavior Using Partial Least Square Journal of Reviews on Global Economics, 2019, Vol. 8 985

Table 4: Fornell Lacker Assessment

Constructs 1 2 3 4 5

1. Attitude 0.86 2. Brand Image 0.779 0.812 3. Conspicuous Consumption Behaviour 0.778 0.708 0.918 4. Patron Status 0.808 0.670 0.719 0.913 5. Quality 0.586 0.691 0.602 0.597 0.803

Figure 1: Measurement Model. consistency of the indicators measured the construct between the attitude, brand image, patron and quality and the construct was no issue on discriminant validity. towards conspicuous consumption behaviour. This finding was consistent with the previous studies that used the similar items and constructs. The meet In addition, to obtain significant of the relationship, a the high internal consistency which ranges from 0.77 to bootstrapping with 500 sample was conducted to 0.99 (Deeter-Schmelz et al., 2000, Kilsheimer, 1993, determine the path loading and t-values. The Bush and Martin, 2000). relationship measured that significant values should less than 0.01 with the t-values must exceed 2.33. 4.4. Structural Model Table 5 showed that there was positive and statistically significant relationship of attitude (β= 0.415, t- values = In a structural model, the investigation was on a 5.002, p<0.01), brand image (β= 0.165, t- values = causal relationship between patron status, brand 2.664, p<0.01), patron status (β= 0.198, t- values = image, quality, attitude and conspicuous consumptions 2.684, p<0.01), quality (β= 0.415, t- values = 2.935, 2 behavior. The R values of 0.658 explained that 65.8 p<0.01) and conspicuous consumption behaviour. percent of conspicuous consumption behaviour was However, the significant relationship was on small explained by attitude, brand image, patron status and effects as recommended by Cohen (1988) the f square quality. This indicates that there is a high correlation 986 Journal of Reviews on Global Economics, 2019, Vol. 8 Kori et al.

Table 5: Structural Model

R Square Path Coefficient R Square Beta SE T- Values P Values F Square LL UL Adjusted

Attitude -> Conspicuous 0.415 0.083 5.002 p<0.01 0.123 0.013 0.034 Consumption Behaviour Brand Image -> Conspicuous 0.165 0.062 2.664 p<0.01 0.025 -0.04 0.039 Consumption Behaviour 0.658 0.655 Patron Status -> Conspicuous 0.198 0.074 2.684 p<0.01 0.037 -0.025 0.046 Consumption Behaviour Quality -> Conspicuous 0.127 0.043 2.935 p<0.01 0.023 0.022 0.062 Consumption Behaviour less than 0.2 was small effects. The result showed the engage in conspicuous consumption behavior when values f square of attitude (f 2 = 0.123), brand image (f 2 buying luxury products. The attitude changes an = 0.025), patron status (f 2 = 0.037), and quality (f 2 = individual perception on the social standing, and they 0.023) were less than 0.1 and this indicates the small highly prefer the visible status of the products to those effects on conspicuous consumption behaviour. that are privately consumed. The wide exposure to global media has enticed people to go for branded This further supported with the values of confidence goods. The brand image stimulates a customer to interval bias-corrected (CI) of the lower limit (LL) and process information, differentiating the brand, upper limit (UL). The result explained that if there is a generating purchasing reasons, and creating positive statistically significant relationship, the values of the feelings. Furthermore, the quality of luxury products lower limit and the upper limit was not straddled on could be on the top priority among all the factors. It is values of zero. From the finding for attitude (LL= 0.013, undeniably true that the perception of the luxury UL = 0.034) and quality (LL= 0.022, UL = 0.062) products brings about a pronounced effect on their confirmed there were statistically significant conspicuous consumption behavior. relationship between conspicuous consumption behaviour. Thus hypothesis 1 and hypothesis 4 was ACKNOWLEDGEMENT supported by this study. However, the exception of brand image (LL= -0.04, UL = 0.039) and patron status This research supported by Research Grant of (LL= -0.025, UL = 0.046) found the values of Lestari (600-IRMI/MyRA 5/3/Lestari (091/2017)) and confidence interval bias corrected were straddled on Universiti Teknologi MARA (UiTM). zero and this confirmed that brand image and patron REFERENCES status were not statistically significant on conspicuous consumption behaviour. Hence, hypothesis 2 and Barclay, D., Higgins C. and Thompson R. 1995 The Partial Least hypothesis 3 were not supported by this study. Squares PLS Approach to Causal Modelling: Personal Computer Adoption and Use as an Illustration. Technology 5. RECOMMENDATION FOR FUTURE RESEARCH Studies, 2 (2), 285-309. Bush, A.J. and Martin, C.A. 2000. Do role models influence teenager’ purchase intentions and behaviour? Journal of Consumer In the future, the study can be extended to Marketing. 17(5): 95-106. investigating the role of gender and income as https://doi.org/10.1108/07363760010341081 moderator to discover the significant relationship Chin, W.W. 1998b, “The partial least squares approach to structural equation modelling”, in Marcoulides, G.A. (Ed.), Modern between attitude, brand image, quality, patron status Methods in Business Research, Lawrence Erlbaum and conspicuous consumption behaviour. Associates, Hillsdale, NJ, pp. 295-336 Consumers and Designer Brands: A Global Nielsen Report: New 6. CONCLUSION York, USA, 2008. Deeter-Schmelz, D. Moore, J. and Goebel, D. 2000. Prestige clothing shopping by consumers: a confirmatory assessment and This study aims to investigate the significant refinement of the PRECON scale with managerial relationship between attitude, brand image, patron implications. Journal of marketing Theory and Practice. 8: 43- 58. status, quality and conspicuous consumption behavior, https://doi.org/10.1080/10696679.2000.11501879 statistically. Respondents were mostly interested to Measuring Conspicuous Consumption Behavior Using Partial Least Square Journal of Reviews on Global Economics, 2019, Vol. 8 987

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.84

© 2019 Kori et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

988 Journal of Reviews on Global Economics, 2019, 8, 988-997 Effects of Subjective Knowledge and Religious Motives on Malay Muslims’ Receptiveness of Non-Muslim Country’s Halal Food Products

Hasman Abdul Manan1, Shahira Ariffin1,* and Tengku Sharifeleani Ratul Maknu2

1Faculty of Business & Management, Universiti Teknologi MARA, 42300 Puncak Alam, Selangor, Malaysia 2Faculty of Business and Management, Universiti Teknologi MARA Negeri Sembilan, 70300 Seremban, Negeri Sembilan, Malaysia Abstract: Most imported food products from non-Muslim countries have Halal logos on the packaging but news on fake Halal logos has been circulating in the media on many occasions; because of the disgraceful act by firms that craved for a slice of the highly profitable global Halal food market. Hence, the objective of the study was to examine the effects of subjective knowledge and religious motives on Malay Muslims’ receptiveness toward non-Muslim country’s Halal food products. The convenience sampling method was used to collect data from 450 Malay Muslims within the Greater Kuala Lumpur/Klang Valley region. Results have shown that trust and subjective norm mediated the relationship between subjective knowledge and receptiveness, whereas, religious motives had no effect on receptiveness. Essentially, it is important for global Halal foods’ players to obtain adequate information on consumers’ decision-making behaviors in different markets; for the benefits of their marketing and promotional efforts. Keywords: Halal, Malay Muslim, Non-Muslim Country, Receptiveness, Food market.

1. INTRODUCTION “And whoever chooses other than al-Islam as his Din - then it will never be accepted For Muslims, the term Halal reigns supreme since it from him, and he, in the Hereafter, will be is a manifestation of one’s total submission and among the losers.” (Al-Imran: 85) obedience to God’s commands. As a religion, “Islam guides the way on how Muslims should conduct Fascinatingly, the Halal market has emerged as the themselves to earn Allah’s blessings and mercifulness new global economic phenomenon with a strong in every facet of their life, where its teachings have presence in developed nations (Elasrag, 2016). Halal is been taught and instilled in every believer ever since no longer been viewed as purely a religious obligation childhood, and it also serves as the guidance for for Muslims but a very lucrative and the fastest growing humanity” (Mustafar & Borhan, 2013, p.1303). Also, global industry (Rezai, 2008). Based on the 2018/19 Islam manages as well as limits Muslims behaviors as Global Islamic Economy Report, Muslims spent around consumers to ensure its followers accomplish USD 2.1 trillion across the food, beverage and lifestyle “prosperity, peace, and happiness in this world and sectors in 2017 (“State”, 2018). The report also predicts hereafter” (Mustafar & Borhan, 2013, p. 1301). Muslims’ spending to reach USD 3 trillion in 2023 Essentially, all Muslim consumers must obey the (“State”, 2018). As well, the global Halal market is commands of Allah in the Holy Quran which ruled that expected to be worth more than USD 5 trillion by 2020 their buying behaviors ought to be consistent with the (Bodiat, 2017). On the home front, the Halal market is Halalan Toyyiban concept, thus signifying Islam as ad- very competitive as local and international brands are din (a complete way of life) and simply not only a vying for limited shelf spaces at retail outlets to capture myriad of religious practices. As the words of Allah the attention of their targeted market segments (Shafie (s.w.t): & Othman, 2009). This opinion found support in Chan (2014) assessment, where he explained that Malaysia "O' mankind! eat of what is in the earth has a mature Muslim consumer market and a robust lawful and good; and do not follow the demand for Halal products. footsteps of Satan. Surely he is a manifest foe for you." (Al-Baqarah: 168) Commercially, Halal has grown into a significant market parameter that continues to expand across multiple subsectors of the food supply chain (“What is Halal,” 2016) and food is one of Malaysia’s most

*Address correspondence to this author at the Faculty of Business and important import items, of which, it had accounted for Management, Universiti Teknologi MARA, Puncak Alam Campus 42300, Selangor, Malaysia; Tel: +60332585190; E-mail: [email protected] 7.8 % of the country’s total imports in 2017 (Italian

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Effects of Subjective Knowledge and Religious Motives on Malay Muslims’ Receptiveness Journal of Reviews on Global Economics, 2019, Vol. 8 989

Trade Agency, 2018). Additionally, the total imports for lifestyles from other ethnics in Malaysia since religion, edible agricultural products in 2017 was USD 11.8 society, and family shaped their cultural hence, have its billion; whereas, USD 12.3 billion is the estimated place in a collectivist society. As an important cultural figure for 2018 (“Malaysia”, 2018). Interestingly, element, religion imbues a very significant influence on economists have predicted Malaysia to become one of individuals among the Malays in Malaysia. The Malays Southeast Asia’s most attractive markets by 2050 due in Malaysia professes the religion of Islam which is also to its increasing wealth level and a more urbanized the unifying factor that binds all the Malays in the population (“Report”, 2017). Notably, all foods are nation (Lai et al., 2010). Kamaruddin and Kamaruddin lawful for Muslims’ consumptions except those that (2009, p.38) mention “a Malay is born into a culture and contain alcohol and harmful ingredients along with religion simultaneously, and one who rejects Islam is foods derived from prohibited animals (“What is Halal,” no longer legally considered Malay.” Moreover, the 2016). Then again, it is hard to gauge and authenticate relationships within the Malay ethnic are mainly Halal even upon or immediately after consuming the hierarchical and collective as the younger generations food products (Komitopoulou, 2013); in which, Darby are expected to submit and conform to the leadership and Karni (1973) refer to as credence quality attribute. of the elderly (Lai et al., 2010). A study on ethnic identification revealed that the Malays in Malaysia Irrefutably, most imported food products from non- preferred to identify themselves as Muslim instead of Muslim countries have Halal logos (of their respective by ethnic race or nationality since being a Muslim countries) on the packaging to symbolize the Halalness signify a much deeper sense of belonging (Wee, 2015). of the brands. Even so, there are alarming issues of Halal logos and certificates abuses in both Muslim and Malay Muslim consumers were the chosen non-Muslim countries (Zainal et al., 2010). An article respondents for the study. Essentially, the Malays are written by Halal Monitoring Committee (Halal HMC, known to be a rather closely knitted community, 2013) revealed that the term Halal has become the conventional with high cultural values, and they are most abused word by Muslims and non-Muslims. The flourishing on being collectivists. Zamani (2003 as cited word ‘Halal’ can be seen at many places without any in Hei et al., 2011) is in the opinion that the Malay kind of regulation and corroboration and thus, Muslim communities are unique due to the set of qualities like consumers are made to believe that these products are high tolerance level, humble, hospitable, and genuinely Halal (Halal HMC, 2013). News on fake Halal unassuming. On the contrary, the other ethnic groups logos has been circulating in the media on many in the country do not inherit these attributes (Zamani, occasions; because of the disgraceful act by firms that 2003; as cited in Hei et al., 2011). Additionally, Lai et craved for a slice of the highly profitable global Halal al. (2010) observes some of the attributes of the food market (Abdul et al., 2009). Hakimah Mukhtar, the Malays have remained intact despite the massive influx Halal Hub director for the Department of Islamic of other cultures with different lifestyles and behaviors. Development Malaysia (JAKIM), disclosed, Halal Noor et al. (2013) explain food is an essential element certification is just a part of the organizations’ for the Malays since it has long been integrated into marketing ploys (Habibshaz, 2012). The statement numerous religious and social festivities especially found support in a post by Coconuts Media (i.e. an during both Muslim’s celebrated Hari Raya, wedding online multinational media organization across Asia) ceremony and the various types of religious-oriented where it was reported that consumers felt the Halal kenduri or feasts. Moreover, food is a significant tool certification acquired by an Islamic fashion brand is that can bond members of the family together and, merely a shameless marketing gimmick to promote its between societies; given that food has part of the so-called Islamic product (Coconuts Jakarta, 2016). As Malays’ culture and lifestyles (Noor et al., 2013). well, Hassan Bayrakdar, a Halal consultant questions Moreover, ethnocentric sentiment has a major effect on the move by a company to gain a Halal certification for the attitudes of Malay Muslim consumers, particularly its hygiene products as he believed that companies when it comes to their product choices (Mokhlis et al., nowadays are using Halal certification just to gain the 2001). competitive edge rather than for compliance purpose (Alim, 2019). Looking at the present scenario, the objective of this study was to examine the effects of subjective The Malays represent the largest race in Malaysia knowledge and religious motives on Malay Muslims’ (Lai et al., 2010). According to Kamaruddin and receptiveness toward non-Muslim country’s Halal food Kamaruddin (2009), the Malay ethnic has distinctive products. The study may likely be part of the early 990 Journal of Reviews on Global Economics, 2019, Vol. 8 Manan et al. initiatives in examining Malay Muslim consumers’ food- Subjective norm is the perceived social pressure related behaviors toward imported Halal foods from that referent others placed on individuals; whether to non-Muslim countries, within a collectivist social execute or refrain from performing the behaviors (Al- setting. Malaysia is essentially a collectivist society Nadhi et al., 2015). For the purpose of the study, (Hofstede, 2011). The modified Theory of Reasoned subjective norm is defined as Malay Muslim consumers Action (TRA) formed the basis for the study’s beliefs those people who are important to them would theoretical framework. The addition of three constructs approve or disapprove of their food choices. (i.e. subjective knowledge, trust, and religious motives) in the model is based on the empirical evidence in In line with Alam and Sayuti (2011) finding that extant literature from various field of studies such as establishes behavioral intention is a function of marketing, hospitality, health, and tourism. Moreover, subjective norm, therefore, Malay Muslim consumers’ TRA has been empirically proven to predict the receptiveness toward imported Halal foods from behavioral intention of Malaysian Muslim consumers Muslim-minority nations may well be under the toward Halal food products (Lada et al., 2009). influence of perceived social pressure or subjective norm. Besides, conforming to in-group’s wishes is a 2. LITERATURE REVIEW common trait among individuals within the collectivist society (Triandis et al., 1988). On the other hand, the There are three types of knowledge namely purchasing behaviour of many Malay Muslims are subjective knowledge, objective knowledge, and prior becoming more individualistic as the result of experience (Brucks, 1985). Subjective knowledge globalization and modernization in the country; which represents one’s perceived self-estimated knowledge has led to a new socio-economic formation (Hashim, whereas objective knowledge denotes an individual’s 2006). Hays (2015) adds that Malay Muslims living in factual knowledge; but a prior experience which refers urban areas have made known of their inclination to to the consumer’s experience has only little influence adopt the Western lifestyle and its liberal ways. As on behavior (Brucks, 1985). For the study, subjective such, the influence of subjective norm on Malay knowledge can be defined as Malay Muslim consumers Muslims’ food choices should be determined for the self-rated knowledge about Halal. benefit of the brand owners and marketers. As for Naturally, knowledge plays a crucial role in receptiveness toward Halal food products from non- constructing the pattern on how consumers would Muslim countries is defined as Malay Muslim collect, organize, and apply information regarding food consumers’ willingness to accept the Halal food products as well as a significant attribute in their products from non-Muslim countries. Hence, decision-making processes (Pieniak et al., 2010). It has Hypothesis 3: Subjective norm has a significant been established that knowledge influences positive effect on Malay Muslim consumers’ consumers’ buying behaviors (Von Noormann, 2009: receptiveness of Halal foods products from non- Alam & Sayuti, 2011). This statement is consistent with Muslims countries. O’Fallon et al. (2007) and Liu et al. (2012) conclusions that specified knowledge shaped one’s trust and Trust is the consumers believe toward information attitude respectively. Also, knowledge is a known regarding Halal. It is essential in the absence of antecedent of subjective norm (Bates et al., 2007; Kim product warranties coupled with the elements of et al., 2014). Statistically, subjective knowledge has uncertainty and risk involved in purchasing products demonstrated to be the stronger motivator of (Crosby et al., 1990, as cited in Ali et al., 2017). Trust is consumers’ buying-related behaviors than objective also a major factor in one’s decision to purchase new knowledge (Raju, et al., 1995; Aertens et al., 2011). products (Yun et al., 2008). The ability to trust signifies Thus, an important facet in any relationship especially with those that would have a profound effect on a person’s Hypothesis 1: Subjective knowledge on Halal has life (like one’s wellbeing). Essentially, trust on the a significant positive effect on Malay Muslim Halalness of imported goods from non-Muslim nations consumers’ trust toward Halal food products from non- construes a ‘leap of faith’ for Muslims. In placing more Muslim countries. emphasis, Ali et al. (2017) claimed that trust toward the Hypothesis 2: Subjective knowledge on Halal has Halalness of foods purchased and consumed is quite a a significant positive effect on Malay Muslim delicate matter to Muslim consumers since they are not consumers’ subjective norm. able to verify the Halal authenticity of food products Effects of Subjective Knowledge and Religious Motives on Malay Muslims’ Receptiveness Journal of Reviews on Global Economics, 2019, Vol. 8 991 even after consumption. Irrefutably, trust is a key toward imported Halal food products from non-Muslim element in the consumption of Halal foods; of which, countries which comprise of five (5) items per this trust together with the trust on Halal certification construct. The items for subjective knowledge were the and supply chain members would greatly influence the revision of Flynn and Goldsmith, (1999); Berlin (2006), behavior of Muslim consumers (Ali et al., 2017). and, Ambali and Bakar (2012) lists of questions. Therefore, Meanwhile, Ou and Sia (2010) works provided the basis for the questions on trust. Religious motives Hypothesis 4: Trust has a significant positive effect items were adapted from Honkanen et al. (2016) and on Malay Muslim consumers’ receptiveness toward Rahman et al. (2013). While, Berlin (2006) and Dunn Halal food products from non-Muslim countries. (2008) studies served as the groundwork for the development of subjective norm questions. Finally, the Cultures have significant effects on individuals’ food revised items for receptiveness were taken from Han choices (Dindyal & Dindyal, 2003) and their impacts on (2006) and Huh et al. (2009) studies. food choice varies among societies and individuals. Food choice is a unique psychological process A self-administered structured questionnaire with a consisting of multiple factors such as motives, six-point Likert scale was used to measure all variables personality, and attitude toward food, that combined to where every item encompasses the following answer influence the individual’s mind in all sort of ways, which categories: 1 (strongly disagree), 2 (moderately subsequently resulted in the food being preferred or disagree), 3 (disagree), 4 (agree), 5 (moderately agree) disliked (Babicz-Zielinska, 2006). Notably, religion is and 6 (strongly agree). The purpose of this six-point the most significant determinant of food choice motives scale was to collect feedback from the respondents among adult consumers in urban communities within a without any worries on them giving neutral responses. multi-ethnic country like Malaysia (Rahman et al., The areas of investigation were confined to several 2013). For the purpose of this study, religious motives locations that have major shopping complexes within is defined as Malay Muslim consumers motives to the Greater Kuala Lumpur/Klang Valley boundary. The consume foods are significantly influenced by their shopping mall interception technique was adopted as a religion. tool for data collection, as recommended by Zikmund (2003); utilizing the convenience sampling method. It is important for Muslims to consume foods that Statistical Package for Social Science (SPSS) and are consistent with the requirements of the Islamic law Structural Equation Modeling (SEM) via AMOS (version or Syariah law. The Islamic diet has proven to be 24.0) were the statistical procedures for the study. SEM beneficial to Muslims physical wellbeing and has is an analysis technique that requires a large sample, become more apparent with results from various Halal and a sample size of at least 400 is more desirable food researchers (e.g. International Institute of Halal since the goodness-of-fit indices are starting to Research and Training) which have underlined the demonstrate their asymptotic properties at this number sheer wisdom of Allah (s.w.t). Hence, (Hu et al., 1992, as cited in Tinsley & Brown, 2000). Hypothesis 5: Religious motives have significant Consequently, the study had collected responses from positive effect on Malay Muslim consumers’ 450 Malay Muslim consumers; in which, the receptiveness toward Halal food products from non- researchers viewed as empirically adequate for a good Muslim countries. quantitative data analysis using SEM.

3. METHOD 4. RESULTS AND DISCUSSION

The questionnaire in this study was divided into two It was found that most Malay Muslim respondents separate sections and was separated by headers; to were females (58.4%). Moreover, 51.3% of the ensure a natural and smooth progression from respondents are between 26 to 40 years old, 79.6% segment to segment for respondents to follow and have tertiary level education and many of them are answer all questions without much hassle. The first married (47.6%). section or Part A comprised questions about the The construct validity of the study’s questionnaire samples’ socio-demographic profiles. In Part B, the was measured using the exploratory factor analysis respondents were required to evaluate their (EFA) as advocated by (Pantazis, 2012). Equally, Saad psychological tendencies (i.e. food-related behaviors) (2014) mentions EFA is a data exploration tool that is 992 Journal of Reviews on Global Economics, 2019, Vol. 8 Manan et al. used to determine the number of variables and the Table 1: Exploratory Factor Analysis underlying factor structure that need to be analyzed; as well as to find out representative constructs for the Factor / Items Factor Loading ensuing analysis. Factor analysis is mostly employed by researchers as an exploratory technique in which KMO = 0.852 the goal is to summarize the structure of a set of Barlett’s Test Sig.level = 0.000 variables (Coakes & Ong, 2011). To test the content’s Total percentage (%) of variance explained = 77.54% adequacy for the factor analysis; the Bartlett’s Test of SKnow1 pretty much 0.804 Sphericity (Bartlett’s test) and the Kaiser-Mayer-Olkin SKnow2 knowledgeable 0.860 (KMO) were used to evaluate the Measure of Sampling SKnow3 familiar 0.890 Adequacy. According to Hair et al. (2007) the measure SKnow4 know 0.850 of sampling adequacy is a statistical test to serve to quantify the level of inter-correlations between the Sknow5 Expert 0.774 determinants. Trust1 Reliable 0.812 Trust2 Dependable 0.854 Extant literatures have recommended that for the Trust3 Genuine 0.842 factor analysis to be deemed appropriate; the Bartlett’s test must have a significant level of 0.01 (p < 0.01) or Trust4 Trustworthy 0.869 0.05 (p < 0.05) and a KMO value of 0.50 and above. Trust5 Accurate 0.849 Field (2009) explains a KMO index range between 0.0 SNorm2 other people 0.817 to 1.0, and analysis results between: (1) 0.50 to 0.70 SNorm3 sense of belonging 0.807 are mediocre; (2) 0.70 to 0.80 are good; (3) 0.80 to SNorm4 identify with 0.768 0.90 are great; and, (4) 0.9 and above are superb. Whilst, Hutcheson and Sofroniou (1999) added those SNorm5 important that 0.699 values which are less than 0.50 are not acceptable and RMot1 permissible 0.841 must be excluded from the factor analysis. The factor RMot2 contain no 0.910 analysis for the study’s main constructs results are RMot3 produced 0.914 shown in Table 1. Both KMO and Barlett’s test RMot4 harmony 0.895 significance (sig.) for all constructs were 0.852 (which Rct2 likely 0.719 is more than the recommended value of 0.50) and p = 0.000 respectively. Moreover, the total variance Rct3 no problem 0.719 percentage (%) that was extracted was 77.54%; which Rct4 Willing 0.792 is more than 50% as proposed by Anderson and Rct5 accept 0.770 Gerbing (1988) in which Tabachnick and Fidell (2001) point out as an indication of convergent validity. Also, the methods to assess discriminant validity is the from Table 1; the results have shown that all factor Fornell-Larcker criterion in which, the AVE value of an loading values were appropriate for factor analysis, individual construct should be greater than the squared except for items SNorm1 and Rct1 which had factor correlation estimates with all other constructs (Fornell & loading values less than 0.50. As suggested by Larcker, 1981 as cited in Henseler et al., 2009). The Hutcheson and Sofroniou (1999), item with a factor outcomes (in Table 3) denoted that every AVE loading below than 0.50 must be removed from further exceeded its inter-construct correlations estimate analysis. hence, implying discriminant validity existed between the constructs (Henseler et al., 2015). In the study, the construct validity was determined by convergent validity and discriminant validity. As an The Confirmatory Factor Analysis output (as indication of convergent validity, the composite illustrated in Table 4) revealed that all indices were reliability and Cronbach alpha value should be equal or within the suggested desirable range. It showed that greater than 0.70 together with an average variance the hypothesized theoretical model appropriately fit the extracted (AVE) of 0.5 and above (Hair et. al, 2007). observed data. Thus, the results permitted the study to The results (in Table 2) established the reliabilities for draw its conclusions. all variables were larger than 0.70 as well as the AVE for all constructs were greater than 0.50. Thus, Table 5 presented the outcomes of the variables’ signifying the existence of convergent validity. One of theorized relationships. Overall, five hypotheses were Effects of Subjective Knowledge and Religious Motives on Malay Muslims’ Receptiveness Journal of Reviews on Global Economics, 2019, Vol. 8 993

Table 2: Reliability Analysis

Factor AVE Composite Reliability Cronbach Alpha

Subjective Knowledge (SK) 0.667 0.908 0.913 Trust (TR) 0.770 0.943 0.950 Subjective Norms (SN) 0.650 0.877 0.891 Religious Motives (RM) 0.777 0.933 0.928 Receptiveness (RCT) 0.568 0.837 0.845

Table 3: Discriminant Validity Analysis

Standardized Correlations (squared correlations) Estimates

SK TR SN RM RCT

Subjective knowledge (SK) 0.667 Trust (TR) 0.128 0.770 Subjective norm (SN) 0.142 0.213 0.650 Religious motives (RM) 0.001 0.000 0.001 0.777 Receptiveness (RCT) 0.055 0.263 0.164 0.000 0.568

* The diagonal (in bold) shows the Average Variance Extracted (AVE). presented in the study. Four hypotheses were knowledge about a subject or subjects. The presence positively significant at the 0.001 (p < 0.001) level of a positive path between subjective norm and whereas, the remaining hypothesis was not supported receptiveness corresponded with Von Meyer-Hofer et (p > 0.05). It has empirically proven that subjective al. (2015) and Lee (2008) studies. Hence, conforming knowledge is a determinant of trust and subjective to in-group’s wishes is a common behavior among norm. The significant positive relationship between individuals within the collectivist society (Triandis et al., subjective knowledge and trust is consistent with Li et 1988). Also, the finding corroborated Chang and Fang al. (1999) conclusion that states individuals’ subjective (2013) assumption that described an individual’s knowledge (on Information Technology) had intention to behave in a certain manner (i.e. successfully predicted trust (toward online shopping). receptiveness) is a function of trust. Essentially, religion As well, the effect of subjective knowledge on is an important element in people’s food choices subjective norm found support in Bates et al. (2007) (Lindeman & Vaananen, 2000) and religious motives study; where they posited that one’s subjective norm reflect the acceptability of a food in one’s religion toward a behavior is in proportion to his or her level of (Honkanen et al., 2006). However, receptiveness had

Table 4: Confirmatory Factor Analysis Output

Indices Desirable Range Value

≥ 0.90 (good fit) GFI 0.880 0.80 < x < 0.90(acceptable fit) 0.05 ≤ x ≤ 0.08 (acceptable fit) RMSEA 0.074 Value up to 0.1 and not less than 0.05 is accepted CFI ≥ 0.90 (good fit) 0.943 0.80 < x < 0.90 (acceptable fit) TLI x > 0.90 0.932 CMIN/df 1 ≤ x ≤ 5 3.439

Source: Hair et al. (2007); Wallgren & Hanse (2010). 994 Journal of Reviews on Global Economics, 2019, Vol. 8 Manan et al.

Table 5: Regression Weight

Hypothesis Relationship Estimate S.E. C.R. P Result

H1 TR <--- SK .382 .045 7.608 *** Supported H2 SN <--- SK .380 .054 7.739 *** Supported H3 RCT <--- SN .134 .044 2.934 .003 Supported H4 RCT <--- Trust .491 .061 9.582 *** Supported H5 RCT <--- RM .043 .062 .941 .347 NS

Note: NS – not supported. an insignificant relationship with religious motives. This The significant causal link between subjective norm result demonstrated its uniformity with Lindeman and and receptiveness establishes that food choices among Sirelius (2001) and Shaharudin et al. (2010) works. individuals with a collectivistic cultural background tend to be more uniformity-seeking; since collectivists perceived conformity seeking behaviors would 5. CONCLUSION “enhance their relatedness and connection to others”, which contributed hugely to their happiness (Markus & Halal is the standard for high quality, wholesome, Kitayama, 1991, as cited in Yoon et al., 2011, p.63). A safe and ethical products (Elasrag, 2016). Moreover, good example is the Malay ethnic that has a unique the health benefits that Halal food offered to individuals have been the catalyst behind the growth of the global lifestyle from other ethnic groups in Malaysia since religion, community, and family helped shaped their Halal food market (“Global Halal Food”, 2018). The cultural heritage; and have its place in a collectivist Halal industry in Malaysia is now one of the most society (Kamaruddin & Kamaruddin, 2009). important contributors to the local economy and the Halal market is projected to contribute 5.8% to the The religious motives are part of the motives in the nation’s gross domestic product by 2020 from the food choice questionnaire that are designed to current figure of less than 2% (Asa, 2017). Being a measure factors (health-related and non-health-related) Muslim-majority nation, the Halal market in Malaysia is that affect individuals’ food choices (Asma et al., 2010). naturally a big business and the country is witnessing The non-significant link among food’s religious motives an influx of firms promoting their brands amid strong with receptiveness can be attributed to the Malay demand from Muslim consumers for Halal products Muslim consumers buying priorities that are not (Dhesi, 2016). religion-related (for example perceived value and health consciousness) since they are leaving the It has been revealed that Malay Muslim consumers’ responsibilities of ensuring the Halalness of food receptiveness of non-Muslim country’s Halal food products are indirectly affected by subjective products in the hand of the respective government agencies the country such as JAKIM (Shaharudin et knowledge through trust and subjective norm. al., 2010). In Malaysia, the only organization Therefore, brand owners and marketers should pay recognised by the government in dealing with close attention to the causal relationships between determining and organizing halal certification and logo knowledge, trust, and social influences; to increase is JAKIM (Malaysian Islamic Development Malay Muslim consumers’ receptiveness toward Halal food products from non-Muslim countries. Consumers Department). The non-significant link among food’s religious motives with receptiveness served as make responsible and informed purchases whenever reminder that JAKIM has to take up a more aggressive they have adequate knowledge about the goods as role in ensuring the imported products are halal and well as having a positive perception concerning the toyyiban for muslims’ consumptions. products (Niemann, 2010). 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.85

© 2019 Manan et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

998 Journal of Reviews on Global Economics, 2019, 8, 998-1005 Relationship between Website Determinants and Customer Switching in a Hypermarket Online Shopping: Customer Trust as a Mediator

Shereen Noranee*, Muhammad Azlan Shah Badar, Rozilah Abdul Aziz, Zarina Abdul Munir and Veera Pandiyan Kaliani Sundram

Faculty of Business and Management, UiTM, Puncak Alam, Malaysia Abstract: The growth of online market size is very promising in the Malaysia’s online shopping landscape. Given the helpful growth of online shopping website among retailers in Malaysia, there is a crucial need for understanding what drives Malaysian customers to switch from one retailer to another. Therefore, the purpose of this paper is to develop an understanding of the website design, website security/privacy, and website shopping service, as predictors, influencing customer switching in a hypermarket online shopping and the effect of customer trust as a mediating variable. A survey was carried out on 300 respondents and data were analysed using multiple regression analysis. It was found that website shopping service was a significant predictor of customer switching in online shopping and customer trust fully- mediated the relationship. The results from this study would enable online shopping retailers to better design their website marketing strategies that could build trust and retain their customers directly. Keywords: Website determinants, customer switching, customer trust, online shopping.

1. INTRODUCTION Siekpe, 2009; Liao & Liu, 2012), but fewer studies on the relationship between website determinants and Retailers are to embrace the online shopping trend customer switching. Thus, this study focuses on the or continue to lose out more businesses. Retailers, relationship between website determinants and which were most likely impacted by the emergence of customer switching in online shopping, and the online shopping four years ago, were the ones which mediating role of customer trust towards the held back from joining the digital platforms. Specifically, relationship between website determinants and brick-and-mortar hypermarkets must engage with customer switching. online platforms in order to cope (The Malaysian Reserve, 23 June 2019). 2. LITERATURE REVIEW Al-Nasser, Islam, Zainal Abidin, Azam and In Malaysia, revenue in the eCommerce market Prabhakar (2015) found that due to the novelty of web- amounts to US$3,751m in 2019. The revenue is shopping in Malaysia, information regarding the effect expected to show an annual growth rate (CAGR 2019- of website determinants towards online shopping and 2023) of 11.4%, resulting in a market volume of the factors impacting customer online purchase US$5,776m by 2023. The average revenue per user intention in the online shopping environment are (ARPU) currently amounts to US$185.06 (Statistica, 23 lacking. This makes it imperative to identify the June 2019). Al-Nasser at el. (2015) found that the determinants of website that can affect customer internet’s impact upon the Malaysian market was switching on online shopping in the context of significant and this has made it convenient for Malaysia. website’s customer to purchase products and services Besides, there are many studies about website from the website’s retailer and to go through the determinants and customer satisfaction (e.g., product information over the Internet. There were Zimmerman, 2012; Wu, Lee, Fu, & Wang, 2013; Kaura, plenty of shopping websites available in Malaysia Prasad, & Sharma, 2015; Kesharwani, Sreeram, Desai, recently such as Zalora Malaysia, Lazada Malaysia, 2017), and yet the results were not consistent. In Lelong, ShaShinki, Fashion Valet, ASOS, addition, most previous studies explored on the Shopbop.com, EastDane.com, Amazon.com, Book relationship between the two variables (Hausman & Depository, and 11street. 2.1. Customer Switching

*Address correspondence to this author at the Faculty of Business and Customers will definitely switch to other websites Management, UiTM, Puncak Alam, Malaysia; Tel: +6 03 3258 7094; once they are not satisfied with the brands. Issues of Fax: +6 03-3258 7045; E-mail: [email protected]

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Relationship between Website Determinants and Customer Switching Journal of Reviews on Global Economics, 2019, Vol. 8 999 customers switching from one service to another can customer’s needs in security/privacy such as providing be caused by several factors (Ling, Jing, Hock, & San, security for customers is very important to eradicate the 2011). Additionally, Ling et al. (2011) prove that barriers that may bring customers to switch into website design, website security/privacy, and website another website (Ertell, 2010). In the context of online customer services can lead customers to retain on that shopping, security is a confidential infrastructure, which website in online shopping. Customer switching can be is reliably set up to protect consumer information (Hsu, interpreted as customer behaviour where the behaviour Chang, & Chen, 2012). In another study, Zimmerman of the customers differs based on the satisfactory level (2012) identified and examined the main areas of of the customers or it also can be defined as the concern and issues currently facing Malaysian online process of being loyal to one service and switching to shopping users and their effect on future online another service, due to dissatisfaction on goods and business. Their findings revealed that users of online services (Wei, 2013). According to Accenture Global shopping viewed privacy as a risk in disclosing Consumer Pulse Research (2013), there are 66% of information online to retailers as their primary customers switched companies in at least one of ten challenge. industries due to poor service in the past year and the worst thing there are 82% of customers felt their Website Shopping Service service provider could have done something to prevent Berry, Bolton, Bridges, Meyer, Parasuraman, and switching. The research also revealed that there are Seiders (2010) found that the current industry shopping 55% of customers say they would have stayed if the services categorized as personalized services and company had proactively contacted them, and 51% of interactive services. According to Azam, Qiang, and customers say they would have stayed had the Abdullah (2012) justified that one crucial factor of trust company simply recognized them and rewarded them in retail service settings is providing an individualized for their business. Losing customers was a big threat application of services to customers. Websites like for any business organization in terms of its present J.Crew.com have stylists waiting by on instant and future earnings. The cost to acquire a new messenger to answer any immediate questions the customer is five times the cost of retaining the consumer may have. Amin (2012) reported that customers. personalized service refers to any behaviours occurring in the interaction intended to the individuation of the 2.2. Website Determinants customer. Therefore, the proposed hypotheses are as Website Design follow: Website design can be divided into two variables, H1a: There is a relationship between website design aesthetic and functional variables (Zimmerman, 2012). and customer switching. According to Prashar, Vijay, and Prasad (2017), b website design can be the best determinants to study H1 : There is a relationship between website these both variables and their previous literature of security/privacy and customer switching. study reported that the site visual cues like H1c: There is a relationship between website shopping merchandise presentation, layout design representing service and customer switching. aesthetic variable while the interface of the site, site usability, merchandise selection and navigation 2.3. Customer Trust representing a functional variable. Customers see design and aesthetic as the major reasons for the Trust can be defined as customers’ confidence in an acceptance of online shopping websites (Harris & organisation’s reliability and integrity to refrain from Goode, 2010). opportunistic behaviour (Khun, Spies & Petzer, 2015). According to Yap, Ramayah, and Shahidan (2012), Website Security/Privacy trust has positive and significant effects on customer According to Ertell (2010), there are about 70% of switching. They found that trust is a stronger emotion the web users in the United States are concerned than satisfaction and that it may, therefore, better about the safety of their personal information online predict customer switching. Their study confirmed that and lack of this brand recognition in the retail world will trust has a positive effect on retention or loyalty. Trust rose up the customer’s concern, as in a brick and has a positive effect on loyalty and it helps to attract mortar store. Therefore, the understanding of new customers and later can retain existing ones (Yap 1000 Journal of Reviews on Global Economics, 2019, Vol. 8 Noranee et al. et al., 2012). Another study was done on 4- or 5-star This approach was also consistent with Park, Kim, hotels confirms that website design, website security, Funches, and Foxx (2012) sensory experience that information quality, responsive time, and interaction encompasses aesthetic and functional aspects of were related to customer trust (Thinh, Pham, & website presentation. Website security/privacy was Strickler, 2019). associated with attributes affecting consumer trust towards the website. Then website shopping services Additionally, in order to gain trust, one party must referred to the customer services that assist consumer believe that another party will perform actions that will in online shopping from beginning till the end. result in positive outcomes for it. Therefore, in building trust, the website customers should believe these Past literature has identified the importance of positive outcomes will continue in the future because utilizing the stimulus-organism-response (S-O-R) trust has a positive effect on customer switching. Trust framework (Mehrabian & Russell, 1974) in examining in online retailers was another major concern among online shopping environment effects on customer Malaysians in internet shopping. Al-Nasser et al. (2015) switching. The framework hypothesizes that website indicated that most non-users of online shopping in determinants act as stimuli (stimulus) that affect the Malaysia were still not confident in purchasing goods customers’ trust (organism), which ultimately affects and services over the internet. They claimed that the their behavior (response). A model for online shopping issue of trust seems to be one of the factors why was developed in this study by integrating the effects of Malaysians do not shop online. Most Malaysian website determinants in online shopping into the S-O-R consumers were not confident with online shopping framework as well as taking into account the previous transactions because of trust. A study found that a lack studies on website environment and experience. of trust to have a statistically significant influence on customer switching behaviour (Tweneboah-Koduah, In examining the effects of website determinants in Mann, & Quaye, 2018). Hence, the suggested online shopping, in this study, “stimuli” focused on hypotheses are as follow: website determinants, more specifically, website design, website security/privacy, and website shopping H2a: There is a relationship between website design services. “Organism” described as the internal state, to and customer trust. measure the trust scale, which ultimately reflects upon the attitudinal state of the customers while engaging b H2 : There is a relationship between website with particular website attributes given by the retailer. security/privacy and customer trust. Then finally “response” outlined by potential customer behavioral reactions. H2c: There is a relationship between website shopping service and customer trust. Utilizing the S-O-R framework enabled this study to examine the relationship between website H3: There is a relationship between customer trust and determinants and customer switching as well as to customer switching. explore the effect of customer trust as a mediating H4a: Customer trust mediates the relationship between variable. The conceptual framework of this study was website design and customer switching. based on Stimulus-Organism-Response (S-O-R) theory. The three website determinants such as H4b: Customer trust mediates the relationship between website design (product presentation and interface website security/privacy and customer switching. design), website security/privacy, and website shopping service (personalized services and interactive c H4 : Customer trust mediates the relationship between services) affect customer switching in online shopping, website shopping service and customer switching. while the customer trust played roles as a mediating variable. 2.4. Theoretical Background 3. METHODOLOGY After reviewing the related studies on online shopping experience and website quality three website The correlation study was carried out to test the determinants have been determined to be relative to relationship among website determinants as the study at hand. Website design incorporated both independent variables, customer switching as aesthetic as well as functional features of the website dependent variable, and customer trust as a mediator. design experience, as identified by Zimmerman (2012). Relationship between Website Determinants and Customer Switching Journal of Reviews on Global Economics, 2019, Vol. 8 1001

The data were gathered within a period of three majority of the total respondents were from middle months. The respondents were among the customers management working position (50.7%). 43.3% of a Malaysian hypermarket (which will be addressed indicated that respondents did online shopping as Hypermarket A) in Klang Valley. The average between 6-10 times per month. population for this study was 1200 respondents which were based during a normal weekend, which is on Table 1: Regression Analysis with Customer Trust as the Dependent Variable Saturday only. The number of population was secured from the Customer Service Department Manager. Variable Standardized Beta Coefficients Purposive sampling technique was used and the sample size was 300 respondents which were sufficient Website Design .025 according to Krejcie and Morgan (1970). Data were Website Security/Privacy .163** collected from Hypermarket A's walk-in customers. Website Shopping Service .339** All questionnaire items of 5-point Likert scale were R .411 adopted from Zimmerman (2012) for website R2 .169 determinants, Lee and Huang (2014) for customer Adjusted R2 .160 switching, and Ariff, Sylvester, Rahim, and Zakuan, F value 20.031 (2014) for customer trust. Example items for website Sig. F value .000 design was “The website provides product pictures from various angles”, website security/privacy was Durbin Watson 1.246 “Within the website my information is confidential”, website shopping service was “The website provides personalized shopping service for me”, customer trust Multiple regression analysis was used to investigate was “I will get what I ordered through this site”, and the factors that contribute to the mediator, customer lastly customer switching was “When I switched the trust. No assumptions had been violated indicating that website I lost the network that I have developed”. the multiple regression analysis was valid. Table 1 shows that 41.1% of the variance in the regression Face and content validity of the questionnaire were model was explained by the independent variables for evaluated by a hypermarket manager and a Customer the mediating variable as a dependent variable. H2b Service Management lecturer, respectively. Statistical and H2c were found to be significant where both p- Package for the Social Science (SPSS) version 23.0 values were 0.005 and 0.000 (p<0.05) respectively. was used to analyse the raw data and for Whereas, H2a was found to be insignificant as the p- documentation purposes. Factor analysis was value was 0.664 (p>0.05). The Durbin-Watson value of conducted to underlying the structure in the data 1.246 denoted acceptable dependency of a variable in matrix, to find out the most parsimonious set of the regression model. Table 1 shows that website variables, and to create the goodness of measure to shopping service as the most significant predictor of test the hypotheses. Data analysis techniques used customer trust as the dependent variable (β=0.339**; were normality test, descriptive analysis, reliability p<0.05). Meanwhile, website security/privacy analysis, and multiple regression analysis. In this study, (β=0.163**; p<0.05) also shows a significant predictor the Cronbach’s Alpha in this study was accepted as all to customer trust. However, website design was found variables above than .70. to be an insignificant predictor to customer trust (β=0.025; p>0.05). Hence, H2b and H2c and were 4. FINDINGS supported, however, H2c was found not supported.

The total number of respondents was 300. 44.7% of The regression analysis was used to investigate the respondents were male and 55.3% were female staff. factors that contributed to customer switching without a The highest percentage for age category is at the mediator. The second column of Table 2 shows that range of 31-40 years old (44.3%), followed by 41-50 42.6% of the variance in the regression model was years old (29.7%). Majority of the customers were explained by the independent variables to the Bachelor Degree (42.3%), followed by Diploma holders dependent variable without a mediator. H1a and H1b (24.7%) and STPM holders (22.7%). For monthly were found to be insignificant as both p-value were income category, most respondents (30.3%) earned 0.111 and 0.129 (p>0.05) respectively. Whereas, between the range of RM3,001-RM4,000, while the hypothesis H2c was found to be significant as the p- 1002 Journal of Reviews on Global Economics, 2019, Vol. 8 Noranee et al.

Table 2: Regression Analysis with Customer Trust as the Mediating Variable and Customer Switching as the Dependent Variable

Standardized β Standardized β Variable Value Without Value With Remarks Mediator Mediator

Website Design .091 .080 Customer trust is not a mediator. Website Security/Privacy .088 .013 Customer trust is not a mediator. Website Shopping Service .372** .217** Customer trust is a complete mediator. Customer Trust .458** Mediator is significant. R .426 .596 R2 .182 .356 Adjusted R2 .173 .347 R2 Change .182 .174 F Value 21.903 79.674 Sig F Change .000 .000 Durbin Watson 1.244 1.420 value was 0.000 (p<0.05). The Durbin-Watson value of found to be insignificant with customer switching as the 1.244 denoted acceptable dependency of variable in dependent variable. Therefore, it was proven as the regression model. The standardization beta customer trust did not influence the relationship coefficient value without mediator for website shopping between website design and customer switching as service was significant with customer switching well as the relationship between website (β=0.372**; p<0.05). Therefore, H1a and H1b were not security/privacy and customer switching. Thus, H4a and supported, while H1c was supported. H4b were not supported. Meanwhile, mediating variable as the independent variable shows that there was The regression analysis was used to investigate the significant as p-value was 0.000 (p<0.05).and β value factors that contributed to customer switching with a was 0.458**. Thus, hypothesis for H3 was supported. mediator in the third column of Table 2. 59.6% of the variance in the regression model is explained by the 5. DISCUSSION independent variables increased. Two factors were found to be insignificant because both of p-value were Website shopping service was the only element of recorded as 0.117 and 0.798 (p>0.05), whereas website determinants influenced customer switching in website shopping service was found to be significant as a direct relationship. According to Ling et al. (2011), the p-value was 0.000 (p<0.05) The Durbin-Watson quality of website shopping services has been widely value of 1.420 denoted acceptable dependency of documented as impactful determinants on customer variables in the regression model. It can be concluded switching. Website shopping services were crucial that only website shopping service had a complete aspects related to online purchasing, fulfillment, speed mediator. This was proven as website shopping service of, and easy returns. However, website design was an had a significant reduction from the value of the insignificant predictor to customer switching. This standardized beta coefficient for relationship without finding contradicted with few studies stating that mediator (β=0.372**) and with mediator (β =0.217**). customers saw design and aesthetic as the major The significant reduction shows that customer trust reasons for the acceptance of online shopping mediates the relationship between website shopping websites (Harris & Goode, 2010; Zimmerman, 2012). In service and customer switching. Thus, H4c was addition, website security/privacy also found to be supported. insignificant predictor to customer switching. This finding was different from Ertell’s (2010) claiming that Nevertheless, customer trust did not mediate the the understanding of customer’s needs in relationship between website design and customer security/privacy such as providing security for switching as well as the relationship between website customers is very important to eradicate the barriers security/privacy and customer switching. It was proven that could bring customers to switch into another as website design and website security/privacy were website. Relationship between Website Determinants and Customer Switching Journal of Reviews on Global Economics, 2019, Vol. 8 1003

Website security/privacy and website shopping shopping retailers should be capable of providing service gave impacts on customer trust as a dependent personnels who are always ready to offer help and/or variable. Both of these predictors could enhance give feedback to customers on the spot. This can be customer trust in online shopping. According to Berry et done by offering more contact options to customers like al. (2010) and Hsu et al. (2012), the current industry social media and email in order to make the customer- shopping services categorized as personalized business relationship as personal as possible. For services as well as interactive services were very example, Hypermarket A could add in their website by important and website security was a confidential sending thank you email to customers. Lastly, infrastructure in the context of online shopping. Hypermarket A should be able to accommodate Nonetheless, website design was found to be customers with the ability to check in-store product insignificant with customer trust. Das (2016) reported availability on the website itself by including as much other website determinants that have significant product information on their website. relationships with customer trusts such as website awareness and website association in online shopping. Theoretical Implications

It was proven that customer trust could influence This study contributed to the use of the S-O-R directly to customer switching as it was found to be framework, as well as new dimensions of website significant. This finding was supported by a study done determinants in order to update the framework on on medical tourism industry (Han & Hyun, 2015). online shopping experience. Website design and Meanwhile, customer trust completely mediated the website security/privacy were found to be insignificant relationship between website shopping and employee with customer switching. Continual revisions to aspects switching. This finding was aligned with finding from a of the framework as well as definitions for website previous study in an online merchant (Hong & Cha, design and website security/privacy will be necessary 2013). Nevertheless, customer trust did not mediate to keep the research behind online shopping the relationship between website design and customer experience as current as possible. Ultimately website switching. Therefore, it was proven as customer trust shopping service makes a key business decision. could not influence the relationship between website Managerial Implications design and customer switching. This finding was similar to finding from a previous study in internet shopping Current website determinants consisted of three (Shin, Chung, Oh, & Lee, 2013). But, this finding was dimensions namely website design, website different from finding in the previous study that was security/privacy, and website shopping service. Thus, reported customer trust fully mediates the relationship future researchers could explore on the expenditure of between website design and customer switching in website as another possible website determinant such online shopping (Ganguly, Dash, Cyr, & Head, 2010). as after-sales service (Koo, Kim, & Lee, 2008), brand In addition, customer trust also mediates the reputation (Goswami & Mathur, 2011) and relationship between website content and customer informational quality (Chincholkar & Sonwaney, 2017). switching in e-marketing effectiveness (Rahimnia & Hypermarket A should improve their services in term of Hassanzadeh, 2013). Besides, customer trust also shopping service as this factor was the utmost found did not mediate the relationship between website influencer for a customer to not switch to other online security/privacy and customer switching. Hence, it was shopping retailers. Hypermarket A should put more proven as customer trust could not influence the effort to please their customers in online shopping. relationship between website security/privacy and customer switching. 7. CONCLUSION

6. RECOMMENDATIONS AND IMPLICATIONS This study evaluates the relationship between website determinants, customer trust, and customer Recommendations switching from the perspective of 300 online shopping customers of Hypermarket A in Klang Valley. Data Focusing on website shopping service, it is analyses such as descriptive analysis, normality test, recommended that online shopping retailers should correlation analysis, and regression analysis were deliver good customer service through the online employed. The result of the findings showed that experience. One effective method is by sending customer trust mediated the relationship between expressions of gratitude to customers via email. Online 1004 Journal of Reviews on Global Economics, 2019, Vol. 8 Noranee et al. website shopping service and customer switching. This Ganguly, B., Dash, S. B., Cyr, D., & Head, M. (2010). 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.86

© 2019 Noranee et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

1006 Journal of Reviews on Global Economics, 2019, 8, 1006-1012 Entrepreneurship and Facebook Engagement: A Case Study of the Online Community in Malaysia

Sri Fatiany Abdul Kader Jailani*, Syukrina Alini Mat Ali, Nur Atiqah Rochin Demong, Noor’ain Mohamad Yunus and Erne Suzila Kassim

Faculty of Business and Management, Universiti Teknologi MARA Cawangan Selangor, Kampus Puncak Alam, Kuala Selangor, Malaysia Abstract: Businesses often use social media applications such as Facebook, Instagram and Twitter to drive their services or sales. With these different social media platforms, business owners obtain important data, but they struggle to extract the true “intelligence” or information that can help them in decision making. In digital marketing, it is important for business owners to develop a good relationship with the customer prior to any transaction. Customer engagement is important to build rapport with the customer, hence establish understanding by greeting and thanking the customer. This study uses exploratory approach and adopts an inductive approach to explore the nature and degree of the social media usage that captures online business activities. The data was collected via Facebook Insight (Facebook BIS) based on top post sales for the year 2018. The result of the study revealed that the customer prefers different range of products such as food, gadgets and different services related to health and fitness. Business owners who uploaded and share photos to promote their products tend to receive more viewers, customer reactions and likes. This research also reveals the pattern of Facebook engagement between entrepreneur and customers (followers of the social media page). Using Facebook as the platform of investigation, the research objectives are to investigate the pattern and engagement as well as segmentation of the sales post activities in a public community Facebook group. The findings offer some explanation and suggestions for business owners to boost up their sales by studying the pattern and engagement as well segmentation. Therefore, the business owner can make wiser decisions to engage using appropriate ways and offer the right product and services that suit with customers need. Keywords: Entrepreneurship, online community, Facebook engagement, social media.

1. INTRODUCTION awareness. The implementation of business intelligences systems (BIs) in today’s world has a great Social media is one of the greatest digital platforms impact on community. The emerging trends and rapid in this era. One of the most useful, and often under- development of business intelligence systems (BIs) in utilized, aspects of social media is the ability to gather today’s era is important towards the management data. The data that is gathered from social networking performance and decision-making process. Thus, the can help to monitor sales, increase the understanding researcher believes that the use of the business of the customer experience, and set the tone for the intelligence system (BIs) had grasp the attention from personality of the business. As for that, it is important to all aspect of communities, the capabilities of BIs recognize the ways how social media and business provide greater improvement towards their operation intelligence (BI) go hand in hand. For instance, the and daily tasks. Therefore, this study aims to discover Facebook Insight is a powerful and free analytics tool the pattern of Facebook engagement between that allows people to measure the performance of entrepreneurs and customers (followers of the social businesses from their Facebook pages by tracking the media page). Using Facebook as the platform of number of likes, page views, reach, and more. investigation, the research objectives are to investigate Meanwhile, business intelligence has been identified as the pattern and engagement as well as segmentation an essentially of a blanket term that is used to describe of sales post activities in one of the online community the many ways different industries analyse and collect Facebook groups in Selangor, Malaysia. raw data. When it has been used as a combination with social media, BI can provide companies information 2. LITERATURE REVIEW such as customer demographics, search habits, and social behaviours. Each of these factors is incredibly Business intelligence will promote accurate useful in increasing revenue opportunities, driving information for better decision making. It includes clear marketing efforts, generating leads, and raising brand understanding on departmental tasks, disciplines and academic output, developing areas that performed poorly, to take initiative techniques or to determine the

*Address correspondence to this author at the Faculty of Business and best practice, point out the reasons for retention and Management, Universiti Teknologi MARA Cawangan Selangor, Kampus Puncak Alam, Kuala Selangor, Malaysia; Tel: 03-32585136; monitoring performance, analysing university research Fax: 03-32587000; E-mail: [email protected] performance, and financial management (Kabakchieva,

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Entrepreneurship and Facebook Engagement Journal of Reviews on Global Economics, 2019, Vol. 8 1007

2015). However, how users perceive BIs final posting was performed by examining the posts to implementation will depend on several factors (Larry, ensure they meet the goals of the evaluation. Using the 2015). Furthermore, the BI tools offer features that can key words such as “items for sale”, which has been set measure the business engagement in social media. by the Facebook admin, a total of 38 posting was identified and used in the research evaluation. Business engagement focuses on a set of strategies and corresponding activities designed to 4. RESULTS AND FINDINGS provide solutions to business needs in a state, region, or local area that ensure the workforce system will be a The posting was retrieved, and the contents were valued partner to the business community. The analysed to understand the common pattern and to purpose of these business engagement programs is to determine the future direction. The results and findings address the needs of businesses, workers, and are explained in this section. communities through the development of ongoing 4.1. Demographic Background of Selected strategies and activities to promote long-term economic Facebook Group stability and growth (Ryan, 2016). The effectiveness of business engagement will ensure that the community Facebook page? has been created on 19 April 2009 views the development of system as their success. The to facilitate interaction and discussions among goal of a business engagement is important to the communities. This group was a closed group and business community until they cannot imagine doing limited to 13 years old and above who were the business without the community system. A business residents, workers or business owners in. As of engagement will lead to a Facebook engagement when December 2018, there are 23,243 followers of this the post been shared, liked or commented by the group. There are policies set by the group admin to viewer. In addition, Facebook business engagements monitor the activities to ensure harmony and peace explain the way users interact on social network. The between the followers. As this platform is solely for more audience perform the action, the higher the businesses, thus the administrator has set some Facebook engagement rate and therefore, the more limitations for entrepreneurs: no sales on Sunday, one successful the business page will be. Hence, the day one post and post-hijacking advertisement is not combination of this elements will lead to the findings of allowed. An analysis was conducted using FB Insights the research objective in this study. to examine the demographic profile of the followers of the Facebook group. FB Insights is an informative 3. RESEARCH METHOD platform provided by FB to analyse of the audience’s This is an exploratory study which adopts an interaction and to help enhance the FB page. Based on inductive approach to explore the nature and degree of the results in Table 1, it could be concluded that the social media usage that captures online business majority of the followers are female aged between 25- activities. The main focus of the study is the analysis 34 years old. This data is particularly useful for and interpretation of data collected from social media. business owners as they can plan the right content to A community-based Facebook group which is generate more engagement with the followers. considered as one of the active online communities in Moreover, the data helps them to further refine their Selangor, Malaysia was selected as the media of focus and provide more understanding of their target investigation. Based on Cooper and Hedges (2009), market. there are six stages that govern the research method; Table 1: Demographic Profile of the Followers 1) define the problem 2) collect the evidence 3) evaluate of the evidences for inclusion and exclusion Age range Women Men Total (selection criteria) 4) analyse or integrate the evidences 5) interpret the cumulative evidence and 6) present the 13-17 97 115 212 synthesis methods and results. The page retrieval 18-24 1909 1996 3905 started by searching for the evidences from Facebook 25-34 5334 4858 10192 group engagement within 6 months and a total of 83 35-44 3178 2658 5836 posting was presented. As suggested by Tanskanen, 45-54 1187 1138 2325 Ahola, Aminoff, Bragge, Kaipia and Kauppi (2017), the 55-64 235 248 483 raw evidences require further evaluations for inclusion 65+ 78 136 214 and exclusion criteria. Therefore, the selection of the 1008 Journal of Reviews on Global Economics, 2019, Vol. 8 Jailani et al.

Figure 1: The Data with the Highest Engagement.

4.2. Facebook Engagement 4.3. Product Category and Number of Responses

Using FB Insights, in the “engagement” section, an This analysis was run to determine what product analysis was conducted to examine the best times to category was being sold the most and which of them publish postings, examine the highest number of views, receive the most responses from the community. The comments and reactions amongst the FB group segmentation result is shown in Figure 4. The sales audience from June to December 2018. As shown in posts are categorized as nine categories namely baby Figure 1, it was found that Wednesday was the best items, fitness, food and beverages, lifestyle, home day for posting. accessories, pet accessories, hand phone, multiple types and preloved items. In general, pre-loved items The next analysis was aimed to identify the best dominate the product category with 14 different sale time to post in the FB Group. The result, as displayed posts and a total of 228 reactions. However, the in Figure 2, shows the top/peak time for posting in the highest number of reactions accumulated is for the Facebook group. The active participation is also food and beverages category, which all of the three indicated by high number of posts, comments and sale posts champion the reactions. reactions among FB group audience. The next analysis is to assess how sharing photos Figure 3 depicts the FB active members and in the first sale post drives the members’ reactions. engagement in 2018. The number of active members Based on the segmentation results in Figure 5, it can fluctuates due to the rules set by the administrator. The be suggested that sale posts with photos and images highest posts, comments and reactions was in October received a total of 355 reactions as compared to 187 2018.

Figure 2: Best Day and Time for Posting. Entrepreneurship and Facebook Engagement Journal of Reviews on Global Economics, 2019, Vol. 8 1009

Figure 3: Engagement of Community FB in 2018.

Figure 4: Product Categories and Number of Business. reactions for photos that do not have any photos interpreted as word of mouth, whereby the member’s uploaded for the sale post. Therefore, it can be confidence in the brand and products are essential for concluded that images and photos are important to sharing and promoting. The results of the segmentation capture the members or community’s interest in the are shown in Figure 6. In comparing the product posting. category, only sale posts on food and beverages are shared by the viewers. Sale post is extended to the Next, the researchers aim to assess if there is any viewer's friends and family for food and beverages only association between product category and viewer’s which indicate the community’s love towards food and share of the sale post. The viewer’s share could be gastronomy as it is synonym for general Malaysians. 1010 Journal of Reviews on Global Economics, 2019, Vol. 8 Jailani et al.

Figure 5: Shared Photo in the First Post and Reaction.

Figure 6: Product Category, Shared Photos and Viewer’s Share.

Finally, the researchers aim to analyse the as a society who give full respect to others, and to correlation between gender Facebook engagement on greet each other is considered as a cultural mores. sale post greetings and how the sale post greetings drive reactions. The researchers hypothesized that The results of the segmentation engagement are females greet the viewers and males do not. Another shown in Figure 7. Based on the results, it shows that hypothesis is that when sale posts begin with 78% of the sale posts from female entrepreneurs begin greetings, they will drive a higher reaction rate. with greetings, while only 20% of the male sale posts Greetings are important because it helps to trigger starts with greetings. In addition, the top sale posts positive conversation and further connect people at a depicted as darker shades are from none-greeting more personal level. In addition, Malaysians are known posts. Even though it might be a little surprising, when Entrepreneurship and Facebook Engagement Journal of Reviews on Global Economics, 2019, Vol. 8 1011

Figure 7: Greetings, Product Category and Number of Response. analysed further, these top posts are for food and the majority of Facebook users in Malaysia are within beverages, indicating what products the community this age range (Digital Influence Lab Pte Ltd, 2018). really likes. Nowadays, the Facebook industry in Therefore, it is important for the business owners to Malaysia has been hit with a new wave, which is online know the right age group of segmentation in order to food ordering. As people’s life getting busier with a boost their sales and profits. Based on the six months’ demanding and hectic lifestyle, they do not have time analysis in 2018, Wednesday is reported to be the and energy to prepare their own food. most active day to post on Facebook. Other countries also share similar trends. This finding is consistent with 5. LIMITATION OF STUDY York (2018), who stated that Wednesday and Thursday are the best times to post on the Facebook. This shows While this study makes a number of valuable that the engagements of Facebook group are higher contributions, there are several limitations that need to during the midday or weekdays. In addition, based on be addressed. This study focussed on one social the recent posting, the majority of the FB users post media which is Facebook page that used for online more after 8 to 9 pm as it is their free time after working business. Facebook is the highest social media chosen hours. As for the business engagement, the findings by people for business purposes but by adding other reveal that general, pre-loved items dominate the social media can enrich the result of the finding. Next product category. Moreover, the viewers only shared limitation is, this study concentrated on Bandar Puncak post that related with food and beverages, which shows Alam community. Therefore, the findings just focus on that Malaysian community love towards food and the activities that been run by that community. Hence gastronomy as it is synonym with Malaysia. Post which future studies should consider to include more begins with greetings drive a higher reaction rate as communities to be involved in the study so the findings compared to no greetings. Finally, this finding relates can be interesting and vary. Another limitation is the with the products and services sold by the business time frame; this study been conducted for only six owners with the demographic information of the months so there is limitation of postage can be track on selected FB users, which are female. From the result it this study. shows that the competition for consumer attention 6. DISCUSSION AND CONCLUSION across media outlets is intense, especially on social media platforms. Therefore, consumers in turn are Based on the findings, the majority of the users are overwhelmed by the proliferation of online content, and female who are aged between 23 to 34 years old as it seems clear that marketers will not succeed without 1012 Journal of Reviews on Global Economics, 2019, Vol. 8 Jailani et al. engineering this content for their audience. This study Digital Influence Lab Pte Ltd. 2018. The Digital Marketing Agency That Gets You More Business Online. Available at: agreed with Kumar, Bhaskara, Mirchandani, and Shah https://digitalinfluencelab.com/. [Accessed 10 Jan. 2019]. (2013) which show that social media can be used to Hedges, L. V., & Cooper, H. 2009. Research Synthesis as a generate growth in sales, and ROI, connecting social Scientific Process. The Handbook of Research Synthesis and Meta-analysis, 1. media metrics such as “comments” to financial metrics. Kabakchieva, D. 2015. Business Intelligence Systems for Analyzing University Student’s Data. 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and Analytics: From Big Data to Big Impact. MIS quarterly, 36(4). https://doi.org/10.2307/41703503

Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.87

© 2019 Jailani et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

Journal of Reviews on Global Economics, 2019, 8, 1013-1023 1013 The Role of Neighbourhood Satisfaction in Mediating Social- Physical Attributes and Urban Quality of Life in Malaysia

Siti Nurul Munawwarah BT Roslan1,*, Fatimah BT Kari1, Nurulhuda BT Mohd Satar1 and Wan Nor Azriyati BT Wan Abd Aziz2

1Department of Economics, Faculty of Economics and Administration, University of Malaya/ Management & Science University, Malaysia 2Department of Estate Management, Faculty of Built Environment, University of Malaya, Malaysia Abstract: Quality of life in urban areas has become an important factor for sustaining any urban living. A wide range of factors contribute to quality of life and neighbourhood satisfaction is one of the factors that has been highlighted by many researchers. Neighbourhood satisfaction comprises both social and physical factors. Households located in urban areas are able to benefit from variety of urban infrastructure and services provided by the public sector and achieve better living standard. However, increase in the number of urban population has resulted in higher crisis of unemployment, shelter and amenities provision in urban areas. This study intends to evaluate the social-physical attributes that can influence the urban residents’ quality of life by adopting neighbourhood satisfaction as a mediator between the two. Primary data collected through a survey involving 384 respondents were utilized in this study and SEM –AMOS was used for the data analysis. This study covers seven local authorities in the Klang Valley. The findings revealed that, the partial mediation exists, that the neighbourhood satisfaction mediates the relationships between social-physical attributes and quality of life. This study suggests that accessibility to public community space for all races and free barriers for disabilities and erlderly should be enhanced to make sure that they can access to the facilities provided in their neighbourhood area and increase their quality of life. Furthermore, residents and public involvement are important as it is also helps to understand the needs of the residents for better future planning and development in urban neighbourhood. Keywords: Social-physical, neighbourhood satisfaction, urban quality of life.

1. INTRODUCTION future and understands how they live within culture and system. The definition of QoL in Hassan (2013) allows Urban area is characterised by high concentration people to increase their personal growth, enjoy their of people. To date, half of the world’s population lives healthy lifestyles, access easily to acquire knowledge in urban areas. It is estimated that by 2030, more than and to enjoy their standard of living. Quality of life three quarters of the population will choose to live in observed levels of satisfaction in people’s lives towards urban areas (Zainal et al., 2012). The national average their physical health, family, education, employment, per capita income and urbanisation level are strongly wealth, religion, belief, finance, and environment. There associated. The urbanisation rates have been are many factors that have a significant impact on the influenced by economic development. The rise in quality of life. Satisfaction with the neighborhood is urbanisation in Malaysia has also led to an increase in among the factors most researchers stress (Mohit, the number of migrants in Klang Valley based on Peng (2012). The high migration rate to the Klang Valley is 2012; Sirgy et al., 2002; Oktay, 2010; El Din, 2013). driven by an accessible housing price, new residential Social and physical factors contribute to satisfaction of development, acceptable living costs, employment and the neighbourhood (Mohit, 2012; Abdul Ghani Salleh, job opportunities and good environment and physical 2012; Sirgy et al., 2002; Hur & Marrow –Jones, 2008). conditions (Fadzil, 2014). In order to achieve a higher Sirgy et al. (2002) have stated that physical level of well-being and quality of life (QoL) for their characteristics make a significant contribution to family, migrants choose to move to urban areas. neighborhood resident’s satisfaction. Certain Quality of life can be described as a sense of well- researchers emphasised various aspects of social and being of people’s life and the ability to live successfully physical, including noise, crime levels, race, rate of and peacefully in the living environment (Mohit & Ali, accidents, the connection between communities, 2016). Geetha et al. (2017) define QoL as how the safety, housing density, landscape and neighborhood person’s sense of life is changing entirely for a better proximity. (Mohit, 2010; Aiello, 2010; Sirgy et al., 2002; Permentier & van Ham, 2011; Temelová & Slezáková, 2014). However, the studies do not agree on the role of

*Address correspondence to this author at the Department of Economics, the social-physical characteristics in neighbourhood Faculty of Economics and Administration, University of Malaya/ Management & Science University, Malaysia; Tel: 03-55216868; Fax: 03-5511 2848; satisfaction and quality of life. For example, according E-mail: [email protected]

E-ISSN: 1929-7092/19 © 2019 Lifescience Global 1014 Journal of Reviews on Global Economics, 2019, Vol. 8 Munawwarah et al. to Permentier & van Ham (2011), crime rates and 2. LITERATURE REVIEW distance from the city centre have had no effect on 2.1. Social-Physical Attributes and Neighbourhood satisfaction. In their study, Sampson & Raudenbusch Satisfaction (2004) demonstrated that high criminality is affecting neighbourhood satisfaction, while Graham and Neighbourhood satisfaction can be measured with a Chaparro (2012) found that insecurity is linked to set of attributes such as social and physical attributes, happiness. However, the relations between crime and economic attributes and environmental attributes. Sirgy satisfaction of the neighbourhood have not been found et al. (2002) develop a conceptual model by proposing by Di Tella & Shargrodsky (2009). three neighbourhood attributes that may affect social, physical and economic satisfaction of the resident. The Salleh (2012) highlighted that dwelling unit, housing attributes are social, physical and economic attributes, environmental attributes, education, health, characteristics. Social features are neighbourhood public facilities, recreational facilities and public relationships, children’s playgrounds, neighbourhood transport are physical features of neighbourhood interracial relationships and crime levels. (Prementier, satisfaction. Whereby the social characteristics of 2011; Basolo & Strong, 2002; Parkes et al., 2002). neighbourhood satisfaction are interaction with Domains include housing value in the neighbourhood, neighbourhood, social interaction, ethnic relationship, living costs, socio-economic status and improving public safety, religious facilities and political facilities. neighbourhoods as regards the economic aspects His study in Penang shows that residents in urban (Sirgy, 2002; Salleh, 2012; Wakekoro, 2015). Salleh’s neighbourhood are generally satisfied with their studies (2012) examine the characteristics of the neighbourhood’s physical and social features, but there neighbourhood which can help satisfy the are some features that create dissatisfaction that will neighbourhood overall. affect their quality of life, such as safety, public transportation services, political activities, and living Matthieu et al. (2011) assess the relationship between neighbourhood features and neighbourhood costs. satisfaction and how residents perceive their reputation Most researcher’s current study highlighted social for their neighbourhood. The study concluded that the and physical attributes such as crime rate, public objective attributes in explaining the perceived transportation, public facilities, and recreation facilities. reputation contribute more than neighbourhood satisfaction. More important to explain neighbourhood There is a lack of literature on neighbourhood satisfaction are subjective attributes. The study found satisfaction and quality of life that touched on the that the neighbourhood features such as social - accessibility of disability-free barriers, the public physical can affect neighbourhood satisfaction and community that is accessible to all types of races, and overall quality of life. Turkgulo (1997) in his study in the types of public facilities that were provided in the Nigeria emphasised on the attributes that related to neighbourhood area. This study also contributes to the accessibility. This study is also supported by Toscano new knowledge that the respondent’s sample is from et al. (2008) and Salleh (2008). These studies selected area in urban Klang Valley where primary data emphasised the importance of facilities for accessibility were collected through systematic sampling to obtain in measuring the satisfaction of the neighbourhood. the outcome for this study. The aim of this paper is to Accessibility includes public library access, religious assess the social-physical attributes that can influence building and public transport (Mohit, 2010). the quality of life of urban residents by adopting neighbourhood satisfaction as a mediator between the A study by Howley et al. (2009) in Dublin two. Structural Equation Modeling (SEM) used for the investigates how high density housing affects neighbourhood satisfaction in Dublin city centre. The analysis as it is used to test the relationship among the findings from the study showed that environmental construct’s variables in the study (Awang, 2015 & quality, noise, lack of community involvement, traffic Salem et al., 2018). It is to raise awareness of and lack of services and facilities are factors that affect important social issues affecting the well-being of the the neighborhood’s dissatisfaction. Residential people of Malaysia. It is also important for local satisfaction influences neighbourhood satisfaction authorities to identify factors influencing neighbourhood study in the Netherlands (Hanneke & Christine, 2013). satisfaction in order to enable them to make an The results of the study showed that the informed decision to improve urban resident’s lives. neighbourhood area with a variety of shops and green The Role of Neighbourhood Satisfaction in Mediating Social-Physical Attributes Journal of Reviews on Global Economics, 2019, Vol. 8 1015 spaces will generally increase the satisfaction of the needs and amenities. It is why their families improve neighbourhood. (Prementier et al., 2010; Lu, 1999; their quality of life. (Maran, 2012). Many environmental Mohan & Twigg, 2007). features have an influence on their life and their quality of life in various locations and areas. (Maran & Kweon, Hur & Morrow-Jones (2008) studied the impact of 2011). Wingo (1973) stated that there are three physical attributes on homeowners and neighbourhood reasons why QoL is considered as an economic good. satisfaction in Franklin County, Ohio. General First, people who are willing to trade off with other appearance, housing density, trees, crime safety, things to get the QoL because the QoL is scarce and cleanliness, pedestrian access to shops, local getting QoL would make them just as happy. Second, government service and accessibility to recreational on the basis of QoL consideration, households and opportunities are the components of physical attributes businesses decide where to stay and locate. Third, all that can influence the satisfaction of homeowners in basic community-related needs must be assigned as a the neighbourhood. The findings showed that the most public good to the public. The impact of the sufficient important factors for neighbourhood satisfaction are resources allocated to the public will satisfy individuals general appearance and density of housing, while and society (Wingo, Gillingham & Reece, 1979). satisfaction with trees, pedestrian access to shops, and neighbourhood racial composition are not important in QoL has traditionally been associated with the determining neighbourhood satisfaction. Gross Domestic Product, price levels and living costs. With the high growth rates, the state of the economy However, it shown later by Mohit (2016) in his study has improved in terms of industrial production, import in Kuala Lumpur on subjective perception on the and export growth, as well as foreign investment. neighbourhood features and their quality of life, the (Rokicka, 2014). New economic thinking, however, neighbourhood physical features are highly depending shifted from traditional thinking and QoL concept to on the urban features and design of the more complex definitions and concepts (Lambiri, 2006). neighbourhood, followed by the variable of nearness to This is because the rise in GDP growth does not facilities, street lighting, and landscape/greenery. In always benefit society to improve the standard of living terms of social condition aspect, neighbourhood safety in society and human security. Some of the prosperity is the highest impact that affects neighbourhood period disadvantages, and where economic growth is satisfaction, followed by community cohesion, race increasing, may increase social inequalities, and there relationship and the least important are open space, may be no reduction in poverty, or even worse. family privacy times and community involvement. In the Increased traffic flow, noise levels in cities, congestion neighborhood area, social interaction with in urban areas, increased crime rates, environmental neighbourhood and crime rate shows no damage and increased stress levels are the side neighbourhood satisfaction relationship. effects of economic growth and can also affect QoL people (Rokicka, 2014). Capitalist societies are placing Ibem et al. (2015) examines neighbourhood increasing emphasis on sustainable urban satisfaction among residents of public housing in development. To have a good quality of life, the Nigeria, and the study showed that poor access to basic services and facilities and infrastructure facilities satisfaction of the neighborhood must be concerned caused dissatisfaction in the housing estate’s (Howley et al., 2009; Mohan & Twigg, 2007; Sirgy & neighbourhood environment. Dissatisfaction also Cornwell, 2002). comes from the social, economic and environment There are mixed results on the relationship between feature. The important characteristics that influenced the satisfaction of the neighbourhood and QoL. Sirgy & the neighbourhood from the study, availability and Cornwell (2002) propose three concepts to access the accessibility of services and infrastructure facilities, impact of neighbourhood satisfaction towards quality of cleanliness of the resident’s area, socio-economic life, the result showed that there is positive relationship environment in resident’s neighbourhood location, between these variables as neighbourhood satisfaction noise in the neighbourhood area, privacy and security in residents. is as a mediating variable between social, physical and economic as an independent variables and quality of 2.2. Quality of Life life as a dependent variable. Supported by Mohit (2012), the findings of the study conclude that overall In every city and metropolitan area, most people quality of life is influenced by neighbourhood choose to move and live in cities to meet all the basic satisfaction, together with neighbourhood attributes, 1016 Journal of Reviews on Global Economics, 2019, Vol. 8 Munawwarah et al. and the study found that economics gives more H4: Neighbourhood Satisfaction mediates the satisfaction, followed by physical attributes and social relationship between social-physical attributes and attributes that have the least effect on neighbourhood quality of life satisfaction. El Din et al. (2013) studied the neighbourhood satisfaction’s quality of life and 3. RESEARCH DESIGN AND DATA COLLECTION METHODS demonstrated that satisfaction with the neighborhood is crucial to achieving a better quality of life. The aim of this study is to evaluate the contribution of the social-physical attributes on the urban residents’ Study conducted by Western & Tomaszewski quality of life by adopting neighbourhood satisfaction as (2016), in examining the relationship between objective wel-lbeing and overall life satisfaction shows that there a mediator between the two. Quantitative approach used to achieve the aim of this study. This study uses a is positive relationship between objective of well-being quantitative approach to help explain current issues and life satisfaction. Higher satisfaction on subjective and it also serves to assess the relationship between well-being will be achieved with a good and better variables, which can also help to save time with lower health level, more leisure time with family, more costs. (AbuKhalifeh, 2017 & Eyisi, 2016). Primary data frequent contacts with family and friends and less material deprivation and financial problems. Income were collected through a questionnaire survey to Klang Valley residents. This study was conducted through a shows have no significant effect on life satisfaction cross-sectional study that gathers the data only once. after taking into account other aspects of objective well- For this study, self-administered questionnaires were being. Furthermore, the quality of life is associated with distributed to the household as a respondent. the satisfaction of the neighbourhood. There are three factors influence to neighbourhood satisfaction, The satisfaction level of social-physical attributes of physical, social and economic conditions. The study respondents was measured along with their findings showed that satisfaction with economic neighborhood satisfaction and quality of life. Potential attributes is highly correlated with neighbourhood respondents who have been asked to answer the satisfaction followed by satisfaction with physical questionnaire will be allocated 20 minutes to complete attributes and the least impact with neighbourhood the questionnaire. Five-point likert-scale were used to satisfaction is satisfaction with social attributes. (Mohit, measure the satisfaction level with ‘1=very 2016). poor…5=very good’. In research design, three types of variables were used, social-physical as an independent Oktay (2010) also concluded that the neighbourhood satisfaction and quality of life have a variable, quality of life as a dependent variable and satisfaction of the neighbourhood as a mediator positive relationship. The factors such as security and between independent and dependent variables. sense of belonging are the social attributes and the maintenance of the streets and noise are the physical This study covers seven local authorities in the attributes found that have a positive effect on Klang Valley namely Kuala Lumpur City Hall, Petaling neighbourhood satisfaction and quality of life. This Jaya City Council, Shah Alam City Council, Klang study aims to assess the impact of social-physical Municipal Council, Sepang Municipal Council, Subang attributes on the quality of life of urban residents by Jaya Municipal Council and Selayang Municipal adopting neighbourhood satisfaction as a mediator Council. The main reason why these seven local between the two. governments were selected was because they represent the Greater Klang Valley (Zyed et al., 2016). In modelling this relationship based on the literature review, several hypotheses are tested: As a sampling technique, systematic random sampling was used. The population data set reported H1: Social-Physical has a significant impact on Neighbourhood Satisfaction by the Department of Statistics Malaysia (2016) shows in Table 1 (DOSM, 2016) the sample size of the H2: Neighbourhood Satisfaction has a significant effect respondents based on the household population in on Quality of Life Klang Valley. The respondent’s criteria were (1) the respondents must be residing in landed housing and H3: Social-Physical has a positive impact on Quality of high-rise housing and (2) the respondents must be 21 Life years of age and older. The Role of Neighbourhood Satisfaction in Mediating Social-Physical Attributes Journal of Reviews on Global Economics, 2019, Vol. 8 1017

Table 1: Distribution of Respondents by Municipalities

Local Authorities Total Population (000) Percentage of population Number of respondents

Kuala Lumpur City Hall 670 15 % 75 Selayang Municipal Council 581 13 % 65 Shah Alam City Council 509.5 12 % 60 Klang Municipal Council 820.8 19 % 95 Subang Jaya Municipal Council 814.2 19 % 95 Petaling Jaya City Council 705.7 16 % 80 Sepang Municipal Council 272.4 6 % 30 Total 4373.6 100 % 500

Source: Department of Statistics (2016) and author’s calculation.

To determine the sample size, we refer to the table another study, the value of the factor loading in the by Krejcie & Morgan (1970), which stated that the model can be used as 0.60 and above (MacKinnon, minimum sample size is 384 for population over 1,000,000. As the population in Greater Kuala Lumpur Table 2: Respondents’ Socio-Demographic Characteristics is 2,047,646 the total number of respondents for this study is 500. The questionnaire distribution was Demographic Percentage covered by two housing types that are landed housing Gender and high-rise housing. Table 1 presents the municipal Male 55 distribution of respondents. The data were analysed Female 45 using the approach of Structural Equation Modelling Age (SEM). 21-30 47.2 31-45 36.6 4. RESULTS AND DISCUSSION 46-59 16.2 Education Level 4.1. Socio-Demographic Characteristics No formal education 1.2 Primary School 2.5 Table 2 presents gender groups that are fairly PMR/SRP 0.8 represented between males (55%) and females (45%). SPM/SPMV 10.6 The respondent’s age group is between the ages of 21 STPM/STAM/Matriculation 3.9 and 59, with 58.9% of respondents being married and Certificate 2.0 39.9% of respondents being single. A postgraduate Diploma 15.1 holder account for 16.2% of respondents and an Degree 47.4 undergraduate student account for 47.4%. In the employment sectors, the majority of respondents are Tertiary education (Master/PhD) 16.2 from the private sector (60.1%) and 28.8% from the Others 0.2 public sector. In relation to monthly income, the largest Marital Status group is between 53.8% of RM1000-RM3000 and the Single 39.9 smallest 5.9% of monthly income from RM9001 and Married 58.9 above. Divorced 1.2 Employment Sector 4.2. The Confirmatory Factor Analysis (CFA) Private Sector 60.1 Public Sector 28.8 For each construct variables, validity and reliability Self Employed 7.5 were assessed before testing the correlation using Others 3.5 individual CFA. Fitness indexes and factor loading are Monthly Net Income used to test the construct correlation. Brown (2014) 1000-3000 53.8 and Raykov (1997) recommended a factor loading 3001-5000 31.9 value of 0.60 and a construct reliability of 0.70. In 5001-9000 8.4 1018 Journal of Reviews on Global Economics, 2019, Vol. 8 Munawwarah et al.

Table 3: Fitness Index

Name of category Name of index Level of acceptance

Absolute Fit Index RMSEA RMSEA < 0.08 GFI GFI > 0.90 Incremental Fit Index AGFI AGFI > 0.90 CFI CFI > 0.90 TLI TLI > 0.90 NFI NFI > 0.90 Parsimonious Fit Index Chisq/df Chi-Square/df < 3.0

Source: Awang et al. (2015).

2008; Awang et al., 2015). Any factor loading below 0.6 4.2.1. Individual CFA in the model should be dropped to increase the Figure 1 shows that the fitness index appears to be reliability and validity of the construct impact. The satisfied in the model of social / physical attributes. It loading factor value is to show the relationship of shows from the results that some of the factor loading strength between the indicator and the construct. For construct values are found below 0.60 which can each fitness index, Table 3 is the recommended value reduce the reliability and validity impact of the construct (Hair, Babin, & Krey, 2017): in the model. In this case, one open space subscale

Figure 1: The Role of Neighbourhood Satisfaction in Mediating Social-Physical Attributes Journal of Reviews on Global Economics, 2019, Vol. 8 1019

Table 4: The summary of Fitness Indexes

Name of category Name of index Index value Comments

Absolute fit RMSEA 0.079 The required level is achieved Incremental fit CFI 0.950 The required level is achieved TLI 0.942 The required level is achieved IFI 0.950 The required level is achieved Parsimonious fit Chisq/df 4.030 The required level is achieved had no low factor loading problem indicating that this used in this study to examine the significant level for construct could be retained for subsequent analysis. hypothesis testing. Three hypotheses have been tested Meanwhile, social and public subscales have two items with the help of SEMs in this study and three below 0.60 factor loading. After the items dropped and hypotheses are as follows: the analysis was re-run, the fitness index summary is as follows: H1: Social-Physical has a positive impact on Neighbourhood Satisfaction From this table, the measurement model has achieved the construct validity as all fitness indexes H2: Neighbourhood Satisfaction has a positive impact have achieved the required level (Zainudin, 2015). This on Quality of Life study used the CR test to test the reliability of the H3: Social-Physical has a positive impact on Quality of construct and AVE to test the construct’s convergent Life validity. The result for CR should be 0.6 and for AVE should be 0.5 or higher. The results below showed that H1 showed the hypothesis of testing the causal the value of all CR exceeds 0.5 and AVE showed that effect of social-physical attributes on neighbourhood the value exceeds 0.6. satisfaction. The result shows that the path coefficient of social-physical attributes to neighbourhood CR AVE satisfaction is 0.240. This figure explained that it will Social/Physical 0.958 0.884 contribute to increasing neighbourhood satisfaction by Open Space 0.884 0.656 0.240 unit each unit increase in social-physical Social 0.903 0.650 attributes. The standard regression weight error of Public 0.908 0.622 0.240 is 0.060 and the critical ratio is displayed as 4.023. This can be concluded that the hypothesis that

social-physical attributes have a significant effect on 4.3. Structural Equation Model (SEM) neighbourhood satisfaction is fully supported in the prediction of neighbourhood satisfaction significant at SEM allowed the researcher to examine the output 0.005 level due to the regression weight for social- using two sets of procedures that are standardised physical. regression weight and regression weight. The items included in the standardised regression output are beta The result for H2 testing of neighbourhood coefficient, factor loading, R2 used for equation, and satisfaction’s causal effect on quality shows that the R2 used for model. The regression weight, on the other path coefficient estimate is 0.236. This figure also hand, consists of beta coefficient, standard errors of explained that each unit increase in neighbourhood path coefficient and critical ratio. The regression weight satisfaction will result in a 0.236 unit increase in quality

Table 5: The Regression Weights

Estimate S.E. C.R. P Results

Neighbourhood_Satisfaction <--- Social_Physical .240 .060 4.023 *** Significant

Quality of Life <--- Neighborhood_Satisfaction .236 .048 4.911 *** Significant

Quality of Life <--- Social_Physical .241 .054 4.470 *** Significant 1020 Journal of Reviews on Global Economics, 2019, Vol. 8 Munawwarah et al. of life. The standard error shown is 0.048 and the hypothesis indicates that the relationship between critical ratio is shown as 4.911. This can also be social-physical attributes and quality of life is mediated concluded as the hypothesis that neighbourhood by neighbourhood satisfaction. Partial mediation exists satisfaction has a positive impact on quality of life is in this model as after the mediator variable has entered positively supported. the model, the direct effect of social-physical on quality of life is significant. In this case, social-physical H3 testing the causal effect of Social-Physical attributes found have significant direct effect and attributes on quality of life shows that the path significantly indirect effect on quality of life and through coefficient of Social-Physical attributes to Quality of Life mediation by neighbourhood satisfaction. is 0.241. It shows that the value of 0.241 explained that it would also increase by 0.241 unit for quality of life in Based on the aim of this study to evaluate the every unit in social-physical attributes. A standard error relationship between social-physical attributes and of 0.054 is presented with the regression weight quality of life, this study supported the Sirgy & Cornwel estimate of 0.241 and the critical ratio is 4.470. It can (2002) model that social and physical attributes have a be concluded from this result that the social-physical significant impact on the quality of life mediates by attributes have a strong impact on the quality of life. satisfying the neighbourhood. Based on the finding revealed, the model contains the partial mediation. It 4.4. Testing Mediation should be noted that if the indirect and direct effects are significant, partial mediation can be defined. Thus, In this study, there is a research hypothesis which it can be concluded that neighbourhood satisfaction evaluates the indirect between the social-physical mediates the relationship between social-physical attributes and the so-called mediator’s quality of life. satisfaction and quality of life. This study contributes to This study used the satisfaction of the neighbourhood the new knowledge where this study includes as a mediator between social-physical attributes and accessibility and free barriers to disabilities and elderly quality of life. The Step-Wise approach (Baron & people, condition and provision of place of worship and Kenny, 1986) was adopted in this study. This approach condition of playground as a new domain to discuss is recognised as a key tool to evaluate the effect of social/physical attributes. In contrast to the previous mediation. Statement of hypothesis for testing the study, the domains discussed touching more on effect of mediation as shown below: physical features, walkability, landscape and public H4: Neighbourhood satisfaction mediates the amenities provided in the neighbourhood area. For relationship between social-physical attributes and current studies it is important to ensure accessibility quality of life and barriers free for disabled and elderly people that everyone is equal to the facilities offered in their The result showed from the indirect effect that the neighbourhood. The condition and the provision of the mediation took place in the model. The result of H4 place of worship are also important factors, which can

Figure 2: Social-Physical on Quality of Life.

INDIRECT EFFECT DIRECT EFFECT a = Social on neighbourhood satisfaction = 0.24*** c’ = Social on Quality = 0.26*** b = Neighbourhood Satisfaction = 0.25*** a x b = 0.24 x 0.25 = 0.06*** The Role of Neighbourhood Satisfaction in Mediating Social-Physical Attributes Journal of Reviews on Global Economics, 2019, Vol. 8 1021 improve the satisfaction of the neighbourhood and pedestrian walkway and the landscape in influence the quality of life. As Malaysians have neighbourhood are also found as the factors that can different cultures and regions, it is important for contribute to resident’s quality of life. Last but not least, different regions to enjoy enough and equal worship. in terms of public facilities and services, affordable health facilities, public toilet, parking facilities, post 5. CONCLUSION office and police station found as important attributes in order to enhance the quality of life. The quality of life in the Klang Valley is contributed by the satisfaction of the neighbourhood that together In conclusion, the findings in the study has shown with the satisfaction of the neighbourhood influences that there is a positive relationship between social- the social-physical attributes. There are three physical attributes and quality of life, thus, steps must subscales of social-physical attributes, which are open be taken by local authorities and developers in space, public facilities and services, and social and civil improving the wellbeing of the urban communities. As society, as reported in the results and findings. The such a more inclusive approach which include overall quality of life of urban residents is positively providing facilities, maintenance of public amenities, influenced by neighbourhood satisfaction, because the providing basic needs as well as giving voices among result demonstrated neighbourhood satisfaction has a the local residents will assured a more liveable significant indirect impact between social-physical neighbourhood. attributes and life quality. ACKNOWLEDGEMENT Social and cultural is a construct of social-physical attributes that can have an impact on quality of life. We wish to acknowledge the support of Ungku Aziz Factor in influencing the quality of life in urban areas Centre for Development Studies, University of Malaya are the provision and condition of public community (grant no PD007- 2017/CPDSRG2017/2018) for space, public library and disability-free barrier and financing this research. elderly people. For open space and recreational area, the condition of playground and recreational area,

Appendix: Results of Confirmatory Factor Analysis

Results of Confirmatory Factor Analysis Construct L VE CR

Social-Physical attributes 0.884 0.958 E2 Social and Culture 0.903 0.65 E3 Provision and condiion of public community space 0.81 E4 Provision and condiion of public community space 0.81 E5 E3 Public community space are accessible to all races 0.91 E6 E4 Provision and ondition public library 0.93 E5 Provision of barrier free for disabilities and elderly 0.79 E6 Locations of public space in my neighbourhood are strategic 0.78 Open Space and Recreational Area 0.884 0.656 F Condition of playground and recreational area 0.69 F2 Provision and condition of pedestrian walkway 0.68 F3 Landscape in neighbourhood area is beautiful and elegent 0.64 F4 Recreational area and urban public spaces in neighbourhood well maintaed by the Local 0.67 Authority Public Facilities and Services 0.908 0.622 G2 Health facilites are adequately provided and affordable 0.78 G3 Public toilet within the neighbourhood 0.82 G4 Parking facilities 0.8 1022 Journal of Reviews on Global Economics, 2019, Vol. 8 Munawwarah et al.

G5 Post office 0.77 G6 Police Station 0.78 G7 Lcattion of public facilities and services are strategic and accessible 0.78 E1 Neighbourhood Satisfaction 0.669 0.919 a My neighbourhood has a good provisions of facilities and services meet my needs 0.79 b My neighbourhood is clean and well-maintained 0.78 c Trust and confiedence among each other (with other community) 0.77 d My neighbourhood is safe and have low crime rate 0.78 e My neighbourhood has beautiful landscape and green area 0.8 f The location of my neighbourhood is straegic and easy access from other area 0.77 g The location of my neighbourhood adopted green technology for a sustainable lifesyle 0.76 h Good place to raise kids 0.85 Quality of Life 0.904 0.966 B11 Education a Low education level is linked with unemployment 0.92 b High level of education were associated with the better job opportunity 0.75 c Academic knowledge is associated with better job opportunity 0.91 d Lack of skill contributed towards unemployment 0.75 Income j I am satisfied with my current income 0.96 k My current income is sufficient my own/my family needs and expenses 0.94 Health Hospital facilities 0.81 Clinic facilities 0.88 Satisfaction of health facilities 0.96 Critical health problem 0.86

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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.88

© 2019 Munawwarah et al.; Licensee Lifescience Global. This is an open access article licensed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, provided the work is properly cited.

1024 Journal of Reviews on Global Economics, 2019, 8, 1024-1034 Adoption of Instant Messenger: An Empirical Investigation

Arun Kumar Tarofder1,*, Umme Salma Sultana1, Siti Khalidah Binti Md Yusoff1, Sultan Rehman Sherief1 and Ahasanul Haque2

1Management and Science University, Malaysia 2Department of Business Administration, International Islamic University Malaysia, Malaysia Abstract: Instant Messenger (IM) is one of the quickest developing intra-hierarchical innovations that have been changed organizational communication framework. Intuitiveness, sharing substance, diminishing reaction time are a couple of its attributes that charm the two people and associations. It has been accounted for that 63 per cent associations over the world have just been executed IM in their authoritative correspondence framework. Thus, a tremendous number of specialists have researched the possibility of IM as an intra-hierarchical correspondence framework. In light of the broad writing survey, a blended supposition can be found on the viability of IM over the globe, which in the end urges this examination to explore more inside and out. All the more particularly, this examination tries to explore the critical drivers of IM adoption in an organizational setting. Moreover, this examination likewise tries to give a superior understanding of the marvel of IM usage in various socioeconomics, for example, orgabnizational size and industry. An online structured questionnaire was produced to gather data. With three reminders, this study able to get responses from 197 respondents from 3 primary states in Malaysia. Results of this study uncovered that knowledge creation is the most vital driver for IM adoption followed by organizational pressure and relative advantage. Additionally, domination examination uncovered that the organizational pressure is moderately more imperative in Corporation than SMEs. So also, learning creation turns into the most essential driver for assembling industry and relative advantage circumstances for benefit. This finding, to be sure, gives rules to administrators on why associations ought to receive IM in their intra-hierarchical correspondence framework. Keywords: Instant Messenger, Adoption, Knowledge creation, Relative Advantage, Organizational pressure.

INTRODUCTION What’s more, the most recent couple of years, the infiltration rate of IM has expanded pointedly because Creating compelling and instantaneousness of accessibility and a shoddy bundle of the web. organizational communication framework has been Technavios guage a sharp development of big most extreme worry for each association. Numerous business IM over the time of 2014 – 2019. Elangovan associations have been contributing the critical add up and Agarwal (2015) submitted that IM gives the new to build up their communication framework. Email is stage to associations to speak with their partners. one of them, which has changed the whole conventional communication strategy for both individual In spite of colossal prevalence, numerous and association. In any case, email does not maintain researchers rebuked about the effectiveness of IM in for long. Actually, before it ranges to development an organizational setting. For example, Carol and arrange, instant messenger (IM) has been supplanting Robert (2011) recognized that very nearly 68.72% of email framework in the 21st century. In 1996, Mirabilis representatives felt work interference because of the presented a standout amongst the most embraced regular notice. They contended that each message not innovations on the planet, called as an instant implied for each individual from a gathering, but rather messenger. From that point forward, IM conveyed warnings grab people’s consideration and demand another wave to the organizational communication individual to check messages. In another investigation, framework. For example, Wang, Hsu, and Fang (2005) Vibeke (2016) presumed that representatives’ said 21% individual utilizing IM at their work dissatisfaction altogether relies upon the level of IM environment for their everyday communication. commitment. Because of this obscure outcome of IM Correspondingly, Wilkins (2007) found that 77% of their reception, a few researchers propose administrators respondents felt that IM has a critical positive result of reconsider before executing IM in their official their work lives. In comparable mold, Sean et al. (2007) communication framework. Henceforth, the reasons for expressed that because of one of a kind synchronous this investigation are process, IM is generally more appealing than different types of organizational communication, i.e. email. • To recognize critical thought processes behind IM appropriation into the organizational

communication framework. *Address correspondence to this author at the Management and Science University, Malaysia; Tel: +60355112840; Fax: +60355112841; E-mail: [email protected]

E-ISSN: 1929-7092/19 © 2019 Lifescience Global Adoption of Instant Messenger Journal of Reviews on Global Economics, 2019, Vol. 8 1025

• To look at contrasts amongst administration and communication in an organizational setting. Fiedler assembling industry with respect to the thought (2009) implied that IM gives a stage create deliberately processes behind IM appropriation; and applicable shabby talk, which regularly produces an important conclusion. Consequently, unmistakably IM • To research contrasts amongst expansive and conveys a few noteworthy communicational little associations toward the significance of advantages to the associations. In any case, there is a various intentions behind IM selection. scarcity of observational research on the effectiveness of this media. In spite of the fact that numerous earlier examinations have researched comparable issues, not IM Adoption Research very many of them have inspected the contrasts between various socioeconomics. Also, this Various specialists have analyzed the selection of investigation gives an unmistakable rule to directors on IM (Chiristina and Stephanie 2006; Sean et al. 2007; how IM can improve organizational communication. Wang et al. 2005; Shih and Fan 2013; Alan et al. This will unquestionably add to both scholastic and 2010). Every one of these investigations can be functional domains. arranged into two wide streams, individual and association. Table 2 presents outlines of a few earlier examinations concentrated on IM appropriation. LITERATURE REVIEW Discoveries of earlier examinations are plainly Introduction to Instant Messenger reassuring for IM appropriation. Be that as it may, the greater part of these examinations were skewed toward Instant messenger (IM) idea has created by Mirlabs the utilization of prominent speculations, for example, in 1996 with the reasons for lessening communication the hypothesis of contemplated activity (TRA), cost and giving constant individual to-individual innovation acknowledgment show (TAM) and connection. In spite of the fact that exploration around dispersion of appropriation demonstrate (DOI). In spite there is in the simple stage, there are a few meanings of the fact that approval of these hypotheses is of IM proposed by numerous researchers. Table 1 inescapable, the commitments of these scientists in the exhibits a sequential meaning of IM embraced from down to earth situation are sketchy. All the more earlier examinations. “Individual to-individual particularly, it is imperative to comprehend the communication, however web” is a typical subject of motivation behind IM in organizational settings and test every one of these definitions. Be that as it may, the its effectiveness. This will reap new information and convenience of IM isn’t restricted to this. Truth be told, guide administrators toward IM selection. advantages of IM are yet to be found sharing data, Technology Adoption and Organizational capacity to make status, ongoing connection, capacity Demographics to produce collective information are names of the few advantages that can be yielded from IM reception. Organizational trademark is of the prevailing What’s more, IM is equipped for giving social nearness variables in the zone of innovation reception. There are and lessening value-based separation by incorporating a few essential organizational qualities that impacting synchronous and offbeat communication. Not at all like innovation reception. Industry write and organizational email, has IM given a more noteworthy control of size are the two most prevailing qualities. In his continuous collaboration which improves down-top investigation, Khong et al. (2010) expressed that

Table 1: Definition of Instant Messenger

Author Definition

Lee et al. (2006) p. 103 IM is “an internet based application that provides close to real time communication between people”. McCla, Yen and Huang (2004) “IM as a type of information technology to facilitate communication and labeled it as the ability for one to see if a chosen friend, co-workers, or associate is connected to the internet”. Cunningham (2003) “IM traces its roots to single-line person-to-person communication to facilitate built into mainframe computer operating system”.

Source: Adopted from prior studies. 1026 Journal of Reviews on Global Economics, 2019, Vol. 8 Tarofder et al.

Table 2: Empirical Findings of Prior studies

Author Context Theory Factors Findings

Chiristina Individual and Library Do not use any No conceptual development Results indicated that patron and communication specific theory overwhelming accepting Stephanic communication through IM (2006) Sean et al. Individual; comparing Discuss partially Benefits of using IM (conveying emotion Though students like to use (2007) e-mail vs IM about DOI building relationship and ease of use) IM for their personal and social communication but author raised questions about the effectiveness of IM in organizational setting. Wang et al. Individual; students TAM and Network Perceived ease of use, perceived Results confirmed strong (2005) from Taiwanese Externality usefulness, Behavioral intention to use, goodness-of-fit for three colleges Theory actual use, Technology utilities, perceived proposed model developed in number of users this study Shih and Fan Organizational, Travel TPB, TRA, TAM, Innovativeness, Optimism, Discomfort of Results confirmed only (2013) Agency Motivators and Control, Discomfort of use, Insecurity of optimism has significant Inhibitors of transaction, in security of communication positive effect on IM adoption. Technology They also added IM tools Readiness have no critical barriers to use and adopt. Alan et al. Individual TRA Attitude, subjective norm, intention Results confirmed validity of (2010) behavior TRA for IM adoption. Suling and Small e-commerce Media Richness Better relationship; Efficient collaboration, Results indicated that IM is Jerry (2008) business cost saving, productivity improvement, very much useful for organizational learning cohesive team; organizational communication. read more customers; customer However, management be satisfaction skeptical of using IM Fiedler Organizational; Strategically Strategically irrelevant communication; Results confirmed that all the (2009) (corporate setting) irrelevant cheap- technical information richness, social identified variables have talk distance, collective orientation significant effect on building communication. trust by communication through IM. Elangovan Individual (Whatsapp; DOI Features, Security and cost Results confirmed that feature and Prachi Skype) is the most important to adopt (2015) IM Hong et al. Individual Socio-technical Perceived user base relationship They classified all these (2013) theory commitment; perceived system quality; factors into 3 brands interaction effect categories. Social and technical variables have significant effect on continue to use IM. It also revealed that positive interaction helps to use IM repeatedly

Source: Adopted from different prior studies. administration industry generally utilizes fundamental So also, a few researchers distinguished that communication innovations contrast with the organizational size can influence reception process. In assembling business. He additionally determined that their investigation, Teo and Tan (1998) recognized the email, document sharing are the two primary exercises solid relationship between web reception and in the administration business. Then again producing organizational size. Premkumar (2003) distinguished industry utilizes more advanced communication comparable outcomes and inferred that appropriation innovation, for example, undertaking asset arranging of PC interceded communication innovation essentially (ERP). In comparable mold, Thompson (2007) relies upon organizational size. The regular explanation contended that distinctive industry has the diverse for this result could be accessible or assets. The huge necessity in connection to innovation appropriation. He association for the most part has sufficient assets to included that power of IT selection likely relies upon actualize front line innovation. Be that as it may, the data required by industry. setting of this investigation is unique. IM does not Adoption of Instant Messenger Journal of Reviews on Global Economics, 2019, Vol. 8 1027 require the colossal add up to contribute either management of business exercises to accomplish a convoluted exertion. Indeed, numerous IM competitive advantage (Jackson et al. 1995). programming is uninhibitedly accessible, for example, Administrative support is key to the rate of dispersion of WhatsApp. Thus, it is vital to test the impact of web advances among all partners including workers, organizational size on reception of IM. providers, wholesalers, and end clients. This factor has predictable critical positive impact in relatively every Development of Conceptual Model earlier research, particularly in creating nations. This is given to the point that in creating nations, In light of broad writing survey, this investigation organizational choices are solely made by top proposed a model and four speculations to test. This management. In that capacity, representatives don’t model comprises of four free (information making; intentionally take an interest in innovative changes. organizational weight; relative preferred standpoint; Moreover, the reception of innovation regularly requires and saw social nearness), and one ward variable, critical venture. Thusly, effective web appropriation to a inward appropriation of IM. Figure 1 exhibits the great extent relies upon the support of top conceptual model for this investigation. management. Top management support selection Knowledge Creation procedures by rousing and helping endeavors toward innovation advancement by assigning the vital assets Andrew McAfee (2006), Professor of Harvard for this reason. In accordance with the part of top Business School, unfolded in his book that “The move management for the selection and dissemination of IT to Enterprise 2.0 can create new knowledge advances, the accompanying speculation is made: administration process, prompting open advancement H2: Top Management Support has significant positive and new corporate communications culture”. effect on IM adoption in organizational setting. Essentially, numerous researchers conceded that knowledge creation would be the prime intentions in Relative Advantages the appropriation of web-based social networking. Quy and Shipilov (2012) clarified in insights about the This is a standout amongst the most connected and exceptional highlights of online networking that can powerful determinants in the innovation reception create incalculable data for associations. Likewise, domain. This factor was proposed by Rogers in his well Jinwon, One-Ki and Woojong (2013) talked about the known hypothesis of Technology appropriation created commitment of IM on the creation of knowledge. They in 1983. He hypothesized that more advantages of new specified in their investigation that IM gives an open innovation over existing one will probably impact stage that produces unending data in the constant appropriation process. In such manner, numerous condition. They likewise presumed that IM destroy limit earlier examinations distinguished a few advantages between various administration levels. In another collected from IM contrast and SMS and email examination, Baoxiang and Wang (2011) specified that innovation (Vibeke 2016, Wilkins 2007). Continuous making powerful and significant knowledge is an communication, status sharing, producing knowledge incubus for any association. Be that as it may, by are names of few. In his investigation, Doyle (2003) executing IM, the knowledge creation process turns out expressed that energy of IM is a long way from being to be generally less demanding and quicker. As per comprehended. So also, Shinder (2005) recommended Cunningham (2003) IM support key knowledge from that the IM would be the most prevalent and usable each side of the association. In light of the exchanges, organizational communication framework because of this examination proposes the main theory as take its special characteristics, for example, multitasking after: ability, double communication framework, and customization by empowering individual connection. In H1: Knowledge creation has significant positive effect the exceptionally late year, Goveia (2008) guaranteed on IM adoption in organizational setting. from his investigation that short, directed notes can Top Management Support essentially support profitability, which can be encouraged by IM. In comparative form, numerous This measurement of an association relates to analysts distinguished nearness mindfulness is another knowledge among senior management in regards to novel quality which makes IM more appealing than the capability of data advances and the will to act SMS and email. Subsequently this investigation proactively in its dispersion in the effective proposed: 1028 Journal of Reviews on Global Economics, 2019, Vol. 8 Tarofder et al.

H3: Relative advantage of IM has significant positive and ward factors. All the construct were adopted from effect on IM adoption in organizational setting. the prior studies (Sean et al. 2007; Wang et al.2005), which confirmed face, content and construct validity of Perceived Social Presence this study. Moreover, exploratory factor analysis confirmed discriminant analysis of this study and Social presence isn’t another idea. Hypothetically, it results presetns in Table 4. Various things were identifies with the social brain research idea of embraced from various works of writing to quantify closeness and quickness. Short et al. (1976) built up factors. The five-point Likert scale was utilized to the hypothesis of social presence in view of these two quantify every one of these things. The last principle columns. In their investigation, they expressed questionnaire was sent to associations through email. that up close and personal correspondence considered In spite of having a few constraints, email questionnaire having a higher social presence than innovation considered as a standout amongst the best and perfect intervened correspondence. Around then the internet techniques in a hierarchical setting. was in the rudimentary stage but to find its maximum capacity in correspondence. Be that as it may, in the Sampling 21st century, the internet turns into a fundamental piece of our everyday correspondence. It gives a As indicated by Sekaran and Bouge (2013) there feeling of social presence for both sender and are five vital strides in inspecting process that received beneficiary in the virtual world. Besides, IM gives by this examination. At in the first place, this distinctive highlights to empower a feeling of social investigation distinguishes the correct populace and presence, i.e. announcement; video talk, and so on. association working in Malaysia is the principle Ramirez et al. (2009) proposed that IM support the populace for this examination. 2579 associations’ email sentiment presence by upgrading the intelligence was gathered from Malaysian Investment Development encounter between accomplices. Thus, this Authorities (MIDA) database. The majority of the investigation proposes the accompanying theory Malaysian researchers concurred that MIDA’s database is a standout amongst the most refreshed H4: Perceived social presence has positive effect on and real accessible in Malaysia. An underlying adoption of IM in organizational setting. welcome had been sent to all these email addresses. Shockingly, 786 messages were bobbed because of Instrument Development unidentified conditions. Moreover, just 268 organizations were eager to partake in this review. An organized questionnaire was created to gather primary data. Additionally, a few stages were adjusted With 3 updates in a half year time frame, this from earlier investigations with a specific end goal to examination figured out how to get 242 reactions. In finish the last questionnaire. These means were (a) any case, 45 reactions were deficient because of 2 conceptualization and operationalization; (b) fundamental reasons. These were missing data and determining the estimation scale; (c) pre-test by various reactions in a single inquiry. Henceforth, this legitimacy test; (d) post-test by pilot study; and (e) investigation delivered 197 finished reactions from finish. By following these means, this examination various associations essentially from 3 fundamental guaranteed more prominent comprehension and business states in Malaysia, to be specific Kuala limiting disarrays. In addition, this examination Lumpur, Selangor and Penang, test estimate, surely, a additionally connected two imperative standards, basic worry for primary research. In any case, the vast specifically standards of wording and estimation majority of the earlier examinations proposed that (Sekaran and Bouge 2013). example estimate between 100 to 200 is sufficient to There were two areas primarily created by close- make inferences in a hierarchical setting (Bahtiar et al. finished inquiries. It is on account of close-finished 2018; Stich, Tarafdar and Cary 2018; Molinillo and inquiries help to limit reactions time and furthermore Japutra 2017). Subsequently, immediately, this ready to create a huge measure of institutionalized investigation executed data examination with 197 data with negligible exertion. In the principal area of the reactions. questionnaire, this investigation included six statistic Respondents’ Attributes questions which had been estimated by the nominal scale. To wrap things up, the second segment Table 3 exhibits the attributes of respondents for predominantly comprises of things identified with free this examination. Results demonstrated that 55.83 Adoption of Instant Messenger Journal of Reviews on Global Economics, 2019, Vol. 8 1029

Table 3: Respondents Characteristics

Frequency Percent Frequency Percent

Industry Number of Employees Manufacturing 86 43.87 Less than 50 68 34.51 Service 110 55.83 51-100 53 26.90 Annual Revenue 101-200 26 13.13 Below 1000000 96 48.73 201-300 32 16.24 1000001-2000000 42 28.31 301-400 6 3.04 200001-300000 28 14.21 401-500 9 4.56 300001-400000 14 7.10 More than 500 3 1.52 400001-500000 11 5.58 Using IM for Organizational Communication Above 500000 6 3.04 Yes 163 82.74 No 34 17.26 Forms of IM Years of using IM Computer Based 23 14.11 Less than 1 78 47.85 S.Phone Based 140 85.89 1-2 53 26.90 2-3 9 5.52 3-4 13 7.97 4-5 8 4.90 More than 5 2 1.22 percent respondents were from benefit and 43.87 Hypothesis Testing percent from assembling industry. It is additionally evident that the vast majority of the respondents’ So as to test the theory, this investigation utilized income was beneath 100 thousand. In view of this distinctive measurable systems, in particular different obviously the greater part of the respondents are little relapse. Furthermore, this investigation additionally in estimate. Comparable outcomes likewise discovered connected strength examination to look at the relative in view of number of representatives. 61.41 percent significance of various factors expressed in the reasonable model. Be that as it may, before executing respondents have under 100 workers. As indicated by various relapse and strength examination, this Malaysian National SME Development Council, 97.3 investigation tried three most imperative suppositions percent of aggregate business improvement in 2010 of multivariate investigation, to be specific discriminant was have a place with SME. What’s more, 90 percent legitimacy, unwavering quality and typicality. of SME are benefit related, 3 percent development and 1 percent farming. Additionally, Malaysian government Exploratory Factor Analysis (EFA) was utilized to likewise arranged SME’s into three unmistakable analyze discriminant legitimacy, Cronbach alpha and classes, to be specific, large scale; little and medium. collinearity test were utilized to test the unwavering In their report, they recognized the majority of the quality and ordinariness separately. Table 4 presents SMEs in Malaysia are have a place with the full scale. consequences of EFA and affirmed tasteful result as Same outcomes additionally think about this every one of the pointers’ qualities were more than the investigation. In connection to utilizing IM as edge. Furthermore, all things were stacked properly on the suitable variable with a higher stacked esteem. hierarchical correspondence, 82.74 respondents Four elements arrangements developed not concurred that they have been utilizing IM as their surprisingly with the higher eigenvalue of 1 and specialized instrument. Actually, 85.89 percent IM aggregate change stacked as 79.69. Besides, factor clients embraced telephone based IM. Despite the fact stacking was higher than the edge of 0.50, going from that numerous associations in Malaysia have been utilizing IM, yet utilizing IM is new wonder in Malaysia. .766 to .878. It is on account of 74.75 percent clients have just 1 to 2 Likewise, the Cronbach alpha test was executed to years of involvement in this new rush of authoritative guarantee interior consistence between scales. For this specialized instrument. 1030 Journal of Reviews on Global Economics, 2019, Vol. 8 Tarofder et al.

Table 4: Exploratory Factor Analysis

Egenvalue Factors Loading % of Variance Alpha

Factor 1 (Knowledge creation) 7.644 47.775 .9234 Knowledge creation 1 .857 Knowledge creation 2 .845 Knowledge creation 3 .844 Knowledge creation 4 .803 Factor 2 (Organizational Pressure) 2.499 15.616 .8987 Organizational Pressure 2 .826 Organizational Pressure 1 .819 Organizational Pressure 3 .805 Organizational Pressure 4 .766 Factor 3 (Relative Advantages) 1.564 9.77 .9026 Relative Advantages 3 .878 Relative Advantages 1 .874 Relative Advantages 2 .858 Relative Advantages 4 .836 Factor 4 (Perceived Social Presence) 1.044 6.525 .9269 Perceived Social Presence 1 .798 Perceived Social Presence 4 .798 Perceived Social Presence 2 .793 Perceived Social Presence 3 .790 investigation, the edge an incentive for alpha was 0.60 most critical determinants of IM appropriation in recommended by Churchill (1979). Alpha qualities for Malaysian associations. All the more particularly, 43.7 five variables were great and more than the limit (Table percent difference of IM reception can be clarified by 4), which guarantee interior consistency for this information creation, trailed by relative points of interest examination. Because of an expansive number of tests, (37.1%); saw social nearness (19.5%) and authoritative this examination tried the focal hypothesis to look at weight (10.6%). Thus, this examination unquestionably ordinariness. Two critical test were proposed by reasoned that all proposed speculation have been Kleinbaum et al. (1988), to be specific resistance and acknowledged. Be that as it may, relapse examination fluctuation swelling factor (VIF). They proposed that can’t anticipate significance of these variable in various resistance esteem ought to be more than 0.10 and VIF industry. Consequently, this examination likewise esteem ought to be beneath 10. In the two executed predominance investigation. circumstances, this investigation gave palatable outcomes (Table 5). Subsequently, this investigation Table 6 presents predominance investigation results certainly executed numerous relapse and strength for to gauge the significance of autonomous factors in two making inferences. distinct ventures, to be specific manufacturing and service. Intriguing yet significant outcomes uncovered Table 5 introduces the outline of relapse comes by strength investigation. Results demonstrated that about. Results demonstrated that the general model fit every one of the four factors are fundamentally critical was 68.8 percent. At the end of the day, right around for adoption of IM, yet hierarchical weight isn’t huge for 69 percent of inside reception of IM can be clarified by the administration business. In addition, knowledge the four factors recognized by this examination. Results creation is the primary worry for service industry likewise demonstrated that all proposed theory are keeping in mind the end goal to adopt IM, though, acknowledged at 99 percent certainty interim. Relapse relative advantage circumstances is the principle comes about uncovered that information creation is the influential factors for the manufacturing industry. Adoption of Instant Messenger Journal of Reviews on Global Economics, 2019, Vol. 8 1031

Table 5: Results of Multiple Regression

Model Unstandardized Standardized t Sig. Tolerance VIF Coefficients Coefficients B Std. Error Beta

1 (Constant) 7.394E-018 .039 .000 1.000 Knowledge Creation .467 .073 .437 6.443 .000 0.136 6.933 Organizational Pressure .113 .051 .106 2.199 .029 0.201 4.263 Relative Advantages .381 .055 .371 6.963 .000 0.421 2.013 Perceive Social Presence .209 .060 .195 3.501 .001 0.447 2.238 a. Dependent Variable: Internal Adoption of IM. Adjusted R2 = .683; F = 104.97; Significant Value = 0.000.

Table 6: Impact of Explanatory Variables on Internal Adoption of IM: Manufacturing Sector Vs Service Sector

Independent Variables Manufacturing Sector Service Sector Differential Effect (α = β + β’) (β = α + α’) (α’ = -β’)

Constant 1 0.031 -0.043 0.074 (0.589) (-0.634) (0.861) Knowledge Creation X1 0.425* 0.557* - 0.132 (8.468) (7.722) (-1.506) Organizational Pressure X2 0.168* 0.021 0.147*** (3.276) (0.307) (1.724) Relative Advantages X3 0.462* 0.467* -0.006 (8.848) (6.880) (-0.064) Perceived social presence X4 0.398* 0.342* 0.056 (7.650) (5.160) (0.665) R2 0.613 n 197 F 39.829*

Similar results were found in many prior studies (eg. advantage standpoint is the primary thought process in Geiger and Laubert 2018; Tseng et al. 2017). positive association to adopt IM. In connection to Furthermore, comes about affirmed that organizational organizational pressure, it has generally more impact in pressure weight is one of the compelling indicator for the corporation than SMEs. Many prior studies utterly the manufacturing industry, which fundamentally vary mentioned that organizational pressure plays important from the service industry. Together these outcomes role in corporation in order to prompt the adoption give essential bits of knowledge with respect to IM process of IM (Nanda et al. 2018; Fang et al. 2014) adoption amongst manufacturing and service industry Authoritative weight could be a typical topic in huge which was yet to get it. association, particularly in connection IM. A conceivable clarification for this may be that the huge In comparative mold, Table 7 presents aftereffects associations need to implement tenets and direction for of strength examination amongst SMEs and Large institutionalized correspondence convention. associations. Results uncovered that learning creation Consequently this investigation affirmed that the is the primary worry for SME to embrace IM in their adoption procedure in both SMEs and corporation correspondence framework. The conceivable purpose substantial associations vary fundamentally. behind this outcome could be the number of employees. All the more correctly, IM would be a CONCLUSIONS LIMITATIONS AND FURTHER STUDY compelling medium of acquiring information with minimal number of members, which can be seen in This examination set out with the point of SME. On the opposite side of the coin, relative recognizing essential components impacting IM 1032 Journal of Reviews on Global Economics, 2019, Vol. 8 Tarofder et al.

Table 7: Impact of Explanatory Variables on Internal Adoption of IM: Firm Size SME and Cooperation

Independent Variables SME (α = β + β’) Corporation Differential Effect (β = α + α’) (α’ = -β’)

Constant 1 0.006 0.002 0.004 (0.126) (0.037) (0.046) Knowledge Creation X2 0.561* 0.367* 0.194** (10.833) (6.010) (2.427) Organizational Pressure X3 0.135** 0.104*** 0.031 (2.617) (1.677) (0.382) Relative Advantages X4 0.387* 0.613* -0.226* (7.821) (9.385) (-2754) Perceived social presence X5 0.330* 0.444* -0.114 (6.672) (6.853) (-1.395) R2 0.628 n 197 F 45.171*

Note: i) *, **, *** indicates the regression coefficients are significant at 99%, 95% and 90% respectively, ii). reception in authoritative setting. Furthermore, this Another striking conclusion can be made in light of investigation likewise analyzed contrasts amongst the discoveries that IM improve the feeling of being assembling and administration industry in connection social. In spite of numerous contentions, IM can give a with these pivotal determinants. This examination virtual stage where each worker can be locked in, surely is one of only a handful few, which shared their desires et cetera. These offices make IM experimentally researched imperative determinants for more well known among representatives, particularly in IM appropriation in an authoritative setting. In view of the association. discoveries, this investigation gives the accompanying recommendation that contributes both scholastically In connection with useful commitment, this and for all intents and purposes. investigation affirmed that learning creation is the fundamental reason for embracing IM in SMEs, while In light of the relapse comes about, obviously IM relative focal points for extensive associations. It could upgrade authoritative correspondence, as well as be on account of extensive associations may require collects information from each edge of associations. more vital formal learning than SME. As it were, SMEs’ Without a doubt learning is the key for increasing upper utilization to unravel quickly by getting casual strategic hands. Because of this interesting element, learning. associations should fuse IM as their medium of correspondence. Another wonderful finding from this examination is that authoritative weight isn’t critical for the It is additionally predictable that IM gives a critical administration business to embrace IM and learning number of advantages to the hierarchical creation is the primary corner of this industry. In this correspondence by diminishing correspondence cost, way, plainly information creation is one of the principle sharing constant data, refreshing individual status et exercises of IM next to correspondence. cetera. This finding to be sure, gives a future look of hierarchical correspondence framework. For example, Notwithstanding taking numerous activities to limit by embracing IM association can undoubtedly pulverize mistakes, this examination had a couple of the limits amongst best and lower level administration. impediments. As a matter of first importance, it may not proper to sum up conclusion in view of just 197 By partaking in IM correspondence, associations can urge their representatives to take an interest in the respondents. It is imperative to manage at the top of basic leadership process, which in the end give the priority list the conceivable predisposition in these strengthening to their workers. In this way, it is worth to reactions too. Also, these respondents for the most part recommend that each association ought to receive IM get from three fundamental states in Malaysia. in their everyday correspondence. Subsequently, it is prudent to expand more example Adoption of Instant Messenger Journal of Reviews on Global Economics, 2019, Vol. 8 1033 from everywhere throughout the Malaysia keeping in Hong Jinwon One-Ki (Daniel) Lee Woojong Suh , (2013),”A study of the continuous usage intention of social software in the mind the end goal to sum up the conclusions. context of instant messaging”, Online Information Review, Vol. 37 (5) pp. 692 – 710 Besides, this examination had created theoretical https://doi.org/10.1108/OIR-08-2011-0144 model with just four autonomous factors. However, Jinwon Hong One-Ki (Daniel) Lee Woojong Suh , (2013),”A study of the continuous usage intention of social software in the relapse examination showed that lone 68 percent context of instant messaging”, Online Information Review, fluctuation of IM appropriation is clarified by these four Vol. 37 Iss 5 pp. 692 – 710 https://doi.org/10.1108/OIR-08-2011-0144 factors. Additionally considers, which consider these Khong Sin Tan, Siong Choy Chong, Binshan Lin, Uchenna Cyril Eze, factors, should be attempted. In addition, it is worth to (2010),”Internet-based ICT adoption among SMEs: utilize more factors to test different factors, for Demographic versus benefits, barriers, and adoption example, many-sided quality, similarity et cetera. intention”, Journal of Enterprise Information Management, Vol. 23 (1) pp. 27 – 55. https://doi.org/10.1108/17410391011008897 To wrap things up, this investigation never tests the Lee, M.K.O., Cheung, C.M.K., Lim, K.H. and Sia, C.L. (2006), impact of culture on IM reception. We can’t deny that “Understanding customer knowledge sharing in web-based correspondence style altogether relies upon culture. 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Received on 22-08-2019 Accepted on 05-09-2019 Published on 02-12-2019

DOI: https://doi.org/10.6000/1929-7092.2019.08.89

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