Role of Emotional Capital and Liabilities in Saudi Arabian Firms - Research Proposal Example

QUANTITATIVE RESEARCH METHOD Role of emotional capital and liabilities in Saudi Arabian firms: A Saudi Arabian research proposal Name Course Institution Tutor Date INTRODUCTION Saudi Arabian business culture addressing issues such as company financial accounting, intellectual capital and corporate governance and disclosures has no sufficient background information. The researcher has puts forward this research proposal to lay out strategies on how to carry out research on the role of moving assets and liabilities in Saudi Arabian firms. The proposed work will revolve on interaction of intellectual capital, financial accounting, corporate governance and disclosures. The researcher is motivated by the fact that Saudi Arabian culture has strict stipulated guidelines. In terms of business, there exist different negotiation strategies. Background of the study People of Saudi Arabian community are known not to mean what they say in the manner they say it unlike in other parts of the world. The culture is found to be forgiving of foreigners’ inappropriate behaviors, unlike natives. Even so, the culture stipulates that the people living around should embrace the stipulated manners in which Saudi Arabian ethics in business demand. Learning how to conduct business as stipulated by the cultural beliefs of the Saudi Arabian people always distinguishes between a successful business and a non-performing business. The Saudi culture applies the Islamic law across all platforms. The culture demands that people should always be sensitive to Islamic teachings and way of life. Due to such facts, the researcher has deemed it necessary to carry out the research on the mentioned elements in order to determine the role of emotional assets and liabilities in Saudi firms. The business world, today, has faced many crises. Saudi Arabia is a kingdom that is engraved with massive potential and massive resources. Even so, the business environment in Saudi has not yet fully gained from these potential and recourses. Out of these observations, it is often wondered whether there is an existence of other factors that will aid the realization of the full potential and resource utilization. The concern is whether there are other assets that companies better returns in time of financial breakdowns or in social environments that are faced with dynamic contingencies. Saudi Arabian culture poses different environmental, social and business challenges as compared to other cultures. The fact that Saudi inhabitants follow strict Muslim law may be a challenge for business. The above factor has necessitated for the empirical research that will help people understand better the interaction of other business assets such as emotional assets in the performance. Emotional capital is defined as a brand value of the sort. It is the goodwill of a product in a firm that motivates people to keep on being loyal to the brands. There are three forms of emotional capital. The first emotional capital is external emotional capital. This form assumes that the value of employees’ feelings and perception held by the customer and any other stakeholders of the business is what builds the external emotional capital. Researchers argue that the best way a firm may increase its real profits is through generating enough emotional capital. Internal emotional capital is the next type which stipulates that a firm should create strategies within which it invests on the value of the emotional commitment of its customers, employees and other stockholders. The researchers argue that these emotional commitments are held in the hearts of these people. The third form is intra-personal emotional capital. The researchers stipulate that this form involves the level of positively focused energy that business leaders and owners channel in their companies. It is stipulated that this capital will degenerate enough motivation and inspiration to employees and other stakeholders of the business. Literature review Kaplan & Notron (1996; 2001), Abeysekera (2003) and Sveiby (1997) have contributed to the research on emotional capital and its interaction with other forms of capital in a business. There are also other authors who have attempted to theorize and formulate hypotheses on the role played by emotional capital and its interaction with intellectual capital and other forms of capital that add value in the business. Emotional capital involves the emotional state of the business employees, customers and other stakeholders. As Csikszentmihalyi (1975), Goleman (1995: 6-7: 289-290) Cooper (1998) Tsai, (2001) and Druskat & Wolff (2001) stipulate in their research, emotional capital investment is the first step that a company should acquire in order to prosper in a social location such as Saudi Arabian culture. There are various ways through which the mentioned forms of capital interact in order to add value to the business. Attracting the customers’ emotional investment in the products of the company creates more value rather than appealing to the rational decision making habits of the customer. Csikszentmihalyi (1975) and Goleman (1995: 6-7: 289-290) in their hypotheses argue that the customers are interested in purchasing from businesses they like and businesses that understand them. They argue that these companies should create value and goodwill on their products and services. Cooper (1998) and Tsai (2001) also stipulated that every positive relationship that the business influences is an asset to the business. It is suggested that emotional wealth be built through asserting people around the business as investors. The connection formed becomes of an intellectual nature and emotional investment. The nature of relationship managers and owners maintain in the business motivate or demoralize employees, customers or other stakeholders. . Abeysekera (2003), Sveiby (1997), Csikszentmihalyi (1975), and Goleman (1995: 6-7: 289-290) stipulate that all firms require different forms of capital in order to prosper. These assets must create a primary information commonality in order to create a core purpose in the objectives of the business (Lev, Sarath, & Sougiannis 1999). Emotional capital includes assets such as pride, delight, determination and commitment. Liability includes anger, hatred, and stress geared towards clients from the firm among many others. Abeysekera (2002) stipulated that when business assets are managed badly, they can lead to the downfall of the business. The assets he mentioned including emotional assets and if managed badly, they can lead to increased liabilities in the firm (Ronen 2001). For example, customer satisfaction among members of the Saudi community should be taken seriously because they create an intellectual capital of the business. If a business does not inculcate trust between its employees and management, which is an emotional asset, that can lead a business to its downfall (Druskat & Wolff 2001; Backhuijs et al. 1999; Lev, Sarath, & Sougiannis 1999; Boone & Raman 2001a&b). Such societal and social obligations facilitate for empirical data that will try to explain the importance of emotional capital interaction with other forms of capital in the business (Lev, Sarath, & Sougiannis 1999). Motivation and contribution The world, today, is faced with globalization and free trade implementations. The implications of this are that the geographical boundaries hindering the operation of businesses in every part are facing extinction (Csikszentmihalyi 1975). This creates an importance for the study to be effected. In order to set up empirical data on the social implications of globalization on corporate social responsibilities of firms in Saudi Arabia, effects of global links on intellectual and emotional assets and their implication on the financial/accounting books should be determined (Druskat & Wolff 2001). It is important to evaluate the social stipulations and decide which social needs are to be considered as positive. The match and mismatch segments created by the interaction of the roles played by the assets are important determinants of the success nature of the firms in Saudi Arabia. Boone & Raman (2001a&b), Ronen (2001), Romer (1998) and Swinson (1998) stipulated that attributes of intellectual capital on different products and services can be derived from different emotional capital. There are stipulated guidelines that are required to be followed in the business environment. These guidelines may have effects when it comes to the role of emotional capital and its interaction with other business assets such as intellectual capital and corporate governance. The above statements lead to another motivation for the study to be effected in order to build a contribution on empirical data where necessary. The research paper aims at building a contribution by creating a basis for further studying of empirical testing and theoretical study of the interactions of the assets. The study also aims at achieving a common goal. The plan is to provide empirical evidence that there are other assets in a business that make a business achieve its objectives more efficiently other that core values. The proposed research questions 1. How does business accounting, intellectual capital, and corporate governance interact with emotional capital to influence a fair value, profits, and business operation of firms in Saudi Arabia cross culture? 2. What are the effects of emotional capital and what role does emotional capital and liability play in Saudi Arabia firms? Hypotheses The primary hypotheses of the study are: 1. Saudi Arabian firms lag behind in the implementation of emotional capital and liabilities Due to the social constraints. 2. Emotional capital plays a vital role in ensuring that the firm meets its set targets and obligations. 3. There is a possibility of identifying a two-fold problem from the discussion of asset communication in a Saudi business environment 4. There are stipulated guidelines that are required to be followed in the business environment. Researchers argue that there is no general basis of defining emotional capital therefore they attribute this point to the lack of adequate research on this topic. Even so, the study will be able to show a clear cut hypothesis on the topic. For instance, evidence of value creation of interaction of emotional capital to other forms of capital is that it is appropriated in financial books using the traditional accounting methods (Backhuijs et al.1999; Lev, Sarath, & Sougiannis 1999). According to Backhuijs et al. (1999) and Lev, Sarath, & Sougiannis (1999) the case of Saudi Arabia business conditions shows that some years back there was the absence of emotional assets and liabilities due to the rigid nature of the religious beliefs. In such instances, the firms tend to be undervaluation and need a common goal within its stakeholders. Boone & Raman (2001a&b) and Ronen (2001) add that the lack of emotional support leads to the production of unrealistic financial statements that undermine the image of the business. It led to the agreement of several researchers that the inclusion of emotional assets and liabilities is a necessary element in a business, and it reflects the capabilities of the business through fair representation in the financial statements. The research also focuses on creating effective methods that will be in future used to measure and monitor the assets and liabilities information in the firm. As much as technology influences the livelihoods of people across all countries, Saudi customs are still rigid, and the people observe the nature of their customs with high seriousness. Due to such societal and social obligations the research will facilitate for empirical data that will try to explain the importance of emotional capital interaction with other forms of capital in the business. There is a strong interaction between intellectual capital and corporate governance that promote the integral role in value determination of the assets. In a more elaborate manner, less motivation and less commitment from employees on care of plant and machinery in the company, the life of the plant and machinery shortens. Consequently, if the sales staff is under less motivation to carry out their duty to help customers in the business, the satisfaction customer derive will go down therefore the revenue of the company shall drop. The research will aim at producing empirical evidence that firms transact the named forms of capital through the process of carrying service or product transactions between the customer and the business. The services and products are regarded as the mediums for the process. Emotions are caused by cognitive evaluations that are either cognizant or comatose. The emotions customers experience in business is enshrined on physical, behavioral and cognitive processes. The research will show that the emotions a customer experience or employee emotions are the basic emotional capital strategies of the business. The main guiding principle for the evaluation shall be the interplay of the assets in the business. All firms require different forms of capital in order to prosper. These assets must create a primary information commonality in order to create a core purpose in the objectives of the business. Despite the fact that other original forms of literature have described and defined emotional assets, the definitions may not have inculcated the cultural differentiations in the different cultures of the world. Under the research, there is an aim to increase the definition of emotional assets/capital with sufficient data. The research paper supports the definition that emotional capital is all those assets that set in motion the intellectual assets and the accounting/financial assets (Ronen 2001).The theories put forward are mood theory as the main theory under study, emotional intelligence theory and communicative theory among others (Tsai 2001). Research design Quantitative research design is appropriate because the purpose of the research is to test a predictive role or results of hypotheses. The research design employs deductive logic. The design suits the study because the phenomena are well developed in regards to the theories and concepts put forward. Research strategy Quantitative techniques play a specific role in the research. One of the best methods may be administration of questionnaires to the firms under sample area. Data analysis shall be made through the study of the hypotheses under the literature review of the proposal and the theoretical study of the theories already discussed. The research strategy will employ the use of study as a pool for collecting data. The survey will facilitate the study of individual units in the community. The study will use a sample population in the Saudi Arabia business environment. A pilot study will enrich the actual study with the basic requirements and the real tools to use in the study. A total of 20 firms will be placed under the sampling approach of the study. There will be three modules of questionnaires to be administered in the studies. The first questionnaire will be administered on managers of the firms. Each firm is to be requested for one manager to answer the questions. The other questionnaire is the employees’ questionnaire. Each firm will be provided with three questionnaires where the employees will be chosen randomly to complete it. The third module is the customers’ questionnaire and each firm will have three questionnaires. The customers will be selected on a random basis. The research will investigate many Saudi Arabian firms in order to obtain different data on the research question. The research will involve a random sampling approach on Saudi companies. Table will be selected through the use of random numbers to obtain a set minimum number of companies. The data will be collected true a survey. The respondents will be interviewed via administration of a questionnaire and where this will be difficult, telephone and internet methods shall be used. The questionnaire shall observe all the necessary ethical considerations as guided by the Saudi culture. Survey methodology Sample selection and mode of data collection The survey sample in the study will take the shape of a non-probability nature. The method is referred to stratified sampling where a sub-population within the population is identified. After identification of the sub-population, it is included in the sample selected in an unbiased manner. The survey can be administered through many ways. Several factors will determine the choice of administration. These factors include the cost of administration, coverage of the target population, and response accuracy. The flexibility of asking the questions is also a factor that will determine the choice mode of data collection. The most faced factor is the willingness of the respondent to participate in the study. The survey will use modes such as telephone, mail, online surveys, and personal in-home surveys. The most common mode is personal mall or street intercept survey. Data collection instrument The questions in this study are clearly distinguished. There are open-ended questions and closed-ended questions. The open ended questions will give the respondent an opportunity to formulate his or her own answers. The closed-ended questions will help the respondent to pick an answer for the question. Usually, the closed-ended question has a number of options that the respondent may choose. Questionnaire sample questions Managers’ questionnaire 1. Please indicate your age 1) 20 - 30 2) 31- 40 3) 41-65 2. Please indicate your gender Male Female None of the above 3. Do you understand the meaning of intellectual capital, and emotional capital? Yes No 4. If yes, does the business use the assistance of these capitals in running a business? Yes No Sometimes 5. How do these capitals affect the business in the Saudi business environment? Positively Negatively 6. If positively, what are the features of the Saudi Arabian business intellectual capital? 1. 2. 3. 4. Example of employees questions in the questionnaire 1. Please indicate your age 1) 20 -30 2) 31 - 40 3) 41 - 65 2. Please indicate your gender Male Female 3. Does the management of the firm treat you as stipulated by the firm’s principles? Yes No Sometimes Yes No partially 4. Do you feel like part of the firm when working for it? Yes No Partially 5. What is the relationship between you and other employees like? 1. 2. 3. Example of questions to the customers 1. Please indicate your age 2. Please indicate your gender Male Female 3. Does the firm offer quality customer care services? Yes No Partially 4. Do you feel appreciated when you do your purchases in this particular firm? Yes No Partially 5. What is the range of your customer satisfaction offered in this firm? 1 2 3 4 5 6 7 8 9 10 Data analysis The first thing to be done when it comes to data analysis will be to discover the variation in each variable of interest. The data is calculated to give a pattern of tabulation. Data analysis shall be made through the study of the hypotheses under the literature review of the proposal and the theoretical study of the theories already discussed. Basic measurements will include mean calculation. It will measure the central location of how the stated assets affect the existence of other capital in the business. Variance will measure the dispersion in the data calculated. The median measurement shall show the central point of understanding on the result of the study. The intention of the researcher is to enrich the Saudi Arabian intellectual capital research. The study is done on the businesses operational in Saudi Arabia. The data analysis technique employed is a multivariate analysis. The data will be put in tables and graphs such that it represents the value of measurements obtained in the research. One of the methods of representing the data will be frequency distribution tables. Statistical analysis There are three features that will be used to measure and analyze the accuracy of the data. These features are central tendency, variability, and skewness. After determination of data validity, it can be presented in a graph or a frequency distribution table. Variance will measure the dispersion in the data calculated. The median measurement shall show the central point of thought on the result of the study. The information can also be statistically represented in many other measures such as histograms representing customer satisfaction and asset image in a firm and frequency polygon representing time variance between which a customer visits a business. The information can also statistically be presented in a frequency distribution table. The table will show the number of firms under observation; customers’ satisfaction rates, and employee comfort in working for the organization and motivation obtained from managers. Measures of central tendency will be analyzed using one of the statistical methods mentioned below. The measures are mode, median, and mean. For a particular measure to be used, the level of measurement is considered. The mode will be used to tell the most frequent occurring value such as satisfaction rate ranging from 1 to 10. The median will point out the measure that is centrally placed and its implication on the theoretical and hypothetical analysis of actual research. The mean is calculated by sum of value of cases/ number of cases The equation is X=∑xi/N. F in an algebraic version. Statistical measure of variance in the study will be defined as the average squared deviation of each case from the mean. Each case is taken and distanced from the mean. The resultant answer is squared then the average of all such numbers is taken as the variance. Measure of standard deviation is the distance covering a clear case originating from the mean. The standard deviation is calculated by finding the square root of the variance. A frequency distribution table Firm A B C No. of customers paying a visit (positive) No. of negative customer visits (negative) Employee satisfaction rate Managers motivating rate Example of a bar chart statistical representation Percentage will represent the number of people who believe that the assets under study influence a positive outcome of business. The category 1 and 2 represent the gender, male or female. Advantages and limitation The limitations anticipated are low statistical power. The result of the analysis is anticipated to reveal a statistically significant difference between the variables under study if statistical differences truly exist. Error rate problem is another limitation. Statistical significance can artificially be inflated during the performance of multiple pairwise tests. The other limitation is a restriction of range. The first benefit of the study is the testing of an already existing phenomenon. The other benefit is that the study is based on testing hypotheses that have already been constructed. The research is useful because it will allow the use of quantitative methods that will facilitate the prediction to be made. REFERENCE LIST Abeysekera, I (2003), Intellectual Accounting Scorecard-Measuring and reporting intellectual capital, The Journal of American Academy of Business,3(1&2), 422-427. 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Horney, S, 1999, Speech delivered as the Chairman Lend Lease Corporation Ltd., Australia. OECD Symposium on Measuring and Reporting of Intellectual Capital Amsterdam, June 9-11. Kaplan RS & Norton, DP, 1996, Using the Balanced Scorecard as a strategic management system. Harvard Business Review, January-February: 75-85. Kaplan RS & Norton, DP, 2001, Balance without profit. Financial Management (UK), January : 23-26. Knight, DJ, 1999, Performance measures for increasing intellectual capital. Planning Review, 27(2), March/April: 22-27. Lev, B, Sarath, B & Sougiannis, T, 1999, R&D reporting biases and their consequences. 2 Intangible Conference in New York City, Intangibles Management, Measurement and Organization, New York, May 27-28. Petty, R & Guthrie, J, 2000, The case for reporting on intellectual capital: evidence, analysis and future trends. The current state of business disciplines, 1, Accounting, ed. S.B. Dahiya. Spellbound Publications, Rohtak, India. 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