Architecture, a career option for women? Romania case.

ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012), Page|1 URL: http://www.reaser.eu e-mail: editors@reaser.eu ___________________________________________________________ Copyright © 2012 Pro Global Science Association All rights reserved. No part of this publication may be reproduced, stored, transmitted or disseminated, in any form, or by any means, without prior written permission from Pro Global Science Association, to whom all requests to produce copyright material should be directed, in writing. ____________________________________________________________ ___________________ Editor in Chief: Ruxandra Vasilescu Editors: Cristina Barna Manuela Epure Graphics: arch. Raluca Niculae ___________________ ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012), Page|1 URL: http://www.reaser.eu e-mail: editors@reaser.eu ___________________________________________________________ Copyright © 2012 Pro Global Science Association All rights reserved. No part of this publication may be reproduced, stored, transmitted or disseminated, in any form, or by any means, without prior written permission from Pro Global Science Association, to whom all requests to produce copyright material should be directed, in writing. ____________________________________________________________ ___________________ Editor in Chief: Ruxandra Vasilescu Editors: Cristina Barna Manuela Epure Graphics: arch. Raluca Niculae ___________________ ______________________________________________________________________________ ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012), Page | 3 URL: http://www.reaser.eu e-mail: editors@reaser.eu ______________________________________________________________________________ TABLE OF CONTENTS 1. Akopova, E.S., Akopov, S.E. – Towards the European integration model perspectives ……………...5 2. Bratu (Simionescu), Mihaela – Improving the accuracy of consensus forecasts for Euro area ……...11 3. Bogdanov, D.B. – New technologies on the way of higher education expansion ……………………..16 4. Boldea, Bogdan-Ion – Social factors influence on economic growth. The case of Romania …………25 5. Bradić-Martinović, Aleksandra, Zdravković, Aleksandar – Integration of western Balkan countries into the European system of digital data archives in social sciences: the case of Serbia ……………………..32 6. Bucea-Manea-Tonis, Radu, Bucea-Manea-Tonis, Rocsana – Content management system for EBusiness………………………………………………………………………………………………………..42 7. Chirea, Catalin Gabriel, Bazacliu, Gabriel – Optimization of a tour in a distribution network ……....49 8. Danciu, Aniela, Strat, Vasile – The FDI profile in the Romanian manufacturing sector ……………57 9. Dokukina, Anna – Management issues of smart growing business: knowledge-oriented employees as a critical competitive factor ……………………………………………………………………………….…65 10. Dragomirovic, Srdjana – Competitive analysis of economic development of Serbia and EU depending on the possibility of using Strategy Europe: 2020 in Serbia ……………………………………………....79 11. Ďurková, Katarína, Čábyová, Ľudmila, Vicenová, Eva – Regional development in economic core regions ………………………………………………………………………………………………………...87 12. Enachescu, Vladimir-Aurelian, Hristache, Diana Andreia, Paicu, Claudia Elena – The interpretative valences of the relationship between sustainable development and the quality of life …………………..93 13. Epure, Manuela – Population ageing- a demographic trend with various consequences……………...…97 14. Faslia, Ndoc, Brahimi, Fran – Effects of the free trade agreements on the development of the agriculture sector in the Balkan region…………………………………………………………………….108 15. Gašparíková, Jana – Future of science and society …………………………………………………….114 16. Gjino, Gentiana, Illollari, Orkida – Innovation in multi-channel retail banking. The bank wins or loses customers ……………………………………………………………………………………………………119 17. Ionescu, Alina Mariuca – How does education affect labour market outcomes? …………………....130 18. Jurisova, Vladimira, Ďurková, Katarína – CSR communication and its impact on corporate image .145 19. Lopatina, E.Yu. – Risk management under the conditions of globalization ………………………...150 ______________________________________________________________________________ ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012), Page | 4 URL: http://www.reaser.eu e-mail: editors@reaser.eu ______________________________________________________________________________ 20. Milenkovic, Ivan, Milenkovic, Dragana – Inward foreign direct investments in Serbia – investigating motives in the past and prospects for the future ……………………………………………………….....158 21. Muça, Brunilda Hoxha, Sajmir, Doraci, Galantina – Effects of informality on Albania’s labor market…………………………………………………………………………………………………….….166 22. Niculae, Raluca Livia – Architecture, a career option for women? Romania case ………………….170 23. Oprean, Camelia – Testing the financial market informational efficiency in emerging states ……..181 24. Ostrovskaya, V.N. – Benchmarking as a factor of the economic crisis consequences’ leveling…….191 25. Popkova, E.G., Romanova, M.K., Kukaeva, L.I. – Elaborate cluster policy: new vision of the regional development………………………………………………………………………………………………….198 26. Rosca, Felician, Dorgo, Madalina – Management of musical education at early ages ………………208 27. Sava, Cipriana, Caraivan, Luiza – The durable development of cultural tourism in Timisoara and its surrounding area: capitalizing on the existing assets and resources……………………………………..217 28. Takács, István, Nagy-Kovács, Erika, Holló, Ervin, Marselek, Sándor – Model for optimization of biomass utilization for energy production by energetic and economic requirements ………………….225 29. Tégla, Zsolt, Hágen, István , Holló, Ervin, Takács-György Katalin –Adoption of logistic principles in WOODY-biomass energy clusters …………………………………………………………………………236 30. Tinyakova, V.I. – The new approaches in econometric researches of financial markets. Distributed volatility ……………………………………………………………………………………………………...247 31. Barna, Cristina, Vasilescu, Ruxandra - Monograph Review Koloman Ivanicka et al: New model of socio-economic sustainable development of the Slovak Republic, A Monograph, School of Economics and Management in Public Administration in Bratislava, Institute of European,National and Global Studies, 2012 ………………………………………………………………………………………………………………...256 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 5 URL: http://www.reaser.eu e-mail: editors@reaser.eu Towards the European integration model perspectives E. S. Akopova 1+, S. E. Akopov 2 1 Rostov State Economical University Rostov, Russia 2 North Caucasian Federal University (NCFU), Russia Abstract. European integration within the booming European Union with its original as well as emerging members became a prominent example of sustainable economic growth, employment and social and ecologic development. However, conditions throughout the EU are not the same everywhere; moreover, they change drastically due to demographic processes and migration, which have a huge impact on the social structures and social policy, correspondingly. During the year 2011 it became clear that the last financial and economic crisis not simply had a negative impact on dynamics of economic development of EU, but revealed deep contradictions in European integration model. These processes (quite often accompanied by erroneous anti-recessionary steps of the national governments of EU countries) led to the aggravation of the whole range of economic and social problems in the European states. For instance, expected measures including rigid economy of the budgetary expenses have a boomerang effect, i.e. cause reduction of consumer demand and investment activity; therefore growth rates of gross domestic product slow down as well. As a result, the budgetary incomes continue to shrink while sufficient deficiencies and the related new loans remain. Finally, Greece and other problem states get to the “vicious circle”. We aim to discuss some issues concerning the European integration project and its reasonability: to define the degree of national EU member states’ responsibility in regard to their national economic and social policy, to assess possibilities of restriction of their sovereignty within EU, to analyze peripheral relations’ overcoming within EU when Germany and some of the most successful member countries tend to be “locomotives of economic growth” and the centers of key economic decision-making which are only applied on other states of EU. Keywords: Europe, European Union, European integration, crisis, economic growth, national states. JEL Codes: P44, P47, P48, P52. 1. Introduction There is no doubt that the European Union as a fruit of European integration has made significant contributions to prosperity, democracy and security in Europe. The EU’s enlargement policy has been one of its most successful, serving as a powerful instrument of foreign policy contributing to the stabilization of political and economic development in the acceding countries (Atilgan, Klein 2006). However, since the Southern and Eastern European enlargement of the EU in 2004, there has been talk of a political and institutional “overexpansion” of the EU, which aggravated when the negative consequences of the economic crisis became clear. 1 Doctor of Economics, Professor 2 Undergraduate + Corresponding author: akopova-sovet@rsue.ru . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 6 URL: http://www.reaser.eu e-mail: editors@reaser.eu As EU already contains 27 member states there is a reasonable fear that further augmentation or even “non-compression” could lead to Europe’s inability to act effectively. 1.1. European integration model overview Economic integration is a process aiming at abolishing discrimination between domestic and foreign goods, services and factors of production. Typically this process runs through four stages: free trade area, customs union, common market and economic and monetary union. A free trade area involves the removal of tariffs between member countries on their reciprocal trade in goods and services, and the maintenance of the respective national tariffs towards non-member countries. When in addition to the liberalization of trade among member countries, these levy a common external tariff (CET) against third countries, a customs union is formed. A common market possesses all the elements of a customs union plus the free movement of the factors of production among the member countries. Finally, a common market in which the major micro- and macro-economic policies of the member states are harmonized under supranational control and in which a single currency is adopted, leads to an economic and monetary union (Rueda-Junquera 2006). According to Article 49 of the Treaty on the European Union (TEU), “Any European State which respects the principles set out in Article 6(1) may apply to become a member of the Union.” A prerequisite for starting negotiations is the degree of development of the candidate country. Any European state interested in joining the EU must initiate the appropriate far-reaching reforms. The conditions for membership are laid down in the Copenhagen Criteria, which require the “stability of institutions guaranteeing democracy, the rule of law, human rights and respect and protection of minorities; the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union; acceptance of the Community acquis: ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.” Adopting the “acquis communautaire” thus means accepting the total body of EU law created thus far. Not only the common legal system has supported integration efforts in Europe, but also the establishment of common institutions endowed with a supranational decision-making power, a clear mandate and a certain amount of automatically available financial resources. These institutions have helped the European integration scheme to pursue clearly identified regional interests rather than the sometimes conflicting interests of different Member States. Common institutions have acquired a supranational nature thanks to the partial transfer of sovereignty from Member States to them, making possible that these institutions have operated appropriately. Both management and decision-making powers have been transferred to these institutions, in such a way that most of their actions have binding character on the Member States. Therefore, operating common institutions has been a shared sovereignty exercise. This fact has made these institutions to play an essential role in strengthening the integration process, since their operation has allowed the consolidation of the idea of supranationality. The transfer of sovereignty, as well as the common European law, has not been uniform in all the areas, but still very close (fig. 1). While in some of them it has been far-reaching (e.g. in agricultural and monetary matters), in others it has been practically non-existent (e.g. in taxation and social issues). Institutions have had their scope limited to those powers assigned to them by the Treaty on EU or derived from its implementation (Rueda-Junquera 2006). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 7 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 1: Transposition of EU law, by policy area, % Source: http://epp.eurostat.ec.europa.eu/ 2. Urgent problems of the European integration model While the European Union (EU) has long been the most developed model of regional integration, it was severely shaken by the recent economic crisis, causing increasing doubts about the integration process. The lack of a timely and coherent response to the Euro crisis called into question the integrity of the eurozone, whose structural and institutional fault lines have been revealed by the financial crisis (Cameron 2010). The EU’s interests extend far beyond its own ability to influence events, since Europe is directly affected by foreign crises and conflicts as well as by disruptions and blockades in trade and in the supply of raw materials. From a geopolitical perspective, Europe lies in a sensitive and turbulent neighbourhood. In order to better confront the current dangers, the EU’s security strategy depends on an “effective multilateral system”, strengthened by the integration of neighbouring states (Atilgan, Klein 2006). The problem is, that while close cooperation remains the main tool of economic growth for the European states, there are certain limits of its enlargement. Already in 2006-2007, just before the crisis, it became obvious that the EU’s instrument of accession as an all-purpose solution for managing crises, promoting democracy and furthering economic integration has exhausted. Thus, we do not consider further enlargement on the scale of multiple states as a possible option, and new integration models creation has to be the main focus of our study. 2.1. “Core” and “less developed” economies coordination The first EU challenge is increased fiscal coordination amid a worsening economic outlook (Cameron 2006). GDP rate slowed down or even became negative after 2008 (fig. 2 and 3). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 8 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 2: Real GDP per capita growth rate: percentage change in 2012 comparing with 2008 Source: http://epp.eurostat.ec.europa.eu/. The EU needs to cleanse the financial system and follow through on austerity measures introduced by almost all member states. The major risk today is the continuing fragility of the economies of some eurozone member states such as Greece, Spain, and Portugal, and the possibility of renewed speculation on the financial markets. Although there are some positive signs of economic recovery in Europe, many economists continue to warn of a possible "double dip" recession and the likely impact of the ongoing problems of many European banks. While most passed the "stress tests" at the end of July 2010, there was broad agreement that these tests were not as strenuous as they could have been. The political identity issues aggravated the economic crisis. Despite the EU has progressed from a customs union to a single market and a eurozone and gradually extended its membership, it proved unable to strengthen its political institutions at a pace and with a depth consistent with the needs of its integration, as well as the number and heterogeneity of its membership. Faced with widespread public skepticism about the EU, European capitals remain attached to national sovereignty and reluctant to give great powers to Brussels. Furthermore, France and Germany remain divided on the issue of economic governance, and questions linger over the EU's final eastern borders. Some authors see the reason in smaller-scale regional integration processes suppression (Cameron 2010). It becomes apparent that while the EU is strongly pledging its support to open regionalism among developing countries and has embarked on bi-regional cooperation and integration agreements building on this regional integration process, the EU support can be a double-edge sword. In seeking to strengthen regionalism, the EU ay also put regional integration processes under unwarranted pressures. The following section elaborates on the more pro-active attitude of the EU to promote or interfere (depending on the perspective) with the regional integration of developing countries. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 9 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 3: General government gross debt (million euro) Source: http://epp.eurostat.ec.europa.eu/. 3. European integration model prospects We found out the impossibility of further EU augmentation. But still there is a need in strong cooperation between the member countries. Starting with this facts, other forms of integration other than full membership must serve to complement enlargement. The goal is to develop models that lie in between the European neighbourhood policy and full membership, that are well suited for states that either cannot or do not want to join the EU in the foreseeable future. With such an approach, the varying stages of development of different countries can be accommodated, and at the same time the EU’s goal of caring for its neighbours’ security and stability can be fulfilled. For example, the model EEA+ (European Economic Area+) envisions the broadening of cooperation in trade and political economy. Members of the EEA+ contribute significantly to the common programs that impact the single market. The extent of their contribution is determined by way of an annually adjusted proportionality factor. The method of calculation used for third states is fixed in the various association and cooperation treaties. Third states making a financial contribution to the different programs are entitled to participate in the arrangements like the member states. While not obliged to pay into the ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 10 URL: http://www.reaser.eu e-mail: editors@reaser.eu common EU budget, the EEA states must contribute to the economic and social cohesion of the European economic area as outlined in the agreement of May 1, 2004. The history of the EU shows that crisis often—but not always—leads to increased integration (McNamara 2010). Crisis alone will not produce results unless there is the political will and creativity to respond with decisive innovation. From the initial establishment of the European Coal and Steel Community in response to the challenges of postwar reconstruction to the single-market innovations of the 1980s, examples abound of the ability of political elites to seize crisis for policy innovation. Even so, long periods of stagnation in political, economic, social, and security arenas have persisted even in the face of serious dysfunction. In the early years of the EU, the so-called empty chair crisis blocked movement on needed decision-making reform for years. A long period of economic stagflation and hard times in the 1970s brought little in the way of policy integration. 4. Conclusion Today certainly represents a crisis push moment. Yet despite some limited EU capacity building, there has been a striking lack of coordinated political leadership across the European capitals faced with market pressures. If anything, the zeitgeist favors political entrepreneurs whipping up anti-EU feelings as austerity programs begin to bite, rather than pushing for further integration. 5. References [1] Atilgan C., Klein D., EU Integration Models beyond Full Membership. Konrad-Adenauer-Stiftung e.V. Working Paper / Documentation. 2006, 158. [2] Rueda-Junquera F.. European Integration Model: Lessons for the Central American Common Market. Jean Monnet/Robert Schuman Paper Series. 2006, Vol. 6 (4). [3] Cameron F.. The EU Model of Integration -Relevance Elsewhere? Jean Monnet/Robert Schuman Paper Series. 2005, Vol. 5 (37). [4] Cameron F., The European Union as a Model for Regional Integration. Council on Foreign Relations Press, 2010. [5] Tavares J. A., On The Future of European Integration: Idea, Economics, and Political Economy. Dahrendorf Symposia Series - Working Paper. 2012, 13. [6] McNamara C. K., The Eurocrisis and the Uncertain Future of European Integration. Council on Foreign Relations Press, 2010. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 11 URL: http://www.reaser.eu e-mail: editors@reaser.eu Improving the accuracy of consensus forecasts for the EURO area Mihaela Bratu (Simionescu)1+ 1 Faculty of Cybernetics, Statistics and Economic Informatics, Academy of Economic Studies, Bucharest Abstract. Starting from the predictions made by the Consensus Economics for the average percentage change in the previous year of the imports and exports of Euro Area for 2010 and 2011, some strategies to improve the forecasts accuracy were tested. The most accurate forecasts for 2010 were those based on ARIMA models for the mentioned indicators. An improvement of the forecasts accuracy for the average percentage of change in imports was registered for 2011 by combining the lowest and the highest predicted values of the experts using equally weighted (EW) scheme. Knowing the historical accuracy of Consensus forecasts and the best strategies to improve it, a better orientation could be done in the future decision-making of economic agents, especially central banks. Key words: forecasts, accuracy, combined forecasts, Consensus forecasts JEL Classification: E21, E27,C51, C53 1. Introduction In this study some proposals are made in order to improve the accuracy of Consensus Economics forecasts for the average percentage change on the previous year of the imports and exports of the Euro Area. New forecasts were provided by choosing the maximum and the mínimum values, the median, the average and combined forecasts based on the critical values provided by the sample of forecasters. Some predictions were made using ARIMA models, the econometric modeling proving to be a very good method to get accurate forecasts. Novotny F. and Rakova M.(2010) compared the forecasts made by Consensus Economics to the naive predictions and those made by International Monetary Fund, Organization for Economic Cooperation and Development and of the European Commission. 2. Strategies to improve the forecasts accuracy Bratu (2012) states some important strategies to be used in practice in order to improve the forecasts accuracy. One of these strategies is building combined forecasts in different variants: predictions based on linear combinations whose coefficients are determined using the previous forecasts and predictions based on correlation matrix, the use of regression models for large databases of predicted and effective values. On the other hand, we can apply the historical errors method, which implies the same value of an accuracy indicator calculated for a previous period. 1 PhD Candidate in EconomicStatistics at Institute of Doctoral Studies of theAcademy of EconomicStudies Bucharest + email: mihaela_mb1@yahoo.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 12 URL: http://www.reaser.eu e-mail: editors@reaser.eu The most used combination approaches are: the optimal combination (OPT), with weak results according to Timmermann (2006), the equal-weights-scheme (EW) and the inverse MSE weighting scheme (INV). Bates and Granger (1969) considered two predictions p1;t and p2;t, for the same variable Xt, derived h periods ago. If the forecasts are unbiased, the error is calculated as: ei, t = X i, t − pi, t (1) The errors follow a normal distribution of parameters 0 and σ i2 . If ρ is the correlation between the errors, then their covariance is σ = ρ ⋅σ ⋅σ . The linear combination of the two predictions is a 12 1 2 weighted average: ct = m ⋅ p1t + (1− m)⋅ p 2t (2) The error of the combined forecast is: ec, t = m⋅e1t + (1− m)⋅e2t (3) The mean of the combined forecast is zero and the variance is: σ c2 = m 2 ⋅σ 12 + (1 − m) 2 ⋅σ 22t + 2 ⋅ m ⋅ (1 − m) ⋅σ 12 (4) By minimizing the error variance, the optimal value for m is determined ( mopt ): mopt = σ 22 −σ 12 σ 12 +σ 22 − 2⋅σ 12 (5) The prediction error variance of the optimally combined forecast is: 2 = σ opt σ 12 ⋅σ 22 ⋅(1− ρ 2 ) σ 12 +σ 22 − 2⋅ ρ ⋅σ 1 ⋅σ 2 (6) Stock and Watson (2004) were interested in the variances of the forecast errors. The individual forecasts are inversely weighted to their relative mean squared forecast error (MSE) resulting INV. In this case, the inverse weight ( minv ) is: σ 22 (7) minv = σ 12 +σ 22 The prediction error variance of the inversely combined forecast is: σ 12 ⋅σ 22 ⋅(σ 12 +σ 22 + 2⋅ ρ ⋅σ 1 ⋅σ 2 ) 2 σ inv = (8) (σ 12 +σ 22 ) 2 Equally weighted combined forecasts (EW) are gotten when the same weights are given to all models, disregarding all information of the covariance matrix of the prediction errors and taking the average. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 13 URL: http://www.reaser.eu e-mail: editors@reaser.eu The forecast error variance of EW is: 1 1 1 2 = ⋅σ 2 + ⋅σ 2 + ⋅σ ⋅σ ⋅ ρ (9) σ eq 4 1 4 2 2 1 2 12 In this study the database provided by Consensus Forecasts was used. It consists in 26 values for the average percentage change on the previous year of the imports and export of Euro Area predicted by famous institutions (main investment Banks and important analytical centers) for 2010 and 2011. Starting from this dataset new predictions were made, choosing as values of the average percentage change of imports and exports the maximum and the mínimum values, the median, the average and combined forecasts base on the critical values provided by the sample of forecasters. For the combined predictions the optimally, inversely and equally weighted schemes were used. Table 1. New predictions for the average percentage change in the previous year of the imports and export of Euro Area Average percentage change of the: Maximum value Minimum value Average Median Combined forecasts (OPT, INV) Combined forecasts (EW) Registered values Exports (%) 2010 2011 9.3 6.9 6 1.3 7.17 5.20 7.2 5.35 Imports (%) 2010 2011 7 7.8 5.1 1.3 6.31 4.9 6.35 5.05 6.37 1.35 5.54 5.43 6.08 5.8 8.99 4 11.1 6.4 9.3 4.1 Source: own computations using Excel The simple errors, calculated as the difference between the predicted and the registered value, were computed for the proposed predictions. Table 2. Errors of new predictions Simple errors (percentage points) Exports Imports 2010 2011 2010 2011 Maximum value -1.8 0.5 -2.3 3.7 Minimum value -5.1 -5.1 -4.2 -2.8 Average -3.93 -1.20 -2.99 0.8 Median -3.9 -1.05 -2.95 0.95 Combined forecasts (OPT, INV) -4.73 -5.05 -3.76 1.33 Combined forecasts (EW) -5.02 -0.6 -0.31 -0.1 Lowest error of the forecasters -1.8 0 -0.7 -0.2 Source: own computations using Excel An improvement of the forecasts accuracy for the average percentage of change in imports was registered for 2011 by combining the lowest and the highest predicted values of the professional forecasters ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 14 URL: http://www.reaser.eu e-mail: editors@reaser.eu using equally weighted (EW) scheme. All the experts in forecasting tended to underestimate the values of the indicators. For data series provided by Eurostat for the average percentage change on the previous year of the imports and exports of Euro Area (for 1995-2009) ARIMA models were built. The lack of stationarity conducts us to transform the data, working with . The autoregressive models gotten for the two variables are: Table 3. New predictions based on ARIMA models for the average percentage change in the previous year of the imports and export of Euro Area Average percentage change of the exports (%) 2010 2011 12 11.55 Average percentage change of the imports (%) 2010 2011 6.71 7.25 Table 4. Errors of new predictions based on ARIMA models Simple errors ARIMA models forecasts Average percentage change of the exports (%) 2010 2011 0.9 2.31 Average percentage change of the imports (%) 2010 2011 0.25 3.11 The lowest errors were provided by the forecasts based on ARIMA models for exports and imports indicators of 2010. For 2011 the errors are rather large, the best Consensus Economics prediction and the combined forecast in EW version being better. 3. Conclusions In literature there are many ways to get more accurate forecasts. From empirical researches one method proves to be better than others. In this case study, for 2010 ARIMA models for the transformed data series of the average percentage change of exports and imports generated better forecasts than those made by the experts from Consensus Economics for Euro Area. For 2011 the combined predictions based on EW scheme for the indicator related to imports improved the accuracy of the forecast. A null error was gotten for one forecast of the average change in exports for 2011. The ex-post assessment of the Consensus forecasts accuracy and the strategies to improve it should be known in order to improve the future decision making of economic agents. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 15 URL: http://www.reaser.eu e-mail: editors@reaser.eu 4. References [1] Bates, J., and C. W. J. Granger (1969), The Combination of Forecasts, Operations Research Quarterly, 20(4), 451468. [2] Bratu M. (2012), Strategies to Improve the Accuracy of Macroeconomic Forecasts in USA, LAP LAMBERT Academic Publishing, ISBN-10: 3848403196, ISBN-13: 978-3848403196 [3] Novotny F., Rakova M. (2010), Assessment of Consensus Forecasts Accuracy: The Czech National Bank Perspective, Working Paper, No. 14/2010, available at http://www.cnb.cz [4] Stock, J., Watson M. (1999) A Comparison of Linear and Nonlinear Univariate Models for Forecasting Macroeconomic Time Series, chap. 1, p. 1-44, Cointegration, Causality and Forecasting: A Festschrift, In Honour of Clive WJ. Granger. Engle R, White H. [5] Timmermann, A. (2006): Forecast Combinations, chap. 4, pp. 135-196, Handbook of Economic Forecasting. G. Elliott, C. Granger, and A. Timmermann, Elsevier. [6] CONSENSUS ECONOMICS http://www.consensuseconomics.com/Economic_Forecast_Publications.htm. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 16 URL: http://www.reaser.eu e-mail: editors@reaser.eu New technologies on the way of higher education expansion D. V. Bogdanov1+ 1 Accounting and Economical Activity Analysis Chair All-Russian Distance Institute of Finance and Economics, Volgograd, Russia Abstract. In accordance with various recent studies as well as European Declarations, almost all EU members proclaim that increasing and widening participation in higher education is a major policy objective. Due to certain initiatives in this field, the amount of students, choosing for higher education establishments, is increasing year after year. Nevertheless, these numbers provide the evidence of quantitative dynamics, while qualitative (e.g. social) change is aimed. A shift towards knowledge-based societies does not only imply a process of higher education massification; this institute must become more socially inclusive. This means, the students entering, participating in and completing higher education at all levels should reflect the diversity of European countries’ populations. To fulfill such requirements, some measures aimed at educational process facilitation must be accepted, so that students were able to complete their studies without obstacles related to their social and economic background. In our opinion, the primary role in the educational reform belongs to technological modification and renovation. Thus, an overview of new technologies helping to expand higher education initiatives throughout Europe is of a great interest. Keywords: higher education, new technologies, distant education, Europe, universities, social policy. JEL Codes: I24, I25, I28. 1. Introduction According to London Communiqué 2007 of the countries participating in the Bologna Process, “higher education should play a strong role in fostering social cohesion, reducing inequalities and raising the level of knowledge, skills and competences in society». Thus, the part of social policy, responding for the promotion of education, shoud aim to maximize the potential of individuals in terms of their personal development and their contribution to a sustainable and democratic knowledge-based society, aspiring that the student body admitted, participating in and completing higher education at all levels reflects the diversity of European members' populations. In this article, we will introduce some information on the modern «average» European student and will find out, if there are any problems, which young people from various social strata face concerning their will and possibilities to continue education at the universities. We aim also to provide some opportunities of the new technolgies' use for the purposes of any obstacles (related to the social and economic background of 1+ Candidate of Economic Sciences, Senior Lecturer, e-mail: 210471@mail.ru ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 17 URL: http://www.reaser.eu e-mail: editors@reaser.eu students) prevention. In our opinion, social policies shoud continue authorities' efforts to provide adequate student services, create more flexible learning pathways into and within higher education, and to widen participation at all levels on the basis of equal opportunity . 2. 2.1. Current state of higher education in Europe accessibility “Average” European student’s profile The number of students, having completed at least upper secondary education, increased since 2000, but not significantly. Nevertheless, the data (provided on the fig. 1) show that the population, aiming at continuing their education in high schools and universities, does not diminish. Fig. 1: Proportion of the population in the 20-24 age group having completed at least upper secondary education (Source: Eurostat, Labour Force Survey, data extracted July 2011) The participation rate in tertiary education strongly depends on the age group of the population concerned and the theoretical age for obtaining a secondary education certificate that might allow students to continue their education. In 2009, at the EU level, about 13 % of men and 19 % of women aged 18 were participating in tertiary education. The participation rates reached their peaks for the male and female populations at the age of 20, by about 30% and 42% respectively. After the age of 24, participation rates drop around 5% per year up to only 2% for men and 2.5% for women aged 35-39. National differences in terms of education systems and, in particular, the age at which young people transfer from upper secondary education to tertiary level as well as the duration of the first study degree, cause significant fluctuations in participation rates. Thus, in Belgium, Ireland, Greece, Spain, France, Portugal and the United Kingdom, more than 20% of men and more than 30% of women aged 18 participated in tertiary education. In Turkey, male and female rates were balanced and were around 23%. The only country where female participation peak was reached at the age of 18 was Cyprus, with a rate of 44%. During the period 2000-2009, in the EU-27 on average, the student population in tertiary education increased by around 22% (2.7% annual growth rate), reaching almost 19.5 million individuals in 2009. The distribution of full time students and part time students in tertiary education varies from one country to another as well as from one age group to another. In 2009, from the 18-23 age grouping Europe, almost 88% of all students were full time students. They were nearly 73% in the 24-29 age group, and only around 59% and 51% within the 30-34 and 35-39 age group respectively. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 18 URL: http://www.reaser.eu e-mail: editors@reaser.eu In the same year, in most European countries, the participation in full time tertiary education programme decreased with the age of students. The exceptions were found in Estonia where the participation in full time programme of the age group 35-39 was higher for 2.7 percentage points than that of the age group 30-34. In Malta, Finland and Switzerland, these differences remained at less than 1 percentage point. In addition, in countries such as the Czech Republic, Greece, France, Italy and Portugal, all students of all ages here analyzed were enrolled into full time programme. 2.2. Major obstacles on the way of higher education expansion Higher education expansion within different social strata is an urgent problem as most European countries face aggravated unemployment. At the same time, tertiary education graduates integrate into the job market two times more quickly than people with at most lower secondary education. At European Union level, the average duration of the transition to the first significant job was only 5 months for people with tertiary qualifications, close to 7.4 months for the upper secondary level and up to 9.8 months for people with lower education levels. Holding higher education qualifications is more conducive to employment. On the average, 86% of tertiary graduates between 25 and 39 years of age are working, as opposed to 78% of those with upper secondary qualifications at most, and to only 60% of young people with lower level qualifications. This is even more true for older people (40-64 age group), where tertiary graduates are 37% more likely to be in employment than non-graduates holding qualifications up to lower-secondary level (Table 1). Table 1: Proportion of people in employment by age group (25-39; 40-64) and highest level of education attained, 2010 Low Medium High Low EU BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU 2539 59.9 57.6 44.9 48.7 67.3 56.6 53.1 43.7 67.7 59.3 61.0 60.0 79.0 57.4 41.5 79.8 43.8 4064 51.4 46.3 39.5 41.1 61.3 54.7 38.7 47.8 54.6 49.8 53.9 47.0 61.4 39.1 23.1 54.8 34.7 2539 77.5 81.9 77.6 79.9 83.2 80.1 73.2 67.2 72.2 69.8 80.9 73.2 82.9 72.7 67.4 82.6 74.2 4064 70.3 69.7 68.3 70.8 76.9 74.5 65.8 65.7 61.7 68.2 70.8 72.1 74.0 62.6 62.2 66.2 60.6 2539 85.6 90.2 86.6 79.5 88.3 88.7 81.6 82.8 80.1 79.6 88.2 73.5 86.7 82.4 88.0 87.6 80.3 4064 82.4 78.9 82.0 87.2 84.6 86.1 78.8 79.0 80.0 79.9 78.8 83.0 82.8 80.1 85.7 82.4 77.0 MT NL AT PL PT RO SI SK FI SE UK IS LI NO CH HR TR 2539 65.3 70.1 64.1 52.1 76.0 60.6 61.6 24.2 60.1 62.8 57.0 70.7 : 65.7 73.9 55.4 50.3 4064 41.8 58.7 53.3 36.0 64.7 51.5 48.7 31.6 53.7 65.9 55.6 79.3 : 63.0 67.5 40.5 41.9 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 19 URL: http://www.reaser.eu e-mail: editors@reaser.eu Medium High 2539 86.4 87.5 85.6 75.7 82.0 75.6 83.2 74.9 78.0 84.7 78.2 76.1 : 84.5 84.3 73.3 65.1 4064 75.4 76.2 73.3 59.7 76.5 63.5 66.3 66.3 71.8 82.5 76.0 86.1 : 79.8 79.6 57.6 50.9 2539 92.3 92.3 88.2 87.9 87.5 88.1 90.8 80.7 85.0 87.6 88.7 87.6 : 90.8 88.4 83.9 80.1 4064 75.4 83.6 84.1 79.9 82.3 81.5 83.9 84.0 83.6 88.5 82.3 90.3 : 89.8 88.3 75.8 68.0 Source: Eurostat, Labour Force Survey (data extracted July 2011) Restrictions on the number of places (numerus clausus) in tertiary education programmes may be set either at central/regional level or at institutional level. In some instances access may be unrestricted. Different combinations of these three options are also in operation in some countries. Specific entry criteria may be applied to some or all fields of study or programmes. When a limitation procedure exist at national or regional level the education authorities limit the places available and in many cases exercise direct control over the student selection procedure. A numerus clausus of this kind may apply only to the places that will be funded by the public budget or it may be extended to the overall number of places. In addition, the limitation on the number of places can be applied to all courses by tertiary education institutions or to some specific fields only (e.g. medicine and health). 3. 3.1. Modern technologies in Higher Education Possibilities of technological modernization Possibilities of modern technologies’ introduction within the educational process are extending as the educational institutions autonomy increases. Increased institutional autonomy can also be seen in higher education for the management of academic staff. Nevertheless, central authorities in the great majority of countries are still responsible for defining the categories of staff and their related qualifications as well as basic salary levels. In a dozen countries or regions, these elements are defined jointly between central and institutional levels. Institutions themselves are almost completely responsible for the evaluation and promotion of academic staff as well as the educational tools used by them. While administrative possibilities arise, there still remain issues connected with funding. The European Union continued to spend around 5% of its GDP on education until 2008. Furthermore, although total public expenditure on education as a percentage of GDP remained stable between 2001 and 2008 at the EU-27 level, the expenditure per student increased (see Fig. 2). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 20 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 2: Trends in the annual expenditure on public education institutions (ISCED 0 to 6) by pupil/student, in PPS EUR (thousands), 2000 and 2008 (constant prices). Source: Eurostat, UOE and national accounts statistics (data extracted June 2011). Expenditure per pupil increases also with the level of education. In the EU, the average annual cost per secondary school pupil is higher than that of primary school pupils and the average cost per student in tertiary education in the EU was almost twice as high as for primary pupils. Thus, technological renovation in higher education is relatively facilitated in comparison with primary and secondary education. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 21 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 3: Annual expenditure in public institutions per pupil/student and educational level (ISCED 1, 2-4 and 5-6), in PPS EUR (thousands), 2008 (Source: Eurostat, UOE and national accounts statistics; data extracted June 2011) 3.2. New technologies’ application within the educational institutions In addition to broader policies designed to tackle social exclusion, in all countries where fees are payable for higher education some form of mechanism exists by which parental and students’ contributions can be adjusted according to means. Three main criteria are used: family income, the number of children, and family status (Fig. 4). Fig. 4: Factors taken into account in offering reductions or exemptions of fees in public and private education institutions (Souce: Eurodice) In the great majority of countries, support mechanisms operate at central level and family income is the determining factor, and geographical location is not the main criteria. The specialisation, customisation and convenience that distance education affords has found an eager audience among students, working professionals and employers. Many academic institutions, and especially those with a public-service mandate, consider online learning key to advancing their mission, placing postgraduate education within reach of people who might otherwise not be able to access it. While distance education programmes continue to grow in number and to improve in quality, most students see online courses as a supplement to face-to-face classes, and nearly two-thirds of respondents maintain that traditional degrees carry greater credibility than those earned online. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 22 URL: http://www.reaser.eu e-mail: editors@reaser.eu Corporate participants hold this view most staunchly. Few participants (11%) say that online and in-class students are likely to take the same classes together and compete for top grades. The higher education sector is becoming more and more competitive. Universities seem to be in competition to attract talented students and lecturers. These dynamics have an impact on their proposed eservices. The quality of education and better returns on the diploma were the first elements to be considered. E-services provided by universities seek to create a “product differentiation” in a more competitive market (free entry market). At the same time, ICT help universities to give more personalised services and to take into account the differences between students. The quality of education is increasing with the use of these technologies (Youssef, Ragni 2008). Universities are competing worldwide. They are trying to attract the best students and professors worldwide. By creating knowledge, by creating innovative patents, training the “knowledge workers”, diffusion of culture, etc. they are considered the key actors in the knowledge-based economy. Since they are in competition, the usage of ICT was viewed in the early 90s as a means of creating competitive advantages. They were engaged in hard policies for equipment and e-services production. In some ranking of universities, the equipment criteria are highly considered. As later adopters were equipped, creating competitive advantage within the university is more closely linked to efficient use of the technology rather than the equipment itself. But, to our opinion, one should not forget that online-services provided by the universities have a significant social impact as they make higher education more accessible. Two stages characterize this race by universities to deliver e-services. The first corresponds to the situation where the quick change of technologies allowed a major differentiation of the services proposed by universities (Youssef, Ragni 2008). This stage corresponds to an earlier period of the Internet and its associated technologies. For example, e-learning was perceived as a tool of differentiation of universities aiming at reaching students worldwide. This strategy of offering these services to the students by the more competitive universities rapidly became a common strategy for the whole university sector. The usage of Internet becomes very common in European universities and most of them offer many standardised services. Many universities offer free online courses and access to many resources. To some extent, this standardization process leads to a package of services offered freely by all universities. Table 2: Standard usages of ICT in European countries Basic e-services – Standard Free access to computers Free access to Internet Free access to software Online access to virtual library Free access to virtual resources Online e-administration of students Table 3: Innovative usages of ICT Advanced e-services – Innovative uses Podcasting Usage of collaborative platforms ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 23 URL: http://www.reaser.eu e-mail: editors@reaser.eu E-Learning 2.0 (social capital and social interactions) Web access to courses Online exams Serious Gaming as pedagogical tool Network of universities sharing common best practices E-resources E-skills oriented programmes E-governance of universities (e.g. E-vote) A second element characterizes the new forms of e-services and affects the innovative usages of ICT by universities. Universities seek to personalise their services for their students and offer courses in different formats. This was made possible thanks to the multiplicity of the channels of distribution and the tractability of the interactions among students and among students and teachers. The supply of university services was verticalized and customized. The Internet allows universities to offer high value services, not linked to geographical proximity. These discrimination strategies seem to be satisfying for both the universities and the students. Students have exactly what they need and universities are catching more students by less means, and benefit from a scale economy. But these dynamics are not observed in all European countries. Many countries have a centralized governance system of universities that prevents changes from being made locally. A non-discriminatory argument among students is invoked to explain why universities, while they are aware of the values, do not use these possibilities fully. 4. Conclusion Educational models are changing. As universities embrace open and flexible learning the international student market is becoming a reality. Formal learning becomes integrated with non-informal learning and educational innovation is financially, technologically and socially driven. Open education and open educational resources play an increasingly important role in supporting educational transformation. This era of pervasive technology has significant implications for higher education. Technology allows students to become much more engaged in constructing their own knowledge, and cognitive studies show that ability is key to learning success. Online degree programmes and distance learning have gained a firm foothold in universities around the world. What was once considered a niche channel for the delivery of educational content has rapidly become mainstream, creating wider access to education, new markets for content and expanded revenue opportunities for academic institutions. New technologies are also affecting other areas of campus administration. Social-networking tools are helping to build connections with alumni and support career service activities. E-marketing campaigns expand the reach and success of recruiting and fundraising efforts, and drive down the cost of direct-mail campaigns. And automated, self-service programmes reduce administrative requirements, streamline course registration and enhance academic life. 5. References [1] Key Data on Education in Europe. Education, Audiovisual and Culture Executive Agency, 2012. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 24 URL: http://www.reaser.eu e-mail: editors@reaser.eu [2] The Future of Higher Education: How Technology will shape Learning. A report from the Economist Intelligence Unit, 2008. [3] Trow M.. From mass higher education to universal access. Research and Occasional Paper Series: CSHE.1.00. 2000. [4] van Damme D. The need for a new regulatory framework for recognition, quality assurance and accreditation. Introductory Paper for the UNESCO Expert Meeting, Paris, 10-11 September 2001. [5] de Wit H.. Internationalisation of Higher Education in Europe and its assessment, trends and issues, 2010. [6] Youssef A. B., Ragni L.. Uses of Information and Communication Technologies in Europe’s Higher Education Institutions: From Digital Divides to Digital Trajectories. The Economics of E-learning Monograph, 2008. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 25 URL: http://www.reaser.eu e-mail: editors@reaser.eu Social factors influence on economic growth. The case of Romania Bogdan-Ion Boldea1+ 1 West University of Timisoara, Romania Abstract. The economic sustainable development and social and cultural development are closely related to one another. The purpose of this paper is to prove that macro-statistical indicators such as GDP are not the most viable measures of sustainable development, failing to take into consideration some specific sectors of the economy, such as the black market, grey economy, or education and healthcare indicators, as Human Development Index. Within the paper, these last factors are divided into cultural and demographic factors capable to provide economic growth. Secondly, the paper reveals the social and economic context in Romania, in comparison with other European countries, in order to identify the main differences between those countries and the source of problems related to the Romanian economy. Keywords: sustainable development, demographic and cultural indicators, GDP, HDI JEL Codes: E24, H21, H55, J31 1. Introduction The purpose of this paper is to prove that the most used macroeconomic indicator, GDP per capita is not always the most proper indicator to measure the nation wellness. It is indeed very easy to be calculated. The GDP fails to take into consideration some specific sectors of the economy, such as the black market and grey economy. The reason most of them failed is related to the wrong hypothesis that the nation wellness is based only on the level of income. Within the paper, the social factors are split into demographic and cultural factors. The analyses performed present the significance of each of those two factors when studying their impact on the economic growth. For example, the population’s structure represents a very important social indicator, as it influences the distribution of the public income. None of the economic topics have captured the attention of the economists, physicians and politicians, as the concept of the economic growth. This is due to the major significance of the topic upon the entire population in a country, which made the maintenance or improvement of the economic environment an objective of the macroeconomic policy, on short, medium and also long term. The analysis of the social factors helps understanding the human behavior in respect of consumption, savings, investitional system, expectations and atitude towards the economic circumstances, which also have a major impact on the economic growth. The basic idea is that human development should be taken into account along with the economic development when establishing the macroeconomic objectives of a country. The paper points out the necesity for a society to sustain the human development (which is measured by HDI), taking into consideration the economic benefits which arise from it on long term. The results of the analyses performed prove the relevance of cultural and demographic environment when analyzing the economic growth. 2. The demographic influence upon economic growth Due to the fact that people’s economic behavior varies at different stages of life, changes in a country’s age structure can have significant effects on its economic performance. Usually, nations with a high 1+ Lecturer PhD, e-mail: bbi77@yahoo.com. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 26 URL: http://www.reaser.eu e-mail: editors@reaser.eu proportion of children are likely to devote a high proportion of resources to their care, which tends to depress the pace of economic growth. By contrast, if most of a nation’s population falls within the working-ages, the added productivity of this group can produce an increase in the economic growth. This is how the combined effect of this large working-age population and health, family, labor, financial and human capital policies can create virtuous cycles of wealth creation. Furthermore, if a large proportion of a nation’s population consists of the elderly, the effects can be similar to those of a very young population: a large share of resources is needed by a relatively less productive segment of the population, which likewise can inhibit economic growth. Population’s structure has three main mechanisms for determining economic growth: human capital, savings and labor supply (Bloom, D., Canning, D., Sevilla, J., (2001). a. Human capital The demographic transition has also significant effects on investments in human capital, effects which are the least tangible, but may be the most significant and far-reaching. The demographic transition begins with changes in mortality that results in a population that lives longer and stays healthier. A longer life expectancy causes fundamental changes in the way that people live. Attitudes towards education, family, retirement, the role of women and work tend to shift. A society has the chance to experience deep-rooted changes in its culture, as its people become more valuable assets. For example, the positive correlation between education and earnings is well known. As life expectancy increases, parents are likely to choose to educate their children to more advanced levels. Healthier children, in turn, tend to experience greater cognitive development per year of schooling than their less healthy counterparts parents also know that there is a good chance that each child will benefit from schooling investments over a long working life and, with fewer children, can devote more time and money to each child. The result of this educational investment is that the labor force as a whole becomes more productive, promoting higher wages and a better standard of living. Women and men therefore tend to enter the workforce later, partly because they are being educated for longer, but they are likely to be more productive once they start working (Marini, M., (2004)). All these mechanisms are heavily dependent on the policy environment. A growing number of adults will only be productive if there is sufficient flexibility in the labor market to allow its expansion, and macroeconomic policies that permit and encourage investment. Similarly, people will only save if they have access to adequate saving mechanisms and have confidence in domestic financial markets (Alesina, A., Glaeser, E., (2004)). The demographic transition creates conditions where people will tend to invest in their health and education, offering great economic benefits, especially in the modern world’s increasingly sophisticated economies. But governments invariably play a vital role in creating an environment where high quality health and education provision is possible – necessary steps to make the most of their country’s demographic opportunities. b. Savings as a factor of development All long-run growth theories imply that a country can grow faster by investing more, in human or physical capital or in R&D, but that a country with international capital markets cannot grow faster by saving more - domestic saving is not an important ingredient in the growth process because investment can be .nanced by foreign saving. From the point of view of a standard theory of economic growth, positive cause and effect relation between domestic savings and economic growth may appear in advanced economies, in which quite high domestic savings may constitute an essential source of financing domestic investment and an economic growth factor, without the necessity of using foreign investment. For the same reason, in the poorest countries there should not be any relation between domestic savings and economic growth, as these countries, in order to finance their investment, use mostly foreign savings as their domestic savings are quite scarce. The demographic transition also encourages the growth of savings, thus improving a country’s prospects for investment and growth. There is an accounting and a behavioral effect at work. The young and the old consume more than they generate, unlike working-age people, who tend to have a higher level of economic ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 27 URL: http://www.reaser.eu e-mail: editors@reaser.eu outputs, and also a higher level of savings. Further, people tend to save more between the ages of 40 and 65, when they are less likely to be investing in their children and the need to prepare for their retirement is becoming more pressing. So when large numbers of baby boomers start hitting their forties, national savings will tend to rise. Incentives to make certain choices can reinforce this tendency to save among the new young baby boomers. Improved health, and longevity, make saving easier and more attractive. A healthy population must plan far in advance if it is to maintain its standard of living through decades of retirement. Additionally, private household savings can provide the capital accumulation needed to finance growth.Further work is needed, however, to take account of the institutional features of pension systems when assessing the importance of the demographic transition to the determination of national savings. c. Labour supply as a factor of development A feature of modern economic growth is the changing trend in aggregate labour supply. The changing trends in aggregate labour supply that one finds in long runs of data are usually neglected by modern growth theory, which typically assumes a constant rate of labour force growth. The demographic transition affects labor supply in two ways. There is an essentially mechanical effect, based on the regular and inevitable aging of the baby boom generation (Baby Boom Generation refers to the persons borne between 1944 and 1964, when the birth rate was very high). When this generation is between 15 and 64, it is more likely to be working, thus lowering the ratio of dependents to non-dependents. During the peak working years of 25 to 59, this effect is especially strong. The number of people who would like to work (labor supply) therefore gets bigger, and provided the labor market can absorb the larger numbers of workers, per capita production increases. 3. The cultural influence upon economic growth Culture (Latin: cultura, lit. "cultivation") is a modern concept based on a term first used in classical antiquity by the Roman orator, Cicero: "cultura animi" (Harper, Douglas (2001). The term "culture" appeared first in its current sense in Europe in the 18th and 19th centuries, to connote a process of cultivation or improvement, as in agriculture or horticulture. In the 19th century, the term developed to refer first to the betterment or refinement of the individual, especially through education, and then to the fulfillment of national aspirations or ideals. In the mid-19th century, some scientists used the term "culture" to refer to a universal human capacity. For the German nonpositivist sociologist Georg Simmel, culture referred to "the cultivation of individuals through the agency of external forms which have been objectified in the course of history” (Levine, Donald (1971)). In other to determine the impact of culture on economic growth, a three steps approach is needed. Firstly, there is a direct impact of culture on expectations and preferences. Secondly, one has to take into consideration that those beliefs and preferences have an impact on economic outcomes (for example, different religious affiliations and ethnic background are associated with different preferences for redistribution). To claim a causal link, however, a third step is necessary. All work on culture and economics faces the problem that causality is likely to go both ways – from culture to economics and from economics to culture. The above definition of culture suggests an answer: to focus only on those dimensions of culture that are inherited by an individual from previous generations, rather than voluntarily accumulated. Moreover, religious practices, even when they respond to economic conditions, are modified over time only at centuries or even millennium frequency. In this respect, the cultural aspects that should be considered are religion and ethnic background that can largely be treated as invariant over an individual’s lifetime. Over years, the decision ofsaving money has been analyzed as the culture's main mechanism to influence the economic preferences, through the relation between religion and the preference for savings (indicator measured as the percentage of population that educate their children to make savings). The studies performed in this respect showed that religious people are more likely to educate their children to make economy than ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied SocioSocio Economic Research (Volume 4, Issue 2/ 2012 ), pp. 28 URL: http://www.reaser.eu e-mail: editors@reaser.eu the non-Christians Christians (Birdsall, N., Kelley, A., Sinding, S., (2001). Furthermore, it can be stated that sharing a specific religion can have an influence on a country's economic performances. performanc Parents have a natural tendency to teach their children what they have learned from their own parents, without a full reassessment of the current optimality of those beliefs. Thus, even if cultural norms were efficient when they were introduced, they might might continue to be taught even after they have become inefficient. People take many decisions in life in which they lack previous experience: which college to attend, which profession to undertake, how much to save for retirement. In these situations, choices cho are usually based on prior beliefs, in which culture play a significant role. Going further, culture can be studied through three main elements – ethnicity, language and religion. This can be explained by the fact that the ethnicity provides a genetic basis in which socioeconomic behaviors between groups of people can be easily differentiated, the language is an effective tool of communication and the religion can provide insights into the characteristics of culture. Source: www.visionofhumanity.org A glance at the history reveals that the distribution of language speakers has reflected the distribution of economic power in the world. Latin, for example, was a universal language in Europe during the Middle Ages and the Renaissance (Rongxing, G., (2006). French was once known as the universal language of diplomacy, and English today is often said to fill such a role in world commerce. During the supremacy of the Soviet Union, Russian was the language which was thought in most countries. The decline of the Russian power has been accompanied by a parallel decline in the use of Russian as a second language. Since the late twentieth century, China’s economic power has stimulated the learning learning of Chinese in other countries. However, none of those has been able to become a universal language. With the aim of making international communication simpler, numerous efforts have also been made to create artificial languages during the past centuries (Volapuk, created by Johann Martin Mart Schleyer in 1880, or Esperanto, o, created by Ludwig L. Zamenhof in 1887). 4. Social and economic context in Romania Firstly, the paper reveals the social and economic context in Romania, in comparison with other European countries, untries, in order to identify the main differences between those countries and the source of problems related to the Romanian economy. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 29 URL: http://www.reaser.eu e-mail: editors@reaser.eu After two years of negative readings and a cumulated GDP contraction of more than 8%, growth resumed in 2011 with the economy growing slightly above potential by 2.5%. The labour market remained subdued in 2011: according to the Labour Force Survey (LFS), the unemployment rate for the age group 15-74 remained at 7.4% in 2011. Alarmingly, young people remain a particularly vulnerable group as the unemployment rate for employees below 25 years continued to increase and reached its highest level of 25.4% (LFS) in the last quarter of 2011. The overall employment rate remained low in 2011 at 58.5%. Unit labour costs have declined by 3.7% in 2011, enhancing the competitiveness of the economy. Labour market conditions are expected to improve over the forecast horizon with unemployment forecasted to decrease to 7.2% in 2012 and to 7.1% in 2013 (www.europa.eu). Even worth, on a long time prediction the number of contributors to the public budget will decrease constantly. 400.0 350.0 300.0 250.0 2010 200.0 2060 150.0 100.0 50.0 CY NL IE ES LU MT EL CZ FI PL AT BE FR SK DE PT SI LV EE IT LT HU BG DK RO 0.0 Fig.2: Number of contributors to the public budget / number of retirements (source: European Commission) Average salaries in Romania belong to the lowest of Europe and even the double digit growth rates experienced during the last years of economic boom did not raise them to a European average level. And: several years of double digit would be needed to achieve a convergence with Western European average salaries. A simple example might illustrate this notion: If we take average industrial labor costs from 2002 for Germany (32 EUR) for Germany and for Romania (1.5 EUR) and make the realistic assumption that labor costs will grow each year by 3% for Germany and the unrealistic assumption that they will grow by 20% for Romania each year a catch up for Romania would have been achieved in 2022. Year 2008 2009 2010 2011 2012 2013 2014 Average Salary (Gross) Average Salary (Gross Aerage Salary (Net) Average Real Wage Growth RON 1,682 1,767 1,836 1,920 2,020 2,130 2,282 EURO 457 416 432 457 487 520 563 RON 1,309 1,350 1,403 1,464 1,539 1,620 1,734 % 16.50% -2.30% 0.20% 1.10% 2.30% 2.70% 4.60% Fig. 3. Romania – Average Gross and Net Salary Data and their Growth .The data represents the current estimates of the CNP (Comisia Nationala de Prognoza), Romania ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 30 URL: http://www.reaser.eu e-mail: editors@reaser.eu As a consequence of the evolution of the Romanian salary, the income stopped being an adequate indicator of the standard of living. Furthermore, there are two main sources of the aforementioned evolution: the decrease in the number of employees and the salary clustering, which means that high-value salaries increased significantly, while small-value salaries continued to decrease. Since 1990, the United Nations Development Programme (UNDP) has calculated the HDI and included it in its Human Development Report. It measures the average achievements in three basic dimensions: a long and healthy life, access to knowledge and a decent standard of living. The HDI emphasises that aspects other than economic activities and their growth (namely GDP and its growth rate) are important for evelopment, including life expectancy, literacy and enrolment rates. This approach argues that income, commodities and wealth are means to an end. They do not constitute a direct measure of the living standard itself. Romania fell into the category of countries with a medium development level, being behind many countries which adhered to European Union later, like our country, but which fell in the group of countries with a high development level (Hungary, Poland, Czech Republic, Estonia, Lithuania, Latvia, Slovenia, Greece, Malta, Cyprus etc.). 1970 1975 1980 1985 1990 1995 2000 2005 2010 Hibrid HDI 0,643 0,677 0,708 0,725 0,723 0,702 0,713 0,755 0,785 New HDI Old HDI x x x x 0,688 0,674 0,690 0,733 0,767 x x 0,786 0,792 0,786 0,780 0,788 0,824 x Fig. 4: The evolution of the Human Development Index in Romania (Date sources: Human Development Report 2010 3 Human development Report 2009 for 1990 – 2005 and Human Development Report 2007/2008 for 1980 and 198; xMissing data) 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 0.89 0.88 0.88 0.88 0.87 0.86 0.86 0.86 0.86 0.85 0.85 0.85 0.85 0.85 0.84 0.82 0.81 0.81 0.81 0.80 0.80 0.78 0.78 0.78 0.77 0.75 0.73 IE SE NL DK FI FR DE BEES LE GR IT AT UK CZ SL EE ML SK CY HU PT PL LT LV ROBG Fig. 5: The average Human Development Index in Europe (Date sources: Human Development Report 2010 3 Human development Report 2009 for 1990 – 2005 and Human Development Report 2007/2008 for 1980 and 198; x- Missing data) Calculated according to the new methodology in 2010, HDI in Romania recorded a significant increase, from 0.688 in 1990 to 0.767 in 2010, a level which places our country among the countries with a high level of development, on position 50. Although for the first time Romania comes ahead of Bulgaria (position 58), our country however is situated on the last but one position among the EU member states. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 31 URL: http://www.reaser.eu e-mail: editors@reaser.eu 5. Conclusions Both cultural and demographic factors have specific influences on the economy. More specifically, the culture defines the way the population’s preferences, the way they make decision, the perception upon life and the future prospects. On the other hand, the demographic factors are important, mainly because of the population structure and the capacity of working and contributing to the GDP formation. For obtaining economic growth, countries can focus on social development, by increasing life expectancy, by improving education and raising the expected years of schooling, by reducing poverty (more specifically, the population at risk of poverty) and also by controlling the unemployment rate. As shown above, both cultural and demographic factors have specific influences on the economy. Continuous investment in human capital leads to sustainable development and should be one of the basic objectives of any country wishing to achieve high standards of living and economic benefits. 6. Acknowledgements This work was co-finaced from the European Social Fund through Sectoral Operational Programme Human Resources Development 2007-2013, project number POSDRU/89/1.5/S/59184 „Performance and Excellence in Postdoctoral Research in Romanian Economics Science Domain”. 7. References [1] Aghion, P., Howitt, P., Growth and Unemployment, Review of Economic Studies,1994. [2] Alesina, A., Glaeser, E., Fighting poverty in the US and Europe, Oxford University Press, 2004. [3] Anghelache, C., Isaic-Maniu, Mitrut, C., A., Voineagu, V.,The system of indicators used in measuring poverty, 2006. [4] Benhabib, J., Spiegel, M., The role of human capital in economic development: evidence from aggregate crosscountry data, Journal of Monetary Economics, Amsterdam: Elsevier Science, 1994. [5] Birdsall, N., Kelley, A., Sinding, S., Population Matters: Demographic Change, Economic Growth, and Poverty in the Developing World, New York, NY: Oxford University Press, 2001. [6] Bloom, D., Canning, D., Sevilla, J., Economic Growth and Demographic Transition, National Bureau of Economic Research, 2001. [7] Deaton, A., Paxson, C., The Effects of Economic and Population Growth on National Savings and Inequality, Demography, Vol. 34, 1997. [8] Giuliano, P., On the determinants of living arrangements in Western Europe:does culture origin matters?, Working Paper, 2004. [9] Guiso, L., Sapienza, P., Zingales, L., Does culture affect economic outcomes, The Journal of Economic Perspectives, 2004. [10] Harper, Douglas. Online Etymology Dictionary. 2001. [11] Harrison, L., Huntington, S., Culture Matters: How Values Shape Human Progress, Basic Books, 2000. [12] Levine, Donald (ed). Simmel: On individuality and social forms'. Chicago University Press, 1971. p6. [13] Margineanu, I., Precupetu, I., Life quality in Romania 2010, Institute of Life Quality Research, 2010. [14] Nelson, R., Phelps, A., Investments in Humans, Technological diffusion and Economic Growth: Human Capital Formation and Manpower development, New York, The Free Press, 1966. [15] Romania: evaluation of poverty, Human Development Unity, 2003. [16] Romania: report of poverty measuring, The program for analytic assistance and advisory, 2007. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 32 URL: http://www.reaser.eu e-mail: editors@reaser.eu Integration of western Balkan countries into the European system of digital data archives in social sciences: the case of Serbia Aleksandra Bradić-Martinović 1+, Aleksandar Zdravković 2 1 2 Institute of Economic Sciences, Belgrade, Serbia Institute of Economic Sciences, Belgrade, Serbia Abstract. Science has a very important role in the development of any society. A special dimension of social phenomena has been analyzed by social sciences like anthropology, economics, education, communication studies, sociology etc. Despite that this type of research should provide solid basis for solving many social problems, the researchers in this area in the Western Balkans are facing many problems. The main limitation is the lack of funding for quality research, and the consequences are reflected in the small number of scientific papers published in internationally recognized journals and studies without connection to real problems. Regarding the fact that process of collecting primary data is most expensive and time consuming phase in the research process, establishment of national digital data archives for research data in social sciences and their integration into the standardized system for data sharing on the international level is considered as cost savings solution. Digital data archive (DDA) is technique that would deal with issues of preservation and archiving primary research data. In this paper we analyze the concept of DDA and its significance for researchers in social sciences, give an overview of EU effort in this field, reflected through the work of Council of European Social Science Data Archives (CESSDA), organization that gathers social data archives across Europe. In addition, we analyze the current practice of data archiving in Western Balkan countries and possibilities to build the prototype of DDA in Serbia according to the European standards. Keywords: social sciences, database, data archive, research, DDA, CESDA JEL Codes: 03, 031, 034 1. Introduction Science has a very important role in the development of any society. A special dimension of social phenomena has been analyzed by social sciences like anthropology, economics, education, communication studies, sociology etc. On the other side, revolution in information and communication technology (ICT) has enabled companies to use scientific and technical knowledge much easier in order to achieve competitive advantage on the market. Knowledge becomes primary driver of a firm’s value (Bock, Zmud, Kim & Lee, 2005) and has been recognized as one of the key sources of growth in the global economy (WB, 2012). Ability of storing, analyzing and sharing data and information through networks, Intranet or Internet, gives a completely new dimension of knowledge used in the companies. Arzberger et.al. (2011) point out specificity of knowledge as an economic and public good, since knowledge does not diminish by using, but increases by sharing. Kline and Rosenberg (1986) revealed a central place of knowledge and research (knowledge discovery) in innovative process that enables organizations to achieve competitive advantage. + Corresponding author: abmartinovic@gmail.com . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 33 URL: http://www.reaser.eu e-mail: editors@reaser.eu Research has indicated (UKDA, 2002; Corti, et al., 2011) that there has been a sharp increase in collecting data that has been used in studies of economic, political and other social issues, over the last decades. Regarding the fact that process of collecting primary data is most expensive and time consuming phase in the research process, establishment of national digital data archives for research data in social sciences and their integration into the standardized system for data sharing on the international level is considered as cost savings solution. Digital data archive (DDA) is technique that would deal with issues of preservation and archiving primary research data. The practice of archiving data in the social sciences is extended in the European Union. Umbrella organization of all EU archives in social science is Council of European Social Science Data Archives – CESSDA. Currently, opposite to EU countries, primary data collected through research in social sciences in Bosnia and Herzegovina, Serbia, and Croatia, remain mainly in possession of researchers or research institutions that have conducted specific research projects. Major step in the process of solving this problem, with the key objective to improve the research infrastructure of Western Balkan countries is FP7 – SERSCIDA project. The project addresses the issues of potentials of usage of information-communication technologies for the benefits of scientific research and exchange of knowledge in Western Balkan countries. In this paper we analyze the concept of DDA and its significance for researchers in social sciences, give an overview of EU effort in this field, reflected through the work of Council of European Social Science Data Archives (CESSDA), organization that gathers social data archives across Europe. In addition, we analyze the current practice of data archiving in Western Balkan countries and possibilities to build the prototype of DDA in Serbia according to the European standards. The paper is organized as follows. In the first section we described role of data collection within research process. Second section deals with the issues of data archiving and DDA in Europe. Third section presents field research on current practice of data archiving in Serbia in the context of DDA establishment. 2. Research process as a base of knowledge Kline and Rosenberg (1986) revealed a central place of knowledge and research (knowledge discovery) in innovative process that enables organizations to achieve competitive advantage. Figure 1 presents the relationship between research, knowledge and phases in the design and implementation of innovations. Numerous arrows indicate the complexity of their interactions and interdependences. Without the need for detailed analysis of individual bonds, we can point out a direct connection of research with all phases of practical implementation and indirect connection with creation of knowledge base. Research, generally speaking, is a complex process made up of several major phases. Regardless of research, common phases, presented on Figure 2 are: 1. Study planning - phase of conception and according Brink at al. (2006) this phase of research involves activities with a strong conceptual element. In this phase researcher formulate the research problem, hypothesis, methodology and define the necessary data, 2. Data collection - expensive and very important phase of research often associated with extensive field work for interviews (face-to-face, telephone, computer assisted personal interviewing), questionnaires (paper-pencil questionnaires, online surveys), etc, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 34 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 1: Chain link model of innovation. Source: Kline, S, J, Rosenberg, N, (1986), p. 290. 3. Data analysis – data must be organized (e.g. classification of data according characteristic properties or features), observe for possible existence of relationships among the two or more recorded data or parameters (e.g. correlation), compare with the work of other researcher and try to find a generalised conclusion based on limited amount of results Fig. 2: Phases of research projects. Source: GESIS, http://www.gesis.org/en/services/ The rapid development of ICT has caused significant changes in the research area. Researchers in contemporary environment can keep data in place of their origin or can easily perform data analysis at ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 35 URL: http://www.reaser.eu e-mail: editors@reaser.eu various levels and multidimensional, due to the digital form of data they work with. This opportunity can give them a completely new insight into the research problem. NSB (2005) believes that digital collections of research data "provide new phenomena for study". Therefore, long-live digital data collections and digital archives are gaining great importance for researchers. However, researchers in research and scientific (i.e. think-tank) institutions must make additional efforts and adapt to changes, with the goal of full exploitation of all offered possibilities. It is obvious that “digital information compiled for research purposes is playing an increasingly important role in today’s knowledge economy” (NDAC, 2002). Consequently these changes have created a need for open access to digital data archives (DDA) which contain research data and institutional repositories which contains scientific and research papers. As a result of these processes we can add one more phase in the research process: 4. Archiving and registering the data – is the last phase of research process when there is a DDA to preserve, store and disseminate the data together with research results and make them available for research community for further analysis. 3. Archiving and sharing data The practice of archiving and data sharing began in the fifties. There are several reasons for data sharing and Fienber (1994) argues that the archiving and sharing process: 1. Reinforces open scientific inquiry. When data are widely available, the self-correcting features of science work most effectively. 2. Encourages diversity of analysis and opinions. Researchers having access to the same data can challenge each other’s analyses and conclusions. 3. Promotes new research and allows for the testing of new or alternative methods. Examples of data being used in ways that the original investigators had not envisioned are numerous. 4. Improves methods of data collection and measurement through the scrutiny of others. Making data publicly available allows the scientific community to reach consensus on methods. 5. Reduces costs by avoiding duplicate data collection efforts. Some standard datasets, such as the General Social Survey and the National Election Studies, have produced literally thousands of papers that could not have been produced if the authors had to collect their own data. Archiving makes known to the field what data have been collected so that additional resources are not spent to gather essentially the same information. 6. Provides an important resource for training in research. Secondary data are extremely valuable to students, who then have access to high-quality data as a model for their own work. Research has indicated (UKDA, 2002; Corti, et al., 2011) that there has been a sharp increase in collecting data that has been used in studies of economic, political and other social issues, over the last decades. At the same time, there has been significant progress in computer technology and networks, statistical methodologies and techniques. It makes possible to collect, store and share data in completely new way. Modern technology has enabled the research data to be stored in digital form and to be used and reused by numerous of researchers. Today, the process can be completed directly or via Web, very easy and with small costs. Despite that, many research projects rely on primary data, even when the research on specific phenomenon has already been done by another research team. In a small country like Serbia high costs for data collecting can be big obstacle for researchers, especially in social science. For instance, in order to get personal opinions in some matter, social science researcher must provide sufficient number of questionnaires to obtain good statistical sample. That process requires time and money. The situation is particularly difficult if one takes into account the fact that Serbia in 2001 allocated 27.9 million euro or 0.16% of GDP from the ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 36 URL: http://www.reaser.eu e-mail: editors@reaser.eu state budget for scientific research compared with Finland that allocated 3.41% of GDP at the same year. In the meantime the situation has improved, so in 2011 Serbia has allocated 110 million euro or 0.33% of GDP, but it is still far below the requirements set by the Lisbon Declaration, which proclaims that funds for this purpose should to be 3% of GDP, of which 1% would be allocated directly from the state budget. One way to improve the situation and facilitate the researchers is to create a national digital data archive which would store research data created in social sciences with a view to their reuse in the form of secondary data. Arbor (2012) points out that archives and domain repositories that preserve and disseminate social and behavioural data perform a critical service to the scholarly community and to society at large, ensuring that these culturally significant materials are accessible in perpetuity. There are many reasons in favour of the concept of DDA, but researchers must be aware that the process of archiving requires additional knowledge and effort to prepare the data by standards. Data archiving is a process and researcher must learn how to follow all the phases of the data lifecycle. The data lifecycle includes the following phases: creating data, processing data, analysing data, preserving data, giving access to data and re-using data Fig. 3: The data Lifecycle. Source: Corty, et al. 2011, p.15 Each phase of data life cycle is equally important, and must be conducted in accordance with the standards. UK Data Archive (Corty, et al. 2011, p.15) describes the stages of archiving (Figure 2): • Creating data - plan data management (formats, storage, etc.), plan consent for sharing, locate existing data, collect data (experiment, observe, measure, simulate) and capture and create metadata. • Processing data - enter data, digitalization, transcribe, translate, check, validate, clean data, anonymise data where necessary and manage and store data. • Analyzing data - interpret data, derive data, produce research outputs, author publications and prepare data for preservation. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 37 URL: http://www.reaser.eu e-mail: editors@reaser.eu • Preserving data - migrate data to best format, migrate data to suitable medium, back-up and store data, create metadata and documentation and archive data. • Giving access to data – distribute data, share data, control access, establish copyright and promote data. • Re-using data – follow-up research, new research, undertake research reviews, scrutinise findings and teach and learn. In developed countries, worldwide DDAs function for decades and one of the biggest is in the USA and UK. The history of DDA in Europe can be seen thru the history of United Kingdom Data Archive (UKDA). The first steps in the field of digital data archives in Europe have been made in United Kingdom by Social Science Research Council (SSRC). The SSRC established in 1967 SSRC Data Bank in University of Essex. During the seventies Data Bank was faces with the problem of resistance to the archiving data, due to the standard which had been hard to fulfilled by the researchers. The turning-point came in the early 1970s when the Government Statistical Service enabled government surveys to pass to the Survey Archive, as the Data Bank had been renamed in 1972 and became SSRC Data Archieve (UKDA, 2002). During the 1980s Data Archive put the focus on data from empirical research and from research that had been considered to be of public concern, although this period can be seen as a low point for the social science in UK. The nineties bring the need for closer and deeper partnership among researchers within academic institutions and users of their researches. Rapidly expanding of the Internet services has enabled a deepening of this cooperation. New millennium has brought new standards and technology solutions, and greater international cooperation among digital archives in Europe. The practice of archiving data in the social sciences is extended in the European Union. Umbrella organization of all EU archives in social science is Council of European Social Science Data Archives – CESSDA. It was founded in the seventies and today gathers digital archives of twenty one European countries. Key objectives of CESSDA are: to ensure that the data which researcher collect today can be used in the future, i.e. help research institutions to make a plan for the archiving process; to provide a gateway to social science data (some 30,000+ social science and humanities researchers and students within the European Research Area - ERA each year, providing access to 25,000 data collections, delivering over 70,000 data collections per annum and acquiring a further 1,000 data collections each year), to organize education and knowledge sharing thru expert seminars and conferences and to cooperate with other international organizations sharing similar objectives. Today, CESSDA is in the process of transformation to CESSDA ERIC (European Research Infrastructure Consortium). 4. Data archiving practice in Serbia – field research Although majority of EU countries establish DDA in the field of social sciences, in Western Balkan countries there are no existing or sustainable social science data archives in these countries that would deal with issues of preservation and archiving of those primary data. Thus, research institutions in WB countries are currently faced with the problem of possible loss of valuable research data forever due to the lack of infrastructure and capacities for archiving such data in an adequate manner in line with existing European standards. Generally speaking, during the establishment of the national DDA scientific community meets the similar problems: a) technological issues related to the establishment appropriate standards for data ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 38 URL: http://www.reaser.eu e-mail: editors@reaser.eu collection and preparation for the preservation and providing compliance with those standards1; b) institutional and managerial issues that arise as a result of different forms of organizing the research process and policy; c) financial issues regarding funds that has to be provide for the functioning of DDA; d) legal and policy issues regarding the copyright and open access to the research data and e) cultural and behavioural issues are very important to those produce and those who manage research data, because they need a proper technique for data promotion according to sharing practice (Arzberger et.al, 2011). In this section we try to address some of these issues for WB countries, more specifically institutional and managerial, as well as cultural and behavioural issues. We illustrated these issues using the survey of current practice in data archiving in Serbia, but it could be extended to other WB countries having in mind numerous similarities among them as a consequence of similar level of economic and social development. According to our opinion, these issues are the most critical obstacles in acceleration of the process of DDA building. Here we present results of our field empirical research, as the starting point for the future development of DDA and its integration in European DDA system. This survey is a part of broader research within FP7 – SERSCIDA project. One part of our survey was loosely designed to follow scheme of the data lifecycle, which is given in previous section. We realized survey by sending the questionnaires to the social sciences researchers’ community in Serbia and with response rate around 36%. Our objective was to investigate how much the practice of data preserving is widespread among the researchers producing the primary research data and how the data are preserved. Generally, 38% of respondents confirmed that they or their research teams preserved data after research project was completed. Figure 4, in regard to the data processing and analyzing phases within data lifecycle, reveals usual forms of data kept. The majority of researchers have kept their data either in raw form or cleaned form to certain level suitable for the analytics2. However, practice of data documentation with metadata which is crucial for further secondary analysis is very low widespread, i.e. around 17% of researchers have accompanied documentation to the data in some occasions. 1 This is particularly true in countries with the existence of DDAs at the level of individual institutions (institutes, university research centers, NSI archive, etc). 2 This question allows multiple choices. Vertical axis shows separated relative frequency of each answer relative to number of total positive responses on data preserving practice. This also holds for the following three issues discussed. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 39 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 4: Forms of data kept The following figure further investigates issue of data documentation. Not even that researchers in Serbia do not practice to document the data, but when they do it, they do not apply some international standards like DDI, DC etc. Fig. 5: Standards applied to data documentation Figure 6 presents usual choice of mediums where data are preserved, in line with following face of data lifecycle phase. The majority of researchers used to store data at personal computers' or computers of other members of research team, while few of them in some occasions put it on servers or archives, which is an assumption for broader availability of data for secondary analysis. Fig. 6: Mediums where data are preserved Finally, figure 7 gives an insight into the issues of access to data. As it is expected in regard to the low level of data standardization and choice of local mediums for data preservation, just a few of researcher made their research data available for use of wider research community. Unfortunately, the majority of datasets remains available for secondary analysis only for the members of research team. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 40 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 7: Mediums where data are preserved To summarize, analysis of responses to these several questions clearly give evidence that researchers in Serbia as the main producers of the data in social sciences have very low level of knowledge on the issues of data preservation. Data are mostly preserved in raw form, without appropriate documentation and standardization according to the international standards. In addition, data are mostly kept on local mediums with very limited access, usually only to the members of research teams. This altogether represents the main obstacle to the major development of the DDA and availability of data for secondary analysis. 5. Conclusion Digital data collections are powerful catalysts for progress and for democratization of the research and education enterprise. Proper stewardship requires effective support for these essential components of the digital research and education environment of the 21st century. The need for digital collections is increasing rapidly, driven by the continuing exponential increase in the volume of digital information. The number of different collections supported by the NSF is also increasing rapidly. Currently, primary data collected through research in social sciences in Bosnia and Herzegovina, Serbia, and Croatia, remain mainly in possession of researchers or research institutions that have conducted specific research projects. Data collected through such research, although of high value for social scientists (both in these countries and internationally) for any further exploration, remain unavailable. There are no existing or sustainable social science data archives in these countries that would deal with issues of reservation and archiving of those primary data. We illustrated these issues using the survey of current practice in data archiving in Serbia. Our analysis shows that researchers in Serbia have very low level of knowledge on the issues of data preservation. Consequently, data are mostly preserved in raw form, without appropriate documentation and standardization according to the international standards. In addition, data are mostly kept on local mediums with very limited access, usually only to the members of research teams. Ongoing FP7 - SERSCIDA project aims to overcome all of these obstacles and to provide solid base for establishment regional or national digital data archives in social sciences in Serbia, Croatia and Bosnia and Herzegovina. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 41 URL: http://www.reaser.eu e-mail: editors@reaser.eu 6. References [1] Arbor A., Colyer C., Donakowski D., et al., Guide to Social Science Data Preparation and Archiving – Best Practice Through the Data Life Cycle, 2012, Michigan, pp. 1-43 [2] Bock,G. Zmund R., Kim Y., Lee J., Behavioral intention formation Knowledge Sharing: Examining the Roles of Extrinsic Motivators, Social-Psychological Forces, and Organizational Climate. Management Information Systems Quarterly, 29(1), 2005., pp. 87-111. [3] Brink H., Van der Walt C., Van Rensburg G., Fundamentals of Research. Methodology for Health-care Professionals, Second Edition, Juta and Co (Pty) Lt, 2006. [4] World Bank, Knowledge for Development – K4D, http://web.worldbank.org/WBSITE/EXTERNAL/WBI/WBIPROGRAMS/KFDLP/0,,contentMDK:20269026~m enuPK:461205~pagePK:64156158~piPK:64152884~theSitePK:461198,00.html (last visit 24 April 2012) [5] Corti L., Van den Eynden V., Bishop L., Morgan-Brett B., Managing and sharing data. UK Data Archive, Colcehester, Essex, 2011. [6] NDAC - National Data Archive of Canada, Building Infrastructure for Access to and Preservation of Research Data – Final Report, Social Science and Humanities Research Council of Canada, 2002. [7] NSB, Long-lived digital data collections: enabling research and education in the 21st century, National Science Foundation, Report, 2005. [8] OECD, The Knowledge-based Economy, Head of Publications Service, OECD, Paris, 1996. [9] Arzberger P., Schroeder P., Beaulieu A., Bowker G., Casey K., Laaksonen L., Moorman D., Uhlir P., Wouters P., Promoting Access to Public Research Data for Scientific , Economic, and Social Development. Data Scence Journal, 3 (November), 2004., pp.135-152. [10] Feinberg S.E., Sharing Statistical Data in the Biomedical and Health Sciences - Ethical, Institutional, Legal and Professional Dimensions, In Annual Review of Public Health, 15, Palo Alto, CA, Annual Reviews, Inc., 1994, pp. 1-18 [11] Kline S.J., Rosenberg N., An Overview of Innovation, monograph The Positive Sum Strategy, Harnessing Technology for Economic Growth, 1986., pp. 274-305 [12] UKDA, Preserving and Sharing Statistical Material, The Royal Statistical Society & the UK Data Archive, University of Essex, 2002. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 42 URL: http://www.reaser.eu e-mail: editors@reaser.eu Content management system for E-Business Radu Bucea-Manea-Tonis 1, Rocsana Bucea-Manea-Tonis 2 ++ 1, 2 Spiru Haret University, Romania Abstract. Electronic businesses have as interface a website that displays a very rich, structured content, according to the different type of business. To display the content in real time, a content management system can be used, such as the Drupal platform. It has various advantages such as structuring the content by taxonomy, access to the elements of design, access to SEO tools, access to social media tools, access to HTML code edit tools. Thus, users can edit HTML pages without knowledge of the language. For the case study in this article we used the WhyzzyWig content from Drupal. Keywords: e-business, content management system, Drupal, WYSIWYG editor. JEL Codes: M15 1. Types of web sites for E-Business From the customer's point of view there are two types of sites:  search sites, take the form of search engines, web directories, and indexes containing references to other sites;  finale sites: thematic portals, business sites, clients sites. 1.1. Search sites Search sites are composed of three entities: 1) search machine (robot) - this robot can read and index in full or partially the content of existing sites, and updates its references at regular intervals (once a month or more often) 2) Quotes of search system – allows to store information relating to the title and the address of the pages, keywords used, links to other pages, as well as the text of the header tags (h1... h5,), anchors, etc. 3) Search Software - a program that allows the classification of quotes (indices) and returns it in accordance with the request of the visitors and keywords. Examples of search engine are: www.google.com, www.yahoo.com, www.aol.com, www.msn.com, www.yandex.ru, www.linkuri.ro. Web directories are a type of the search engines that actively involve the user; the user reads the catalogue according to the topic of interest, without inserting keywords. Within these directories the information is entered by individuals or companies seeking to promote its products, brand, etc., free of charge or for a fee. Examples of web directories can be found at the addresses http://www.freewebdirectory.org/, http://www.directorycritic.com/free-directory-list.html. + Corresponding authors e-mail address: radumanea.mk@spiruharet.ro, rocsanamanea.mk@spiruharet.ro ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 43 URL: http://www.reaser.eu e-mail: editors@reaser.eu 1.2. Thematic sites These sites provide information in a specific field. Examples of thematic websites are: http://www.phpromania.net/, or http://www.w3schools.com/, which contains information on the various standards on programming languages. The information is free, but the sites offer the possibility to buy various books and accurate information like http://www.w3schools.com/books/default.asp. The site also allows posting of advertisements for a fee. Portals are websites that allow the unification and structuring of very large and very detailed information in different areas and supply it to the end user free of charge or for a fee. Such portals often associated email services, social media, auction services, sales, purchase and pay online. Unlike simple thematic sites, these portals allow customizing information. So a client that uses the www.yahoo.ro portal can choose the MyY! Facility, that is active in the email account, to personalize its own Yahoo page. The website selects only the quality information and emphasizes the ease in access from the user point of view o and the design is less important. The content is extremely varied, from daily news and weather forecast up to the possibility of buying online and money transfer service, thanks to partnerships with Amazon, Cdnow etc. Organizations websites – designed to promote the company and its products/services on the Internet. ISRA Center, a market research company, presents its products through the site http://www.isracenter.com/. Commercial sites - these can be the organizations or consortia sites; along with the promotion of the brand and products online, offers support for selling them. They are part of the business transaction types B2B, B2C, C2C. (e.g.: http://www.kenvelo.com/en/, www.cel.ro). The final sites are divided more in the aggregators of content, based on links to other sites from an area of interest (Business, advertising, and so on.), web service providers, containing descriptions in .wsdl format for the exposed methods, and text-based web sites under UTF8 standard, loaded dynamically from a database or static in .HTML format. This format is well suited to online publishing by administrator or users (e.g. Wikipedia) using a Content Management System (CMS). 2. Content management systems for E-Business Content management systems expose the procedures for work flow management in a collaborative environment. These procedures can be executed manually or automatically in sequential mode. The first content management system (CMS) was announced in the late 90 's. CMS are divided into proprietary systems – whose program source is only available to the beneficiary of the software license and Open source – allowing anyone making changes on the programmable component of type. Most of the CMS include online publishing facilities, layout/theme management, versioning control, indexing, search and retrieval facilities. A content management system based on components (CCMS) specializes in creating modular documents. For example, a CCMS who uses Darwin Information Typing Architecture (DITA) XML lets users assemble different content themes - defined in individual modules - in a map type structure. These components can be reused (not copied and pasted) in another document, or in multiple documents maintaining the coherency and the conservancy of the entire set of documents. [www1] The most known content management systems are Drupal, Joomla. In this article we focus on Drupal. 2.1. Drupal Drupal is an Open source CMS for medium, large and very large size websites. Thanks to the WYSIWYG editor (What You See Is What You Get) compatible with Drupal (whyzzywig, ckeditor) the .html documents can be edited having access to most of the facilities offered by a professional editor like WordPress or Microsoft Word. In other words, Drupal is a platform for the web sites administration that allows creating, editing and publishing pages in .html format (fig.1). [www3] ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 44 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 1: Drupal CMS [www4] Drupal CMS advantages: a) easy to install and configure; b) HTML editor allows easy management of content; c) it is geared towards SEO: there are modules that allow to add descriptions and keywords or to generate the site map in XML format; d) has a customizable professional statistics module that might be integrated with other tools like Google Analytics, that can determine how many hits gets each page or other useful stats; e) There are a multitude of modules that allow to add web site features such as forums, blogs, RSS feeds, newsletters, or surveys (fig. 2); ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 45 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig.2. Drupal Modules [www5] f) the design of the site can be modified using the themes available on drupal.org (fig.3); Fig.3. Drupal Themes [www6] g) it is adapted to WEB 3.0: the content added to the site can be split by category using the Taxonomy module; h) it is platform independent and can be installed on the LAMP using the Linux operating system, Apache Web Server, MySQL database server and PHP programming language; i) it can be integrated with various web applications through standards and web services such as XML and SOAP. [www7] 2.2. WYSIWYG editors A WYSIWYG editor (an acronym for 'what you see is what you get' – fig.4.) is a program that allows developers changing and simultaneous viewing documents in .html format. It sets apart from ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 46 URL: http://www.reaser.eu e-mail: editors@reaser.eu traditional HTML editors that require specific markers depending on language (tags) by developer - and prevent viewing of the content being edited. The first real WYSIWYG editor was a text processing program called Bravo, invented by Charles Keeping at the Xerox Palo Alto Research Center in the 70 's. [www8] Fig. 4. Drupal Whizzywig [www9] 3. Case study Our case study reflects how a WYSIWYG editor can be used to edit a site. In fig.6 can be seen a website loaded in the editor and all the tools available to use. It is very similar to word editor, thus there is not needed additional training (fig.5). Below are presented additional technical issues: a) The whyzzywig tool bar is introduced by makeWhizzyWig('edited', '<?=$tool bar;?>')method. b) The website content is loaded in a text area control, being part of a form. <form name="Whizzywig" method="post" onsubmit="return checkform(this);"> ……………………………… <input type="submit" name="save" value="Save"> <textarea name="edited" id="edited" style="width:100%;height:500px"> <?=$editable;?> </textarea> </form> c) Reading the source file allows loading the content in the text area control: $editable = file_get_contents($f); ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 47 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 5. JEDEP edited with Drupal d) The changes made can be sent through POST method in order to be saved on disc: $fsave = fopen($f, 'w'); fwrite($fsave, $html); fclose($fsave); //open the file in write mode //saving the file e) A template can be built in such manner that the title zone and the editable zone can be replaced with tags such ##TITLE## and ##EDITABLE##. The two zones will be replaced with the changes operated, as you may see below: $html=str_replace('##TITLE##',$_REQUEST['t'],$template); $html=str_replace('##EDITABLE##', $editable,$html); f) The editable zones will be defined in the source file, using <whizzywig> </whizzywig> tags. These zones will be identified using regular expressions such as REGEX and will be replaced with the new content as you may see bellow: preg_match('|<whizzywig>(.*)</whizzywig>|Us',$content,$match); $editable = $match[1]; 4. Conclusions Frequently updated web content for E-business, sometimes even by unfamiliar users who to markup languages involve the use of CMS platforms. One of the most popular CMS is Drupal platform that incorporates a WYSIWYG editor (What You See Is What You Get). The case study focuses on the configuration file in order to successfully load the content of a web site in the editor, which allows the user to update and save changes made to it. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 48 URL: http://www.reaser.eu e-mail: editors@reaser.eu 5. References [www1] - http://en.wikipedia.org/wiki/Content_management_system [www2] - http://www.xmlmind.com/tutorials/DITA/index.html [www3] - http://it-ech.com/content/joomla-vs-drupal.html [www4] - http://drupal.org/node/10858 [www5] - http://drupal.org/project/Modules [www6] - http://drupal.org/project/themes/index?project-status=0&drupal_core=7234 [www7]- http://drupal.ro/despre-drupal [www8] - http://whatis.techtarget.com/definition/WYSIWYG-what-you-see-is-what-you-get [www9] - http://drupal.org/project/whizzywig ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 49 URL: http://www.reaser.eu e-mail: editors@reaser.eu Optimization of a tour in a distribution network Catalin-Gabriel Chirea 1, Gabriel Bazacliu 2 1 2 University of Polytechnics – FILS (German), Bucharest University of Polytechnics – FILS (German), Bucharest Abstract. The Traveling Salesman Problem can be found in many practical situations, from the distribution of goods, mail delivery or planning of routes for customer service to the design of best ring topology that will connect computers. Keywords: traveling salesman problem, heuristic methods, optimization techniques. JEL Codes: C61 1. An informal definition of the Traveling Salesman Problem (TSP) A traveling salesman has to visit n cities (clients). He will begin from his own city and after he would have visited each city exactly once he will return to the departure point. In what order should he visit the cities in order to achieve the minimum distance (or minimum cost)? 2. Mathematical model Given a weighted, complete diagraph with n nodes. Our goal is to determine an order in which each vertex should be visited such that each vertex is visited only once, and the total tour length, or cost, is minimal. 1 if j appears on the tour directly after i xij   (2.1.) 0 otherwise Formulation as an optimization problem: Minimize Subject to: for all for all for all 3. Solving methods 1. Exact methods 2. Heuristic methods a. The method of the successive insertion b. The method of the best successor (Nearest Neighbor) 1 Ing. MS student 2 Professor, PhD Ing. (2.2.) (2.3.) (2.4.) (2.5.) ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 50 URL: http://www.reaser.eu e-mail: editors@reaser.eu c. The 2-opt improvement method There are many other heuristic solving methods. 4. Theoretical example Given data: Table 1 Fig. 1 4.1. The method of the successive insertion 4.2. The method of the best successor (Nearest Neighbor) 1st iteration max(c1j)=c16 cr=c16+c61=25 [1-6-1], ROUTE=25 1st iteration min([c12,c13,c14,c15,c16])=5 cr=c13+c31=10 [1-3-1], ROUTE=10 2nd iteration max([min([c12,c62]), min([c13,c63]), min([c14,c64]), min([c15,c65])])=12.5 [1;4;6;1] Δ =c14+c46-c16=13.5 cr=cr+ Δ =38.5 [1-4-6-1], ROUTE=38.5 2nd iteration min([c32,c34,c35,c36])=6 [1;3;2;1] Δ21=c32+c21-c31=6 [1;3;5;1] Δ22=c35+c51-c31=10 Δ =min(Δ21,Δ22)=6 cr=cr+ Δ =16 [1-3-2-1], ROUTE=16 3rd iteration max([min([c12,c42,c62]), min([c13,c43,c63]), min([c15,c45,c65])])=5 [1;3;4;6;1] Δ31=c13+c34-c14=6 [1;4;3;6;1] Δ32=c43+c36-c46=8 [1;4;6;3;1] Δ33=c63+c31-c61=0.5 Δ =min(Δ31,Δ32,Δ33)=0.5 3rd iteration min([c24,c25,c26])=6 [1;3;2;5;1] Δ =c25+c51-c21=10 cr=cr+ Δ =26 [1-3-2-5-1], ROUTE=26 ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research ( Volume 4,Issue 2/ 2012 ), pp. 51 URL: http://www.reaser.eu e-mail: editors@reaser.eu cr=cr+ Δ=39 [1-4-6-3-1], ROUTE=39 4th iteration max([min([c12,c32,c42,c62]), min([c15,c35,c45,c65])])=5 [1;2;4;6;3;1] Δ41=c12+c24-c14=0.5 [1;4;2;6;3;1] Δ42=c42+c26-c46=4.5 [1;4;6;2;3;1] Δ43=c62+c23-c63=8 [1;4;6;3;2;1] Δ44=c32+c21-c31=6 Δ =min(Δ41,Δ42,Δ43, Δ44)=0.5 cr=cr+ Δ =39.5 [1-2-4-6-3-1], ROUTE=39 4th iteration min([c54,c56])=4.5 [1;3;2;5;6;1] Δ =c56+c61-c51=8 cr=cr+ Δ =34 [1-3-2-5-6-1], ROUTE=34 5th iteration max([min([c15,c25,c35,c45,c65])])=4.5 [1;5;2;4;6;3;1] Δ51=c15+c52-c12=10 [1;2;5;4;6;3;1] Δ52=c25+c54-c24=8 [1;2;4;5;6;3;1] Δ53=c45+c56-c46=1 [1;2;4;6;5;3;1] Δ54=c65+c53-c63=2.5 [1;2;4;6;3;5;1] Δ55=c35+c51-c31=10 Δ =min(Δ51,Δ52,Δ53,Δ54,Δ55)=1 cr=cr+ Δ =40.5 [1-2-4-5-6-3-1], ROUTE=40.5 5th iteration min([c64])=13.5 [1;3;2;5;6;4;1] Δ =c64+c41-c61=13.5 cr=cr+ Δ =47.5 [1-3-2-5-6-4-1], ROUTE=47.5 Fig. 2 Results with 2-opt: [1-2-4-5-6-3-1], ROUTE=40.5 Fig. 3 Results with 2-opt: [1-3-6-5-2-4-1], ROUTE=44.5 The comparison of the results when the departure point is different and when the results are improved with the 2-opt improvement method: ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research ( Volume 4,Issue 2/ 2012 ), pp. 52 URL: http://www.reaser.eu e-mail: editors@reaser.eu The method of the successive insertion The method of the best successor n0 1 2 3 4 5 6 Without 2-opt With 2-opt With 2-opt Without 2-opt D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 40.50 D= 44.00 D= 40.50 D= 47.50 D= 42.00 D= 40.50 D= 42.00 D= 47.50 D= 42.00 D= 47.50 D= 42.00 D= 40.50 D= 47.50 Table 2 5. Practical example We are in Darmstadt, Hessen and we have to visit all the German states capitals. 1st column 2nd column 3rd column 4th column BW Baden – Württemberg Stuttgart BY Bayern München BE Berlin Berlin BB Brandenburg Potsdam HB Bremen Bremen HH Hamburg Hamburg HE Hessen Wiesbaden MV Mecklenburg – Vorpommern Schwerin NI Niedersachsen Hannover NW Nordrhein – Westfalen Düsseldorf RP Rheinland – Pfalz Mainz SL Saarland Saarbrücken SN Sachsen Dresden ST Sachsen – Anhalt Magdeburg SH Schleswig – Holstein Kiel TH Thüringen Erfurt Table 3 Legend: 1st column: State flag 2nd column: Abbreviation of the state 3rd column: Name of the state 4th column: State capital 5th column: Distance between the state capital and Darmstadt The distances between all the states capitals are given in the following table. 5th column 128.70 km 287.00 km 442.73 km 417.11 km 360.25 km 419.56 km 37.08 km 459.63 km 287.37 km 200.25 km 30.66 km 138.49 km 384.04 km 326.15 km 506.44 km 209.33 km ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research ( Volume 4,Issue 2/ 2012 ), pp. 53 URL: http://www.reaser.eu e-mail: editors@reaser.eu Table 4 In this work three heuristic methods are used for solving this problem:  The method of the successive insertion  The method of the best successor (Nearest Neighbor)  The 2-opt improvement method ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research ( Volume 4,Issue 2/ 2012 ), pp. 54 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 4 5.1. The method of the successive insertion ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research ( Volume 4,Issue 2/ 2012 ), pp. 55 URL: http://www.reaser.eu e-mail: editors@reaser.eu ROUTE= 2343.55km 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Darmstadt Stuttgart München Dresden Erfurt Magdeburg Potsdam Berlin Schwerin Kiel Hamburg Bremen Hannover Düsseldorf Saarbrücken Wiesbaden Mainz Darmstadt Fig. 5 5.2. The method of the best successor (Nearest Neighbor) ROUTE= 2602.24km 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Darmstadt Mainz Wiesbaden Saarbrücken Stuttgart München Erfurt Magdeburg Potsdam Berlin Dresden Hannover Bremen Hamburg Kiel Schwerin Düsseldorf Darmstadt Fig. 6 ISSN: 2247-6172 ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 56 URL: http://www.reaser.eu e-mail: editors@reaser.eu Comparison of the results when the departure point is different and when the results are improved with the 2opt improvement method: The method of the successive insertion The method of the best successor n0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Without 2-opt With 2-opt With 2-opt Without 2-opt D=2343.55 D=2332.95 D=2332.95 D=2308.79 D=2308.79 D=2332.95 D=2332.95 D=2388.20 D=2308.79 D=2332.95 D=2332.95 D=2388.20 D=2332.95 D=2332.95 D=2332.95 D=2332.95 D=2308.79 D=2343.55 D=2332.95 D=2332.95 D=2308.79 D=2308.79 D=2332.95 D=2332.95 D=2381.20 D=2308.79 D=2332.95 D=2332.95 D=2381.20 D=2332.95 D=2332.95 D=2332.95 D=2332.95 D=2308.79 D=2425.64 D=2319.39 D=2319.39 D=2604.75 D=2585.15 D=2651.71 D=2697.41 D=2443.59 D=2634.82 D=2495.91 D=2568.12 D=2442.93 D=2407.75 D=2546.52 D=2471.93 D=2761.19 D=2308.79 D=2602.24 D=2319.39 D=2319.39 D=2693.49 D=2693.80 D=2809.39 D=2855.09 D=2490.70 D=2701.21 D=2514.81 D=3085.52 D=2490.04 D=2585.39 D=2850.59 D=2777.47 D=2918.87 D=2731.43 Table 5 6. Conclusions For the studied cases the method of the successive insertion provided a better solution than the method of the best successor, but the second method gives us the possibility to solve the problem more easily and faster. Selection of a different starting city will usually lead to a different solution. The solution generated by the two heuristic methods can be improved using the 2-opt improvement method. 7. References [1] Bachem, A., Komplexitätstheorie im Operations Research. Zeitschrift für Betriebswirtschaft, 1980 [2] Brucker, P., Ganzzahlige lineare Programmierung mit ök. Anwendungen, Hain, Meisenheim am Glan, 1975 [3] Domschke, W., Drexl, A., Einführung in Operations Research, Springer – Verlag, München, 1997 [4] Domschke, W., Logistik: Rundreisen und Touren, R. Oldenbourg Verlag, München, 1997 [5] Held, M., Karp, R.M., The travelling salesman problem and minimum soanning trees, Operations Research, 1970 [6] Meyer, M., Hansen, K., Planungsverfahren des Operations Research, Vahlen, München, 1985 [7] Müller – Merbach, H., Operations Research, Vahlen, München, 1973 [8] Müller – Merbach, H., Heuristics and their design: A survey. European J. of Operations Research, 1981 [9] Newmann, K., Operations Research Verfahren, Hanser, München, 1975 [10] http://de.wikipedia.org/wiki/Deutschland [11] http://de.wikipedia.org/wiki/Problem_des_Handlungsreisenden [12] http://map-of-germany.org/ [13] http://www.postleitzahl.org/entfernung.html [14] http://www.smims.nrw.de/homepage2002/projekte/projekt8/dokumentation/index.html ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 57 URL: http://www.reaser.eu e-mail: editors@reaser.eu The FDI profile in the Romanian manufacturing sector Aniela Raluca Danciu 1+, Vasile Alecsandru Strat 2 1 2 Academy of Economic Studies, Bucharest, Romania Academy of Economic Studies, Bucharest, Romania Abstract. The beneficial impact of FDI was especially important for the transition economies in Central and Eastern Europe, in need for additional capital investment, as well as access to foreign technology and management techniques in order to modernise and improve their economies and narrow the development gaps .Foreign capital played a decisive role in the reshaping of the transition economies in Central and Eastern Europe . Among the benefits from FDI there were also some indirect effects on local firms, such as increased local competition that force other firms to improve their economic performance. The countries in Central and Eastern Europe have been recipients of large foreign capital inflows, driven by the several factors such as: market size and its potential development, factor costs, especially labor cost, but also human capital (education and skills), trade openness, infrastructure reform, price liberalization, fiscal policy, institutional development, technological absorption capacity. The combination of all these factors explains why foreign investors decide to invest in a certain area. Predominance of one or the other of the basic factors and motives in the firms‘ decision give a certain profile to the respective investment. This paper is aiming to explore the underlying factors that drive the FDI behavior in Romania, in the manufacturing sector. We based our estimation on the firms‘ answers regarding the importance of the different factors for the decision to invest in Romania. Keywords: foreign direct investment, FDI behavior, types of large FDI, Cluster Analysis JEL Codes: C38, F21 1. Evolution of FDI After 1990, the barriers to foreign capital accession were lifted in Romania as well, creating the potential for rapid reforms to market structures and for the development of the economy. The physical capital stock of Romania was largely obsolete at the end of the communist regime and modernization was urgent. Since Romania opened up for foreign capital, the much needed foreign influx of investment gradually increased, FDI showing substantial growth rates especially after the accession to EU, with a high of 9.3 bn euro in 2008. Unfortunately, the economic crisis reversed this trend, inducing a sharp decrease in the FDI inflows: 3.49 bn in 2009, 2.22 bn in 2010 and only 1.9 bn euro in 2011 2. Determinants and motives for investing There have been numerous empirical studies that have focused on the location choices of MNCs and FDI flows in developed countries (Shaver, 1998; Head et al., 1995; Friedman et al.,1992; Culem, 1988; Nachum and Wymbs, 2005). Since early-2000s these studies have also started to concentrate on the transition economies within the CEE region (Campos and Kinoshita, 2003; Deichmann, 2001; Resmini, 2003, 2007;  Corresponding author. Tel.: + 402331776 E-mail address: anielaco@hotmail.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 58 URL: http://www.reaser.eu e-mail: editors@reaser.eu Boudier-Bensebaa, 2005; Cieślik and Ryan, 2005).According to Slay (2003, p.1) "… relative to the rest of the world, this region has been an excellent bet". The theoretical framework of this paper addresses three branches of the literature: The first branch emphasizes the new economic geography (NEG) initiated by Krugman (1991a, 1993, 1995) and later synthesized by Fujita et al., (1999) .Krugman (1996, 1998) demonstrates that the location of economic activity is determined by two groups of factors. First, those that include traditional natural advantages of particular locations such as central location, market size, and external economies that relate to supply linkages or others such as knowledge spillovers. Second, those that consist of market forces including all kinds of input costs and non-market factors such as pollution. While all the above forces play some role in the choice of location, empirical studies suggest that their importance may vary depending on a region, country or industry. The second branch of the literature derives from the knowledge-based view of the firm (Cantwell, 1989; Cantwell and Janne, 1999; Cantwell and Piscitello, 2002, 2005). Cantwell (1989) states that knowledgeseeking investments vary across locations because they depend on location specific factors, such as the number of scientists and educated people in the area, previously established innovations, R&D intensity, the education system, and good linkages between educational institutions and firms. The third branch addresses the literature on the determinants of FDI in transition economies (Lansbury et al., 1996a; Holland and Pain, 1998; Mayer, 2001; Estrin et al., 2001; Rasmini, 2000; Lankes and Venables, 1996; Garibaldi et al., 2001; Brenton et al., 1999; Cieślik and Ryan, 2005). For instance, Lansbury et al., (1996a) demonstrate that labour costs and research intensity have a significant influence on the pattern of inward investment. The evidence is consistent with the notion that some investors have been attracted to CEECs by a combination of relatively low labour costs and the availability of skilled workers in particular sectors and countries. In conclusion, the literature usually categorizes foreign investors according to their reasons for investment as follows:  new markets - market seekers (usually the investors are internal/domestic market oriented)  low labour costs and skilled labour force or/ and natural resources (efficiency seekers) Countries in Central and Eastern Europe generally offer attractive conditions, especially comparative lower labour costs, along with educated and skilled labour force; they compete for attracting more FDI. Consequently, important foreign investors preferred to re-localize completely or partly or to open branches in these new areas. The ways of penetrating these economies are as follows:  Full new investment (green field investment)  As participant in the privatization process (brown field investment) or as buyer of already existing private or state owned companies 3. The dataset description and methodology The data for the present study derives from the questionnaires, which were designed to examine the locational determinants of FDI in the Romanian Development Regions. The data collection was undertaken in June 2011. The list of 556 foreign companies was obtained from Romanian National Trade Office and it included names and addresses of foreign companies that have already established their presence on the Romanian market except Bucharest – Ilfov Region, in the form of FDI, before 2009 and having activity in 2009, in the manufacturing sector (10-33 NACE), having the number of employees >100 and also having a foreign contribution to capital >50%. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 59 URL: http://www.reaser.eu e-mail: editors@reaser.eu Due to the fact that the given data set was two years old, we examined its validity by checking the contact details of each investor using the internet and phone. We found that 15 companies were no longer reachable and 10 were double-counted. Out of this total number of firms, we received 235 answers, which is a good rate of responses. The structure of questionnaire covered topics ranging from general information about the foreign companies (e.g. year of establishment, origins, employment, sales and turnover) to specific information about the Romanian location (e.g. entry mode, region, motive for investing). In order to encourage participation in the survey, a system of third contacts, using the internet and phone, were established with potential respondents). First, a brief prentice e-mail was sent out to the senior management of all the companies for which the contact details had been verified, prior to sending the questionnaire. The aim of the letter was to explain the objectives and importance of the study, and to request their participation in it. Second, the questionnaire was sent out to the respondents who had expressed interest in participating in the study. Finally, a thank you letter was sent to all respondents after the collection of the results. In order to reveal the types of large FDI in the manufacturing sector, we applied cluster analysis. The aim was to identify the groups which consist of similar firms (according to certain criteria), but the firms should be different from one group to another. Grouping criteria are those known in the literature as important for the FDI profile (cost level or efficiency seeking, and prospects of the market in Romania or market seeking), (Birsan M., Buiga A., 2008) We based our estimation on the firms‘ answers regarding the importance of these criteria for the decision to invest in Romania. Since the manufacturing sector comprises not only capital/technological intensive activities, but also labor intensive activities, especially in some subsectors, we expect FDI in this sector to be of both types: efficiency seeking, and market seeking as well, but in various proportions. The proportion of each type is important, since it expresses two different ways of the manufacturing sector‘s integration into the world economy through FDI flows. The aim of this part of our research was to check whether or not the FDI types in the manufacturing sector fit the ―classical types mentioned in the literature. 4. Types of large FDI in the Romanian manufacturing sector For grouping the firms we used a hierarchical (numerical) clustering method. Since the variables in our questionnaire are not of numerical nature we used codification – from 1, which is the least important, to 5, the most important and then considered them as being numerical scores. To group the firms, firstly we have chosen the two characteristics: the cost level (efficiency seeking) and the perspectives of the market in Romania (market seeking). These two clustering characteristics were based on the variables which were constructed using the answers from the 17th and the 18th questions (from the 6th module) of the questionnaire. From the total sample only 210 firms could be assigned to one of the two clusters and therefore the other 25 that couldn’t (using our proposed method) were dropped from the analysis. The first significant difference between the two clusters is revealed right from the beginning of our analysis process and is due to the volumes of the groups: 147 efficiency seeking firms and only 63 market seeking ones. Thereby is clear right from the beginning that Romania was considered more often as an alternative by the foreign investors who seek for a place were to develop a manufacturing facility (that will work for a already existing foreign market). Another important difference is revealed when analyzing the method used by the investors when they decided to start the investment. A significantly higher percentage of those seeking for efficiency (71.2%) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 60 URL: http://www.reaser.eu e-mail: editors@reaser.eu started a Greenfield investment (62.3% of those seeking for market started a Greenfield investment). Also noteworthy is the fact that over two thirds of the respondents decided for a Greenfield investment. As it was expected a significantly higher percentage of the firms that were labeled as efficiency seeking are sending their products mainly to export. Almost 98% of them send their products to export when only 55.6% of the firms that are market seekers send the most important part of their products to export. Table 1 - Output main destination When talking about the level of technology involved by the production process there is not much difference between our two clusters. About 77.8% of the market seeking firms and 81.0% of the efficiency seeking ones are Low Tech Companies (Table 2). Even though there is not a significant difference between the two clusters it is important to note that over three quarters of the foreign investments in the manufacturing sector are low tech companies. This is another evidence of the fact that the main advantage taken in consideration by a foreign investor when deciding to come to Romania is the cheap labor force. Table 2 – Firm’s technological profile Going further with our analysis a significant difference involving the technological profile of the respondents is revealed. The difference appears when dividing each of the two technological profiles Low Tech and High Tech in two dichotomous classes Low Tech and Medium Low Tech and High Tech and Medium High Tech. The companies from the High Tech and Medium high Tech class do not show any significant difference (also important to note here, is the low number of companies with these profiles). A significant difference appears when talking about the low tech and medium low tech firms. As it is clearly shown in the Table 3 a significantly higher percentage of the efficiency seeking respondents are having a Low Tech technological profile. As mentioned before this can be considered as a very strong evidence of the fact that companies that seek for efficiency are mainly having a low technological production process and are choosing Romania for the low cost of the labor force ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 61 URL: http://www.reaser.eu e-mail: editors@reaser.eu Table 3 – Firm’s technological profile (4 groups) Major differences are visible between our two groups when we are talking about a firm’s profile versus the type of the initial investment. The efficiency seeking firms that have a medium low technological profile are more inclined for a Greenfield investment (66.7%). Also a significant difference is easy to see when analyzing the companies with a medium high technological profile. The same phenomena is present and therefore firms that seek for efficiency prefer in a significant higher percentage (73.9%) a Greenfield type of investment. Table 4 – Firm’s technological profile versus firm’s type of investment Noteworthy is also that all efficiency seeking companies that have a high technological profile started their investment in Romania as a Greenfield one (this fact might be interesting when assessing the technological level of the Romanian companies and the Romanian research level from the higher education system). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 62 URL: http://www.reaser.eu e-mail: editors@reaser.eu In order to reveal other significant differences between our two clusters we continued our research by analyzing the results obtained at the first sixteen items of the 6th question (Table 5). We calculated the average score for each item for both clusters. The results are listed in the following table: Table 5 – Foreign Direct Investments determinants By analyzing the values from Table 5 it is obvious that firms that are seeking for efficiency are more interested in the existence of the nearby airports (item number 3), the available labor force ( item number 6), the low costs of labor force ( item number 7) and the existence of the other companies with the same profile (item number 11) (those that have a higher average score for the second column). Also important to note is the fact that only the differences registered for the existence of the nearby airports (item 3) and the available labor force (item 6) are statistically significant at a Confidence level of 95% (see Appendix). Other significant differences are those registered for the favorable geographic condition (item 5), the available raw materials suppliers in the region ( item 10), the existence of universities and the research centers ( item 14), the low rent levels and low land price (item 15), the cheap available raw materials (item 16). All these 5 items were taken in consideration more by the companies that are seeking for new markets. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 63 URL: http://www.reaser.eu e-mail: editors@reaser.eu 5. Conclusion Our approach clearly reveals that two different types of foreign direct investments in Romania can be identified: market seeking companies and efficiency seeking companies. The differences between the two clusters, revealed by our analysis are significant when talking about the way that the investment was started and also about the technological level of the production process. Noteworthy is also the fact that Romania is mainly a destination for firms that are seeking for efficiency. 6. Acknowledgements This work was supported by CNCSIS, project number TE code 349/2010. 7. References [1] Barios S., Gorg H.and Strobl E.,. Multinationals’ location choice, agglomeration economies and public incentives,2003, CORE Discussion paper n. 17 [2] Birsan M., Buiga A.,FDI In Romania evolution and main types of large firms in the manufacturing sector, 2008,OECD Global Forum on International Investment, www.oecd.org/investment/gfi-7 [3] Chung W., and Alcacer J., Knowledge seeking and location choice of foreign direct investment in the United States,2002, Management Science, vol. 48, n. 12, pp.1534-1554. [4] Coughlin C., Terza J., and Arromdee V., State characteristics and the location of foreign direct investment within the United States,1991, The Review of Economics and Statistics, n. 73, pp. 675-683. [5] Danciu A., Serbu R., The differences between Romanian Regions considering the potential to attract FDI, 2011, Analele Universitatii din Oradea, [6] Fujita M.and Thisse J., Economics of Agglomeration, 2002,Cambridge University Press, Cambridge. [7] Guimarães P., Figueiredo O., and Woodward, D. , Agglomeration and the location of foreign direct investment in Portugal,2000, Journal of Urban Economics, n. 47, pp. 115-135. [8] Head C., Ries J. and Swenson D., Attracting foreign manufacturing: investment promotion and agglomeration, 1999,Regional Science and Urban Economics,vol. 29, pp. 197-218. [9] Head K.and Mayer T., Market potential and the location of Japanese investment in the European Union,2004, Review of Economic and Statistics, vol. 86 n.4,pp. 959-72. [10] Hogenbirk A.and Narula R., Location and agglomeration of FDI in The Netherlands: implications for policy, 2004,MERIT – Infonomics Research Memorandum series n. 006. [11] Krugman P., Increasing returns and economic geography, 1999, Journal of Political Economy, vol. 99, n. 3, pp. 484-99. [12] McCann P., Classical and neoclassical location-production models,2002, in McCann, P. (ed. by), Industrial Location Economics, Cheltenham, Edward Elgar. [13] Ottaviano G.I., Regional policy in the global economy: insights from the New Economic Geography,2003, Regional Studies, vol. 37, n. 6-7, pp. 665-674. [14] Resmini L., Economic integration and industry location in transition countries,2004, ZEI working paper n. B10. [15] Schmenner R., Huber J., and Cook R., Geographic differences and the location of new manufacturing facilities. 1987, Journal of Urban Economics, n. 21, pp. 83-104. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 64 URL: http://www.reaser.eu e-mail: editors@reaser.eu [16] Szalavetz A., The role of FDI in fostering agglomeration and regional structural change in Hungary,2004 EURECO working paper. [17] UNCTAD, (2004), World Investment Report, United Nation, Geneva. [18] UN-ECE, (2001), Economic growth and foreign direct investments in the transition economies, Economic Survey of Europe, chapter 5, vol.1. [19] Voinea L., Is relocation really good for the host economy? Evidence regarding FDI impact in the Romanian manufacturing industry, Group of Applied Economics, Bucharest [20] Zhang K., Foreign Direct Investment and Economic Growth in China: A Panel Data Study for 1992 – 2004, Department of Economics, Illinois State University, www. ideas.repec.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 65 URL: http://www.reaser.eu e-mail: editors@reaser.eu Management issues of smart growing business: knowledge-oriented employees as a critical competitive factor Anna A. Dokukina1+ 1 Plekhanov Russian University of Economics Abstract. Modern companies are creating their value through various projects. In this connection project management approaches to smart growing business is developing faster than other managerial techniques; methodology and tools are getting more efficient and supplementing different business areas. Despite the high level of development of the management field, there are a lot of challenges in implementation of knowledge-admired concepts and models. Knowledge management as a system is one of them. Globalization makes business create new success factors, and experience can be the crucial one, especially if the company is innovative and operates in the high technological industries. Referring to the early definition of knowledge management – “in its simplest form, knowledge management is about encouraging people to share knowledge and ideas to create value-adding products and services”1 – researchers in this field of study try to highlight social intentions of knowledge management as primary ones. But at the same time several significant changes in organizational environment, such as growth, can create the need for more precise and formal initiatives in terms of managing knowledge2. This paper presents the outline of research devoted to the knowledge management system to be integrated into the project management of a company. The main question is about the personal issue: are the employees ready for implementation of Project Knowledge Management, and what managerial decision can be made in this connection. Keywords: business smart growth, information society, organization, knowledge management, social factor, employees, decision making. JEL Codes: O10, O31, O32 1. Introduction Global market relations determine the economic development of companies and new management approaches and techniques. Modern business activity is characterized by de-materialization of the value chain, and therefore the decrease in need for physical resources and increase of knowledge-intensity of work content. As a consequence, knowledge plays an important role as intangible resource of organizations. At the same time the degree of temporary forms of co-operation and working constellations is also growing. Comparing to other managerial approaches, project-oriented tools are quite new, but according to several recent researches, popular enough and prevalence of economic activities is exactly project-based. [4] 1+ . Assoc.Prof. PhD (Economics), Tel.: +7 916 6118987; fax: +7 495 9582947 E-mail address: Dokukina.AA@rea.ru 1 Chase, R. L. (1997). The Knowledge-Based Organization: An International Survey. Journal of Knowledge Management, 1(1): 38– 49. 2 Leseure, M. J., & Brookes, N. J. (2004). Knowledge management benchmarks for project management. Innovations in Education & Teaching International, 42(2): 103–116. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 66 URL: http://www.reaser.eu e-mail: editors@reaser.eu The main problem in project management (PM) is that knowledge is generated within one project and then lost. Failure to transfer this knowledge within the organization leads to wasted activity, for example very common “re-inventing the wheel”, and decreases the project performance as a result. This happens because the focus on short-term performance of the project concept could be interpreted as conflicting with the long-term knowledge management goals of the organization in which the projects are organized. So organization should find a way to harmonize those processes and find common goals and objectives for both approaches. At the same time knowledge management (KM) as an organizational approach is getting more and more popular in modern business environment since it is a source of competitive advantage. However most of the literature has no empirical basis, but is focused on the conversion of tacit knowledge. [1, 5] Despite the existence of several actions to prevent the loss of knowledge and some experience, only a few firms manage systematically to identify and transfer valuable knowledge from projects to following projects. [3] Being a universally recognised as critical competitive asset knowledge defined increased interest in KM. Taken together, a commitment to effective KM in the context of a project-based business strategy is emerging as a potent means of establishing and sustaining competitive advantage. So far, literature has identified the specific problems and challenges of project knowledge management (PKM) but does not provide businessmen with concrete solutions of how to manage knowledge in projectbased performance. Of course there are several empirical researches focusing on single or few cases and project types; there are also models developed for specific organisations, but there is still a lack of general and transferable solution. Men of light and leading in this sphere, such as Hanisch, Lindner, Mueller, & Wald (2009), consider a systematic approach towards PKM as rather uncommon by now. [4] Since project activity can be considered as company’s operation, IT and KM are used to improve business. However, most of the attempts to link IT and KM to project environment are still sparse and disconnected. Even after valuable investment in IT, managers face the difficulty integrating it into the business performance, which is even more critical in case project-based company. [1] Lierni & Ribière (2008) conducted the research and found that largest group of PKM users came from organizations with more than 10,000 people and most of them represent IT industry. At the same time, they noticed that there is an increasing interest in developing integration of KM into the project management of the firms and, therefore, a trend of focusing more on people rather than on IT. [6] These ideas define presented research issue related to understanding of human factor in PKM system within the smart growing company. 2. The Model of project knowledge management system: basics of the research 2.1. Research scope and objectives The study is focused on managerial effectiveness of various projects and opportunities to keep the corporate unique knowledge. It is self-evident that all companies are facing problems and making mistakes. To find a solution they are spending certain amount and types of resources – money, time, people, – which are nearly equal because, all in all, reduce company’s profit. However, in spite of the difficulties of knowledge-oriented development, the corporations can introduce appropriate system to combine their operational, information and intellectual advantages. The primary objective is to explore the KM approach and develop critical success factors for its implementation within a company. It is a rather new science dimension, but there are a lot of researches and case-studies to analyze. PM best practices should be reviewed as well in order to find solutions for knowledge capturing and sharing between employees, business units, project offices and company in general. In particular, the research looks at two potentially knowledge-admired elements – IT and HR – and ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 67 URL: http://www.reaser.eu e-mail: editors@reaser.eu analyzes how they can be integrated. Finally, to develop and implement a practical-oriented model of PKM System based on gained information and experience. 2.2. Research Questions At the beginning of the research proposal there were just few questions:  can KM really increase company’s efficiency, or it is just new trend (like innovation myths)?  is there any solution for knowledge management given by PM best practices?  how do companies deal with this issue nowadays? After collecting some information about the subject some more questions were raised:  how PKM can be efficiently implemented?  are there any software solutions for PKM?  are the employees ready for implementation of PKM? For obvious reasons most of these issues are beyond the scope of this article. So this paper essentially deals with the individual’s attitude of being a part of the corporate KM System and binge involved in knowledge capture. Of course, among the conclusions some additional points of the project are also mentioned. 2.3. Methodology Research methods include literature review, interview, survey, sample and appropriate tool. As it has been found out, PKM as a scientific area is not well developed and described in the literature. This can be explained by the age of KM in itself, since it became an independent field of study only in mid90s. In Russia, for example, first publications were translated only in 2003 3. So the background is mostly focused on business articles representing world best practices. Additionally, it should be mentioned that appropriate terminology of PKM and existence of this approach was discovered only in the half of publications. Mostly they were about situation analysis and problem definition for future researches. On the other hand, this helped to put the questions and specify certain points of the main subject and problem solving. Particularly, it is connected with the corporate culture importance in KM and following studies in HR management field. In order to get real business cases and best practices around 10 interviews with representatives of Russian and European companies were made. The format of interview was informal and unstructured conversational type, without predetermined questions and the object of interview in order to let people describe his or her own perception and understanding of the subject. Although, there were several predefined dimensions for the conversation, topics to discuss in other words:  project management practice in respondent’s organization;  understanding of KM approach;  common communication and information sharing channels;  intentions to develop organizational culture and its present values;  best practices or problems which an organization aims to develop As a means to develop the appropriate model of PKM System and support empirical assumptions about individuals’ behavior in terms of the KM process a web-based survey was created. The main aim of the survey was to prove that modern well-educated or experienced staff is ready for being a part of a PKM System. At the same time key problems and weak areas should be defined in order to find a managerial or technological solution to try and eliminate them. Finally, any surprising opinions were expected. In case of this survey a stratified sampling probability method was used. A stratum is a subset of the population that shares at least one common characteristic. Examples of stratums might be males and females, or managers and non-managers. In case of PKM research it was 100 people sample of high-educated professionals or last year students. 3 Nonaka, I., Takeuchi, H. The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation. Oxford University Press. 1991. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 68 URL: http://www.reaser.eu e-mail: editors@reaser.eu The survey was send to various companies and universities in Russia and Europe. The survey was available on both Russian and English languages. The meaning of questions was absolutely similar, so responses could be analyzed together. All the responses were collected in less than one week, after the required amount of respondents was reached, collecting process was stopped. SurveyMonkey was used as a web-based tool that enables to create online surveys. 3. On the issue of employees as a part of the corporate PKM System 3.1. Concept of PKM System in brief PKM is an approach that provides the link between the principles of knowledge management and project management. Love et al. (2005) set the standard for understanding knowledge issues in project environments. They put a particular focus on KM in the context of cross-functional and international project teams as well as on the role of organizational learning in projects. [7] There are a lot of common examples of unsuccessful KM within project activity. For example capturing knowledge and experiences is dropped because of missing time resources. Moreover, there are individual and social barriers to capture individual knowledge and experiences, which Disterer describes in his earlier researches (2000, 2001). [2] Disterer (2002) tried to adapt several KM practices for project-based firms regarding their implementation in routine organizations, which are already well established. Unfortunately only few of them can be transferred (Fig. 1). [3] Fig. 1. Knowledge transfer to and from projects [3] Knowledge capturing process should be well managed; working steps and time budgets should be aimed at keeping and transferring knowledge; experiences must be predefined. Additionally responsible person has to be defined in order to manage how experiences have to be documented, stored and preserved. Even though knowledge management should be implemented to each step of the project, project closing is becoming the most important phase to identify and to capture new knowledge, especially analysis of failures and mistakes. Full and by, the corporate KM system can be described as follow (Fig. 2). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 69 URL: http://www.reaser.eu e-mail: editors@reaser.eu KNOWLEDGE BASE Communities of practice Learning while Defined roles Project Learn Learn before after Results Fig. 1. The general model of PKM System Background for management decision. Employees behaviour and KM Based on the survey results company’s top management can define if their employees are ready to be engaged in PKM processes and define areas in their behavior and cultural maturity. Background and demographic information. a. The average age of the respondents is 27 years, ranging from 20 to 47 years; b. 90% of respondents are working, and 6% from them are self-employed. 10% of overall amount are still students, but only 2 of them do not have any work experience (Chart 1). Chart 1. What is your current occupation? 58% of respondents have work experience more than 3 years and 38% less than 3 years. So the results of the survey represent the opinion of experienced staff with deep understanding of business (Chart 2). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 70 URL: http://www.reaser.eu e-mail: editors@reaser.eu Chart 2. Do you have any work experience? c. 67% of respondents are working in project-based organizations and 27% of them are taking a part in projects. So the biggest part of the sample is familiar with project management techniques and practices (Chart 3). Chart 3. Are you dealing with projects at your work/school? Therefore, this sample is representative for case of this research and understanding of the results is quite important of PKM model developing. 1. Personal behavior. a. It is useful to know the attitude of individual to Social Media technologies and his or her usage of it. 43 % of the respondents are active users of Social Media, taking advantage of various networks and services. On the other hand, 45% of respondents are using Social Media only for communication and taking advantage of services’ convenience. It is important to take into account the remaining 12% who are not really using this technology. It shows that not every single worker is ready to accept new ways of communication for various reasons and it can be of primary importance in implementation of PKM approach. The main idea is to apply common tools for all the users, and if employee does not use it in his personal life, it would be much harder for him to do it at work. Socialization duty is the one that hardly can be just forced in business environment, and 12% are crucial (Chart 4). However this is a subject for future research. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 71 URL: http://www.reaser.eu e-mail: editors@reaser.eu Chart 4. Are you a Social Media user? b. Blog type of Social Media can be also considered as an example. Here is the one, which is known for quite a long time and common for overwhelming amount of the Internet users. At the same tool it is one of the first and most important tools of KM, when it is just an empirical science even. 67 respondents do not use this tool at all, while 23 of them have a public one and only 10 respondents are taking their personal notes. This information is a bit surprising, but can be explained by a new political and advertising role of blogs, which can confuse regular users (Chart 5). Chart 5. Do you have your personal diary or blog? c. 70% of respondents have their school notes archive, which is quite impressive for the sample with an average age of 27 years. But only 33% can rapidly find something there. This is a brilliant example of how people appreciate their knowledge; they do not want to lose it even 10 years after, even understanding low relevance of this information. At the same time they are not making an effort to store recent information (Chart 6). Chart 6. Do you have an archive of your school/university materials? ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 72 URL: http://www.reaser.eu e-mail: editors@reaser.eu d. The most interesting part of the survey is represented by two questions: what people do when they need some information and when they find this information. Most of the respondents (77,6%) often try to find solution themselves, and 86% of the samples are using search engines in order to find solution on the Internet. This fact is not surprising, but it proves people’s intention for independence in their decision making process and creativity. And on top of it, only 2,3% of the same sample ask questions in Social Media, and 83,7% practically never do that. At the same time it is also found out that almost 85% of the sample will most likely call a competent friend rather than ask a question in Social Media, probably because they do not want to make their questions in public (Chart 7). Chart 7. What are you doing when you are facing an issue you don't know how to deal with? e. Only 2,4% of respondents are posting their discovered solutions on the Internet. That can be explained by one of the KM barriers called “Fear of exposure”. It means evidentially that 86% of the respondents are often looking for information which is generated by only 2,4% of them. This fact is surprising and confusing at the same time. In this connection the following question appears: if 3% is enough to find relevant information? (Chart 8.). Chart 8. What are you doing when you found a brilliant solution for some issue? ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 73 URL: http://www.reaser.eu e-mail: editors@reaser.eu The next idea is about perfect balance between knowledge creators, knowledge consumers and how company can influence that. On the one hand, it is dramatic for knowledge; on the other hand, if all 100% often publish their solutions on the Internet, there will be a search and quality issue. So it is not only a cultural, but also an IT issue. Many efforts have been recently done in order to find a system which is capable to analyze a huge amount of various information and provide user with a human-adapted answer. This approach is called Big Data and known as one of the most hyped terms in the market today. The first Big Data Hype Cycle helps enterprises develop strategies to address the growing business need for insight from datasets of increasing volume, velocity and variety. Gartner4 defines big data as “high volume, velocity and/or variety information assets that demand costeffective, innovative forms of information processing that enable enhanced insight, decision-making, and process automation” Probably this will be still a question for a couple more years, but going back to the survey results, 61.2% of respondents are doing nothing with generated knowledge, while only around 9% are writing it down at least for themselves. So a lot of information is lost for individuals as well as for society. In fact, it creates a problem. But KM is an approach to solve it. There is a bunch of tools and processes of information capture, share and reuse, which can be adapted for individuals or large companies. 2. Knowledge Management. a. Looking at individuals’ attitude to KM it was figured out that 77% of the respondents are aware of KM existence, and even 20% of them know how to deal with that. Still there are 23% who do not know what it is even about (Chart 9). Chart 9. What do you know about Knowledge Management? b. The following results are not so optimistic, because only 2% of the respondents use this approach on everyday basis. Of course there are people who are doing it when the subject is important (24%), but that does not contribute to the efficiency or overall KM System within an organization, it just helps to reduce the risks. There is also a fact that 10% of the respondents have tried to do KM, but gave up because of complexity of the process. That means a good system and optimized processes can 5 times increase KM users (Chart 10). 4 The world's leading information technology research and advisory company (http://www.gartner.com). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 74 URL: http://www.reaser.eu e-mail: editors@reaser.eu Chart 10. Are you using Knowledge Management methodology and techniques? c. Most of the respondents (82%) believe that sharing their knowledge can lead to their promotion, 27% of them think that this can happen because company’s management would mention their skills and competences, while 8% do not consider it to be noticeable for the top management. Basically it means that most of the employees are ready to share their knowledge, especially if the firm states it as a noticeable action (Chart 11). Chart 11. Do you think that sharing knowledge with colleagues can lead to a promotion? d. Finally 84% of the respondents intend to work in admired knowledge company, constantly learn and share their knowledge, while 12% state that they just do not need it. That can be reasoned by not understanding overall picture of KM approach and the way of its implementation to the particular specializations (Chart 12). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 75 URL: http://www.reaser.eu e-mail: editors@reaser.eu Chart 12. Do you want to work in a company which using Knowledge Management approach? In short, the survey results demonstrate that employees are ready for being a part of the firm’s KM System and want to be involved in knowledge capture and share for both personal and corporate purposes. The most serious problem is that there is no clear understanding of concrete actions they should do in order to achieve these goals. So, common tools and processes description provided by the company are needed. 4. Conclusion PM is quite developed management approach, but still there are several issues to solve, and in this connection KM is one of them. In particular, there are no precise methodological patterns that can be effectively applied. At the same time, for already 20 years KM methodology is being developed. There are a lot of world best practices, empirical studies and publications about how companies should treat it. The conditions of innovation economy are the background to such processes. Smart growing organizations have to address complex business changes, react fast, and be flexible to new and interdisciplinary economic, managerial and financial issues. That is why the business organized on the project basis is on a strong increase, and projects are accepted to be one of the most admired knowledge organizational forms. However, project has a temporal nature, so when it is over, the project documents, details, contact persons, etc are hard to access, or even lost. Therefore, the acquired knowledge and experiences have to be identified, prepared and distributed through specific actions to bridge the boundaries between one project and business developments, or the firm's permanent organization. An important knowledge management function has to handle the knowledge and experiences from projects. Promising activities focus on the closing of projects, where dedicated and conscious steps of reflection have to be taken. Therefore a working atmosphere, which allows open and constructive discussions, must be provided by management. Additionally systematical collections of project profiles and contact persons can support the reuse of knowledge in other projects. Faster finding of similar problems or experts for certain questions can speed up and improve project work. Moreover a systematically exchange of knowledge and experiences makes the acquainting of a new employee considerably easier. According to Peter Van Sommers “It is widely acknowledged that traditional Project Management techniques are no longer sufficient”5. The success of projects depends on the right combination of knowledge and experience, therefore dissemination and usage of existing knowledge is critical. Companies must spend 5 Sommers Van. P. The Biology of Behavior. John Wileys & Sons.1972. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 76 URL: http://www.reaser.eu e-mail: editors@reaser.eu sustainable learning efforts not only for one project, but for the future of the company. Failures must be seen as opportunities to improve rather than to blame people involved. Beside existence of various models and approaches, most of the researches are common in culture issue regarding implementation of KM. As a conclusion, here are some general ideas. Our society has chosen technocratic evolution dimension and is successfully following it. Most of the innovations in any industry (such as creation of new computers for medicine, new analytical software for psychology, new planning systems for management and etc.) are based on the technological progress. KM is a much more complicated concept, and refers not to only one evolution dimension. However, the society is already mature enough regarding the cultural side. But even if such a conceptual sociological question is still a purpose for discussion, it is obviously possible to develop appropriate culture with single company – that is idea many researches are focused on recently. With this, possible cultural or societal influences on PKM must be considered when comparing the results to further research from other parts of the world. Another point of interest might be the comparison of the study’s findings to research conducted in the non-profit sector. In this context, the question arises, whether PKM might be affected by different working styles, long-range goals and sustainability and different intrinsic motivations of employees. [8] Some of them have already developed the PKM approach, but it also does not provide common findings about the organization, instruments, and appropriate methods. Moreover, the actual user behavior of PKM systems has not been investigated so far. Perhaps, this explains why there are no precise PKM tools and methods. There is an experience at this filed, but still no common success factors defined. Managerial decision on integrating of PKM systems is more common for companies with high projectand knowledge-intensity as can be found in the plant construction sector, construction and consultancy services. The most important implications for project managers arising from the present study are that successful KM initiatives require appropriate incentives for team members and a user-friendly information system that facilitates the sharing and management of knowledge among all project participants. However the generalization of the findings may be partial by reason of limited empirical study sample. Organization must be favorably disposed to develop and maintain a working culture of sustained focus towards project objectives and goals. Additionally, senior management must promote a culture of trust and dependence with the use of open communication to nurture team participation, mutual support, and collaboration in all project teams. With the use of factors such as performance measurement, innovation, learning, and team coordination, organizations can establish and promote behaviors and values for effective use of information. Technically, unique and effective IT systems are needed to meet specific business and project needs. This approach will help a firm link IT with business results and a future development. IT systems should not be designed in isolation with the assumptions that people will use it for productive purposes. Besides, information behavior and values, and consequent information management practices should influence IT practices, which may not be the case in many organizations. Finally, the results show that KM and PM practices support each other and together, they influence information behavior and management practices. In summary, the paper concludes that KM activities in project-based firms have comparatively little to do with technology; rather, the focus must be on the behavior and attitudes of people as determined by the professional, organizational, and, perhaps, national cultures from which they come. In their efforts to implement effective KM, senior management must give particular attention to these cultural issues, which are critical for the success of knowledge-management activities. There are a few recommendations top management can do: 1. Create a no-blame culture that is really the key. If people are to be open about their project knowledge, they must feel assured that there are no unfavorable consequences of openness. 2. Allocate sufficient time and resources for project post-mortems and documentation. There should be a rule, strictly enforced; that a project is not over until the knowledge gained is properly managed. If possible the post-mortem should be facilitated by a qualified facilitator who is not involved with the project. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 77 URL: http://www.reaser.eu e-mail: editors@reaser.eu 3. Establish easy to reference project records. These should be with unique reference to documentation of failures and what could have been done to avoid them These are issues, which are related to culture and, hence, can only be changed by intensive efforts from the top management. This study has examined the critical success factors for KM initiatives in project-based organizations. Drawing on the suggestions of various researchers in recent years, the study makes an attempt to propose a conceptual model of such factors. Six factors have been identified and included in the model: 1. Familiarity with KM. 2. Coordination among employees and departments. 3. Incentive for knowledge efforts. 4. System for handling knowledge. 5. Cultural support. Successful KM initiatives require appropriate incentives for team members and a user-friendly information system that facilitates the sharing and management of knowledge among all project participants. There are solutions for the first four parts, but there was nothing for the fifth one. During the social technologies investigation the idea of using new collaborative approaches came up. Of course, the thought concerning using Corporate Social Networks is not absolutely new, but taking into account its potential synergy effect for KM initiatives, it can be pretty innovative. This finding leads to development of PKM model that includes three components: I. Individuals – personal KM and attitude should be developed. Regarding the implementation, it is about hiring right staff for a company doing PKM. II. System – appropriate system using (for instance, in our case Enterprise 2.0 has been studied) approach and providing collaborative and knowledge management tools for users. III. Management – developing specific corporate culture and establishing necessary organizational processes. As it has been mentioned above, this paper mostly covers the ideas related to the first, and, partly, the third layer. So, the theme provides wide opportunities for future researches based on the framework of the PKM model. Regarding the findings the following subjects are considered for more deep research: 1) What factors should be the basis to make IT corresponding to PKM needs, and to what extent the technical decision should be universal and unique at the same time. 2) How to involve in knowledge capture and sharing top management representatives or high-qualified staff? 3) How to implement PKM in terms of high privacy and security requirements for the firm’s business activity? 4) What is the best way of financial motivation calculation for knowledge management activity? 5.Acknowledgements I would like to express my sincerely gratitude to Dr. A. Petrovskaya for sharing her knowledge and experience during the process of this work. She has given her precious time and plays a key role to prepare the project effectively and moreover in time. 6. References [1] Davidaviciene, V., Raudeliuniene, J. ICT in Tacit Knowledge Preservation. 6th International Scientific Conference. Business and Management. Vilnius, Lithuania. Selected papers. 2010, pp. 822-828. [2] Disterer, G Individual and social barriers to knowledge transfer. Proceedings of the 34th Annual Hawaii International Conference on System Sciences. 2001, pp. 1-7. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 78 URL: http://www.reaser.eu e-mail: editors@reaser.eu [3] Disterer, G. Management of project knowledge and experiences. Journal of Knowledge Management. 2002, 6 (5): 512-520. [4] Hanisch, B., Lindner, F., Mueller, A., & Wald, A. Knowledge management in project environments. Journal of Knowledge Management. 2009, 13(4): 148-160. [5] Leseure, M. J., & Brookes, N. J. Knowledge management benchmarks for project management. Innovations in Education & Teaching International. 2004, 42(2): 103-116. [6] Lierni, P. C., & Ribière, V. M. (2008). The relationship between improving the management of projects and the use of KM. Vine. 2008, 38(1): 133-146. [7] Love, P., Fong, P.S., Irani, Z. (Eds.). Management of Knowledge in Projects Environments. Oxford: ButterworthHeinemann. 2005, p. 256. [8] Trompenaars, F., Dumetz, J., Saginova, O., Covey, S. et al. Cross-cultural management textbook: Lessons from the world leading experts in cross-cultural management. CreateSpace Independent Publishing Platform. 2012. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 79 URL: http://www.reaser.eu e-mail: editors@reaser.eu Competitive analysis of economic development of Serbia and EU depending on the possibility of using strategy Europe: 2020 in Serbia Srdjana Dragomirovic1+ 1 Faculty of Economics - Nis, Republic of Serbia Abstract: In March 2012, Serbia received the status of candidate for EU membership. However, Serbia is not prepared for the memberships of this organization even though there have happened huge structural changes in the national economy of Serbia. On the other hand, the European Union has taken a new strategy of development, Europe: 2020, which includes smart, sustainable and inclusive growth. This work will draw attention on the achieved economic development of Serbia, through the competitive analysis of economic development of Serbia and EU-27. In that case, it will be analyzing some indicators of four groups of indicators of economic development: quantitatively expressed indicators of economic development, economic and social indicators of economic development, scientific and technological as well as value expressed indicators of economic development. The quantitatively expressed indicators of economic development will be used in case of overview achieved level of industrial and agriculture development. The subjects of this analysis will cover the level of production of some of the food and industrial products. Economic and social indicators will indicate the level of „quality of life“ in Serbia, compared with EU-27. Scientific and technological as well as value expressed indicators of economic development will show the condition of national economy. All of the four groups of indicators will point out the level of economic development which Serbia deals with. The final part of this paper will show the level of inconsistency of economic development of Serbia compared with the European Union. Finally, this work will indicate if Serbia can implement strategy Europe: 2020 in the national economy of the country and if it can, if Serbia gets all assumption for European integration. Keywords: economic development, strategy Europe: 2020, European integration. JEL codes:: O10 1. Introduction The European social model based on a structured and regulated labor market once was a source of competitive strength. For half a century or more, it provided such an economy that was able to provide highquality industrial products, stable employment, and equitable distribution of income. However, two things have changed. First, technical progress has become more intermittent. Second, financial globalization has become an irreversible fact which threatens the essential features of the European model. [1, p.419] Burdened with high labor costs, in recent years Europe is failing to maintain its international competitiveness. Twelve years after the Lisbon Strategy adoption, the EU is faced with the need to revise this strategy and its basic premises: market liberalization, more flexible labor market, modernized system of social protection and adequate social model. [5, p.88] The global economic and financial crisis in 2009 brought into question the sustainability of the existing European model of economic development. In order to meet the challenges of the deterioration of the current 1+ PhD student, e-mail: srdjapn@yahoo.com. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 80 URL: http://www.reaser.eu e-mail: editors@reaser.eu model of economic development, the EU has adopted a strategy of Europe -2020. The same is based on the achievement of specific goals aimed at achieving sustainable, inclusive and smart growth. This limited set of goals relates to employment, innovation, education, social inclusion and climate change. The objectives are as follows[2, p.3]: Domains Goals 1. Employment Increase employment by 75% 2. Innovations Increase investment by 3% GDP-a 3. Climate change/Energy Reduce greenhouse gas emission for 20% Increase renewable resources energy share up to 20% Increase energetic efficiency up to 20% 4. Education The share of early school leavers should be under 10% 40% of 30-34 years old should have completed a tertiary or equivalent education 5. Social involvement 20 million less people should be at risk of poverty Institutional integration seen through the European Union, requires a high level of integration and development of EU member states. As In March 2012 Serbia received the status of candidates for EU membership, it is expected to achieve a certain level of development to effectively integrate into the regional organization. The current model of economic development of Serbia, based on the service sector, high consumption, imports and foreign debt growing, does not lead to the achievement of development goals, but also increases the ease and speed by which the economic problems arise at the time of global economic crisis. This work will indicate if Serbia can implement strategy Europe: 2020 in the national economy of the country and if it can, if Serbia gets all assumptions for European integration. 2. Indicators of economic development of Serbia and EU In the case of economic development achieved of Serbia, it will be analyzed economic development of Serbia through the competitive analysis of economic development of Serbia and the EU-27. It will be analyzed some indicators of four groups of indicators of economic development: quantitatively expressed indicators of economic development, economic and social indicators of economic development, scientific and technological as well as value of economic indicators expressed development. The greatest attention will be focused on those indicators related to a limited set of goals adopted by the EU through the Europe: 2020 strategy. 2.1. Quantitatively expressed indicators of economic development The quantitatively expressed indicators of economic development are used in case of overview achieved level of industrial and agriculture development. The subjects of this analysis cover the level of production of some of the food and industrial products in Republic of Serbia. In combination with the comprehensive percentage share of these products in the export structure, we can consider the competitiveness of the Serbian economy. Table 1: Industrial products in the Republic of Serbia, selected products, 2010 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 81 URL: http://www.reaser.eu e-mail: editors@reaser.eu Total Mining and briquetting of coal Hard coal, thous. tons Brown coal, thous. tons Lignite, thous. tons Extraction of crude petroleum and natural gas Crude petroleum, thous. tons Natural gas, mill. m3 Mining of metal ores Lead-zinc ore, thous. tons Copper ore, thous. tons Other mining and quarrying Formed marble and granite blocks, tons Natural sand, thous. m3 Round pebbles, gravel, crushed and broken stone, thous. m3 Clay and kaolin, thous. tons Manufacture of food products Raw leather, tons Sausages, tons Canned meat, semi-finished and finished meals of meat, tons Fruit and vegetable juices, tons Jams and marmalades, tons Vegetable oils, refined, tons Margarine and hydrated vegetable fats, tons Cheese, tons Flour, thous. tons Sugar, refined, thous. tons Food for animal upbringing, thous. tons Cocoa, chocolate and chocolate products, tons 108 193 37563 865 424 219 10665 514 1023 5928 152 2190 57124 14836 215745 4799 181469 43570 20709 527 469 835 39255 Source: Statistical Yearbook, Statistical Office of the Republic of Serbia, Belgrade 2011, p.230 The most important sectors of the Serbian economy are the basic manufacturing industry (metallurgy), leather, food and chemical industries. Accordingly, Serbia mainly exports iron, steel, nonferrous metals, grains, vegetables and fruits. Intermediate goods, i.e. means of reproduction have the largest share in the structure of exports along with capital goods and energy. The world trend of decrease in industrial production and the primacy of the service sector compared to manufacturing is also typical for Serbia. Industrial production in the Republic of Serbia in June 2012 fell by 4.0% compared to the same period in 2011. Thus, the Electricity, gas, steam and air conditioning supply sector recorded fall of 14.8%, the mining sector recorded a decline of 4.4%, and manufacturing industries decline of 1.8%, [4, p.39] Given the fall tendency in the mining sector the most Lignite 37,563 thous. tons was produced in 2010, and the least 108thous Hard coal. tons (Table 1). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 82 URL: http://www.reaser.eu e-mail: editors@reaser.eu The competitiveness of Serbian economy is at extremely low levels, according to the Statistical Office data in which in August 2012 the deficit amounted to 5135.1 million, that represents an increase of 2.8% compared to the same period last year, while the export-import ratio is 58.4%. 2.2. Scientific and technological indicators of economic development Indicators of science and technology not only demonstrate the achieved technological development of a country, but are also a significant indicator of the achieved economic development of the national economy. Among the more important indicators of science and technology can be included the following size and structure of the research, the proportion of new production technologies, and the creation of new technologies. An important indicator of the achieved technological development in Serbia is certainly a percentage of payments or a share of GDP, which is related to scientific research. This indicator is also a parameter that allows a comparative analysis of investment in technological development in Serbia and the European Union. Table 2: Gross domestic expenditure on R&D (% of GDP) time geo EU 27 2008 2009 2010 1.92 2.01 2 target 3 Source of Data: Eurostat The European Union in its strategy clearly defined a goal that is related to achieving the level of spending 3% of GDP in the name of innovation. Serbia can be characterized as a technologically underdeveloped country where the percentage does not reach a GDP share of 0.5% in point of research and development. What also may prove to be a major drawback is the lack of awareness of technological developments, since despite significant spending on science, some 100 million euro in 2008, the percentage is characterized by stagnation at the 0.3% of GDP in 2003. [10, p.10] 2.3. Economic and social indicators of economic development The complex phenomenon of economic development can be understood if the indicators of economic development are seen as a complex unity composed of parts in which each element complement another. In addition to technological and socio-technological, economic and social indicators of economic development are often cited as an important additional component in the explanation of the achieved economic development of national economy. Employment indicators provide information about the poverty level, and thus, about achieved economic growth. Through the labor market and employment increase, the government can influence poverty reduction only if the production growth is accompanied by the increase in employment. If the production growth is not accompanied by an increase of labor force engagement, that is employment, the state loses the ability to reduce poverty through economic growth. In such conditions, the unemployment rate increases, but also the percentage of employment in informal sector with marginal jobs. [7, p.270] Table 3: Employment rate by age group 20-64 (%) time geo EU 27 2010 2011 target 68.6 68.6 75 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 83 URL: http://www.reaser.eu e-mail: editors@reaser.eu Serbia 47.2 45.4 Source of Data: Eurostat and Statistical Office of the Republic of Serbia The European Union, with Europe: 2020 Strategy, predicted to increase the percentage of employment of working-age population aged 20 to 64 years, by 68.6% in 2010 and by 75% in 2011. The achievement of \such a high percentage of employment would be a reflection of sustainable economic growth which is the result of increased productivity and employment. Serbia, however, is characterized by a smaller percentage of employment, with a tendency of further decrease. Employment rate of the working-age population from 15 to 64 years old, has decreased from 47.2% in 2010, to 45.4% in 2011. At the same time there has been an increase in the percentage of unemployment from 20% in 2010 to 23, 6% in 2011. The main reason for the decrease in employment and an increase in unemployment in Serbia should be sought in increased citizen consumption, both national and personal. By identifying liberalization with the deregulation of the market, the basic institutional rules of the market as an institution that performs a confrontation of supply and demand have been ignored. Favoring spending, Shumpert's "working condition" ,that is, offer, has been replaced by Keyne's well-being. " Employment is a result of a number of factors including the flexibility of the labor market, legislative activity, and the degree of technological development of an economy. Given the fact that Serbia is considered to be technologically backward country, as we have seen, we cannot say that we are in danger of Keynes' "technological unemployment," which he regarded as one of the dangers of modern society. The pace of discovering new ways of saving labor exceeds the rate at which we find new forms of exploitation of labor. Given the insufficient development of technology, activating industries could recruit more workers, but also "working condition" could get the predominance in relation to the "welfare." 2.4. Value expressed indicators of economic development The essential component of the indicators of economic development of a country is certainly value expressed indicators of economic development. These indicators are the most important indicators of economic development, by which changes in GDP best represent the economic dynamism of a national economy. As the global economic crisis has brought the sustainability of the European model of economic development into question, in explaining value expressed indicators we need to make a distinction between the level of GDP and the growth rate of GDP. Can we expect the economic growth and development in the years to come? In the years of the crisis when the production level is reduced, but the rate of growth as well? Looking at the situation in Europe (Table 4) we can see that the positive GDP growth of 2.4% in 2010, after a negative 4.6% in 2009 in the global financial and economic crisis, again reduces with the tendency of keeping the level of 1.8% in 2012. According to predictions, the European Union will face in 2012 an extremely low GDP growth of just 1.4%. Table 4: European Countries: Real GDP Growth, 2009-12 (Percent) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 84 URL: http://www.reaser.eu e-mail: editors@reaser.eu 1 GDP valued at parity. Economic According to Europe as a region, in 2012 in terms of expected in European Monetary highest form of integration with a policy, a single single currency - the essential component union reflected performance, both monetary, of the the highest degree of adopting a common However, some as Greece, Spain, needed much more increased the lifting of the which was based on regional, agrarian p.102] This region real grow of GDP of lowest level of real the member countries raise performance at integration. Son integral part will of 1.8% in 2012, negative economic 2.0%, which is the crisis in which this the other side last arrivals to the expects growth by of real GDP from it still was not a EMU. Looking at country that has the membership in the we can conclude growth of 2% in does not deviate member countries Union. However, structure of GDP in Europe1 Advanced European economiesi Emerging European economiesi European Unioni Euro area Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovak Republic Slovenia Spain Other EU advanced economies Czech Republic Denmark Sweden United Kingdom EU emerging economies Bulgaria Hungary Latvia Lithuania Poland Romania Non-EU advanced economies Iceland Israel Norway Switzerland Other emerging economies Albania Belarus Bosnia and Herzegovina Croatia Macedonia Moldova Montenegro Russia Serbia Turkey Ukraine 2009 -4.6 -4.1 Real GDP Growth 2010 2011 2.4 2.3 1.7 1.6 Average weighted by purchasing power 2012 1.8 1.3 Source: IMF, World Outlook,2011 IMF data, looking at the greatest declines real GDP growth is eurozone. EMU Union, represents the regional economic unified monetary central bank and a euro. [6, p.6] An of the monetary nearly equal economic and countries that joined integration by currency. member states such Portugal and Ireland than integration and performance through Cohesion Fund, resources from and social funds. [3, should expect the only 1.1%, and the GDP is expected in that received help to the beginning of the Portugal as its face negative growth while Greece expects growth of about result of liberal debt member state is. On Estonia, as one of the monetary integration, -6.0 4.4 4.4 3.4 -4.2 -4.3 -3.9 -2.7 -1.7 -13.9 -8.2 -2.6 -5.1 -2.3 -7.0 -5.2 -3.6 -3.3 -3.5 -2.5 -4.8 -8.1 -3.7 1.8 1.8 2.1 2.1 1.0 3.1 3.6 1.4 3.6 -4.4 -0.4 1.3 3.5 3.1 1.6 1.3 4.0 1.2 -0.1 1.7 1.6 3.3 2.4 0.0 6.5 3.5 1.7 2.7 -5.0 0.4 0.6 3.6 2.4 1.6 -2.2 3.3 1.9 0.8 1.4 1.1 1.6 1.5 1.0 4.0 2.2 1.4 1.3 -2.0 1.5 0.3 2.7 2.2 1.3 -1.8 3.3 2.0 1.1 -4.1 -5.2 -5.3 -4.9 2.3 1.7 5.7 1.4 2.0 1.5 4.4 1.1 1.8 1.5 3.8 1.6 -5.5 -6.7 -18.0 -14.7 1.6 -7.1 0.2 1.2 -0.3 1.3 3.8 -1.3 2.5 1.8 4.0 6.0 3.8 1.5 3.0 1.7 3.0 3.4 3.0 3.5 -6.9 0.8 -1.7 -1.9 -3.5 4.8 0.3 2.7 2.5 4.8 1.7 2.1 2.5 3.6 2.5 1.4 4% , and a decline 6.5% in 2011 when member of the 3.3 0.2 -2.9 -6.0 -0.9 -6.0 -5.7 -7.8 -3.5 -4.8 -14.8 3.5 7.6 0.7 -1.2 1.8 6.9 1.1 4.0 1.0 8.9 4.2 2.5 5.0 2.2 0.8 3.0 7.0 2.0 4.3 2.0 6.6 4.7 3.5 1.2 3.0 1.8 3.7 4.5 3.5 4.1 3.0 2.2 4.8 Serbia, as a candidate status for European Union, that its GDP 2011 (Table 4) much from the of the European looking at the Serbia, we can ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 85 URL: http://www.reaser.eu e-mail: editors@reaser.eu conclude that the growth in recent years is based on increased imports, growth in consumption and external debt that is foreign borrowing. Bearing in mind all the above-mentioned facts, this GDP growth tells us more about a low starting sizes than the development successes of Serbia. The existence of such a growth, however, does not lead to an increase in aggregate demand, but leads to a decline in economic activity and quality of social welfare in the long term. Economic development of Serbia requires strategic and operational update. The mistaken idea that development can be "bought" by the transfer of resources from a donor to a recipient and foreign direct investment is still being built in Serbia which indicates a huge foreign debt. The inflow of capital in all countries, especially in developing countries is so diminished that in the next few years it cannot be completely back to normal levels. Serbia can find its way to growth and development, but only if it can find the optimum recipe of reallocation of the resources as the basis of economic growth, with the right mix of elements of the new European model of economic development. However, what must be taken into account when implementing the new European model are just the initial level of inequality, as well as the stage of economic development reached. 3. Conclusion The last world economic crisis has left a huge gap between the member states. The imbalance between the members of the European Union is not the result of any intervention or macroeconomic imbalances, but unbalanced initial predisposition. As Serbia is a candidate for membership, with the comparative analysis of the indicators of economic development of Serbia, the conclusion is that Serbia needs a new model of economic development. Serbia can implement the Europe 2020 strategy, only if it adapts to its conditions, where it is primarily thought about inequalities, but also about the achieved level of economic development. However, the uncertainty in its own strength is the major threat to the development of Serbia. Therefore, the membership in the European Union is not a path towards achieving a sustainable economy, but to maintaining the same. Having before us a clear picture of the distortion of the development of some member states, Serbia should shift the focus from entering the European Union towards achieving a sustainable economy. Turnaround will not be easy. It requires rebalancing of economic development, a broad pattern of post-crisis development, to gaining macroeconomic stability as a necessary condition for achieving economic development, but also laying the foundation for future economic growth. 4. References [1] Eichengreen B.,The European Economy Since 1945, Princeton University Press,2007. [2] EUROPE 2020 A strategy for smart, sustainable and inclusive growth, European Commission Brussels, 2010. [3] Zirojević M., Jelisavac S., Evropska monetarna unija i evro, Biblid 0025-8555,54(2002) Vol. LIII, br. 1-2, 2002, pp. 99-114 [4] Monthly statistical bulletin, Statistical Office of the Republic of Serbia, Belgrade, 6/2012 [5] Petrović P., Antevski M., Regionalna ekonomska integracija u Evropi: efekti i otvorena pitanja, 1 UDK: 339.13(4) Biblid 0025-8555,58(2006) Vol. LVIII, br. 1, Februar 2006, pp. 84-103 [6] de Grauwe P., Ekonomija monetarne unije, Beograd, 2004. [7] Nallari R.and Griffith B., Understanding Growth and Poverty, Theory, Policy, and Empirics, The World Bank, 2011. [8] Regional Economic Outlook:Europe, IMF, October 2011 [9] Statistical Yearbook, Statistical Office of the Republic of Serbia, Belgrade 2011. [10] Strategija naučnog i tehnološkog razvoja Republike Srbije za period od 2010. do 2015, Ministarstvo za nauku i tehnoloski razvoj [11] Broadberry S., O’Rourke K. H., The Cambridge Economic History of Modern Europe , 1870 to the Present, Cambridge University Press, 2010 [12]L.Boltanski,L.and E.Chiapello,: Le Nouvel Esprit du Capitalisme,Paris, Gallimard 1999.2 07074995 9 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 86 URL: http://www.reaser.eu e-mail: editors@reaser.eu [13] A. Irwin, and D. Barben, Science culture in Society issues and the scientific community. Theme paper for an ESF workshop, Vienna 18th-19th June 2012.-draft paper, not officially published. [14] A.Rip, and P.B.Joly,: Changes in and around science: their dynamics and their evaluation. Theme paper for an ESF workshop Vienna 3rd-4th May 2012. [15] Leading scientists call for improved innovation policy across Europe.In:http://www.esf.org/media-centre/ext-singlenews/article/leading scientists call for improved policy across Europe. [16.] K.P.Liesmann,: Teorie nevzdelanosti. Omyly společnosti vedení.,Academia Praha 2010, p.57.978-80-200-1677-5. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 87 URL: http://www.reaser.eu e-mail: editors@reaser.eu Regional development in economic core regions Katarína Ďurková1, Ľudmila Čábyová2, Eva Vicenová1+ 1 2 University of Ss. Cyril and Methodius in Trnava, Faculty of Mass Media Communication, Slovakia University of Ss. Cyril and Methodius in Trnava, Faculty of Mass Media Communication, Slovakia Abstract. The paper analyzes the different approaches of authors to the theme of regional development, specifically in the economic core regions. It defines the basic terminology concepts as region and regional development, shows the factors influencing the regional development and its effects and summarizes existing research on the regional development with a focus on knowledge-based society. The authors discuss the importance of various institutions and impact of the institutional density on the regional development in the context of knowledge transfer. Keywords: region, regional development, economic core region, factors of regional development. JEL Codes: O18, R11, R58 1. Introduction The term “region” is a terminological basis for a topic dedicated to regional development. When specifying the definition of the region, there exists a great diversity of opinions due to the different perspectives. However, for the purposes of our project only few of them are needed. Buček (1996 in Rajčáková, 2001) defines the region as a geographical object, which has the character of a spatial unit with properties of a system, for which is characteristic its integrity, relative isolation and functional organization. Furthermore, the region is defined as a dynamic spatial system, for which are typical specific natural and socio-economic characteristics, different from other areas. It is not only spatially, but also an economic and social unit. According to Paulíčková (2005) in terms of marketing, it is not possible to define the region using only the criteria under its administrative organization and administrative division. For the marketing aspect there are important specifics and mutual coordination among the subsystems, which include municipalities, cities, micro-regions, enterprises and associations. Matoušková (1997) has an interdisciplinary look at the region: she defines the region as a geographically defined area, which has common socio-economic, ethnic, geographical, historical, cultural and other characteristics. We can use different aspects for the classification of regions - spatial aspect, demo-geographical aspect, territorial-statistical aspect, climate aspect, the significance for tourism, etc. In terms of the distribution of knowledge it is important the classification of regions as:  metropolitan regions - with a high concentration of population and businesses, high GDP per capita and a strong focus on education, research and services;  the economic core regions - they are characterized by a strong industrialization in the past, but this also caused problems and growth retardation by gradual de-industrialization. The employment in industry peaked in the U.S. and Canada in the 60's of the 20th century. In Europe it shifted about 2030 years; The development in Central and Eastern Europe was besides de-industrialization also 1.PhD 2 + Assoc.Prof. PhD Corresponding author: eva.vicenova@ucm.sk . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 88 URL: http://www.reaser.eu e-mail: editors@reaser.eu  affected by a change in the political and economic system and privatization; Conservative population, cultural dependence, reduced rate of innovation of regional environment is typical for these regions; On the other hand, a high level of responsibility, perseverance and solidarity is observable in these regions; The key issue in these regions, as indicated by Buček – Rehák – Hudec, is an innovation dilemma and a lack of radical innovations; These regions can be found among the successful industrial centres today (Cremona, Poznan, Trnava), transformation poles and troubled de-industrialized centres (Ostrava, Kosice); peripheral, rural regions - arise as a result of long-term cumulative causation of several negative factors - unfavourable demographic structure, lack of economy, deteriorated social and economic indicators; despite the above, the life in these regions may also have its positives. 2. Factors influencing the economic level of regions These regions differ mainly in the economic level, which is affected by the following factors:  localization of enterprises in the region, their frequency, branch structure, economic stability, the intensity of intra-regional economic relations, types of organizational forms;  quantitative and qualitative characteristics of the population and its movement;  technical and social infrastructure in terms of complexity, quality and quantity;  the available natural resources and their utilization rate;  direct and indirect impacts of the state economic policy. 2.1. Localization of enterprises Businesses located in the region have a decisive influence on the economic and social development of the region. They are a source of job opportunities, thereby affecting the level of employment in the region. They are also a source of income for the population and a source of income for the public and regional budgets as well. In relation to the economic development of the region it is important its frequency and size (due to a higher labour supply), branch and sector structure, which is reflected in the level of GDP per capita of the region, the average amount of wages and skills of the labour force, and economic stability. The economy of the region is increased by the presence of secondary and tertiary sector. The economic core regions are mainly characterized by the presence of secondary sector and manufacturing companies focused on low-cost labour force. Many of the economic core regions are characterized by the branch specialization. On the one hand, it supports the innovation performance of the enterprises, but on the other hand, the dominance of one industry is a risky fact, because it creates a great dependence on this sector. 2.2. Demography The population is an integral part of the production and value processes in the region. In relation to the development, the quantitative and qualitative characteristics of the population are important. From the quantitative characters it is frequency (concentration) of the population and a dynamics of the evolution. It is also important its settlement structure. From the qualitative characters the development of the regions is affected by the age structure and educational level of the population. The level of education is directly related to the production structure and dynamics of businesses. Educated population is, according to some studies, more quickly adaptable to changes, more informed and faster finds the solutions even in crisis situations. 2.3. Technical and social infrastructure It is a conditional factor of the regional development. The technical infrastructure (transport, energetic, telecommunication networks, water and waste management) directly influences the allocation of the companies and their performance. The technical infrastructure is needed by the enterprises as well as by the households, but in a different range and combination. The development of technical infrastructure is a highly ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 89 URL: http://www.reaser.eu e-mail: editors@reaser.eu expensive investment, it is financed mainly from public sources, by which on the one hand it affects the development and on the other hand it reflects the development rate of the region. The distribution of the social structure (apartments, educational, medical, cultural, recreational, sports, administrative and social facilities) is mainly associated with the structure and the size of settlements. Social infrastructure is concentrated and easier to develop in the urban settlements. Responsibility for the condition and the development of the social infrastructure is divided between the government, regional government and private institutions. 2.4. Natural and geographic conditions Natural and geographic conditions (area size, geomorphology and geology of the territory, vegetation, condition of the environment) substantially affect the development of the region - they create prerequisites for the utilization of land, for the existence of specific industries in the region and affect the formation of the settlement structure and along with it also the lifestyle of citizens. The region can not affect its position in the broader limited space, but its size and position is, however, closely linked to the social and economic activities in the region. What is important is the degree of conservation of nature in the region, which acts somewhat restrictive. The impacts of industrialization in the economic core regions are also reflected negatively on the state of the environment in it. 2.5. Economic policy of the government The regional development is influenced by the monetary, fiscal and sector policies of the government. Through the state budget, there are interregional redistribution of the taxes and income on the one hand and the costs on the other. Economically stronger regions, which include the economic core regions, contribute to the state budget with higher amounts, while the higher amount of resources goes to the peripheral regions through social grants. 3. Effects of regional development The development has many forms - depending on location and conditions, which we take into account, from the goals that people set themselves, from an institution or a social group that set the goals. The development also has of a number of dimensions - from multinational, through regional to a local level. The development cannot be separated from the economic and social policy of the area. The effects of the regional development are difficult to express in value and are not clear. Unlike businesses, in which the effect can be exactly economically quantified, the regional development is created by the public benefits for individuals and groups in the given region. They can be expressed as external and agglomeration economies. External economies arise from the development of the economic base and the interconnectedness of industries in the region as a result of technological innovation or as the effects of urbanization (the concentration of population and built infrastructure). Agglomeration economies flow from complexly built technical and social infrastructure in the area. The Act on regional development support no. 503/2001 Coll. defines the regional development as a sustainable growth of the economic and social potential of the region, which increases its economic level, performance, competitiveness and the standards of living of its population. An important prerequisite for the regional development is an effective regional policy, which creates an appropriate institutional and regulatory environment to support cooperation among the public, private and non-profit sectors, including educational institutions. 4. Institutions and regional development According to several studies (Gibbs et al. 2001) the regional development is also affected by its institutional facilities - from traditional institutions at the regional level, such as government organizations, regional and local governments through research and educational institutions, financial institutions, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 90 URL: http://www.reaser.eu e-mail: editors@reaser.eu businesses, to various interest and professional associations, support and mediatory institutions and NGOs. These institutions have a supporting character in order to ensure smooth information flow between the subjects in the region and stimulate the innovative activities. In terms of describing the impact of institutions on the regional development, it is worth noting Benneworth’s (2008) dimensions of the region:  the so-called hardware equipment (hardware) of the region that are tangible and visible elements of the region, such as technical infrastructure, production factors;  the so-called software package (software) of the region, which can be classified as institutional structure, social infrastructure;  the so-called intellectual equipment of the region (mindware), which includes cultural identity and image of the region. These components of the regional development have different ability to respond to the changes carrying out in the region, while it can be claimed that the most flexible is the hardware equipment. A key element in the regional development is knowledge, their creation, transfer and management. In connection with this theme and institutions Šebová sets out (2009) the following trends:  the institutional isomorphism - the growing homogeneity of organizations involved in the regional development, influenced by a desire to obtain money from the same sources and under the same conditions, which leads to an imitation and mutual learning;  the transition to decentralized organizations, private sector input and creation of joint public-private organizations of the regional development;  the specific role of intermediary agencies and organizations to support small and medium-sized enterprises;  increasing role of universities as a “knowledge interface” between the local and the global economy;  growing importance of the European structural policy in the creation of networks of regional development agencies. Institutional density itself can have supportive as well as braking character, so its coordination and interaction is highlighted mostly. This is very difficult in the economic core regions, which is shown in the studies of authors (Hassink, 2005; Benneworth, 2006; Hudson, 2004). National and regional governments in order to support the industry create a network of different organizations, which over time becomes overlapping and confusing, without the ability to initiate and promote changes in the region; institutional inertia can then slow down the development processes. One of the key factors of the regional development is the ability to upgrade the old, dysfunctional institutional connections, to realize a shift from traditional regional government to multi-level governance, which leads to a coordination of the network of the different subjects of the regional development in order to reach consensus. Regional self-government has a specific character – established institutional units for management of the regional development – self-governing regions (SGR) – do not have their own citizens or an area that belongs solely to the administration of the SGR. The area belongs to the municipal cadastral government; the citizens are involved in the government indirectly through elected representatives and various partnership organizations. According to the study led by Bauer (2010), the regional government today is not, as much as it should be, a key player in the development of their area. This is caused by several factors – particularly, unsatisfying territorial-administrative division of regions in terms of the regional development management, high fragmentation of the settlement structure; the lack of tools for SGR to promote the regional development; insufficient legal framework of inadequate quality for the execution of the regional government; and also low quality of regional development management. 5. Education and research vs. regional development Education and qualification are closely related to the absorption of new knowledge. Education, research and innovations create a knowledge triangle that enables business growth, thus contributing to the overall ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 91 URL: http://www.reaser.eu e-mail: editors@reaser.eu growth of the region. Increasing the level of education contributes to the acceleration of technological progress, to a more efficient use of physical capital and a greater flexibility of businesses and their productivity. Universities have an irreplaceable role in creating a knowledge society; however, it is not just in a provision of education and research activities, but also in a collaboration of universities with the business environment. Education in the region should be connected to the business activities of the enterprises. The coordination is important within the interactions between the business and education sectors in the region. The model of the transformation process in relation to the universities, public and private sectors created by Etzkowitz and Leydesdorff as a “triple helix model” is based on an interactive dialogue. If the dialogue is interrupted, all three sectors are losing. The economic core regions are characterized by lower expenditure on R&D than in the metropolitan regions; the cooperation between the enterprises and educational institutions of university type is also weaker due to a lower trust and mutual connections. Education was in the past focused on technical courses, management courses were absent. Today, the situation is rather the opposite, universities have responded to the increased demand for management courses, but nowadays the companies are lacking skilled employees in technical fields. 6. Conclusions From the research, which sought to answer the question to what extent is the future of the region affected by its past, can be drawn the following conclusions:  changes in the central and eastern European countries do not have the same character as the changes in the countries where the market principle worked also after world war ii;  institutional density in the regions of central and eastern Europe is both qualitative and quantitative at lower levels than in the original European Union countries and this affects their economic stagnation and rigidity;  established mechanisms of the existing economic and social relations are likely to prevent new changes. The ability to generate the so-called structural advantage will be important for the long-term regional development; this ability is in contrast to the competitive and comparative advantage much more based on the interaction of public and private forces. Economic core regions should try to break the dependence on traditional industries. This means, innovate the industrial focus, strengthen the transition to the new industries and stimulate the innovative processes and products for new markets. According to the forecast of regional development in 2030, the regions of Western Slovakia, which also includes the Trnava region, will specialize in industries with higher added value, while the effect of the spread of the development will reflect in the services sector too. The inflow of investments with higher added value will open the space for increased engagement of domestic enterprises in the international networks. According to the above forecast the regions should concentrate their activities in order to achieve the competitive advantage, which will be relevant at least in Central Europe. 7. Acknowledgements This paper was created within the VEGA project, Reg. No. 1/1059/11 “Barriers of knowledge distribution from universities to business”. 8. References [1] Bauer, R. et al. (2010). Dobré spravovanie rozvoja regiónov – výzva pre Slovensko. Košice, Slovakia: Karpatský rozvojový inštitút. ISBN 978-80-970368-0-5 [2] Buček, M., Rehák, Š., Hudec, O. [s.a.]. Regionálne dimenzie znalostnej ekonomiky. [on-line]. ISBN 978-80-2253239-6. Available from: <http://147.232.5.229/krvam/files/clanky/katedra/redipe.pdf> ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 92 URL: http://www.reaser.eu e-mail: editors@reaser.eu [3] Černá, J. (2009). Úlohy univerzít v dynamike znalostných procesov. In Region Direct, Vol. 2, No. 1, pp. 80-106. ISSN 1337-8473 [4] Džupka, P. Podporná politika v regiónoch ekonomického jadra. [s.a.]. [on-line]. Available from: <http://nhfnew.euba.sk/rsa/images/stories/doc/0109dzupka.pdf> [5] Halás, M. (2008). Priestorová polarizácia spoločnosti s detailným pohľadom na periférne regióny Slovenska. [online]. In Czech Sociological Review, Vol. 44, No. 2, pp. 349-369. Available from: <http://sreview.soc.cas.cz/uploads/afc5cefd24278e4e4359aa475dcac0fa4e754157_512_2008-2Halas.pdf> [6] Lichtigová, M., Cocuľová, J. [s.a.]. Vysokoškolské vzdelávanie ako nástroj regionálneho rozvoja. [on-line]. Available from: <http://www.uniregio.fvs.upjs.sk/pdf/zbornik/Lichtigova_Coculova.pdf> [7] Pauličková, R. (2005). Regionálny a mestský marketing. Bratislava, Slovakia: EUROUNION. ISBN 80-88984-726 [8] Ručinská, S. (2008). Pôsobenie univerzity na podnikateľský sektor v regióne. [on-line]. [s.l.]. [cit. 2009-11-03]. Available from: <www3.ekf.tuke.sk/konfera2008/zbornik/files/.../rucinska.pdf> [9] Šebová, M. (2009). Vplyv inštitucionálnej hustoty na znalostné procesy v REJ. In Region Direct, No. 2, pp.130151. [10] Šikula, M. et al. (2008). Dlhodobá vízia rozvoja slovenskej spoločnosti. [on-line]. Bratislava, Slovakia: Ekonomický ústav SAV. Available from: <http://www.akademickyrepozitar.sk/sk/repozitar/dlhodoba-viziarozvoja-slovenskej-spolocnosti.pdf> [11] Šindleryová, I. (2008). Knowledge management as staring point for regional development theory? In KSI Transactions on Knowledge Society, Vol. 3, pp. 72-75. ISSN 1313-4787 [12] [s.a.]. Regionálny rozvoj. [on-line]. [s.l.]. Available from: <http://www.kgrr.fpv.ukf.sk/GSR/pdf/7rozvoj.pdf> ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 93 URL: http://www.reaser.eu e-mail: editors@reaser.eu The interpretative valences of the relationship between sustainable development and the quality of life Vladimir-Aurelian Enachescu 1, Diana Andreia Hristache2, Claudia Elena Paicu 2 Faculty of Economics, Bucharest Academy of Economic Studies 1 2 Teacher`s Training Department Departament of Economic Doctrines and Comunication Abstract. In the context of the modern human societies, the conceptualization of the quality of life involves other approaches. The scientific “refining” of the concept leads to finding “intimate resorts”, both theoretical and practical, called to lead to new results. Building a coherent image on the quality of life and on the implications it generates, in various facets of economic and social life, is the core of our scientific approach. Our purpose is to highlight the results considered by us to be significant in terms of correlations between sustainable development and the quality of life. At the same time we consider necessary to enrich the multidisciplinary nature of the concept of quality of life with new approaches. This is what we identify as key pillars, namely, educational and communicational sustainability, for the objective, relevant and modern treatment of the phenomenon itself. Keywords: quality of life; educational sustainability; communicational sustainability. JEL Codes: I25, I31, O15, P46, Q01 1. Introduction Sustainable development in modern society is no longer simply a goal. It is closely related to ensuring a certain level of the quality of life. In the 50’s we were talking about quality of life in terms of quantifying the macroeconomic welfare society through sociological perception of the degree of happiness of individuals. Today the concept of quality of life related to sustainability and vice versa. Thus, between the two concepts, a genuine communicative feedback was being build. Only based on these terms of the concept of quality of life, the development of modern human societies, built on sustainable principles, is not a nonsense. In support of our statements we identify the concerns of a series of international bodies to redefine sustainability as a result of the process of improving the quality of human life, taking into account the maintenance and support capacities of ecosystems. (IUCN / UNEP / WWF, 1991) 2. Interpretive valences of the quality of life The multidisciplinarity the concept of quality of life generates is especially relevant since, the reporting to a research area or another would reduce its use of theoretical and practical significance. Therefore the interpretation process, in the first sense, highlights the approach of the quality of life in close relation to the sustainable development of society (Van de Kerk and Manuel, 2008). The latter is now identified also through the construction of the "Sustainable Society Index" (SSI). The importance of this defining composite indicator is to implement, develop and monitor the sustainability concept at national and / or regional level concomitantly with the responsibilities it generates. (Hales and Prescott-Allen, 2002) The implementation of the sustainable development policies is a major concern for Romania. Peculiarities of SSI-Romania, identified by five additional indicators - Gross Domestic Product (GDP) Poverty Rate, Research and Development, Transportation, Ecological Agriculture - serve to reinforce the relevance of the 22 indicators originally built to provide a complete view about this complex process. Recent estimates express, in a broader sense, the quantification of welfare, according to the Human Development 1 Corresponding author: PhD student, vld_enachescu@yahoo.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 94 URL: http://www.reaser.eu e-mail: editors@reaser.eu Index (HDI), resulting in a holistic approach to the individual location in the center of the complex processes underlying societal development. (Fig. 1) 0.8 0.78 0.76 0.74 0.72 HDI 0.7 0.68 0.66 0.64 1990 2000 2005 2009 2010 2011 Fig. 1: Evolution of Human Development Index (HDI), Romania Its value for 2011 is 0.781, which gives Romania the position 50 of 187 countries with comparable data. The HDI evolution places Romania above the regional average, in the context of the index quantization of health is 0.851, plus 0.831 the value of the index of education and only 0.674, the value of the standard of living. (Fig. 2) 0.95 0.94 0.93 0.92 0.91 0.9 0.89 0.88 0.87 0.86 0.85 Norway Netherlands Ireland Liechtenstein Germany Sweden Switzerland Iceland Denmark Belgium Fig. 2: Evolution of Human Development Index (HDI) in Europe Also, observe the upward trend of the Human Development Index (HDI) in Romania, even if the values are modest compared to the top 10 ranking countries in Europe: Norway, first place with HDI score of 0.943 followed closely by the Netherlands with an accumulated score of 0.910, to that at the opposite at the end of the table, lie Belgium, with a HDI score of 0.886 estimated for 2011 (HDI, 2011). Because HDI analysis relates to three dimensions through which identifies: health, education and standard of living of the population, at some point in this triad, the educational dimension turns to be, for our research too, a key aspect. Our argument is strengthened by its own central positioning in highlighting HDI. At the same time, we believe that the educational dimension participates as a true "intermediate communication", to messaging correlation between sustainable development and quality of life. Considering these aspects, we undertake the research from a new perspective that treats quality of life. It's what we call "sustainability education". Through its we want to generate also how to respond to current needs, objectives of human communities concomitantly with subjectivism of perception of individual and group welfare. (Constanza, 2008) We consider building sustainability education necessary, in so far as it leads to the development and sociological definition of human comportamentamentale typologies. Moreover, through its correlation with the typology of motivational values, defined through the "Schwartz Model" (2006), our research converges to supplement the model with two additional items: education and communication. They are, in our opinion, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 95 URL: http://www.reaser.eu e-mail: editors@reaser.eu the glue that ensures the creation functionality, in good terms, so much needed for sustainable development and social welfare. Today, education sustainability must be perceived in the EU Member States, ranging all the way from achieving a comprehensive and integrative vision (WEF, 2010) where the issue of its compatibility with the labor market should be a priority. According to the strategy "Europe 2020" the main aim is to focus the efforts of the Member States to develop "knowledge and innovation economy ", with high employment work rate through which to ensure social and territorial cohesion. Therefore, the specific objectives that must be achieved at EU level by 2020 aims to: increase employment rate by 75% of the active population aged between 20-64 years, reducing the dropout school rate below 10%, concomitantly with increasing the percentage of educated population (higher education) at least 40%, and not least, combating poverty (European Commission, 2010). Note that sustainability education plays an important role in the successful implementation of the EU Sustainable Development Strategy. Therefore, we consider that educational sustainability is built by activating a genuine “behavioralinstitutional matrix” based on facts. Only if we consider the period 2003-2010 in EU Member States, notice that it was characterized by a number of favorable trends in the field, even if targets were only partially achieved: the school dropout rate dropped to 14.1% in the EU members in 2010, the proportion of adults with low levels of education diminished from 35.6% in 2000 to 27.3% in 2010. Progress has been made in terms of public participation in continuing education and long-life learning. However, the target of 12.5% was not achieved for the latter indicator, it registered only 9.1% for 2010 (Eurostat, 2011). Therefore further to the implementation of a set of strategies and policies aimed at increasing the availability of occupational structures and at achieving skills necessary for the labor market is required. At the same time it is necessary to take into account the characteristics of the specific occupational structures and the situation of each state. In this context, we also consider necessary the development of the relationship between sustainable education and sustainable communication. Communicative sustainability is in our opinion the result of changes caused by activation at the societal level, of the communication paradigm. The finality of our arguments converges to the need to solve the problem brought to debate given the fact that any modern human community is maintained today precisely by communication networks (Dragan, 1980). In this, the individual acquires and develops a series of skills such as critical thinking, problem solving, creativity, taking initiative in decision-making processes, skills considered essential for the new configuration of the European model of sustainability. (EUR-Lex, 2010) Through the latter, changing the attitudes and behaviors of human communities provides another perspective of interpretation and construction of a consistent image of quality of life. Regardless of how we analyze the interpretive valences of the relationship that is established between sustainable development and the quality of life, one thing is certain: improving the quality of life in sustainable communities is required. Required is also the need to efficiently manage and use the resources available, along with the potential for ecological and social innovation economy to ensure environmental protection, social cohesion and welfare, in the modern human societies. 3. Conclusions Redefining the concept of ‚quality of life’, both at the individual and societal level, requires today new interpretative meanings. The assessment of the specific dimensions of the quality of life, through the key role of the education domain for the human communities, is becoming "sine qua non" of the achievement of sustainable development. It must be connected to the communication domain, because only by activating the latter, the enhancement of skills and competencies acquired by individuals through education and training can be valued realistic. It is the only way to move from a mostly static interpretation of the concept of quality of life to a dynamic one, in the sense of its adaptability to the conditions and messages obtained using communication feed-back. The realization of enriched conceptualization of this phenomenon, basically subjective, through its reporting on sustainable development, we believe that it will be, in its transitional process, from the abstract ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 96 URL: http://www.reaser.eu e-mail: editors@reaser.eu to the concrete, the way to generate clarity, consistency and adaptability that is needed, according to the existing realities. 4. References [1] IUCN/UNEP/WWF. Caring for the Earth: A strategy for Sustainable Living. IUCN/UNEP/WWF. Gland, Switzerland. 1991 [2] Hales D., and Prescott-Allen R., Flying Blind: Assessing Progress toward Sustainability. In: D.C. Esty, and M.H. Ivanova (eds.), Global environmental governance:options and opportunities. Yale Center for Environmental Law and Policy. 2002 [3] Costanza R.,et al. An Integrative Approach to Quality of Life Measurement, Research and Policy. Survey And Perspectives Integrating Environment & Society. 2008, 1 (1): 1-6 [4] Van de Kerk G., and Manuel A.R.. A comprehensive index for a sustainable society: The SSI – the Sustainable Society Index. Ecological Economics. 2008, 66 ( 2-3): 228-242 [5] UNDP. Human Development Report 2011. Sustainability and Equity: A Better Future for All. United Nations Development Program me. 2011, available at : www.undp.org [6] Schwartz S.. Mapping and Interpreting Cultural Differences around the World. Comparative Sociology. 2006, 5 (2-3): 137-182 [7] Dragan I.. Paradigme ale comunicarii de masa. Editura Stiintifică si Enciclopedica. Bucuresti, 1980 [8] European Commission, Europe 2020: A Strategy for Sustainable Growth and Jobs. Brussels. 2010, available at : http://ec.europa.eu/europe2020/index_en.htm [9] WEF. World Economic Forum Global Education Initiative Report. Davos-Klosters, Switzerland. 2010, available at: www.weforum.org [10] Eurostat. Sustainable development in the European Union. 2011 monitoring report of the EU sustainable development strategy. European Union, Luxembourg. 2011, available at : http://epp.eurostat.ec.europa.eu [11] European Union. Resolution of the Council and of the Representatives of the Governments of the Member States, meeting within the Council, on youth work. EUR-Lex. Official Journal of the European Union C 327. 2010, 53 (01): 1-5, available at : http://eur-lex.europa.eu ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 97 URL: http://www.reaser.eu e-mail: editors@reaser.eu Population ageing - a demographic trend with various consequences Manuela Epure 1+, 1 Spiru Haret University Bucharest, Romania Abstract. Population ageing is a global phenomenon with long-term consequences on the economic development. Population is ageing as a result of two trends: people are living longer than they used to and are healthier and secondly the fertility rate has constantly decreased not only in the developed countries but also in developing ones. The ageing of the world’s population is a matter of concern for everyone; the consequences are detectable on every aspect of life- for individual and for societies. The paper is examining the possible approaches to population ageing and aims to emphasize the economic behavior determinants that affect people’s behavior during their life cycle. . Keywords: population ageing, life expectancy, dependency ratio, financial literacy. JEL Codes: J11, J14, J26, E24. 1. Introduction Population ageing is becoming a global problem because of the linkages across nations. The phenomenon is more pronounced in higher-income countries and is progressing quickly in some developing countries, notably China. In order to reveal why population is ageing so rapidly, several causes can be identified: a) People are living longer: Life expectancy in the EU continues to increase rapidly (the share of over 65 years old in society is rising fast) b) The fertility rate is decreasing and slowing population growth. c) Many of the additional years that people are living are healthy ones. Nevertheless, this demographic trend has important consequences and it requires a coherent approach at national and international level. The paper is examining the possible approaches to population ageing and aims to emphasize the economic behavior determinants that affect people’s behavior during their life cycle. 1 + PhD, Professor Corresponding author: mepure.mk@spiruharet.ro . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 98 URL: http://www.reaser.eu e-mail: editors@reaser.eu 2. Defining the issue Studying the past and current statistics referring to the population ageing, one can be easily conclude that population ageing is a demographic trend that started to manifest a few decades ago and it becomes a real problem of today’s society. Looking at the population statistics in Romania (see Fig.1), it can be seen that the life expectancy has constantly increased in the past years, which means that the shape of the Romanian population pyramid (Fig.2) begins to look like those pyramids of the countries which are facing the social and economic problems of ageing. Figure 1 Life expectancy in Romania, 2004-2009 (Source: 2009 Annual Yearbook, National Institute for Statistics, www.insse.ro[3]) Young groups of population start to shrink, especially 0-15 years old (birth rate constantly decreasesFig.3), and older generations (over 55, and 65 years old) share is expending constantly (Fig.3 is showing that starting with 1996 Romania is experiencing a negative natural increase of the population). The active groups of population are less numerous than the population groups that are near to the retirement age and of those already retired. That is generating a significant pressure on the pension system and even on the taxation system; the dependency ratio clearly indicates that active population of Romania is supporting a higher number of retired ones. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 99 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 2 Population by age and sex in 2009 (source: 2009 Annual Yearbook, National Institute for Statistics, www.insse.ro [3]) Fig.3 Birth rate, mortality and natural increase (source: 2009 Annual Yearbook, National Institute for Statistics, www.insse.ro[3]) Extending the analysis at the demographic current trend of population ageing at EU level, and also looking at the European projections for the next decades, the situation is even horse. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 100 URL: http://www.reaser.eu e-mail: editors@reaser.eu Just looking to the following graphs, the shape of the pyramid dramatically changed in less than 40 years. Fig.4 EU27 population in 2010 and the projection for EU27 in 2050 (Source: EUROSTAT) The 15-64 age group will decrease from 67% to 57% and at the same time the elderly (65+) will increase from 17 % to 29% and that means an overall dependency rate increasing from 26% to 50%, ( even 55% in some countries such as Portugal, Italy, Bulgaria, Spain, Greece, Germany) which will clearly generate a tremendous pressure on public finance, elderly care expenditure will be difficult to cover and in general a sharp decreasing of the living standards of the elderly can be foreseen. Some past studies are showing how the “colors” of ageing are changing. Looking at the population evolution, the studies are illustrating the fact that the significant changes occurred constantly in the average of the average age, from 1960 to 2060 (Fig.5). The intense yellow represents the average of 31.5 years old in certain countries and in the future the color will obviously cover a large part of the EU, and the average becomes 41.5 years old ( for the same intense yellow) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 101 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig.5 The evolution of the average of the average age for 1960 to 2060 (source: WB) The statistical records are telling us that we are facing a real problem- population ageing, and that means that it is obviously necessary to look on the long-run implications of population ageing in term of policies. The findings of the literature review can be summarized as follows: • The effects of population ageing (people are living longer, old years are healthy years, the elderly are more active now than in the past) can be seen as an ability of the population to work longer, to choose voluntarily a later retirement which means a realistic policy on the pension system reformation but it also means to allow older generations to have an individual choice when and under which conditions to retire. • A change in people’s mentality about work and leisure is highly desired mainly because today the retirement years are seen by the majority of people as leisure time – Romania case is clear – see Fig.6 • Visible changes in economic behavior during the working years are needed – save more spend less • Financial literacy is needed, we should be able to raise awareness among current young and adult working generations –basically to adopt a proactive approach of the population ageing. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 102 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig.6 Gross saving as GDP percentage – Romania case (source: www.insse.ro – database[2]) 3. Four basic approaches of population ageing Introducing this topic is just scratching the “surface of the iceberg”, I may say, but it should raise debates and maybe further collaborative research work in order to develop comparative studies at EU 27 level. Facing a problem means always to have a problem solving approach, looking at the best ways to get the problem solved is not simple, several alternatives can be explored and the scholars (Lee, R. et al. 2012) that have been studying population ageing suggest the following four approaches: 1. Workers save more and consume less in order to prepare better for their retirement. Statistic records show that people are not very keen to save more, they are willing to enjoy their prosperity years consuming more. Thus, educating active population to save more for the retirement years can be an option but the consumption trends are contradicting us. 2. Workers pay higher taxes (and consume less) in order to finance benefits for older people. It can be difficult to develop this approach mainly from social reasons, social turbulences can occurpeople do not easily accept increases in taxes. More feasible is to analyze carefully the current social benefits ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 103 URL: http://www.reaser.eu e-mail: editors@reaser.eu system and to rethink the new coordinates of a structural reform in the system, this is the Romania case but it can be also the EU case. In today’s consumption society, producers/sellers are encouraging consumption through intensive marketing campaigns so in this context a lesson to learn is needed …how to educate people to voluntarily reduce their consumption? Is it possible? 3. Benefits (and thus consumption) for older people are reduced so as to bring them in line with current tax and saving rates. Reducing benefits when the state’s financial viability is in “danger” becomes a very common decision today; the need for structural reforms in the social protection national systems is obvious. 4. People work longer and retire later, raising their earnings and national outputs. The old ages are healthy ones for the majority of today’s elderly people. Being active means to work longer and the living standards are maintained at the same level for elderly too, financial independency becomes a reality and general welfare of the society increases. Policy-makers should address all four options depending on the country level of population ageing. It is time to act; any delay can generate difficulties in the future decision- making process. There are various assumptions about retirement age, healthcare costs increase, public support for older persons, the effects of increased national savings on investment returns. No matter what paths will be chosen a coherent and global approach should be set up in the near future. . 4. People’s economic behavior during their life cycle Economic behavior is changing continuously, individuals adopt economic decisions during their entire life cycle, and these decisions are influenced significantly by a wide range of factors. Just for demonstration reasons some behavior determinants can be addressed as follows: - Factors affecting income security in old age (aggregate demand, savings and investments) - - Society’s burden in transfer flows through all public and private channels - The capability for governments to maintain the current levels of publicly funded support for old people. Also, the research should be oriented to investigate trends of the private pension provisions. What levels of personal savings would be necessary in order to sustain a certain level of living standards in the retirement ages? ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 104 URL: http://www.reaser.eu e-mail: editors@reaser.eu Clearly, our options are few: consume less, work more or both! But, are we prepared to accept it? For example higher saving rates for the working population will generate the reduction of their current consumption. More or less, in the past decades the age patterns of consumption have changed, researchers are still developing methods to forecast consumption behavior. Age patterns of consumption have been changed, particularly if we include health care. In 1960 consumption at the age of 60 was lower than at the younger adult ages. In 2007, records show that the age-consumption profile has been transformed radically. The elderly consume substantially more than younger people. The combination of declining labor earnings at older ages with sharply increasing consumption means that population ageing has become more costly, both for individuals and for society as a whole. Raising payroll taxes, as another alternative to population ageing, would reduce consumption and it will make possible to pay more benefits for current and future elderly populations. It is time to act! Any delay will be a heavy “legacy liability” that will be passed on to future generations. Basically the fundamental issue that society faces is how to allocate the increased costs of population ageing across these resources. But each option has different implications of social and economic nature. Social effects such as: impacts on families, transformation of the household structure, redesigning the transportation or built environment are current issues that policy-makers are trying to address. Another important issue that should be considered is how population ageing might affect total holdings of wealth, the composition of assets such as: houses, consumer durables, or corporate capital. Basically the economic theory suggests that many households accumulate savings for precautionary reasons and for retirement. Romania is following the same pattern in terms of saving reasons, but as an overall effect, the savings are declining as a percentage of total GDP (Fig.6). Analyses on ageing are often focused on tangible and financial wealth, sometimes the impact of human capital is rarely considered. Human capital refers to the useful skills of the population acquired through formal and informal education, training, on-the-job experience. Relevant recent studies indicate that human capital is just important as tangible capital as a driver of economic growth. Investing in education – is a real option (higher education is associated with longer life) for better health…education improves also the financial literacy and that means people will be able to see savings as ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 105 URL: http://www.reaser.eu e-mail: editors@reaser.eu There is little research on the impact of ageing on investment in human capital. The most human capital was accumulated in the early stages of the life cycle. Today are talking about “smart growth” based on the lifelong learning concept. 5. The policy-makers and the legacy they pass on to future generations The economic prospects in the coming years are not optimistic, but we realize that the only sources of economic growth are: productivity, innovation, creativity. The knowledge-based society aims to generate and distribute the new scientific, technological knowledge and that will ensure the gains in efficiency. The need for action should be seen as today’s decision and not a later one. The economic crisis in EU 27 is telling policy-makers that urgent decisions are more than welcome. There are some directions that policymakers should take into consideration: - Fiscal policy – many state budgets are imbalanced or the equilibrium between revenue and spending is rather fragile - The productivity will increase due to higher inputs: increases in the quantity and quality of private & public capital, improved education, training and skill of the labor force. Current global trends are witness that having a younger population will help drive innovation, based on the fact that young people are more creative. The older groups of population are seen not creative anymore and that is affecting the quality of the labor force. An aged labor force is considered less productive, still no deep research has been undertaken in this direction so far in Romania, nor in EU. Mainly the description of the consequences of population ageing is based on forecasts, but any forecast is subject to uncertainty and uncertainty means that action should be accelerated rather than delayed. Adaptive mechanisms to deal with population ageing are needed. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 106 URL: http://www.reaser.eu e-mail: editors@reaser.eu 6. Conclusion It has become clear that there are many topics for which more knowledge would help the decision – making process . Further research in the following 4 main areas: • Demographic and health measurement and projections; • Evaluate the capacity to work longer; • Changes in consumption and savings through better communication...to achieve this desired social behavior; • modeling the efforts of decision-makers, and building reliable data on structural changes in revenue and spending. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 107 URL: http://www.reaser.eu e-mail: editors@reaser.eu 7. References [1] Lee, R., Ferguson R. et all- Ageing and the macroeconomy- Long-term implications of an older Population (working paper in progress), National Research Council of the National Academies, The National Academies Press, Washington DC, USA, 2012 [2] *** - National Institute of Statistics online database, www.insse.ro [3] *** - 2009 Annual Yearbook, INSSE, www.insse.ro [4] *** - EURORSTAT online database, http://epp.eurostat.ec.europa.eu [5] David E. Bloom, Axel Boersch-Supan, Patrick McGee, and Atsushi Seike –Population Aging: facts, challenges and responses, PGDA Working Paper no.71, 2011, http://www.hsph.harvard.edu/pgda/working.htm ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 108 URL: http://www.reaser.eu e-mail: editors@reaser.eu Effects of the free trade agreements on the development of the agriculture sector in the Balkan region Ndoc Faslia¹ , Fran Brahimi² ¹Ministry of Agriculture, Albania ²Ministry of Finace, Albania Abstract. The signature of free trade agreements between the countries of the Balkan region has given these countries' economies more space and makes them much more competitive. These effects are sensitive mainly in the agricultural sector where the volume of trade exchanges in these last 3 years turns out to be significantly increased. On the other hand, the economic crisis has highlighted a number of problems which need to be considered for the agricultural market in the region. The experience of these years shows that for the agricultural sector in Balkan countries, there is a need for deep structural changes such as changing the size of the farm, the land market development and increased competitiveness. For this reason we should increase the level of public and private investments in the future. Keywords: free trade agreement, trade exchanges, land market, competitiveness, agricultural market. JEL Codes: F10, F18, Q10, Q19. 1. Introduction On December 19, 2006, Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia and Kosovo signed an Agreement to amend and enlarge the Central European Free Trade (CEFTA 2006). This Agreement entered in force in July 2007 for Albania, Kosovo FYR Macedonia, Montenegro and Moldova in August 2007 for Croatia and in September 2007 for Serbia and Bosnia and Herzegovina. The Agreement aims not only to expand trade in goods and services within for South East Europe Countries, by means of fair, stable and predictable rules, but also it goes further in regional integration by including the provision for intellectual properties rights, public procurement and investment. All CEFTA2006 members are in process of European integration, with Croatia becoming a member in 2013 and Albania, Macedonia, Montenegro and Serbia that has the candidate country status. In fact the CEFTA 2006, as the old CEFTA, is in fact an EU product to serve as in instrument to bring together the trade negotiators for the Central and Eastern European countries and reconstructing a formalized system of trade links amongst themselves. The last step of this Agreement is the signing of Additional Protocol, which has cut most of the duties and quotas for agriculture products. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 109 URL: http://www.reaser.eu e-mail: editors@reaser.eu In terms of agricultural trade within CEFTA Agreement, Albania has a combined trade regime with tariffs and quotas. More specifically, Albania applies tariffs at zero level, for all products originating from the territory of Kosovo and uses of escalating tariffs on imports of agricultural products from all other countries of CEFTA. Minimal tariff applied is at 0% and maximum 15%. Albania's trade regime is supplemented by quotas applicable to the importation of certain products, quotas currently applied to imports of certain products from 7 CEFTA countries, namely Macedonia, Serbia, Croatia and Montenegro. As with Kosovo, Bosnia and Herzegovina, and Moldova has no quota for the implementation of CEFTA. With the Additional Protocol Albania has dropped all the duties and quotas with the CEFTA members, excluding Bosnia and Herzegovina that has not signed the Additional Protocol. The Additional Protocol of the CEFTA Agreement will further liberalize trade in agricultural products, increasing the opportunity for access to agricultural products in a free trade area of about 30 million inhabitants without any tariff or quota. But on the other hand, in order that this “opening” may not remain an illusion, the main challenge for the Balkan countries is to exploit this growing opportunities to access markets, which means to increase domestic product, and to be oriented to the export of those products for which countries have more potential and more competitive skills. 2. Material and methods Many statistical data are analyzed on production, exports and imports of agricultural products before signing the agreement and after the signature of the agreement. The analysis is done for the period 2007-2010, for a four-year period. The volume of trade exchanges of each country is analyzed in relation to the CEFTA member states as well as in relation to the volume of general trade. Present study reflects the weight of trade partners within the CEFTA agreement. More specifically are analyzed specific products that are exported and imported from and to Albania with CEFTA member countries. 3. Results and Discussion Agricultural products trade exchanges with CEFTA countries for the period 2009-2010 resulted in an increase compared to 2008. In 2010 there was an significant increase as a result of increasing exports by about 65% compared to 2009, or the level of exports is about 40% higher than exports in 2008. On the other hand the level of imports has continued to grow by about 60% in 2010, compared to 2009. All in all, the volume of trade exchange in 2010 increased by 61% and the import-export ratio was at 1:8,5. Tab. 1. The volume of exports and imports Years 2007 2008 2009 2010 Exports $ 16.232.450 9.774.550 8.356.130 13.833.200 Imports $ 43.826.500 62.758.990 73.569.470 118.138.030 Trade volume 60.058.950 72.533.540 81.925.600 131.971.230 Regarding the level of exports to CEFTA countries, the table shows that in 2009 there was a decline in exports for all CEFTA member countries. While in 2010 the level of exports has increased for all countries. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 110 URL: http://www.reaser.eu e-mail: editors@reaser.eu In 2010 Kosovo was the main destination of Albanian exports about 40% of total exports, followed by Bosnia & Herzegovina and Macedonia respectively 19 % and 17 % of the total volume of exports. With regard to imports, in 2010, there was again an increase in the volume of imports from all CEFTA member states. About 26% of Albanian imports originated from Serbia, followed by Macedonia with 18 and Kosovo 14%. The following chart presents the development of trade exchanges for the period 2006-2010 which clearly shows an increase in trading volume after 2007. There is also a steady increase in the difference between exports and imports with imports that were larger in volume than exports. Chart nr. 1. The development of trade exchanges The chart below shows the share of each CEFTA member countries in total trade exchange of Albania in 2010. As shown by the graph Albania's main trading partners within CEFTA countries are Croatia and Serbia each occupy 24% of total trade exchange in Albania. While the smaller share trading partner is Montenegro which accounts for only 1% of the volume of trade exchanges. Chart nr. 2. The share of each CEFTA member countries in total trade exchange ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 111 URL: http://www.reaser.eu e-mail: editors@reaser.eu In the following two charts are given Albanian exports according to their destination, and imports division by origin. As you can see the main destination of exports in the year 2010 was Kosovo that constitutes 40% of all exports, followed by Bosnia & Herzegovina with 20% and Macedonia, with 17%. Montenegro and Moldova are the two countries that make up the smallest Albanian exports, with Moldova that the level of exports was zero during all these years. With regard to imports, it is obvious that Croatia and Serbia are two countries where most of Albanian imports originated, namely 26% and 25% , followed by Macedonia, with 18% of total imports and Kosovo with 15%. Again, the volume of imports from Montenegro is the smallest among the CEFTA member states with only 1% of total Albanian imports. Chart nr. 3 Albanian exports Chart nr. 4 Albanian imports Albanian products exported are dominated mainly by raw products. More specifically, the most exported product to the B & H has been leathers that constitutes 96% of total exports. To Croatia are mainly exported canned fish, watermelon, herbs, and fresh tomatoes. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 112 URL: http://www.reaser.eu e-mail: editors@reaser.eu The spectrum of products exported to Montenegro is more extensive and is dominated by exports of cabbage (cauliflower) with 15% of total exports, followed by essential oils, tomatoes and watermelon with 14% each. The part of vegetable exports to Montenegro is significant, because of the distance between the two countries, enabling the delivery of these products in fresh condition. The same phenomenon is seen even in the case of Macedonia where products exported are extensive, while main exported products are medicinal plants with 32% of the total exports, followed watermelon raw leather with respectively 10% and 9% of the volume of exports. The products exported to Serbia were watermelon with about 41% of total exports, followed by leather with about 26% of total exports. Also significant weight in exports to Serbia was attained by herbs by about 12% of exports and tomatoes with 10% of the value of exports to this country. Characteristic of exports from Albania to Kosovo is a very wide range of food and agricultural products, with more than 85 products that are exported. This somehow reflects the fact that trade between the two countries, during the period of our analysis there were no tariffs or custom quote. While the main groups of exported products are those watermelons and sunflower oil that are each about 17% off, followed by tomatoes with 10% of total exports. While in terms of Albanian imports from CEFTA countries there is a dominance of processed products. Also it may be noticed a significant weight import of grain(cereals) from these countries, because Albanian agriculture cannot be competitive in the market for this product, focusing mainly on the production of vegetables, using the advantage of climate for the production of these products. More specifically, from B & H mainly is imported sugar which constitutes about 70% of imports from the country followed by sausage and bacon with about 14% of total imports. From Croatia mainly are imported canned fish which constitutes about 37% of imports from the country, followed by wheat crops by 34%. Product imported from Moldova is wheat which accounts for about 88% of all imports from that country, followed in sunflower oil with about 8% of the value of imports. The greater value of imports from Montenegro are mainly alcoholic beverages (wine and beer), which in total account for about 67% of imports from the country. The third group of imported products are medicinal plants, which in 2010 comprised 19% of total imports from the country. This product mainly goes for re-export, reflecting the fact that medicinal plants are Albanian most exported product to Europe and America. In the case of imports from Macedonia it may be noted that the group of imported products is extensive and includes many products. The main part of these imports is represented by sunflower oil, which constitutes 42% of total imports, followed by some other products with 10 percent. Products imported from Serbia to Albania were those cereals with 31%, followed by 20% sugar and water and sunflower oil groups, respectively 10% and 9%. Products imported from Kosovo have been flour with about 30% of total imports, followed by natural and mineral waters, with 23% and beer by 15%. The aim of the Additional Protocol to the Agreement of CEFTA is the further liberalization of trade in agricultural products between CEFTA countries, through the elimination of tariffs and quotas that currently apply to trade between countries. The main benefit from this further liberalization of trade exchanges within CEFTA will be the increased access to enter markets given that the products can now be offered to a market of over 25 million without any tariff or customs quota. The elimination of tariffs and quotas will generally be translated into a lower price for final consumers, thereby also affecting the stability of food prices in the country, within this latest price developments agricultural and food products in international markets. This effect could be very positive in terms of domestic production, especially grain and flour where it fails to cover the demand in the country and a good part this requirement is covered by the import of these products, which in international markets have had their price volatilities. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 113 URL: http://www.reaser.eu e-mail: editors@reaser.eu On the other hand the further opening will mean a further increase in competition between domestic and imported products or in other words, a greater exposure of farmers to competition from imported products from CEFTA countries. 4. Conclusions 1. Implementation of the free trade agreement CEFTA, has led to the growth of the volume of trade exchange between the Balkan countries. 2. The exchange volume is increased to 40% for exports and about 60% for imports over the last 3-4 years. 3. Additional Protocol to the CEFTA Agreement for full liberalization of trade exchanges provides the opportunity for further growth of these trade, exchanges in agriculture. 4. Removal of tariffs and quotas, requires the improvement of production technologies, modernization of production, reduction of costs and increase of the competitiveness of agricultural products. 5. In all CEFTA member countries, in order to raise competitiveness deep structural changes are required in the agricultural sector, in order to make better use of natural resources in agriculture. 5. References [1] CEFTA Free Trade Agreement December 19, 2006 [2] Christie E (2002) Potential trade in Southeast Europe: a gravity model approach. WIIW working papers no. 21, March [3] Eurochambres (2005) Competitiveness of Western Balkan Companies. [4] EUROSTAT (2010) External trade of the Western Balkan countries. Statistics in focus, external trade1/2005. [5] IMF (2007) Serbia and Montenegro: export performance and external competitiveness. In: Serbia and Montenegro. [6] Messerlin P, Miroudot S (2004) Trade liberalization in South East Europe: review of conformity of 23. [7] South Eastern Europe in the EU stabilization and association process: regional report, pp 23–72. [8] Statistical Year Book, MAF &CP of Albania, 2011 [9] Uvalic´ M (2001) Regional cooperation in Southeastern Europe. J Southeast Eur Black Sea Stud 1(1):55–75 [10] World Bank (2005) Doing business in 2005: removing the obstacles. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 114 URL: http://www.reaser.eu e-mail: editors@reaser.eu Future of science and society Jana Gašparíková1+ 1 College of Economics and Management in Public, Bratislava, Slovak Republic Abstract. Acceptance of science in society is quite sufficient and especially after signing Lisbon treaty starts to be more and more pronounced .Public wants to be involved in this successful process and wants to be informed about all scientific outcomes and successes and also about all important influential scientific discoveries as well as about creative scientists.The involvement of public slightly changes concept of science- scientific culture, position of scientists, new understanding of innovation etc. Key words: recontextualization of science, new governance in science, new agents and stakeholders JEL codes: A20 1. Introduction Science, technology, innovation and society are intertwined and governed in Europe and undergo quite substantial change with the creation of the European Research Area and even more so with recent efforts to position Europe as an innovation space by 2020. It is concentrated on two important agendas – changes in and around science –and their dynamics and their evaluation. Both these issues concern recontextualization of science – new governance of science and new knowledge in science. All these changes in science have reflected new modes of knowledge closely connected with democratization of science directed consequently towards more public engagement in science and more information about science on the part of the public. All these scientific initiatives were and are also linked with a changing mission of research universities and their new type of governance, because more stakeholders began to take part in the process of regulating and influencing education and research institutions.. The governance of scientific institutions is under pressure, simultaneously pushing innovation, democratization and scientific integrity to a new shape and form. New forms of governance are emerging: the discourse on responsible scientific development, including attention to ethics and codes of conduct, interactive forms of technology assessment, and experiments with public engagement. 2. Recontextualization of science and new forms of governance + tel.0042152495475, email jana.gasparikova@vsemvs.sk. This paper was written for grant VEGA2/0206/09 Súčasné trendy vo svetovej ekonomike a znalostná ekonomika. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 115 URL: http://www.reaser.eu e-mail: editors@reaser.eu The recontextualisation of science is connected with new strategic support of research and development and new actors influencing creation and sponsorship in science. It is bound with new policy implications resulting in new valorization of science stressing the importance of public involvement in science. Tied with it is important issue of new production of knowledge - this requirement is connected with a new mission for universities. The recontextualization of science shows increasingly influential impact of civil society leaders through engagement with research, coverage of science in the media and so forth. This trend is accompanied by the important trend of de-professionalization of scientific knowledge production together with professionalization of the new actors involved. And new forms of governance. New forms of governance require new public management: - it proposes accountable autonomy for self governance of the organization instead of hierarchical subordination - the performance of the organization is measured on a regular basis and these measures are used for resource allocation - this approach requires operational tools at each level to evaluate the quantity and quality of outputs and their impacts[1]. On the other hand, it is very important to decode the trend for future development of science embodied in the massive investment in anticipatory methods such as technology assessment and foresight exercises. This future-oriented research and policy is oriented on national and comparative aspects. The anticipatory approach is also very important for taking into account the activity of actors in the European Research Area and its future development 3. European Research Area (critical observation) If we want to summarize general development in science, we should admit that the European Research Area was a success, but the European Knowledge Society as defined in the Lisbon Agenda was a failure. A new scientific agenda resulting from new governance in science stresses the importance of dynamics in European science., which must be taken into an account in the future development of the European Research Area. Unified European space showed there is no way to speak about this space as something unified. It is necessary to include to ideas about European research space also considerations on their different cultural and national influences, and both about their national special policies. Increasing importance of public and its diversification is proved by immigration influences and by internet. It is necessary to understand Europe as a social laboratory and to accept there does not exist one leader in scientific and technological policy, but there are individual regions and also individual states supporting continuous negotiations. The unified research area raises many important and interesting questions - as for instance competitiveness of different research institutes among themselves. The original idea based behind this competition is very stimulating - to produce new ideas in research means to support originality and competitiveness- but this original idea turns due its controversial development upside down in recent times. Instead of receiving new knowledge, the result of this competitiveness is very often a struggle for new citations and new not really original scientific outputs [5]. There is a danger that scientific and technological policies in different countries create their entire scientific ideology supporting their national competitiveness without any deeper innovation research criteria. This ideology results in consequences, which do not fulfill inner criteria and logic for scientific development. This tendency has also devastating influence on knowledge society - from the stricto sensu understanding and main goals of knowledge society are different in comparison to industrial society, where the main goals of industrial society were embedded for instance in successful businesses and production or ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 116 URL: http://www.reaser.eu e-mail: editors@reaser.eu in sources of roar materials. The production of new knowledge and work with this knowledge and ways of processing this knowledge are main goals of knowledge society, but very often this main goal of knowledge society turns to something very different. (for instance not to obtaining original knowledge). 4. Innovations- their changing content One of other important phenomena which are crucial for future scientific development, are innovations. Their concept and understanding needs to be slightly modified. ESF hosted conference on The Science of Innovation, which took place in Brussels on 28th February 2012. There is the conclusion of the policy brief published by the European Science Foundation on innovation policy what can be summarized in ten thought provoking issues that the science of innovation poses to policy makers: 1. Innovation policy: ‘uncommon sense’ needed – innovation is not always benign and its effects are not clean cut. It is important to understand how best to optimize, not maximize, innovation 2. The ‘science of innovation’ – diversification of innovation policy is vital. In particular a better understanding of innovation policy for the service sector is important, as this is the largest and fastest growing sector, making up more than two-thirds of European economies 3. Policy myths and rituals – there are many ‘myths’ in the world of innovation policy, such as the role of venture capitals, SMEs and the state. Innovation policy sometimes has a ritual dimension, in which policy-makers apply certain principles from elsewhere – often the US – because it seems like the thing to do, rather than because of clear evidence that it will work in their particular situation. Innovation policy has to be context-specific, and this is a big challenge for those who want to develop European-level innovation policy 4. Blind spots in innovation policy – knowledge transfer from other sectors than universities have been largely omitted in the discourse on innovation; the focus on tertiary education has for instance in some cases reduced the quality of the output of secondary education 5. Creative destruction, or destructive creation? – rather than ‘creative destruction’ we are increasingly seeing a process of ‘destructive creation’, in which new products and services diminish or destroy the usage value of existing ones, to the benefit of a few rather than many 6. Cognitive lock-in – the increased proximity between innovation policy and innovation research may have the effect of inhibiting the creation of new knowledge that could change policy directions 7. The ERA and academic disparities – the effect of European Research Area (ERA) policy may be uneven, as the opportunities it presents are unevenly distributed 8. Evidence-based innovation policy: limits and challenges – innovation policy is often not really evidence-based, or even based on distorted evidence. Available evidence from innovation research is fragmented, of variable quality, hard to interpret and often used inappropriately 9. Sharing risks and returns: toward a new model of knowledge governance – a new model of knowledge governance is considered, with innovative financial tools to give returns proportional to the very active high risk-taking role of state in investing in innovation 10. Innovation aimed at public value - stimulating the right type of innovation requires a clear idea of ‘public value’ and how to measure it [4]. Those comments on innovation want to describe dangers connected with obsessive acceptance of innovations without taking into account their critical judgement., in spite of it, that innovation has become one of the centre pieces of European policy, and in spite of it that sound understanding of the nature and dynamics of such a powerful driver to the economy has become crucial and will have huge consequences in shaping current and future scientific policies. The impact of innovations (and their more critical understanding ) will have also dramatic influence on executing a processing of knowledge and science in the future. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 117 URL: http://www.reaser.eu e-mail: editors@reaser.eu 5. Scientific Culture There is also other important issue concerning science – problems of scientific culture and the changing context of scientific culture under contemporary social conditions. Science must be also aware about having feedback on reactions of public- public must be informed about latest scientific outputs. Stricto sensu science must have special position- to be objective source of knowledge, but with limited outcomes, to have reflection of its own role, but to occupy authority without precedence. Scientific culture is connected with problems in opening science to wider society and its democratization. This is very important for broader societal understanding and greater scientific transparency. These two movements are linked with two important approaches - in science and education- :with excellence and relevance. Excellence is a very important approach underpinning professionalism and excellent results in education and in research. This approach is based on research credibility and academic legitimacy.. Relevance is an approach connected with business practice and in offering a sound base for vocational training at schools. This trend for relevance is mediated by recent conditions in science and education providing for practical knowledge in different education institutions - for instance in business schools. These two characteristics are sometimes in very strong opposition - for instance - when scientific research and education are executed in a very elitist atmosphere (in this sense there is a very strong opposition to excellence and relevance in different universities), or when there is a very strong stress on managerialism in science and in education. This trend of managerialism pushes the problems much further and negatively deeper – problems of producing research swinging between excellence and relevance concerns especially by researchers at universities who must perform pointless research, which very often has nothing to do with real research or another negative feature - the pursuit of researchers and teachers for new publications and citations ( the so-called ‘publish or perish’ slogan). This has been caused by many reasons, but one of them is very clear – international comparison and competitiveness have brought us many positive and also negative features -some of those negative features for instance are too many comparisons of quantitative indicators or negative consequences accompanying global mobility of scientists, because of a spatially fragmented career- , a rapid succession of moves across institutions, regions and countries pose significant obstacles to serious, certainly longer-term scientific or educational engagements 6. Institutional dynamics in science Ambivalent consequences in scientific culture are documented in institutional dynamics in science. Science starts to be regarded as a professional job and not as a mission - this trend is accompanied by the changing social status of scientists – a new type of scientists appears professionally in various institutions, for instance scientists with newly established firms, or a media scientist who attracts attention for a special radio or TV performance. In reality it is good to find common platform among different policies in unified European research area. As mentioned earlier, scientific research depends on more factors as in previous period. It means cooperation in science is influenced not only by scientists and researchers In the foreground appear sponsors, managers , stakeholders and last but not least also public[3]. In the case of public it is necessary to map different organizations, which could influence scientific research from the position of public - those are organizations of third sector, which could also influence research. . During quick progress and support of research in different countries comes to foreground also the question of different influences from the side of managers and sponsors of science, who have classical ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 118 URL: http://www.reaser.eu e-mail: editors@reaser.eu academic carrier, but do not work in research. We see these tendencies are noticeable in different scientific disciplines - natural and health sciences, but also in the field of social sciences and humanities. 7. Conclusions Not only conditions which influence science are being changed, but also the position of scientists in society. The public is interested to know more about scientists and to know their ethical background, because different cultural and religious attitudes appear in the case of scientists .These attitudes are very important and help to explain real scientific and research climate in different institutions, regions and countries. There is a question about responsible research - how it can be implemented, created and defended. This new dimension of science is an integral part of science and it is necessary to accept it and build on it a new scientific and educational platform with new incentives and challenges. It must be accepted that science is now a very vivid and many-sided living organism, which has many friction points also with the public and society (concerning information for the public and also by its own institutions characterized by one’s scientific culture). The future development in science will definitely show us new unexpected dimensions of dynamics in science and its consequent accompanying changes. 8. References [1]L.Boltanski,L.and E.Chiapello,: Le Nouvel Esprit du Capitalisme,Paris, Gallimard 1999.2 07074995 9 [2.] Irwin A., and Barben D., Science culture in Society issues and the scientific community. Theme paper for an ESF workshop, Vienna 18th-19th June 2012.-draft paper, not officially published. [3]. Rip A., and.Joly P.B, Changes in and around science: their dynamics and their evaluation. Theme paper for an ESF workshop Vienna 3rd-4th May 2012. [4].Leading scientists call for improved innovation policy across Europe.In:http://www.esf.org/media-centre/ext-singlenews/article/leading scientists call for improved policy across Europe. [5.] Liesmann K.P., Teorie nevzdelanosti. Omyly společnosti vedení.,Academia Praha 2010, p.57.978-80-200-1677-5. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 119 URL: http://www.reaser.eu e-mail: editors@reaser.eu Innovation in multi –channel retail banking. The bank wins or loses customers Gentiana Gjino1+, Orkida Ilollari2++ 1, 2 Raiffeisen Bank , Albania Abstract : "For many institutions, Internet is a dilemma. Embrace it and still will find yourself losing ground in your business or at least, can see your earnings falter. But ignoring it can be fatal” (The Economist) New technologies are changing the functionality of society and its various components: from one person to multinational companies. We are facing a complete change of paradigm not in vertical type, which belongs to a single sector, but the indirect type. If in the first case it is essential to jump on the train of the new technology, in the case of indirect paradigm that is obvious and inevitable, and this is what is happening in the time frame1. Initially it seemed that computers and technology would support only a way of living and working in industrial societies, rather than a modifier factor. In fact, company computers were used only to speed through office automation and to eliminate the large amount of paper documents. For many years it was thought that technology was only a useful tool to support the traditional, not understanding that represented a great opportunity to expand. Obviously, in this revolution are included banks in Albania, which from living a period of stability since 1992, are now facing a new world with more competition, more dynamics and more flexibility. We should not be surprised that in such cases the banks can be found weak, but there is not enough time to recover, it is precisely in these moments that plan strategies should be done which will define the future, "Customer oriented". The real cause of this debacle can be summarized in a letter: "E", i.e., Electronic. A very simple way to verify the impact of new technologies, in our case the banking system, is to see the large number of words that have been born and was preceded by the prefix "e": e-banking, e-trade, e -Business. In fact, no new words are born, these terms are common in the traditional financial world who added the letter "e" as to emphasize a'' new way'', a new world: the world of the New Economy. We can draw a line (hypothetically speaking) eline to distinguish the two worlds. On the one hand, there are the typical traditional businesses which dominate the contributions to "physical" processes (slow and without flexibility) where products are placed by type "push". And on the other hand are businesses built by communication networks characterized by a pronounced innovation, the speed and flexibility of processes and products are placed by type "pull". Also, for the bank to win or lose customers is faster than in the past, the products are levied by type "pull". In this new way of acting, the client is in the center of the bank and consistently pursued from the policy of Customer Relationship Marketing. So, it is important to understand the characteristics of this new financial world, and thus define policies and strategies to adapt the structure of the bank in its entirety, but with special care not to see these changes as an actual trend but as the foundations to build the bank of the future. Banks should be seen today in this perspective. Key words: bank, innovation, cross-sell, online banking, technology, customer. 1+ Corresponding author: gentian.gjino@raiffeisen.al Corresponding author: orkida.illollari@raiffeisen.al 2++ 1 F. Riolo, D. Masciandaro, (2010), Internet banking, Edibank ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 120 URL: http://www.reaser.eu e-mail: editors@reaser.eu JEL codes: G21 1. Introduction The purpose of this paper is finding a bank model able to compete successfully in a market where socioeconomic and technological factors have brought a major change in how banks operate. It will also examine various electronic channels, such as physical and virtual, which today can be accessed through the services offered by the lending institution, by mentioning for each of them, the most practical and significant cases. For this material formulation some difficulties were faced in incorporating and interpreting the various sources. Since the argument of e-banking is relatively new and in constant evolution, the bibliography often turns quite old, because after a year of publication significant changes may occur. This has been shown in exposure of strategies and organizational structures which have been defined as victorious. To remedy this lack in traditional literature, researches and studies performed by specialized companies were consulted showing exactly the current market situation. These results are compared with published articles in specialized magazines, written by sector experts, reports shown in several congresses where practical cases are presented and the last but not the least our own experience in the banking system. When you have the necessity to make bank transactions, you try to work with the bank that serves you faster in order to save time. However, there are cases when there is not enough time to go to the bank; or you need to make a last minute transaction meanwhile that the bank will close for few minutes, and even if you arrive there, there is not sufficient time to perform the transaction; or it can happen you are out of cash in your portfolio and you need money which can’t be withdrawn from the bank account because the working hours have finished. In order serving to customers even in the above mentioned cases, now banks are offering also electronic banking services. Using of alternative channels (through computers and other electronic devices) has made possible that banking service to be offered 24 hours a day. Therefore the bank can work even when its doors are closed. This way we save more time. When using automatic teller machine (ATM) you can perform actions with the bank at any moment. ATMs are computers that work like a bank counter. ATM can be used to withdraw money, deposit money, make payment of loan installments, transfer money from one account to another or simply for checking the bank account. All these actions are performed only by using a plastic card given from the bank and by entering respective password. ATMs can be placed at any location, so the client does not necessarily need to go in bank offices location for making the needed transactions. Another electronic service is the one called the “Electronic transfer of funds” (POS / EFT). Using ETF, the bank transfers an amount of money to another bank by sending an electronic message. In this case, for transferring this amount of money, there is no need for the customer to fill a check and banks do not need the check. Besides above benefits, you can transfer your money without wasting time. Internet banking - allows customers to conduct financial transactions in a secure Internet site managed by a virtual bank. Mobile banking – it is used to perform controlling of account, transactions, payments and other banking transactions through a mobile devices or Personal Digital Assistant (PDA). Phone banking – it is a service provided by financial institutions, which allows customers to perform transactions via mobile phone. Electronic transfers are made online in real time. Through an electronic message, it is given an instruction to a computer for deducting a certain amount of money from a bank account and sending it to another account. The message is sent and the relevant amount is transferred. There is no physical movement of the cash. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 121 URL: http://www.reaser.eu e-mail: editors@reaser.eu All these developments are not widely present in Albania. Some banks have installed ATMs and plastic cards have been issued. Few other banks offer the banking service via Internet. Distribution and usage of electronic banking is still limited. Still, this development pertains for sure to a near future, not far away. But we should not forget, people will continue to keep cash in their hands and will be willing to use them. Electronic money cannot replace completely the traditional money/cash. 2. Innovation and its importance Innovation is the process of transforming the new ideas into values, for being more competitive in the market, to gain competitive advantage and to maintain that competitive edge. Innovation is not just about creating new products or services, it is more than that. There are several ways of conceiving the innovation which the future has called them as "the eight angels of innovation" and which are: - New products and services, a product or service that is new to the market; - New business models, new pricing structure, business model or approach to an existing business model; - New "Brand" Experiences - new ways for customers, partners or staff to intervene in order to understand the brand-in and what stands before it; - New partnership strategies, new alliances between companies that have visible results in innovation, new synergies, and products; - New distribution channels, innovative ways to bring the product or the service to the customer; - New client segments, in order for the company to reach new segments of customers using the existing products or services; - New communication channels, new ways to communicate with partners, customers or staff; - New processes, new ways to optimize the operational aspects, to reduce costs or produce a product or develop a product or a better service for the customers; For understanding the importance of technological factors it is sufficient to see the increase of business investment in the new technologies. 3. Innovation in the banking system The evolution of economic policies – the financial and monetary policies have forced banks to identify new areas in order to be more profitable and to achieve high standards of efficiency. Banks are guided by the philosophy of continuous change through investments in the increase of banking service quality, improvement of technology and human resources, increasing of product gamma via a differentiated price. Establishing a new "online" business is a key element for the bank, as it is the conversion of the old bank in a virtual bank and the decision of integrating alternative channels (virtual) using the existing structures. With the new information and telecommunications technology, an evolution towards a more integrated market led to a substantial change in economic relations. Globalization of markets and quickly spreading of new alternatives of technological facts have substantially affected the functioning of economic systems in all countries. After 90’s we are witness of major changes in production processes, techniques of ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 122 URL: http://www.reaser.eu e-mail: editors@reaser.eu human resources management and finances which can be called as "new paradigm" 2 which is a new development model based on different rules from the traditional ones known as the "new economy. This is in reality a "second industrial revolution" but with different features from the previous one, not from importance point of view but from the impact on the world economic system. When talking about the conversion of the so-called "old economy" into the "new economy" taking into account only the technological factor it is quite simple. The difference is manifested in different ways and has represented all macro - economic aspects. The logic of alternative channels is the triumph of the new economy paradigm and of the technology information, able to link different economic actors in new ways, reducing space and time distances. So the alternative channels are an instrument, in this new competitive landscape, bringing us to review the markets and of the so-called "traditional" activity areas part of financial intermediaries and banks. In the center of the dynamic of the evolution continuity it is the change of the market and of the competition system. Change, in part, has to do with technological development, introduction and distribution of the alternative channels. Important and decisive factors are the liberalization of the legal regulation and of the economic – financial one. Usage of e-banking does not mean changing the habits of cash usage, in the contrary with the help of information and communication technologies, is made possible time overcoming, avoidance of time losses deriving from bureaucratic aspects of traditional banking, for a faster and more efficient management of personal finances administration. "Multi channel" integration helps banks to gain competitive advantage through rapid development of innovative products, enhancing customer experiences by responding to consumer demands in a uniform way through a delivery channel and increasing benefits through "Cross Sell". Integration of different technological systems in distribution channels helps the increase of operational efficiency, avoids systems duplication and reduces systems maintenance requirements. Building of a "multi channel" structure helps banking system to improve the service toward the customers and increase the sales. However the achievement of a full multi - channel integration it is not simple at all. 4. Bank types in the world Spread of information and communication technologies, the increase of personal computers usage, internet connectivity and the wide spread of mobile phones, have drawn the bank’s attention to the possibility of “electronic banking”. "Another reason that made useful the use of electronic channels was the need to minimize costs and simultaneously increase the efficiency of banking services. In this way, banks used the main distinguishing characteristics of the Internet, the interaction, thus by developing the distribution of banking services structure in order to meet the increase of customers needs and simultaneously, to increase their incomes. Internet banking banks types: 1. Information banks or marketing website - they are used only for marketing information about the bank, the products and the offered services; - this is a basic form of an e-banking bank; - provide information about loans and deposits interests; 2 Federici T., Ferracchiati A.,(2009) La banca virtuale: una strada ancora da percorrere. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 123 URL: http://www.reaser.eu e-mail: editors@reaser.eu - in extreme cases, provide a contact point on the line through which customers can send an e-mail asking for specific information, the purchase of a brochure, etc.; - risk is relatively low because there is not a direct link to the bank server or with its internal network; - this service can be offered by the bank itself or can be "outsourced"; - These sites should be under continuous and strict monitoring to prevent unauthorized changes. 2. Communication Bank website - This type of site allows the flow of information in two ways: first, users can get different information and secondly they are allowed to send a "feedback" by resubmitting the information. - The risk is relatively low because there is not a direct connection to the server or the bank's internal network. - They should be vigilant and continually check to monitor, prevent and manage unauthorized interference to access the server or the bank's internal network or computer systems. - Much more needed is also viruses’ control. 3. Transactional website Banks - Meanwhile that communication banks include a dual flow of information, transfer of funds requires a site far more complex; - Clients can make transactions with their accounts in real time; - Customers may update or modify account information; - Clients can make payments to third parties in and out of the bank; - These banks are exposed to a higher risk and therefore they must have very strong monitoring systems. Bank Types in the world; 1. Banks “bricks and mortar” type: they are ordinary banks; they do not offer e-banking services but rely only on their branches (physical branch) to deliver their services. These are the traditional banks. However many traditional banks are being separated from their status during the years, by implementing e-banking as an indispensable need for this important channel. 2. Virtual banks: they are banks without physical location/branches, but offer their services to clients only through e-banking. These banks are not supported through branches network, but can only be viewed online (website) through advertising or via their ATMs network. 3. Banks “Brick to click": When a traditional bank "brick and mortar "starts offering its services through e-banking for its customers, then it is called" brick and click". Most major banks and even smaller banks are becoming "brick and click" type of bank. 5. How will the e-banking future be? Development of alternative distribution channels has been one of the outstanding developments of the banking system during the last decade. From all the popular electronic channels services the most used ones have been internet and mobile. In a recent study recently made by “Celent”, an analyst firm, it predicts that e-banking adoption by Western Europe banks will grow rapidly, from a current average of 6% will go up to 25% at the end of 2010 . Most developed markets are Spain, France, Italy and England. Adopting of the new digital channels of banking system will grow more. This growth will be encouraged even more by the use of digital equipment from new generations. - According to a McKinsey research, the main brakes on using of internet banking are: Lack of network compatibility for making the cash transactions, Lack of a face to face contact with a bank operator, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 124 URL: http://www.reaser.eu e-mail: editors@reaser.eu - Low level of perceived safety, - A basic habit going toward traditional desks How will be e-banking future? - Customers will be more familiar with e-banking and will have a greater commodity for banking services. - E-banking will continue to grow. - Banks will extend their functionality and will go beyond basic banking services to personalized ones. 6. Advantages and disadvantages of alternative channels (e-banking) Nowadays, a good part of commercial banks offer various forms of internet banking, also known as online banking or electronic banking. The challenge of this industry is the designation of new channels for offering banking services, in a simple and reliable way to be used by the customers. Some banks see internet primarily as a channel of communication with their clients, others see ebanking as a way of building the external market (example. in all EU), without having the need of investing in a “bricks and mortar” type of bank. Others see e - banking as an alternative channel of sale or services. Others think that all the above are complementary to each other. Some banks are concentrated in internet banking for customer; others aim to provide a full service bank website for corporate customers. Alternative channels fulfill many functions of the relationship between bank and customer. Besides the presentation and recognition of the banking institution and its initiatives and products, such channels offer other benefits as well: From customer perspective: - Convenience: Differently from bank’s desk, these channels does never close, they are open 24 hours a day, 7 days a week. It is not necessary to waste time waiting in a line as the bank now is just a click away. - Located everywhere: if the customer is located outside the city or out of the country, he can be connected instantly with the bank and can take care of his accounts & finances. - Faster transactions: online transactions are more quickly than the bank desk’s transactions. - Efficiency: customers can administrate all their accounts and transactions, all these with only one click. - Effectively: banks offer sophisticated instruments, alarms or management programs to help the client administering all of its assets efficiently. From bank perspective: - Control and costs reduction: thousands of customers can use these channels simultaneously without the help of cash desks and bank’s staff. - Reduction of the administrative work and are reduced as well paper costs, printed forms or different paperwork Besides the costs that should be covered, there are also some disadvantages or drawbacks: - Starting the service may require some time: to be registered as users of these channels the client will have to appear personally at the bank, fill out a form and may sign any contract - The learning curve: the use of these channels at the beginning may seem complicated and difficult to use by the client, it will need some time for orientation (to read the instructions, to learn the functions, etc.) - Technical problems: in case for various problems the client cannot reach the alternative communication channels, it cannot perform the desired action. - Lack of personal interaction: when the client interacts with the bank through alternative channels, he loose personal contact with bank staff and cannot consult them for well-administration of its financial means. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 125 URL: http://www.reaser.eu e-mail: editors@reaser.eu The banks’ challenge is to ensure that the same products and level of service offered through e-banking is the same with traditional distribution channels such as branches. It is essential that banks should ensure consistent levels of service in all distribution channels. 7. Virtual banks and their role in world finance The problem of definition: We have seen that the importance of information is very closely linked to the world of technology3, as we reach the point of talking about information society. This is essential in the activity of a bank, in fact, from it depends one of the distinctive and traditional competencies: the function to demobilize financial profits and funding. Banks may interfere until they have a greater willingness and ability to process information. In this way the bank can offer the customer a better performance versus the performance you can take acting personally. A bank: a) recognizes the different job opportunities b) know how to assess the risk profile c) draw up a budget that improves the results under the risk profile of activity and liquidity on the basis of initial goals. This power of the banks has been operating for a long time and has been one of the factors that has contributed to higher obstacles in the entry. But with the emergence of information society the situation is changing. In fact, it is possible to enter more quickly in a large amount of information with a very convenient price. So, in terms of ability to recognize numerous job opportunities it is obvious more and more an increase in clients own financial knowledge, which in turn recognize different forms of work, not to say even profitability and risk. We can mention here the number of statistics and graphics on historical stock performance. Every day can be found information in specialised magazines, but more quickly can be found via internet. In order to compile an optimal budget, information is not enough: what is important is the ability to process this information. In fact, having more information can be even a negative element, they may run into with an overabundance because where you have more information is equally if not having any. So we should be able to choose only the significant information. Even that, this was one of the distinctive powers of banks, risking not be considered as such, because there are available complex models processed by specialized entities that deploy an information processing technology produced by technology suppliers. So, the information assumes an increasingly greater importance, not only for the banks but for the entire economic environment. This brings additional value to the physical good or service. A company that is able to manage information better than competitors has a competitive advantage because: a. Understands better than the competitors the value that the client assigns to the virtual perfect bank or Click-Only. b. Partially virtual Bank or click and brick. In the first case, virtual is present in all means; a fully virtual bank means a kind of completely dematerialized bank which does not have any physical aspects. It means a bank without structure (branch and agency), without infrastructure and personnel (especially that of front office) and the real elements of operational processes (paper or money). It means a bank that through hard work in ICT (Information Communication Technology) is able to divide the banking function of banking structures and to reproduce only the first one4. 3 4 Bernacchi A., (2007), Sportelli bancari virtuali, decollo lento in Europa comScore Media Metrix Dahlbom B., (2010),Dalla società dell’informazione a quella delle idee. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 126 URL: http://www.reaser.eu e-mail: editors@reaser.eu Click only form has not been widely used and it is mainly used by SIM financial companies which handle credit card management, but above all it is used by those new competitors coming from sectors other than financial but have extensive technological skills. In the case of click and brick banks, we have to do with a mix between tradition and technology, among material and immaterial. Traditional distribution channels e.g. counters are supported by the new ones, which are then used as additional distribution methods, not substitutes. It is not a bank without structure, infrastructure and personnel and without a separation between banking structure and function. Rather it must be seen as the natural evolution of traditional banks. In fact, these banks may not immediately become completely virtual, i.e. click only. This change must be in fact a gradual change. They must pass through intermediate stages for various reasons: a. have neither the resources nor technological capabilities for the change; and if even so, the market may not be ready to embrace the change; b. rigidity in terms of labour laws makes it difficult reorganization of human resources Also for this type of bank is not required to become a completely virtual bank. They have a property under the form of counters and agencies that need to be evaluated, for example by changing them into financial stores. We must mention that the click Only actors, besides being low in number, has a tendency to open these stores in strategic areas so that by means of a tidy appearance of the pacts and the presence in the territory and allow the other to allow services that currently or may not be offered through virtual channels for technological or legislative restrictions, or may be offered only by relying on a traditional bank5. For these reasons, as per the writers’ opinion, it is wrong not to consider click and brick banks as virtual ones just for the fact that there are structural components (brick) such that they can not be fully dematerialized. Therefore I would not deteriorate them, as many do, as an inferior class of the electronic bank. So, we can affirm that the virtual bank does not have a precise definition and form. It can be realized with different solutions that have some common key features such as high levels of technology use and separation between banking structure and function. Regardless, by this definition, the virtual bank has a target of four items, i.e. to allow the client to meet his expectations, grouping them under the notion of 4 E-s:  Everything: the opportunity to access a huge range of products:  Every time: opportunity to access 365 days a year, 24 hours 24;  Everywhere: possibility to enter the bank from any location;  Everyway: opportunity to access to services through the appropriate vehicle (PC, mobile) We must emphasize two aspects in the concept of virtual banks. The first aspect is the fundamental role of Information Technology, which allows to review the organizational content and to modify the manner of offering and fulfilling banking service, by becoming the main factor of the new way of understanding the bank. The second aspect to be considered is the central role of the channels and distribution function. 8. Conclusions From what we saw in this extract we noticed that technologies have become important components of banking institutions at the extent that there is a convergence between banking and technology sector, consisting of alliances and acquisitions. Given the speed with which new technologies bring changes in the financial field, it results difficult to find a winners model in this new reality. If it was first thought that e-line was a clear boundary line, a point of no return between the economic world of the twentieth century and that of the twenty-first century, 5 EFMA Studies, (2011), Inovation in retail banking. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 127 URL: http://www.reaser.eu e-mail: editors@reaser.eu in 2000 were observed several aspects that characterized an ''old'' economic model and traditionally were considered to be excessive and inappropriate for the new economic reality. Thus, there was a partial redimensioning of innovative aspects of the "new economy". During the recent years, was passed from a radical concept of virtual bank, a bank totally dematerialized, which operated only in the network, to a more moderate concept of virtual channels which cover a significant role. In fact, it is true that credit institutions can’t function alone in terms of work and number of counters, but they need to strengthen their distribution activities through electronic channels where the main goal is to fulfill customer requirements. But the problem is that clients, in a very delicate area such as financial field, are not yet ready to use only virtual channels; personal contact remains still a very important role. This thesis emphasizes the idea that the winning model for banks is more diversity of integrated channels, including physical and virtual channels coordinated among themselves and not the pure virtually. This is for economic reasons (virtual, unlike originally thought, often brings increased costs) and social reasons (clients are not ready for such a change). The financial market is changing, not only viewed with growing opportunities, often based on questionable predictions, but considers the actual results achieved, the cost - benefit report and the time of reaching the "break - even" point. These especially in the case of banks rated on the stock-market. The financial markets stagnation is causing a determined slowdown in online activity of the clientele. This negative performance burdens further the cost/income ratio of virtual channels and brings a delay in reaching the "break - even" point. At the end of this adjustment process we will have a kind of convergence between old and new economy, between physics and virtual, where the structure of credit institutions will certainly be more elegant and flexible in comparison with the actual, but not entirely without substance. After consult ting other researches and gathering different opinions on this subject, personally I cannot agree with this argument, because we are still in a state of complete transformation, where it is not possible to do long - term predictions and, therefore, cannot yet be determined which technology will be successful, so I think that it is very dangerous to turn exclusively only on one channel, even if it comes to the Internet. We must take into account the fact that the Internet in Europe is now so widespread that it is able to replace the other distribution channels. Thus, the banks must therefore provide the opportunity to choose how to reach them. Afterwards, it will be the client that will make a kind of natural selection, by preferring one channel more than the other. But, even in this case it is difficult to think that it will come out a single winning channel: people are different, have different needs, cultures, life styles, and so not everyone will make the same choice. It is very likely that over time each channel will be specialized in certain services. It is important that it is not be bank the first to make this choice. In addition, the pure – bank, unlike a multi – channel bank, can hardly have a large market share due to the fact that it is not able to pay all depositors, but only those who we might consider as pioneers. Following the stages of life cycle of a technology (entry, consolidation, maturity, decline), we should remember that in general electronic channels and all virtual channels are still in the early start - up. A quick glance at the types of banks and the services they offer, gives us an overview of the variety of this system. Thus, for example, part of this system are the traditional banks with branches and subsidiaries distributed in order to be closer to potential customers, as well as virtual banks, which do not have a traditional banking infrastructure, i.e. physical counters, but exist only online. A middle course on this multitude of offers consists on online banking services presented by traditional banks, as a valuable alternative to time consuming in managing personal finances more efficiently. After a slow start, we can say that currently, electronic banking has entered the development stage. This development comes as a result of the rapid spread of internet, highly increase of the number products it offers, and reduced costs of computing equipment. However, there are different theses and opinions when considering its future. Some people thought that the offering of such service would be followed by the elimination or minimization of the use of traditional channels for obtaining banking services, heading ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 128 URL: http://www.reaser.eu e-mail: editors@reaser.eu towards fully virtual banks. But soon, it was realized that such a hypothesis was too optimistic and that the role of traditional channels was underestimated. Electronic banking has certainly brought about an evolution in the banking system, by 'establishing' a bank branch in everyone's home and is destined to develop further. However, these recent years show that online banking services, even in future, will have an additional role of the traditional ones. Currently, the most preferred model seems to be the American model called "click and mortar" which encourages customers to use internet banking for basic transactions, leaving more time to bank employees for services such as financial planning or advice. Over time and with the offering of online banking services, it is likely that the banks' websites will be used the same as counters and ATM-s. All these will continue to be part of a multi-channel model as optimal strategies to ensure their customers more flexibility, practicality and convenience. Key terms definition: Bank An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks Innovation The creation of new products and/or services. Cross-sell The strategy of pushing new products to current customers based on their past purchases. Cross-selling is designed to widen the customer's reliance on the company and decrease the likelihood of the customer switching to a competitor. Online banking A system allowing individuals to perform banking activities at home, via the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence Technology The complete set of knowledge about how to produce in an economy at a point in time, including techniques of production that are available but not economically viable. Customer A person, company, or other entity which buys goods and services produced by another person, company, or other entity. 9. References [1] Agnew A., (2008), CRM (interactive embrace), in “Banking Technology”. Bank of Albania, (2008), Banka ne moshën e internetit. [2] Resti A., (2009), Tutte le bugie dell’e-banking, in “Bloomberg investment”. [3] Rigon A., (2008), Per le banche si apre la sfida della distribuzione. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 129 URL: http://www.reaser.eu e-mail: editors@reaser.eu [4] Bennici R.,(2005), Le nuove prospettive nell’utilizzo delle tecnologie: il call Center. [5] Dahlbom B., (2010),Dalla società dell’informazione a quella delle idee. [6] Bernacchi A., (2007), Sportelli bancari virtuali, decollo lento in Europa comScore Media Metrix. [7] E-banking service (http://www.ffiec.gov/ffiecinfobase/booklets/e_banking) [8] Simoudis E., Click & Mortar: channel integration in the new world order, in “DM Direct, Business Intelligence Newsletter. [9] EFMA Studies, (2011), Inovation in retail banking. [10] EFMA Studies, (May 2012), The future of face to face, how to make the transmisition a reality. [11] Finalta & EFMA , ( Jan 2012) , Multichannel Banking in Europe, Reaching the next level in onlne sales. [12] Riolo F., Masciandaro D., (2010), Internet banking, Edibank. [13] Klein J., Malik N., Warren D.,(2009), Beyond day trading, in “McKinsey Quarterly” [14] Koller L., (2004), Web banks in trouble. [15] Kotler P., Scott W. G., Marketing Management. [16] Pictet,(2009) Banks, focus on the internet – part 1, www.pictetfunds.com [17] Stamoulis D. S.,(2011). How banks fit in an internet commerce business activities model, in “JIBC. [18] Federici T., Ferracchiati A.,(2009) La banca virtuale: una strada ancora da percorrere. [19] Morgan J. P.,(2010). Online financial Europe. [20] Timmers P.,(2008), Business Models for Electronic Markets. [21] Scott W.G., Murtula M., Stecco, M. , (2007), Il commercio elettronico. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 130 URL: http://www.reaser.eu e-mail: editors@reaser.eu How does education affect labour market outcomes? Alina Mariuca Ionescu 1+ 1 Alexandru Ioan Cuza University of Iasi Abstract. The paper aims to identify and characterize certain relationships that might appear between the access to education and the labour market outcomes. It emphasizes several aspects of education influencing labour market outcomes pointing out which are the main outcomes impacted by education. The analysis is focused on 32 European countries, while data on United States and Japan are also considered. Within this study, the access to education is defined in terms of participation and investments (expenditure on education and research, financial aid to students, funding of education). Labour market outcomes are assessed mainly using different employment/ unemployment rates as well as elements of wages and earnings. The findings show that the higher one's level of education, the better one's chances of getting a job and keeping the status of employed person in times of crisis on labour market. A higher participation in education is not necessarily associated with a higher employment rate, since the entry on the labour market occurs for some individuals as an alternative to continuing their education. Keywords: education, labour market, labour market outcomes. JEL Codes: I25, J21, J24, J30 1. Introduction Education is frequently seen as a crucial policy instrument in the fight against poverty as it may help individuals to access better jobs that raise their labour earnings and thus contribute to the improvement of their lives. On the labour market, education provides both productive capacities to individuals and their signals to potential employers – hence, attained qualifications are a main asset in worker competition for jobs available on the labour market (Gangl, 2000, p. 3). The labour market outcomes influenced by education are diverse and there are various pathways through which education operates when generating this type of effects. Following the broad interest manifested both in the research literature and among policy-makers for the study of impact of education on labour market outcomes, the present paper aims to identify and characterize certain relationships that might appear between access to education and the labour market outcomes. The analysis is focused on 32 European countries, while data on United States and Japan are also considered. The research has been organized as follows: it first presents a short literature review about the relationship between education and labour market outcomes, focusing on: mechanisms by which education affects individuals’ outcomes on labour market, types of such outcomes impacted by education, gender differences in education and labour market outcomes; the next section describes the methodological issues 1+ Post-Doc. Researcher. Corresponding author: alina.ionescu@yahoo.com . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 131 URL: http://www.reaser.eu e-mail: editors@reaser.eu (sample, indicators, method); the paper continues with the presentation of the main results concerning the way education affect labour market outcomes and ends with a discussion and conclusion. 2. A short literature review on the relationship between education and labour market outcomes A considerable amount of literature (for example, Mincer, 1958, 1974; Glewwe, 1996; Gangl, 2000, 2001; Hauser et al., 2000; Margolis and Simonnet, 2003; Tansel, 2004; Pascarella and Terenzini, 2005; Goldberg and Smith, 2007; Stiglitz et al., 2009; Edgerton et al., 2012) has been published on the relationship between education and labour market outcomes. The author has identified the following aspects as being central in the scientific debate on this relationship: 1) Mechanisms by which education affects labour market outcomes Pathways through which education operates when affecting individuals’ outcomes on labour market are numerous and diverse: years of schooling; educational level attained; attainment of a particular credential; educational system; investments in education; schooling quality; individual’s educational track; parents’ educational track; curriculum type; and sector of activity.  Years of schooling A large amount of modern empirical work on the labour effects of education builds on the classic model of Jacob Mincer (1958, 1974) and Becker (1964), whose equation states that the natural logarithm of annual earnings or of the hourly wage depends linearly on years of schooling controlling for experience and experience squared (Goldberg and Smith, 2007, pp. 3-4).  Educational level attained Evidence shows that educational level attained has essential net effects (controlling for several relevant social background variables) on occupational status, meaning that higher education provides a substantial advantage over a high school diploma (Pascarella and Terenzini, 2005), while high school and postsecondary education provide a better occupational status than sub-high school levels of education (Hauser et al., 2000; Pascarella and Terenzini, 2005, cited in Edgerton et al., 2012, p. 268).  Attainment of a particular credential Another hypothesis which can be found in the literature (Edgerton et al., 2012, p. 266) states that the significance the attainment of a particular credential has to employers about the characteristics of a potential employee (i.e., values, aspirations, habits, etc.) is more important in enhancing an individual’s educational returns than the increased level of knowledge per se. In the labour market, a person’s academic credentials signify to employers a specific pathway of achievement or performance, as well as the future performance potential of that person as an employee. Vocational credentials may specifically signify that an individual is formally qualified (i.e., has completed the requisite training) for a particular job. Moreover, in some professions requiring certain higher education credentials actions as a function of social selection and stratification (Edgerton et al., 2012, p. 266).  Educational system International comparisons of educational systems presented in the literature (OECD, 2002; Damoiselet and Lévy-Garboua, 1999, cited in Margolis and Simonnet, 2003, p. 2) argue the important role that educational system plays in the school-to-work transition process and emphasize the importance of a professional or technical education and private sector involvement in the educational process.  Investments in education Investments in education help to broaden access to education and hence facilitate the access to skills enabling peoples to get better jobs. Vast research literature provides evidence of the value of investing in education to develop human capital (see Fasih, 2008, for references).   Schooling quality (Tansel, 2004, p. 40). Individual’s educational track ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 132 URL: http://www.reaser.eu e-mail: editors@reaser.eu Margolis, Simonnet and Vilhuber (2001) identified a link between an individual’s educational track and the quality of his or her labour market networks (Margolis and Simonnet, 2003, p. 2). They found that the educational track also has an important direct effect on labour market outcomes (the time to the first stable job and earnings), independently of the effect it has on the means of job finding (Margolis and Simonnet, 2003, p. 29).   Parental educational background (Tansel, 2004, p. 40). Curriculum type According to Gangl (2000, p. 17), apprenticeships perform very favourably, both compared to school-based education at the same level of training and across qualificational levels, which is confirmed by unemployment rates for apprentices that are similar to those of tertiary level leavers.  Sector of activity Glewwe (1996) reveals that the wage structures in the private sector reflects the impact of education on the workers’ productivity more than they do in the public sector. 2) Labour market outcomes impacted by education According to empirical evidence from literature (for example, Soloman and Fagano, 1997; Gangl, 2000, 2001; Margolis and Simonnet, 2003; Goldberg and Smith, 2007; Stiglitz et al., 2009; Edgerton et al., 2012), they usually refer to: wages and earnings; the time to the first stable job; employment/ unemployment; worker productivity; hours worked; nature of work; worker’s health; and fringe benefits.  Wages and earnings Following an extensive review of the economic literature about the impact of education on earnings, Card (1998) concluded that the effect of education on earnings is variously conditioned by a host of other variables: “the return to education [...] may vary with other characteristics of individuals, such as family background, ability, or level of schooling ” (Card, 1998, p. 2). When all other characteristics are similar, education has a positive influence on earnings as Soloman and Fagano (1997, p. 826) summarize, “everything else being equal, those with more and better education seem to earn more” (cited in Edgerton et al., 2012, p. 271). Arguments for the fundamental role of education in increasing individual earnings may also be found in Tachibanaki (1997) and in Fasih (2008, pp. 8-9).  Time to the first stable job Margolis and Simonnet (2003, p. 92) highlighted that time to the first stable job is significantly influenced by individual’s educational track. Simonnet and Ulrich (2000) and Bonnal et al. (2002) had previously shown in their studies that, in France, students who obtained their degrees with an apprenticeship component find their jobs faster and earn more than those who had an exclusively school-based education (Margolis and Simonnet, 2003, p. 1).  Employment/ unemployment Better-educated people typically have lower unemployment (Stiglitz et al., 2009, p. 46) as, regularly, unemployment rates decline with increasing levels of qualifications (Gangl, 2000, p. 17). Moreover, those with higher educational attainment have greater “ability to benefit from disequilibria” (Bowles et al., 2001), while the least qualified workers are the most vulnerable to unemployment during economic downturns (Gangl, 2001).  Worker productivity At the individual level, increased education increases worker productivity securing better employment and enhanced lifetime earnings for the individual (Edgerton et al., 2012, p. 266).  Hours worked  Nature of work Following a review of literature pertaining to the relationship between education and nature of work Edgerton et al. (2012) concluded that individuals with higher education are more likely to be involved in ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 133 URL: http://www.reaser.eu e-mail: editors@reaser.eu work with greater intrinsic and extrinsic rewards. For example, more educated individuals are less likely to be involved in alienating repetitive labour and more likely to be involved in work that permits greater autonomy (developing and reinforcing feelings of self-efficacy), creativity, more novelty and opportunity for continued learning and personal growth (Mirowsky and Ross, 2003, 2005; Ross and Wu, 1995; Schieman, 2002, cited in Edgerton et al., 2012, p. 274), and greater social support which enhances resilience to psychological distress, depression, and anxiety (Ross and Van Willigen, 1997, cited in Edgerton et al., 2012, p. 274). Aggarwal et al. (2010, p. 12) developed a linear model of occupational choice using educational attainment and other individual characteristics as explanatory variables which highlighted that, in all years, schooling raises the probability with which an individual enters non-manual work, and reduces the probability with which an individual enters manual work.  Worker’s health Education appears to have positive effects on worker’s health too, as higher education typically leads to occupations that involve less health risk and provide greater financial capacity to purchase better housing, nutrition, and health care (Edgerton et al., 2012, p. 275).  Fringe benefits According to Goldberg and Smith (2007, p. 14), education increases fringe benefits. They give the example of the incidence of employer provided health insurance that increases with education in the US. 3) Gender differences in educational and labour market outcomes Gender differences in labour market outcomes induced by education depend mainly on pathways from school to further education and work. Lamb (2001) investigated graduates of diploma and degree courses and found that the highest weekly earnings were achieved by male graduates who studied part-time while working. The next highest average weekly pay was obtained by male graduates who went directly from school to study and then into full-time work. The relationship between pathway and income was different for females as they appeared to get better earnings when studying and then working, even if they spent some time finding a job, than when combining work with part-time study. Lamb also found that, in all pathways, average weekly earnings of female workers were lower than those of their male counterparts. Lamb (2001) explained the differences in earnings between males and females partly by differences in the sorts of jobs they obtained. Despite unfavourable differences in earnings for females, empirical studies (Psacharopoulos, 1994; Tansel, 2004) found that overall women’s returns to education are higher than those of men, involving for women greater positive effects of each additional year of education than for men. 3. Material and method In this study, the access to education and training is defined in terms of participation and investments. Participation means that an individual has had the opportunity to experience an education or training opportunity. By linking access with participation, this approach allows for the fact that entrance into education can provide individuals with knowledge and skills - and the economic returns associated with them - even when they do not complete their educational/ training programme. Investments refer to expenditure on education, financial aid to students, funding of education. Labour market outcomes are assessed mainly using different employment/ unemployment rates, as well as elements of earnings. Data source used to describe access to education and labour market outcomes is Eurostat database. Table 1 presents the variables considered in the analysis. The reference year is 2009 for all the variables, with the exception of earnings which are reported for 2010. The sample includes 32 European countries, while data on US and Japan are considered where possible for comparison reasons. The paper examines overall levels of access to education and overall labour market outcomes in order to achieve an explanatory comparative analysis of the performance of analyzed countries in relation to these ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 134 URL: http://www.reaser.eu e-mail: editors@reaser.eu two dimensions, to identify how participation and investments in education affect employment and earnings and to provide suggestions about the appropriate investment to stimulate each type of outcomes. The study also explores if investments done for a particular level of education have a greater impact on labour market outcomes and hence might be of relevance to policymakers. In order to link various variables that describe access to education to labour market outcomes for different levels of education, several Principal Components Analyses (PCA) were run. This type of analysis is justified by data set dimension (up to 16 quantitative variables for 32 countries). PCA allows a set of correlated variables to be transformed in a smaller set of hypothetical uncorrelated constructions called principal components. These principal components are then used to discover and describe the dependencies among variables and to study the relationships that might exist among cases (Timm, 2002). Analysis of correlation is used to confirm and / or to complete findings resulted from PCA. Table 1 Variables used in the analysis Variables Level Investments in education Annual expenditure on public and private educational For all levels of education combined; At primary institutions per pupil/student in EUR PPS, based on full- level of education (ISCED 1); At secondary level time equivalents of education (ISCED 2-4); At tertiary level of education (ISCED 5-6) Total public expenditure on education as % of GDP Public subsidies to the private sector as % of GDP For all levels of education combined Financial aid to pupils and students as % of total public For all levels of education combined expenditure on education Total intramural gross domestic expenditure on R&D All sectors (GERD) (euro per inhabitant) Participation in education and Life-long learning Students (ISCED 1_6) aged 15-24 years (as % of Total corresponding age population) Life-long learning: Participation of population aged from Total 25 to 64 years in education and training (%) Labour market outcomes Employment rate of population aged from 25 to 64 years All ISCED 1997 levels; Pre-primary, primary and (%) lower secondary education (levels 0-2); Upper Unemployment rate of population aged from 25 to 64 secondary and post-secondary non-tertiary education (levels 3-4); Tertiary education (levels years (%) 5-6) (ISCED 1997) Mean hourly earnings (euros) All ISCED 1997 levels; Pre-primary and primary education (levels 0 and 1); Lower secondary or second stage of basic education (level 2); Upper secondary and post-secondary non-tertiary education (levels 3 and 4); First stage of tertiary education, programmes that are theoretically based/research preparatory or giving access to professions with high skills requirements (level 5A); First stage of tertiary education, programmes which are practically oriented and occupationally specific (level 5B); Second stage of tertiary education leading to an advanced research qualification (level 6) (ISCED 1997) In order to verify the adequacy of data for a factorial analysis, the Barlett’s test of sphericity (to test the null hypothesis that the variables in the correlation matrix of the population are uncorrelated), and the indicator MSA (Measure of Sampling Adequacy) of Kaiser-Meyer-Olkin (to evaluate in which degree each variable may be predicted by all the other variables) were used. The results obtained by data processing with ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 135 URL: http://www.reaser.eu e-mail: editors@reaser.eu SPSS are presented below each graphical representation of factorial planes resulted from PCAs. The significance level associated to Barlett’s test of sphericity, Sig = 0.000, is smaller than 0.05 (conventional value) for all the analyses conducted, which means the null hypothesis of variables’ uncorrelation is rejected. Therefore one can conclude that the considered variables are adequate for a PCA in each of the situations considered. The values of the indicator MSA of KMO, greater than 0.5 and closed to 0.8 in all the cases, also indicate the suitability of the considered data for factor analysis. In situations where some variables present correlation coefficients with factorial axes having comparable values on both axes, for a better interpretation of PCA results a rotated solution is generated using Oblim/ Promax with Kaiser Normalization method, available in SPSS software. 4. Results The variance the first two factorial axes in PCA account for ranges between 73% - 97% of the total variance within the analyses conducted so that the characteristics of access to education and labour market outcomes in selected countries will be analyzed below according to the positions of variables and of cases in the factorial plane determined by these first two components. Graphical representation of the positions of variables describing participation and investments in education on the plane of the first two factorial axes (Fig. 1) shows the following:    a direct moderate to weak relationship between participation in education and investments; a direct quite strong relationship between participation in life-long learning and investments;  participation in education seems to be the least correlated with the other variables, so that a factorial solution without this indicator is also generated (fig. 2), underlining investments’ grouping in two different categories: expenditure type, on the one hand, and subsidies and funding type, on the other hand. both participation in standard education and in life-long learning appear to be more associated to investments in the form of expenditure and less to those in the form of subsidies or funding; KMO = 0.699; Sig. for Bartett’s Test = 0; Communalities > 0.65; Variance explained by CP1 = 60.397%; Variance explained by CP1 & CP2 = 78.528%; KMO = 0.694; Sig. for Bartett’s Test = 0; Communalities > 0.75; Variance explained by CP1 = 69.57%; Variance explained by CP1 & CP2 = 84.398% Source: Output obtained in SPSS with PCA Source: Output obtained in SPSS with PCA Fig. 1: The position of the variables that describe participation in education and in life-long learning and investments in education on the first factorial plane from PCA. Fig. 2: The position of the variables that describe participation in life-long learning and investments in education on the first factorial plane from PCA. Variables’ coordinates on the first factorial plane resulted from PCA (fig. 3 and fig. 4) and values of Pearson correlation coefficients (table 2) between variables describing participation and labour market outcomes indicate that: ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 136 URL: http://www.reaser.eu e-mail: editors@reaser.eu  There is an inverse relationship between participation in education and unemployment which, although weak, increases in intensity as the education level of unemployed increases. That is to say, the higher participation is, the lower unemployment is among people with higher levels of education.  There is a direct relationship with moderate intensity between participation and employment, but stronger than that between participation and unemployment. In this case also, the connection is increasingly powerful as the level of education of employees increases, reaching a statistically significant value (Pearson correlation coefficient = 0.476, at the 0.01 level) at the level of tertiary education. The closer link between participation and employment indicators lead to the conclusion that enhancing access by fostering a higher participation in education is usually associated with a higher level of employment. There has not been identified any relationship between participation in education and earnings at neither of the levels of education as confirmed by the values of the correlation coefficients which are very closed to zero. Participation in life-long learning correlates directly both with employment and with level of earnings.     The values of Pearson correlation coefficients express a higher influence of life-long learning on the level of employment of people with pre-primary, primary or lower secondary education. Relationship between life-long learning and employment slightly decreases in intensity as the level of education of employed people increases. KMO = 0.811; Sig. for Bartett’s Test = 0; Communalities > 0.82; Variance explained by CP1 = 67.847%; Variance explained by CP1 & CP2 = 83.929%; Rotation Method: Oblimin with Kaiser Normalization KMO = 0.811; Sig. for Bartett’s Test = 0; Communalities > 0.7; Variance explained by CP1 = 79.630%; Variance explained by CP1 & CP2 = 92.922% Source: Output obtained in SPSS with PCA Source: Output obtained in SPSS with PCA Fig. 3: The position of the variables that describe participation in education and in life-long learning and employment on the first factorial plane from PCA. Fig. 4: The position of the variables that describe participation in education and in life-long learning and earnings on the first factorial plane from PCA. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 137 URL: http://www.reaser.eu e-mail: editors@reaser.eu KMO = 0.781; Sig. for Bartett’s Test = 0; Communalities > 0.76; Variance explained by CP1 = 64.689%; Variance explained by CP1 & CP2 = 82.03%; Rotation Method: Oblimin with Kaiser Normalization KMO = 0.778; Sig. for Bartett’s Test = 0; Communalities > 0.89; Variance explained by CP1 = 83.897%; Variance explained by CP1 & CP2 = 97.083%; Rotation Method: Oblimin with Kaiser Normalization Source: Output obtained in SPSS with PCA Source: Output obtained in SPSS with PCA Fig. 5: The position of the variables that describe investments in education under the form of subsidies and financial aids and employment on the first factorial plane from PCA. Fig. 6: The position of the variables that describe investments in education under the form of subsidies and financial aids and earnings on the first factorial plane from PCA. The position of variables SUBSIDIES and F_AID_all on the plane of the first two principal components identifies them as determining an independent component, both when being analyzed with employment and when considered together with earnings (fig. 5 and fig. 6). The fact denotes the inexistence of a clear relation between this type of investments in education and the investigated labour market outcomes. Pearson correlation coefficients (table 2) however show a moderate direct relationship between the public subsidies to private sector and employment, as well as between subsidies and earnings, the relation being more intense in the case of employment rate for those with upper secondary and post-secondary non-tertiary education and, respectively, in the case of mean hourly earnings of those with pre-primary and primary education. There is a weak direct relationship both between financial aid to students and employment and between financial aid and earnings. The most intense relation occurs between financial aid to students and earnings of those with pre-primary and primary education. Table 2 Pearson correlation coefficients STUD_T Employment EMP_T EMP_primary EMP_secondary EMP_tertiary Unemployment UNEMP_T UNEMP_primary UNEMP_secondary UNEMP_tertiary Earnings Earnings E_I E_II_lo E_II_up E_III_firstA E_III_firstB E_III_second ET_T SUBSIDIES F_AID_all T_pub_EXP_all EXP_student_III 0.508** 0.118 0.298 0.476** 0.691** 0.696** 0.661** 0.554** 0.590** 0.464* 0.503** 0.405* 0.527** 0.356 0.422* 0.363 0.600** 0.660** 0.555** 0.439* 0.462* 0.553** 0.681** 0.353 -0.205 -0.003 -0.181 -0.364* -0.401* -0.430* -0.404* -0.319 -0.412* -0.342 -0.426* -0.371 -0.323 -0.219 -0.370 -0.329 -0.281 -0.432* -0.225 -0.062 -0.482* -0.508** -0.499* -0.298 0.080 0.193 0.132 0.093 0.018 -0.070 0.005 0.663** 0.599** 0.679** 0.690** 0.563** 0.665** 0.496* 0.499** 0.636** 0.523** 0.497** 0.407* 0.475* ,493* 0.343 0.495* 0.363 0.358 0.273 0.305 ,410 0.588** 0.639** 0.648** 0.572** 0.492** 0.575** 0.616** 0.922** 0.907** 0.902** 0.910** 0.886** 0.891** 0.808** **Correlation is significant at the 0.01 level (2-tailed). *Correlation is significant at the 0.05 level (2-tailed). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 138 URL: http://www.reaser.eu e-mail: editors@reaser.eu The position of variables expressing expenditure on education on the first factorial plane resulted from PCA (fig. 7 and fig. 8) suggests the following:     Expenditure on education is generally positively correlated with earnings. It can be identified a stronger relationship between annual expenditure per pupil or student and earnings than between total public expenditure on education and earnings. Moreover, annual expenditure per student at tertiary level of education appears to be the variable of investment the most correlated to earnings (as confirmed by Pearson correlations with values over 0.9 with the earnings of those with pre-primary, primary, secondary or post-secondary non-tertiary education, around 0.89 with the earnings of those who completed first stage of tertiary education and over 0.8 with the earnings of those who completed second stage of tertiary education, all significant at the 0.01 level). There is a more powerful relation between employment rates and total public expenditure on education than between employment rates and annual expenditure per pupil or student. There is a strong relationship both between gross domestic expenditure on R&D per inhabitant and employment and between gross domestic expenditure on R&D and earnings. KMO = 0.687; Sig. for Bartett’s Test = 0; Communalities > 0.66, excepting for T_pub_exp_I and T_pub_exp_II whose values are around 0.5; Variance explained by CP1 = 62.998%; Variance explained by CP1 & CP2 = 73.242%; KMO = 0.688; Sig. for Bartett’s Test = 0; Communalities > 0.75, excepting for T_pub_exp_II whose value is around 0.5; Variance explained by CP1 = 78.319%; Variance explained by CP1 & CP2 = 87.619% Source: Output obtained in SPSS with PCA Source: Output obtained in SPSS with PCA Fig. 7: The position of the variables that describe expenditure in education and employment on the first factorial plane from PCA. Fig. 8: The position of the variables that describe expenditure in education and earnings on the first factorial plane from PCA. Following the preliminary PCAs within the initial data set, the next variables describing access to education in terms of investments appear to have the greatest influence on labour market outcomes: Exp_student_III, GERD_euro, and T_pub_exp. Graphical representation of the variables’ positions on the plane of the first two factorial axes (Figure 9) after selection of variables of access to education the most relevant for labour market outcomes highlights clearly the principal components: investments in education that enhance earnings (first axis) and investments in education that support high employment (second axis). Overlapping of graphical representation of countries on the factorial map and variables map obtained with PCA (Figure 9) permits us to identify some characteristics of the relationship between access to education and labour market outcomes in selected countries, using the rule of the 3σ on each factorial axis. One must look for the counties that are situated outside the intervals: , and, respectively, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 139 URL: http://www.reaser.eu e-mail: editors@reaser.eu corresponding to the two axes and marked on the graph by stippled lines ( ) (Jaba, 2007; Dühr, 2005, 1167-1182). The component of investments in education that enhance earnings places Denmark, Norway, Sweden and Finland over the limit , as having the highest mean hourly earnings, gross domestic expenditure on R&D per inhabitant and annual expenditure per student at tertiary level of education. These countries are followed by six of the EU 15 states, Belgium, Germany, Austria, Netherlands, France and United Kingdom, at the upper limit of interval. All of them are situated inside the interval but in opposition to 9 of the 12 new member states of EU, which are placed on or outside the lower limit of interval. Among EU new members, Cyprus and Slovenia have the best positions on this axis, but still with negative values of their coordinates. Among older EU states, Portugal has the most unfavourable uncomfortable position, being situated closer to new members than to EU15 countries. Island, Cyprus, Spain, and Italy record average values for these indicators. According to their position on the first axis, Romania, Bulgaria, Latvia and Lithuania manifest the lowest interest in investing in research and development and in students at tertiary level of education. According to the second axis, the highest percentage of the total public expenditure on education in GDP and the highest employment are found in Island and Denmark, followed by Norway, Sweden, and Cyprus, which are positioned over the limit . At the opposite side we find Italy, Romania, Spain and Slovakia, which exceed the limit on the second axis. One can notice that 7 of the 9 new members (excepting for Slovenia and Estonia) are positioned inside the third quarter which is characterized both by low employment and earnings and by low investments in education for the support of these types of labour market outcomes. The best performer on both components is Denmark followed by Norway and Sweden, which exceed the limit on both axes, being characterized by the highest employment and earnings and by significant investments in education that improve labour market outcomes. The worst performer on the two components is Romania, followed by Slovakia which also exceeds the limit on both axes. Mean hourly earnings are the labour market outcomes that, along with expenditure per student at tertiary level of education and gross domestic expenditure on research and development, appear to discriminate the most among surveyed countries, as they account for over 76% of the total variance. KMO = 0.739; Sig. for Bartett’s Test = 0; Communalities > 0.84; Variance explained by CP1 = 76.006%; Variance explained by CP1 & CP2 = 89.945%; Rotation Method: Promax with Kaiser Normalization (rotation converged in 3 iterations), k=4 Source: Output obtained in SPSS with PCA Fig. 9: Countries’ and variables’ position on the first two factorial axes. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 140 URL: http://www.reaser.eu e-mail: editors@reaser.eu Eight of the 32 surveyed countries aren’t represented on the scatter-plot as they present missing values for at least one variable included in the analysis. The situation of these countries with regard to access to education and labour market outcomes will be discussed below on the basis of available data (table 3). Hungary, Croatia and Turkey recorded values below the EU27 average, which may indicate their positioning in the third quarter. Switzerland and Luxembourg present values higher than EU27 average, some of them close to those of the best performers, which could place them inside the first quarter of the factorial plane. Ireland and Malta present values both below and above EU27 average, indicating a possible positioning of them inside the second or the fourth quarter. In terms of annual expenditure per pupil/student both US and Japan record higher values than EU27 average for all levels of education combined as well as for each level of education considered separately. If the values of Japan are only 1.03-1.25 times higher than those of EU 27, US values are far superior compared to EU 27 average, ranging from 143% at primary level of education to 246% at tertiary level (table 4). While at primary and at secondary level of education we can identify European countries which spend for a pupil about as much or more than the US (LUX, NO, DK, CY, IS and, respectively LUX, NO, Austria), when considering the tertiary level of education, the difference is huge in favour of the US, which invests 22734.1 monetary units for a student compared to only 14523.9 in Sweden and 15045.6 in Norway, the European countries with the highest values for this indicator. As regards the percentage of the total public expenditure on education in GDP, EU27 accounts proportions that are close to those existing in the US and slightly higher than in Japan (table 4). In terms of investments in education under the form of public subsidies to the private sector and financial aid to pupils and students, EU27 average shares are significantly higher than those registered in the US and Japan (table 4). Table 3 Available values for the countries with missing data Country Ireland Greece Luxembourg Hungary Malta Switzerland Croatia Macedonia Turkey EU 27 Best performer Worst performer EXP_student_III T_pub_EXP_all GERD_euro EMP_T 6.50 629.2 68.5 68.3 1256.9 73.2 5.12 106.4 63.6 10113.7 5.46 76.8 57.7 5.55 82.7 6522.6 4.33 85.8 63.9 51.2 52.3 49.3 9243.7 5.41 473.6 71.0 15045.6 8.72 1274.1 82.7 Sweden Denmark Finland Switzerland 3246 4.09 24.3 49.3 Romania Slovakia Bulgaria Turkey Source: Data extracted from Eurostat database Earnings 25.51 21.95 4.59 25.74 4.25 27.37 Norway 2.04 Bulgaria Table 4 Investments in education in United States, Japan and EU 27 Country United States Japan EU 27 5. EXP_pupil(student)_all/ I /II/ III T_pub_EXP_all / I / II/ III 11369.5 7699.1 9423.5 22734.1 5.47 1.84 2.06 1.24 7484.0 5700.3 6834.7 11591.7 3.61 1.26 1.33 0.72 6503.9 5383.2 6643.0 9243.7 5.41 1.24 2.41 1.22 Source: Data extracted from Eurostat database SUBSIDIES 0.24 0.20 0.53 F_AID_all 4.4 5.5 6.7 Conclusions Education is one of the main determinants of good labour market outcomes for individuals as it plays a central role in preparing individuals to enter the labour force by equipping them with the necessary skills. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 141 URL: http://www.reaser.eu e-mail: editors@reaser.eu Study of the literature showed that education may influence several labour market outcomes, such as: wages and earnings; the time to the first stable job; employment/ unemployment; worker productivity; hours worked; nature of work; worker’s health; and fringe benefits. The mechanisms by which education affects labour market outcomes are diverse: years of schooling; educational level attained; attainment of a particular credential; educational system; investments in education; schooling quality; individual’s educational track; parents’ educational track; curriculum type; and sector of activity. Education may also lead to gender differences in labour market outcomes which depend mainly on pathways from school to further education and work. Despite unfavourable differences in earnings for females, overall women’s returns to education are higher than those of men, involving for women greater positive effects of each additional year of education than for men. The paper also examined how participation and investments in education affect employment and earnings, trying to identify the appropriate investment to stimulate each type of outcome. In order to link various variables that describe access to education to labour market outcomes for different levels of education, Principal Components Analyses (PCA) and analysis of correlation were used. Variables’ coordinates on the first factorial plane resulted from PCA and values of Pearson correlation coefficients between variables describing participation and labour market outcomes highlighted the following findings. A direct moderate to weak relationship exists between participation in education and investments. There is also a direct relationship with moderate intensity between participation and employment, which is increasingly powerful as the level of education of employees increases. There has not been identified any relationship between participation in education and earnings at neither of the levels of education as confirmed by the values of the correlation coefficients which are very closed to zero. Participation in life-long learning correlates directly with both employment and level of earnings. The relationship between life-long learning and employment slightly decreases in intensity as the level of education of employed people increases. At the same time a high participation in education is not necessarily associated with a higher employment rate, since the entry on labour market occurs for some individuals as an alternative to continuing their education. Following the preliminary PCAs within the initial data set, the variables Exp_student_III, GERD_euro and T_pub_exp that describe access to education in terms of investments appear to have the greatest influence on labour market outcomes. Annual expenditure per student at tertiary level of education was identified as the variable of investment the most correlated to earnings, employment rates are closer related to total public expenditure on education, while gross domestic expenditure on R&D per inhabitant presents a strong relationship with both employment and earnings. Graphical representation of the variables’ positions on the plane of the first two factorial axes after selection of variables of access to education the most relevant for labour market outcomes highlights clearly the principal components: investments in education that enhance earnings (first axis) and investments in education that support high employment (second axis). Overlapping countries’ positions on the factorial map and variables’ map obtained with PCA permits us to identify some characteristics of the relationship between investments in education and labour market outcomes in selected countries. The best performer on both axes is Denmark followed by Norway and Sweden, which are characterized by high employment and earnings as well as by significant investments in education that improve labour market outcomes. At the opposite side we find Romania and Slovakia which are the worst performers on the two components. Mean hourly earnings are the labour market outcomes that, along with expenditure per student at tertiary level of education and gross domestic expenditure on research and development, appear to discriminate the most among surveyed countries, as they account for over 76% of the total variance. Research results lead to conclusion that investments in education have a direct effect mainly in stimulating the achievement of positive outcomes (employment, earnings) on labour market and less in reducing the negative ones (unemployment). The research is valuable for policy makers as it brings evidence that employment could be sustained by allocating a larger share of GDP for public expenditure on education, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 142 URL: http://www.reaser.eu e-mail: editors@reaser.eu while workers’ hourly earnings could be improved by investing in research and development and in tertiary level of education. 6. Acknowledgements This work was possible with the financial support of the Sectoral Operational Programme for Human Resources Development 2007-2013, under the project number POSDRU/89/1.5/S/49944 with the title Dezvoltarea capacitatii de inovare si cresterea impactului cercetarii prin programe post-doctorale. 7. 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New York: Pergamon [40] Simonnet, V., and Ulrich, V., La formation professionnelle et l’insertion sur le marché du travail: une analyse multicritères, Economie et Statistique, n°337-338, 2000 [41] Stiglitz, J. E., Sen, A., Fitoussi, J.P., Report by the Commission on the Measurement of Economic Performance and Social Progress, 2009; www.stiglitz-sen-fitoussi.fr [42] Tachibanaki, Education, occupation, and earnings, 1997. In L.J. Saha (Ed.), International Encyclopedia of the Sociology of Education (pp. 293-297), New York: Pergamon [43] Tansel, A., Education and Labor Market Outcomes in Turkey, Middle East Technical University, June 2004, Ankara. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 145 URL: http://www.reaser.eu e-mail: editors@reaser.eu CSR communication and its impact on corporate image Vladimíra Jurišová1+, Katarína Ďurková1 1 University of Ss. Cyril and Methodius in Trnava, Faculty of Mass Media Communication, Slovakia Abstract. The paper deals with CSR communication by means of internal and external tools and the impact it has on corporate identity. At present the issues of corporate social responsibility, i.e. voluntary integration of social and ecological interests into the daily activities and interactions with business partners, receive more and more attention. Many countries have started to cultivate their environment for this subject and at the same time they are being pushed forward by the public opinion. The customers are more demanding in terms of the products’ quality, they search for eco-friendly products and are willing to put pressure on companies that are polluting the environment. That is why it is important for the companies to communicate about the corporate social responsibility. Communication and utilization of the individual internal and external tools for communicating corporate social responsibility currently have a great influence on the global corporate identity. Keywords: corporate social responsibility, communications, internal tools, external tools, corporate identity, corporate image. JEL Codes: M14 1. Introduction Companies that use Corporate Social Responsibility in their strategies should be geared to the needs of external as well as internal environment. They should be transparent and sustainable contribution to sustainable development. From companies that want to apply CSR in their strategy requires a shift perspective on their role in society from the level of „profit only“, that focus only on making profits, for a wider view of 3P called „people, planet, profit.“ It follows that CSR is based on three pillars called triplebottom-line, formulated by John Elkinghton in 1996. The theory of triple-bottom-line is focused not only on economic growth but also on the social and environmental consequences of their activities interrelated. 3Ps is often referred to as the three levels - areas:  Profit – economic area,  Planet – environmental area,  People – social area. When creating a CSR strategy, it is needed to take into consideration even the communication of CSR activities of the company, as it can contribute to more effective corporate CSR policies. Corporate Social Responsibility should start communicating the company at a time when they begin to work with stakeholders. Communicating CSR activities should be directed not only to customers, business partners, + Corresponding author:.vladimira.jurisova@gmail.com. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 146 URL: http://www.reaser.eu e-mail: editors@reaser.eu investors, but to company´s employees, the local community and the general public as well. As a result, communication of corporate social responsibility should be carried:  internally – employees of the company,  externally – with the external environment. 2. Internal tools of CSR Internal communication of the company is a critical component of any functioning social, administrative and technical system. It is the interplay of many activities that interfere with corporate governance. Research performance and corporate culture confirmed the saturation of information as the strongest dimension of organizational performance. Communication as a two-way process of information exchange removes – reduces uncertainty and allows to reach an understanding on both sides communicated. In general, we have the concept of management communication in mind throughout the enterprise information system, which in relation to the organizational structure enables the exchange of information. Effective communication link is the transfer of the right information to the right people at the right time, allowing a combination of different media and techniques. The intensity of the need to communicate is in a variety of different organizational units various, depending on the nature of tasks and problems in the implementation of actions arising from the need for cooperation at horizontal and vertical level. A well-functioning communication is an organization which:  provides links to information considering the continuity and coordination processes,  ensures understanding and cooperation in sharing common goals among employees,  promotes the formation of desirable attitudes and behaviour of employees,  promotes the stability of the organization and employee loyalty. A more crucial point, than the amount, is the value and relevance of the information and the chosen form of communication and the provision of accurate, clear, undistorted transmission between members of the organizations. Primarily for the transfer of information should be used formal communication flows and tools. The content of internal communication of the company could be divided into four categories:  information about the vision and strategy of the organization, including communication of the organizational values and important features of corporate culture. Organizational culture, implemented mandatory compliance standards of behaviour has a great impact on the achievement of goal,  tactical information about the procedures to achieve organizational goals – knowledge and experience packages. Every organization has its own process know-how, which all new employees should has known,  operational information necessary for the performance of work tasks – information solutions to the organization´s other projects, decisions made at other levels of the organization,  general information about company activities – regular open communication of information relating to the internal environment of the organization, staff questions and planning changes, plays a role in promoting the stability of the organization shaping the organizational culture. The specific form of internal communication is influenced by numerous factors. The authors are used to use in their definition different perspectives – subjective and objective factors by Szarková, business impacts and effect of the external environment (Zadák). Research confirmed a correlation between the level of internal communication of the company and organizational culture, vision, strategy, mission and material and technological factors. Communication is a means of engaging employees towards compliance with the principles of responsibility. Well-functioning communication is an essential part of the whole process of implementation of corporate social responsibility in small and medium-sized enterprises. Responsibility as orientation should ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 147 URL: http://www.reaser.eu e-mail: editors@reaser.eu be set to the highest level of organization and communication used to inform and engage employees in an effort to build a socially responsible company. Principles of responsibility intersect all elements of the internal communication system of the organization. Support open dissemination of the contents of all communications between employees and initiate the feedback can be considered as a prerequisite for implementing the principles of responsibility to organizational processes. Depending on the actual communication system, small and medium-sized enterprises can use to communicate the principles of responsibility towards employees by numerous formal and informal communication tools – regular meetings, intranet site, e-mails, bulletin boards, posters, banners, brochures, internal magazine, informal stuff meetings, presentations and videos of responsible behaviour, support anonymous boxes for feedback and new ideas, valuation responsible employees. Principles of responsibility should appear already in the formulation of corporate mission and be included in the organizational values. Intranet as a tool for formal communication should support the open dissemination of information. The effectiveness of meetings depends on the readiness of invited staff and quality of processed documents and subsequent registrations from them. To inform employees about the principles of responsibility in the organization, it is appropriate to create posters, brochures, or videos, disseminate information through the internal magazine. Implementation of the principles of responsibility means creating an environment within the organization that will promote openness and fair treatment. 3. External tools of CSR Unlike internal, external communication of the company´s corporate social responsibility is communication, in which companies should inform the public, community and environment where they work with important facts related to CSR. There are several ways and means by which companies could communicate corporate social responsibility to the public:  internet (website, corporate blog, fan page on FB, Twitter account),  brochures about the company,  various events (open house),  websites,  annual reports,  press releases and conferences,  labelling products, their packages (bio, eco),  presentation of prices obtained under the CSR,  anti-corruption lines for anonymous information lines, where employees can announce eg. breaking rules related to working safety, working conditions, etc. The most important aspect of the implementation of the concept of social responsibility is to allow external control of the responsible behaviour of the interested and concerned public. This can be achieved by the facility publishing high-quality and comprehensive information on relevant activities of the company. Without this requirement we cannot talk about social responsibility, because it is impossible to distinguish responsible company from other companies, whose responsibility is taking place only in the field of PR. Companies should provide the public with detailed and transparent information on all its activities which have or may have environmental and social impacts, as well as about internal control mechanisms. Companies should inform the public about how assesses environmental and social risks of its activities. The main tool for informing the public are annual reports, often called as environmental reports and sustainability reports. The main problem is the lack of annual reporting standards. The annual reports of individual companies are difficult to compare with each other, incomplete or unverifiable. Global Reporting ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 148 URL: http://www.reaser.eu e-mail: editors@reaser.eu Initiative (GRI) tried to solve this problem. Global Reporting Initiative was established in 1997 as a joint initiative of the American non-governmental organization Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme (UNEP), Organization of United Nations. In 2002, GRI became independent as well as independent institution with residence in Amsterdam. The main aim of the GRI is to establish an international standardized model to measure and report economic, environmental and social aspects of the business and improve the quality, reliability and utilization reporting on corporate responsibility. In the three areas GRI makes so called core indicators, which should be held to prepare reports, or explain why a particular indicator is omitted. Indicators are quantitative and qualitative. GRI seeks to maximize efficiency in all business sectors. The question is, to what extent it is possible at all. For certain business sectors GRI have prepared specific amendments (as automotive, finance, telecommunications, etc.) GRI in 2002 released its Sustainable Reporting Guidelines, which aims to provide maximum flexibility in order to remain open and meaningful to the widest possible range of companies. They define general principles and performance indicators that should be respected company and post and fit wants to issue a report in accordance with GRI. It also includes recommendations on how the structure of annual report should looks like. Claims to build CSR reports are high, that is why the ability to prepare highquality CSR report for investors and financial institutions in the world guarantee stability and good management in the company. 4. Conclusion Communication is designed to operate not only on the image of the company, but also to provide public information, to explain and comment meanings, support cultural patterns and agitate. It can be noted that corporate social responsibility is one of the most important factors that influence the image. To create a positive image of the company is needed:  perfect product quality,  reliable service,  reasonable price,  continuous innovation process,  systematic work in favor of business stakeholders. Effective communication of CSR activities should provide an understanding and recognition of the value of the company, which in the final phase has an impact on corporate identity and subsequently on the corporate image. 5. Acknowledgements This paper is part of the project FPVV-24-2012 : An analysis of implementation of the elements of corporate identity to the management of small and medium enterprises in Slovakia. 6. References [1] Bussard, A. et al. (2005). Spoločensky zodpovedné podnikanie. Bratislava: Nadácia Integra. [2] Bělčík, M. et al. (2010). Společenská odpovědnost organizace – CSR v praxi a jak s ním dál. Praha: Grada Publishing. ISBN 978-80-247-3157-5 [3] Ďurková, K. et al. (2011). Vyššie územné celky a ich interná komunikácia. Trnava: FMK UCM. ISBN 978-808105-329-0 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 149 URL: http://www.reaser.eu e-mail: editors@reaser.eu [4] Holá, J. (2006). Interní komunikace ve firmě. Brno: Computer Press. ISBN 978-80-251-1250-0 [5] Jurišová, V. (2010). Reporting, meranie a medzinárodné štandardy v oblasti spoločenskej zodpovednosti firiem. In Conference proceedings. Karviná: Slezká univerzita v Opavě, Obchodně podnikatelská fakulta v Karviné. ISBN 978-80-7248-620-5 [6] Kuldová, L. (2010). Společenská odpovědnost firem. Plzeň: Kanina. ISBN 978-80-87269-12-1 [7] Kuldová, L. (2012). Nový pohled na společenskou odpovědnost firem – Strategická CSR. Plzeň: NAVA. ISBN 97880-7211-408-5 [8] Kunz, V. (2012). Společenská odpovědnost firem. Praha: Grada Publishing. ISBN 978-80-247-3983-0 [9] Szarková, M. (2008). Komunikačné nástroje v systéme riadenia podniku. Bratislava: Ekonóm. ISBN 978-80-2252525-1 [10] Šindleryová-Butoracová, I. – Morovská, I. (2010). Marketing – vybrané prípadové štúdie. Prešov: PU. ISBN 97880-555-0124-6 [11] Trnková, J. (2006) Společenská odpovědnost firem – kompletní průvodce tématem & závěry z průzkumu v ČR. [online]. Available from: < http://www.blf.cz/csr/cz/vyzkum.pdf >. [12] Vysekalová, J. – Mikeš, J. (2009). Image a firemní identita. Praha: Grada Publishing. ISBN 978-80-247-2790-5 [13] Zadák, P. (2003). Kto se podílí na interné komunikaci. In Zborník z konferencie Interná komunikácia. Praha: Institut for international research. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 150 URL: http://www.reaser.eu e-mail: editors@reaser.eu Risk management under the conditions of globalization E. Yu. Lopatina 1+ 1 World Economy and Economics Chair, Volgograd State Technical University, Russia Abstract. The important place in European society structure is occupied by the group of people carrying out similar activity, which could be called an enterprise (business) stratum. The social and economic approach requires to consider within scientific research not only the business activity, but also the subject of business activity, namely a figure of the businessman. The essence of business activity in all the contents is filled with risks of various characteristics. The risk as the phenomenon of the enterprise represents a part of its usual activity. The capital investments possibility, the employment of the new employee, the realization of the goods and services in the market, the formation of the price or signing of the sale agreement could involve business risks. The experience of development in many European countries shows that ignoring, underestimation and the small accounting of the specifics of enterprise risks when developing tactical and strategic tools of economic policy of enterprise subjects definitely restricts the development of modern society and puts the economic system on lower levels. Risk management is a new phenomenon for the development of European members' economies which arose upon economy transition to market system of managing. The majority of “newcomers” in European business do not yet understand up to the end and estimate inevitability of risk and importance of its account in business activity. In the article, according to the considered directions of the globalization processes influence the risks of business activity having paramount value for competitiveness of the companies in the conditions of globalization were considered. Keywords: risk, risk management, globalization, European experience, entrepreneurship, business risk, business activity. JEL Codes: G32. 1. Essence and evolution of risk management Historically in financial institutions, risk functions like legal, compliance, audit, credit risk and market risk were managed in separate organisational silos. Operational risk was generally the responsibility of business units as part of their daily activities. Risk management was focused primarily on financial, predictable and quantifiable risks related to loss prevented corporate governance, alignment to strategic objectives, capital adequacy and stakeholder value. Additionally, regular discussions on risk management started appearing on corporate board agendas. Risk management is a rapidly developing discipline and there are many and varied views and descriptions of what risk management involves, how it should be conducted and what it is for. 1+ Postgraduate, e-mail: 210471@mail.ru . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 151 URL: http://www.reaser.eu e-mail: editors@reaser.eu According to ISO/IEC Guide, risk can be defined as the combination of the probability of an event and its consequences. In all types of undertaking, there is the potential for events and consequences that constitute opportunities for benefit (upside) or threats to success (downside). One should keep in mind that risk management is increasingly recognised as being concerned with both positive and negative aspects of risk. In putting together ERM initiatives, companies are supposed to focus not only on the downside of risk but the upside as well. The traditional approach was to focus on the downside - the losses from currency or interest rate trades in financial markets, for instance, or financial losses that might be caused by a disruption in a supply chain or cyber or terrorism attack that impairs a company's information technology. In thinking about the upside, companies are supposed to consider competitive opportunities and strategic advantages that might arise out of deft management of risk. Some of these "better decisions" involve items like where to locate a plant or office abroad based on a risk analysis that would look at the political environment in a country (Quinn 2008). Risk management is a central part of any organisation’s strategic management. It is the process whereby organisations methodically address the risks attaching to their activities with the goal of achieving sustained benefit within each activity and across the portfolio of all activities. Previously companies have been managing risk by buying insurance, than more recently, many companies have shift to the capital markets with "derivative instruments" that help to manage the ups and downs of moment-to-moment movements in currencies, interest rates, commodity prices and equities. From a mathematical point of view, all of these risks or "exposures" have been reasonably easy to measure, with resulting profits and losses going straight to the bottom line. Now the situation's poised to change as rating companies start to factor in a company's ability to manage ERM. Stakeholders will start to gain a plethora of new risk-related data and information available to them. This story of risk management is likely to expand greatly over the next decade. Where enterprise risk management comes in is where companies manage the risks that defy easy measurements or a framework for management. These include crucial risks such as reputation, day-to-day operational procedure, supply chain, legal and human resources management, financial control, and overall governance. The focus of good risk management is the identification and treatment of these risks. Its objective is to add maximum sustainable value to all the activities of the organisation. It marshals the understanding of the potential upside and downside of all those factors which can affect the organisation. It increases the probability of success, and reduces both the probability of failure and the uncertainty of achieving the organisation’s overall objectives. Risk management protects and adds value to the organisation and its stakeholders through supporting the organisation’s objectives by:  providing a framework for an organisation that enables future activity to take place in a consistent and controlled manner;  improving decision making, planning and prioritisation by comprehensive and structured understanding of business activity, volatility and project opportunity/threat;  contributing to more efficient use/allocation of capital and resources within the organisation;  reducing volatility in the non essential areas of the business;  protecting and enhancing assets and company image;  developing and supporting people and the organisation’s knowledge base;  optimizing operational efficiency. All the objectives' attainment can be portrayed schematically in the following way (see Fig. 1). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 152 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 1: The risk management process stages 2. 2.1. Risk management as a competitive advantage Corporate investment image Studying how corporations manage the incredibly diverse number of risks they face - everything from movements in currencies, interest rates to public perceptions of their reputations is playing an extremely important role in the investment process. Knowledge of individual corporate "risk profiles" might lead to investing in companies with the confidence that they could meet corporate objectives and investor expectations (not only in good times, but also in bad). Knowledge of these profiles might help to identify upand-coming organizations for investment - or to better understand which companies to let into community through a new plant or office, believing that they would do everything possible to avoid environmental damage and to treat employees well (Quinn 2008). The ERM strategy significantly improves business risk assessment and subsequent management processes. The purpose of further evolving strategy is to provide a uniform corporate-wide visibility on risk, thus giving internal stakeholders an understanding of how risks impact the whole of the organisation, rather than on the previous held division by division basis. The strategy establishes a common standard for identifying and measuring risks across all functions and business units and prioritises the primary risks to be collectively managed while encouraging a common risk management culture. Thus, risk management system is part and parcel of building sustainable competitive advantage (see Fig. 2). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 153 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 2: Sustainable competitive advantage The continuous interaction between risk and stakeholders provides the means for a dynamic corporate strategy that drives sustainable competitive advantage. The risk management strategy focuses primarily on managing prioritized risk scenarios and reducing cost supported by adding value through implementation of development opportunities. The engagement process addresses and gauges stakeholders’ sensitivities and the application of cost-effective measures to enhance performance. 2.2. Risk management significance for the European enterprises To say that the current economic and financial crisis is a decisive and testing time for the European single market is an understatement. Since the crisis broke in late 2008, the institutions of the European Union (EU) in Brussels have lost little time in developing measures to restore confidence to the financial markets and reassure EU citizens and businesses alike. The European financial services industry has witnessed a relentless stream of draft legislation from the European Commission (EC) and European Parliament introducing greatly strengthened and rigorously applicable regulations covering not only the financial markets but also the key market actors. Survey, conducted by FERMA, has found that a majority of European companies have established policies, charters, and defined processes related to risk management. Companies are continuing to enhance their risk management fundamentals and narrow the execution gap that occurs from knowing the risk and determining how to handle the risk. The goal is to have risk management practices embedded in the day-today operations so companies can be better prepared when a risk issue occurs. European companies have realized that good internal practices can also help them meet external guidelines as well. By having risk management intertwined with operations, companies will now be able to respond to real-time situations more effectively and minimize losses and surprises. The report highlights five “families” (or stages) of risk management process maturity and summarizes the results about companies in each family: Rules-driven companies represent 39% of respondents and are those companies that operate in a highly regulated sector. These companies often include financial institutions and public bodies.  Balanced and sophisticated companies represent 26% of the survey respondents. These companies focus on balancing their shareholders’ interest in conjunction with compliance objectives. These companies are rather large firms and financial institutions. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 154 URL: http://www.reaser.eu e-mail: editors@reaser.eu  Fire fighters made up 18% of the survey respondents whose companies tend to focus on compliance and merely react to adverse events. These companies are limited to how much they can invest in risk management and are small to medium sized companies.  Self-motivated companies represent 9% of survey respondents and focus on shareholders’ needs instead of regulatory forces and are private owned, mid-sized companies in commerce.  Happy-go-lucky companies represent 8% of respondents and are companies new to risk management and have an unsophisticated risk management approach. These companies are small public bodies that have not seen a need for risk management in the beginning stages of development. Similar research, conducted by Standard & Poor’s in 2008 demonstrates the following data on the European enterprises risk management score distribution (see Fig. 3). Fig. 3: European enterprises risk management score distribution Companies in Europe are realizing that for risk management to be truly effective it needs to be linked with real time decision-making strategies. Therefore, companies are seeing the increasing need to link risk management with their strategy planning activities. Self-motivated and balanced and sophisticated companies are the best at being able to link risk management and strategy decisions together. It is important for companies to be able to quantify their risk. Companies quantify global corporate level risk, certain categories of risk, and certain activities or geographical locations of risk. The tools that companies decide to use depend on the type of risk they need to quantify. Most companies use internal databases and internal brainstorming, along with value at risk and scenario simulation models. The balanced and sophisticated and self-motivated companies use the most sophisticated techniques while the happy-golucky and fire fighter companies use the most basic techniques. Fig. 1: Use “Figure” style here. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 155 URL: http://www.reaser.eu e-mail: editors@reaser.eu 3. Globalization risks and avoidance techniques While globalization has brought many benefits to businesses, companies need to spend more time studying the new and emerging risks involved and planning for low-probability event. All the factors affecting entrepreneurial activities can be divided into internal and external ones (see Fig. 4). At first site it seems that globalization risks are related only to external factors. Nevertheless, there is no doubt that globalization of business stimulates unification of organizational structures, corporate strategies’ templates, and not to forget corporate culture. Informational systems, as well as R&D activities nowadays are driven by quite similar mechanisms. Thus, to our opinion, globalising processes influence on the emergence of both internal and external factors as well as the criteria, which are used in defining and assessing entrepreneurship risks. Fig. 4: Examples of key external and internal risk factors Let us describe the group of globalization risks according to the Risk Management System Standards. The objective of risk description is to display the identified risks in a structured format, for example, by using a table (see Table 1). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 156 URL: http://www.reaser.eu e-mail: editors@reaser.eu Table 1: Globalization Risk Description Global markets at local places as well as regional areas Nature of risk Globalization processes Stakeholders Of any companies conducting international business activities Quantification of risk Political and Economic structures, functions and processes, time and the political and economic space are decisive determinants for local and regional development effecting the business environment Risk tolerance / Appetite According to the determinants of risk, corporations and investors are confronted with a broad spectrum of risks, especially political risk, as it is associated with foreign ventures and investments, and their exposure to different cultures, customs, operational procedures, micro and macroeconomic environments Risk treatment and control mechanisms To become and to remain competitive, it requires to integrate the political risk strategy into the decision making process and to use the risk methodology as a guide for policy formulation Potential action for improvement Structural changes within the political and economic systems Scope of risk The risk description table above can be used to facilitate the description and assessment of risks. The use of a well-designed structure is necessary to ensure comprehensive risk identification, description and assessment process. By considering the consequence and probability of each of the risks set out in the table, it should be possible to prioritise the key risks that need to be analysed in more detail. Identification of the risks associated with business activities and decision-making may be categorised as strategic, project/ tactical, operational. It is important to incorporate risk management at the conceptual stage of projects as well as throughout the life of a specific project. 4. Conclusion As business leaders seek new ways to build shareholder value, they have begun to think in new ways about how risk management is tied to value creation. Across industries and organisations, many are recognising that risks are no longer merely hazards to be avoided but, in many cases, opportunities to be embraced. Risk management should be a continuous and developing process which runs throughout the organisation’s strategy and the implementation of that strategy. It should address methodically all the risks surrounding the organisation’s activities past, present and in particular, future. With operations scattered around the globe, companies face a host of new perils: political and currency risks, cyber attacks, failed communications with suppliers, just-in-time delivery strategies. And, of course, they face dramatic, unpredictable risks associated with terrorism, not to mention non-compliance with attendant anti-terrorism trade and shipping guidelines. But, nevertheless, companies still also face traditional property-related risks to their supply chains and businesses as a whole, to control which they also need an advanced risk management systems and strategies. 5. References [1] A Risk Management System. Federation of European Risk Management Association (FERMA), 2011. [2] Enterprise Risk Management: An Emerging Model for Building Shareholder Value. KPMG, Australia, 2001. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 157 URL: http://www.reaser.eu e-mail: editors@reaser.eu [3] Quinn L. R.. The Evolution Of Enterprise Risk Management. Investopedia, 2008. [4] Doyle D.. Shaping Europe’s Regulatory Framework. In: W. Tubbs et al (eds.). Enterprise risk management. When weathering the storm is not enough. Cary NC: SAS Institute Inc. 2009, pp. 42-44. [5] Spahr R.. Is globalization risky? VOX, 2008. [6] Bosman R.. The New Supply Chain Challenge: Risk Management in a Global Economy. Factory Mutual Insurance Company, 2006. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 158 URL: http://www.reaser.eu e-mail: editors@reaser.eu Inward foreign direct investments to Serbia – investigating motives in the past and prospects for the future Ivan Milenkovic1+, Dragana Milenkovic 2 1 University of Pristina, Faculty of Economics Kosovska Mitrovica and University of Novi Sad, Faculty of Economics Subotica, Serbia 2 University of Pristina, Faculty of Economics Kosovska Mitrovica, Serbia Abstract. Our research tackles inward foreign direct investments to Serbia. In the introduction we explain the reasons why the Republic of Serbia is a latecomer in the transition process and why foreign direct investments passed by Serbia until the 2000s. The first part of the paper investigates what the motives are for inward foreign direct investments to the Republic of Serbia. Secondly we discuss factography of the dynamics of inward direct investments to Serbia and analyze how those affected other macroeconomic indicators, primarily the balance of payment and the exchange rate. Thirdly other implications, as well as their causes, are analyzed in detail, including the quality of inward foreign direct investments to Serbia (greenfield vs. grayfield investments). The fourth part of the paper discusses future prospects of the Serbian economy regarding the quantity and quality of foreign direct investments until the year 2020. Keywords: foreign direct investments, balance of payment, current account deficit, exchange rates, Serbia JEL Codes: F21, F32 1. Introduction Serbia is a latecomer in transition. There are many reasons for this. The breakdown of former Yugoslavia was destructive for the Serbian economy. Governments of Serbia in the 1990s made an unsuccessful attempt to prevent the dissolution of Yugoslavia. They materially and politically supported Serbs from other newformed states, former Yugoslav Republics that were respectable minorities in Croatia and Bosnia & Herzegovina to oppose independence. This was the cause of war with ethnic conflicts that resulted in many victims and huge material destructions as well as a massive number of refugees. That material support to Serbs outside of Serbia was a trigger for a catastrophic situation in Serbia that already had economic problems accompanied with the second biggest hyperinflation in economic history. On top of this, the international community imposed economic sanctions to Serbia that lasted for five years. As a final stage, In 1999 NATO-pact launched an 11-week bombing campaign called “The Angel of Mercy” killing hundreds Serbian civilians and many infrastructure and production premises suffered physical destruction. The decade of the 1990s was not only a lost decade for the Serbian economy, but it was a period that tragically regressed. 1+ Ivan Milenkovic, Ph.D., Associate Professor (Kosovska Mitrovica), Assistant Professor (Subotica). Tel.: +381 63 8876 056; fax: +381 28 497 934. E-mail address: imilenkovic@ef.uns.ac.rs. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 159 URL: http://www.reaser.eu e-mail: editors@reaser.eu As an indication of the degree of calamities, in 2012 Serbia reached only 70% of the industrial production of 1990, despite the acceptable rate of its growth in the last decade. Even though some authors (See f.e. Uvalic, 2012, p.25) consider 1989 as the starting year of transition in Serbia (and the rest of Yugoslavia), no major reforms were made until the end of 2000, when Slobodan Milosevic lost presidential and parliamentary elections, which was a breakthrough. International blockade was banned, Serbia became a member of the IMF1, World Bank group and regional organizations, signed the Treaty on Succession with other former Yugoslav republics, and received massive international donations. The Level of FDI, which is the topic of this paper, was negligible until the year 2000 (except the year 1997, when privatization of Telecom was made). 2. Motives for inward foreign direct investments to the Republic of Serbia In the beginning of this section it is important to present the formal definition of FDI and certain terms that will be used throughout this paper. Foreign direct investment (FDI) is defined as a long-term investment by a foreign investor in an enterprise resident in another economy. FDI can be observed and analyzed from an investor’s perspective or from a host’s perspective. These two perspectives are reported separately as: - Inward FDI (or FDI in the reporting economy) represents investments made by foreigners in enterprises resident in the reporting economy. - Outward FDI (or FDI abroad) represents investments by entities in affiliated enterprises abroad. There are several statistics which are used for FDI description. According to Eurostat2 the most important statistics for FDI measure are the following3: - FDI flows denote the new investment made during the period, - FDI stocks (or positions) denote the value of the investment at the end of the period, - FDI income is the income accruing to direct investors during the period, - FDI intensity is mainly measured as a percentage of GDP. If this index increases over time, then the country/zone is becoming more integrated with the international economy. Inward FDI attracts new and advanced foreign technology, know how, and the possibility for accession to the network of international production and trade. Besides, FDI is the best resource for covering the balance of payments deficit, since there are no liabilities abroad. This is the reason for transition countries, since they have balance of payments deficits, to continuously make conditions for attracting inward FDI. According to the UNCTAD assessment, as well as others, foreign direct investment inflow to Southeastern Europe in the next three years will deteriorate. Despite this general trend, good projects will always find foreign investors. That general view of FDI as a quality source of balance of payments deficit financing especially makes sense in Serbia as a transition economy of the region of Southeastern Europe, where all economies suffer from balance of payments deficit, not only in early years of transition, but also today. As a consequence of respectable FDI stock in the time of structural production changes in combination of huge public spending in countries of the region, deficit of current account remains. FDI level in aforementioned countries should be higher, especially in the years after privatization in order to create a condition for sustainable development. In conclusion, creating a favorable condition for foreign capital in Serbia, as well as in other countries of 1 Socialistic Federative Republic of Yugoslavia was a founding member of the Breton-Woods International Conference where both the International Monetary Fund and International Bank for Reconstruction and Development were formed. 2 http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ [Accessed 07/10/2012] 3 http://epp.eurostat.ec.europa.eu/cache/ITY_SDDS/EN/bop_fdi_esms.htm [Accessed 07/10/2012] ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 160 URL: http://www.reaser.eu e-mail: editors@reaser.eu Southeastern Europe is an important factor that will contribute to increase motives of foreign investors to invest in the Serbian economy. Many researches proved that FDI are the best form of foreign investments. Two possible scenarios are for the Serbian economy in the near future due to the current world financial and economic crises – is either a higher rate of foreign loans or a forcedly driven decrease of current account deficit. The most possible scenario is, in fact, a combination of both. Foreign capital inflow depends on two groups of factors. The first one is related to the favorable global economic conditions and satisfactory global liquidity. However, during the time of global prosperity there was a rise in FID stock, it was a time of foreign investments growth. The second group includes internal factors within the national economy such as: structural reform progress, financial integration etc. Therefore, even in the time of global recession, certain (but much lower) quantum of capital is available, but only economies with better performances are able to attract it. Aside from positive effects of foreign capital inflows, there are also threats and dangers, like overheating of economic activity competitiveness decline (if monetary reserves sterilization policy is consistent – it implies appreciation of national currency that causes loses of competitiveness and an increase of reserves, as the side effect of the process)4. IMF team researchers (IMF, 2007, p. 106. Also see: Cardarelli, 2007, p. 203) point out four main lessons related to big capital inflow: - First, countries that experience more volatile macroeconomic fluctuations – including a sharp reversal of inflows – tend to have higher current account deficits and experience stronger increases in both aggregate demand and the real value of the currency during the period of capital inflows. - Second, episodes during which the decline in GDP growth following the surge in inflows was a more moderate trend than those in which the authorities exercised greater fiscal restraint during the inflow period, which helped contain aggregate demand and limit real appreciation. - Third, countries resisting nominal exchange rate appreciation through intervention were generally not able to moderate real appreciation in the face of a persistent surge in capital inflows and faced more serious adverse macroeconomic consequences when the surge eventually stopped. - Fourth, tightening capital controls has not, in general, been associated with either lower real appreciation nor with reduced vulnerability to a sharp reversal of inflows. One study (Marinkovic, Ljumovic and Zivkovic, 2011) was investigating motives of inward FDI to the Serbian banking industry. Their findings (based on a survey) are that the category of “searching for new markets” dominates. Also important are location, conditions in the domestic market as well as a degree of risk and state regulation, rather than financial parameters. 3. 4 Inward foreign direct investments in Serbia and other macroeconomic aggregates5 Milenkovic, I. and Milenkovic, D. (2011), “CEFTA-Member Countries’ Current Account Deficits – The Case of Serbia”, Romanian Economic Journal, Year 14, No.39, Bucharest, p. 98-99 5 Part of this and chapters contains part of: Milenkovic, D. and Milenkovic, I. (forthcoming), “Limiting factors of sustainable development and its financing – The case of the Republic of Serbia”, East European Economy. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 161 URL: http://www.reaser.eu e-mail: editors@reaser.eu Free trade zone launching was an important step toward the attraction of foreign capital as a factor of improving current account. According to UNCTAD World Investment Report, Serbia held the fourth position in cumulative 2000-2008 foreign capital inflow6. Only the United Arab Emirates, Libya and Bulgaria were ranked better than Serbia, while neighboring countries Croatia and Albania were ranked in 8th and 9th position respectively. Cumulative foreign capital inflow in Serbia was 16.4 billion dollars, which is a 16 time increase to very moderate conditions in 2000. At the moment Serbia's situation is such that it has to attract at least 3 billion dollars of foreign capital per year in order not to have obstacles in achieving high rates of economic growth with the current account equilibrium. Very poor infrastructure quality and overregulated economy are two major obstacles for foreign direct investments income to Serbia. In general, a very important factor for this region is also political stability improvement. Countries of this region are still a ways from a satisfied level of law security and corruption control, which is a serious obstacle for more intensive foreign direct investments inflow. Eastern European transition countries experience shows that these factors are important for integration in global trade and financial flows. The fact that foreign direct investments are much more than simple inflow of capital – the overall investment package also contains transfer of know-how and technology. The most common type of investments in Serbia are investments for securing the market. One of the major motives of such investments is servicing local market, or eventually regional market. Investments in financial intermediation, trade, properties, traffic, housing, etc. make up a huge part of the overall stock of foreign direct investments in Serbia. The problem with the investments in the aforementioned industries is that, as exclusively market-motivated, they are in non-tradable sector. Sachs and Larrain under tradable goods consider agricultural-related goods, mining-related goods, and those goods related to processing industry, while all other goods are considered non-tradable goods7. If we analyze foreign direct investment stock in Serbia, only 23.7% of them are investments in tradable sector (20% - processing industries; 3% mining; 0.7% - agriculture), while the rest of the stock (76.3%) goes to non-tradable goods, which is much more than average for Central and Eastern European countries (where as much as 66% of total foreign direct industry stock goes to non-tradable goods). Foreign direct investments not only have direct negative impact on the balance-of-payments, but also generate consumption, both directly and indirectly8, which results in import increase. Among the twelve biggest foreign direct investments in Serbia in 2000-2011 (see Table 1) there were only two greenfield investments. At the same time this is an essential difference between foreign direct investments in Central and Eastern European economies in the 1990s and in Southeastern Europe (including Serbia) in the 2000s. Table 1: Twelve biggest inward foreign direct investments in Serbia 2000-2011 6 Telenor 1,602 million € Gazprom 947 million € Intesa Sanpaolo 944 million € Delhaize 932 million € Stada 650 million € Mobilkom Austria 570 million € UNCTAD (2009), World Investment Report, http://www.unctad.org/en/docs/wir2009_en.pdf [Accessed 10/10/2012]. Sachs, J., and Larrain, F. (1993), Macroeconomics in the global economy, Prentice Hall, New York, p. 660 8 Kinoshita, Y. (2011): Sectoral composition of FDI and external vulnerability in Eastern Europe, IMF Working Paper 11/123, p. 5 7 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 162 URL: http://www.reaser.eu e-mail: editors@reaser.eu ABInBev 530 million € Eurobank EFG 500 million € US Steel 280 million € Carlsberg 160 million € Michelin 150 million € Heineken 67 million € Source: SIEPA An interesting question arises in so-called supporting measures by the Government in order to attract inward foreign investments. For the biggest foreign direct investments the Government of Serbia negotiated directly with the foreign investors and granted them 10-25% of investing value. Those supporting measures raise many controversial opinions. For example, Nobel prize winner Joseph Stiglitz made a statement that those measures flourished often due to the fact special privileges cadged by investors were granted by the Government. Most economic analysts have a similar attitude towards the supporting measures: by introducing supporting measures we admit existence of a bad investment climate. At the same time foreign investors are in a better postition in comparison with domestic investors, while the price is paid from the state’s budget. Supporting measures are widely used in the region of Southeastern Europe. In Bulgaria certain inward FDI are paying as much as 50% lower taxes in a period of ten years if investment is bigger than a certain amount and if investment is made in a particular region. In Romania tax release of 20% of the purchasing value of the investment amount, plus additional profit tax releases are possible to achieve from foreign investors. In FYR Macedonia it is possible to be granted three-years tax reduction if the investment share is bigger than 20% of the investment. In conclusion, serious competition in the region of Central and Southeastern Europe is recorded concerning the attraction of inward FDIs, including supporting measures. This competition can easily be tracked in the car-manufacturing industry. Ford invested in Romania, Mercedes and Suzuki in Hungary, Kia in Slovakia, and Fiat in Serbia. 4. Other implications of inward foreign direct investments in Serbia The dominant share of Serbian export comes from „low“ and „moderate low“ technology intensive industries. Keeping in mind the present situation in the Serbian economy, this is no surprise, but also the fact that solid growth of exports was achieved mainly by the processing industry and primary products, where Serbia enjoys comparative advantages. In 2009 only 26.7% of Serbian export originated from industries with „high“ and „moderate high“ technology, which is just too mild of an improvement in comparison with 2001, when that share was 23.3%. The total share of „high“ and „moderate high“ technology industries is high, for example, Slovenian (43.9%), and the Czech Republic (57.5%), are almost 2.5 times lower than the average of that in the Western economies. 9 Technology improvements are playing a key role in overcoming poor competitiveness, but also utilizing imported modern technologies without so-called technology training could be inefficient. Since Southeastern European economies are not able to independently encourage development of strategically technology-advanced industries, incorporating large international projects and 9 Nikolic, G. (2010), Pokazatelji spoljnotrgovinske razmene Srbije sa Evropskom unijom, Sluzbeni glasnik, Beograd, p. 136 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 163 URL: http://www.reaser.eu e-mail: editors@reaser.eu development programs of powerful transnational corporations is one of the possible strategies to encourage macroeconomic restructuring in order to develop technology-intensive industries. Regional integrations; i.e., foreign trade liberalization, expanding market through reducing tariff and non-tariff barriers are important for foreign direct investments. One of the most important factors that attracts foreign direct investments is the size of the national market (economy of scale). From that point of view, benefits of a free market are the same as benefits of a bigger market: by multiplication of the number of potential business partners it also multiplies the possibility to increase wealth. The importance of foreign direct investments today is huge, both for developed and developing economies. Foreign direct investments also brings with them a transfer of knowledge and technology through diffusion of innovations, increase of productivity, increase of competitiveness, improved access to foreign markets, incr\ease of employment, etc. Besides, keep in mind that foreign direct investments do not generate loans, it is the most wanted form for financing current account deficit, which are common for developed economies. Table 2: Foreign direct investment inflows in Eastern, Central and Southeastern Europe countries 20022011 (in billion US dollars) Azerbaijan Bulgaria Croatia 1.4 0.9 1.1 3.3 2.1 2.0 3.6 3.5 1.2 1.7 3.9 1.8 -0.7 5.2 3.6 1.5 3.5 2.5 1.6 2.3 2.7 1.7 2.3 2.5 1.7 2.4 2.5 1.7 2.5 2.7 Cyprus Czech Republic 1.1 8.5 0.9 2.0 1.1 5.0 1.2 11.6 1.5 6.0 1.8 6.5 1.5 6.0 1.0 4.5 1.0 4.8 1.0 5.1 Estonia Hungary 0.3 3.0 0.9 2.2 1.0 4.5 3.0 7.5 1.6 6.1 1.4 4.8 1.3 4.8 1.4 5.9 1.4 5.4 1.4 4.8 Kazakhstan Latvia 2.6 0.3 2.1 0.3 4.2 0.6 2.0 0.7 6.1 1.6 6.2 1.0 7.0 1.0 8.0 1.0 6.5 1.1 6.0 1.2 Lithuania Poland 0.7 4.1 0.2 4.6 0.8 12.9 1.0 9.6 1.8 14.5 1.0 12.5 1.1 12.0 1.2 12.6 1.4 12.9 1.5 13.1 Romania Russia 1.1 3.5 1.8 8.0 6.4 15.4 6.5 12.8 11.4 28.7 9.8 35.0 7.2 29.0 7.3 30.0 7.0 31.0 7.2 32.0 Serbia Slovakia 0.5 4.1 1.4 0.7 1.0 1.1 1.7 1.9 5.6 4.2 3.2 2.0 4.5 2.0 2.0 2.2 1.9 2.4 2.0 2.5 Slovenia Ukraine 1.7 0.7 0.3 1.4 0.8 1.7 0.5 7.8 0.4 5.2 0.8 5.2 1.4 4.8 0.8 4.6 0.9 4.8 1.2 5.3 Source: World investment prospects to 2011 – Foreign direct investment and the challenge of political risk Written with the Columbia Program on International Investment, The Economist Intelligence Unite, 2007, p. 210 Contrary to the beginning of the transition period (1990s) when negative influence of FDIs were outlined, together with a loss of national sovereignty and addiction to foreign capital inflow, today FDIs are seen as a leverage of export and technological development. It is a long-term interest of every exportoriented economy to attract foreign greenfield investments. Thanks to a relatively stable political and judicial environment Central European economies were far more attractive for foreign investors than Southeastern European ones. But progress in legislative adjustment to the EU standards, which is confirmed by adding ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 164 URL: http://www.reaser.eu e-mail: editors@reaser.eu Serbia, Macedonia and Montenegro to the “White Shengen list” in 2009, made Southeastern European countries presently more attractive than they were in the past. Not to mention the free trade area esrablishment, which could be an important factor in attracting foreign investments to the Balkan countries. FDI inflow to the CEFTA agreement countries could help increase their export capacity, reducing their balance of payment deficit and improve their overall economic characteristics. It is indicative that all CEFTA agreement member countries are faced with a high deficit of current account, as a result of a large foreign trade deficit. In the first quarter of 2009 global recession is visible, which redirects funds that use to inflow from developed countries to others, to developed countries itself, which makes those funds more expensive or even non-reachable to countries of our region. FDI inflow to the region will certainly influence economic growth in the future, but only if they contribute to the processing industries and tradable goods, which will support export expansion. This scenario could happen if a stable political and institutional environment is in place, as well as an appropriate economic growth strategy. The main common characteristic of the CEFTA agreement countries is uncompetitive export; i.e., lack of competitiveness in the world market, which is a consequence of inherited economic structure during centrally planned economies. Therefore, the need to increase the volume of export is among the most important goals of an economic policy. 5. Prospects for the future In order to maximize utilization of a free trade agreement, Serbia has to improve export. In the period of 2000-2008 Serbia had a respectable rate of foreign trade yearly increase (an average of 19%), which was accompanied with a much more modarate rate of yearly increase of GDP (an average of 5.4%). Since economic structure generates export, it is important to emphasize that even though Serbian economic growth in the last several years had been relatively high, it was mainly based on only three economic sectors (financial intermediation, retail and wholesale, and transport and telecommunications), that are accountable for almost 3/4 of the overall economic growth in the period of 2002-2008. The three mentioned sectors are non-tradables (their products mainly cannot be exported); i.e., they rely mainly on expansion of domestic demand. Economic growth had not been accompanied with appropriate expansion of production, mainly in the tradable sector. This is the reason why Serbian economic growth was accompanied with a relatively high trade deficit, as well as current account deficit. The new model of economic growth has to be significantly based on the tradable sector. Foreign capital inflows, that were mainly used to finance domestic demand, will not be the same as in the past due to the economic crisis in the EU and USA. It could be considered that sectors that had been pillars of the growth had already reached a relatively high level (15% per year). Therefore their growth in the future will surely be diminished. We should keep in mind that the rest of the economy had a relatively moderate growth of 2% yearly, and that it is important to increase productivity of those sectors in the near future. In order for Serbia to achieve sustainable economic growth; i.e., to stop further growth of unemployment, as well as an increase in poverty with all accompanied problems, the average growth of industrial production (especially tradable goods) should be 6.9% yearly. Such an increase should make a yearly increase of Serbian export of 13.5 % possible , as well as an increase of its share in the GDP up to 65%. With the yearly growth of 5.8% (as in 2008), in the year of 2020 Serbia would reach a GDP level of 8,000 euro per capita. Expected inward foreign investments to Serbia could be in the range of 2-6 billion dollars per year if Serbia improves its position on the list of the countries with the world’s best economic conditions (presently at 140th position). The new government of Serbia (formed after general elections in May 2012) is expected take necessary steps for this. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 165 URL: http://www.reaser.eu e-mail: editors@reaser.eu Until the year 2020 it is expected that major inward foreign direct investments in Serbia could be in the energy sector. The state owned Electric company (Elektroprivreda Srbija) has already signed a two billion dollar contract with one consortium from China on building one new electric plant (the 3rd one in thermoelectric plant “Nikola Tesla” in Obrenovac), as well as for investments in renewable sources utilization. At this moment there are also ongoing negotiations with an Italian investor for several new hydro-electric plants on Serbian rivers worth 1.5 million dollars. It is a joint venture investment, with a joint enterprise already formed. In addition the contract is already signed for a 0.3 billion dollar solar panel production plant that will be built in Southern Serbia (in Vranje), which will be the biggest investment in that particular region of Serbia. 6. Conclusion In this paper we have discussed the importance of inward foreign direct investments to Serbia that are necessary to overcome balance-of-payment deficit problems that all countries in the region are faced with. After the introduction we presented why Serbia is a latecomer in transition process, we discussed motives for inward foreign investments to Serbia. We then analyzed inward FDI and other macroeconomic aggregates in Serbia, as well as other implications of inward FDI to Serbia. Finally, we have considered prospects for the future. Most of inward FDI to Serbia after 2000 (as well as in other transition economies) arrived thanks to the privatization of enterprises in certain sectors – primarily cement plants, the tobacco industry and based metal production firms. Later banking and telecommunication industries joined, while greenfield investments were lacking, especially in the industrial sector. 7. REFERENCES [1] Begović, B. et al. (2008), Grinfild strane direktne investicije u Srbiji, Centar za liberalno-demokratske studije, Beograd, [2] Cardarelli, R. et al. (2007), Learning How to Cope with Big Capital Inflows, IMF Survey, Vol. 36, No. 13, International Monetary Fund, Washington, [3] International Monetary Fund (2007), World Economic Outlook – Globalization and Inequality, Washington, [4] Kinoshita, Y. (2011): Sectoral composition of FDI and external vulnerability in Eastern Europe, IMF Working Paper 11/123, [5] Marinkovic, S., Ljumovic, S and Zivkovic, A. (2011), Strane direktne investicije u bankrstvu Republike Srbije: istrazivanje motiva, Medjunarodni problemi, Vol. LXIII, No.4, Belgrade, pp. 505-535, [6] Milenkovic, I. and Milenkovic, D. (2011), CEFTA-Member Countries Current Account Deficits – The Case of Serbia, Romanian Economic Journal, Year 14, No.39, Bucharest, pp. 89-114, [7] Milenkovic, D. and Milenkovic, I. (forthcoming), Limiting factors of sustainable development and its financing – The case of the Republic of Serbia, East European Economy, [8] Nikolic, G. (2010), Pokazatelji spoljnotrgovinske razmene Srbije sa Evropskom unijom, Sluzbeni glasnik, Beograd, [9] Sachs, J., and Larrain, F. (1993), Macroeconomics in the global economy, Prentice Hall, New York, [10] UNCTAD (2009), World Investment Report, http://www.unctad.org/en/docs/wir2009_en.pdf [Accessed 10/10/2012], [11] Uvalic, M. (2012), Tranzicija u Srbiji – ka boljoj buducnosti, (Originally published: Uvalic, M. (2010), Serbia’s Transition, Towards a Better Future, Palgrave Macmillan, Basingstoke, New York), Zavod za udzbenike, Boegrad, [12] World investment prospects to 2011 – Foreign direct investment and the challenge of political risk (2007), Written with the Columbia Program on International Investment, The Economist Intelligence Unite, ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp.166 URL: http://www.reaser.eu e-mail: editors@reaser.eu Effects of informality on Albania’s labor market Brunilda Muça1+, Sajmir Hoxha2, Galantina Doraci 3++ 1, 2, 3 Faculty of Economy and Agribusiness, University of Tirana, Albania Abstract. With the growing interest on the size of informal economy in Albania, an important concern remains the best ways to reduce its dimension. According to scholars of the field, informality in Albania may be as large as 50 percent of its official GDP, or even higher. A reflection of informality in economy is also displayed by informality in the labor market. The socio-economic changes of the late last century, along with other changes, brought about a high rate of unemployment. The effects of unemployment in Albania’s informal economy will be discussed, and one of the methods used for its measure, as well as pinpoint to important lessons drawn when employers and employees are faced with one another. The aim of this paper is to focus on the reduction of informal economy, as seen through labor market lens, as an anti-crisis factor. Keywords: informality, non-official economy, economic crises, labor market JEL Codes: E26, J21 1. Introduction The world has experienced an array of crises, of different shapes and forms, during its lifetime. However, the crisis of the beginning of this century impacted the economies of developed and developing nations. A debate has arisen on ways and tools to reduce its effects in countries directly or indirectly impacted by it. Tangible effects of the crisis were translated into job losses, stricter physical policies adopted by impacted countries, etc. Various countries used bespoken measures that lessened to a certain degree the consequences of the global crisis. In this paper the authors present their views on the size of informal economy in Albania and the growing concern to reduce its dimension, in the light of the crisis. 2. Materials and Methodology Renowned researchers such as Cohen, Kindleberger, etc, have conducted studies on the field, including Albania’s experience in the limelight of the current crisis which can be used as key reference materials. In compiling this study various official data gathered through various means were used, as well as public data which are available in Albania. The objective of this paper is to highlight the informal sector in the Albanian economy, and especially in the labor market. 3. 1+ 2 Research Results PhD student, corresponding author: bruna.muca@gmail.com MsC 3++ Prof. PhD, corresponding author: galantina2003@yahoo.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp.167 URL: http://www.reaser.eu e-mail: editors@reaser.eu The world has faced hundreds of financial crises in the last four hundred years. What is most critical in a crisis is not just what happens in the unfolding of the event, but its aftermath. Scholars indicate that there are several common denominators of a crisis, to include the increase of money available in the market, which bring about development before the collapse. It is inevitable that crisis should be related to economic decline in the countries it occurs. This late November, Albania will celebrate its centennial anniversary of independence. During this period the country has experienced various stages of development, including a centralized state-owned economy during communism moving onto a market economy after its collapse as early as 1991. The economic development of Albania in the last decades has faced various bumps along the road, despite that it has marked rapid development. Noteworthy enough, neighboring Greece has been faced with a severe crisis in the last couple of years. The recent economic crisis can affect Albania’s development. As in any crisis, countries could be categorized either as directly affected by the crisis, or suffering from its consequences. Albania falls in the later. An important role in Albania’s economy is played by its agricultural sector, which provides almost one quarter of its Gross Domestic Product; given that half of its population lives in the rural areas. Latest data indicate that rural population in Albania carries its activities through 368,997 agricultural economic units, also known as farms. Each unit area ranges between 0.52 to 1.13 hectares. Understandably farm sizing is considered small. Although farms are small, the agricultural sector plays an important role in the economy of the country. Given the limited developments of these areas, they are considered as survival economies. In their study, Schneider and Este (2000) considered this type of economic activity as the first level of informal businesses. As of 1990 the economic activity or land owned by the farms has not been taxed. Presently only 320 farmers have paid their obligations and taxes. The government allowed that farmers bypass their tax payment obligation, as an opportunity for farmers to fulfill their survival needs. Therefore collecting information on informal economy is hard, given that those involved in it have not identified themselves or have avoided doing it. In order for policy makers to make effective decisions it is important to possess accurate data on the allocation of Albania’s resources in the informal economy. Therefore it is imperative to know who is engaged in it, how often they engage, and what kind of activities fall under it. In the last five years the CIA Fact book reports that Albania’s informal, and unreported, sector may be as large as 50% of the official GDP. The country develops its economic ties with Greece and Italy, whose informal sector reaches 20 percent, and in turn this also influences the high level of informality in Albania. It is important to note that the informal economy also affects the economic efficiency of the country. Due to the fact that a part of Albania’s economy is held informally, fewer revenues are collected by tax offices. Less collected taxes means that the government is forced to seek other financial means, such as Treasury bond issue. Thus, the presence of informal economy can in term impact the effectiveness of macro policies. Also, high levels of informality directly impact official economic data and due to their lack, statisticians and policy makers in turn lack important information on unemployment level and revenues. Informal labor creates a layer in the society that is not protected by the labor legislation. Occupational accidents, professional diseases contracted while working, unpaid contribution in the interest of the workers are some of the effects of informality at the workplace. A direct effect of informality is that these types of entrepreneurs that informally hire workers are not properly controlled by the line institutions or the Labor Ministry, and the fact that these people work under such conditions, displays their tendency to observe the state norms or employees’ rights. A snapshot of informality in the labor sector would display that treatment some of the employees go through, especially those that have experienced occupational accidents, such as injury, death, paralysis, poisoning, in the mining and construction industries, and in the clothes industry, resemble the condition of the employees in the first stages of capitalism. Those working in the informal sector put in long workdays, face difficult working conditions, and receive small salaries, even if they are enrolled in the official social and health insurance scheme. Employees face threats of various forms from their employers, including dismissal. The loss the state incurs from informal economy and especially by the informal labor sector is huge, and at various levels. When the institutions fail to collect contributions and taxes from income revenues, this ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp.168 URL: http://www.reaser.eu e-mail: editors@reaser.eu would automatically lead to less revenue ending in the state budget. A social responsibility bill accompanies and weakens any government performance, and this is particularly noticeable in the pension and wages level, including public services. From different perspective the well-being of the population is not solely an objective of interest for the government, but also of any entrepreneur, as this would mean higher purchasing power, thus greater revenues for all. A protective measure that could occur is organizing workers under trade unions. Several attempts have been made to organize a trade union in the private sector, where informal economy dominates, but great difficulties have been noticed along the road, especially from employers. Those employees that undertook this responsibility were faced with pressure of all kinds, including dismissal. The largest number of informal workers has been evidenced in most developed towns of the country, where there is greater concentration of economic activity. Data show that the largest numbers of individuals exercising an illegal activity or whose license has expired are located in these cities: Shkoder, Tirane, Fier, Elbasan, and Vlore. The highest density of unlicensed workers was evidenced in the suburbs around the afore-mentioned towns or rural areas which are out of control, and where the economic development rhythm is lower than in the city center. Some objective and subjective reasons of informal labor market include: uncontrolled demographic movement of population toward larger inhabited centers, of greater economic level, and due to higher density of businesses, need for employment in these businesses which has generated the possibility of informal employment; dishonest competition and large movement influx of workforce according to market demand, especially in the construction business, hampers control and legality of the informal labor market; lack of total mobility control and currency circulation are additional reasons that favor informality; the lack of logistical structure can be counted as one of the objective reasons of this phenomenon; while one of the subjective reasons for informal labor market existence can include unemployment level, and employment is seen as one of the ways to flatten it; inter-institutional cooperation among executive bodies, such as the Tax Department, the Labor State Inspectorate, and the Institute of Social Insurance is still at memorandum of understanding level, and cohesion of joint actions in not a legal obligation yet. Another factor that supports an increase in the informal sector is an increase in regulations. Legislative bodies entrusted with law-making authority should place greater importance not simply to increasing the number of regulations, but to their enforcement. It seems like the larger the number of regulations, the larger informal economy gets. 4. Conclusions Informal economy plays a vital role for job openings, generation of incomes, and reduction of poverty in many countries, especially in developing countries. Capturing informal economy is important as it makes visible the works employed by this sector, and their actual economic contribution to the society. However, when economies operate in the informal sector, this operation is tied to operational costs. If informal businesses or employees are caught, they need to pay penalties for not operating in the official market. Informality in Albania is supported by widespread corruption, the existence of a legal framework which varies at times and whose implementation is arbitrary, yet again for corruption reasons, entangled bureaucratic procedures, lack of information on formalization of businesses, and existence of family businesses – 90 % of small businesses in the country. As Albania transitioned from state-owned economy to market economy, the demography of the country changed. Inner migration was one of the factors that helped the establishment of approximately 800 informal zones. The country is undergoing a process legalization of these zones, where some 150 thousand illegal settlements were established in the last two decades. The Agency for Legalization, Urbanization, and Integration of the Informal Zones/Buildings was mandated to carry this responsibility, and it aims to complete this daunting task by the end of 2013. Informal economy in the country is showcased in various shapes and forms, such as in the form of rural families that conduct their daily economic activities, family businesses which almost never register ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp.169 URL: http://www.reaser.eu e-mail: editors@reaser.eu officially; SMEs operating informally using two types of accounts, where officially they report either smaller number of employees or lower wages paid to them, thus evading payment of due taxes; various forms of criminal and illegal activities such as trafficking of narcotics, smuggling, money laundry, whereas they cover their businesses doings as legal businesses, etc. The system of social contribution in Albania is unstable. It has been calculated that nearly 30 percent of employees in officially registered companies are insured and pay social contributions (UNDP, 2007.) Those that pay contributions reportedly pay minimum pay contributions, thus what the system collects is very minimal, even if contributors pay. Polls show that businesses pay minimum required as they are able to be more competitive, and because everyone acts like this. Another reason is lack of trust in the ability of the state to ensure health needs and retirement pensions for workers in the future. The revenues the Albanian Social Insurance Institute collect would increase if inspectors were incentivized, and thus improve performance. Labor force polls of 2009 showed that nearly 55.8 percent of general employment in Albania was in the informal economy. This figure includes a number of employees working for family businesses and who are not paid, those working but who do not pay social contributions, all those self-employed and who hire less than five workers. Those employees whose contributions were not paid represented 27 percent. Those at younger age are more exposed to informality, and data showed that mostly men than female are more prone to work informally. The rate of informality in a country is a pivotal indicator in the study of its economic development. The analysis of informal labor or informality in general helps explain the present condition of the country, especially consolidation of state institutions, level of implementation of legislation, corruption level, to name just a few. 5. [1] [2] [3] [4] [5] References Agency for Legalization, Urbanization, and Integration of Informal Zones/Buildings (ALUIZNI) data. Central Intelligence Agency Factbook. 2012. Country Report: Albania. Last updated on October 4, 2012. Data from Ministry of Agriculture Food and Consumer Protection. Data from Albanian General Tax Directorate. Feige, E. L. The Underground Economies, Tax Evasion and Information Distortion. Cambridge: Cambridge University Press, 1989. [6] Frey, B. S. and Schneider F.. Informal and Underground Economy. At International Encyclopedia of Social and Behavioral Science. Edited by Ashenfelter, O. Amsterdam: Elsevier Science Publishing Company, 2000. [7] Data provided by the Albanian Institute of Statistics (INSTAT) – Labor force poll. [8] Kindleberger, Ch. P., Manias. Panics and crashes: a history of financial crises 1996. [9] Schneider, F. and Enste, D. Shadow Economies Around the World: Size, Causes and Consequences. International Monetary Fund Working Paper, 2000,WP/00/26: pp 1-56. [10] Schneider, F. and Enste, D. The Shadow Economy: An International Survey. Cambridge: Cambridge University Press, 2003, pp 98-99. [11] United Nations Development Programme in Albania, 2007 report. [12] World Bank Report, Albania: Labor market assessment. Report No. 34597-AL. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 170 URL: http://www.reaser.eu e-mail: editors@reaser.eu Architecture, a career option for women? Romania case.* Raluca Livia Niculae 1 1 Spiru Haret University, Faculty of Architecture, Bucharest, Romania Abstract. Many factors affecting women’s participation in the workforce are categorized as sociocultural. Occupational segregation is mostly caused by gender based division of labor which marks radical differences between women’s and men’s abilities and responsibilities. Gender essentialism based on genetic data is indicating areas of gender competence according to socio-cultural expectations. The immersion of gender issues in architecture, traditionally seen as a male dominated profession, raises questions about the eligibility of women professionals especially because of their fragile presence in different instances of architecture: history, theory and criticism. The present paper is focused on the status of Romanian women architects and statistically analyzes current gender trends in architectural education, posing questions about how gender diversity influences architecture. Many great women have established successful careers and had an impact on Romanian architecture. The third part of the paper reviews some of the key points in the development of the Romanian women’s movement of emancipation and democracy and celebrates feminine achievement in national architecture. Keywords: architecture, occupational segregation, women architect, gender stereotypes, career choice, feminising architecture, Romania case. 1. Issues concerning women in/and architecture The scientific discourse concerning women and architecture gathers, in socio-cultural terms, issues about the gender-typing of the profession, tensions between views on femininity and social construction of the architect as a masculine figure. The critique of the patriarchal value system of architecture is based on the proliferation of gender stereotypes regarding innate abilities linked to suppositions about gender professional performances. The social equity democratic desideratum becomes questionable when highlighting the gender pay gap, the uneven remuneration for a similar education background. The reason for this specific economic aspect has long been speculated as the problematic reconciliation between career and family life that ends with a diminution of working hours – the preference for part- time jobs, non working motherhood periods or the forced rejection of promotion opportunities and leadership tasks. There are still too few institutions that provide motherhood policies, flexible working schedule and childcare facilities. Recurrent debates about the socio-economic status of women in the architectural profession are revealing the above facts but also the fragile presence of women in various instances of architecture: history, theory and criticism. Eileen Gray, for example, exquisite modernist artist-lacquer painter, furniture designer and architect, was absent, until recently, from historical records. Her architectural work and furnishings were overlooked and misattributed to a prestigious male architect who left his mark in the form of colourful wall murals, Le Corbusier, and/or to Jean Badovici, the Romanian architect, her lover and collaborator, more likely to stand as the creators of the elegant and modern E. 1027 house. Some photographs of Le Corbusier’s murals are published in L’Architecture d’aujourd’hui (April, 1948) but the name of Gray is omitted. The *  Working paper. Assistant Professor Arch. Corresponding author. Tel.: + 40 722 264 734 E-mail address: ralucalivia@yahoo.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 171 URL: http://www.reaser.eu e-mail: editors@reaser.eu article “Le Corbusier, Muralist”, from Interiors (June, 1948), locates the painted walls “in a house designed by Le Corbusier and P. Jeanneret”. Peter Adam (see Eileen Gray, 2000, pp. 334-35) draws attention on the fact that, in several publications between 1944 and 1981, the architecture and furnishing of E. 1027 are attributed to Le Corbusier and/or Badovici. 1 The absence of women from architectural history is reflected by a lack of visibility and work acknowledgements and also by misattribution of authorship credits. To exemplify this instance, one should consider the case of Denise Scott Brown, the architect wife of Robert Venturi, the well known starchitect who collected, probably without any blame, the credentials for professional couple’s work. “The star system which sees the firm as a pyramid with a designer on top has little to do with today’s complex relations in architecture and construction. But as sexism defines me as a scribe, typist and photographer to my husband so the star system defines our associates as <second bananas> and our staff as pencils”. (Denise Scott Brown. Sexism and the star system in architecture. In: Dana Arnold. Reading architectural theory. Taylor & Francis e- Library. 2004). This could be a case of social trivia proliferated by means of mass communication driven by stereotyped conceptions that influence career choice, opportunities and progression. Considering the reliability of the criticism over the patriarchal basis of architecture constructed on masculine value systems, knowledge patterns and products, the problem about timeliness of the feminist wave in architecture comes into question. The marginalisation of the “feminine” is translated in architectural terms through ornamentation or gender-specific architectural programs. There have been recorded many historical instances where the abundance of ornamentation was condemned as superfluous thus poisoning the functional essence of the architectural object. The National Farmer’s Bank designed by Louis Sullivan was criticised by Frank Lloyd Wright due to its rich decoration considered to be useless and misleading. Not to mention the Law of Ripolin that marked the rise of naturism and modernist ideals by the “coat of whitewash” promoted by Le Corbusier in opposition to all ornate and coloured buildings, architecture that reveals its feminine decadence. It becomes clear that, in order to have a complete perspective on the gender dimension of architectural profession, one should consider on the one side the issues women as professionals involved in the process of making architecture and, on the other, the more subjective aspects concerning the exploitation of feminine forms in architecture, space gendering according to users, gender specific architectural programs or the “different” experience of women in the built environment. While aspects revealing women architect status in contemporary architecture can be supported objectively by socio-economic statistics, issues such as the gender influence on the architect’s design style are merely based on preconceptions about women’s characteristics translated into feminine design principles: empathy, client orientation, aesthetic sense, collaborative nature, flexibility, ergonomics, organicity etc. While male architects are more likely to prefer bold, heavy and monumental aesthetics, the female architect prefers smaller scale designs and is more attentive to details. Perhaps, these trenchant differences in design style are based more on innate gender characteristics than cultivated preferences. If we consider the genetic datum to be non-changeable and limit our perspectives to divergent views upon architecture based on the architects gender, we can agree that female design perspective, if not suppressed due to minority reasons, might be different, and this does not always mean worse. Taking this theory further, by an exercise of imagination, one could meditate upon the exploitation of feminine forms in 1 Parkins, Ilya , Sheehan, Elizabeth M. (eds.). Cultures of femininity in modern fashion. University Press of New England., 2011. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 172 URL: http://www.reaser.eu e-mail: editors@reaser.eu architecture (a priori assumptions of the idealized woman) and the transfer upon different building components such as envelope, texture, decoration, furniture, colour etc. There have been many scientific debates about the parallelism between human body and architectural components 2. Also about architect’s gender and design style expressed through finite architectural product.3 The women architects supposed predilection upon creating decorated interiors, the space being traditionally segregated according to gender 4, minimises women’s abilities and narrows career possibilities. The “ feminine “ design aesthetics should not be attached strictly to female architects as gender should not be seen as a criterion for any kind of architectural judgement. The feminist Judith Butler (Gender Trouble. Feminism and the subversion of Identity, 1990) explores the concept “gender performativity” and defines gender as “the effect of reiterated acting, one that produces the effect of a static or normal gender while obscuring the contradiction and instability of any single’s person’s gender act”. Architecture possesses a tremendous toolkit of methods and forms of display that should not be categorized according to architects’ gender and the social construction of gender difference. “Visual culture embodies cultural beliefs of a society in the visual output of the society”. (Karen Keifer- Boyd. Visual Culture and gender constructions. In: The International Journal of Arts Education. InJAE8.1, NTAEC, 2010.) The stereotypical gender roles are reinforced by gender specific behaviour. The two images presented below are reflecting the way space is gendered in relation to users and specific architectural programs like hospital, mall, nursery or kindergarten are related to women’s specific functions in society and reflected in career choice. Fig. 1: Toronto International Airport, John B. Parkin Associates photo, 1964 (PAN 64040, Panda Associates Fonds, Canadian Architectural Archives, University of Calgary)5 2 Fig. 2: Yorkdale Plaza Shopping Centre, photo, 1964 (PAN 64536, Panda Associates Fonds, Canadian Architectural Archives, University of Calgary)6 See Vitruvius Pollio, Marcus, Vitruvius: The Ten Books on Architecture, Trans M H Morgan, New York: Dover Publications, 1960; Battista Alberti, Leon, On the art of building in ten Books, Cambridge, MA: The MIT Press, 1988; Francesco di Giorgio Martini, Trattati di architettura, ingegneria e arte militare (1470-92), italian ed., Milan: Edizioni I1 polifilo, 1967; Filarete,Antonio Averlino, Trattato d'architettura (1461-63), New Haven: Yale University Press, 1965. The theories of Vitruvius about the appropriation of nature laws in architecture, Leonardo da Vinci’s Vitruvian Man or Le Corbusier’s Modulor are all developing analogies between the ideal human body., always male’s. 3 See Margrit I.Kennedy. Toward a rediscovery of <feminine> principles in architecture and planning. In: Women’s Studies Int. Quart. Great Britain: Pergamon Press Ltd., 1981, 4 (1): 75-81. 4 Women’s interior space vs. men’s exterior space, dichotomy that places indoors the “ lady of the house” while the man takes action as provider and takes charge of the exterior of the domestic premises. 5 Simms, Geoffrey. Gendered Space and Social Conformity in Selected Modern Architectural Photographs. In: JSSAC/ JSEAC 33, 2008, 2: 3-10. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 173 URL: http://www.reaser.eu e-mail: editors@reaser.eu Two different architectural programs: airport and shopping mall. The first, suited for business is occupied by men in opposition with the second, the shopping mall, a space programmed for leisure and tailored to accommodate women. As the prototype of business entrepreneur was always a male figure, women are fitted to describe consumer’s profile. 2. Architecture, a career option for women Although the present research is focused on the status of women architects in Romania, the previous approach reviewed, without exhausting the topic, some of the most debated issues regarding the insertion of gender aspects in the architectural profession, thus creating the context and stating the controversy of the subject. “Women <take care>, men <take charge>. Stereotyping of U.S. Business Leaders Exposed” is the title of a Catalyst research (2005) on stereotyping that examines the barriers to women’s advancement in the workplace. The study reveals that gender- based stereotyping persists in workplace and can misrepresent the true talents of women leaders, challenging career advancement. 7 Considering Romania’s case, the professional segregation according to gender persists as women are still best represented in fields like: healthcare and social services (Q: 79, 7%), education (P: 68%) and restaurants and hotels (I: 63, 4%), professions that are taking advantage of stereotyped female qualities as: caring, providing, patience, empathy and nurturance. Fig. 3: Open Society Foundation. Gender Barometer. 2008 Men are taking over domains like: construction (F: 86,2%), extractive industry (B: 84,1%), agriculture, silviculture and fishing (A: 75,9%), fields that are using male specific characteristics. The process of sex- typing of professions has its roots well developed through childhood activities and is referring to the stereotyped attribution of gender behaviours and values. The consequence of the process affects career choice and impacts women in the workplace blocking advancement. 6 Idem 5. http://www.catalyst.org/knowledge/women-take-care-men-take-charge-stereotyping-us-business-leaders-exposed. Accessed on December, 14, 2012. 7 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 174 URL: http://www.reaser.eu e-mail: editors@reaser.eu The instances that disadvantage women in architectural profession: the lower percentage of female practicians, the lack of “feminine style”8, the lack of female role models as women architects are suffering from social historical invisibility, the masculine status quo that predefines design systems and formal rules and, most important, the perception about women professionals in architecture vary around Europe. Fig. 4: Architects Council of Europe. The architectural profession in Europe. 2008 The Architects Council Survey (2008) reveals that the lowest percentage of women architects are accommodated in the Netherlands while France seems to have the advantage of 56% women architects. Romania is close to achieve equality between genders reflected in number of practicing professionals. Fig. 5: Members of Romanian Architects Order: 2002-2012 8 Fig. 6: Percentage of women/ men architects members of the Romanian Architects Order: 2012 Could be seen as a positive thing that “gives women architects the freedom to become and produce something yet unheard of” (Farshid Moussavi. Agenda bender: the case for the abolition of female role models. In: The Architectural Review. http://www.architectural-review.com/view/viewpoints/viewpoint-farshid-moussavi/8630800.article. Accessed on December, 14, 2012 ) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 175 URL: http://www.reaser.eu e-mail: editors@reaser.eu Analyzing the following chart representing forms of professional practice adopted by Romanian women architects, members in Romanian Architects Order, we note a percent of over 50% employees, ~25% owners of individual architecture offices but less than 5% company owner. Thereby, men are holding a significant proportion of decision making with consequences on the built environment. Fig. 7: Women in Architects Order- Forms of Practice: 2012 In 2012, 43% percent of architects members of Romanian Architects Order are women. That seems quite fair but, if we take a look at the graphs representing graduates of university education, a paradigm shift is being revealed. The increased number of women graduates that reaches 60% women students (in the year 2012), is announcing a reverse of paradigm: the process of “feminising architecture”. The possible implications could be: the recognition, appreciation and absorption of feminine qualities in design (empathy, relatedness and collectiveness), promotion of different values and perspectives such as gender sensitive design.9 Fig. 8: Graduates chart, Ion Mincu University of Architecture and Urbanism, Faculty of Architecture: 1951-2012 9 The scientific research applied to urban design condemns the women experience of built environment to be overlooked (transportation, safety, lack of childcare facilities, difficulties of pedestrian movement) and the presence of women at decision levels to be mandatory regarding urban planning policies. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 176 URL: http://www.reaser.eu e-mail: editors@reaser.eu The appropriate question given the context of feminising architecture is: how can women’s ways of knowing, feeling and designing influence changes and add values in existing patriarchal structures. Surprisingly or not, fields like interior design and landscape architecture are being dominated by female students and graduates. As design and aesthetics are falling under the prerogative of femininity, the obvious question is if below statistics are evoking preferences or escapes of women regarding specific fields of architecture. Fig. 9: Graduates Chart- Ion Mincu University of Architecture and Urbanism, Faculty of Interior Design: 20062011 3. Fig. 10: Graduates Chart- Ion Mincu University of Architecture and Urbanism, Faculty of Urbanism, Landscape Design: 2008-2011 Progression of women in Romanian architecture The following chapter celebrates the development of the Romanian women’s movement for emancipation and democracy and women’s presence in Romanian architecture aiming at empowering through reviewing, in chronological order, some of the most important women achievements related to the architectural profession10. 1848 After the revolution, the feminist wave arises demanding equality of rights between women and men and women emancipation through equal access to education (promoters: Maria Rosetti, Sevastita Balcescu, Maria Nicolau). 1879 The Women review and The bulletin of Romanian woman league are being published, militant feminist press edited by Sofia Nadejde. 1883 Maria Zaharescu is the first licensed women graduating from the Faculty of Letters and Philosophy, Bucharest. 1892 Romanian architecture education started at the end of XIXth century as a private school under the authority of the Romanian Architects Society 1895 Takes place in Copenhagen the 2nd International Conference of socialist women proclaiming March, 8 as the International Women’s Day. 1897 The Architecture Department from Bucharest School of Fine Arts is founded. 1913 Henrieta Delavrancea (1894-1987) is admitted as architecture student but she interrupts the studies during World War II. She will become the colleague of Virginia Andreescu Haret, Marioara Ioanovici, Horia Creanga and Lucia Dumbraveanu. 10 The graph is not exhaustive and represents a short review of the most representative dates concerning women’s activity in the Romanian architecture field. (working paper) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 177 URL: http://www.reaser.eu e-mail: editors@reaser.eu 1915 Lucia Dumbraveanu (1895- 1956), cousin of Henrieta Delavrancea, is admitted at the Superior School of Architecture. 1916 Henriete Delavrancea is interrupting her classes and she starts working as volunteer nurse during World War II. 1919 Virginia Andreescu Haret (1894-1962) was the first women to graduate from the Superior School of Architecture in Bucharest. She continues her studies in Rome. 1920 Lucia Dumbraveanu, called “ Lucus” and Horia Creanga are admitted, after two attempts failed, at Ecole de Beaux Arts in Paris ( at the same exam, G. M. Cantacuzino ranked first at artistic skills ). The two future architects along with Dumitru Savescu chose Gustave Umberstock, second Prix de Rome, to be their supervisor. 1921 Henriete Delavrancea designs probably her first oeuvre: the German house from Nehoiu. 1923 The Romanian Constitution gives women the right to vote in local elections. 1924 Henriete Delavrancea restarts her studies interrupted for 8 years. Solange d”Herbez de la Tour is born in Romania but leaves the country in 1945 and moves to France. She will be the founding member of two women organizations, and will gain many distinctions: Legion of Honour with the rank of Commander Honour Fellow of the American Institute of Architects, Emeritus member of Works Group Sports and Leisure of Architects International Union, National Order of Merit -the rank of Knight, honorary member of the Bucharest branch of Romanian Architects Order. She tried to gain equal rights for men and women architects in France through the annulment of the law and obligation to be of masculine gender and with accomplished military duty, in order to be architect of historical monuments and architect at the Vicinal road service. She had numerous interventions at international level for obtaining equal rights for education and work regardless of gender. 1926 Henriete Delavrancea graduates from the Superior School of Architecture in Bucharest. 1928 Eugenia Greceanu is born (promotion of 1953, Ion Mincu University of Architecture), architect specialised in conservation and restoration of the national built heritage and the study of historical monuments. 1932 Henriete Delavrancea wins, against Creanga team, the first important architectural contest for the headquarters of Hygiene and Public Health Institute. 1946 Doctor Florica Bagdasar is the first women Minister of Health. The first women prosecutor was Silvia Plaiesu and the first dean was academician Raluca Ripan. Elena Voinescu was awarded her architectural diploma (valedictorian). She will be involved in the design of the new wing of the Ion Mincu University of Architecture and Urbanism in Bucharest ( as the architect project manager ). 1947 Solange D’Herbez de la Tour, was awarded by the Faculty of Architecture established in Bucharest within Polytechnic Institute, the architecture diploma. Paraschiva Iubu was awarded her architectural diploma. She developed a long collaboration with arch. Octav Doicescu and N. Cucu (between 1966-1976) and was decorated with the Work Order, 3rd class, awarded by Petru Groza in 1954 (for the architectural works from The Opera Theatre in Bucharest). 1952 Ion Mincu Institute of Architecture was opened and in the same year, Duiliu Marcu was elected president of the new established Architects’ Union of RPR (Popular Republic of Romania). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 178 URL: http://www.reaser.eu e-mail: editors@reaser.eu Arch. Solange D’Herbez de la Tour (b. 1924), born in Romania and established in France, wins an important architectural contest (housing). The Parisian press exclaim:” Enfin une femme architecte. Enfin une vraie femme”. 1953- After World War II until 1989, the Romanian government banned private practice and the state 1955 controlled the architectural design practice. Establishment of “Proiect Bucuresti” Institute. 1957- The Women’s National Council was set up gathering all women associations from all over the 1989 country. The council supported actions for the defence of the right to work and securing the civic, juridical and social equality of women and men. 1960 Solange D’Herbez de la Tour was founding the French Union of Women Architects (UFFA). 1963 Solange D’Herbez de la Tour, was founding in Paris, the International Women’s Union (UIFAUnion Internationale des femmes Architectes) 1965- During the communist period of glory the myth of gender equity was proliferated. Women were 1989 equal social workers and mothers of nation (productive and reproductive tasks). The statistics showed that the majority of women worked in education and healthcare under minimum salary. The situation in this aspect, in sensible the same in present days. 1967- The construction of the extension for the Bucharest Commercial Academy (arch. Cleopatra Alifanti, 1970 1916-2000). 1972 The 3rd UIFA Congress in Bucharest: “Idées et collaboration des Femmes Architectes pour l’humanisation des espaces urbains nouveaux”. The Romanian Architects Union awards her with the award for her entire activity. 1977 Arch. Henriete Delavrancea Gibory stands, without any positive answer, against the demolition of many Bucharest monuments (Vacaresti monastery, Antim monastery, Mihai Voda monastery, Sf. Vineri Church). A contest for Bucharest political and administrative centre area was launched through the Romanian Architects Union. On 28th of April 1977 15 models were presented, 15 teams of architects and among them the Youth Team led by young arch. Anca Petrescu (at only 28 years of age). 1982 March, 6- takes place the last meeting between Nicolae Ceausescu and the Youth Team regarding Peoples’s House. Arch. Anca Petrescu (b. 1949) was named chief architect of the masterpiece of the communist regime. On the construction site were demolished thousands of buildings, important churches, synagogues, Uranus district, Republicii Stadium, Mina Minovici Institute (the forensic institute) etc. 1992 The National Confederation of Women in Romania was set up and joined over 26 women’s organizations from all counties. Besides it, there were more than 25 other organizations dealing with different aspects of the feminist movement in Romania. 1993- Arch. Eugenia Greceanu was the president of the National Romanian Committee ICOMOS. She 2000 was also a member of the Monuments Commission between 1970-1973 and 1990-1996. 2000 IAWA (Internet Archive of Women in Architecture of Virginia Polytechnic) publishes a newsletter about Women in Romanian architecture. 2002 National conference for the establishment of the Romanian Architects Order. 2003 Arch. Anca Bratuleanu receives the Stefan Bals award for restoration of Bordesti monastery. Arch. Ana Maria Zahariade wins the Herder Prize awarded by Alfred Toepfer Foundation from ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 179 URL: http://www.reaser.eu e-mail: editors@reaser.eu Hamburg for contributing with knowledge, development and preservation of eastern and southeastern European culture ( other Romanian winners: Zaharia Stancu, Ana Blandiana, Constantin Noica, Marin Sorescu, Nichita Stanescu, Tudor Arghezi etc. ) 2006 Award of honour (Opera Omnia) for arch. Eugenia Greceanu (Romanian Architects Order). 2007 Exhibition “Henrieta Delavrancea Gibory 1894-1987. Architect.” at the Romanian Peasant Museum on the occasion of the XVth International Congress of Women Architects held in Bucharest. 2008 Award of honour (Opera Omnia) for arch. Elena Voinescu (Romanian Architects Order). 2012 The Department of Theory, Architectural History and Heritage Preservation of Ion Mincu Institute of Architecture was named “Sanda Voiculescu” after the name of the architect and professor Sanda Voiculescu (1938-2001) that revived, after 1989, the Department of History and Theory of Architecture. Arch Viorica Curea was elected president of the Romanian Architects Order. 4. Conclusion… Instead of a conclusion, a few words of Prof. PhD. arch. Sarah Wigglesworth (University of Sheffield): ” We need to be careful that the toxic combination of increasing number of women with a downgrading of status does not simply turn architecture into a low-wage, feminised profession such as nursing and social work or a dilettante’s finishing school subject”. The process of feminising architecture through last years high percentage of women graduates of architecture universities could mean a shift in paradigm of known architecture value system. Hopefully, this fact corroborated with the existing social opinion about architectural profession, will not mean a degradation of the architect’s status as British award winning architect Sarah Wigglesworth pointed out. More research that celebrates and empowers women ought to be carried on in order to record and make visible women’s professional activities. A series of awards are aiming to congratulate women’s designs 11. But are they really helping women’s image or in fact enhance the existing professional gender gap? 5. References [1] Parkins, Ilya, Sheehan, Elizabeth M. (eds.). Cultures of femininity in modern fashion. University Press of New England, 2011. [2] Scott Brown, Denise. Sexism and the star system in architecture. In: Dana Arnold. Reading architectural theory. Taylor & Francis e- Library. 2004 [3] Butler, Judith. Gender Trouble. Feminism and the Subversion of Identity. NY: Routledge,1990. [4] Keifer- Boyd, Karen. Visual Culture and gender constructions. In: The International Journal of Arts Education. In JAE8.1, NTAEC, 2010.) [5] Kennedy , Margrit I.. Toward a rediscovery of <feminine> principles in architecture and planning. In: Women’s Studies Int. Quart. Great Britain: Pergamon Press Ltd., 1981, 4 (1): 75-81. [6] Simms, Geoffry. Gendered Space and Social Conformity in Selected Modern Architectural Photographs. In: 11 Jane Drew Prize, Women Architect of the year (Architects Journal, United Kingdom), Emerging women architect of the year(Architects Journal, United Kingdom), Milka Bliznakov Prize (IAWA, USA) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 180 URL: http://www.reaser.eu e-mail: editors@reaser.eu JSSAC/ JSEAC 33, 2008, 2: 3-10. [7] http://www.catalyst.org/knowledge/women-take-care-men-take-charge-stereotyping-us-business-leaders-exposed. Accessed on December, 14, 2012. [8] Moussavi, Farshid. Agenda bender: the case for the abolition of female role models. In: The Architectural Review. http://www.architectural-review.com/view/viewpoints/viewpoint-farshid-moussavi/8630800.article. Accessed on December, 14, 2012 [9] Open Society Foundation. Gender Barometer. 2008 [10] Mincu, Mioara, Mironescu, Elena. Dictionar Mondo Femina. Romanian women. 1. Bucharest; Alcor Edimpex, 1995. [11] Jugurica , Constantin. The memory of notebooks. The shaken Bucharest 1977-1989. Bucharest: Arhilibra, 2012. [12] Sion, Militza (coord.). Henrieta Delavrancea Gibory. Architecture 1930-1940. Bucharest: Simetria, 2011. [13] Curea, Viorica (ed. ) Arhitecti in timpul dictaturii. Bucharest: Simetria, 2005. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 181 URL: http://www.reaser.eu e-mail: editors@reaser.eu Testing the financial market informational efficiency in emerging states Camelia Oprean1  1 “Lucian Blaga” University of Sibiu, Romania Abstract. The Efficient Markets Hypothesis (EMH) has been one of the most influential ideas in the past years and highlights that assets prices incorporate all information rationally and instantaneously. The last financial crisis has led to criticism of this hypothesis. Many practical observations concerning the reaction of investors, but also the mechanisms for the information encompassing in the price of stocks, come to highlight the aspects of “market inefficiency”. Despite its simplicity, the EMH is surprisingly difficult to test and considerable care has to be exercised in empirical tests. It has attracted a considerable number of studies in empirical finance, particularly in determining the market efficiency of an emerging financial market. Empirical tests have given mixed results about efficiency in these markets. The major challenges to EMH are mainly in the following forms: empirical tests for EMH show no evidence in favour of EMH, the existence of the limitations of the statistical and mathematical models for EMH, the evidence of the excess volatility mean reversion predictability, the existence of bubbles, and non-linear complex dynamics and chaos in the stock market. Efficiency tests in emergent markets are rarely definitive in reaching a conclusion about the issue, because, for a test to be reliable, it should take into consideration the institutional features of these markets. To test the hypothesis of informational efficiency of an emergent market, one should take into account some peculiarities of these markets, like: nonlinearity of asset prices, thin trading, the financial liberalization impact on the performance of emerging markets. The paper proposes a critical analysis regarding the testing methods of the informational efficiency theory of the capital market and also proposes new perspectives that are meant to relax the strong EMH assumptions in emerging markets. Keywords: EMH, information, tests, emerging markets JEL Codes: G14, D8, G00 1. Introduction In his famous study, which will definitively mark the theory of efficient markets, Efficient Capital Markets: A Review of Theory and Empirical Work, written by Fama in 1970, he gives the following definition: “A market in which prices always reflect the available information is called an efficient market”. In this paper, he realizes a synthesis of previous research concerning the predictability of capital markets, the notions of fair game and random walk becoming well formulated. The distinction between the three forms of efficiency is being made: efficiency in its strong form, semi-strong efficiency and weak efficiency. This paper is structured as follows: this section provides a literature review of the market efficiency hypothesis. Section 2 discusses the most common methods, such as the statistical tests, used in testing the classes of informational efficiency. Section 3 presents some previous applied tests on emerging capital  Corresponding author. Tel.: + 40-(729) 96.65.12; fax: + 40-(269) 21.78.87. E-mail address: camelia.oprean@ulbsibiu.ro . ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 182 URL: http://www.reaser.eu e-mail: editors@reaser.eu markets informational efficiency. In section 4 we evaluate in a critical way these tests and we propose in conclusion some issues in order to improve the relevance of these testing methods for the emerging capital markets. The weak efficiency form sustains the hypothesis that the current price of stocks fully reflects all the information concerning the stock market, such as: past prices, exchange rates, volumes of transactions and any other information concerning the markets. In an efficient market, past prices of the titles cannot be used to beat the market or to obtain adjusted rentabilities for a superior risk. In such a context, the chartist or technical analysis is useless. Semi-strong efficiency look, in addition, to the immediate integration within the new course of any new information with a public character, concerning the firms wealth, its results, dividends, the distribution of free stocks, stock market introduction, etc. In an efficient market, in its semi-hard form, fundamental analysis, founded on public information, is useless. Strong efficiency implies, more than that, the quick integration within the market prices, of all available information about the traded asset, including privileged information. Such efficiency (as the semi-hard one) puts into discussion the validity of the entire fundamental value analysis, as the intrinsic value is the market price itself. The capital and financial markets in emergent countries are remarkable for their lack of sophistication (Tarun, Krishna, Jayant, 2005). There are not many reliable intermediaries like credit-rating agencies, investment analysts, merchant bankers or venture capital firms. Multinationals can’t count on raising debt or equity capital locally to finance their activities. There is no access to really accurate information on companies. Corporate governance is also poor in emerging markets. Transnational companies, therefore, can’t trust their partners to adhere to local laws and joint venture agreements. In fact, since crony capitalism thrives in developing countries, multinationals can’t assume that the profit aim alone is what is driving local companies. 2. Methods used for testing the informational efficiency of capital markets Fama (1965) was in the view that the statement about the informational efficiency is general and needs to be tested; moreover, it demands to build up mathematical models and formulations for market equilibrium which will be used for testing the market efficiency. Despite its simplicity, the EMH is surprisingly difficult to test and considerable care has to be exercised in empirical tests. Forecasting experiments have to specify at least five factors (Timmermann, Granger, 2004), namely:    the set of forecasting models available at any given point in time, including estimation methods; the search technology used to select the best (or a combination of best) forecasting model(s); the available ‘real time’ information set, including public versus private information and ideally the cost of acquiring such information;  an economic model for the risk premium reflecting economic agents’ trade-off between current and future payoffs;  the size of transaction costs and the available trading technologies and any restrictions on holdings of the asset in question. Broadly speaking, the incident of white noise, random walk, martingale and fair game properties of financial time series is evidence in favour of EMH. To reiterate, the absence of arbitrage opportunities expresses the idea that the only chance for speculators to gain an opportunity to earn abnormal profits occurs ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 183 URL: http://www.reaser.eu e-mail: editors@reaser.eu if mispriced stocks exist in an economy populated by rational agents. In fact, the mispriced stocks will be automatically adjusted (Islam et all, 2007). Fama (1991) reviewed his 1970 work and classified empirical tests of market efficiency in the following categories: tests for return predictability; event studies; tests for private information, which follow the three forms of informational efficiency. Megginson (1997) completed Fama’s classification with tests for rational fundamental valuation (Dragota, Caruntu, Stoian, 2005). During the last years, there have been published various studies regarding the analysis of the informational efficiency of the emergent capital markets. All of these studies have tried to validate the hypothesis of weak form informational efficiency of these emerging capital markets. Because this form of market informational efficiency has been seldom validated, it is not use to talk about the other two forms of market informational efficiency in the case of emergent capital markets. That is why we present as follows the most important tests used to verify the weak form of EMH. The main approach to the empirical evaluation of EMH on the weak form consists in the identification of market prices behaviour as random-walk processes. The random walk model states that the prices in the financial markets evolve accordingly to a random-walk (with or without drift). Therefore, identifying trends or patterns of price changes in a market couldn’t be used to predict the future value of assets (Saramat, Dima, 2011). 2.1. Statistical tests for independence Given the assumption that the weak-form EMH states that the rates of return on the market are independent, the tests used to examine the weak form of the EMH test for the independence assumption. The tests should imply that an investor couldn’t anticipate with gains the future prices, using historical prices (Todea). The week form of EMH states that two conditions have to be accomplished in the same time: a. the autocorrelation coefficients of variable Rj,t must be close to zero (serial uncorrelation); b. the process Rj,t has to be integrated by 0 order (stationarity condition: series is said to be (weakly or covariance) stationary if the mean and autocovariances of the series do not depend on time). The weak form argues that there should be no correlation of price movements over time. This can be tested statistically. One form of statistical test would look for auto (or serial ) correlation. Autocorrelation sets out the case where the stock price movement for one period of time is related to the price movements in a previous period. The serial autocorrelation is used to test the relationship between the time series its own values at different lags. If the serial autocorrelation is negative it means it is mean reverting and accepts the null hypothesis and if the result is positive coefficients then it rejects the null hypothesis. In statistics, the autocorrelation (Box and Jenkins, 1976) of a random process describes the correlation between values of the process at different points in time, as a function of the two times or of the time difference. Autocorrelation is a correlation coefficient. However, instead of correlation between two different variables, the correlation is between two values of the same variable at times Xi and Xi+k. This is the correlation coefficient for values of the series periods apart. Tests have found that usually there is not significant level of autocorrelation, except in the case of some portfolios of small shares. Even this may be due to measurement problems when collating stock price information. It is difficult to rely on prices for small stocks since they are often infrequently traded (the problem of non-synchronous trading). Alternatively, a run test can look at the changes in price through time and compare the actual changes to what would be expected for a random series. Run test of randomness is an alternative test to test ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 184 URL: http://www.reaser.eu e-mail: editors@reaser.eu autocorrelation in the data. To confirm whether or not the data has correlation with the lagged value, run test of randomness is applied. The run test is a non-parametric test whereby the number of sequences of consecutive positive and negative returns is tabulated and compared against its sampling distribution under the random walk hypothesis. In the stock market, run test of randomness is applied to know if the stock price of a particular company is behaving randomly, or if there is any pattern. Run test of randomness is basically based on the run. Run is basically a sequence of one symbol such as + or -. A run is defined as the repeated occurrence of the same value or category of a variable. It is indexed by two parameters, which are the type of the run and the length. Stock price runs can be positive, negative, or have no change. The length is how often a run type occurs in succession. Run test of randomness assumes that the mean and variance are constant and the probability is independent. Another technique that will be used for testing the autocorrelation is Ljung-Box (1979), for autocorrelations with lag more or equal to 1 (Todea, 2002), or Lagrange Multiplier test (LM) (Lazar, Ureche, 2007). The Ljung–Box test is a type of statistical test of whether any of a group of autocorrelations of a time series are different from zero. Instead of testing randomness at each distinct lag, it tests the "overall" randomness based on a number of lags, and is therefore a portmanteau test. This test is sometimes known as the Ljung–Box Q test, and it is closely connected to the Box–Pierce test. The Box-Pierce test statistic is a simplified version of the Ljung–Box statistic for which subsequent simulation studies have shown poor performance. Ljung-Box test provides a superior fit to the chi-square distribution for little samples. In mathematical optimization, the method of Lagrange multipliers (named after Joseph Louis Lagrange) provides a strategy for finding the local maxima and minima of a function subject to equality constraints. The formal method to test the stationarity of a series is the unit root test. Augmented Dickey-Fuller (ADF) test is applied to test the presence of unit root in the time series of stock price changes in the indices. Majorly it is used to test the stationarity of the time series. ADF test implies that the series of natural logarithms of stock indexes to follow the stochastic process, type AR(1). In other words, ADF Test Statistic represents the t test for accepting or rejecting the null hypothesis of the Dickey-Fuller test. It is an augmented version of the Dickey–Fuller test for a larger and more complicated set of time series models. The augmented Dickey–Fuller (ADF) statistic, used in the test, is a negative number. The more negative it is, the stronger the rejection of the hypothesis that there is a unit root at some level of confidence. Phillips and Perron have developed a more comprehensive theory of unit root nonstationarity. The tests are similar to ADF tests, but they incorporate an automatic correction to the DF procedure to allow for autocorrelated residuals. Phillips-Perron test is a test that does not include in the tested equation differences between the past series and is using the method of least squares in a simple form. The test itself is a t-statistic for regression coefficient, but adjusted to remove errors. The tests usually give the same conclusions as the ADF tests, and the calculation of the test statistics is complex. For testing a series (or the first or second difference of the series) for the presence of a unit root, in addition to Augmented Dickey-Fuller (1979) and Phillips-Perron (1988) tests, one can compute the GLSdetrended Dickey-Fuller (Elliot, Rothenberg, and Stock, 1996), Kwiatkowski, Phillips, Schmidt, and Shin (KPSS, 1992), Elliott, Rothenberg, and Stock Point Optimal (ERS, 1996), and Ng and Perron (NP, 2001) unit root tests. An extra test, in order to confirm that the applied regression is viable, consists in the study of error variance that has to be normal distributed, 0 mean and constant variance. To study the normality, one can use the following indicators: Kurtosis, Skewness and Jarque-Bera. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 185 URL: http://www.reaser.eu e-mail: editors@reaser.eu A significant assumption of the random walk theory is investigated through variance ratio test. One popular approach, the Lo and MacKinlay (1988, 1989) overlapping variance ratio test, examines the predictability of time series data by comparing variances of differences of the data (returns) calculated over different intervals. If we assume the data follow a random walk, the variance of a period difference should be times the variance of the one-period difference. Evaluating the empirical evidence for or against this restriction is the basis of the variance ratio test. 2.2. Trading tests Another point we discussed regarding the weak-form EMH is that past returns are not indicative of future results, therefore, the rules that traders follow are invalid. An example of a trading test would be the filter rule, which shows that after transaction costs, an investor cannot earn an abnormal return. These tests study the weak form of informational efficiency in an indirect way, evaluating the possibility to gain extra profits by using the historical evolution of the asset through a trade strategy. 3. Main results of previous tests applied on emerging capital markets Emerging equity markets are widely thought to be places of substantial trading profits and weak and semi-strong form market inefficiencies when compared to developed markets. In their article, Griffin, Kelly and Nardari, 2009, examine the extent to which this is true using a variety of methodologies and data from 28 developed and 28 emerging markets. Emerging markets exhibit similar autocorrelation in firm returns, suggesting that they are not under or overreacting to news contained in past returns any more than in developed markets. Emerging markets incorporate past market and portfolio returns into prices slightly better than developed markets. Using the article of Basu and Morey (2005), who developed a theoretical model that explores the effect of trade openness on stock return autocorrelation patterns, the paper of Lim and Kim, 2008, brings their proposition to the data, examining the impact of liberalization policies, both trade and financial, on the informational efficiency of 23 emerging stock markets. In general, the key results from fixed effects panel regressions support their prediction that trade liberalization, rather than financial openness, matters the most for informational efficiency. Employing both cointegration analysis and a variety of Granger causality tests, Guttler, Meurer, Da Silva (2007) examine whether the Brazilian stock market is efficient in processing new information about public macroeconomic data (semi-strong efficiency). They found the stock market to be inefficient, which is in line with most results for other emerging markets. They found a long run relationship between selected macroeconomic variables of the Brazilian economy and its stock market index. Islam, Watanapalachaikul, Clark (2007) proposed a theory-free paradigm of non-parametric tests of market efficiency for an emerging stock market, the Thai stock market, consisting of two tests which are runtest and autocorrelation function tests (ACF), to establish a more definitive conclusion about EMH in emerging financial markets. The result of this research demonstrates that an autocorrelation on Thai stock market returns exists particularly during the post-crisis period. Despite the fact that there have been developed various specialty papers linked to the Bucharest Stock Exchange, the approaches linked to the way of evaluating these securities in the specific context of the capital market in Romania are more symptomatic (Bratianu, Opreana, 2010). Besides, their content represents more of some translations of developed studies for other economies, which beyond the scientific importance, many times indisputable, cannot always catch the particularities of the Romanian capital market. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 186 URL: http://www.reaser.eu e-mail: editors@reaser.eu In other words, although the approaches linked to the formal side of the stock operations accurately present the phenomenology of the capital market, they do not equally catch the substance of the problem, given by the stock evaluation logic, base of the transactions done in a rational manner. On the other hand, the issues related to the evaluation of the financial assets, as a premise of an advanced management of the portfolio, are favorite topics in the economic scientific research, even on an international scale. Regarding Romanian capital market, it has been investigated rationality of Romanian investors, and efficiency market hypothesis represented a useful tool in order to achieve this goal (Dragota, Mitrica, 2004). The tests suggested by Fama [1970] have been successfully applied by many authors. Therefore, for many Romanian researchers it was incentive to proceed on investigating informational efficiency of Romanian capital market. Most of these studies have focused on the weak form of informational market efficiency using in that sense autocorrelation coefficients, normality and stationarity tests (Augmented Dickey-Fuller and Phillips-Perron) in order to test random walk pattern for stock returns. One particular study, relatively recent and different from those existing, is that of Voineagu and Pele (2008), in which the efficiency of the capital market in Romania is tested using an econometric model based on the random walk theory, proving the weak form efficiency of this market. Lazar and Ureche (2007) tested weak-form market efficiency of eight emerging markets: Romania, Hungary, Czech Republic, Lithuania, Poland, Slovakia, Slovenia, Turkey. The used tests determined empirically the presence of linear and nonlinear dependences, for most of the returns series. Most of these emerging equity markets were not weak-form efficient. In their paper, Omay and Karadagli (2010) addressed weak form stock market efficiency of emerging economies, by testing whether the price series of these markets contain unit root. The results of ADF and PP indicated that Bulgarian, Greek, Hungarian, Polish, Romanian, Russian, Slovenian and Turkish stock markets were weak form efficient, while the results of nonlinear unit root test implied that Russian, Romanian and Polish stock markets were not weak form efficient. The analysis done in their paper (Dima, Barna, Pirtea, 2007) suggests the following aspects: the financial sector of the market reflected by the BET-FI index can be described „up to a point” as being „informational efficient” (in the weak way of the concept), but the assembly of the weak characteristics does not fully respect the demands raised by such a characterization. In their paper, Dragota, Caruntu, Stoian (2005) reveal that it is not necessary that a market is informational efficient only if prices follow a random walk. In other words, this is a necessary condition, but not a sufficient one. For example, on Romanian capital markets, some studies reveal a random walk evolution of prices. However, their study proves that there is a significant difference between price and an intrinsic value for some assets, which represents a major feature of Romanian capital markets, because that anomaly is persistent in time. Basically, the results of their study put in question investors’ rationality on Romanian capital markets. Another recent paper (Bratian, Opreana, 2010) tested the hypothesis of efficient market in the case of capital market in Romania during the economic financial crisis. The authors intended to test the informational efficiency on the capital market in Romania during the economic and financial recession which affected the economic environment globally. It was analyzed the evolution of stock indices BET, BET-C and BET-FI. Their empirical test followed the research of the random walk hypothesis of three stock indices of the Bucharest Stock Exchange, being made the following tests:  Tests regarding the observance of the normality hypothesis of distributed instantaneous yields (logarithmic) of stock indices; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 187 URL: http://www.reaser.eu e-mail: editors@reaser.eu  Stationary tests for instantaneous yields (logarithmic) of stock indices. Also, the log normal distribution was used in order to model the processes from the capital market because it eliminated the shortcomings of normal distribution. Following the upper statistical tests applied to stock indexes BET, BET-C and BET-FI, the authors reached the following conclusions:  applied statistical tests to detect random-walk type behavior led to the rejection of hypothesis behavior of these daily series of stock indices;  had not obtained sufficient evidence to support the efficient market hypothesis in weak form, for the daily stock indices. From a statistical viewpoint, the test results did not confirm the random-walk hypothesis of stock indices value and the instantaneous returns were autocorrelated for certain lags. The statistical tests performed for each of the stock indexes indicated the fact that the evolution of the training was independent from one period to another (autocorrelation coefficients were significantly different from zero), which invalidated the efficiency hypothesis of weak form market. 4. Conclusions: critical evaluation of testing methods for the emerging capital markets From the above review, it can be concluded that empirical tests have given mix results about efficiency in emerging markets. For a test to be reliable it should take into consideration the institutional features of these markets. These empirical studies have used the conventional efficiency tests, which have been developed for testing mature markets. Emerging markets are characterized by low liquidity, thin trading, unreliable information, and less informed investors. Furthermore, the rationality assumption implies that investors are risk averse, instantaneously respond to new information, and make unbiased forecasts. Based on these assumptions we expect prices to respond linearly to the arrival of information. The weak-form of informational efficiency is put in doubt by some anomalies, like the week-end effect and January effect. These anomalies are empirical results that seem to be inconsistent with maintained theories of asset-pricing behavior. They indicate either market inefficiency (profit opportunities) or inadequacies in the underlying asset-pricing model. An anomaly or regularity is where empirical evidence contradicts the EMH. For example, it may be the case that if a share price rises one day, it is more likely to rise the nest day and if it falls one day it is more likely to fall the nest day. This knowledge would enable us to predict future price movements with some accuracy it would contrabandist the EMH and as a result would be referred to as an anomaly. The major challenges to EMH are mainly in the following forms: empirical tests for EMH show no evidence in favour of EMH, the existence of the limitations of the statistical and mathematical models for EMH, the evidence of the excess volatility mean reversion predictability, the existence of bubbles, and nonlinear complex dynamics and chaos in the stock market. To test the hypothesis of informational efficiency of an emergent market, one should take into account some peculyarities of these markets, like: nonlinearity of asset prices, thin trading, the financial liberalization impact on the performance of emerging markets. The new studies in this field should eliminate two effects from the random walk hypothesis testing: - the effect of thin trading; the effect of nonlinearity. In testing the efficiency of emerging markets, it is necessary to take into account some of their characteristics, like thin trading. Among the consequences of thin trading is the appearance of a serial correlation, studied by Miller, Muthuswamy and Whaley (1994). To remove the impact of this artificial ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 188 URL: http://www.reaser.eu e-mail: editors@reaser.eu correlation, a correction is applied to the observed returns. The methodology proposed by Miller, Muthuswamy and Whaley suggests an autoregressive model AR(1) to separate the effect of infrequent trading (Lazar, Ureche, 2007). Many studies showed that low liquidity, as a result of the thin trading of assets can imply a wrong rejection of weak form informational efficiency because the artificial autocorrelations. We mention in this sense a study that tests random walk hypothesis by eliminating the effect of thin trading. Abraham, Seyyed and Alsakran (2002) analyze the main exchange indexes of Saudi Arabia, Kuwait and Bahrain. They say that inferences drawn from tests of market efficiency are rendered imprecise in the presence of infrequent trading. As the observed index in thinly traded markets may not represent the true underlying index value, there is a systematic bias toward rejecting the efficient market hypothesis. For the three emerging Gulf markets examined in their paper, correction for infrequent trading significantly alters the results of market efficiency and random walk tests. Conventional tests based on autocorrelation coefficients detect only linear autocorrelation. Emerging markets are typically characterized by a non-linear information behavior in stock prices (Todea, 2005). To detect nonlinear correlations in the returns series, Lazar, Ureche (2007) performed a BDS test (Brock, Dechert, Scheinkman and LeBaron, 1996); BDS is a powerful tool for detecting serial dependence in time series. The runs test relies only on the successive returns signs, without interest in their dimension and does not require assumptions about the distribution of the returns. A sequence with too many or too few runs suggests that the sample is not random. In their paper, Hassan, Al-Sultan, Al-Saleem, 2003, examine the market efficiency of a frontier capital market of Kuwait by taking into consideration the role of infrequent trading, non-linearity in emerging stock market and regulatory changes. Correction has been made to accommodate thin trading and possible nonlinearity. The results do not support the null hypothesis of market efficiency for the whole study period and earlier sub periods. The emergent markets are characterized by quick structural changes and gradually financial liberalization. In these conditions, many researchers built tests that could show the possible increase of efficiency in time. These tests of efficiency evolution could be done by using:  Kalman filters: we mention here the paper of Rockinger, Urga (2000) that introduces a model, based on the Kalman filter framework, which allows for time varying parameters, latent factors, and a general GARCH structure for the residuals. With this extension of the Bekaert and Harvey (1997) model it is possible to test if an emerging stock market becomes more efficient over time and more integrated with other already established markets in situations where no macroeconomic conditioning variables are available;  The test of the report of variances with autocorrelation coefficients variable in time: the article of Kvedaras and Basdevant (2002) combines the methodology for testing the efficiency of capital market using the variance ratio robust to heteroscedasticity with the state-space representation, which enabled them to use an efficient filtering technique - the Kalman filter - to get time varying autocorrelations. The impact of financial liberalization upon the emergent markets performance is other element that should be taken into account when testing the weak form of informational efficiency. The classical models that require the constancy of parameters in time are incapable to show the level of efficiency evolution. More than that, the returns are far from the normal distribution, because they are not independent and identical distributed. In these conditions, one should use a model that takes into account all these aspects (see Nguyen, Bellalah, 2008). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 189 URL: http://www.reaser.eu e-mail: editors@reaser.eu Most studies on the informational efficiency submit on the idea that the deviation from random walk process is perceived as a deviation from the hypothesis of informational efficiency. This deviation is caused by the presence of long or short run dependencies:  long run dependencies can be tested with Hurst exponent. The presence of long memory dependence in asset returns has been subject of a long and extensive research. In a recent paper, Cajueiro and Tabak (2005) have shown that long-range dependence for equity returns is time-varying and therefore the dynamics of these Hurst exponents should be explored. Furthermore, Cajueiro and Tabak presented a rank for efficiency built by analyzing median Hurst exponents for different countries;  short run dependencies of financial market can be tested with the General Spectral Test (GST) proposed by Escanciano & Velasco (2006). However, stock returns may show non-linear dependence. Based on this, they proposed a generalized spectral (GS) test, which can capture both linear and non-linear dependence. The research of emergent markets efficiency will have new dynamics because, beside the classical analysis instruments, new research models will be applied, based on the technical progress and on the high speed of incorporating the information. As a conclusion, all the efficiency tests, the scientific identification of markets inefficiencies help the improvement of our knowledge regarding the assets behaviour and the returns evolution in time. They help to improve the assets evaluation models, but also the practice and the vision of professionals in the capital markets. 5. Acknowledgements This work was supported by the project "Post-Doctoral Studies in Economics: training program for elite researchers - SPODE" co-funded from the European Social Fund through the Development of Human Resources Operaţional Programme 2007-2013, contract no. POSDRU/89/1.5/S/61755. 6. References [1] Abraham A., Seyyed Fazal J., Alsakran Sulaiman A. (2002) Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets, Financial Review, volume 37, issue 3 [2] Basu, P., Morey, M.R. (2005) Trade opening and the behavior of emerging stock market prices, Journal of Economic Integration 20, 68-92 [3] Box, G. E. P., and Jenkins, G. (1976) Time Series Analysis: Forecasting and Control, Holden-Day [4] Bratian V., Opreana C. (2010) Testing the hypothesis of a efficient market in terms of information – the case of capital market in Romania during recession, Studies in Business and Economics, vol. 5, issue 3 [5] Cajueiro Daniel O., Tabak Benjamin M. (2005) Ranking efficiency for emerging equity markets, Chaos, Solitons & Fractals, Volume 23, Issue 2 [6] Dima B. & Barna F. & Pirtea, M. (2007) Romanian Capital Market And The Informational Efficiency, MPRA Paper 5807, University Library of Munich, Germany [7] Dragota Victor, Caruntu M., Stoian A. (2005) Market informational efficiency and investors’ rationality: some evidences on Romanian capital market, http://iweb.cerge-ei.cz/pdf/gdn/RRCV_19_paper_03.pdf [8] Dragota, V., Dragota, M., Damian, O., Mitrica, E. (2003) Gestiunea portofoliului de valori mobiliare, Ed. Economica, Bucharest [9] Dragota, V., Mitrica, E., (2004) Emergent capital markets` efficiency: The case of Romania, European Journal of Operational Research, 155, issue 2 [10] Fama, E., (1970) Efficient Capital Markets: a Review of Theory and Empirical Work, Journal of Finance, 25 may ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 190 URL: http://www.reaser.eu e-mail: editors@reaser.eu [11] Griffin, John M., Kelly, Patrick J. and Nardari, Federico (2009) Are Emerging Markets More Profitable? Implications for Comparing Weak and Semi-Strong Form Efficiency, AFA New Orleans Meetings Paper [12] Grossman, S., Stiglitz, J. (1980) On the Impossibility of Informationally Efficient Markets, The American Economic Review, vol 70, issue3 [13] Guttler Caio, Meurer, Roberto and Da Silva, Sergio (2007), Informational inefficiency of the Brazilian stock market, MPRA Paper No. 1980 [14] Hamid Kashif, Suleman Muhammad Tahir, Shah Syed Zulfiqar Ali, Akash Rana Shahid Imdad (2010) Testing the Weak form of Efficient Market Hypothesis: Empirical Evidence from Asia-Pacific Markets, International Research Journal of Finance and Economics, ISSN 1450-2887 Issue 58 [15] Hassan, K. M., Al-Sultan, W., and Al-Saleem, J. A. (2003) Stock Market Efficiency in the Gulf Cooperation Council Countries (GCC): the Case of Kuwait Stock Exchange, Scientific Journal of Administrative Development, 1(1), 1-21. [16] Islam Sardar M.N., Watanapalachaikul Sethapong, Clark Colin (2007) Are Emerging Financial Markets Efficient? Some Evidence from the Models of the Thai Stock Market, Journal of Emerging Market Finance December vol. 6 no. 3 [17] Kvedaras Virmantas, Basdevant Olivier (2002) Testing the efficiency of emerging markets: the case of the baltic states, Working Papers of Eesti Pank, No 9 [18] Lazar Dorina, Ureche Simina (2007) Testing Efficiency of the Stock Market in Emerging Economies, Annals of the University of Oradea - Economic Sciences, XVI [19] Lim, Kian-Ping and Kim, Jae H. (2008) Trade Openness and the Weak-Form Efficiency of Emerging Stock Markets. Available at SSRN: http://ssrn.com/abstract=1269312 [20] Nguyen, D.K. & Bellalah, M. (2008) Stock market liberalization, structural breaks and dynamic, changes in emerging market volatility, Review of Accounting and Finance, vol. 7, issue 4 [21] Omay, Nazli C. and Karadagli, Ece C. (2010) Testing Weak Form Market Efficiency for Emerging Economies: A Nonlinear Approach, http://mpra.ub.uni-muenchen.de/27312 [22] Osamah AlKhazali (2011) Does infrequent trading make a difference on stock market efficiency? Evidence from the Gulf Cooperation Council (GCC) countries, Studies in Economics and Finance, Vol. 28 Iss: 2 [23] Pele, D.T. and Voineagu, V. (2008) Testing Market Efficiency via Decomposition of Stock Return. Application to Romanian Capital Market, Romanian Journal for Economic Forecasting, 5(3): 63-79. [24] Rockinger, Michael & Urga, Giovanni (2000) A Time Varying Parameter Model to Test for Predictability and Integration in Stock Markets of Transition Economies, CEPR Discussion Papers 2346 [25] Stancu, I. (2003) Finante, Ed. Economică, Bucharest [26] Șărămăt O., Dima B. (2011) Testing the weak-form informational efficiency of United Kingdom, United States of America and Japan’s capital markets, Timisoara, Journal of Economics, Volume 4, Issue 2 (14) [27] Tarun Khanna, Krishna Palepu, Jayant Sinha (2005), Strategies that fit emerging markets, 2005, Thriving in Emerging Markets, Harvard Business Review [28] Timmermann Allan, Granger Clive W.J. (2004), Efficient market hypothesis and forecasting, International Journal of Forecasting 20 [29] Todea A. (2002) Teoria pietelor eficiente si analiza tehnică: Cazul pietei românesti, Studia Universitatis BabesBolyai, Oeconomica, XLVII, 1 [30] Voineagu, V., Pele.D. (2008) Testing Market Efficiency via Decomposition of Stock Return. Application Romanian Capital Market, Romanian Journal of Economic Forcasting, nr. 3 [31] Vulić Tamara Backović (2010) Testing the Efficient Market Hypothesis and its Critics - Application on the Montenegrin Stock Exchange, Available at http://www.eefs.eu/conf/Athens/Papers/550.pdf ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 191 URL: http://www.reaser.eu e-mail: editors@reaser.eu Benchmarking as a factor of an economic crisis consequences’ levelling V. N. Ostrovkaya 1+ 1 North Caucasian Federal University, Russia Abstract. Issues of European companies' effectiveness in the conditions of an unstable world economic situation became a priority for all managers. The economic crisis caught many managers unawares and made economic agents of the European market face new major problems on formation of instruments of successful corporate adaptation to the changing environment. The author argues that the benchmarking as an effective way out of the unfavourable situation should become a major factor of an economic crisis evening-out. As the benchmarking unites development of strategy, the analysis of competitors and branch as a whole, the European companies can use it as the tool to find the solution for all the problems arising during the crisis; relying on the experience of other countries, they can define how to organize work so that in short terms restore the forces and to move on to the new levels. In other words, realization of benchmarking potential for the companies of the European Union countries in modern economic conditions allows to develop and introduce recipes of effective development in the uncertain environment, and to prevent the negative effects of an economic crisis. In the article the author's methodology of business processes improvement by means of benchmarking (that is supposed to help European companies avoid bankruptcy following other companies as a result of the crisis, and even to keep the current rates of development despite that the current macroeconomic situation will contradict it) is considered. The competitive and integration benchmarking as the instrument of market agents interaction is offered by the author as a supportive application on the one hand, and the unique factor whose account will allow to level an economic crisis, on the other hand. Also in the article, a comparative and critical SWOT analysis as the tool of a competitive and integration benchmarking, the marketing strategy of solving the problems of a competitive and integration benchmarking, the «house of quality» hierarchy is considered at an assessment of companies’ activities efficiency. These standard economic statements of the author are urgent for the companies of the European Union countries in connection with an existing economic crisis. Keywords: benchmarking, economic crisis, development strategy, economic potential, competition. JEL Codes: M10, M11. 1. Introduction All of us involuntarily became witnesses of the deepest economic crisis for the last 80 years. The crisis shook the financial markets and broke economic growth of the European Union countries. Thousands of people lost their jobs, many of them were forced to emigrate from EU, in search for a better life, young graduates are compelled to choose between staying at home and working for a few years almost free of 1+ Doctor of Economics, Head of Projects and Innovations Chair. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 192 URL: http://www.reaser.eu e-mail: editors@reaser.eu charge, getting hand in. At the price of the pensions, which have been cut down in some EU countries, funds in others were rescued. In the European parliament the special anti-recessionary committee, which analyzes the reasons of recessions was created. It provides recommendations on the measures, which need to be accepted to stabilize a situation. Now it is already visible that the financial markets are supervised more rigidly. Supervisory authorities are created in London, Frankfurt and Paris. EU Member States coordinate monetary and economic policy at home, and also report under the adopted budget to the European commission. But, in our opinion, the measures applied are insufficient for the purposes of similar shocks avoidance. And the unique tool allowing to maintain competitiveness in the market is benchmarking. The increase of competitiveness of the enterprise in many respects depends on the possibility and quality of management of competitive advantages. It is accepted to understand those characteristics, which create certain superiority for the enterprise over the competitors producing and distributing this product as competitive advantage. Such superiority is relative and is defined in comparison with the competitor. 2. 2.1. Competitive advantages and benchmarking Competitive advantages development The majority of possibilities to create and maintain competitive advantages of the enterprise lie beyond its limits, i.e. they consist in effective establishment and development of business relationships with the other business factors and public institutions. In order to resist to unexpectedness of competitive fight and influence of macroeconomic factors, it is necessary to focus attention to cooperation with the subjects of the marketing system. Being able to collect information on various aspects of activity from other subjects of business, the businessmen need to search for the solutions which would be based on the best practice, the best methods and experience of the industry and would result in maximum efficiency. There is a need not only for carrying out marketing research (in its classical sense), but for the philosophy and the function connected with search, identification and application of methods, leading to the maximum productivity (Kunaev, 1995). To reach desirable results of development, it is necessary to carry out the marketing analysis of the market and competitors’ activity not only at the national, but also at the world level. It will allow the enterprises to reveal problems concerning internal business processes, the reasons for backlog from the rival enterprises, and external business processes as well. The most typical sources of obtaining competitive advantages are:  new technologies,  changes of structure and cost of separate elements in a technological chain of production and the sale of goods,  new inquiries of consumers,  emergence of a new market segment (niche),  information and professional skills of its receiving and analysis. Temporary factors of organization’s competitive advantage are defined:  by the source of advantage (Ivanyuk 2001): low-rank advantages (cheaper labour or raw materials) can be easily achieved by competitors; high-rank advantages (patent technology, the unique goods, business reputation) are possible to be kept for a longer while;  by quantity of obvious sources of competitive advantage available for organizations;  by continuous modernization of production and other kinds of activities. The market, with a tendency of continuous strengthening of its competitive field, requires the analysis and monitoring of competitors’ activity and of the enterprises occupying leading position on the market. To optimize own activity and to create competitive advantage, it is necessary to study the experience ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 193 URL: http://www.reaser.eu e-mail: editors@reaser.eu of others, to select in the course of researches working methods from the practice of competitors and partner firms, in order to compare the enterprise to the leaders and to study methods of competitive potential level increase on the basis of the received experience. The essence of this approach in world practice of business is reflected in benchmarking. Now the benchmarking becomes the important tool of the analysis of a market situation and an assessment of competitive positions of the enterprise (on the basis of which strategic decisions are made). 2.2. Benchmarking The benchmarking is a mechanism of the comparative analysis of overall performance of one company with the indicators of others (more successful firms). The term "benchmark" was borrowed in construction and in the mining industry where it designates the fixed point, whose location is precisely defined in three measurements (Sokolova 2007). This point is accepted to a reference mark at measurement of distance, the surface areas. The term was borrowed by an administrative science as a metaphor of the standard, which is likely to aspire, and is usually defined in efficiency terms. Differently, in an administrative context the benchmarking means use of an existing example or a settlement indicator as a starting point for an efficiency assessment in this or that aspect. Thus, the benchmarking is carried out for the analysis of efficiency of separate functions and processes within an organization. It allows to define more precisely the reasons of production inefficiency and to make recommendations on the solution of the revealed problems. The benchmarking finds application in all fields of activity of the enterprise – including logistics, marketing, human resource management etc (Erkov 2006). Having analyzed the views of various authors on the concept of “benchmarking,” it is possible to draw a conclusion that practical experience of benchmarking application was considerably supplemented and modified by R. Camp's definition which appeared in the late ‘80s. The benchmarking began to focus not only on the collection of information for comparison and a technique of the best businesses selection (in order to define a benchmark which can become a behaviour standard), but also on the development of such corporate culture within the enterprise that it could promote the perception of the best working methods. Besides that, the search of the best methods of enterprise oepration stepped over the branch borders. Scientists and practitioners suggest to define the essence of a benchmarking ambiguously: as the concept, and as the process and as the function (a special kind of activity), the tool, a way of an assessment of strategy and aims at the same time. Reverting to the sources of obtaining competitive advantages (new technologies, changes of structure and cost of separate elements in a technological chain of production and the sale of goods, new inquiries of consumers, emergence of a new segment of the market, information), it is possible to allocate the generalized source, called "innovations". Innovation is any introduced novelty which qualitatively improves any production or the process demanded by the market. For example, Danish scientists tried to learn for many years how to treat effectively wounds of the patients with diabetes. At last the group of young scientists found an effective way, received the certificate and formed the company, which was financed by special state fund of young scientists support. Thus, innovations can be used as means of benchmarking. Having analyzed the mechanism of strategy formation within the successful innovative enterprise, other firms can make use of this experience as a source of obtaining competitive advantage, namely the development of new technology. And as the innovative enterprise is object of voluntary financial investments from special state business support funds, receiving financial support will promote a conclusion of business to new higher indicators, thereby not only holding itself afloat during the moments of economic tactical recessions, but also reaching more competitive situation in long-term prospect. For example, the history occurred to Skype shows that there are enormous reserves for technological projects which can appear innovations of world level. Four Estonians designed this program in 2003, having created at first the technology. Then the Swede and the Dane were engaged in sales and financing. And in ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 194 URL: http://www.reaser.eu e-mail: editors@reaser.eu May, 2011 Skype was bought by Microsoft for the record sum of 8,5 bln. dollars. That is today the company expanded to the billion-dollar turn and created the competition to the telephone companies of a world scale. One more experience of Estonian business is a creation within Internet shop of the robot dummy, capable to be arranged under any parameters (growth, weight, breast volume, a circle of hips, waists and t. д). The client specifies data of the figure, and the robot takes the form according to the set parameters and shows the chosen model of clothes. Acceptance of this innovation by the British online shop "Hawes and Curtis" allowed increasing twice the sales. The example of Estonian company shows that there is no need to have too much money to invest and introduce innovations. Nevertheless, the idea that it is a prerogative of the rich countries became common. That is not true, in our opinion. And a problem of the small countries does not consist at all in a lack of ideas or financing. The unique problem of the small countries is an absence of competent marketing of own inventions, ideas, values, a way of life. It is necessary to adopt only experience of applied development of the ideas, very long time ago tested in the West and adopted in EU countries. Today, during an era of business globalization, the company realizes the need for comprehensive and detailed study and the subsequent use of the best achievements of competitors with a view of own survival. The benchmarking as search of standards for study and introduction of experience became the world trend. The long-term experience of benchmarking application in the USA should be picked up and extended in Europe. 3. Benchmarking and marketing activities At an institutional stage of benchmarking development an acquisition of competitive advantages has to be organized as the new business strategy of the enterprise based on cooperation and interaction: the buyer must be turned into the business partner, and achievements of more successful competitors and the leading organizations from various branches, mainly the best international practices, must be studied on the basis of a competitive and integration benchmarking aiming at effective voluntary exchange of the best practices between various subjects of economic activity. Thus it is necessary to understand the analysis of innovative activity of the competitors as a competitive and integration benchmarking, based on interaction and cooperation, for the purpose of association and formation of qualitatively new business processes on the basis of experience of the advanced international organizations of this branch for improvement of competitive advantages at the international level. Thereby the new element is included in the concept of a competitive and integration benchmarking – the interaction, allowing to raise own results of activity, relying on already reached results of competitors. Competitive and integration benchmarking which implies a refusal of rivalry in favour of cooperation can be considered as a driver in the change of philosophy of modern business. Edward Demming places on it emphasis of "guru" of modern management: «the competition – someone wins, someone loses, cooperation – is won by all». At an institutional stage of development of a benchmarking acquisition of competitive advantages it is necessary to organize the new business strategy of the enterprise based on cooperation and interaction: the buyer must turn into the partner in business, and achievements of more successful competitors and the leading organizations from various branches, mainly the international best practices, to be studied on the basis of a competitive and integration benchmarking which achieves the object – an effective voluntary exchange of the best practices between various subjects of economic activity. Thus it is necessary to understand the analysis of innovative activity of the competitors as a competitive and integration benchmarking, based on interaction and cooperation, for the purpose of association and formation of qualitatively new business processes on the basis of experience of the advanced international organizations of this branch for improvement of competitive advantages at the international level. Thereby the new making element is included in the concept of a competitive and integration benchmarking – the interaction, allowing to raise own results of activity, relying on already reached results of competitors. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 195 URL: http://www.reaser.eu e-mail: editors@reaser.eu Competitive and integration benchmarking which implies a refusal of rivalry in favour of cooperation, can be considered as a motivating power changing the modern business philosophy. Edward Demming, the modern management “guru” emphasizes: «competition – someone wins, someone loses, cooperation – everybody wins» (Hananova 2003). In a competitive and integration benchmarking the competitive analysis of advantage can be applied directly as the benchmarking assumes an assessment of enterprise activities’ parameters during their comparison (indicators of the enterprises’ and products’ competitiveness). The tool is not a simple SWOT analysis – it implies carrying out SWOT analysis by means of key factors of success comparison with use of graphic methods of results interpretation, i.e. comparative critical SWOT analysis. Thus, comparative and critical SWOT analysis represents the comparative analysis of key indicators or critical factors of success of the given enterprise and its competitors. The marketing strategy allows the enterprise to direct the resources and efforts to even bigger growth of a resultant indicator and strengthening of competitive advantage that steadily conducts to rapprochement with coupon indicators. Marketing strategy works most effectively when there is a component of corporate strategy indicating how the enterprise should find and work with consumers, possibilities and competitors in this segment of the market. In the conditions, occurring at the present in the world markets, achievement of success is impossible without understanding the desires of the consumer. In connection with it, the traditional idea of qualitative and competitive production is essentially transforming. Quality appears to be the thing, for which the consumer wants and can pay money – innovations. It is possible to interpret innovations as the general set of technical, technical and operational characteristics of a product or a service by means of which the product or service will meet the requirements of the consumer at their operation. The concept of an innovation should be designed and put in a product. In absence of this main condition all inspiring appeals to ensuring quality and carrying out the most careful checks will be senseless and ineffectual. The main objective of any enterprise is to deliver on the market new products (services) before the competitors, at lower price and of the best quality. The mechanism of such purpose achievement is called Quality Function Deployment (QFD), «a method of houses of quality» or a method of synchronous engineering. The QFD method was created in Japan in the late ‘60s, and it was first applied in 1972 by Mitsubishi, the corporation of heavy industry from a shipyard in Kobe. The application of QFD method broke the barriers between enterprise divisions, forcing the experts to work as one team, for the project as a whole. 3.1. House of quality It is possible to enter additional information into consideration and to consider it in the main structure QFD. Figure 1 presents the so-called “house of quality”. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 196 URL: http://www.reaser.eu e-mail: editors@reaser.eu Customer demands What? How much? How good? Importance Correlation matrix Image on the market Planning Costs engineering specifications How? Why? Where to? At what price? Match matrix What? and How? Product assessmen t What and Where to? How? and At what price? (ABCanalysis) How and How much? How and How good? Technical features analysis Special features target values and characteristics Fig. 1: House of quality The house of quality is a popular collection of certain hierarchies and tables, which has a form of the table connecting points between «a voice of a consumer» and «a voice of an engineer». The house of quality is used by interfunctional groups to translate the set of the client’s requirements using market researches and benchmarking analysis data, in the corresponding quantity of prior engineering target indicators, for a new product design creation. The house of quality is to some kind a conceptual card, which provides means for interfunctional planning and coordination of processes of improvement and product development. The house of quality contains 6 major elements: 1. Requirements of the client. The structured list of requirements received from statements of the client. 2. Technical requirements. The structured set of relevant and measured parameters of a product. 3. Planning matrix. Illustrates the perceptions of the client observed during the market research. Includes relative importance of the client’s requirements, efficiency of the company and competitors in satisfaction of these requirements. 4. Matrix of relationship. Illustrates perceptions of QFD group concerning relationship between technical and client requirements. The corresponding scale which is illustrated with use of symbols or figures is applied. 5. Matrix of technical correlation. It is used to define whether technical requirements support or interfere with design of a product. It is a possibility for an innovation. 6. Technical priorities, reference points and target indicators. Completely developed function of quality includes four stages characterizing process of development of production (table 1). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 197 URL: http://www.reaser.eu e-mail: editors@reaser.eu Stage Product planning Product design Process design Production design 4. Table 1: Stages of “the voice of a customer” tracking Target Customer requirements; Production potential; General product's characteristics; Producer's aims; A range of issues to study. The most critical parts and features of a product Critical parameters of each operation and methods of control Production instructions and the means of quality and production control Conclusion Thanks to the consecutive use of four Houses of quality the most important aspects of specifications of an innovative product (technical parameters) will be transformed to parameters processes. It allows to make the process operated that promotes achievement of a stable and satisfactory level of quality of an innovative product and high competitiveness in the conditions of crisis. 5. References [1] Erkov A. A., Benchmarking – the modern direction of development of marketing, 2006. [2] Ivanyuk I. A., International marketing: Monograph. Volgograd: VSTU Publishing house, (2001), 36-37. [3] Kunayev A. I., Competitive advantages in retail. Moscow: SPENDTHRIFT, 1995. [4Sokolova] E. V., A benchmarking in infrastructure branches: the analysis of methodology and practice of application (on a power industry example): Scientific reports. Saint-Petersburg: Scientific research institute of management of St.Petersburg State University, 1, (2001), 7. [5] Hananova N., Features of a national benchmarking, Management of campaign, 10, (2003), 13. [6] Glenn H., Elicit customer needs: using software engineering tools, 2006. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 198 URL: http://www.reaser.eu e-mail: editors@reaser.eu Elaborate cluster policy – new vision for the regional development E. G. Popkova 1+, M. K. Romanova 2+, L. I. Kukaeva 33+ 1 World Economy and Economics Chair, Volgograd State Technical University (Volgograd, Russia) World Economy and Economics Chair, Volgograd State Technical University (Volgograd, Russia) 3 Volzhsky Polytechnic Institute, Volgograd State Technical University Branch (Volzhsky, Russia) 2 Abstract. In this article, the appraisal of the European cluster initiatives’ perspectives is attempted. In view of the inauspicious economic processes taking place (particularly in PIIGS countries), the new vision of the regional development is of high interest. The authors’ previous research concerning so-called “underdevelopment whirlpools” as well as optimal clusterization policies was brought in order to find out if traditional industrial clusters’ formation can lead to undesirable consequences, e.g. technological unification, a decrease in competition within an industry, efficiency loss and “underdevelopment whirlpools’ deepening”. Such hypothesis is verified by means of clusters’ and regional development maps superposition. Furthermore, patterns of industrial and post-industrial (informational) clusterization were examined. The following study indicates that engagement of an innovative component seems to be part and parcel of an effective clusterization process; the contrary could be the cause of the local underdevelopment phenomena. Some authors’ recommendations for regional cluster strategies’ creation are cited. Keywords: cluster, clusterization, cluster policy, European cluster initiatives, regional development, underdevelopment whirlpools, cluster mapping, JEL Codes: O21, O25, O31, O33, O38. 1. Introduction Modern economy is characterized by the existence of considerable disproportions between levels of economic growth in various regions of the country. Such difference is shown to be as a result of intracountry and international comparisons. The key reason for the disproportion formation is dynamism, which is inherent in all economic subsystems of the world. Their separate elements cannot remain within the bounds of the qualitatively homogeneous development and undergo considerable high-quality changes; therefore various stages and phases are formed. Thus, the development phenomenon from the moment of its emergence till its “death” is not a simple quantitative increase; quite the contrary, it represents the change of heterogeneous stages and phases, each one of which has its specific contradictions and specific order besides the main contradiction and the basic, the general rule that exists throughout all stages and phases of its development. Each of the economic development stages corresponds with the new quality of economic growth evolving as a result of high-quality transition, which prepares the economy for the new forms and management methods, in the course of progressive development of productive forces. Also, within the formation of a new economic growth quality, except for internal changes, external conditions can play a special role. Transition cannot be made, and a new quality cannot be shaped, if there are no external 1+ Doctor of Economics, Professor. Corresponding author: 210471@mail.ru. 2+ Undergraduate. E-mail: romanowamaria@gmail.com Candidate of Economics, Professor. E-mail: kukaeva@mail.ru . 3+ ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 199 URL: http://www.reaser.eu e-mail: editors@reaser.eu influences. High-quality transitions should often be provided with continued support from external conditions so that the cause and effect chain of occurring events are not interrupted. Considering different public reproduction types, we came to a conclusion on the existence of spatial and temporary characteristics of economic growth. Thus, the spatial essence of the new quality of economic growth is shown in the existence of points where mostly there are its properties and characteristic features (for example, the developed countries of the world). Its temporary essence is defined by the irreversibility of world economic development. 2. New vision of the regional development 2.1. “Underdevelopment Whirlpools” Phenomena In compliance with the purposes of economic development and in order to consider the perspective changes in the levels of economic growth, and, therefore, the competitiveness of the certain states and regions in comparison with each other in the future as well, a notion of “underdevelopment whirlpools” was introduced (Popkova, 2006). “Underdevelopment whirlpools” arise under the pressure of the developed territories’ economic expansion thus creating conditions for the economic and political hegemony that promotes emergence of additional possibilities for their development, measured by the growth of gross revenue per capita. Thus, “Underdevelopment whirlpools” reflect the mechanism of the separate regions’ loss of possibilities for development owing to time lag and the need of the opposition towards the negative impact of globalization (Fig. 1). Fig. 1: Underdevelopment whirlpool In the most difficult cases such chronic backlog leads practically to an irrevocable loss of possibilities for development owing to intensive resource outflow from the state or the region: manpower in the form of migration, capital, natural resources as an exhaustible source of extensive development, and, enterprise capital in the form of brain drain (Popkova, 2011). «Underdevelopment whirlpools» are characterized by some quantitative parameters:  the whirlpool’s depth – temporary backlog of the country from the developed countries; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 200 URL: http://www.reaser.eu e-mail: editors@reaser.eu  the speed of “tightening” into the whirlpool - strengthening or weakening of temporary backlog for a certain period of time (Popkova, 2011). With the view of calculating these parameters’ gross domestic product, comparison per capita analyzed region together with the gross domestic product developed within the territory/region, is carried out. If the gross domestic product developing the territory/region appears less, it is necessary to pass to depth and speed calculation. The depth is defined by the backlog comparison for two considered consecutive periods of time. Speed is analyzed through dividing a whirlpools’ depth into a period between two consecutive dates. The economic sense of a whirlpools’ depth consists of a number of years in which the territory lags behind for considered intervals of time, and the speed of "immersion" shows how this backlog increases in one year. 2.2. Unreasonable Cluster Policy and its Consequences Industrial clusters tend to be of concern, as a panacea, to many theorists and researchers of regional economic development who claim that the clusterization process can help to overcome the gap between industrial and informational economic setups, creating a competitive advanced economy based on innovative technology (Orlov, 2010; Muro, 2010). However, there are numerous side effects of clustering described in literature, including environmental deterioration (especially in the case of heavy industrial agglomerations), reduction of marketing flexibility through obsolete and inertial cooperation patterns, technological unification on the basis of informational spill-over, and, skilled workforce rotation within the cluster (Romanova, 2011). We think it is fundamentally wrong to shift the main focus of regional development policies to the processes of clusterization in view of the specific nature of integration and territorial industry structures’ formation. Despite the considerable body of existing empirical cluster research, only a few studies have systematically investigated the effect of clusters on the performance of new entrepreneurial firms (not to mention clusterization impact on the regional development), and existing research shows inconsistent results concerning whether new firms are positively affected, or even negatively affected by locating in a cluster (Wennberg and Lindquist 2010). There are some studies which confirm that clusters enhance the probability of entry, survival and growth of new firms (Beaudry and Swann 2001; Dumais et al. 2002; Rosenthal and Strange 2002); nevertheless, practical authors’ observations (in conditions of post-Soviet economies), as well as certain scientific papers (Folta et al. 2006; Sorenson and Audia 2000; Wennberg and Lindquist 2010) indicate that location in a cluster decreases the survival chances of new firms. An economic explanation for such a potentially negative effect is that while moderate levels of clustering are beneficial to new firms, very strong clusters might produce adverse effects due to congestion and hypercompetition among firms for resources and personnel (Beaudry and Swann 2001; Folta et al. 2006; Prevezer 1997). An alternative sociological explanation suggests that specific socio-cognitive effects account for the presence of clusters, independent of economic advantages (Wennberg and Lindquist 2010). In this perspective, clusters arise from easier access to resources for launching a new firm and from exaggerated expectations of success due to skewed perceptions of entrepreneurial opportunities, leading to an increase in start-up rates (Sorenson and Audia 2000; Sorensen and Sorenson 2003). This explanation challenges the assumption that the existence of clusters implies the existence of some underlying economic benefit. In other words, the risks in creating a regional cluster result from its particular strengths, namely: high competitiveness and adaptability in comparison with a separate entity. Even when still taking shape, a young cluster tends to occupy the leading positions in an industry. As a result, the competition, as an incentive to develop and improve business strategies, stops working (Chung 2011). A strong cluster suppresses the enterprises, which remain beyond the borders of cluster infrastructure, taking away their market shares due to essential advantages in costs and product innovations. There is little doubt that such outsiders are represented by small and medium enterprises (so-called SMEs), not to mention micro-businesses, which are unlikely to survive in such a “neighbourhood”. It may be attributed to the concept of cluster policy in Russia: it is focused undoubtedly, on the introduction and ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 201 URL: http://www.reaser.eu e-mail: editors@reaser.eu modernization of advanced technologies, while only large-scale businesses can afford the elaboration and application of R&D, to a considerable extent (Popkova et al. 2012). Bearing in mind the that extensive presence of SMEs in a region is a key factor of poverty reduction, artificial clustering could lead to a paradoxical decline in living standards within some social segments while improving economical indicators “per capita” (e.g. regional GDP). Not in the least, this subjects to making private entrepreneurship less attractive; another factor is the distortion of prices following the irrational policy of resource allocation (Rodriguez-Clare 2005). The process of artificial clusterization may lead to the emergence and deepening of regional underdevelopment whirlpools in the areas around the major clusters (Popkova et al. 2011). 3. Hypothesis verification: cluster and underdevelopment mapping In order to bridge the empirical gap between the firm-level clusterization effects stated above, and region-level (macro-level), certain outcomes let us compare clusters and underdevelopment whirlpools mapping. Clusterization processes can be measured by means of assessing:  employees’ dynamics, and,  average cluster size dynamics. Figures 2 and 3 represent French IT and automotive clusters’ employees and size dynamics. As shown, the former tends to maintain the same level, while the latter, decreases. Fig. 2: French IT and automotive cluster (employees) Fig. 2 – 4 source: http://www.clusterobservatory.eu ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 202 URL: http://www.reaser.eu e-mail: editors@reaser.eu Fig. 3: French IT and automotive cluster (size) GDP per capita in the same region, though, had positive dynamics before the crisis (Fig. 4). Fig. 4: GDP per capita dynamics (France) Not having found any evidence of positive clusterization impact on the GDP per capita growth in developed European countries (See Table 1), we did not face the facts proving that the opposite tendency (clusters growth rate – GDP decrease) could exist. For example, in Hungary, where the GDP per capita dynamics is negative (fig. 5), cluster growth was not distinguished. Fig. 5: GDP per capita dynamics (Hungary) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 203 URL: http://www.reaser.eu e-mail: editors@reaser.eu These findings support previous authors' research indicating that diversity of small clusters do provide economic benefits not only for firms in general, but also for newly starting entrepreneurial firms in particular. Although this study does not identify which mechanisms are producing these benefits and does not confirm if stronger (and bigger) clusters have a direct impact on the regional economy. 4. Perspectives of the European cluster initiatives At the present time, it is not possible to withdraw from the benefits of clustering despite its “weak points”, but the urgent modernization of cluster policies is needed in many developing and developed countries, including by some members of the European Union. Let us present some of recommendations, aimed primarily at strategic clustering in developing European regions. 1. Directive measures should be replaced by the support of potentially effective structures that are in an embryonic state. Different studies (see, for example, Popkova 2011) indicate that the main characteristic of the clusterization process is its evolutional and “natural” development. 2. Analysis of local markets and individual companies should be based on the created (not on the inherited) factors of production. Moreover, it should not be focused on the cluster leaders, as the preceding experience indicates that the major GDP is being created in small and medium-sized enterprises (Popkova 2011). Therefore, clustering should be based on business establishment and integration by means of facilitating its access to private capital and outlets rather than on the infusion of federal, regional and local funds in the existent firms. We see, that the average cluster size is decreasing, which proves specialization’s deepening and the average firm’s size reduction. Whether or not it has a direct positive impact on regional development is still an urgent issue. 3. Small businesses represent an important element in the cluster structure, promoting competition and ensuring flexibility, as well as encouraging rapid responses to the emergence of new market needs (Popkova 2011); SMEs are a distinctive “ground” for innovation, as start-ups with small capitalization generate ideas that can be either bought or supported by large-scale members of a cluster core. The need to integrate small and big businesses (aiming to make the whole system more effective) is nowadays realized and actively supported. J. - L. Truel (Truel 2011) points out a dramatic increase in a number of SMEs within French clusters, which had been keeping a traditional focus on large corporations for a long time. Since 2005, small and medium-sized companies became paramount numerically, as well as in gaining support. Forms of cooperation include mostly the outsourcing of short-run production and cooperation in research, but there are some examples of independent small-scale enterprises’ incorporation in the large corporations’ organizational structure (Haagedorn 2010). Evolutionally, a planetary subsystem is taking shape: while the cluster core acquires a resource “gravitational field”, which attracts small businesses which endeavor to engage in this field (Popkova 2011). Evolutionary character seems to be a paramount feature, which defines the effectiveness of the whole integration process (Popkova 2009). Under the conditions of a free market and without any administrative pressure or other artificial clustering policies carried out in a region, large firms naturally seek to fill in the lack of flexibility establishing less competitive and more cooperative relations with small businesses. Otherwise, efficient allocation of resources among all the players does not take place. An important aspect of the work consists of promoting small and medium-sized businesses participation within the cluster during all stages of its formation and evolution. 5. References [1] Popkova E.G., Shakhovskaya L. S.. “Underdevelopment whirlpools”. The analysis of the economic growth disproportions in the Russian regions. Saarbrucken, Germany: LAP LAMBERT Academic Publishing GmbH & Co, 2011. [2] Popkova E.G., Shakhovskaya L. S., Akimova O. E.. Comparative analysis of qualitive characteristics and motives of wage entrepreneurial labour in modern conditions of economic development. Problems of development of worldwide economy in after crisis period, Graduate School of Management. (2010). 70-74. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 204 URL: http://www.reaser.eu e-mail: editors@reaser.eu [3] Popkova E.G., Shakhovskaya L. S., Mitrakhovich T. N.. Economic growth in the context of developing economies. Problems of development of worldwide economy in after crisis period, Graduate School of Management. (2010). 75-80. [4] Shakhovskaya L. S., Popkova E. G.. New Prospects of Economic Growth: Modern Vision Paradigm, Global Business & Economics Anthology. 2006, Vol. I, (December): 428-439. [5] Popkova E. G., Romanova M. K., Akopova E. S.. Towards the strategies of regional clustering: The role of SMEs. International Symposium on Business, Economics and Financial Applications (ISBEFA). (2012). [Preprint]. [6] Orlov S. V., Economic and Legal Foundations of clustering in Russia, Kaliningrad MIA Law Institute Bulletin, 3, (2010), 76-80. [7] Muro M., Katz B., The New ‘Cluster Moment’: How Regional Innovation Clusters Can Foster The Next Economy, Metropolitan Policy Program at Brookings, 2010. [8] Romanova, M. K., Intellectual spillovers in cluster as a factor of R&D cost-effectiveness, Proceedings of the V International Students’ Scientific-Practical Conference, Novosibirsk, 2, (2011), 238-244. [9] Wennberg K., Lindquist G.. The effect of clusters on the survival and performance of new firms. Small Bus Econ, 2010, 34: 221-241. [10] Chung W. D. C., Positive aspects and risks of cluster zones’ formation in the civil aviation, Moscow State Technical University of Civil Aviation Bulletin, 167, (2011), 100-104. [11] Rodriguez-Clare A., Coordination Failures, Clusters and Microeconomic Interventions, Research Network Working papers, Working Paper #544, (2005). [12] Haagedorn J., Roijakkers N., Small entrepreneurial firms and large companies in inter-firm R&D networks – the international biotechnology industry, MERIT, Faculty of Economics and Business Administration, University of Maastricht, (2000). [13] Truel J.-L., Implementing a successful cluster policy: some clues from the French experience, Université Paris 12, (2011). Appendix Table 1: Cluster size and GDP dynamics in some European regions Region Year Automotive cluster employees Number Austria Belgium 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 34937 35935 32750 33647 36601 36820 36805 37044 39339 39339 64174 64594 61492 59512 57912 57445 Growth (%) 0,03 -0,09 0,03 0,09 0,01 0,00 0,01 0,06 0,00 0,01 -0,05 -0,03 -0,03 -0,01 IT cluster employees Number 22663 29882 31026 28082 28717 29299 29630 30343 31456 31456 19244 21727 20737 16606 16848 17541 Growth (%) 0,32 0,04 -0,09 0,02 0,02 0,01 0,02 0,04 0,00 0,13 -0,05 -0,20 0,01 0,04 GDP per capita EUR PPP 25014.6 24733.4 25855.4 26308.8 27459.5 27959.7 29423.7 30563.5 30563.5 30563.5 24023.1 24480.9 25654.3 25568.9 26240.6 26925.1 Growth (%) 1.7 3.7 2.7 4 3.7 3.7 3.7 2 2.3 1.6 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 205 URL: http://www.reaser.eu e-mail: editors@reaser.eu Bulgaria Czech Republic Germany Finland 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 57476 53961 53246 53246 12019 12019 12019 11593 11593 11593 11593 11593 92232 99844 105941 117169 118088 118088 118088 118088 118088 551034 565532 590901 593027 628112 612979 623169 617925 678579 651217 11628 11419 10934 10708 10499 10556 10478 10727 11083 11083 0,00 -0,06 -0,01 0,00 17483 18758 26983 26983 0,00 0,07 0,44 0,00 0,00 0,00 -0,04 0,00 0,00 0,00 0,00 7418 7418 7418 9249 9249 9249 9249 9249 0,00 0,00 0,25 0,00 0,00 0,00 0,00 0,08 0,06 0,11 0,01 0,00 0,00 0,00 0,00 0,03 0,04 0,00 0,06 -0,02 0,02 -0,01 0,10 -0,04 -0,02 -0,04 -0,02 -0,02 0,01 -0,01 0,02 0,03 0,00 51821 48970 45409 47921 43845 43845 43845 43845 43845 288047 324462 329674 273447 265373 272187 282146 299759 383419 381521 18815 21517 20188 19713 19688 20479 21598 28363 28154 28154 -0,06 -0,07 0,06 -0,09 0,00 0,00 0,00 0,00 0,13 0,02 -0,17 -0,03 0,03 0,04 0,06 0,28 0,00 0,14 -0,06 -0,02 0,00 0,04 0,05 0,31 -0,01 0,00 27836.5 28803.3 28803.3 28803.3 5263.5 5770.1 6314.6 6737.7 7309.1 7765.2 8621.1 9388.3 9388.3 9388.3 13041.4 13900.6 14417 15219.5 16261.7 17054.3 18210.6 19950.9 19950.9 19950.9 22576.1 23063.7 23582.6 24154.7 25193.8 26263.4 27459.8 28836.6 28836.6 28836.6 22291 22851.3 23498.8 23363.1 25128.4 25615.3 27162.1 29365.3 29365.3 29365.3 2.9 3.1 3.1 3.1 7.7 7.5 6.7 7.7 7.7 7.7 7.7 5.4 5.4 5.7 6.1 7 7 7 2.7 3.6 4.3 5.2 5.4 5.4 5.4 2 3.8 3.2 5 5.4 5.4 5.4 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 206 URL: http://www.reaser.eu e-mail: editors@reaser.eu France Hungary Ireland Italy Romania 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 274557 282882 292061 292604 289613 288691 278790 287069 278169 278169 53994 58350 54147 50739 53179 53179 53179 53179 53179 5075 5935 5844 5150 4957 4922 4882 3935 3935 3935 204653 204954 210977 223527 223527 223527 0,03 0,03 0,00 -0,01 0,00 -0,03 0,03 -0,03 0,00 0,08 -0,07 -0,06 0,05 0,00 0,00 0,00 0,00 0,17 -0,02 -0,12 -0,04 -0,01 -0,01 -0,19 0,00 0,00 0,00 0,03 0,06 0,00 0,00 156119 168610 161792 152403 151919 149722 153200 147039 149658 149658 60833 67441 69271 67497 60774 60774 60774 60774 60774 17224 18898 12337 17302 13111 13372 15115 27476 27476 27476 150570 153228 157464 186108 186107 186108 0,08 -0,04 -0,06 0,00 -0,01 0,02 -0,04 0,02 0,00 0,11 0,03 -0,03 -0,10 0,00 0,00 0,00 0,00 0,10 -0,35 0,40 -0,24 0,02 0,13 0,82 0,00 0,00 0,02 0,03 0,18 0,00 0,00 22252.8 23178.7 24041.5 23450.4 24098.9 25150 26016.3 27336.5 27336.5 27336.5 10511.4 11675.1 12596.8 13017.4 13741.6 14183.7 14961.5 15577.5 15577.5 15577.5 24952.6 26162.2 28273.7 29234.3 30756.6 32355.8 34393.2 36928.7 36928.7 36928.7 22263.2 23312.4 22914.2 22953.3 23085.9 23575.7 24631.8 25765.1 25765.1 25765.1 4947.2 5491.6 6018.4 6495 1.6 1.3 1.5 3.6 4.1 4.1 4.1 6.8 5.4 3.9 3.9 3.6 3.6 3.6 10.2 11.8 10.4 12.2 11.6 11.6 11.6 0.9 -0.5 0.9 2.6 4 4 4 9.5 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 207 URL: http://www.reaser.eu e-mail: editors@reaser.eu 2004 82816 2005 79831 2006 79831 2007 79831 2008 79831 2009 79831 2000 71987 2001 70280 2002 70940 2003 70770 2004 71884 Sweden 2005 72965 2006 71569 2007 71589 2008 74891 2009 74891 2000 250028 2001 243084 2002 240038 2003 229091 United 2004 219300 Kingdom 2005 206653 2006 206653 2007 206103 2008 206103 2009 206103 Source: http://www.clusterobservatory.eu -0,04 0,00 0,00 0,00 0,00 -0,02 0,01 0,00 0,02 0,02 -0,02 0,00 0,05 0,00 -0,03 -0,01 -0,05 -0,04 -0,06 0,00 0,00 0,00 0,00 16939 16668 16668 16668 16668 16668 63559 76034 66276 54904 53171 53784 57495 60418 53728 53728 304243 307786 292916 245806 248820 250117 250117 250621 250621 250621 -0,02 0,00 0,00 0,00 0,00 0,20 -0,13 -0,17 -0,03 0,01 0,07 0,05 -0,11 0,00 0,01 -0,05 -0,16 0,01 0,01 0,00 0,00 0,00 0,00 7399.2 7871.7 9073.8 10358.6 10358.6 10358.6 24149.3 24024.5 24813.6 25422.1 27032.2 27035.5 28669 30596.3 30596.3 30596.3 22714.9 23682.2 24692.2 25241.5 26771.9 27412.9 28442.5 29063.1 29063.1 29063.1 10.5 9.7 12.1 12.2 12.2 12.2 1.8 3.9 2.9 4.2 4.2 4.2 4.2 3.6 4.1 3.4 4 2.7 2.7 2.7 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 208 URL: http://www.reaser.eu e-mail: editors@reaser.eu Management of musical education at early ages Felician Rosca1+, Madalina Dorgo2++ 1 West University of Timisoara, Faculty of Music 2 ‘Vidu Ion’ College of Arts in Timisoara, Romania Abstract. The paper presents a model of management in the musical arts domain for children at early stages of development. It is common knowledge that performing arts, including music, are an important part in children's harmonious development. This type of education may start even in the prenatal period. The studies confirm that those children that are beneficiaries of a classical musical education had better results as compared to those without that type of education. Our study presents a scientific reason to educate children from their first stages of development in musical arts as well as the benefits of such a project, together with a management project for a musical nursery school. Keywords: performing arts, music, education, children, musical nursery school, harmonious development JEL Codes: I21, I22 1. Introduction. The management of performance in musical art Musical education can become an essential factor in the harmonious development of children of early ages when it is implemented with a scientific vision where the managerial elements are harmoniously combined with elements of professional art, taught in a way that is appropriate to a specific age group. This implies not only very good management knowledge, but also a total involvement of the elements that are specific to art: talent, musicality, the will to have good results, discipline, personal and public fame. In the past 20 years we have witnessed a significant reduction in introducing professional elements in the case of young or very young children, where the musical element is essential and the child’s good results are considered as stroke of genius sometimes too soon. Broadcast competitions rewarded with high prizes have sometimes encouraged parents to evade a normal gradual education and sometimes adopt their children’s paranoid desire of achievement. Sometimes the very limits imposed by the children’s age, tiredness and degree of overwork have been overlooked, the only motivation being the desire of achievement. On the other hand thousands of people have no chance to develop the muscial talent they were born with, even if at times they prove to be very talented This is why we think that the present study is a balanced, normal and decent proposition regarding the need of performance of a child who is born with musical talent. By implementing the principles presented in this study we consider that a harmonious, beautiful, decent and why not professional development of young and very young children is possible. In the literature some musical education methods are known such as those belonging to musical education systems such as : Orff, Willems, Kodaly, Suzuki. In all these systems the classical instruments such as the piano and the violin, the percussion instruments, blockflote, regarded as musical toys and later as serious means of musical education, are found as basic principles. There are national institutions that implement these methods and which have improved their educational services over the years. + Professor PhD, Tel.: +40744987686, E-mail address: felixorganist@gmail.com ++ PhD candidate, Tel.: +40722136594, E-mail address: madalinarosca@yahoo.com ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 209 URL: http://www.reaser.eu e-mail: editors@reaser.eu The present management plan is not based on any of these methods, but it is an original idea, based on the contemporary Romanian reality, on the educational resources and the financial power of a family with an average income and with parents that have a general education that helps them want their own children’s normal performance and quality education. The pre-school education in Romania is one that has a special dynamic. Due to the changes that have occurred in the past 20 years, the society tends more and more to bring the educational model closer to the European one. Thus, various private nursery schools have appeared as an alternative to the traditional “state” nursery school. The Montessory, Waldorf or Step by Step educational methods are only some of the educational alternatives that the parents of nursery children can choose. Still, there is need of a preponderantly cultural alternative, in which music and musical education is the basis of educational training together with the national curricula imposed by the Ministry of Education. Thus musical training centres have appeared on the market (for instance the DoReMi centre in Timișoara) where children can discover the mysteries of musical instruments or learn about the history of music, in other words to learn music through games. 1.1. The need of an early musical education For many of us musical education seems to be a field of activity without a bright future. Contemporary society is invaded by low quality musical products which have taken music to derisive areas, without any bright perspective. Sometimes the remarks made about music are so ridiculous that they cannot be referred to as a civil perspective and throws us into the morbid “manelism” of the 21st musical century. The causes are multiple and irreversible for whole generations of young people educated by the TV and with musical knowledge acquired at weddings and baptism receptions. Even so, at the opposite end there is a small core of young people who want musical achievements. The groups in which these people activate are religious groups, intellectual groups where music is considered to be an element of personal values. Within such an environment the children’s presence represents a reason for creativity and joy. The children’s choirs, musical competitions for children, concerts for children are moments when parents are thrilled with the artistic performances of their own children. This is why the present project addresses mainly such an environment that is favourable for performance and the children’s balanced education. Beyond musical education we think that there is need of a harmonious, cultivated and balanced environment in which new concepts of equilibrium between activity and rest are thoroughly implemented. At the same time we introduced a new concept regarding healthy eating, using the best bio quality food, that helps to the development of native intelligence, and individual performances. We tried to put into practice a old Latin proverb mens sana in corpore sano (a healthy mind in a healthy body). It goes without saying that the presented project does not conceive only a musical education system, but it also includes the programs in the curricula of a general education nursery school. Even so the main objective of the present project is the natural and balanced performance in the field of music. We conceived a project to set up a Musical Nursery School where, together with the national curricula the children can benefit from a different type of education, the musical education, everything in a natural environment. A different, warmer, more cheerful, more welcoming but still more competent nursery school than the one my children attended. Below I will present the management project of the future Musical Nursery School. As you will notice, the main impediments are, like in most cases, the financial resources. Once solved, the parents, the children and implicitly the entire society will be able to benefit from the offer of a nursery school where music, games, creativity, self-control and a healthy lifestyle will hold an important place. 2. Management project : Musical Nursery School 2.1. The description/ presentation of the organization/firm/department ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 210 URL: http://www.reaser.eu e-mail: editors@reaser.eu 2.1.1. Object of activity “I want to play” Ltd provides for musical and social training to pre-school children, in a safe, professional and natural environment Human resources (number of employees – leading job, execution job) Total 5 employees with certified competences -1 music teacher with a volunteer contract -1 employed nursery teacher -1 economist, with a volunteer contract -1 cook with a volunteer contract -outsourcing: 1 doctor (self-employed), 1 psychologist with collaboration contract 2.1.2. Material resources Registered office of 120 square meters within personal property of 870 square meters, 1 „Nocturno” Viennese piano, 1 „Yamaha” electronic piano with Hammer mechanism, 3 personal computers, 3 licensed software, 1 Canon multifunctional, storage space of 5 square meters, 1 playground provided with swing, slide and sandpit of 1,5 square meters, food store of 4 square meters, bathroom provided with 3 toilets and 3 washbasins adapted for children and a bathtub, furniture specially designed for children 2.1.3. Financial resources (main income sources) -own resources amounting to EUR5700 -personal needs credit amounting to EUR5000 2.2. The SWOT analysis Strengths - personnel with certified competences, under volunteer contract - little competition in the field, due to the services offered, including a vegetarian menu, transport from and to the nursery school, extended program on request and at weekends, providing the necessary vegetables from own garden - eligible for accessing structural funds Opportunities - the parents’ tendency to offer a musical education to their children - the tendency of society to have a healthier and a more natural lifestyle - the parents’ tendency to have a longer program at work at weekend Weaknesses - insufficient capital for building and equipment - lack of partnerships with the mass-media - location on the periphery - the inexistence in the neighbourhood of a station for a means of transport - the impossibility to pay the instalment for the personal needs credit, due to the market volatility Threats - the poverty of the population - the decrease of birth rates at a national level (2002- 21,6 mil. inhabitants; 2011-19,0 mil. Inh., out of which 5 mil. are children) and at a local level (1992- 700.033 inhabitants; 2002- 677.926 mil. inhabitants) - law changes regarding the security of children, curricula, and public catering 2.3. The organization’s main objectives from the present management plan, during the future year of activity, as a result of the analysis above ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 211 URL: http://www.reaser.eu e-mail: editors@reaser.eu The firm’s/organization’s/department’s etc objectives for the future year of activity are: a.Attracting new funding sources by accessing non-repayable grants, through the Minimis Program carried on by the Ministry of Finance, for furniture, musical instruments and solar panels (maximum value of 200.000 euros) b.Partnerships with the media, the „Renasterera banateana” newspaper and Radio Vocea Sperantei radio station, 89,7 FM c.Reducing the food costs by using vegetables from own garden d.Attracting at least 7 new clients e.Training the human resources for marketing 2.4. Expected results and the key performance indicators Objective a. Objective b. Expected results Accessing non-repayable grants Key performance indicators Receiving EUR15,000 Signing a partnership agreement with „Renasterea Banateana” and „Radio Vocea Sperantei” for advertisements and banner ads One and every 2 days on the 3rd page of „Renasterea Banațeana”, one commercial per day between 9-11 p.m. at “Radio Vocea Sperantei”, 1 banner with the Objective c. Objective d. Objective e. logo and the contact details of the nursery school at the registered office of the radio station Growing vegetables, onions, The possibility of buying half of lettuce, radishes, potatoes and the necessary vegetables from cucumbers in own garden own garden Negotiated contracts 7 signed contracts Taking professional development courses 2 employees take the a course at SNFM Timisoara 2.5. Funding sources (attracting the necessary capital company/organization/etc within the following year of activity) for setting up the The activity within the first 6 months will be supported from the personal needs credit and from owner’s equity, and then a percentage from the estimated rate of turnover. 2.6. Financial resources to cover the advertising costs as well as the established advertising and marketing strategy ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 212 URL: http://www.reaser.eu e-mail: editors@reaser.eu The firm addresses the parents in Dumbravita and the north-western part of Timisoara who have preschool children and earnings above the average. The firm will provide musical training observing the obligatory national curricula to children aged 2-7, in a natural environment with limited pollution. The food offered to the children will be chosen from a normal, vegetarian or vegan menu. The firm will offer the children’s transport to and from the nursery school. The price will be EUR200/month/child, in proportion with the prices on the market and the services provided. There will be programs of attracting new clients (in the case of families with two children, the second child will benefit from a 30% discount) and keeping the existing clients (the possibility to pay for two months in advance with a 10% discount; the possibility to pay a part of the fee or the entire fee by means of Barter incomes; after uninterrupted attendance for six months, the payment for the instrument classes will be deduced from the total fee). The payment for services will be made in cash, bank transfer or on-line. The firm will have its registered office on a private property, with parking lot, a waiting lot for parents and a surgery. In the beginning the marketing budget will be a sum of money allocated from owner’s equity and later, a percentage from the rate of turnover will be used for marketing. The firm will organize promotion concerts in hypermarkets in the neighbourhood (Selgros, Real), in the nursery concert hall, on the stage at Food-Court-Mall and the „Lyra” hall in Timisoara during each semester, in order to maintain the parents’ and the children’s interest, to prepare the children for stage appearances and to attract new possible clients. There will also be a stand where the clients will be offered additional information. The firm will be present at fairs with a stand, with representative audio-visual material which will be projected on a screen behind the stand. 2.7. - Investment in technology and equipment musical instruments: 1 professional stool for piano, 5 drums, 3 rattles, means of transport: 1 van 2.8. Resource management 2.8.1. Training programs for the team that will implement the management plan - developing human resources by taking management course at SNFM Timisoara by the nursery teacher specialized in the obligatory national curricula and the psychologist with certified competences. - taking part at national and international nursery fairs - offering financial incentives, once the envisaged target has been achieved - workshops on educational and personal development themes - biannual team-building 2.8.2. Ensuring a friendly and motivating working environment - the firm’s registered office will be in a natural, pleasant environment with modern equipment, musical instruments, PCs, playing ground for children and leisure activities for the employees. - the employees will have free meals and a monthly season ticket for the gym. 2.8.3. The use and control of material and financial resources - making a budget organized monthly and on budget lines - the contracts will be renegotiated periodically with the suppliers - the stationery and the raw materials orders will be centralized ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 213 URL: http://www.reaser.eu e-mail: editors@reaser.eu - there will be a use regulation and a service instruction in the case of the equipment and periodically an inventory will be drawn up 2.8.4. The protection of the environment at work The waste will be sorted so that the biological waste be used for compost for the vegetable garden of the nursery school. The information will be stocked mainly in the virtual environment. There will be ecofriendly light bulbs and movement sensor in order to save power. 2.8.5. The equality of opportunity at work and fighting against discrimination The firm will offer equal opportunities to education to all the children and the employees, irrespective of sex, ethnicity or religion. There will be a similar payment for a similar volume of work. 2.8.6. Identify priorities or risk solution strategies - eliminating the risk of food poisoning in the case of children and the employees - reducing the risk of catching contagious diseases among children - reducing the risk of accidents in the case of children on the playground - initiating internal procedures regarding the way meals are served - signing a contract with a doctor concerning health at work - initiating internal procedures regarding the playground 2.8.7. Professional risk prevention - checking whether the protection equipment (mask, uniform, cap, gloves) during cooking and serving meals. - the children are obliged to have a daily check at the surgery, before entering the nursery. - checking whether the playground is correctly used (special equipment, skidproof carpet, round corners, safety nets) by the children and the nursery personnel. 2.9 Communication within the organisation 2.9.1. Methods and means of communication at work (internal communication) Communication between the employees will take place, on the discussion forum with a moderator, through an intranet network, specially designed for the firm, email and telephone. There will be periodical meetings as well as „informal cafés”. 2.9.2. Ensuring the relationship with the exterior Periodically there will be a clients’ tour, together with congratulations for the special moments of the nursery, the parents and the children. The parents will also be involved in extra-curricular activities, together with their children, being given the occasion to be actively involved in their children’s development (birthdays, music and creative workshops, trips, performances). Possible clients or sponsors will be invited at certain events. The parents will be able to access the discussion forum, the web page or, online, the charts presenting their children’s progress. 2.10. Strategies of finding solutions to problems at work and in the relationships with third parties a. “The day of the firm”, periodical meetings with the employees b. team- buildings c. the annual obligatory participation at psychological counselling meetings. 2.11. Evaluation of the way the envisaged objectives have been achieved ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 214 URL: http://www.reaser.eu e-mail: editors@reaser.eu - by periodical analysis of the rate of turnover - by market studies or questionnaires - by interviewing the employees in order to quantify their degree of satisfaction regarding the work conditions and the satisfaction of their workload, including the training of two employees at SNFM Timisoara. - by interviewing the parents in order to find out whether there is a concordance between the sum of money they pay for their children’s education and the state of things, these evaluations will take place every 3-6 months. - the existence of new contracts signed with the parents for the coming year. - by recognizing the firm as a player on the market, including 1 appearance every 2 days in „Renasterea Banateana”, for at least a month, a daily commercial at Radio Vocea Sperantei for 2 weeks and displaying a banner with the logo of the company and its contact details. 2.12. Attitudes for the management 2.12.1. Defining characteristics of the personal management style (strengths, weaknesses) o o o o o An organized, punctual person sometimes with signs of compulsive behaviour. Motivated and motivating, children being in constant need of stimuli, support and encouragement, of continuous challenges in their progress. I communicate easily, this being a great advantage in working with children. A constant need to know and to learn and the urge to inspire the children that will attend the nursery school. Music oriented and creative, these being the defining elements of the „I want to play” nursery school. Resolute, with authoritarian tendencies. 2.12.2. Personal development objectives in order to improve the weaknesses Developing patience. Accepting the differences in the perception of reality and the mentality of other people. Attending personal development workshops. 3. Conclusion The present project can be implemented with ridiculously low sums of money as compared to the costs the society spends on social re-education. A child who has an early musical education will have not only musical but also other social good results which are favourable to school society. He will be used to discipline, taking into account the fact that in itself music disciplines. The future young person will be a sociable person in the sense that his performance will depend on his colleague in the children choir performance. There will be a bridge towards sensitivity, visual punctuality and psychological equilibrium. This will be a goal towards future school results and professional achievements. A child who has been musically educated will understand the harmony, the rhythm and the polyphony of the world around him, he will also understand and perceive that we cannot exist without beauty and that good results are obtained through hard work and intelligence. This project is an open address to future sponsors who can help us implement this project de facto. The material resources invested in this project will help us have a Romanian implementation method of musical education. The result of the project will be visible after the first generation of children has graduated from the musical nursery school, after the first competitions that they have won. We think that the present paper is a generous and professional offer in a field in which our Romanian children are talented in the field of music. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 215 URL: http://www.reaser.eu e-mail: editors@reaser.eu For the sake of comparison the majority of the European symphonic orchestras have at least one musician of Romanian origin. The Japanese and the Chorean have also given a great significance to the field of music. This is why we think that the offer presented in this managerial plan is realistic, generous and appropriate for the present times for all Romanians. 4. References [1] Baskett, R., Bryant, K., White, W., & Rhoads, K. (2005), Half-day to full-day Kindergarten: An analysis of educational change scores and demonstration of an educational research collaboration, Early Child Development and Care, 175, 419-431. [2] Curwen, A. J. (1896) Kindergarten Music from the Ethical and Intellectual Point of View, Journal of Education, Vol. XVIII. Nov. pp. 650-652. [3] Dolgosev M.; Marinescu E. (2004), Metodica educatiei muzicale în grădiniţa de copii, Bucharest, Editura Aramis. [4] Faulkner, D., & Miell, D. (1993). Settling into school: The importance of early friendships for the development of children’s social understanding and communicative competence. International Journal of Early Years Education, 1, pp.23-45. [5] Florea A. (2006), Metodica educaţiei muzicale în grădiniţă şi în învăţământul primar, Timişoara, Editura Eurostampa. [6] Fujioka, T., Ross, B., Kakigi, R., Pantev, C., and Trainor, L., Brain (Sept.2006), A Journal Of Neurology; Oxford University Press. [7] Ladd, G., Birch, S. & Buhs, E. (1999) Children’s social and scholastic lives in Kindergarten: Related spheres of influence? Child Development, 70, pp.1373-1400. [8] Locke, J. , Some thoughts on education, Vol. XXXVII, Partea 1.Cele Harvard Classics. New York: PF Collier & Son, 1909-1914 [9] Shirreff, E. A. (1887) Infant Schools and Kindergartens, Journal of Education. Vol. IX. April. pp. 187-188. [10] Vasile V. (2004), Metodica educaţiei muzicale, Editura muzicală, Bucureşti, 2004. Professional Journals 1. 2. Bulletin officiel [BO], hors-série n° 3 du 19 juin 2008 - sommaire, Programme de l’école maternelle Effects of Arts Education on Participation in the Arts," Report 36: Executive Summary based on data from the Survey of Public Participation in the Arts conducted by the U.S. Census Bureau in 1992 3. Elementary & Secondary Education Act (ESEA, most recently called the No Child Left Behind Act), and supporting the Arts in Education program at the U.S. Department of Education. 4. Programme d'éducation pour la maternelle – immersion ©2008, Alberta Education, Canada 5. The ‘December Dilemma’ December Holiday Guidelines for Public Schools, Public School Students Performing Religious Music, p.5, Anti-Defamation League 6. Curriculum of the instructive-educational activities in the kindergarteni, Editura V & Integral,2005. 7. The NAMM Foundation, Best Communities for Music Education 2012, Glenn Schellenberg, Music Lessons Enhance IQ, Psychological Science, Vol. 15, No. 8, 2004. Websites 8. 9. http://www.scritube.com/management/PLAN-DE-AFACERI-GRADINITA-PART21293.php http://facultate.regielive.ro/proiecte/management/plan-de-afacere-gradinita-strumfulic-alte-domenii105468.html ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 216 URL: http://www.reaser.eu e-mail: editors@reaser.eu 10. http://facultate.regielive.ro/proiecte/economie/plan-de-afaceri-gradinita-piticot-management-stiintaadministratiei-204205.html 11. http://www.scribd.com/doc/19601899/Plan-Afacere-Gradinita-Privata ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 217 URL: http://www.reaser.eu e-mail: editors@reaser.eu The durable development of cultural tourism in Timisoara and its surrounding area: capitalizing on the existing assets and resources Cipriana Sava 1, Luiza Caraivan 2 1 Faculty of Management in Tourism and Commerce Timisoara Dimitrie Cantemir Christian University Bucharest 2 Faculty of Management in Tourism and Commerce Timisoara Dimitrie Cantemir Christian University Bucharest Abstract. The study focuses on some of the exiting assets and resources in the city of Timisoara and its surrounding area in order to identify various possibilities of developing cultural tourism. In this respect, we underline some definitions of cultural tourism and how they could be applied to the present case study. We also offer for consideration some clear examples of how authorities may capitalize on the existing resources so that foreign and Romanian tourists may be attracted to the studied area. Keywords: cultural tourism, cultural heritage, durable development, Timisoara, anthropic tourist attractions. JEL Codes: L 83, Q 01, Q56 1. Introduction The present study aims to analyze the historical, sociological, economic and managerial perspectives of the city of Timisoara, in relation to its cultural attractions. Although an economic and managerial view of the cultural heritage of an area is not always regarded as appropriate, we take into consideration the financial needs of a community and the necessity for sustainable development. Given the fact that mass tourism may bring both unique benefits and disadvantages to the exploitation of the cultural heritage of a community, the paper presents both sides of this issue. Defining cultural tourism is a demanding task since this notion interferes with a large variety of domains and sub-domains. A further difficulty “arises from the apparently paradoxical union between culture and heritage, on the one hand, and tourism, on the other”, as pointed out by Percec and Caraivan (2012, 91). While heritage brings historical value from the past cultural tradition of a certain community, tourism is rather related to industry, services, markets, suppliers and financial benefits. Nevertheless, we have chosen some definitions that are meant to underline the need to apply cultural tourism in a community where other resources are scarce. The case study we have chosen sustains the idea that cultural tourism is at present “one of the most marketable commodities worldwide, both in “classical” ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 218 URL: http://www.reaser.eu e-mail: editors@reaser.eu venues and cultures and in less conventional and global locations and communities” (Percec and Caraivan 2012, 91). 2. Dimensions of cultural tourism: concept and definitions Sava and Coroama (2011, 568) consider that cultural tourism may become a “strategic option that requires the establishment of specific objectives, target groups and appropriate activities”. In this respect, there are various components that should be taken into consideration: an initial evaluation (identification and selection of the cultural objectives), choosing a strategy for the valorization and development of cultural tourism, advertising and promotion, the launching of a pilot circuit and its practical implementation, initiating a net of public and private representatives interested in cultural tourism (tourist guides are included), and permanent assessment. Promoting cultural tourism as a source of revenue requires a capitalization of existing assets and resources. As Priscilla Boniface points out (1995, 5), “tourism […] trade[s] in the cultural and natural heritage of countries; it involves the inseparable combination of economic and socio-cultural problems and immediately raises the issue of development options.” From an intercultural point of view, tourism could be regarded as a multitude of social spaces and times “in relation to particular formal and informal knowledge regimes accumulated through exposure to tourism packages and through the normative processes of socialization (Smith and Robinson 2006, 16). Dulau and Coros (2009, 75) regard cultural tourism a component of cultural heritage: “cultural tourism is not only the key drivers of economic growth. The concrete discovery of cultural diversity, common identity and pluralism are equally important stakes for cultural tourism. It has a vital role to play in encouraging both a greater understanding of the rich diversity of the national and regional cultures of Europe and a greater appreciation of our common European heritage, roots and culture. Cultural tourism can therefore help further the cause of European integration and identity by fostering a better understanding between the peoples of Europe”. Due to various economic, social and political reasons some destinations have been prioritized over others. Moreover, some communities stopped developing temporarily while the inhabitants have been continuing the struggle for survival. “Consequently, a common phenomenon is that of the uneven distribution of cultural tourism: many attractions suffer from visitor overload, while others are visited to capacity or less; there are cultural items intended to attract visitors, yet, they are not fulfilling that role, whereas, in many parts of the world, cultural tourism is only budding timidly. Other such cases include situations in which one part of a site is worn down, while other parts are deserted. This may also have to do with local people’s or the entrepreneurs’ attitude towards the respective sites: while some may run projects inviting more visitors, others are disinterested in this type of development” (Percec and Caraivan 2012, 93). This is the case of the city of Timisoara that witnessed an economic regression in 2009. Nevertheless, efforts have been made to start collaborations and projects in order to put Timisoara back on the map of Romanian tourism. Cultural tourism is the main form of tourism practiced in this area and it helps the city become a candidate for the title of European capital in 2021. In fact, “the recognition of cultural tourism as an economically beneficial activity is confirmation of its appropriateness as a development strategy especially suitable for aiding developing and least developed countries in their efforts at combating poverty and underdevelopment” (Ivanovic, 2008, 78). Taking into consideration the fact that cultural tourism is a social and economic tool of community empowerment, we have to mention some elements of culture that are attractive to tourists arriving in ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 219 URL: http://www.reaser.eu e-mail: editors@reaser.eu Timisoara and the surrounding area: gastronomy, traditions, traditional dressing and folklore, handcrafts, music and art (such as paintings, sculptures, concerts), history of this area – supported by visual reminders, architecture which gives the area a distinctive appearance, religion – and its visible manifestations, leisure activities. The case study focuses on these elements in order to point out the main tourist attractions in this area. 3. Durable development of cultural tourism: the city of Timisoara Situated in the western part of Romania, the Timis County has a total area of 8697 square kilometers and 407 towns and villages. Despite the fact that this county has one of the most dynamic economies in Romania, being situated in a region with one of the highest ratings of foreign investment, it is not well-known for a sustained tourist activity. One of the main reasons is the scarcity of natural tourist resources (it is a region mostly positioned on the Western Romanian Plain) and the poor exploitation of existing anthropic tourist resources. The development of cultural tourism has significantly increased since the county became part of the Danube-Kris-Mures-Tisza Euro-region. Timisoara is the capital city of the Timis County and, at the same time, one of the key economic centers in Romania. Situated in the south–east of the Pannonian Plain (or in the South of Western Romanian Plain), the city is bordered by the rivers Bega and Timis. Timisoara, also called “Little Vienna”, was first mentioned in historical documents either in 1212 or in 1266. The controversy related to the year when the first buildings appeared in this area has not yet been solved. However, archaeological evidence supports the fact that this area was visited by Romans. The city is easily reached by car, by train or by air. Timisoara is a well-known space of tolerance and multiculturalism, as there are various nationalities living together: Romanians, Germans, Hungarians, Serbians, Bulgarians, Italians, Greeks and gypsies. The main type of tourism practiced in Timisoara is business tourism. However, cultural tourism should also be taken into consideration as it is one of the forms that has great tourist potential. The development of cultural tourism in Timisoara and the surrounding area is related to the existence of valuable anthropic tourist resources which are definitely capable of attracting tourists. Generally, tourists will choose cultural objectives that are within easy reach. The other tourist objectives which are situated within 75 kilometers from Timisoara are interesting if a tourist spends more than three days in the city or has a specific interest in a specific type of objectives such as castles and mansions. However, the city has a series of historical monuments, architectural monuments, museums, religious buildings and cultural institutions that are worth mentioning. Thus, the most significant monuments and architectural ensembles are:  Unirii Square, where visitors can find the Catholic Dome, built in 1754, the Serbian Orthodox Cathedral, the Serbian Diocese Palace (1745), the Baroque Palace built in the 18th century, the monument of Holy Trinity (1740), the Bruck Palace, built in 1910. All these monuments and buildings are built in the baroque style with some elements of secession and art nouveau;  Libertatii Square, where there is the statue of Saint Nepomuk (1756) Rococo style, the building of the former City Hall (built between 1731-1734) which has elements of provincial baroque;  Dicasterial Palace (19th century) and Dechan Palace (1802), the former built in the Renaissance style and the latter in neoclassic style; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 220 URL: http://www.reaser.eu e-mail: editors@reaser.eu  Houses that were inhabited by: Prince Eugene of Savoy (1817), Count Mercy (1718-1734), the house with the iron tree (the house of craftsmen);  Victoria Square where there are: the Opera house, the National Theatre, built in the Baroque style with classical elements, between 1872-1875, with a façade built in Brancoveanu style, Romulus and Remus statue (1926), a copy of „Lupa Capitolina” statue, which was a gift from Rome, the Lloyd Palace, built during 1910 and 1912, built in eclectic style with secession influences, the Orthodox Cathedral, built during 1936-1946 in Byzantine style with Romanian influences, Huniade Castle – built by Iancu of Hunedoara between 1443-1447 on the place of a former castle that belonged to Carol de Anjou. At present the castle is a museum of the Banat region;  Traian Square where there are: the Saint Cross, the Bell of Sorrow, Saint George Square ( 17451755) built in Neo-roman style, the Serbian Palace (1895) built in eclectic style, Mercur Palace built at the beginning of the 19th century in secession style, the Catholic Church of the Millennium built between 1896-1901 in Neo-roman style, the Synagogue, built between 18851889;  the Bastion – to be more specific - Maria Theresia Bastion built between 1730 -1735 and which has the parts of the former fortress of Timisoara;  The Liberation Monument and the monument of the Romanian Soldier are sculptures that are also representative for the city. The museums in Timisoara are mostly in buildings considered monuments:  the Museum of the Banat region is hosted by Huniade Castle (at present, under construction);  the Museum of Art is hosted by the Baroque Palace;  the collection of religious art of the Romanian Orthodox Cathedral is hosted by the Orthodox Cathedral in the basement;  the collection of religious art of the Serbian Orthodox Church is hosted by the Serbian Palace;  the collection of religious art of the Catholic church is hosted by the Catholic Palace;  the museum of Banat villages is situated in the Green Forest;  the Military Room is situated in the Liberty Square;  the museum of Public Transport “Corneliu Miklosi”;  the museum of Revolution Timisoara 1989. Apart from these museums, there is a series of art galleries where different cultural events are organized monthly. Cultural institutions are also present in Timisoara:  the Romanian Opera House, opened in 1946;  „Banat” Classic Orchestra, first performance in 1947;  National theatre „Mihai Eminescu” Timisoara, first performance 1947;  “Csiky Gergely” Theatre Timisoara, a theatre in Hungarian language, first performance 1953;  The German Theatre Timisoara, opened in 1953;  Children’s Theatre “Merlin”; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 221 URL: http://www.reaser.eu e-mail: editors@reaser.eu  The Institute for Culture, Religious Affairs, and National Patrimony of the Timis county;  the French Institute of Timisoara;  the German Institute of Timisoara;  the Intercultural Institute of Timisoara ;  the Students’ House of Culture and Performance;  the Centre for Culture and Art of the Timis County;  AUALEU–theatre. Anthropic tourist attractions which are situated in the vicinity of Timisoara could become points of interests on a cultural tourist map and they may be options for the potential tourist trips. The research we have conducted shows that there are several villages or towns that would be more suitable for a tourist route in the Timis County. Table 1 Towns and villages that have a cultural tourist potential Name of town or village Distance away from Timisoara (Kilometers) Banloc 52 Birda 48 Buziaş 30 Carani 13 Cebza 36 Cenad 73 Ciacova 33 Comloşu Mare 60 Foeni 43 Gad 44 Gǎtaia 55 Hodoni 32 Jimbolia 44 Lenauheim 47 Maşloc 35 Periam 56 Rudna (Giulvǎz) 38 Sânnicolau Mare 64 Şag Timişeni 15 Şemlacu Mic 56 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 222 URL: http://www.reaser.eu e-mail: editors@reaser.eu Teremia Mare 67 Source: www.distanţa.ro The castles and the mansions which are declared historical monuments are:  the Banloc castle built in 1793 by count Lázár Karátsonyi in Renaissance style, belonged to Queen Elisabeth of Greece, King Carol 2nd’ s sister. At present it is renovated by the Orthodox Church.  Count Mercy’s castle, in Carani (1733 - 1734), or the Hunters’ House, it has elements of Turkish architecture;  Mocioni Castle in Foeni, built in 1812 by Andrei Mocioni of Foen;  the Hatter’s Castle in Periam, built by Ivan Korber, together with the City Hall and some craftsmen in 1892, for the hat factory which also works today;  Nakó castle built in Sânnicolau Mare in1864. At the moment it hosts "Bela Bartok" museum;  Petala mansion is situated in Clopodia, built in 1840 by Nyeky Antal in baroque style. The owner, the general Vintilǎ Petala, was forced to give it away in 1951. Today it is private propriety;  Manaszy mansion in Hodoni , built in 1840, at present it is a restaurant;  San Marco mansion, in Comloşu Mare (1840 - 1856) hosts the village school;  Gudenus mansion in Gad, built at the beginning of the 19th century, in baroque style;  Csekonits mansion in Jimbolia (18th century)  Liptay mansion built by Liptay the baron in Lovrin, in 1820;  Maşloc mansion (1855);  Nikolić mansion in Rudna built in the 19th century by Baron Nikolić. Unfortunately, the majority of these mansions are in a real state of decay. Around the city of Timisoara there are ruins of some fortresses, such as:  ruins in Cenad (11th century);  the dungeon or „cula” in Ciacova (13th century) built in Roman and Gothic style; Memorial house are also situated in the surrounding area of the city of Timisoara:  Memorial house "Nikolaus Lenau", hosted by a housebuilt in 1775, where the poet Nikolaus Lenau was born (1802), in Lenauheim;  Memorial house "Dr. Karl Diel"( former surgeon, born in 1855) in Jimbolia;  Memorial house "Stefan Jäger"( painter, born in 1877 in Cenei) hosted by a house in Jimbolia, where the painter spent most of his life;  Memorial house “Dositej Obradović” (Serbian writer) opened in Ciacova, where the writer was born (1742);  memorial exhibition „Bela Bartok” (composer, born in 1881) hosted by Sânnicolau Mare;  „Nichita Stǎnescu” exhibition hosted by Teremia Mare, as an homage for the poet. The museums that are established in this part of the Timiş County are as follows:  Museum of Media “Sever Bocu” in Jimbolia;  Historic and ethnographic collections in Ciacova; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 223 URL: http://www.reaser.eu e-mail: editors@reaser.eu  Buziaş Spa Museum;  Museum of Folk Art „Iulia Folea Troceanu” in Buziaş. Monasteries could also be a point of interest for tourists:  Cebza monastery, near Ciacova (1758);  Săraca monastery, in Şemlacul Mic, built in the 12th century;  Timişeni monastery, in Şag Timişeni, built in 1944;  Sfântul Gheorghe monastery, Serbian orthodox monastery, in Birda, built in 1623;  Morisena monastery in Cenad (2003). Moreover, annual events that take place in the towns and villages that we have mentioned are also meant o attract visitors. Here are just a few examples of such events:  Ruga Bănăţeană in Timisoara, organized in September;  Romanian Theater Festival in Timisoara, organized in May;  Festival of Hearts, Timisoara organized in July;  International Festival “Musical Timisoara”, organized in May;  “George Enescu – Bela Bartok” festival; organized in September;  Master of Puppets’ Festival - Buziaș, organized in June;  Musical festival - Buziaș, September;  Paprika Festival, Wine Festival - Buziaș, October;  "Kerwei" – celebrating folk and German dressing in the villages inhabited by Germans (Lenauheim, Lovrin, Buziaş, Jimbolia, Sânnicolau Mare); “Rugile” are folk celebrations related to church traditions and they take place in all Romanian towns and villages. All these possible manifestations of cultural tourism are promoted by local authorities, economic entities, and tourism agencies. They could easily become points of interest for tourists arriving from Romanian or from foreign countries but also for the people who live in Timisoara. 4. Conclusions Cultural tourism attracts annually a significant number of tourism\ts in Europe. European capitals have developed cultural tourist packages for weekend offers or for longer stays. The European Union sustains the durable development of cultural tourism, and as part of this project the title “Cultural European Capital” is given annually to one European city. Timisoara is a city with a lot of tourist potential. It aims to win or even gain this title by restoration of its buildings, promoting its cultural life and cultural objectives. The area surrounding the city of Timisoara also has valuable tourist resources which could be included in a cultural tourist circuit. However, the implication of local authorities for the rehabilitation, restoration and promotion of some of the cultural objectives is essential. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 224 URL: http://www.reaser.eu e-mail: editors@reaser.eu 5. References [1] Boniface P.. Managing Quality Cultural Tourism. Routledge: London and New York, 1995. [2] Dulău A.V., Coroş M.M., “Investigating Cultural Tourism Development and Attractiveness in Transylvania, Romania.A Focus on the Counties of Cluj and Sibiu”, Proceedings of the 2nd WSEAS International Conference on CULTURAL HERITAGE and TOURISM, 2009, pp. 74-79. [3] Ivanovic M.. Cultural Tourism. Cape Town: Juta and Company, 2008. [4] Mazilu M., Sava C.. News Ways Innovation in Tourism Economy: Implementing Clusters. In: Recent Researches in Tourism and Economic Development. .Proceedings of the 2'nd International Conference on Business Administration: Montreau, Switzerland (ICBA '11). 2011, pp. 71-77. http://www.wseas.us/elibrary/conferences/2011/Montreux/ICICIC/ICICIC-11.pdf [5] Percec D., Caraivan L., Cultural Tourism: The Case of the Banat Region. In G. Raţă, I. Petroman and C. Petroman (eds.) English of Tourism. Newcastle upon Tyne: Cambridge Scholars Publishing, 2012, pp. 91-106. [6] Sava C., Coroama L., Aspects of Urban Tourism and its Educational Implications in the City of Timisoara in Selected Topics in Economy and Management Transformation – Volume I 5th WSEAS International Conference on Economy and Management Transformation (EMT '10) WSEAS Press, 2010, pp. 568- 573. [7] Sava C., Cultural tourism - an opportunity for Timisoara. In: Recent Researches in Tourism and Economic Development . Proceedings of the 1st International Conference on Tourism and Economic Development (TED '11): University Center Drobeta Turnu Severin. 2011, pp.124-129. http://www.wseas.us/elibrary/conferences/2011/Drobeta/TED/TED-20.pdf [8] Smith M. K., Robinson M.. Cultural Tourism in a Changing World. Politics, Participation and (Re)presentation. Clevedon Buffalo, Toronto: Channel View Publications, 2006. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 225 URL: http://www.reaser.eu e-mail: editors@reaser.eu Model for optimization of biomass utilization of energy production by energetic and economic requirements István Takács 1+, Erika Nagy-Kovács 1++, Ervin Holló 2+++ and Sándor Marselek 1++++ 1 Károly Róbert College, Institute of Business Sciences, Hungary, 2 KR Spektrum Ltd., Hungary Abstract. Biomass-energy use is not a new idea. Earlier the by-products of the production processes or naturally grown materials were mainly used for energy production. One of the answers to the contemporary problems is the deliberate as well as mass production of the biomass, furthermore the planned and systematic collection of the by-products, which is the source of the energy being able to replace a part of the fossil fuels. At the same time during the production of biomass the conventional sources of energy are being used (fuels, the embodied energy which is used in the production of the equipment, etc.) which are to be taken into account in determining the net energy production. The research aims to examine how to optimize production and use of biomass energy supply chain process in the energetic and the economic criteria system, how to impact the managing models of the processes to the energetic and economic parameters of the supply chain, what kind of criteria and how these identify the natural (environmental), economic and social sustainability, and how they will be implemented e.g. in frame an innovation cluster. This article describes a test model, analyzes the results of the model examinations and the conditions for compliance with sustainability criteria. Keywords: sustainability, logistics, heating energy, local society, cluster JEL Codes: C67, Q42, Q51 1. Introduction The research carried out in the topic of biomass utilisation of energy production has had a long history of several decades in Hungary. Research primarily focused on the by-products of plant production in the 1980’s (e.g. Lehoczki and Takács 1981 and Lehoczki and Takács 1983 where the economic assessment of the experiments with KTB-R straw bale heating energy production was presented). Afterwards, in the 1990’s attention was mainly directed at plants utilised for energy production in many ways and the technologies of their utilisation (bio ethanol, biodiesel, hard-stemmed and non-hard stemmed resources). At that time the spread of the biomass-based alternative energy resource use was significantly hindered by the relatively low piece of fossil fuels and the relatively low returns on the technologies of producing biomass-based energy resources. Nowadays the price of fossil fuels has considerably been raised and the competitiveness of alternative energy resources has greatly improved due to the fact that the political leaders of different + Dr. habil, Associate Professor, Corresponding author: e-mail: itakacs@karolyrobert.hu. PhD, Assistant Professor. +++ PhD student, Manager ++++ Dr. habil. Professor. ++ ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 226 URL: http://www.reaser.eu e-mail: editors@reaser.eu governments were ready to accept the researchers’ views and also action plans were drafted to decrease the extent of environmental pollution. The need for sustainable development has also become stronger. The complex system of sustainability has necessitated the application of such multi-criteria decision making models that help select the optimal decision making alternatives by arguing criteria. Due to the general system of points of view on the implementation of projects it is necessary to examine technical, financial and economic feasibility alike. The evaluation of the points of view is usually hierarchic, i.e. technical feasibility (the availability of equipment, suitable technology and licenses to implement the given project at the given place and time) is the prerequisite of the examination of economic feasibility (return) which is the necessary (but not at all satisfactory) condition for financial feasibility (the availability of financing sources and funds). The parts of the system of conditions are correlated as technical feasibility affects the cost of the project, the possible revenue; the compounds of the funds has an impact on their costs that affect return and, at the same time, the economic risks detected while analysing returns influence the cost of funds (credit spread risk). The traditional system of points of view can actually include compliance with environmental-economicsocial sustainability. Furthermore, their simultaneous examination in an explicit way has not been carried out. At the same time, there is a need for such an optimising model that are suitable for arguing for natural sustainability directly (e.g. energy balance (return), or aggregated CO2 emission) or indirectly (e.g. by minimising the environmental pollution of transportation). Moreover, the model includes social sustainability as an impact factor together with employment as well as the impacts of organisation structures on performance, instrument efficiency and capital investment requirement (how many and what types of instruments are necessary to solve the task). The model can be used to solve all types of optimisation problems when it comes to  designating transportation areas ,  selecting the optimal site of the plant,  evaluating the energy payback ratio and the impacts on aggregated CO2 emission of the sporadic biomass for energetic purpose as well as  analyzing the economic impacts of organisational solutions. A complex system of indicators is used for optimisation where the widely used investment-economic criterion is supplemented by transport optimising and energy efficiency and possibly an aggregated CO2 emission optimising component. The issue of energy payback is detailed by the dimensions of the optimising model. Energy utilisation and energy payback were modelled by the concept of mass flow models. The concept of mass flow models are described by the equations of raw material extraction/production-processing-utilisation-losses. In the case of pure mass flow (when mass is not transformed into energy) the weight of all the masses in the system equals the amount of masses accumulated in the system and those leaving the system as losses on the basis of the law of conservation of mass. The law referred to above also holds true for the production of biomass for energetic purposes. At the same time, the amount of energy deriving from nature (decisively i.e. solar energy) plays a significant part of producing the utilisable amount of energy although significant amount of hidden energy also accompanies the process of production (embodied in the instruments of production, materials used and energy taken in through production) together with overt energy (taken in the process by means of fuel). However, instruments do not only pass down their economic value (see amortisation) to products via several production cycles but also energy that is necessary for their creation. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 227 URL: http://www.reaser.eu e-mail: editors@reaser.eu Regarding energy payback we have to measure the extent (frequency) of payback of the direct and indirect fossil energy source based energy taken in the system in the energy amounts produced within its lifespan. To measure this, EPR (Energy Payback Ratio) energy payback ratio was worked out that examines the relationship between total net energy yield and total energy payback by means of lifecycle analysis. [White and Kulcinski, 2000]. where En,L is total net energy (J) produced during the lifespan (L) of the establishment Emat,L is total energy (J) taken in by the materials during the lifespan (L) of the establishment Econ,L is total net energy (J) taken in instruments and the establishment during the lifespan (L) of the establishment Eop,L is total net energy (J) taken by its operation and fuels during the lifespan (L) of the establishment Edec,L is total energy (J) necessary for stopping the establishment after its lifespan (L) Estimating the energy footprint of the instruments, i.e. their embodied energy is a modern approach of measuring energy efficiency through which a real picture can be obtained about the usefulness of the single solutions aimed at saving energy. The name of the approach is the Input-Output Embodied Energy analysis model by Leontief, which is the adaptation of the neoclassical theory of general balance. [Leontief, 1966] (NB also Wikipedia: Embodied energy, 2012.) The research and examinations that make a try to define the energy equivalence of the different masses and instruments play a significant role in the practical application of the model. The activity of the research team of the University of Bath (UK) is outstanding who worked out the embodied energy per unit in different types of masses as well as their CO2 equivalence. [Hammond, Jones 2008] The definition of the energy equivalence of a machine, equipment, building or establishment is a complex task. According to estimations, e.g. the energy equivalence of an average Australian car is 0.22-0.27 TJ. During the lifespan the relative weight of the single components vary, which must be taken into consideration in the examinations (e.g. in our calculation the car has a share of 64%, road construction 21% and running a car 15% of the energy equivalence in the first year while by the end of the lifespan (after 40 years) running a car represents 62%, car manufacturing and running 28% and roas construction 10% of the total 6.572 TJ energy equivalence (embodied energy). [Treloar et al. 2004] At the same time, we have to consider that the energy efficiency of certain activities will improve due to the technical development and improvement, which stresses the necessity of revising the standard values of modelling from time to time. [The NEED Project 2011] The spread of the external costs of biomass-based energy production is significant in different European countries (the typical value is 1-2 euro cent but there are countries where it can even each 5-6 euro cent). [A villamosenergia termelés externális költségei…. 2010] This directs our attention to the importance of analysing the cost component. The energy payback ratio of the biomass-based energy production is 15-30 times higher, which is a very favourable value in the comparison of single power plant technologies. However, we must bear it in mind that the aggregated CO2 emission indicator can be relatively unfavourable as predicted by high GWP values. [Lund and Biswas 2008] GWP (Global Warming Potential) is an indicator to express the impacts of greenhouse gases numerically that defines the extent of the greenhouse impact of the given gas compared to the same amount of carbon dioxide for a certain period (usually for 100 years). Obviously, the GWP of carbon dioxide is 1 according to the definition. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 228 URL: http://www.reaser.eu e-mail: editors@reaser.eu The objective of the research is to create a multi-factor model of evaluation by arguing for sustainability criteria that assist in designating the site of the furnace of burning biomass, setting the frontiers of its region together with ranking decision making alternatives. 2. Material and methods OPTILOG© model is a multi-factor comparative method in which logistic costs, energy payback, CO2 emission and economic return will simultaneously be assessed and the optimal is the one in which the factors are the best balanced. Model variations: A) Dimensions of the three dimensional OPTILOG© model: 1. Net transportation (logistic) cost 2. Energy payback ratio (EPR) 3. Net present value (NPV) B) Dimensions of the four dimensional OPTILOG© model: 1. Net transportation (logistic) cost 2. Energy payback ratio (EPR) 3. Aggregated CO2 emission 4. Net present value (NPV) Optimisation criteria: the area covered by the triangle or square by the standardised values of the criteria should be maximum on the three-or four-dimensional ray diagram. Steps of optimisation: 1. Preparing the tables with the basic data 2. Preparing the parameters of the alternatives 3. Calculating the values of dimension variables per alternative 4. Standardising result values 5. Calculating OPTILOG© optimum criterion value 6. Evaluating results 2.1. Calculating the values of dimension variables Dimension 1: Transportation arrangement optimum Optimisation takes place by trying to find the shortest distance of transportation or the cheapest way of transportation by using the method of the smallest squares. Designating the site of the optimal furnace on the basis of the cheapest transportation costs in the case of a single mass flow Condition: different means of supply with different costs and substantially different amounts where Cj is the average transportation cost weighed by the amount of goods to be transported and the distance between the sites of the resources and j site of usage (Ft) ci i is the transportation cost of the amount to be transported from i site of resource (Ft/km) mi,yis the weight to be transported between i site of resource and j site of usage in y year (t) di,j is the distance between i site of resource and j site of usage (km) ny is the number of resource sites ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 229 URL: http://www.reaser.eu e-mail: editors@reaser.eu k is the number of potential sites of usage Optimum: If the site of the furnace and the site of energy utilisation differ or there are several alternatives, optimisation takes place by considering the cheapest input supply cost and output cost of further transportation. Condition: different means of supply with different costs and substantially different amounts and different transportation costs of energy (heating, steam...) to the site of usage. Optimum: where Cj is the average transportation cost weighed by the amount to be transported and the distance between the sites of resources and j potential furnace (Ft) CEj j is the energy transportation cost between j potential furnace and the site of usage (Ft/km) k is the number of sites of resources Dimension 2: Energy payback on the basis of the Energy Payback Ratio (EPR) Energy payback is defined by analysing the project lifecycle by comparing the amounts of utilisable/utilised energy and directly or indirectly utilised energy created during the years of operation (Y). It is calculated as follows: 1. estimating the amount of utilisable energy produced during the lifespan of the project 2. estimating the amount of directly utilised energy (fuels) or indirectly utilised energy (embodied energy, the size of the energy footprint produced during the lifespan of the project 2.1. estimating the amount of energy embodied in the instruments invested during the lifespan of the project to meet its objectives 2.2. estimating the value of energy embodied in the instruments partly meeting the objectives of the project per performance unit during the lifespan of the project by considering the conditions of the use of instruments 2.3. estimating the performance of instruments that partly meet the objectives of the project 2.4. estimating the value of energy utilised during the lifespan of the project 2.5. equivalence of energy necessary for the infrastructure connected to the operation of the project 2.6. equivalence of energy necessary to meet the basic demands of the labour force who operate the project 2.7. estimating the energy necessary to stop the project by the end of its lifecycle The next correlation describes the estimation of net energy that can be produced by operating the project during its lifespan on the basis of the projected energy production. where ENi,y is net (utilizable) energy (J) that can be produced during the lifespan by i project alternative EVi,yis the amount of electric energy (J) in y years in the case of i project alternative EHi,y is the amount of geothermal energy (J) in y years in the case of i project alternative EMi,y is the amount of energy (J) embodied in the mass for sale in y years in the case of i project alternative Y is the lifespan of the project (year) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 230 URL: http://www.reaser.eu e-mail: editors@reaser.eu Estimating the energy footprint (embodied energy) of the project where EEi,y is the amount of energy (J) embodied in the mass for sale in y years in the case of i project alternative EE:Pi,y is the energy embodied in the instruments meeting the objectives of the project in y year per unit during the lifespan of the project by considering the conditions of the use of instruments in the case of i project alternative accounted for once a year when the use of their utilisation for the project began (J) EE:Si,y is estimating the value of energy embodied in the instruments partly meeting the objectives of the project per performance unit during the lifespan of the project in the case of i project alternative in y year every year accordingly to the use of the given year (J) Energy value of running where EOi is the equivalent of total energy value of running by using i project alternative during the lifespan, which is in accordance with the energy footprint (embodied energy) of the amount of materials and energy resources utilized (J) EO:Ai,y is the equivalent energy of the materials and energy resources utilized by i project alternative in y year of running that is accounted for annually in accordance with the energy footprint (embodied energy) of the amount of materials and energy resources utilized (J) Energy equivalence of restoring the condition prior to the project and destruction The energy equivalence of restoring the condition prior to the project is estimated to be 10-30% of the energy embodied in the establishments of the project. Calculation of energy payback where EPR is the energy payback ratio for the lifespan of the project (-) ENi is the estimated value of net (utilizable) energy for i project alternative for the project lifespan (J) EEi is the estimated amount of energy embodied in the instruments of i project alternative for the project lifespan (J) EOi is the equivalence of the energy of materials, energy, labour, embodied energy utilized in i project alternative for the project lifespan (J) ERi is the estimated equivalent energy of restoration in the case of i project alternative at the end of the project lifespan (J) Dimension 3: Present value of revenue realised in the period of lifespan The process of calculating revenues realised in the period of years (Y) is the following: 1. Estimating cash-flow for the whole project lifespan 1.1. timing of investments, estimating investment costs at fixed prices (there might be a need for another supply of logistic instruments and some technological equipment for the project lifespan (Y year) 1.2. estimating running costs at fixed prices ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 231 URL: http://www.reaser.eu e-mail: editors@reaser.eu 1.3. estimating revenues realised in the years of operation at fixed prices 1.4. estimating the residual value of instruments at the end of the period 1.5. estimating the costs of destruction and restoring the original state at the end of the period 2. estimating alternative rate of interest 3. calculating net present value Due to the constraints of the present paper the parts of cash-flow and calculating NPV indicator will not be dealt with as they can be found with details in the professional literature. Dimension 4: Calculating aggregated CO2 emission Aggregated CO2 emission can be defined by analysing project lifecycle like in the case of Dimension 2 and 3 by defining CO2 equivalence embodied in the instruments and materials realised or indirectly utilised during the project lifespan (Y). Its calculation is analogue with defining embodied energy, which is now not detailed, either due to the limitations of the present paper. 2.2. Defining the optimum of the model The optimum is at the maximum of the area covered by the standardised model values of the factors (dimensions) (see Figure 1). The order of the axes is discretionary in the case of three dimensions whereas in the case of four dimensions it is fixed; clockwise (1) standardised logistic costs, (2) energy payback, (3) aggregated CO2 emission, (4) indicator of revenue after the project lifespan. In a professional sense, the indicators are favourable even if costs are the lowest possible (LCC), ERP is the highest possible, aggregated CO2 emission is the lowest possible and revenues (NPV) are the highest possible. Optimum: the area bordered (defined) by the standardised values of the criteria should be maximum. The area of the polygon is calculated by using the area of the triangles that make it up. As the standardised values can also be negative, their common vertex comprises the smallest standardised value so the length of the side of the triangle (D) is as follows: In the case of logistic costs:  D LC   SD LC  min(  SD LC j j j )  The lower logistic costs are, the more favourable so by multiplying them by (-1) they are transformed in the similar reference values. In the case of energy payback:  D EPR  SD EPR  min( SD EPR ) j j j In the case of aggregated CO2 emission:   2 2 2 D CO   SDCO  min(  SD CO ) j j j  The lower aggregated CO2 emission is, the more favourable so by multiplying it by (-1) they are transformed in the similar reference values. In the case of return on investment:  D jNPV  SD jNPV  min( SD jNPV ) where DLC,j  is the transformed, standardized value of the logistic costs of j alternative for the project lifespan (-) SDLC,j is the standardized value of the logistic costs of j alternative for the project lifespan (-) DEPR,j is the transformed, standardized value of the energy payback indicator of j alternative for the project lifespan (-) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 232 URL: http://www.reaser.eu e-mail: editors@reaser.eu SDEPR,j is the standardized value of the energy payback indicator of j alternative for the project lifespan (-) DCO2,j is the transformed, standardized value of the aggregated CO2 emission of j alternative for the project lifespan (-) SDCO2,j is the standardized value of the aggregated CO2 emission of j alternative for the project lifespan (-) DNPV,j is the transformed, standardized value of net present value income generation of j alternative for the project lifespan (-) SDNPV,j is the standardized value of net present value income generation of j alternative for the project lifespan (-) The size of the area designated by values in the case of three dimensions: Tj  3 LC EPR D j  D j  D EPR  D jNPV  D NPV  D LC j j j 4   The size of the area designated by values in the case of four dimensions: Tj  1 LC EPR 2 2 D j  D j  D EPR  D CO  DCO  D NPV  D NPV  D LC j j j j j j 2   Tj is the area covered by the standardised criteria values (-) where Optimum: max T j Tj is the area covered by the standardised criteria values (-) where 3. j  1, k  Results Five possible scenarios have been outlined (Table 1) to test the model that were evaluated by input data based on professional estimation. Table 1: General characteristics of scenarios Code of the scenario A B C D E Characteristics of the basic material supplying district The sampling district covers the geographic area modelled, roadworks density is balanced. The sampling district goes beyond the geographic area modelled, roadworks density is favourable. The sampling district is smaller than the geographic area modelled, roadworks density is not balanced. The sampling district is smaller than the geographic area modelled, roadworks density is not balanced. The sampling district goes Characteristics of machinery Organisational characteristics Order 4D 3D Modern machinery with average Ocasional cooperation, not utilization. coordinated decision making 2 3 Modern machinery with above the average utilization. Cooperating participants, coordinated decision making mechanisms 1 2 Machinery of low performance with above the average utilization and significantly extra capacity. Not cooperating participants, weak machinery performance, not coordinated decision making 5 5 Modern machinery of high performance with below the average utilisation and extra capacity. Old fashioned machinery of low Not cooperating participants, weak machinery performance, not coordinated decision making Cooperating participants, 4 4 3 1 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 233 URL: http://www.reaser.eu e-mail: editors@reaser.eu beyond the geographic area modelled, roadworks density is favourable. performance with above the average utilization and above the average environmental pollution. coordinated decision making mechanisms Source: own construction After standardising the criteria values of the scenarios and calculating the three-and four-dimensional OPTILOG© indicator (Figure 1) the indicators obtained were suitable for ranking the alternatives. Excluding the aggregated CO2 emission from the criteria made some changes at the top of the rank in this particular situation. However, the three-dimensional examination also supplies proper information to omit the least favourable scenarios. As a consequence, preparatory procedures can be reduced by means of a two-stage examination that consists of a preliminary selection and working out the values of the fourth dimension is also carried out in the case of the reduced alternatives. ÁT ÁT 1.5000 1.5000 1.0000 1.0000 0.5000 0.5000 0.0000 0.0000 -0.5000 -0.5000 -1.0000 -1.0000 -CO2 -1.5000 -1.5000 -EPR A B C D E NPV -EPR NPV Source: own construction Fig. 1: Polygonal areas ‘stretched’ by the criterion variables on three-and four-dimensional ray diagrams The results of the tests proved that the optimisation model served as a proper decision making instrument in selecting between the alternatives in the case of a multi-criteria problem. However, the application of the model requires significant knowledge capital for which the cooperation between producers, consumers and the institutions that provide intellectual capital is inevitable. Due to the constraints of this study it cannot be explained in details but rather it is the cluster model that is the most suitable for meeting this requirement as from certain aspects it is better at integrating the interests and roles of the participants than the classical models of cooperation and alliance. Our experience in this field reflects the observations of Maciejczak [2012] in Poland. Károly Róbert College takes part in several regional clusters (among others to utilise renewable energy resources) as a governmental organisation and has experienced the birth of such synergies which prove that the efficient application of our model worked out to compare the biomass utilisation alternatives for energy production and its necessary maintenance triggered by technological and technical changes can be the most efficient within the framework of a cluster model cooperation. As a further argument for this, our experience that reflect that of Maciejczak and Szczupska [2012] transaction costs are favourable in a cluster model, which is also an important economic point to consider. 4. Discussion, conclusions ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 234 URL: http://www.reaser.eu e-mail: editors@reaser.eu The complexity of economic and social processes requires a complex approach in the processes of evaluation. Arguing for the environmental-economic-social sustainability among the criteria of the model for evaluation is not possible at all times by means of direct indicators - that is why indictors that are suitable for expressing, describing or estimating observations in numbers can and must be selected while taking the essential relations between the process elements into consideration at the same time. The research focussed on the biomass utilisation for energy production that results in utilisable energy on the one hand although the process directly or indirectly consumes energy and also has external impacts on the environment (heat emission, CO2 emission) that are unfavourable. The acquisition of input is not only a question of logistics but also influences the volume of the two factors stressed above (energy embodied in utilised instruments, infrastructure, CO2 emission while transportation etc.) It has also to be stressed that the efficiency of using the instruments, the level of cooperation describing the quality of social contacts influence return on energy as well as the volume of externalities as higher level cooperation and more efficient use of instruments improve return on energy and reduce environmental pollution. Adding the criteria of sustainability to the traditional return on economy shows a longer-term way of managerial thinking. However, it also supports making better grounded decisions. 5. Acknowledgements The research has been funded by the research programme TÁMOP-4.2.1.-09/1-2009-0001 entitled “OPTILOG organisational model for optimally serving energy centres”. Bioenergetic Innovation Cluster furnished part of background data through its management organisation, KR Spektrum Ltd. The innovation activity of the cluster as well as the publication of this paper were funded by the application won within the framework of ÉMOP-1.2.1-11-2011-0009 entitled “Working out a remote sensing system suitable for surveying biomass potential under the auspices of Bioenergetic Innovation Cluster”. 6. References [1] A villamosenergia termelés externális költségei, különös tekintettel a megújuló energiaforrásokra. Elemző tanulmány. V2.0. (2010). Készült a MEH részére. Budapest, 2010. April. Power Consult Szolgáltató Kft. 163. p. Online: http://www.eh.gov.hu/gcpdocs/201006/meh_externalia_powerconsult.pdf. Downloaded: 16 June 2012 [2] Hammond, G. P. and Jones, C. I. (2008): Inventory of Carbon and Energy (ICE). University of Bath. 62 p. Online: http://perigordvacance.typepad.com/files/inventoryofcarbonand energy.pdf. Downloaded: 16 June 2012 [3] Lehoczky M. and Takács I. (1981): A melléktermék felhasználás műszaki fejlesztésének lehetősége és gazdaságosságának összefüggése. Kutatási jelentés. Gödöllő, MÉM Műszaki Intézet, 1981. 24 p. (12.396) [4] Lehoczky M. and Takács I. (1983): Növénytermesztési melléktermékek hasznosításának ökonómiai értékelése. In MTA-MÉM Agrár-Műszaki Bizottság Kutatási Tanácskozás. Gödöllő. 18-19. January, 1983 [5] Leontief, W. (1966): Input-Output Economics. Oxford University Press. New York. p. 134 [6] Lund, C. and Biswas, W. (2008): A Review of the Application of Lifecycle Analysis to Renewable Energy Systems. Bulletin of Science Technology Society. 28: 200-209. [7] Maciejczak, M. (2012): The concept of smart specialisation in the development of agribusiness sector on the example of cluster of innovations in agribusiness in Mazovia province. Annals of the Polish Association of Agricultural and Agribusiness Economists 14 (6): 169-176. [8] Maciejczak, M. and Szczupska, M. (2012): Transaction costs in the functioning of clusters. Annals of The Polish Association of Agricultural and Agribusiness Economists 14 (6): 177-181. [9] The NEED Project. (2011): Efficiency conservation. Energy consumption. Online: http://www.need.org/needpdf/infobook_activities/IntInfo/ConsI.pdf. Downloaded: 16 June 2012 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 235 URL: http://www.reaser.eu e-mail: editors@reaser.eu [10] Treloar, G. J.; Love, P. E. D. and Crawford, R. H. (2004). Hybrid Life-Cycle Inventory for Road Construction and Use. Journal of Construction Engineering and Management 130 (1): 43–49. Online: http://www.inference.phy.cam.ac.uk/sustainable/refs/lca/Treloar.pdf. Downloaded: 16 June 2012 [11] White, S. W. and Kulcinski, G. L. (2000): Birth to death analysis of the energy payback ratio and CO2 gas emission rates from coal, fission, wind and DT-fusion electrical power plants. Fusion engineering and design. 48: 473-481. [12] Wikipedia: Embodied energy (2012). http://en.wikipedia.org/wiki/Embodied_energy. Downloaded: 16 June 2012. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 236 URL: http://www.reaser.eu e-mail: editors@reaser.eu Adoption of logistic principles in WOODY-biomass energy clusters Zsolt Tégla1, István Hágen2, Ervin Holló3, Katalin Takács-György4 1,2 ,&)4 Károly Róbert College, Institute of Business Sciences, Hungary 3 KR Spektrum Ltd., Hungary Abstract. Applying logistics principles within production technologies is not an objective or not even a magic potion. It is a tool for getting and maintaining some competitive advantage. This is true in the case of production technology of arboreal biomass for heating purposes too. The produce is not only to compete with other arable land outputs (food or forage), but the energy gained through burning it should be competitive compared to energy coming from other sources. Our investigation dealt with questions related to the raw material provisioning of a virtual energy-cluster. We examined those elements of production technology, in which the logistics methods and the optimisation of the flow of materials showed tangible results. The competitiveness of actors in the economic sphere is significantly determined by the effectiveness of their provisioning chain. The optimal solution to these tasks is provided by that combination of apparatus wherein both the “time factor” (JIT) and the efforts to minimise costs are realised. The provisioning chain we examined comprised of harvesting, transport and storage process elements; of these, harvesting in particular, due to its exceptionally high operating costs. We sought an answer to the question of whether it is better to transport the raw material directly to the processing plant or indirectly after temporary storage. In the case of indirect delivery, where should storage facilities be established and how many should there be, in the interests of minimising total costs? We created and utilised a simulation model to solve the task. Keywords: logistics, energy-cluster, optimization, harvesting, simulation model JEL Codes: C67, Q42, Q51, 1. Introduction Woody biomass energy production is one of the key questions of sustainable energy supply. According one of the early conceptual definitions of the sustainability, the sustainable natural conservation strategy should include managing the resources in such a way that, satisfy all demands of the present generation without reducing the future generation’s opportunities. [NRC Board on Agriculture] Nowadays the sustainability has a wide interpretation.[Bongiovanni, Lowenberg-DeBoer, 2004] In according the Burtland report [World Commission on Environment and Development, 1987] the sustainable development is a development that includes the today and the future, where the requirement system and its necessity of the present meet the later own demand of the future generation in it. [Willers, 1994] 1 Ph.D., Associate Professor, e-mail: zstegla@karolyrobert.hu Ph.D., Associate Professor 3 Ph.D. Student, Manager 4 Dr. habil, Associate Professor 2 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 237 URL: http://www.reaser.eu e-mail: editors@reaser.eu The woody biomass energy production is one of the renewable sources of alternative energy production. Woody biomass as an exhaustible, but renewable natural resources today is almost used for heat and rarely for electricity   Woody biomass: The trees and woody plants, including limbs, tops, needles, leaves, and other woody parts, grown in a forest, woodland, or rangeland environment, that are the by-products of forest management. Woody biomass utilization: The harvest, sale, offer, trade, or utilization of woody biomass to produce bioenergy and the full range of bio-based products including lumber, composites, paper and pulp, furniture, housing components, round wood, ethanol and other liquids, chemicals, and energy feedstocks. [Anonymus, 2003] This means that the social sustainability means together, the manufacturing in a quantity according to a social need of food and industrial (energetic aim) materials, the correspondence to economical criteria, and the responsibility for the environment. The new explanation of sustainability is the thermodynamic approach of natural and social processes. Considering the earth’s ecological system as a closed one, beyond running out of available limited resources will cause the increase of the entropy of the system. The bounds of sustainable development can be traced back to quantitative and qualitative limits. [Georgescu-Roegen, 1979; Ayres, 1995; Kerekes – Szlávik, 2001; Martinás, 2006] The efficiency of artificial energy taken into the agro-ecosystem with technological elements can be increased as far as the efficiency of solar energy can be increased by using it. [Jørgensen – Svirezhev, 2004; Neményi, 2009] From this aspect it is necessary to examine the potential woody biomass producing systems from the logistic side, too. It is also important to highlight the role of innovation from the alternative energy use. Here – because of the space limit – we mention only two aspects of the question. As economists dealing with the cooperation theory suggest that within the small and medium-size enterprises, the operation along the cooperation helps the continuous innovation and the development of their innovational skills. From the point of view of the woody biomass producers the cooperation in the frame of innovation cluster can develop not only the above mentioned skills, but can reduce the investment process and with the help of building up logistic clusters – with the energy producer in the center – the transaction costs coming from the material input side can also be reduced. [Miles et al., 2006; Maciejczak – Szczupska, 2012] The human capital is interpreted as the condition of the long-term success, but not merely the human capital, as an input, but the contact capital being incarnated in the people. The significance of the relational capital higher within small and mediumsize enterprises’ innovational cooperation, as the base of knowledge based growth. [Welbourne – Pardo-delVal, 2009; Takács – Takács.György, 2011; Macieczjak, 2012] In the dispersion of woody biomass use one other element is the notoriety of the technology beside the available technical facilities and of course the land can be used for energy production. Here the clusters –they are the platform to meet the chain participants – are the area of interpersonal communications chains as well, because the individuals make their decisions on the adaptation of new technologies on the base of information coming through these channels. [Csizmadia, 2009] Our investigation dealt with questions related to the raw material supply of a virtual energy-cluster. We examined those elements of production technology, in which the logistics methods and the optimisation of the flow of materials showed tangible results. The competitiveness of actors in the economic sphere is significantly determined by the effectiveness of their supply chain. The optimal solution to these tasks is provided by that combination of apparatus wherein both the “time factor” (JIT) and the efforts to minimise costs are realised. The supply chain we examined comprised of harvesting, transport and storage process elements; of these, harvesting in particular, due to its exceptionally high operating costs. We sought an ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 238 URL: http://www.reaser.eu e-mail: editors@reaser.eu answer to the question of whether it is better to transport the raw material directly to the processing plant or indirectly after temporary storage. In the case of indirect delivery, we wanted to know where storage facilities should be established and how many should there be in the interests of minimising total costs. We created and utilised a simulation model to solve the task. We established that in case of short transport distances (1-3 km), direct transport is feasible. In the case of greater distances, indirect transport and the development of micro-logistical storage centres is justified. The number and location of these micrologistical storage centres can be exactly determined with the help of our model. 2. Material and method The application of logistic principles primarily depends on the special features of agricultural production (living organisms, weather, environmental conditions etc.). Of these influencing factors the most significant one may be seasonality and time factor (the need for having the jobs done at the right time and within the appropriate period). Under the term seasonality we mean the seasonality of expenditure (operational, materials etc.) and revenue. Due to it, the utilization of instruments (cultivating, sowing, plant protection, harvesting, transporting etc.) is unfavourable. Non-adequate utilization incurs increased costs (in the present case the running costs). The utilization of machinery can be improved by contracting workers to engage free capacity if there is a need for that. Another way for decreasing the costs of non-adequate utilization is employing contracted workers. (In the case of valuable machines it is small enterprise size and integration). The logistic examination of biomass cluster for heating utilization starts with optimizing the micro-logistic processes (RST) of arable plant production connected to the time factor by paying attention to the time limitation and cost minimization. Data necessary for the examination derive from AKII and MMI databases as well as by processing own data. The method of processing takes RECAM heuristic simulation model into consideration that stresses JIT principles. Examinations were carried out on all agricultural tasks with high demands for transportation so in this way the organization of a basic material producing cluster of any size and crop rotation on the basis of logistic principles is feasible. The method is the heuristic simulation model that pays utmost attention to JIT principles, which makes it possible to calculate the time necessary for complex (two or three-stage) work processes. 2.1. Optimizing the processes of biomass production in agriculture as a micro-logistic system linked to time constraints To execute JIT ‘just in time’, such labour organizational procedure must be sought and applied that considers the strive to cost minimizing (economical running), stresses the alternative of doing work within an optimal period of time, i.e. optimizes plant production processes. The optimum is where the time constraints and cost minimization are realized. By means of working on arable land meeting this double objective is quite a complex task. The definition of capacity and the selection of such a system of instruments adapted to the size of the company, crop rotation, production site (ecological environment, shape of parcels, slopes, distance from the manor etc.) only hold true in the surroundings where calculations were made. Organizing labour processes is the most economical if the capacity of all machines and machinery participating in the process are fully utilized. The fixed costs of the capacity not covered by sensible operation (loss of time, waiting, idle time) increases the costs of productive performance. Time function: TÖ = (TR + TRV) + (TSZ + TSZV) + (TF + TFV) hour] TÖ = total execution time hour/task TR = loading TRV = waiting time of loading machines TSZ = transportation ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 239 URL: http://www.reaser.eu e-mail: editors@reaser.eu TSZV = waiting time of carriers TF = processing TFV = waiting time of processing TOPT = TRV = TSZV = TFV = 0 Of course, it is only theoretic in the case of a given machine combination. That is why it can only be operated with the highest costs so that the waiting time of the rented instrument should be 0. 2.2. The supply logistic system of biomass based energy cluster Raw material supply of the virtual energy cluster we analyse can be realised three ways: 1. At the time of harvesting each production unit transports the high humidity level wood-chips (4550%) to the central storage facility of the power plant. 2. The harvested amount is stored in temporary storage facilities on the production site, and is transported to the power plant in the rhythm of usage. 3. In the case of large distances micro-regional storage facilities are established for temporary storing the wood-chip output of the given micro-region until the time of usage. Production units nearby still transport directly to the power plant. Figure 1 is showing these variations. Figure 1: Direct and combined supply systems POWER PLANT Direct supply from the production units POWER PLANT Combined supply with temporary storage facilities (Ri) Source: own construction ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 240 URL: http://www.reaser.eu e-mail: editors@reaser.eu We tried to find out which solution leads to the lowest total costs. For this we utilised the heuristic simulative method (RECAM) for optimising harvesting-transport. For establishing the number of regional centres we built a simulation model shown in figure 2. The calculation method applies for the model is the one used by Cselényi (1997). First we calculate total costs in the case when we are not using temporary (regional) storage facilities – everything is transported directly to the power plant (3, 4). In this case total costs: K  K sz  K r K sz Costoftransportation Kr Costofstorage  0 Ft Total transportation costs: n K sz   k i si i 1 ki si Qi ci Qi ci specific cost of transport from field i distance from field i to power plant yield on land i capacity of vehicles transporting from field i During calculation we assumed one kind of transportation and one kind of vehicle. Our RECAM survey showed that MTZ 82 (tractor) + Fliegel EDK 130 (trailer) is the lowest cost means of transport. If full transport is done by the same machines: k 1  k 2  ...  k n és c1  c 2  ...  c n The total storage costs: K r  re R e Te re specific maintenance costs of the power plant storage Re average stock at the power plant storage Te average storage time at the power plant storage Cost K resulted will be the base – algorithm cycle starts from here. After this we analyse total costs in case of 1,2,…,m storage facilities. In these cases K  K sz  K r K sz szállítási költség Kr raktározási költség This time the transportation costs consist of two factors: K sz  K szr  K szf K szr cost of transportation from storage to power plant K szf cost of transportation form fields to storage Detailed calculation is as follows: ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 241 URL: http://www.reaser.eu e-mail: editors@reaser.eu m K rsz   k ( r ) j s ( r ) j Q (r ) j j1 c (r ) j k (r) j specific cost of transport from storage j s(r ) j distance from storage j to power plant Q(r ) j yield on fields belonging to storage j c(r ) j capacity of vehicles transporting from storage j This is one of the key factors in calculation since total costs can be reduced significantly if we minimise transportation cost from storage to power plant. When transporting biomass from filed to storage the following costs arise: Assuming that storage facilities R1,R2,…,Rm are associated with territories t1, t2,…,tm m tj f sz K   k jp j s jp j j1 p j 1 k jp s jp j c jp j j c jp j specific cost of transport from field pj to storage Rj j Q jp Q jp distance from field pj to storage Rj j yield on fields pj belonging to storage Rj capacity of vehicles transporting from field pj to storage Rj Storage costs are to calculated here too, of course: K r  K er  K rr K rr K er storage costs of storage facilities storage costs of power plant m K rr   rj R j Tj j1 rj specific maintenance costs of storage Rj Rj average stock at storage Rj Tj average storage time at storage Rj In this case total costs are: m K   k ( r ) js ( r ) j j1 Q(r) j c(r) j m tj    k jp j s jp j j1 p j 1 Q jp c jp j m j   rjR j T j1 We should notice that there are going to be fields from which transportation is directly to the power plant. In our calculation in such cases the power plant functions as storage facility but no further transportation is needed.[ 3,4 ] The following in equation demonstrates things stated above: ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 242 URL: http://www.reaser.eu e-mail: editors@reaser.eu k isi Q jp Q(r) j Qi j  K ri  k jp j s jp j  k ( r ) js ( r ) j  rj R j Tj ci c jp j c(r) j Thus, if transportation and storage costs of field i directly to the power plant are lower than total transportation costs to any storage Rj it is better to transport directly to power plant. This calculation should be performed for all fields and storage facilities. As a result we will be able to see the limits of the area around the power plant within which fields belong directly to the power plant. These fields will transport directly to the plant, the rest to allocated storage facilities. (see Figure 1.). Planning the supply system of the virtual energy cluster we established The task: designing the supply system for a 1 MW biomass based hot water and heating plant based on the methodology presented earlier. Starting data: Raw material need: 1.100 t/year (18-20% humidity level wood-chips) 2.500 t/year (45% humidity level wood-chips) Need of land: 110-120 ha (energy poplar /AF 2/, 45 t/ha yield, 2 year cutting cycle) Analysing the distance features (1-10 km) of the virtual cluster based upon the RECAM method the MTZ 82 (tractor) + Fliegel EDK 130 (trailer) proved to be the lowest cost means of transport. Following RECAM simulative model methodology we calculated total costs in the case of various scenarios. Data and results of direct, indirect and combined supply are shown in table 1-3. 2.3. Table 1: Costs in the case of direct supply Name Field 1 Field 2 Field 3 Field 4 Field 5 Field 6 Field 7 Field 8 Field 9 Field 10 Total: Distance (km) 7 4 10 5 4 5 8 10 8 5 66 Source: own calculation Area (ha) 10 4 10 4 6 3 5 6 8 6 62 Yield (t) 450 180 450 180 270 135 225 270 360 270 2 790 Specific cost (Euro/ha) 130,2 115,4 160,9 118,9 115,4 118,9 140,1 160,9 140,1 118,9 1 319,9 Cost (Euro) 1 302,3 461,5 1 608,9 475,8 692,3 356,8 700,6 965,4 1 120,9 713,7 8 398,3 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 243 URL: http://www.reaser.eu e-mail: editors@reaser.eu Table 2: Costs in the case of indirect supply Name Field 1 Field 2 Field 3 Field 4 Field 5 Field 6 Field 7 Field 8 Field 9 Field 10 Total: Distance (km) Area (ha) 6 3 9 4 3 4 7 9 7 4 56 10 4 10 4 6 3 5 6 8 6 62 Harvest and Loading cost Number of Transportation Total cost Yield (t) transportatio (Euro) rounds cost (Euro) (Euro) n cost (Euro) 450 180 450 180 270 135 225 270 360 270 2 790 818,9 368,2 818,9 368,2 552,3 276,1 460,2 552,3 726,2 552,3 5 493,6 76,1 30,4 76,1 30,4 45,7 22,8 38,1 45,7 60,9 45,7 471,9 22,50 9,00 22,50 9,00 13,50 6,75 11,25 13,50 18,00 13,50 140 182,7 36,5 274,0 48,7 54,8 36,5 106,6 164,4 170,5 73,1 1147,8 1077,7 435,2 1169,1 447,3 652,7 335,5 604,8 762,3 957,6 671,0 7113,3 Source: own calculation Table 3: Costs in the case of combined supply Name Distance Area (km) (ha) Field 1 3 Field 2 1 3 Storage 1 Field 3 5 Field 4 1 4 Storage 2 Field 5 3 Field 6 4 Field 7 7 Field 8 3 Field 9 5 Field 10 1 4 Storage 3 Total: 44 Source: own calculation 10 4 10 4 6 3 8 5 6 6 62 Harvest and Loading Number Transportatio Total cost Yield (t) transportati cost (Euro) of rounds n cost (Euro) (Euro) on cost (Euro) 450 818,9 180 368,2 630 106,6 31,50 127,9 1 421,6 450 818,9 180 368,2 630 106,6 31,50 170,5 1 464,2 270 552,3 45,7 13,50 54,8 652,7 135 276,1 22,8 6,75 36,5 335,5 360 726,2 60,9 18,00 170,5 957,6 225 460,2 270 552,3 270 423,7 765 129,4 38,25 207 1 772,6 2 790 5 365,0 471,9 101 767,3 6 604,2 Based on the results we can draw the following conclusions: - Total logistic costs are the highest in the case of direct supply (8 398,3 Euro). Base logistic cost amounts to 3,01 Euro/t. - Total logistic costs in the case of indirect supply are 7 113,3 Euro, leading to a base logistic cost of 2,55 Euro/t. - Combined supply results in considerable savings – total logistic costs in this case are 6 604,2 Euro with a base logistic cost of 2,36 Ft/t. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 244 URL: http://www.reaser.eu e-mail: editors@reaser.eu - 3. Savings amount to 1 794,1 Euro compared to direct supply and 509,1 Euro compared to indirect supply. Direct supply is justified for shorter distances (1-3 km) – for distances larger than this storage facilities are to be built. In line fields must chose the nearest storage facility. Positioning micro-regional storage facilities – in the case of a geometrical arrangement – is to be based on GPS coordinates, production/yield data and logistic points of equilibrium. Summary, conclusions Systematic thinking and total cost approach are the prerequisites of planning and operating logistic systems together with meeting the 6 points of logistics (getting the right product at the right place at the right time in the right quantity and quality with the right costs to the consumer). Special attention can be paid to cost as it is one of the decisive factors of competitiveness. Total cost approach means that all the costs of the parts of the system should be minimum. Therefore, the cost minimizing opportunities for the constituents of the system must be examined together with the mutual impact of the costs of the single parts. The objective is that the decreasing costs on the side of a part should not result in cost increase that exceeds the decrease in the case of another part. The quantity of raw material (biomass) production (woody and soft stemmed plants) is influenced by the size of the production area and the yield per unit. It is essential to choose a production site that meets the ecological needs of the plant to be produced to reach the targeted yield. In most cases the size is determined by demand. On the basis of the raw material requirements of existing or would-be enduser, heating centre or power plant total energy needs= energy producible on the unit area x size of the area. Of course, a larger part of a production site can be suitable for producing biomass (competitive with crop production)-in such cases products are sold in a processed form (pellet, briquette...) so a supply market emerges. In this case the logistic chain works in a PUSH system. In the case of the construction of the logistic system of the biomass cluster for heating the application of a PULL system is more likely as meeting the local, micro-regional, regional and cluster needs decide on the quantity of the plant produced based on the requirements of consumers and customers in time and quantity. Of course, we must not disregard the possibility of placing extra, excess products (They can influence sales price, and the costs of extra transport and storage increase logistic costs, which decreases competitiveness). The special feature of the system is that the basic material is produced on agricultural arable land and harvesting takes place during a predefined period of the year. In the case of ensuring continuous supply crop structure, plantation structure and species structure play a vital role. The competitiveness of woody biomass depends on two factors. It should be competitive with the crops and forage produced on arable land on the one hand, and should also compete with heat and electricity deriving from fossil energy resources, on the other hand. From the point of view of logistics, the most important parts in production technology with the highest costs incurred are harvesting and transportation (in bulk, long distance). That is why it is essential that the operation should be arranged by paying continuous attention to logistic principles so that costs are kept to the minimum. It can be realized by totally synchronizing the process elements of harvesting, transportation and product processing. When harvesting woody biomass a great bulk must be transported, which also means a peak in labour during the winter months from November to March. Severe weather conditions in winter makes harvesting and transportation even more difficult or sometimes impossible. Ensuring the maximum use of the valuable harvesting machine can only be carried out by trailers that carry 5-8 tons due to the weather conditions. Transporting by them, however, is only worth for distances of 4-5 km. The cost of harvesting increases in line with the distance of transportation then at a certain distance it breaks down an steeply goes up. Of course, this is not novelty but when examining the breaking point we can conclude that it is due to the fact that some of the vehicles do not return to the harvesting machines. The costs of unused capacities of the machine with high operating (rental) costs (fixed with the price of the rent and area) also increase the costs of running. The competitiveness of the product (chop of wood) lies in the minimum ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 245 URL: http://www.reaser.eu e-mail: editors@reaser.eu running costs of technology. That is why a number of vehicles with proper capacity must be selected for the distance. The optimal solution is the combination of machines where both the time factor (JIT) and minimal costs are considered. Cooperation in the sustainable energetic cluster can result in optimal harvesting and transporting connections. The members of the cluster can realize a significant decrease of 10-15 % in the costs of transportation and warehousing. At the same time, the capacity of instruments has significantly been improved, which results in decreasing accumulated logistic costs. 4. Acknowledgements: KR Spektrum Research, Development and Service Ltd. is engaged with cluster managerial tasks. The innovation activity of the cluster as well as the publication of this paper were funded by the application won within the framework of ÉMOP-1.2.1-11-2011-0009 entitled Working out a remote sensing system suitable for surveying biomass potential under the auspices of Bioenergetic Innovation Cluster. BioenergeticInnovation Cluster E-mail: ikc@kft.karolyrobert.hu telephone: 37/518-133 Address: 3200 Gyöngyös, Mátrai út 36. www.bikc.hu www.krspektrumkft.hu 5. References [1] Ayres, R. U. (1995): Life cycle analysis: A critique. Resources, Conservation and Recycling. 14: 199-223. [2] Anonymus: Memorandum of Understanding on Policy Principles for Woody Biomass Utilization for Restoration and Fuel Treatments in Forests, Woodlands, and Rangelands. http://www.fs.fed.us/woodybiomass/documents/BiomassMOU_060303_final_web.pdf. 7 pp.Downloaded: 30 June, 2012 [3] Bongiovanni, R. – Lowengerg-DeBoer, J. (2004): Precision agriculture and sustainability. Kluver Academic Publisher. Precision Agriculture. 5: 359-387. [4] Csizmadia Z. (2009): Együttműködés és újítóképesség: Kapcsolati hálózatok és innovációs rendszerek regionális sajátosságai. Budapest. Napvilág Kiadó. 254 pp. [5] Georgescu-Roegen, N. (1979): Energy Analysis and Economic Valuation. Southern Economic Journal. 45: 1023-1058. [6] Jørgensen, S. E. – Svirezhev, Y. M. (2004): Towards a thermodynamic theory for ecological systems. Elsevier Science. Amsterdam – Lausanne – New York – Oxford – Shannon – Singapore – Tokyo. 366 p. [7] Kerekes, S. – Szlávik, J. (2001): A környezeti menedzsment közgazdasági eszközei. KJK – Kerszöv. Környezetvédelmi Kiskönyvtár. 294 p [8] Miles, R. E. – Miles, G. – Snow, C.C. (2006): Collaborative Entrepreneurship: a business model for continuous innovation. Organizatzional Dynamic. 35. (1) 1–11 pp. [9] Maciejczak, M. (2012): The concept of SMART specialization in the development of agribusiness sector on the example of clusters of innovations in agribusiness in Mazovia Province. Annals of the Polish Association of Agricultural and Agribusiness Economists. XIV. (6) 169-176 pp. [10] Maciejczak, M. – Szczupka, M. (2012): Transaction costs in the functioning clusters. Annals of the Polish Association of Agricultural and Agribusiness Economists. XIV. (6) 177-181 pp. [11] Martinás, K. (2006): Non-equilibrium economics, Interdisciplinary Description of Complex Systems (INDECS). 4. (2): 63-79. [12] Neményi, M. (2009: Thermodinamic modeling of agro-ecological systems especially regarding the plant production. Cereal Research Communications. 37 (Suppl.): 529-532. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 246 URL: http://www.reaser.eu e-mail: editors@reaser.eu [13]Takács-György K, Takács I (2011): Global challenges and local answers by the SMEs in the North Hungarian Region – Role of strategic thinking. In: The International Conference Small and Medium Sized Enterprises in a Globalized World: 5th Edition. Cluj-Napoca, Románia, 2011.09.22-2011.09.24. Cluj-Napoca: Babes-Bolyai University, pp. 7-19. [14] Tégla Zs - Kovács E. - Miller Gy.: A versenyképesség javításának lehetőségei biomassza alapú energiaklaszterben. Gazdálkodás, 2008. (52. évf.) 3. sz. 238-247. old. [15] Welbourne, T. M. – Pardo-del-Val, M. (2009): Relational Capital: Strategic Advantage for Small and MediumSize Enterprises (SMEs) Through Negotiation and Collaboration. Group Decision and Negotiation. 18. (5) 483-497 pp. [16] World Commission on Environment and Development (WCED) (1987). Burtland Report. United Nations. New York. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 247 URL: http://www.reaser.eu e-mail: editors@reaser.eu The new approaches in econometric research of financial markets. Distributed volatility V. I. Tinyakova1+ 1 Chair of Information Technologies and Mathematical Methods in Economy, Voronezh State University (Voronezh, Russia) Abstract. Volatility is one of the most important characteristics of any financial instrument return. The idea which states that all information about financial assets is contained in its price is implemented in current approaches to modeling the volatility of financial assets and it corresponds well with the efficient market hypothesis. Therefore, all volatility models use only the information contained in the price of the asset is being modeled. In this paper we propose an approach that implements the assumption that the volatility of an asset depends on the market volatility. But the relationship is not correlation-regression, though this may exist, but is probabilistic, in the sense that the probability of the high volatility of any asset increases with the volatility of the financial market. To implement this approach, a model which helps to evaluate the distributed volatility is offered. Distributed volatility, however, as VaR, helps to evaluate the positive and negative part of volatility, but unlike VaR, describes volatility dynamics. So it allows forecast calculation of the financial asset volatility, particularly in estimation of the intrinsic value of stock options. Keywords: volatility, distributed volatility, forecast estimation of volatility, financial market, VaR, BlackScholes formula, CRR-model, model ARCH JEL Codes: C51, C53, C58, G11, G17 1. Introduction Volatility is one of the most important characteristics of return of any financial instrument. Understood as a general measure of uncertainty in the dynamics of financial assets and characterizing the variability of the market price, it is ambiguously interpreted and can be measured in different ways. Most often this term refers to: 1) the emotional response of market activity; 2) the variability of return on financial assets; 3) the "true" value of the quantity, defined by the term; 4) the implicit (internal) variability of the assets used in the estimates of the cost of an option contracts; 5) risk of portfolio of assets. The ambiguity of the meaning given to this term naturally orients to the creation of the corresponding variety of models and methods for assessing the level of volatility. Currently, two estimates of volatility are the most popular: mean-square deviation and VaR. Both of these estimates are usually interpreted as a risk and are used in various techniques used to support investment decisions. Typically, the models that form the basis of techniques, volatility is considered as a fixed parameter, but in fact, its value changes over time. This also applies to the Markowitz’s model, and the Black - Scholes formula. The models implicitly assumed that the volatility in the form of mean-squared deviation is fixed at a level that will take place in a preemptive period of time. In other words, the calculation of these models would have to be made using forecast estimates of volatility. 1+ Dr. Sc. of Economy, Professor. E-mail: tviktoria@yandex.ru. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 248 URL: http://www.reaser.eu e-mail: editors@reaser.eu In the classic versions of these models forecast estimates are not used, whereby they lost their practical value. Therefore, research on modeling of volatility in which attempts are made to correct the situation, the subject of many papers. 2. Theoretical basis of modeling of volatility 2.1. Review of existing approaches True volatility - the non-observed value, and so the question of its nature and its evaluation requires special approaches. In most approaches [4, 7, 9] the volatility is considered as stochastic variable, which has the peculiar property of clustering of values in periods of calm behavior of the market and of its excited state, which suggests the possibility of its prediction. This property was discovered by R. Engle. For the simulation of those same features he offered econometric model ARCH. The simplest version of this model is written as follows: rt    xt , xt   t u t , (1) (2)  t2   0  1 xt21 , (3) where rt – return of financial asset;  – average return of financial asset; xt – deviation from average return of financial asset;  t2 – dispersion of return of financial asset;  0 ,  1 – estimated coefficient of the model; ut – unobserved normally distributed random component of the model, with zero mathematical expectation and unit dispersion. To get volatility forecast evaluation with the help of models-ARCH, which would provide the necessary accuracy in the determination by the Black - Scholes risk-neutral pricing options, failed. Therefore, studies have focused on improving the equation (3). First, there were models ARCH (p), in which the dispersion equation contains more variables delayed  t2   0   1 xt21   2 xt2 2     p xt2 p . (4) Then the models GARCH were developed, where the general form of the equation to predict the dispersion is described as follows: p q  t2   0    i xt i    i t2 j . i 1 (5) j 1 Solution of the problem of estimation of volatility with these models was failed, so they become more complex and modified. At present, the modeling of volatility than ARCH and GARCH, used model, GARCH-M, AGARCH, AGARCH-M, EGARCH, EGARCH-M. General form of these models can be found in [2, 5, 6]. Not receiving with this class of models consistent results, ensure in all circumstances the possibility of practical application of the Black – Scholes’s formula, researchers paid their attention to other more complex class of models, known as the "stochastic volatility model". These models are characterized by the presence of two sources of randomness, reflecting the evolution of the financial asset returns. Stochastic volatility model of the first order can be written as follows: xt   t u t , (6) ln( t2 )   0   1 ln( t21 )  c t , where ut and  t –independent, normally distributed random variables with zero mean and unit variance. (7) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 249 URL: http://www.reaser.eu e-mail: editors@reaser.eu Estimation of the parameters of stochastic volatility model is a rather complicated procedure and is usually performed with a Monte Carlo method or by using Kalman filtering theory. Attempts of the usage of stochastic volatility were made in the calculation of the cost of exotic options. But this model didn’t become an assessment tool of exotic options. The assessment of the impact of sharp rise of the prices of financial assets arouses the great interest. The sharp rise - although a rare event, but it is crucial for understanding the level of required protection for making of investment decisions. In such situations, when the financial market is experiencing extreme behavior of prices, methodology VaR is usually applied. With this methodology we can estimate the allowable decrease (increase) of the price of assets over a period of time at a given level of risk. Development of econometric approach in assessing of volatility was stimulated by the desire to get such result, which could be used in the calculation of the option price by the Black – Scholes formula. Pursuit of these models was over when the concept of "implied volatility" was introduced. The introduction of this concept has led to the fact that the estimated parameter of the Black – Scholes formula was, in effect, replaced by an adjustable parameter. This approach has become the preferred alternative to modeling of forecasts of volatility on historical data. Implied or internal volatility is the solution of the nonlinear equation. Nonlinear equation in this case is the Black – Scholes formula, an unknown quantity  , and the right side of this equation is the market value of the option. The analytical expression for  is not possible. Therefore, the solution of this nonlinear equation is made by numerical methods. In [1] method of bisection and Newton's method are recommended for this purpose. On a combined share market MICEX-RTS (www.rts.micex.ru) implied volatility in the valuation of options on futures is determined by the formula   A  B  (1  exp( C  x 2 ))  D  arctg ( E  x) , E  Strike   / T , x  ln   F(t )  (8) (9) where Strike – strike of the option; F(t ) – price of the underlying futures contract at the current time; t; T – time from the current day to the day of option expiration inclusively, in the shares of the year;  – volatility, expressed as a percentage of the price of the underlying futures; A, B, C, D, E – parameters used in setting the dependence of volatility on the difference between the option strike and the price of the underlying futures. After each transaction algorithm of setting these parameters provides for their modification, according to which the volatility curve (8) most accurately reflects both the implied volatility of the last trade and the previous transactions made with decreasing time scales. The basis of this algorithm is the method of averaging observations Kalman. With the help of implied volatility the problem is solved only for European options. Therefore, issues of new approaches remain relevant. 2.2. Proposed approach. distributed volatility In considered approaches to modeling the volatility of financial assets idea well corresponded with the efficient market hypothesis is implemented, according to which all information about financial assets is contained in its price. Because of this, only the information that is contained in the price of the asset being modeled is used in all models of volatility. Below we propose an approach that implements the assumption that the volatility of an asset depends on the volatility of the market. But the relationship is not correlationregression, though it may exist, but probabilistic, in the sense that the probability of the high volatility of any asset increases with the volatility of the financial market. Implementation of the proposed approach provides for construction of a model in which should reflect the basic ideas used in the modeling of financial markets. In these ideas can be seen a discrete and continuous representation of stochastic processes describing the evolution of the prices of the underlying ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 250 URL: http://www.reaser.eu e-mail: editors@reaser.eu assets of options, reflecting the complex nature of the mechanism of reflecting of complex nature of the random component of the econometric models, the description of the simulated processes is written in several equations. The model, which construction is described below, in a sense, is a specific implementation of these ideas. The specific implementation provides forming of a model with which to evaluate the distribution of volatility, which is defined as the expectation of a random variable with values in the form of average estimates of possible deviations of return of the financial asset on the trend and conditional probabilities of the reality of these deviation [10]. To understand how to construct a mechanism of the model of distributed volatility, with which it reflects the changes in the dynamics of the simulated asset, we consider the models that have been used as an example to follow. This model, which, in fact, have become the standard, due to the fact that all researchers orient on this model. An important place in this list is the equation that is associated with the name of Bachelier and which in the Black - Scholes model describes the micro-mechanism of forming of action return S  t   t , S (10) where  – average rate of return; t – short period of time in which this model makes sense;  – risk, measured by the mean-square deviation;  – normally distributed random variable with zero mean and unit variance. The first term of this equation is the continuous component and is the expected rate of return action, and the second term - the amount of risk, which in each case has a shock (unknown) effects on the level of expected returns, changing it in one direction or another depending on the sign and the values of the random variable  . Model of distributed volatility also has two components, one of which reflects the changes in time, and the second - probability of shock effects. But the playback mechanism shocks built on a different principle. To understand this, we consider the binomial model of (B, S)-market, which is called the CRR-model. For a correct construction of this model we assume that on the market financial transactions are carried out with a bank account B  ( Bt ) t  0 and a single action, the cost of which is usually denoted by S  ( S t ) t  0 . The price of the ( B, S ) -market changes abruptly at successive moments, and is described by the equations Bt  (1  rt ) Bt 1 , S t  (1   t ) S t 1 (11) (12) with B0  0 and S 0  0 . Bank rate in (11) is constant, and the return on equity   (  t ) t 1 is a Bernoulli sequence of independent and identically distributed random variables 1 ,  2 , . . . , taking two values ru , (13) t   rd  ru rd , with probability p  P(  t  ru ) and q  P(  t  rd ) respectively. In the binomial model of ( B, S ) -market mechanism of playback of shock effects is based on the use of a discrete random variable. The absence of a trend component does not mean that this model describes the process without trend. If we apply the methodology of simulation and with the help of this model reproduce the trajectory of the process, it appears that the trajectory has a trend that is formed under the influence of the probability distribution and the magnitude of jumps in (13) the price of the asset. It is important that shock component can be thought with using a continuous random variable, and with the help of discrete. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 251 URL: http://www.reaser.eu e-mail: editors@reaser.eu The use of a discrete random variable to represent the shock component allows extending the capabilities of risk modeling. In particular, with its help it is possible to implement a new way of looking at the volatility of financial assets. Within this framework, volatility is defined as the weighted value of shock effects (possible values of a discrete random variable), the assessment of which is carried out using data from the historical period. Instrument of concepts is a special kind of econometric models. In the simplest case, a model with which it is possible to predict the magnitude of the distributed volatility is written as follows: rt  M( rt / rt 1 )   tp , (14) d  M[(rt  M(rt / rt 1 ))  sign (rt  M(rt / rt 1 ))] , p t   d  2d F(z t b) , e b0  b1 z t , 1  eb0  b1 z t z t  rI t  M( rI t / rI t 1 ) , F(z t b)  (15) (16) (17) (18) where rt – yield of the underlying stock at the moment; t; M(rt / rt 1 ) – conditional mathematical expectation of the return of the underlying stock; d –average magnitude of absolute deviation from stock returns conditional expectation;  tp – distributed volatility of returns of the underlying stock at the moment t; z t – deviation of the values of the index at the moment t from conditional mathematical expectation; rI t – profitability of index at the moment t; M(rIt / rIt 1 ) – conditional mathematical expectation of the return of the index. In contrast of the expression (10) that is meaningful only in the infinitely small intervals of time, this model preserves the correct application in specific time intervals. It allows us to use it for analysis, and for the forecast calculations. Conditional mathematical expectation in (14), as a rule, is a first-order autoregressive model, used to describe the trend of the asset. As a trend, you can use other models such extrapolation. In the particular case, the trend may be missing, and then the conditional expectation is replaced by unconditional. Estimated parameter d is a measure of the average amount of risk with which the model is determined by the upper limit and lower limit of the expected average yield, with the help of which loss of the buyer and seller of a security can be easily calculated. This approach to risk measurement methodology is similar to risk-metric, offered by J.P. Morgan to calculate VaR. And in this approach, and the approach of J.P. Morgan amount of risk is determined by the probability. But if the evaluation of the probability of VaR indicates the investor, the value of risk, calculated by using the expression d (16), explicitly depends on the probability distribution of the index, which characterizes the activity of the stock market. In the model (14) – (18) logistic distribution figures, which in the form in which it is written in econometrics called logit-model. For these purposes, you can use a probit-model with a normal distribution. However, the logit-model for our purposes is preferable. This is due to the fact that the logit-model can be generalized to more complex probabilistic description of the risk than it is presented in (16). The need to build more complex structures of probability arises, for example, the modeling of incomplete markets. Volatility, represented in the form (16) is differentiable by z function. Consequently, there is the possibility of limiting the analysis, the results of which provide the most complete picture of the nature of the local behavior of asset returns based on market activity. Feature of the distribution of volatility is also on the fact that it, unlike  and VaR determines not only the value of the average or maximum deviation, but also in terms of the entropy H t   F(z t bˆ ) log 2 F(z t bˆ )  (1  F(z t bˆ )) log 2 (1  F(z t bˆ )) (19) ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 252 URL: http://www.reaser.eu e-mail: editors@reaser.eu assess the level of uncertainty. And between the absolute value of the distributed volatility and the level of uncertainty there is a relationship. This inverse relationship: the lower the value of the distribution of volatility, the higher the level of uncertainty. Entropy characteristics of the distribution of volatility can be used as a criterion to assess how accurately reproduces the volatility fluctuations of the simulated process. For this we introduce the coefficient H (e) , H ( ) KH  where H (e)    (F(e bˆ ) log t 2 (20) F(e t bˆ )  (1  F(e t bˆ )) log 2 (1  F(e t bˆ ))) , et  rt  M(rt / rt 1 ) , t H ( )   (F(σ t bˆ ) log 2 F(σ t bˆ )  (1  F(σ t bˆ )) log 2 (1  F(σ t bˆ ))) . t Value of entered factor is between 0 and 1. If K H  0 , volatility reproduces not those oscillations that take place in reality. If K H  1 volatility reproduces exactly oscillations of historic period. Unlike of  and VaR, with the help of which average and maximum possible losses are reproduced, using distributed volatility an estimate of possible losses in each particular situation can be obtained. This property makes distributed volatility particularly attractive for practical use. Construction of the model (14) – (18) is carried out in stages, using the method of least squares, maximum plausibility method and the Monte Carlo method. 2.3. The order of distributed volatility To distinguish between the probability distribution obtained using models of different complexity, we introduce the concept of "order of distribution of volatility." Volatility, which is obtained by the model (14) (18) is called the distribution of the first order and volatility denote  t[ p , 1] . The model, which is obtained by using a distributed volatility of the second order, taking into account like xt1 the volatility of the first order looks rt  M( rt / rt 1 )   t[ p, 2] , (21) d1  M[(rt  M(rt / rt 1 ))  sign (rt  M( rt / rt 1 ))] , d 2  M[(rt  M( rt / rt 1 , xt1 ))  sign (rt  M(rt / rt 1 , xt1 ))] , (22)  t[ p , 2]  d1  d 2  2 P0 (d1  d 2 )  2 P1d1  2 P2 d 2 , (24) P0  P ( t[ p , 2]   d1  d 2 / z t ) , P1  P ( (23) (25) [ p , 2] t   d1  d 2 / z t ) , (26) [ p , 2] t  d1  d 2 / z t ) , (27) P2  P ( P3  P ( t[ p , 2]  d1  d 2 / z t )  1  P0  P1  P2 , z t  rI t  M(rI t / rI t 1 ) . (28) (29) Thus, the volatility of the value of the distribution of the second order are formed on the basis of the distribution of a random variable with a set of possible values of the four elements. As the distribution of this random variable is used multinomial logit-model is multiple choice. For the convenience of its records introduce the coded values for the considered values of the random variable, commenting on substantive meaning of these values. Establish the following correspondence:  d1  d 2  0  y0 – the most unfavorable situation on the market;  d1  d 2  d1  d 2  1  y1 – unfavorable situation on the market;  2  y 2 – favorable situation on the market; ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 253 URL: http://www.reaser.eu e-mail: editors@reaser.eu  d1  d 2  3  y3 – the most favorable situation on the market. From these models it is easy to understand that the increase in the order of distribution of volatility requires double the number of possible values of a random variable, based on which it is built. Infinite increase in the number of items included in the set of possible values of the random variable is meaningless. Theoretically, this increase is limited to the difference that exists between the continuous and discrete. But in practice, we can restrict the 16, or, at most, 32 possible values of the random variable. All d , estimated as coefficients of these models, positive quantities. Moreover, by construction, the model is always executed chain of inequalities d1  d 2  d 3  . Of these properties can be concluded in accordance with that, the higher the order of distribution of volatility, the wider the range of possible values of a random variable, and thus more fully distributed volatility reproduces the full range of possible changes in the profitability of the financial asset. 3. The results of empirical research Feasibility forth new ideas for measuring volatility of financial assets has been considered by the example of the volatility of shares of OJSC "Surgutneftegas" for the period from 20.02.2009 to 31.12.2009 (see Fig. 1). 0,6 0,4 Deviation of sh average Volatility 0,2 Current volati 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 Volatility of th Volatility of th -0,2 Volatility of th -0,4 Fig. 1: Graph of the volatility of stock returns "Surgutneftegas". The configuration of the curves suggests that the most sensitive to changes in volatility has distributed third-order and low sensitivity of the current volatility used in the Engle model as the dependent variable. Mean-square deviation  and VaR are static characteristics of variability, and compare them distributed volatility pointless. At the same time, the approximation accuracy with which distributed the volatility of various orders reproduce actual fluctuations yield was the highest in the model to calculate the volatility of the second order. By fidelity of vibration current volatility  t can not compete with the distributed volatility. This is so that it reflected the positive part of the volatility and, therefore, it can help to identify only the most changes in volatility, and not yield a financial asset. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 254 URL: http://www.reaser.eu e-mail: editors@reaser.eu Distributed volatility, however, as VaR, evaluates the positive and negative part of the volatility, but unlike the VaR with the help of the dynamics of the volatility, which allows projections of variability of the financial asset. 4. Conclusion The proposed model is a distributed volatility which fairly accurately reproduces the current volatility of financial assets on the assumption that the level of this variability is determined by the appropriate level of volatility of the market index. Dependence of the characteristic features of the asset index resembles W. Sharpe single index model, which, based on a regression of asset returns on the profitability index was decided to build an effective portfolio. This suggests that the distribution of the volatility can be used not only in the problems of option pricing, but also in solving problems of portfolio investment. The specific properties of the distributed volatility caused by the possibility of its derivation, as well as the entropy estimate of the situation in which to make investment decisions, greatly expand the range of tasks, which involves posing a risk assessment or expected to change. Moreover, the distributed model of volatility in these situations can be used as a standalone tool, such as implementing a stock option trading strategies volatility. 5. References [1] Burenin A.N.. Forwards, futures, options, exotic and weather derivatives. Moscow: Technical Society named by academician S.I. Vavilov, 2008. [2] Lukashin Yu.P.. Adaptive methods of short-term forecasting of time series. Moscow: Finances and Statistics, 2003. [3] Melnikov A.V., Popova N.V., Skornyakova V.S.. Mathematical Methods of Financial Analyses. Moscow: Ankil, 2006. [4] Andersen T.G., Bollerslev T.. Answering the skeptics: Yes, standard volatility models do provide accurate forecasts. International Economic Review. 1998, Vol. 39, No. 4: 885-905. [5] Engle R., Lilien D., Robins R.. Estimating Time Varying Risk Premia in the Term Structure: The “ARCH-M Model”. Econometrica. 1987, 55. [6] Engle R.. Generalized Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation. Econometrica. 1982, 50: 987-1007. [7] Forecasting Volatility in the Financial Markets. Edited by J. Knight, S. Satchell, 2007. [8] Green W.H.. Econometric Analysis. New York: Macmillian Publishing Company, 2000. [9] Stochastic volatility. Selected Readings. Edited by N. Shephard. Oxford, 2005. [10] Tinyakova V.I., Suyunova G.B.. Distributed Volatility: model and property. Modern Economy: problems and decision. 2010, 3 (3): 138-149. 6. Appendix Table 1: Dynamics of indexes of RTS and closing prices of the shares of OJSC "Surgutneftegas" Date 20.02.2009 24.02.2009 25.02.2009 26.02.2009 27.02.2009 02.03.2009 03.03.2009 04.03.2009 05.03.2009 Index 517,22 524,69 538,11 547,55 544,58 539,37 540,74 562,87 559,09 Shares 17,50807 17,29948 17,60084 18,28196 19,02252 19,11693 19,4077 20,55759 21,67273 Date 12.05.2009 13.05.2009 14.05.2009 15.05.2009 18.05.2009 19.05.2009 20.05.2009 21.05.2009 22.05.2009 Index 979,82 947,53 932,11 936,27 939,65 968,88 1023,98 1001,36 1013,37 Shares 25,83446 25,67794 25,79825 25,46232 24,32346 24,96431 25,16546 24,57103 24,77879 Date 27.07.2009 28.07.2009 29.07.2009 30.07.2009 31.07.2009 03.08.2009 04.08.2009 05.08.2009 06.08.2009 Index 1037,61 1001,8 973,78 1001,3 1017,47 1067,98 1074,49 1094,26 1083,79 Shares 23,94847 23,45453 23,40067 23,91713 24,17597 25,16287 25,31308 26,27811 26,27115 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 255 URL: http://www.reaser.eu e-mail: editors@reaser.eu 06.03.2009 10.03.2009 11.03.2009 12.03.2009 13.03.2009 16.03.2009 17.03.2009 18.03.2009 19.03.2009 20.03.2009 23.03.2009 24.03.2009 25.03.2009 26.03.2009 27.03.2009 30.03.2009 31.03.2009 01.04.2009 02.04.2009 03.04.2009 06.04.2009 07.04.2009 08.04.2009 09.04.2009 10.04.2009 13.04.2009 14.04.2009 15.04.2009 16.04.2009 17.04.2009 20.04.2009 21.04.2009 22.04.2009 23.04.2009 24.04.2009 27.04.2009 28.04.2009 29.04.2009 30.04.2009 04.05.2009 05.05.2009 06.05.2009 07.05.2009 08.05.2009 576,39 634,92 627,6 618,93 652,53 647,55 665,58 650,62 694,69 696,93 737,19 721,64 740,94 752,63 721,16 682,91 689,63 685,51 733,93 746,03 748,62 740,47 760,58 810,9 817,41 814,67 807,61 805,85 819,57 834,59 800,22 775,24 785,13 820,7 831,41 803,17 784,01 814,78 832,87 855,67 871,58 897,1 942,31 938,27 23,24434 25,12122 25,39612 24,89655 24,85121 24,91418 24,83813 24,83813 24,87839 24,58405 24,46185 24,73641 24,31769 24,13074 24,11591 21,80483 21,80483 21,63694 21,6355 21,6355 21,6355 21,65723 21,67495 21,67495 21,67346 21,67346 23,0942 23,75693 23,71951 23,80705 23,80705 23,69584 23,63161 24,06232 23,95607 23,35688 22,6473 23,22534 24,20984 24,06096 23,99442 24,11165 24,56066 25,25626 25.05.2009 26.05.2009 27.05.2009 28.05.2009 29.05.2009 01.06.2009 02.06.2009 03.06.2009 04.06.2009 05.06.2009 08.06.2009 09.06.2009 10.06.2009 11.06.2009 15.06.2009 16.06.2009 17.06.2009 18.06.2009 19.06.2009 22.06.2009 23.06.2009 24.06.2009 25.06.2009 26.06.2009 29.06.2009 30.06.2009 01.07.2009 02.07.2009 03.07.2009 06.07.2009 07.07.2009 08.07.2009 09.07.2009 10.07.2009 13.07.2009 14.07.2009 15.07.2009 16.07.2009 17.07.2009 20.07.2009 21.07.2009 22.07.2009 23.07.2009 24.07.2009 1017,92 990,26 1030,79 1053,73 1087,59 1167,42 1180,56 1127,57 1108,73 1149,95 1096,68 1105,3 1121,79 1127,23 1077,17 1082,19 1038,41 997,68 1011,38 961,04 932,74 959,18 947,52 955,45 951,46 987,02 977,94 960,46 950,24 921,44 924,11 889,77 884,94 835,23 835,61 866,55 887,85 903,23 925 972,31 987,69 963,06 975,96 1012,62 24,12149 23,44998 24,20503 24,83312 25,47015 26,22474 25,9615 25,26169 25,23676 25,56213 24,88511 24,83957 24,84529 25,13871 24,45591 24,01028 23,67369 23,42544 22,90873 23,46528 22,92085 22,39545 21,90678 21,73686 21,69436 22,13668 21,90977 21,85279 21,45384 20,83969 20,86692 20,38629 20,18118 19,39835 19,68877 20,35038 20,34949 20,62657 21,26308 22,03613 22,3552 22,18322 22,24331 23,27173 07.08.2009 10.08.2009 11.08.2009 12.08.2009 13.08.2009 14.08.2009 17.08.2009 18.08.2009 19.08.2009 20.08.2009 21.08.2009 24.08.2009 25.08.2009 26.08.2009 27.08.2009 28.08.2009 31.08.2009 01.09.2009 02.09.2009 03.09.2009 04.09.2009 07.09.2009 08.09.2009 09.09.2009 10.09.2009 11.09.2009 14.09.2009 15.09.2009 16.09.2009 17.09.2009 18.09.2009 21.09.2009 22.09.2009 23.09.2009 24.09.2009 25.09.2009 28.09.2009 29.09.2009 30.09.2009 01.10.2009 02.10.2009 05.10.2009 06.10.2009 07.10.2009 08.10.2009 1080,08 1065,14 1033,72 1025,12 1054,57 1059,92 1005,77 1001,52 993,57 1018,5 1050,44 1094 1103,02 1072,05 1070,49 1089,46 1066,53 1073,62 1053,17 1074,05 1063,57 1093,04 1135,94 1159,8 1163,76 1196,55 1194,21 1224,33 1246,81 1231,41 1245,56 1210,57 1249,14 1254,31 1242,23 1225,29 1248,73 1260,56 1254,52 1266,85 1224,8 1227,19 1270,63 1287,37 1334,94 25,58398 25,16604 24,64646 23,73563 24,52486 24,61102 23,31843 23,15495 23,0837 23,94031 24,27761 25,72329 26,55342 26,4428 26,32939 26,87546 26,3837 25,92336 25,03882 25,05867 24,88098 24,76762 25,42336 26,20924 26,57307 26,433 26,7645 27,53501 28,16922 27,72615 27,24605 26,51732 26,34106 25,95941 25,56037 24,83032 24,70937 25,50902 25,96412 26,03629 25,00334 24,75129 25,54915 26,35166 26,91413 ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 255 URL: http://www.reaser.eu e-mail: editors@reaser.eu Monograph Review: Koloman Ivaniča et al. – ‘New model of socioeconomic sustainable development of the Slovak Republic’ Cristina Barna 1, Ruxandra Vasilescu 2 1 2 Pro Global Science Association, Romania Pro Global Science Association, Romania Abstract. This paper is a review of the monograph entitled ‘New model of socio-economic sustainable development of the Slovak Republic’, edited in April 2012 by School of Economics and Management in Public Administration in Bratislava (SEMPA). The team of authors (Ing. Vladislav Bachár, CSc., Ing. Ondrej Barič, PhD., Assoc. Prof. PhDr. Peter Čajka, PhD., Assoc. Prof. PhDr. Jozef Darmo, PhD., PhDr. Jana Gašparíková, PhD., Prof. Dr. Ing. Ivan Haluška, DrSc., Prof. RNDr. Koloman Ivanička, DrSc., Ing. Pavlína Ivanová, PhD., Dr.h.c. Assoc. Prof. Ing. Mária Kadlečíková, CSc., Ing. Ivan Klinec, PhD., Assoc. Prof. PhDr. Martin Klus, PhD., Prof. Ing. Igor Kosír, CSc., PhDr. Silvia Matúšová, CSc., Mgr. Andrej Mongiello, Assoc. Prof. PhDr. Lucia Rýsová, PhD., Prof. Ing. Mikuláš Sedlák CSc., RNDr. Juraj Silvan, CSc., PhDr. Veronika Sklenková, PhD., Assoc. Prof. Ing. Peter Staněk. CSc., Assoc. Prof. PhDr. Peter Terem, PhD., Ing. Vanda Vašková, PhD., Ing. Natália Vašková, PhD., Prof. Dr. Štefan Volner, CSc.) researched for finding a viable alternative of a new creative economy and new adequate development strategies for Slovakia, in the context of a changing world which is still facing the crisis impact, and in the framework of Europe 2020 and Rio+20 challenges. Keywords: socio-economic sustainable development, knowledge-based economy, change, innovation, qualification, syntropic economic theory, entrepreneurship, change management, debt crisis, science, agricultural and food industry , structural funds, industrial policy JEL Codes: 011, 020, 030 1. Introduction This monograph is inspired by Rio+20 Conference of June 2012 which provided the opportunity for expressing the commitment for sustainable development, and represents the outcome of a research project of the School of Economics and Management in Public Administration in Bratislava and its Institute of European, National and Global Studies conducted by a team of specialists led by Prof. Dr. Koloman Ivanička, DrSc. It is an interdisciplinary monograph, consisting of 19 individual articles which deal with the most up-to-date issues regarding the imperative idea of shaping a new model of development for Slovakia in the context of Europe 2020 and Rio+20. The monograph benefits from a preamble by Prof. Ing. Viera  Corresponding author. Assoc. Prof. PhD Cristina Barna Tel.: + (4-0723263677); E-mail address: (cristina_barna1412@yahoo.com). ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 256 URL: http://www.reaser.eu e-mail: editors@reaser.eu Cibáková, CSc., Rector, School of Economics and Management in Public Administration in Bratislava, who considers the monograph a fine-quality and inspiring contribution to debates and reflections on the path of Slovakia’s development in the future decades. 2. Review of individual articles The monograph begins with a prologue by Prof. RNDr. Koloman Ivanička, DrSc. on the requirements for a new model of socio-economic development in Slovakia, from the following: a rapid development of its ideopolises, the renewal of the paradigm that economy is a science of economization and development of homes, priority to education, research, investment, focus on creative industries, creative services and creative institutions, knowledge of remodelling, thoughts and consciousness. The author considers that Slovakia can create its own “country branding”, its own image, with the aim to show to Europe and to the world how the country creates the way of transformations and a new emerging future model. In his opinion this is a nationwide task and a key responsibility of central bodies, political and regulatory institutions (ministries, universities, research, education, management, etc.). The first article of the monograph is written by Ing. Pavlína Ivanová, PhD. and Assoc. Prof. Ing. Peter Staněk, CSc., and it is about technologies changes, innovations and qualifications. According to them, globalisation processes as well as technological changes rank among key factors influencing national and global labour markets. A combination of various processes taking place at the same time modifies the overall need for work, as well as the links between qualifications and innovations, at the same time globalisation processes (outsourcing, offshoring) changing the need for qualifications. The authors analyze the features of technological and innovation change processes of the last decades and try to find answers for the significant question regarding the content of study, labour market forms from the point of view of flexible employment possibilities. They also emphasize on the lifelong learning phenomenon directly related to innovations and technologies. Their conclusion in this article is that in case of the Slovak Republic (as in other small open economies) the dual contradiction in the implementation of knowledge-based economy is obvious. In the current context of the crisis, there are threats for two statements: that a university degree secures a good career and a growing income, a problem which goes beyond national sates’ border. In the second article of the monograph entitled ‘Conscious evolution and creative design of syntropic economy theory’, the author Ing. Ivan Klinec, PhD. introduces to the readers the concept of syntropic economic theory which is associated with the transition to the global economic system, and which will replace competition and fight by cooperation and competition and co-creation. In the beginning of his very interesting article, the author focuses on ‘conscious evolution’ as it is presented by American futurists Barbara Marx Hubbard and R. Buckminster Fuller. Conscious evolution is connected with creative design of all products of human thinking. The solution of the current global civilization crisis is interconnected with the creative design of the new syntropic theory of economics. Such theory can support the shift from the entropic character of the current industrial age economy to the new syntropic model of the information age economy. The author is supporting his assumption by mentioning many existing appropriate methodological tools in the economic literature and by analyzing the main characteristics of the syntropic theory of economics. Economy is presented as an anticipatory system and as a mental map – plurality of the economic theory, which is facing a shift from entropy to syntropy. Ethics is the key element of the synthropic economic system. The design of the syntropic economic theory is seen by the author as a starting point and must be done by a great number and great diversity of economic thinkers from the whole world from various ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 257 URL: http://www.reaser.eu e-mail: editors@reaser.eu countries. The speed of its creation is one of the main preconditions of changing the present direction of humankind toward a sustainable world and toward overcoming the emerging global crises. The third article of the monograph – ‘New era of civilization – challenge for changes in entrepreneurship, organization and management’ written by Prof. Ing. Mikuláš Sedlák, CSc. approaches entrepreneurship issue and the emergence of a new type of organizations. In his opinion, the future of business will be a linear extrapolation neither of the past nor of the present. We are living in a complex period, subject to turbulence, discontinuity and unpredictable changes and this new era of the society needs a new type of organizations, which is reflecting the condition of information period and not the industrial past. The author considers that each organization must be prepared to leave a lot of what has been done in the past, maybe even everything. This concerns not only the business but also the government. Radical changes will be needed everywhere. In this context, traditional systems of business management are quickly going out of date and they are not able to solve present problems. Business management needs a new philosophy for the changing environment and the author argues that this is change management. The leaders will become captains of the new organizations, they not only predict, but also are trying hard to create a more attractive future than the present. Another article of the monograph, written by Prof. Ing. Igor Kosír, PhD., sees Slovakia within the network of challenging changes. After an interesting and a deep analysis of the challenging changes in world economy, including EU economy, based on citations from famous Fukuyama, Aivazov-Kobyanov, Hutington, Schwab etc and on his own analyses and predictions, the author refers to Slovakia situation. He considers Slovakia should improve all its conditions to enhance its competitiveness. Slovakia has its natural as well as historical premises to help actively to the future much more efficient Eurasian cooperation and integration. The fifth article of the monograph is entitled ‘Lisbon strategy and Europe 2020 – the ways to achieve global competitiveness of the European Union and of the Slovak Republic’ and is authored by doc. PhDr. Martin Klus, PhD. and PhDr. Veronika Sklenková, PhD. The authors see Lisbon strategy as a hope for European Union and its members to achieve global competitiveness in the new millennium. First they analyze the origins of the Lisbon Strategy and its revision, and then they focus their analysis on the Competitiveness Strategy for the Slovak Republic until 2010, which was also called the National Lisbon Strategy, the aim of which was no less ambitious than the aim of the Lisbon Strategy itself – ‘to do all that is possible to utilize talents and knowledge of the Slovak people to the fullest and to develop their ability to continuously work with new information, produce new findings and so that they are capable of their practical utilization’. After a thorough analysis regarding the question whether the Lisbon Strategy really was the way to achieve global competitiveness of the European Union and, within it, of the Slovak Republic, the authors consider that even though the Lisbon Strategy could in a way play the role of a good idea of how to ‘make the European Union the most competitive region in the world’, the steps EU and its member states should have undertaken were not really implemented, and, hence, only remain in their declaratory form. In this context, Europe 2020 was born in the ruins of the unsuccessful Lisbon Strategy and is seen by the authors as the new prospect for global competitiveness of the European Union and of the Slovak Republic. The author of the next article of the monograph, Prof. Dr. Ing. Ivan Haluška, DrSc., tries to find a key to the debt crisis solution: the renewal of permanent employment and GDP growth. Based on the analysis of the failure of the current neo-liberal concept of saving, the author formulates a solution of the crisis: growth of employment rate and GDP. He considers it is necessary to seek and concentrate resources stimulating employment and GDP growth, including restriction of expenses or relocation of resources (though only those without negative influence on the employment and GDP growth dynamics) whilst keeping the risk of ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 258 URL: http://www.reaser.eu e-mail: editors@reaser.eu inflation under control. That would be a way of progressive realization of the demands of many economists to return to the social contract. He formulates a complex approach of quality business environment and points to new investment criteria. The article also outlines ways to increase resources to support the desired quality of GDP growth. Among other things the introduction of new temporary taxes aimed at extraordinarily high yields and property companies. It proposes a new concept of operation of the financial the state tax system. The conclusion presented is based on humanistic theories of economic ideas, a new paradigm of civilization, by which the new government initiative could contribute to the development of a new concept of social market mechanism, also a new vision of Europe’s future prosperity. PhDr. Jana Gašparíková, PhD proposes to the readers an article on ‘new dimension concerning future position of science’. The author considers that a very important phenomenon determining the character of the unified European research area is the character of scientific knowledge and innovations production. The support of innovations and research should be monitored by public interest, and the author proposes to the readers in the beginning of the article an analysis of the public and science. On the other hand, she approaches temporality in scientific development and the importance of deciphering various influences in science and technology policy and decision-making processes. The unified research area raises many important and interesting questions, as for instance the competitiveness of various research institutes. The author points to the danger that scientific and technological policies in different countries develop scientific ideology entirely supporting national competitiveness without any deeper innovation research criteria, and also analyzes the problems of funding. Moreover, she focuses on the positive fact that scientific research obtained many successes especially through globalization, making breakthroughs in many progressive countries around the world, not only in the European research area but also in America, Australia, Japan, India, etc . In this context, the Slovak Republic has formulated its own science and technology policy framework in the document The Long-term Intention of Governmental Strategy of Science and Technology Policy up to 2015. Not too sceptical, the author considers that it should be noted however, that the unified European research area represents an ideal premise which has different connotations in the case of science and its position in the Slovak society. Dr. h. c., Assoc. Prof. Ing. Mária Kadlečíková, CSc presents in her article of the monograph the development trends in the Slovak agricultural and food industry and its changing priorities. According to her view, the serious challenge for the Slovak agricultural and food sector is the reformed Common Agricultural Policy 2014 – 2020, since it is going to continue with the unequal conditions for the farmers from the new EU Member States. This is particularly due to the preference of small farms, while in the EU-10 historically have been larger farms dominating. Therefore the sector has to be well prepared for the demanding prerequisites of the reformed policy on the one hand, while considering on the other hand the forecasted global development trends, it is important to elaborate own domestic vision and strategy of the sector development. The author offers in her article the analysis of issues such as the mission and development of agricultural and food industry, the impact of transformation of the Slovak agriculture, Slovak agricultural and food industry in the EU accession context, global crisis and their impact on the Slovak agriculture, emergence of the new CAP 2014 – 2020, future challenges in the Slovak agricultural policy context, upcoming priorities of the agricultural- food industry. She concludes that there is no other way for Slovakia than to outline a new strategy of agriculture development in which to be active an European player, as its natural and human resources have the necessary potential. The ninth article is signed by Ing. Ondrej Barič, PhD. and focuses on innovative industrial policy in the light of EU strategy. The introductory part of the article is a brief overview of EU strategy related to industrial policy in the light of EU documents since the ‘Earth Summit’ in 1992, the summit of the European Union in Göteborg in 2001 where the EU Sustainable Development Strategy (SDS) was ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 259 URL: http://www.reaser.eu e-mail: editors@reaser.eu adopted to the new Strategy Europe 2020, setting specific goals for European industry: sustainable growth, competitiveness and employment. Industrial policy and research and development policy as the important parts of the system of national policies and needed a new strategy at the end of the first decade of the 21st century. The author points out that in a time of crisis, when economic problems must be overcome, the development of industry is an essential element. In this respect one of the most important initiatives of Europe 21020 strategy is the industrial policy in the globalisation era. The prospects of industrial policy, as a part of economic policy, should consider the transition to ecologic economy in the context of sustainable development – as the central long-term goal of EU - and elimination of poverty and assurance of better management of sustainable development. The fast growing markets enabled by globalisation should be the incentive for the increase of industrial production and employment and of international competitiveness in the line of productivity and costs. In the case of the Slovak Republic, the National SD Strategy was formulated, according to the recommendation of the UN and the National Strategy of Sustainable Development of the Slovak Republic was approved by the Government and the National Council of the Slovak Republic in 2001 as ‘a binding conceptual and complex document of development of society’ and the Ministry of Economy prepared a strategic document Systemic Structure of Slovak National Economic Strategy for 2005 – 2013, setting the direction of development of individual economy policies. The new industrial policy strategy is a welcome challenge for Slovakia to reduce technological and innovation gaps and catch up with the developed countries. This can only be done by supporting research and education from the state budget. RNDr. Juraj Silvan, CSc. is the author of the next article, Fundator of tradition in enterprise system and organisation of life: legacy for sustainability, approaching the model of the famous Czech inter-war entrepreneur Tomáš Baťa, a man ahead of his times, one of the world’s famous multinational retailers, manufacturers and distributors (in footwear) and its current validity. Baťa’s view on human capital as the key resource to growth and development is essential in times of crisis, in the author’s opinion. The underlying principle of his philosophy was the harmonization of work (employment) and life of his employees, creating and implementing a modern system of housing and lifestyle to raise the living standards of his employees and fellow citizens. His philosophy and fundamental principles are an inspiration for today’s management and leadership: proactivity and involvement of employees in work, use of modern technology, power and responsibility of leading employees, self-administration of economic units, applying creativity and innovation, minimizing waste of time, ethics in business, a forerunner of benchmarking, connection of business activities with public and political activities corporate purpose-built accounting on weekly basis as a tool of internal economy control and system of administration – all these principles largely contribute to the reduction of business risk. On the other hand, a powerful healthcare system, because ‘culture of the nation is not just cathedrals and temples but also dynamic and thriving enterprises and hospitals” was a particular concern of the Bat’as, together with the principle of lifelong learning and focus on education. The author summarizes, as a conclusion, the ‘legacy’ left by the Bat’a’ ‘dynasty’ or his ‘messages’ for the future generations : sustainable socio-economic development, opportunities for life-long learning and youth education, inventiveness, creativity and innovation, decentralized research and development, flexibility, professional diversification, development of social structure, unique architecture and urbanism thinking. The eleventh article of this monograph is under the sign of finance, the current global financial crisis and the process of transformations occurring in this domain to be expected after the crisis. The authors, Ing. Vanda Vašková, Ph.D., Ing. Natália Vašková, Ph.D., start by listing the radical changes brought about by globalization in the financial sector, both positive and negative, among which: the liberalization of financial ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 260 URL: http://www.reaser.eu e-mail: editors@reaser.eu flows, integration and securitization; unprecedented interconnectedness; virtualization of trading; expansive quantitative increase in the number of financial operations; formation of new players on the market; a significant increase in institutional investments; as well as an increase in excessive disposable financial resources. The negative outcomes would be: an increase in financial crime as the consequence of information systems abuse, lower predictability of development, higher risk rate, and excessive volatility. In the opinion of the authors, all these transformations require a more competent and flexible financial regulation and supervision system. On the other hand, the crisis itself has entailed the need for economic reforms, in spite of EU efforts of intensification of the integration process. EU is still experiencing the financial markets destabilization due to the sovereign debt crisis (second half of 2011) which has resulted in mistrust for the financial institutions. Nevertheless, finance has regained its leading role in shaping the new form of capitalism. The authors set out the concept of financialization, as a rather new phenomenon of the increasing role of the financial institutions in the functioning of domestic and international economies (according to Epstein). Analyzing the reasons of the global financial crisis, ‘the de Larosière Report has identified the shortcomings in the existing regulation and supervision104 and initiated the adoption of a new European regulatory and supervisory framework’ to which the Basel Committee responded promptly. National and international regulations, with the observance of differences and specificities of local economies are required to the following purposes: ‘to improve the ability of the banking sector to absorb shocks arising from financial and economic stress regardless of their origin; reduce the risk of spillovers from the financial sector into the real economy; improve risk management; and to strengthen bank transparency’ (BIS, 2009). According to the authors, a question still remains to be answered: ‘to what extent the regulation and supervision will be able to eliminate potential negative effects resulting from the increasing interconnectedness of global financial markets’. Ing. Vladislav Bachár, PhD. raises the issue of the debt crisis and the way it was perceived in Slovakia. The debt crisis in a few countries of the Eurozone has become a threat to the economy of the EU member states and therefore has lately been a constant issue debated in Brussels. The euroskeptics look pessimistically to the future and comment upon the instability of the European institutions. Although common belief is that the causes of the debt crisis lay in the financial crisis and the recession as a consequence of the irresponsibility of the politicians of the respective countries (Ireland, Portugal, Greece, Spain and Italy…), the author identifies and deals with the following causes: a progressing globalization of financial markets and world economy, deregulation of the money, which enabled substantial changes in the mass and structure of the currency. On the other hand, the perception of this crisis in Slovakia favours the view according to which this is a consequence of irresponsible behaviour of financial institutions and populist policy of governments which preferred indebtedness. Though a way out is looked for by EU prime ministers and finance ministers, the possibilities are limited, therefore only short-term solutions have been found so far. The summit in Brussels in 2011 ‘resulted in dividing the EU into two parts; establishing a new union within the existing one; an agreement on enforcing fiscal discipline and penalties, approving activity of the European Stability Mechanism starting in June 2013 and the operation of the EFSF until June 2012’. In spite of all the measures taken and the intervention of the International Monetary Fund, the uncertainty remains: how long will such measures last? The following article approaches another much debated lately topic: education and research infrastructure, with a case study on Slovak Republic. The knowledge-oriented society as an objective of EU strategy requires an increased attention and concrete measure for the improvement of education and research infrastructure for the improvement of the quality of education and research. This is an issue to ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 261 URL: http://www.reaser.eu e-mail: editors@reaser.eu be seriously considered not only by the politicians, but also by the society itself, where there is still a lack of appreciation of the importance of this domain to achieve EU goals. A historic nation can only develop by setting in order its values hierarchy, in the opinion of Assoc. Prof. PhDr. Peter Terem, PhD., Assoc. Prof. PhDr. Peter Čajka, PhD., Assoc. Prof. PhDr. Lucia Rýsová, PhD., the authors of this article. In Slovakia, the education and research infrastructure is the result of a historic development, under the influence of several factors: geopolitical, geo-economic and geo-cultural, with most of the major changes and transformations in the 20th century. The more a nation pays attention to education, the more wealthy and competitive it will be. Assoc.Prof. PhDr. Jozef Darmo, PhD. signs the next interesting article about the New Information Order, and the need of it in Europe and worldwide. The media systems topic is strictly connected to global integration and globalization. The question is: how fair, while admittedly useful, is this media system? His point of view on the overwhelming role of media and the New International Information Order is challenging, The author shifts the common focus from informational exploitability of new technologies, new media as simply means of global spreading of information to who controls their development and to what purposes. And while the multinationals place their infrastructure and media systems in CEE countries ‘causing economic dependency and the transformation of these countries to mere sources of cheap workforce, appropriation of their natural resources for the price that is the right to existence’, the authors wonder whether in this case we are not facing with the elimination of plurality of opinions. Radio, TV, journalism have become homeless entities. There is an obvious need for a new information rule that should be both ‘spiritually and socially fair’. Sustainable security in the world as the challenge for the 21st century is the title of the fifteenth article signed by Mgr. Andrej Mongiello. In a globalized world, where there are no more barriers and people move freely worldwide, global peace preservation is a must. But our geopolitical space, in the opinion of the author, has long ceased to be just a geographical or natural environment, it also includes the cyberspace. Cyberspace is a facilitator of spreading culture, values, finance, a vehicle for business deals and education, tourism, prevention of disasters, but it is also a vehicle for violence and command of military operations. The concept of ‘sustainability of security’ is highlighted, as an objective to be attained forthwith, provided that both the geographical space and the cyberspace are considered. This objective for the 21st century needs the support of all entities concerned, from individuals to private companies and states to be attained. The last article of the monograph signed by PhDr. Silvia Matúšová, CSc., Knowledge-based economy and practice of state restructuring, is like a corollary of the volume, as it brings forward the basic concepts of current EU strategy, knowledge-based economy, society, human resources, education, life-long learning, benchmarking. They are all applied to the model of socio-economic development of Slovakia and its future direction. The author particularly points out the field of education as the driver of progress in the new type of society – provided that knowledge is no longer abstract, but closely connected to practice - and the need for financing the education systems from public funds as a solution to the high rates of unemployment in the EU. In the Epilogue to this monograph, which is an important contribution to the whole Slovak society for integration and progress, the editor Prof. RNDr. Koloman Ivanička, DrSc., summarizes the main ideas of the contributing authors towards a new model of development in Slovakia. The new era of the knowledgeoriented society, based on science and technology developments, for increasing potential seems to have become out of reach, in the author’s opinion. Therefore, a new model of socio-economic development is required. The author provides for such a model projection for future planning, which is the essential task of society. ISSN: 2247-6172; ISSN-L: 2247-6172 Review of Applied Socio- Economic Research (Volume 4, Issue 2/ 2012 ), pp. 262 URL: http://www.reaser.eu e-mail: editors@reaser.eu 3. Acknowledgement We acknowledge PhDr. Jana Gašparíková, PhD from School of Economics and Management in Public Administration in Bratislava, Slovakia, also member in Editorial Advisory Board of Review of Applied Socio-Economic Research, who provided us this interesting monograph for review in the journal. 4. References [1] Ing. Vladislav Bachár, CSc., Ing. Ondrej Barič, PhD., Assoc. Prof. PhDr. Peter Čajka, PhD., Assoc. Prof. PhDr. Jozef Darmo, PhD., PhDr. Jana Gašparíková, PhD., Prof. Dr. Ing. Ivan Haluška, DrSc., Prof. RNDr. Koloman Ivanička, DrSc., Ing. Pavlína Ivanová, PhD., Dr.h.c. Assoc. Prof. Ing. Mária Kadlečíková, CSc., Ing. Ivan Klinec, PhD., Assoc. Prof. PhDr. Martin Klus, PhD., Prof. Ing. Igor Kosír, CSc., PhDr. Silvia Matúšová, CSc., Mgr. Andrej Mongiello, Assoc. Prof. PhDr. Lucia Rýsová, PhD., Prof. Ing. Mikuláš Sedlák CSc., RNDr. Juraj Silvan, CSc., PhDr. Veronika Sklenková, PhD., Assoc. Prof. Ing. Peter Staněk. CSc., Assoc. Prof. PhDr. Peter Terem, PhD., Ing. Vanda Vašková, PhD., Ing. Natália Vašková, PhD., Prof. Dr. Štefan Volner, CSc., New model of socioeconomic sustainable development of the Slovak Republic, School of Economics and Management in Public Administration in Bratislava, Institute of European, National and Global Studies, Bratislava, K-Print, Komárno, April 2012