Management & Change by IILM Institute for Higher Education

N. R. Sheth Arunoday Saha o

c. S.Ven~ata

Ratnam

.SanjllY K.Jain Mohan L. Agrawal

Some Reflections on Management Cross-Cultural Perspectives The West, Japan and India Labour-Management

and Change

in Technological

Innovation-

Relations in an Era of Globalization

Marketing Research in India: A Perspecti~e Relationship Marketing in Indian Service Organizations: Natural Facilitators and the Levels

The

K'amlesh Misra

Role of Exports in Local Economic Development: An Application of the Pittsburgh REMI Model

O.P.'Gupta

An Empirical Test of Random-Walk Model on the Indian Stock Market

Neela Mukherjee

Change Management and Public Managers: Capacity Building for Sustaining Change BOOK REVIEWS

The Journal of the Institute for Integrated Learning in Management, New Delhi .I

-'r

Management

& Change The Journal of the Institute for Integrated Learning in Management (IILM), New Delhi

Debi S. Saini (Professor, IILM) Sarni A. Khan (Asstt. Professor, IILM) Zafar H. Anjum

Editor Assistant Editor Editorial Coordinator: Editorial Advisory Board Mohan Abad

L. Agrawal, Ahmed,

Richard

Butler,

Chetan

Baxi, Correa,

P. K. Jain, Rama

Professor,

M. Y. Khan,

Arunoday

Professor,

Indian Institute

Ex-Director,

National

Productivity

Delhi School of Economics,

Professor,

of Pittsburgh, of Technology

Relations,

USA

USA (lIT), New Delhi

New Delhi

DU South Campus, New Delhi

Studies,

University

of Delhi, Delhi

Courycil, New Delhi University

of Delhi, Delhi

IILM, New Delhi Indian Institute

International

Szell, Vice President, Vrat,

Studies,

University

Dean, IILM, New Delhi

N. R. Sheth,

Prem

Gurgaon

New York University,

Faculty of Management

Director-Research, Saha,

of Bradford, Institute,

Shri Ram Centre for Industrial

Professor,

Jamshedpur

IILM, New Delhi

Stem School of Business,

Management

J. D. Singh, Gyorgy

University

Development

Professor & Head, Deptt. of Financial Studies,

Misra,

N. K. Nair,

Centre,

Management

Institute,

of Delhi, Delhi

Robert Morris College,

Professor,

K. Mamkoottam,

V. N. Pandit,

Relations

University

Management

Dean-Emeritus,

Professor,

J. Joshi,

Kamlesh

Professor,

Avijit Ghosh,

Xavier Labour

Chancellor,

Dean-Research,

N. R. Chatt.erjee, Joseph

Professor,

Pro-Vice

of Management,

Management

University

Professor & Dean, Postgraduate

Ahmedabad

Institute,

of Osnabruck,

New Delhi

Germany

Studies & Research,

lIT, New pelhi

Manuscript Submission The Editorial Board invites manuscripts on all aspects of management and related social sciences. For style sheet, please refer to the inside of the back cover. Enquiries should be directed to the editor. .

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Management & Change The Journal of the Institute for Integrated Learning in Management (JlLM), New Delhi

VOLUME 1

NUMBER

APRIL

1997

FROM THE EDHOR ARTICLES Some Reflections on Management and Change Cross-Cultural Perspectives in Technological Innovation-.The West, Japan and India

N. R. Sheth

ArunodaySaha

Labour Management Relations in an Era of Globalization

C. S. Venkata Ratnam

Marketing Research in India: A Perspective

Sanjay K. Jain

Relationship Marketing in Indian Service Organizations: The Natural Facilitators and the Levels

Mohan L. Agrawal

101

Kamlesh Misra

109

O. P. Gupta

127

Neela Mukherjee

145

Role of Exports in Local Economic Development: An Application of the Pittsburgh REMI Model An Empirical Test of Random- Walk Model on the Indian Stock Market COMMUNICATIONS Change Management and Public Managers: Capacity Building for Sustaining Change BOOK REVlEWS Economy

and Business

153 Environment

Surendra 1. Patel: Indian Economy Towards the Twenty First Century. Reviewed by Dalip S. Swamy. Om Prakash: The Commercial Society. Reviewed by V. S. Minocha. Sudipta Dutta: Family Business in India. Reviewed by Arunoday Saha.

153

N. K. Sengupta: Government and Business Reviewed by Debi S. Saini. Veena Bhatnagar: Small Scale Industry-Concept, Status and Policy. Reviewed by A. K. Seth. Strategic

163

Management

Shiva Ramu: Strategic Alliances. Human

Resource

Reviewed by Kamlesh Misra.

Development

165

S. K. Ghosh: HRD in Third World-Quest for Empowerment. Reviewed by Ishwar Dayal. Udai Pareek: Training Instruments for Human Resource Development; and, P. L. Rao: HRD Through In-House Training. Reviewed by Sami A. Khan. Industrial

169

Relations

C. S. Venkata Ratnam (ed.): Industrial Relations in Indian States. Reviewed by K. R. Shyam Sundar. B. R. Patil: Collective Bargaining-Perspectives and Practices. Reviewed by Debi S. Saini. Manik Kher: Coping with Technological Change. Reviewed by Kuriakose Mamkoottam. Debi S. Saini (cd,): Labour Judiciary, Adjudication and Industrial Justice. Reviewed by Vijay K. Seth. J. S. Sodhi: Industrial Relations and Human Resources in India. Reviewed by Debi S. Saini. Debi S. Saini (ed.): Labqur Law, Work and Development: Essays in Honour of P. G. Krishnan. Reviewed by Sami A. Khan. Prem Misir: Workers Participation in Management-Case of Nationalized Enterprises in Guyana. Reviewed by Manju Bhagat. General

184

Management

Sharu Rangnekar: In The Wonderland of Indian Managers; and, In The World of Corporate Managers. Reviewed by Swapan Kumar Majumdar. 186

Finance Raj S. Dhankar (ed.): Managing PSU Finance. Reviewed by Deepa Vasudevan. R. N. Joshi: Cash Management: Perspectives, Principles and Practices. Reviewed by D. K. Mehra. Public

189

Management

P. R. Dubashi: Recent Trends in Public Administration.

Reviewed by Suresh Misra. 191

Marketing Rajagopal: Rural Marketing Administration in India. Reviewed by Venkatesh Umashankar. Y. C. Chow: The Skill of Managing Time; The Skill of Self Management, The Skill of Sales Probe;and Handling Sales Objections. Reviewed by Vinnie Jauhari. Production

Management

K, K. Anand: Quality Management Research

194

Handbook.

Reviewed

Methodology

T. Subbi Reddy and P. Bappa Rao: Research Methodology Reviewed by Sujata Chaddha. BOOKS

by K. Suryanarayanan.

RECEIVED

196

and Statistical

Measures

199

FROM THE EDITOR

he need for a more rigorous and scientific approach towards the discipline of management is being increasingly felt. While the quest for newer perspectives continues throughout the world, management scientists in India are worried about the existing state of both management education (Chakraborty, 1993) and management research (Gupta, 1992). The new economic environment has further exacerbated these problems, putting the traditional perspectives upside down. The words "quality" and "professional excellence" have become relevant in contemporary management practices more than ever before. The Institute for Integrated Learning in Management (IILM), which is barely three-years old, is committed to the cause of professionalism and quality in management education and'research. Perhaps, the most conspicuous manifestation of this concern is the launching of Management & Change, the journal of the institute, in the fourth year of its existence. IILM firmly believes that a modem management institute is obliged to produce leaders (and not just managers) with global vision who have "insights into the expectations of market and society," have the potential "to act as harbingers of change by conceptualizing and proactively practising their learning, leadership and interpersonal skills" (Rai,1997: 2), and by being "sensitive to aesthetic concerns and ethical issues ... [are] prepared to adapt to change in their careers and community life" (Misra, 1997: 2). In furtheraoce of these objectives, Management & Change is committed to provide to,all concerned an excellent laboratory for experimentation and cross-fertilization of ideas, and thus to contribute to creation of new knowledge. A sizeable pedagogy at IILM is oriented to practical learning in industry. The institute believes that theory unrelated to practical experience is not the desired form of academism. But conversely, as the maxim goes, we also believe that practice without theory is blind. Thus the cause of management science will be served better if we contribute towards developing perspectives that intertwine greater academic rigour with indigenous realities.

While "theory versus practice" has been an issue of debate since long and continues to be so, the globalization syndrome has made this labyrinth further intriguing. The whole world is experiencing major changes in industrial organization as well as in management practices for the last two decades. India too has been witnessing these changes more concretely since 1991 when the new economic policy (NEP) came into vogue, throwing variegated challenges to business enterprises. Different reasons explain these macro and micro challenges, which include changed economic configurations, major political changes, increased national and international competition, concept of flexible production, introduction of information technology in all sectors of the economy, and greater awareness of the need for functional autonomy. The emerging business realities have necessitated development of new models of management; and much of the traditional \\iisdom in nearly all functional areas of management is coming under threats of replacement. Issues in strategic human resource management, for example, are being underpinned in new paradigms. These include: more cooperative decision making, greater employee jnvolvement, more labour-management consultation, and management rationality being based on mutual trust rather than on prerogatives. 1Qere is a movement away from conflict-based "them and us" attitude towards a sophisticated form of neo-unitarism with an accent on commitment and cooperation-a situation where managers and other employees share a similar view of the enterprise functioning and a common sense of realism. SO,memanagement thinkers have gone to the extent of suggesting such cha.nges in management policies that will "restore respect for the soul and create workplaces that are akin to sanctuaries" and "make work pan of spiritual practice" (Secretan, 1996).The advocates of industrial pluralism however, disturbed by these developments apprehending that weare now' destined to live in a society promoting covert coercion on the less-empowered interest groups, whicl, will undermine the balancing potential of countervailing power. , These and other new challenges facing management theory and practice will compel management scientists and practitioners to redraw their a"genda. The new knowledge in this regard as reported in current management periodicals at national and international levels has already started making appearance. Management & Change too will make all out efforts to contribute towards articulating this agenda and to encourage scholars in all functional areas of management and connected social sciences to submit their research papers and articles for publication, and to help generate

ate,

Management & Change, Volume 1, Number I (April, 1997)

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

further thinking on these perspectives.We propose to publish in it the work that contributes most to further intellectual development of management academics as well as business leaders. I am committed towards providing an open window in its editorial policy and would like to build on this strength by attempting to widen the range of perspectives and theories. While the changing business scenario has led to interesting revelation of new management practices and skills requirement, apprehensions are also being expressed about their fall out. Probably the most worrying consequence of the changed policy, especially for the champions of social justice, is the greater incidence of job contracting, sub-contracting, casualization, and a diminution in the minimum standards of employment. In the UK, for example, only less than half of the workforce has full-time indefinite' standard' working contracts. The picture of these apprehensions as well as the plight of the poor and disempowered in general in the new scenario has been painted by Professor N. R. Sheth (in the lead paper of this issue) with a very fine brush. This paper raises pointers towards newer issues in business ethics concerning management education and research. I am hopeful that scholars and management practitioners will come out to debate these issues further by critically examining the existing perspectives and building newer ones through the forum of Management & Change. A number of academics and scholars have offered immeasurable help in various ways and shown concern for the successful launching of this journal. I am in dearth of appropriate words to adequately thank them for these gestures of theirs. The editorial board, and the members of the editorial team will anxiously look forward to receive scholarly contributidns in the form of papers, management cases, and request for book reviews from those who are passionately concerned about generation of new knowledge in management theory and practice. We would also wait for the readers' judgement as to how far we have succeeded in attempting to realize our goal of promoting excellence in management literature.

REFERENCES Chakraborty, S. K. (1993) Managerial Transformation by Values: A Corporate Pilgrimage. New Delhi: Sage Publications. Gupta, Rajan K. (1992) "Crisis of Management Research in India," Economic and Political Weekly, August 22. Rai, Malvika (1997) "From the Chairperson" 1 (1), IILM Review, 2. Misra, Kamlesh (1997) "From the Dean" 1 (1), JILM Review, 2. Secretan, Lance H. K. (1996) Reclaiming Higher Ground: Creating Organizations that Inspire the Soul. New Delhi: Sage Publications.

DEB! S. SAINI

SOME REFLECTIONS ON MANAGEMENT AND CHANGE

N. R. Sheth

Professional management lies in the mainstream of the globalization process. An ideal picture of global economy implies social and economic interdependence. among nations with promise of stability and growthfor all partners. But in today 's reality, globalization is characterized by growing divisions, disparities and mislrust among people at all levels. Inequalities of income and standard of living are increasing globally, both within nations and between them. The paper underlines two major issues to be addressed, alongside the bright prospecls of the high-ledl global village: the widening gap between the rich and the poor creating grealer relative deprivation among the poor, and the crisis of character among the affluent. As things stand today, any new or additional contribution tmvards resolution of our giant-sized problems such as malnutrition, ignorance and IlUnger,for example, should be welcomed and supported as an important step in social well-being and progress. The paper makes a case for employing lhe managerial\'kills of the professional managers in actualizing the new vision of a more equitable glohal society.

ereare some reflections on the process of management and change in the foreseeable future. Let us stand at a vantage point in the corridor of the life-span of those of us who will be in the mainstream of professional management over the next few decades. What promIses and challenges does the emerging scenario hold for us? We have more than one reason to feel happy, excited, and hopeful about coming events in our life and work situations, We are in the midst of major social and economic upheavals, We are inevitably moving on the path of liberalization, privatization and a variety of reforms in the management of our economy. In this process, we are accompanied by most other countries in the world in an effort to survive

Reflections on Management

and Change

and grow with dignity. We are increasingly being drawn into global economy and global markets. This trend is vigorously strengthened by the recent explosion of knowledge in information, communication and transport. The .computer, the satellite, the television, the supersonic aircraft have all brought us into the orbit of the celebrated global village. We have world-wide networks of information and communication of all varieties with instantaneous accessibility for people in all comers of the world. These networks cover virtually all aspects of personal and social living-business, recreation, education, culture, health, science, technology, and what not. We can know and do everything quickly, effectively and accurately. We may soon be able to wear telephones, televisions, and computers comfortably on our bodies. Global markets bring to us all kinds of modem goods and services to flatter our expanding needs and fancies. We can partake of global foods, global entertainment and a plethora of global products and facilities. We seem to be progressively getting pulled into a global culture which will offer us all kinds of joys, opportunities, and challenges. Such inviting signs of material progress should make us happy and hopeful of continuing happiness in the years ahead. Professional management lies in the mainstream of the globalization process. Global economy and markets imply global enterprise. The multinational corporation and foreign institutional investment have become important segments of economic outlook and business practices everywhere. Concurrently, management philosophy, systems, and education have acquired global perspectives. Indeed, management education and development are practised more and more like multinational business. Schools of management from affluent societies compete aggressively for clientele from all parts of the world. Rapid growth of knowledge and its application in quantitative disciplines, information science and human relations have led to a continuing process of modernization in concepts, strategies and practices in all areas of management. The global manager is in great demand and bears a special value. Management skills and expertise are regarded as powerful instruments in raising the standards of performance and prosperity in all types of enterprise-business and non-business, government and non-government, small and big. All this should strengthen our happiness and hope to occupy important and respectable positions in the process of designing, planning and managing the enterprise of the future. Let us 'hope, even anticipate, that we shall cross the coming decades with sustained satisfaction and happiness.We are aware that the current state of progress in artificial intelligence, biotechnology, and exploration of Management & Change, Volume 1, Number 1 (April, 1997)

Sheth

the universe may any time take us to a global situation of individual and collective existence of a quality and impact that no body can predict. Let us for the present, indulge in the art of positive thinking. Let us hope that the individual and society, as we know them, will progress with dignity in the midst of mass-produced copies of human beings, escalating struggles for existence between human beings and bacteria, and competition in space between our world and aliens. Meanwhile, we need to descend to our immediate life-space. The current wave of globalization is chased by its advocates with hopes and efforts for harmonious, balanced and comprehensive economic and social development of all partners in the comity of nations. Global knowledge and experience are used in large measure to design and plan integrated models and methods of economic, social and human development. All these good intentions and exercises in development do not seem to yield expected results. An ideal picture of global economy implies social and economic interdependence among nations with promise of stability and growth for all partners. In today's reality, globalization is characterized by growing divisions, disparities and mistrust among people at all levels. Inequalities of income and standard of living are increasing globally, both within nations and between them. Ironically, the global march towards models of equality, interdependence, harmony and homogeneity is accompanied by fragmentation and discord between rich and poor nations, rich and poor regions, rich and poor communities and the like all over the world. The old socialist cliche of the rich getting richer and the poor becoming poorer appears to hold considerable validity in today' s socio-economic scenario. The world carries a heavy historical baggage of over-population, poverty, disease, ignorance and degradation among the deprived section of the society in all places. These people do not share the happiness and hope offered by modem marvels of science and technology and the process of globalization. Of course, all our blueprints for tomorrow's global society contain much concern about poverty, deprivation and human indignity. They also promise that the gains of development will trickle down to all sections. At the same time, we increasingly hear about shrinking of employment prosp:cts all over the world. The state-of-the-art in modem technology and economy with an inescapable interconnection among countries is probably leading us to a paradoxical situation of mounting affluence for some and growing deprivation for large masses of people. Those of us who reap the benefits of the current process of changes are overwhelmingly influenced by one of its by-products: extreme competitiveness guided by open markets. Such competitiveness enhances Management & Change, Volume 1, Number 1 (April, 1997)

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Reflections on Management

and Change

fears of uncertainty and risk among people whose fortunes depend on the shifting equations of the markets. This raises a sense of insecurity. Insecurity breeds impatience, greed and hunger for power. We have in recent years witnessed an alarming rise in greed and corruption all over the world. Corruption now pervades almost all sections of the population from highprofile leaders and officials down to petty traders, humble teachers and students. We often chase instruments of power, social recognition and snobbery in a crazy manner. We are willing more and more to sell our souls to acquire or retain a coveted office or wealth to raise our importance in society or in our own eyes. Sometimes we stoop to any degree of unethical or illegitimate action to raise our own stock. We can easily let someone else's life, character or dignity to be ruined if it serves us to achieve our immediate need for pleasure or power. This crisis of human character is likely to prove more hazardous to the ideal of a happy global society than the widely trumpeted killers like environmental pollutants, viruses and nuclear weapons. We have then two major issues to grapple with, alongside the bright prospects of the high-tech global village: the widening gap between the rich and the poor creating greater relative deprivation among the poor, and the crisis of character among the affluent. Poverty and deprivation are a great shame and curse for us all within the framework of the science-propelled, liberal, humanized global society which we think we are pursuing. Poverty casts its shadow far and wide. It leads to helplessness and agony which germinate seeds of disease, moral degeneration, frustration, intolerance, violence and all kinds of unspeakable exploitation by the rich. We are all aware of the ease and rapidity with which deadly contagious ailments, child prostitution, child labour and violence in the name of God, country and ethnic loyalty have grown recently in the wake of mounting money-power of the rich and the widening vulnerability of the poor. A significant factor in this social drama is the ever-rising consciousness among the poor of their current state of deprivation and hopelessness about any significant improvement in the near future. This new consciousness is a product of the unstoppable spread of the ideas and institutions of democracy and the pervasive popular access to electronic media. The reality of relative poverty and deprivation "tend to grip our minds and conscience with special force if it is observed through live reproduct{on of events and experiences. Most people like us are thus reasonably aware of the life situation of those of our fellow-citizens who have little knowledge and less hope in respect of the promised bounty ofthe global village. How do they live in our Management & Change, Volume 1, Number 1 (April, 1997)

Sheth

consciousness? Our minds and hearts often melt when we learn about their woes. Then, soon enough, we pull out from their space with the palpable thought that we have no authority, power or t~me to do anything about them. Wait a second: we have, in fact, absorbed some most relevant and useful ideas and models of humane management of human resources in enterprise as well as in society. We use various HRD concepts and techniques to treat all human beings as precious resources and plan their development as an integral part of the whole enterprise or society. This new approach is based on modern ideas of participative management and holistic concern with human welfare, equality and dignity. Is that not an important contribution to management of poverty and deprivation? It is, indeed, a welcome contribution. At the same time, we need to ask: do we have additional obligation to mark adequate space for our less fortunate brethren in the emerging global village? We know that the problems of development of the poor are multifarious and complex. Hence, the main burden of this task has to be carried by government and non-government agencies with a mandate to serve the interests ofthe disadvantaged sections. These agencies will undoubtedly continue to be busy with problems of social and economic disabilities. Hence, it is a part of conventional wisdom for us to believe that we can not do anything beyond following the new principles and practices of management of human relations. Our consciousness then m(wes out of the socio-economic reality of the disadvantaged fellowtravellers into the plums promised by the new global civilization. There is, however, another reason why we wish to dilute our consciousness for social reality of our weaker and disadvantaged compatriots. Our sense of uncertainty and insecurity in our crowded, competitive, corrupt world is increasing by the day. Those of us who have special professional skills or achievements have begun to set cash prices on our knowledge, wisdom and talent in the global market. This exercise in pricing ourselves leads to feelings of being under-rewarded by the society. An increasing proportion among the elite sectiqns in management, bureaucracy and professions have begun to nurse a feeling of being neglected or exploited by a society for which they work hard. We then look out for receiving compensatory rewards by legitimate means or otherwise. We also expand our view of fair compensation to equate success with material gain and social recognition. We try to achieve such gainsJor ourselves and our kin by fair means or foul. For instance, our consciences have begun to accept cheating in examinations or evasion of government dues as socially acceptable and even desirable. Our self-centredness and greed have placed Management & Change, Volume

I, Number

1 (April,

1997)

Reflections on Management

and Change

us where we want to secure the proverbial pound of flesh regardless of its effect on others. It is no secret that the horrifying growth of the mafia in all segments of social life. is largely due to the rat race for wealth, power and status usually among the well-endowed elite in urban and rural communities. Interestingly, the mafia emerge from the poor and the weak. They create pockets of wealth and power among their peers. Believe it or not, they provide prized employment opportunities among the poor who have no legitimate mode of earning to live above starvation. In fact, one of the most admired role-models for the young in the new society is likely to be provided by the self-serving quick-fixer in all types of social action, including the noblest ones like education, health, justice and religion. The culture of greed, selfishness and cheating travels down the socio-economic ladder in many ways. Should we then be surprised by globalization of corruption? Globalization of greed and corruption may worry us for a while. But, as things stand today, we may quickly conclude that we have no way of dealing with such problems. We can then relax and wait for government and non-government agencies of socio-economic reform to change conditions of poverty and deprivation and to contain the forces of corruption and greed. Ifwe take such a view of the reality around us, we may not be able to relax beyond a short while. In the global village, the existence of too many poor, deprived and helpless people will generate its own social, economic and political force to resist and challenge the position and privilege of the rich. The official and non-official efforts of reform will continue. But the yield from these efforts is likely to be slow and small. It is now widely recognized that management of social enterprise and programmes at all levels needs to be shared by government, non-government organizations and people at large. We need to develop adequate awareness of the reality of poverty and deprivation in our environment. This reality needs to be an integral part of our social consciousness. Adequate consciousness of the conditions of deprivation around us and acceptance of our complimentary responsibility in dealing with such conditions should move us to a state of self-examination. While we enjoy the products of modem technology and consumerist culture, we should comprehend the socially damaging and destructive implications of material affluence. We increasingly discover how cruel and uncontrollable human wants can be. We have, for instance, considerable knowledge about the hazards for individual and society underlying the current wave of growth in the automobile and chemical industries. Such knowledge and experience should motivate us to regulate and rationalize our needs and wants. We do Management & Change, Volume 1, Number 1 (April, 1997)

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Sheth

I I

not need to adopt Gandhian ideology to discover that regulation of needs and wants leads straight to a style of life free of greed and corruption. The combination of adequate awareness of our socio-economic environment, recognition of our role in dealing with problems and selfdiscipline in consumption should enable us to spare time and resources to participate in social action for the disadvantaged people around us. Our participation may be an integral part of existing government or voluntary programmes for creating jobs, raising levels of literacy, education or health or improvement of quality of life. We could also raise or enhance corporate responsibility for social action in relation to the community surrounding business locations. There are already some welcome signs in the corporate sector showing positive orientation to responsibility for the wider community. This responsibility is usually perceived in the spirit of enlightened self-interest. We need to persuade entrepreneurs and corporations to develop consciousness and accept responsibility for dealing with poverty and deprivation in the same perspective as I have commended for individual managers. There may be situations where we do not have an infrastructure of government, non-government or corporate effort to contribute to community welfare action. Such situations call for our own initiative and leadershIp to launch a programme oriented to local needs and priorities. We can organize such efforts within the framework of professional associations, philanthropic fraternities or social clubs. Our managerial skills and insights can perhaps be employed to reap dividends of socio-economic enrichment for the disadvantaged people around us. Such results will obviously make a positive contribution to socio-economic development in the society at large. They will also yield a great sense of personal and professional fulfilment for us. There is, of course, a fair chance that our efforts may fail to achieve spectacular results in the foreseeable future. Such non-achievement need not deter us from the commitment to work for the community. As thlllgS stand today, any new or additional contribution towards resolution of our giant-sized problems of malnutrition, ignorance and hunger should be welcomed and supported as an important step in social well-being and progress. If such steps are taken either in concert or discretely in various parts of a town, region or country, they are bound to add up sooner or later to yield significant results in our journey to a less equal, less ignorant, less wretched, less wicked and therefore more liveable society. An important aspect of such effort on our part is our contribution to a new vision of the role of professional managers. The enlarged perspective of managerial role Management & Change, Volume 1, Number

1 (April, 1997)

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12 Reflections on Management

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to embrace responsibility for community welfare as a vital ingredient should gradually deliver to us a new sense of professional pride and joy. Many of us will continue to be relatively unimportant in the socio-economic hierarchy in the enterprise or in the society. But, we may, silently and solidly, be able to demonstrate the importance of the less important.

N. R. Sheth, Ph.D., is a renowned management scholar. He is the Ex-Director, Indian Institute of Management, Ahmedabad. Currently, he is Honorary Senior Fellow at Gujarat Institute of Developmental Research, Joka Road, Ahmedabad-380 015. Among others, his book: Social Framework o/the Indian Factory is a pioneering contribution to industrial sociology in India. His researches have specially focused on trade unionism and other aspects of industrial relations.

Management & Change, Volume I. Number I (April, 1997)

CROSS-CULTURAL PERSPECTIVES IN TECHNOLOGICAL INNOVATION-THE WEST, JAPAN AND INDIA

Arunoday Saha

This paper discusses how cultural factors, notably differences in values, affect technological innovation and development in both advanced and developing countries. Technology is viewed as a subsystem of the cultural system which includes ideas and norms. The values identified as being congenial to the growth of machinery and processes are the desire to control and bend nature to serve human needs, reliance on reason as the sole means of understanding the world as well as for the solution of all problems relating to the physical universe, emphasis on individuality and change and acceptance of happiness as the sole good. The place of these values in the cultures of the West, East, Asia and India, and their relationships with technology are discussed.

INTRODUCTION

he impact of cultural factors on technological innovation and â&#x20AC;˘â&#x20AC;˘ development has not received the attention it deserves. Machinery and operating techniques are frequently conceived of in terms of financial investment, scientific knowledge, education and training, and intangible environmental factors such as values; and the institutional network within which technology originates and thrives is often ignored. Yet, differences in technological capabilities can be satisfactorily explained only when cultural factors are considered. Especially with respect to technological innovation, very wide disparities exist among the various cultures of the world. Virtually all modern technology has originated within a single major cultural region~he West, comprising of the nations of Western Europe and the United States which cover roughly one-tenth of the globe's population-and the rest of the world (with the possible exception of Japan in very recent times) has merely copied machinery and techniques initially developed in the West.The answers to the two questions that naturally arise, Management & Change, Volume I, Number I (April, 1997) 1997 by Institute for Integrated Learning in Management. All Rights Reserved.

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14 Cross-cultural Perspectives in Technological Innovation why modem technology originated in the West, and why firms in the USA and Western Europe continue to lead in technological innovation, in all likelihood, lies in the value premises of Western civilization. These values, developing over the centuries, have shaped the material aspect of life in the West and, in turn, have been influenced by continuous technological change. As regards other parts of the world, pre-existent values, beliefs and institutions impede--and in some cases such as Japan as well as the countries lying in the Confucian belt of East Asia, encourage-the adoption of imported machinery and processes. In most nations of Asia and Africa, however, the introduction of new teclmologies fails to yield the expected results. Despite the availability of adequate finances, willing donor and recipient organizations and a favourable political climate, the imported equipment is often under-utilized, used less productively and, at the end of its useful life, the users may look forward to a fresh induction, indicating, thereby; that the technology provided has not been absorbed. Among the causes of this rather recurrent phenomenon, the one that usually escapes attention is the likely incompatibility of the ideological and institutional framework of the recipient society and the intrinsic characteristics of modem technology, developed in a different social-cultural milieu. The issues involved mostly lie beyond the training and competence of the engineers and specialists concerned. Sometimes, borrowing societies do not wish to disturb the fundamental features of their culture, in spite of the desire for foreign machinery. But silence in the matter has left a lacunae in the understanding of the dynamics of technology change in developing countries, though, it must be admitted, the topic is increasingly gaining attention.(Baark and Jamison, 1986)

BASIC DEFINITIONS This article examines the issues arising from the interaction oftechnology and values from the perspective of the anthropological concept of culture. The term culture has a wide variety of meanings. I subscribe to the anthropological definition of culture in its broadest sense as the "way of life of a social group" (Bierstedt., 1970). Culture, according to this perspective, is a complex whole that includes ideas, the framework of norms, and tools and techniques. A combination of these three parameters forms a total system different from other systems, even ifboth have elements in common. These three categories are by no means mutually exclusive, but interact with one another. Particularly, philosophy or ideology underlies both norms and techManagement & Change, Volume I, Number I (April, 1997)

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nology. This viewpoint is supported by the fact that modem machinery and processes are derived from the principles of rational science and experimental methods, both dominant ideologies of the present -day West. Thus, technology constitutes a component of culture and is not really separate from social forces, and the process of technological change may be viewed as a part of cultural change. Though a manifestation of ideology, technology possesses an important distinguishing characteristic. Originating in one culture, it can be transferred to another social context more easily than beliefs and behavioural norms can, because technological ptoductsare completely and unambiguously formulated. For example, a motor car which represents the manifestation of a range of highly developed scientific ideas remains the same in all parts of the world, irrespective of social systems. However, technological processes, which lie at the interface between materials and norms, fall into a slightly different category. Maintenance and operating procedures, being partly in the nature of norms, are less completely expressed and consequently less easily transferred. Since culture, as previously noted, is a system, its components maintain an overall homeostasis, though dissonance may be present to a greater or lesser degree, and a disturbance in any part of the system produces repercussions in the other parts. In modem Western societies, the rapid rate of technological innovation introduces strains. Since institutions and ideas do not change quickly, a period of incongruity occurs before they adjust to altered physical circumstances. This phenomenon, in which changes in other societal parameters trail technological transformations, has been te~ed "cultural lag" by Ogburn (1964). It may be further postulated that the congruence between values and norms and the introduced technologies provides a favourable environment for the latter's efficient functioning and progress. In the case oftechn~logy transfers from the West to developing countries, the variance between the ideological and normative elements and the processes transferred is often considerable. The cultural lag, if it can be called so, may never be overcome if traditional patterns continue to be stubbornly held, resulting in an almost permanent state of mismatch; and transferred technology remains an appendage alien to the system. Contrary to the trend in many nonwestern nations, pre-existent cultural structures in Japan were congenial to borrowed equipment and processes. In many cases, they were consciously mllulded to suit the needs of industrialization.

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VALVES RELEVANT

TO TECHNOLOGY

The following sections discuss the values identified as being relevant to technology in three different cultures--the West, East Asia with particular emphasis on Japan, and India. DOMINANCE OVER NATURE The origins of technology may be traced to the interaction between people and their environment. Men and women adapt to their surroundings as well as change in the environment, and one type of collective effort aimed at transforming the latter to suit human needs is termed technology. However, as technology encroaches upon nature, the changes it brings about generate new pressures necessitating fresh reactions in the shape of further technological innovations accompanied by modifications in values and norms. In this context a culture's attitude towards the environment acquires importance. Altman and Chemers (1984) have classified cultures in terms of whether their members believe that (i) people are subjugated to nature, where they live at the whim of powerful and uncompromising forces, (ii) people are inherently part of nature like animals, trees and rivers, where they live in harmony with their environment, and (iii) people are above nature, dominating and exploiting the environment. The Judeo-Christian heritage of the Western world postulates that humans are separate from objects in the ecology and have the power to act on, alter, and control their natural surroundings. The Old Testament's conception of God as an omnipotent being, who after creating the universe, transcended His creation, leaving the world to be known and handled by men, led to a view of nature devoid of the sacred. As humans were made in the image of God, distinct from other entities, their role and right consisted in subjugating, changing and exploiting the environment. This orientation, has predominated in Western civilization which has traditionally regarded uncontrolled nature or the wilderness with hostility (Saha, 1996). The essentially antagonistic attitude toward nature provided a favourable precondition for modern technology which emerged when reason, particularly in the form of mathematics combined with the experimental method, came to be applied to problems relating to the control of nature. This approach--which is also the approach of modern science~id not assume final shape till the Renaissance of the sixteenth century. But its origins, as Murray (1978) states, probably lay in the Late Middle Ages when people Management & Change, Volume 1, Number 1 (April, 1997)

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for the first time realized that apart from "brute force and interventions of the supernatural," the environment could also be changed "through the application of the mind." Another factor that played an important role in Western attitudes toward nature is the cultural preference for struggle, the overcoming of the weaker side by the stronger in situations of conflict and a considered rejection of the spirit of compromise involving as it inevitably does a scaling down of one's own position. In contrast to the civilization ofIndia and China, the European culture always holds the military man in the highest esteem. In ancient Rome, a citizen could not occupy public office until be had served in ten armed campaigns. Even the person reputedly the wisest in the Western world of classical times, Socrates, was an excellent soldier (as against Buddha in India and Confucius in China). The remarkable military successes of Alexander the great further induced an early recognition of the importance of strategy--or the application of the mind, apart from mere bravery-in winning battles. It was to be expected, therefore, that people in the West would view their relationships with the surroundings in the idiom of conflict and use their intelligence in the "conquest" of nature. . The conviction of man's superiority over other entities on earth was immensely strengthened by the scientific and industrial revolutions of the last two and half centuries or so. Science and technology based on it rapidly produced vehicles for conquering the environment that were incomparably more effective than those of the past. Each challenge presented by nature was met with an appropriate response. Thus, the challenge of distance was overcome by the development of transport mechanisms ofvarious kinds, the fastest of which crossed continents in hours. As such, the Judeo-Christian ethic of people as controller's of nature played an important role in the development of modern science and technology, particularly in the initial stages. In modern times, however, efforts to subdue nature have met with such prodigious success that the alternative cultural orientation advocating a harmonious relationship with the surroundings has begun to gain ground. Not only have the epochal discoveries of Charles Darwin made during the second half of the last century fixing the place of man as a biological species firmly in the scheme of life on earth exerted an impact on the Western mind, but progressive alienation of people from their natural surroundings produced by advancing technology, has also given rise to an intolerable contradiction. The enormous power of modern technology has disrupted the vital links of the complex web of biological and physical within which the present Management & Change, Volume

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and all future generations of humanity must live. Uncontrolled exploitation of natural resources on a massive scale has polluted the air and water and undermined other parts of the ecosystem, making the planet less fit for habitation. Instead of catering to human welfare, the tools afforded by science, through environment contamination, have sometimes caused sickness and discomfort, and may pose yet more serious dangers. Different technologies emerged in response to specific environmental challenges. But a single technological solution used the fact that regions of the world which lack affluence are unwilling to accept limitation on economic progress that environmental protection inevitably involves, traditionally, the concept of nature as an entity separate from human beings did not exist in the ideologies of non-western cultures. Members of most Asian and African societies, as a consequence, remain unconscious oftheirnatural surroundings; and biological theories about the place of man in the ecosystem have had little influence. The Hindu attitude toward nature which is nearer to the second classification of Altman and Chemers may be mentioned in this context. In Hinduism and Buddhism which O'Dea (1966) describes as "immanentist religions," God or the sacred simultaneously permeates the world and lies beyond it. All entities, including people, possess elements of the "Universal Self' or Brahma, and men and women are not separate from nature, there existing a bond of continuity between them and their environment. Humans may be reborn as animals or plants. From this essentially mystical viewpoint, originally contained in the ancient religious books called the Upanishads (also known as the Vedanta), there developed the idea of the physical universe as an illusion (maya) or fantasy-an idea peculiar to Indian mysticism. The spirit underlying phenomena being the only "reality" worth knowing, classical Indian civilization turned away from the world of ordinary perceptions and became engrossed in its own conception of the true nature of things, the all-pervasive unity behind appearances. The rejection of the objective universe as unreal and deceptive made it psychologically difficult for the pre-modem Indian to do serious thinking about the environment. Sti1l1esswas he inclined to manipulate his surroundings in any organized, purposeful manner. The fundamental pre-condition for the development of technology or, for that matter, the physical sciences-an interest in nature--did not exist in Indian tradition (Saha, 1990). The requirements of social and economic life in pre-modem India were catered to mainly by the famous caste system. It consisted of a hierarchy Management & Change, Volume 1, Number 1 (April, 1997)

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of functional groups at the top of which were the Brahmins, the priestly caste, followed by the administrators, the traders and the artisans, each category associated with reduced degrees of prestige. In this scheme, individuals who performed manual tasks occupied the lower rungs of the social esteem ladder from which they could not normally emerge. Physical work having been permanently devalued, a major impetus to technology development did not exist in Indian tradition. Another factor in classical culture uncongenial to the progress of technology was the low esteem accorded to matter reflecting the pattern of society, hierarchy prevailed in the rest of the universe as well. Above " people were the gods, and the sub-human world consisted of successively lower forms-animals or "moving beings," plants or "stationary beings" and physical objects (Davis, 1976). The functioning of the universe was, thus, associated with harmony with each element having been assigned a definite place. Possessing as it did the lowest possible status, inanimate matter-" the principal ingredient of technology--eame to be viewed with contempt, and those who manipulated it occupied the bottom strata of society-the despised members of the fourth caste, the Shudras, Though with the coming of modernization the status of the lower castes improved, attitudes toward physical obje"cts and manual work remained llnaffected, a tendency reflected among other things, in aspirations of personnel employed in modem scientific and technological research establishments for high administrative positions rather than for research output. Since the basic postulates ofIndian civilization recommended existence in harmony with nature, in being at peace with oneself and with one's surroundings, the culture did not, as might be expected, generate in its members the motivation, the prodigious energy necessary to undertake al1endless series of endeavours to subdue nature and compel it to serve human needs. After a measure of security from starvation and a few elementary comforts of life had been obtained, Hindu civilization had nothing in it to encourage the strenuous pursuit of further technological advances. It is not surprising, therefore, that among the civilizations of the world, India has been remarkably inert as regards technological innovation-a trend that persists in modem times. Barring the manufacture of iron of very high purity, which did not rust (known in ancient Europe as "senc Iron," "used for the making of sword blades, etc.), no important technological process originated in India. Many foreign observers, during pre-modem times. have commented upon the country's technological backwardn~ss and the general poverty of the material refinements of life among the people. Marco Polo Management & Change, Volume 1, Number

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20 Cross-cultural Perspectives in Technological Innovation who visited South India in the thirteenth century (Lathen, 1958), reported that the inhabitants went about dressed only in loin cloth, and that the king ','wore a handsome loin cloth" studded with jewels; households hardly had any furniture and even monarchs squatted on the ground or on a raised platform, and ate with their fingers. Toward the end of the eighteenth century, Sir Charles Grant in a pamphlet entitled, Observations on the State and Society Among the Asiatic subjects of Great Britain wrote: "Perhaps no acquisition in natural philosophy would so effectively enlighten the mass of people as the introduction of the principles of mechanics and their application to agriculture and the useful arts. Not that the Hindus are wholly destitute of simple mechanical contrivances. Some manufactures, which depend upon patient attention and delicacy ofh.and, are carried to a considerable degree of perfection among them; but for a series of ages, perhaps for two thousand years, they do not appear to have made any considerable addition to the arts of life. Invention seems wholly tepid among them" (Sulbarayappa, 1971). As compared to India, the considerably greater technological dynamism of East Asian countries may be attributed to the fact that the indigenous cultures of these regions have been more interested in nature. The Chinese religion ofDaoism, in particular, is preoccupied with nature-especially its overpowering aspect and the concomitant insignificance of humans-an attitude well-reflected in Chinese and Japanese landscape painting. Though essentially a mysti~al belief-system, Daoism differs from mysticism elsewhere in not being entirely other-worldly. To be sure, the East Asian perspective of nature differs from that of the West in the sense that in the former there is no urge to exploit the environment, to deliberately bend it to meet human needs. Neither is there, for that matter, the lofty sense of superiority of man over things in nature which characterizes attitudes in the West. The keen interest of the Daoism in the natural environment (derived from primitive Shamanism), and the resultant tendency to tinker with physical objects gave rise to the epochal Chinese technological innovations of pre-modern times--printing, gunpowder, paper-making and the magnetic compass. But not only did the absence of a rational, experimental approach halt the further development of these innovations, the Chinese failed to exploit their inventions to serve human needs; and the full potentialities of these technologies were realized only after they had been transferred to the West, via the Middle East. Gunpowder, for instance, had little impact on the course of Sinic history, but its use transformed society, war, and politics in the West. Similarly, the magnetic compass enabled EuManagement & Change, V91ume 1, Number I (April, 1997)

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rope an mariners to explore and spread their civilization to distant parts of the globe, and printing and paper ushered in an era of universal literacy which is pre-requisite for an industrial society. In Japan, the Zen variety of Buddhism consisting ofa fusion ofDaoism and Indian Buddhist philosophy-which later came to be identified as embodying Japanese spiritual culture-had considerable impact on the course of industrialization. The tendency of Zen towards manipulating nature is evident in such art forms as Bonsai and miniature gardening. In Bonsai, otherwise giant trees are reduced to a human scale. Yet, attitudinally, Zen differs from the perspective of science in adopting a subjective, intuitive approach rather than a rational, objective one. Also absent is a conception of the inherent orderliness of natural processes. Moreover, Zen .supports the identification of the individual with the external phenomenon under consideration and stresses self-dependence, forthrightness and the exclusion of intermediaries. In a typical Zen meditation session, undertaken for the purpose of attaining mystical enlightenment, the personal efforts of the initiates assume utmost importance; the master merely points in the right direction. This, incidentally, contrasts with the master-disciple relationship prevalent in India, in which dependence on the guru is indispensable for the disciples' learning. Unlike the Indians who during the initial phase of their interaction with European nations, were fascinated only by Western religion and philosophy, the Japanese displayed an intense interest in European technology (as well as science), ever since they became aware of its usefulness and superiority. As the historian Panikkar (1953) points out: "While Raja Rammohan Roy was corresponding with Condorcet, the Japanese scholars were laboriously translating Dutch books on mathematics." The Japanese interest in European machinery, in all likelihood, derived from their Daoist and Zen cultural background. Of particular significance is the fact that during the early period of contact with the West, the Japanese hardly made any distinction between Western science and technology, viewing both from the perspective of their practical usefulness. States Nakayama (1976): "While science in the nineteenth century Europe was still, in the main, a cultural activity rather than a practical means of achieving economic growth, the Japanese image of science in the late nineteenth century was quite modem. It was exclusively utilitarian and pragmatic, planned for national interests if not purely profit-making, specialized and compartmentalized." Moreover, instead of merely copying foreign technology, the Japanese adopted the more difficult approach of mastering the processes involved, and thereby, Management & Change, Volume 1, Number

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22 Cross-cultural

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Perspectives in Technological Innovation

becoming self-reliant. For example, when the Jacquard loom first came to Japan, the machine was dismantled and reassembled time after time until a full understanding of the technology behind it had been obtained. The craftsmen involved could then substitute some of the metal parts with wooden ones. In modem times, Japanese manufacturers devote considerable amounts of energy to the assimilation of tools and techniques produced outside of -their organizations. The underlying conviction is that the mere purchase and ,use of machinery hampers progress since the procured technology "remains frozen, a foreign thing" which does not become an integral part of the organization. Most large Japanese firms beheve that to develop ongoing technologies, they should develop the basics themselves. A good portion of the production equipment used by an average Japanese manufacturer is designed and built by its own engineers and machinists, a measure that usually costs less because safety margins incorporated into general use machines can be eliminated. Moreover, purchased equipment is extensively modified to meet specific requirements. To a typical manufacturing company in the West, the idea of making its own machines is not a particularly sound one. The company would rather buy equipment off-the-shelf. In developing new products, industrial designers in Japan prefer the independent and direct approach and avoid intermediaries. R&D engineers usually do not rely on formal market research conducted by marketing specialists to obtain ideas for new products. Often researchers themselves spend time at sales offices where they come into contact with buyers, study market trends and the needs of customers and reexamine the course of a product's development (Herbert, 1990). For example, a Honda R&D team that spent several days at supermarkets in the United States conversing with customers as they loaded shopping bags into their cars came away with ideas for a redesigned hatchback (Saha, 1994).

SUPREMACY OF REASON

As indicated earlier, modem technology was born when, during the Renaissance, reason came to be employed for the manipulation of objects iunature. In science, the introduction of the experimental method by Galileo brought scientific theorizing nearer to reality, thereby, improving the prospects offinding solutions to practical problems. For the first time, the methods of logical argument and computation merged with the practical techManagement & Change. Volume I, Number 1 (April. 1997)

••

"iIIIl-.

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niques of production that had, in many cases, come down from ancient times. The results were not then evident, but once the tenuous lmks between the two independent traditions has been established; there was no stopping, and the combination ultimately proved to be an explosive one (Bernal, 1969). It is significant in this respect that a unique feature of Western civilization has always been its considerably greater regard for rationality than any other culture, and this esteem for reason has increased with the passage of time. To be sure, the faith of the mainstream of modem Western society in reason is intense and absolute. According to the sociologist, Peter Berger, a functional rationality underlies the two dominant features of modernity namely technological production and bureaucratic organizations, and is also carried into the totality of experience. By rationality Berger means not an intellectualization of the world, but rather "the imposition of rational controls on the material universe, over social relations and finally, the self." Though they founded the systematic, formal body of knowledge called science, and invented the machine as well, the Greeks contributed little to technology (understood as a useful thing or technique). The Romans, who at a later date appropriated the Hellenic texture of civilization, put to use many Greek ideas and gave to the world the bureaucracy-a human machine of immense utility. Roman technological achievements surpassed those of other contemporary nations. Massive public buildings, all-weather highways, bridges over wide rivers, dams, tunnels, the making of concrete, and extensive use of machines in warfare testify to Roman technological ingenuity. The rise of Christianity after the fall of Rome led to a decline of the rational outlook. With god becoming the centre of the universe, everything moved according to a pre-conceIved, divine plan. Faith being dominant, not only did irrational practices (such as the burning of witches and heretics) proliferate, but the material aspects of civilization suffered a setback. Pounds (1974) states: "Medieval manufacturing was remarkably unprogressive both in techniques of production and also in its organization structure. In very few respects did medieval industry show any technical advance on that of classical times, and knowledge of some industrial processes was even lost. " The discovery and diffusion of the works of classical authors, in the fifteenth century, marked the end of the Age of Faith and the beginning of Renaissance. The literature of antiquity, divorced in the main from the idea of God, while it supplied ideals and suggested points of view, served essenManagement & Change, Volume I, Number

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Innovation

tially as a launching pad from where new forms of perception and thinking took off in unexplored directions. More directly relevant to technological development was the greater esteem enjoyed by craftsmen. Their enhanced status enabled scholars to establish contact with them. In the seventeenth century, Newton and others established that nature obeyed fixed laws capable of being expressed in mathematical form. The universe began to resemble a vast and intricate machine. The leading figures of the scientific revolution were devoted men who thought they had merely unravelled the divine plan. In fact, Christianity which sometimes came into conflict with scientific advances was, in the main, in agreement with and supportive of both modem science and technology. Ideas of science affected the economic and political spheres as well where they played a part in ending the arbitrary powers of rulers to, among other things, expropriate property. The withdrawal of authoritarian control over economic affairs encourages the growth of capitalism; it stimulated competition, resulting in an immense outpouring of energy, part of which was devoted to the development of new processes and products. Freedom from restrictions and manufacturing, coupled with rapidly expanding demand, led to technical innovations on an unprecedented scale giving birth to the industrial revolution. The architects of the industrial revolution were mostly artisan inventors, and scientists played only a minor role at the initial stages. It is no accident that the growth of technology and advancements in the formulations of science should roughly parallel the economic domination of capitalism, sometimes one coming to the forefront and at some other time another. The relations between them are complex, but can be understood with the aid of the concept of culture which states that the normative and ideological components of a culture--in this case, capitalist institutions and science--tend to be in agreement with its technology. The same intellectual tendency underlies the three apparently disparate phenomena, namely the progressive strengthening of the spirit of rationalism and the simultaneous weakening of the forces of irrationalism. From about 1875 onwards, the findings of basic science began to be seriously applied to manufacturing (Rosenberg and Birdzell, 1986). Industry started employing scientists, and the laboratory became a part of the production establishment. At the beginning, science played an ancillary role to industry; it studied production processes, applied its familiar techniques of testing, measuring, quantifYing and analyzing, and standardizing the procedure to obtain best result. Management & Change, Volume 1, Number 1 (April, 1997)

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With the advent of the twentieth century, science moved to the centrestage of industry. Ideas generated within the body of science-in the laboratory-were put to production. The invention in the late 1940s of the transistor by William Shockley and his colleagues, working in the Belliaboratories, may be mentioned in this context. The emergence of sciencebased technology signifies the final triumph of reason, for science embodies rational thinking in a form so concentrated that its working and results evade the common sense understanding of the untrained observer. From the late 1960s onwards, however, industry in the West faced tough challenges from Japan. High quality, relatively inexpensive items made by Japanese firms ended the dominance of Western companies in a wide range of industries. The strength of Japanese manufacturers lay, in the main, not in their innovation capabilities but in what is often referred to as "marketpull," the ability to redesign products to yield maximum consumer satisfaction. Japanese firms were particularly successful at taking items made first in the West and then changing or adding a few features so as to suit the tastes of customers better. Though the importance of orienting a product to satisfy customer needs cannot be over-emphasized, extensive concern for the consumer, in all likelihood, contained the seeds ofJapanese's vulnerability, as it caused them to accord relatively low priority to the scientific side of technological change, and herein, lay the West's strength. In knowledge-intensive fields like chemical engineering, the Japanese had never been serious competitors. In more recent times, they also lag behind in computer software, an area of overwhelming Western (or US) strength. Of additional significance is the fact that, despite efforts, the Japanese have not succeeded in catching up in this crucial technology as they earlier did in an impressively large number of manufacturing endeavours (Desmond, .1995). The advantage of the West in computer software apparently emanates from its long intellectual tradition of building abstract, logical structures that may be traced in history to at least the giant theological systems of medieval scholastic philosophers, if not earlier. Japan has no such religious or secular tradition; its culture has always viewed abstract concepts with a degree of suspicion, stressing instead concrete phenomena or what can be taken by the hands or seen by the eyes. Besides, reason never occupied a prominent place in Japanese tradition, though the Confucian component of Japanese culture advocates a pragmatic, rational approach to human relationships and values economic progress. In any case, by the early nineties the West had effectively overcome Management & Change, Volume

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the Japanese challenge, partly by learning from whatever Japan had to offer and, in part, by pressing ahead its own intrinsic strengths. In the West the tradition of seeking knowledge for its own sake goes back to the ancient Greeks, an urge that seems to have increased in modem times, as evidenced by the huge investments in laboratories conducting basic research. No other civilization has a similar tradition. As long as science remains the principal pusher of technology, the West will continue to have an edge over other cultures in technological innovation. As far as India is concerned, the Hindu world-view has always regarded reason with a degree of contempt. Vedantic mysticism which forms an important component ofIndian culture, is highly irrational. By its very nature, mysticism not only denies the law of contradiction--since opposites are thought to be united in the same "Universal Self'--but antagonizes the common-sense, pragmatic perspective of things. To quote Max Weber (1946): "The most irrational form of religious behaviour, the mystic experjence is in its innermost being not only alien but hostile to all form. Form is unfortunate and inexpressible to the mystic because he believes precisely in the experience of exploding all forms and hopes by this to the absorbed into â&#x20AC;˘Alloneness' ." The rejection of form by the most prestigious component of Indian tradition, seriously discouraged an interest in technology. Also significant is the fact that the vast bulk of ancient and medieval Hindu literature abounds in miracles and absurdities of magnitude and frequency difficult to find in the writings of other literate peoples. In works belonging to the major cults of Vishnu and Siva, the universe is described as play (lila) of the gods who conduct its affairs in an arbitrary and whimsical manner. Though the establishment of British rule from the second half of the eighteenth century onward subjected Indian society to intensive Western influences, the tenets of classical tradition were not superseded. As a matter of fact, reacting to Christian missionary attacks on the beliefs and practices of Hinduism, Western educated Hindus emphasized the mystical ideas contained in the Upanishads as constituting the essence ofIndian culture. In time, the notion that Indians and Westerners possessed different mental characteristics the former being '-'spiritual" and the latter "materialistic" grew, and became firmly embedded in the consciousness of the average individual. Towards the end of the nineteenth century Vivekananda, the foremost popularizer ofVedantism, observed: "When the Oriental wants to learn about machine-making, he should sit at the feet of the Occidental and learn from him. When the Occidental wants to learn about the spirit, about God, about the mystery and meaning of the universe, he must sit at the feet Management & Change, Volume 1, Number 1 (April, 1997)

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of the Oriental and learn" (Hay, 1970). Needless to add, with such attitudes, Indian technological competence remained low. As a result of prolonged and intimate association with a major industrial power, India enjoyed a headstart in industrialization over other non- Western nations. Not only did India possess easier access to Western machinery but British finance, technical expertise and entrepreneurial abilities were also available. But the intense anti-technological bias of indigenous tradition prevented the Indians from building upon that initial advantage. The revival and popularization of Vedantic mysticism while it infused all areas oflife with increasing irrationality was particularly detrimental to the development of technology. Indian industry, with the passage of time, became a high cost low-quality producer as well as excessively dependent upon foreign sources for equipment and knowhow. The relative decline of the country's industrial position vis-a-vis other non-Western nations-which began at the inception of the present century-is particularly striking when compared with Japan. Amsden (1989) reports that in 1899 the value ofIndia's total manufactured exports exceeded that ofJapan's; by 1913 export values were equal; by 1929 Japan's manufactured exports exceeded those of India, and the margin widened thereafter. And China which lagged behind India in 1950, with very little external assistance, surpassed the latter in virtually all indicators of technological and industrial performance, during the succeeding decades. EMPHASIS ON INDIVIDUALISM AND CHANGE

The notion that innovation is engendered by individualism which disrupts the prevailing status quo, leading to instability and change (including technological change) is widely held (Peters, 1991). Originating in the form of a new idea put forward by a creative individual, a proposal for change, by its intrinsic character, represents a declaration of revolt against tradition which comprises the essence of society. A group discussing a problem rarely comes up with a high-quality solution. Several factors seek to pre" serve the status quo. First is love of custom. Second, change involves uncertainty and necessitates the expenditure of additional energy. Innovative ideas, according to psychologists, occur to individuals during periods of quiet thinking. A group discussing a problem rarely comes up with a highquality solution. Creative individuals are usually persons above the ordinary in intelligence who possess knowledge and experience in a wide range of. fields. Yet, for progress to materialize the support ofthe uncreative many is Management & Change, Volume 1, Number

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indispensable, and the criterion of providing such support is objective, rational evaluation. Only in a society that respects the individual, where custom has ceased to command loyalty, where reason is esteemed, where the mass of people do not seek to avoid exertion, will a suggestion in opposition to convention be accepted for consideration and possible implementation. In the West, the perception of the individual's separateness from his or her social group first emerged during the Renaissance in Italy, and it transformed the way a person viewed himself and the world around him. An objective treatment and consideration of all external things became possible. The subjective side at the same time asserted itself with corresponding emphasis. One of the first consequences of the growth of individualism was an extraordinary outpouring of energy in all fields of secular activity-industry, commerce, the sciences, the arts--as compensation began to be linked to performance, rather than to social status. Indeed, the vigour of capitalism derived in large part from the ideology of individualism. As industry and commerce expanded, the emphasis on the individual increased, with one trend influencing the other. In the nineteenth century, John Stuart Mill, the prophet of liberty, decried the wearing down into uniformity all that is unique in a person, and recommended the cultivation of individuality within the limits imposed by the rights and interests of others. And the philosophers to the eighteenth century Enlightenment in France, encouraged by the example of new scientific discoveries, proposed the idea of progress involving discernible advances in knowledge, happiness and material condition of mankind as an independent law of nature. As one would expect, the concept of progress is highly relevant to technological innovation. The spirit of innovation is reckless, seeking constant change and flux, creating uncertainty in its wake. For innovation to occur on a large scale, societal characteristics must be conducive to change both at the macro and micro levels. As Kmetovicz (1992) observes: "The primary factor contributing to the difficulty of new product development is management of change and yet, the management of change is a crucial part of the new product development methodogy. While technology is one part of the change mechanism, it must be recognized that it is not the only element." It is not surprising, therefore, that virtually all modem technological innovation have occurred within Western civilization where the ideals of individualism and change are deep-rooted. By contrast, Japanese culture has always placed the group above the individual. "A nail that sticks out gets hammered down," goes a popular Japanese saying. Group propensities are strengthened by Confucian teachManagement & Change, Volume 1, Number 1 (April, 1997)

Saha

ings stressing good interpersonal relationships. Conflicts disturb social harmony, hence should be strenuously avoided. Disagreements when they arise, should be settled through consensus among members of the group. Though in general valuing stability over change, the Analecls of Confucius at one place states: "Rotten wood cannot be carved; a wall of dirty earth will not receive the trowel," (Legge, 1971), thereby, lending a measure of sanction to change. Conforming to the broad trend of-indigenous culture, a typical Japanese company regards R&D as the responsibility of all employees and not just that of the R&D department. Small groups, comprised of persons drawn from operational as well as supervisory categories which are widespread throughout Japanese industry, have installed many important process and product changes. Many workers also participate enthusiastically in their companies' suggestion programmes individually. Furthermore, R&D personnel in Japan work closely with employees in the production departments. The laboratories are closely integrated with the manufacturing departments, and R&D scientist routinely travel back and forth from the office to the factory floor, coordinating changes with operatives and learning from the problems encountered, so that future designs can be improved. R&D also maintains close links with the marketing departments, seeking the latter's advice regarding a product's size, shape, price and obtaining feedback about customers' reactions. A similar relationship exists between a big company and its smaller suppliers and subcontractors. As a result, whereas firms in most other countries tend to be secretive about future products, research personnel from large Japanese firms hold regular meetings with representatives of their leading subcontractors to discuss details, a practice that allows the smaller units to contribute early in the product development cycle. Though the spirit of individualism is favourable to innovation, modem technological innovation demands close cooperation among a fairly large number of individuals (Kiely, 1994). Consequently, a social system that encourages competition between one industry group and another and cooperation within a group seems quite favourable to technology development, as is evident from numerous Japanese successes in product and process improvement or what is often referred to as "incremental innovation" (Burgelmen, 1996). Yet, the contribution of Japanese industry to the development of really original products leaves much to be desired. Truly original ideas still tend to come from the USA and Western Europe. The Indian social and cultural scene differs substantially from that of Management & Change, Volume 1, Number

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Japan and the West. The idea ofthe individual never appealed to the Indian mind, the individual always being indistinguishable from and embedded in the social segment-either the family or the caste----to which he or she belonged. Neither, for that matter, was the conception of society as a distinct entity ever present in Indian tradition. That Indian civilization has been remarkably inert as regards technological innovations, is in no small measure attributable to the absence of the concept of the individual in indigenous culture. The name of not a single sculptor or architect emerges from the impressive quantities of statuary and construction works surviving from pre-modem times. Furthermore, Indian religion intensely disapproved of change, favouring the maintenance of status quo in all matters, including technology. As Weber (1958) observed: "Hinduism is characterized by a dread of the magical evil. of innovation." The caste system, which governed all manufacturing in the past, considered any deviation from traditional methods as sacrilege. Hence, the very slow pace of technological change, in the country and the persistence of ancient technologies. For example, the overwhelming majority of modem Indian farmers use a type of plough mentioned in the Rig Veda, composed around 1500 Be. The bullock cart which transports the bulk of India's farm products resembles the clay model of a vehicle found in the ruins ofMohenjo Daro, a settlement that thrived in 2500 Be. The potter's wheel, still in use, has also remained basically unchanged since that period (Piggott, 1952). In recent times, the arrival of modem technology has not had the effect of displacing older processes. Many factories continue to use equipment dating from WorId War II or earlier. The captains ofIndian industry display great reluctance to replace machinery as long as they are in working condition. The still largely non-competitive nature of the Indian marketplace--despite government measures intended for liberalizing the economy, since 1991-encourages technological stagnation. The assimilation of modem technology by Indian industry may be understood in the light of the dynamics of the caste system. Throughout the course of history, whenever Hinduism encountered a people having a different way of life, it incorporated the group in its social structure by converting the members of the group into a caste and assigning them a place in the caste hierarchy-a process which may be called compartmentalization. In a similar manner, modem Western technology has been compartmentalized; it has been assigned a place in the esteem hierarchy-albeit a superior one. As such, present-day technology does not replace or influence the Management & Change, Volume I, Number I (April, 1997)

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older processes but exists side by side with them. And government policies, aimed at encouraging small industries and cottage workshops have the effect of perpetuating backward technologies, particularly in those industrial sectors where large units are not allowed to compete. HUMAN ORIENTATION Technology can be viewed from the perspectives of the consumer and the producer. The former standpoint renders life more comfortable, more enjoyable. Most technological products, except those for military purposes, cater to that part ofthe human personality which seeks pleasure and comfort, the Freudian "id." The production aspect of technology, on the other hand, demands entirely different qualities--a substantial degree of application, hard work and sacrifice of comforts. Nevertheless, because of narrow specialization and co-ordination of different experts' knowledge, no genius-like effort is required for most technological innovations. It follows, therefore, that societies which value or approve of pleasure as well as sensual satisfactions-and also have regard for the concomitant exertions required to achieve them-will be congenial to the development of technology. Cultures that do not value pleasure advise the individual to rise above both pleasure and pain (for instance, the Hindu nirvana}--an attitude detrimental to technology. In ancient Greece and Rome, the hedonism inherent in Pagan religion persuaded most people to pursue pleasure and seek gratification of the senses-a part of which could be satisfied through physical objects. The Roman aristocracy, for instance, possessed such a taste for exotic luxuries from the East that Pliny complained of a drain of gold from the Empire. Melancholy and pessimism dominated the mood of Europeans during the Christian interregnum of the Middle Ages. Thereafter, as attitudes of resignation, piety, asceticism and preoccupation with a future declined, the pursuit of pleasure regained respectability. The growth of individualism combined with the intensifYing influence of rationalism promoted hedonistic tendencies. Since money was required to secure most pleasures, wealth-generating activities increasingly became central to life. And the Biblical opinion that it was impossible for a rich man to enter heaven ceased to carry weight. The advent of machine manufacturing reduced prices, enabling large number of people to enjoy, for the first time, a range of commodities hitherto not within their reach and available only to the wealthy. New products Management & Change, Volume

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often appeared as luxuries, but soon became necessities. At the workplace, on the other hand, the general feeling of well-being seems to have declined duting the early stages of industrialization when liberals denounced the "dark Satanic mills" that employed children along with women and men, all labouring long hours under unhygienic conditions. Not only were human relationships divested of their former informality and set in the purpose-oriented mould, the demands of productivity required work to be divided into small segments with the individual operator trained to perform his assignmenttasks well. Critics contended that industrialization caused financial considerations to become the sole criteria ofjudging everything; cold calculations of profit and loss, in particular, debased human relationships, reducing labour to a factor of production not really different from a piece of equipment. Besides, the monotony of repetitive movements alienated the operator from his work. These developments contradicted the humanistic traditions of We stem civilization. Since such criticisms contained a substantial quantity of truth, both machinery and the organization of work redesigned, durmg the subsequent periods, to suit better the psychological and physiological characteristics of human operators. Eachadvance in production technology contributed to improve working conditions and augment the general sense of well-being. The switch from steam to electrical power has this effect. Other changes with similar consequences followed. Ethical thinking kept pace with developments in industrial capitalism. The doctrine of utilitarianism formulated by Jeremy Bentham proclaimed that every person pursues his own happiness and that the principle of the "greatest happiness of the greatest number" determines the desirability of conduct (Russell, 1945). This principle agreed with the ethos of capitalism, geared to satisfy wants. In the West, the capacity ,of a product to satisfy the senses, to make life more comfortable, more pleasant assumes paramount importance (March, 1994). Hence, the emphasis on quality, aesthetic appeal and the downgrading of the cost criteria. Often, decisions regarding the selection or replacement of atechnology are not based on comparisons of price and utility, a practice that leads to the rejection of older processes possessing the advantage oflow cost. The trend of office automation supports this assertion. As in the West, product development in Japan too owes substantially to the Japanese cultural approval of sensual gratification-and perhaps more so. Japan's indigenous religion, Shinto, is basically a cheerful religion containing no concept of guilt or sin. Stressing the brighter side oflife, its myManagement & Change, Volume 1, Number 1 (April, 1997) .

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thology is devoid of stories recounting major catastrophe or the presence of fearful divinities. Even death does not receive much attention in Shinto, the rituals of which are used in marriages but not in funerals. Shintoists believe that human nature is fundamentally good. Since people are born of gods (Kami), the natural disposition of humanity cannot be anything but worthy. Left to themselves men and women will not do evil. The enjoyment of the senses is heartily approved of, and the need for external restraints on individual behaviour is denied. The fact that Japanese product designs tend to be highly consumeroriented assumes significance in this context. The term "Kansei engineering" has been coined to describe the development of technology aimed at the satisfaction of the user's desires and inclinations which are not always obvious. "Kansei engineering" stipulates that the selection of a commodity does not depend solely upon such rational criteria as prices, function, and reliability but on the extent to which the Kansei or senses of the customer are satisfied. Hence, a product must appeal not only to the reason of the buyer, but to his or her senses as well (Yamamoto, 1990). Products that offer trivial conveniences crowd the Japanese marketplace. Examples include the Kakko razor which ejects wet shaving foam from the handle at the push of a button, and a beer can with a metal strip that changes colour depending on the temperature of the liquid inside and bicycles that are custom-made to conform to the dimensions of the user's body. The process of technological change in Japan has been characterized as following a bottom-up trend (in contrast to the top-down approach typical in the West), and direct concern for the welfare ofthe human individual guiding the development of new technology. When for instance, carbon fiber, which has a tensile strength three times that of regular steel and is lighter than aluminium, first appeared, European and American firms began considering it for use in the aircraft industry. In Japan, the new material was used to make golf club shafts and fishing rods. After mass production had established quality and brought down costs, carbon fiber was applied to larger items. Similarly, large-scale integrated circuits (LSIs) were initially used in missile and space vehicles in the United States. In Japan, LSIs were first used in pocket calculators and watches. This led to big differences in production volumes and prices. With respect to satisfaction of the senses, Indian cultural values differ fundamentally from those prevalent in Japan and in the West. The idea and practices of asceticism have always found a fertile ground in the country, conforming as they do to the basic notions ofIndian civilization. Asceticism Managemenl & Change, Volume 1, Number I (April, 1997)

34 Cross-cultural

Perspectives in Technological Innovation

has as its objective the destruction of the body, or the negation of its importance, so that the spiritual nature of man may be more emphasized. Primarily, asceticism consists of the contraction of natural desires under the mandate of some higher ideal, an ideal that fundamentally contradicts the rationale of technological development. Though ascetic practices at one time or other have been common in many parts of the world, there is probably no country in which asceticism has been held in such high esteem as in India. The injunction of the sacred books and the examples of the sages have kept before the minds of people the thought that renunciation of the world with rejection of its pleasure and pursuits is the supreme good. Wandering sadhus or ascetics may be seen in any town or village in present day India. They have always been held in high esteem. In fact, according to Dumont (1970), the "world renouncer" (who may not always be a wanderer) is the only type of individual valued in Hindu society, and he is respected only to the extent he is outside the world "both exterior to and superior to society proper." To be sure, the principle of asceticism is capable of leading to great unhappiness. Being indifferent to his own pain, the ascetic tends to be indifferent to the pain of others. Pleasure is something alien to the ascetic from which he psychologically flinches. That the routines of daily existence in India are marked by considerable lack of grace, rudeness and absence of fellow feeling, in all likelihood, derives from the ascetic strain of Hinduism. Advocating the destruction of wants, ascetic values oppose the ethos of the modern industrial system oriented towards fulfillment of wants--real wants, derived wants, and those created by advertisement. Ascetic ideals underpIn the widespread incidence of poverty ih the country. It would, however, be incorrect to say that the average Indian does not desire comfort and happiness. But lacking cultural sanction, the pursuit of pleasure is associated with low esteem, and there is a sense of ambivalence about it. Affluent Indians who can indulge in the gratification provided by modern technology often suffer from a diffuse sense of guilt. Moreover, Indians in general are less inclined than people in the West or Japan to undertake pains in order to improve their material condition. The indifference of Indian manufacturers and service facilities to satisfy the needs of customers may be attributed in part to the depressed cultural regard for gratification itself, giving rise to low product quality and sloppy service throughout the economy. Consumers in the country are also less demanding than Western or Japanese buyers. Khanna (1986) who conducted a survey of popular image stereotypes of products from various Asian countries-Taiwan, S. Korea, Singapore, India, Japan and Thailand--found that IndiaManagement & Change, Volume I, Number I (April, 1997)

',I

il'..â&#x20AC;˘ ':,1~ ____~

'll;

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made commodities were associated with the "lowest ratings on critical factors like quality, creativeness, fashion or design and technology."

CONCLUSION Cross-cultural comparisons of the West, Japan and India bring into focus the values relevant to technological innovation, namely the domination of man over nature, the supremacy of reason, emphasis on individualism, and change and acceptance of human happiness as the supreme good. These convictions, congenial to the growth of technology are found in the most developed form in Western civilization; Japan possibly excels in the last value pertaining to the satisfaction of the senses. And India is not only deficient in all these beliefs but also the central tenets of Hindu culture, in varying degrees, contradict them. An examination ofthe values supporting the development of technology explain why modem machinery and process originated in the West and why firms in the USA and Western Europe continue to lead in technological innovation. The remarkable technological successes of Japan as well as the depressed performance of India in this respect are also explained. . An understanding of the values relevant to technology is likely to be helpful to managers in both the developing and affluent parts of the world. Managers and administrators in Third World nations, wishing to modernize their economies, should first analyze their own cultures and identify elements that support the growth of technology. Features congenial to machinery should be strengthened and the opposite tendencies discouraged, to a feasible extent. For enterprise managers in the West and Japan, an acquaintance with the inter-relationships of technological change with other societal parameters enables them to put their own efforts at devising new products and processes in a broader and more realistic perspective. This is so because culture affects the buying public as well as the innovators. Since a part of human behaviour springs from knowledge, a comprehensive understanding ofthe dynamics of technological change is likely to influence managerial actions and plans. At the same time, an adjustment of values to better suit the needs of technology becomes easier.

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36 Cross-cultural Perspectives in Technological Innovation

REFERENCES Altman, I and M.M. Chemers (1984) Culture and Environment Cambridge: Cambridge University Press. Amsden, A.H. (1989) Asia's Next Giant. New York: Oxford University Press. Baark, E. and A. Jamison (1986) The Technology and Culture Problematic Technology Development in China, India and Japan. London: Macmillan. Bernal, J. D. (1969) Science in History, Vo12. Harmondsworth: Penguin. Bierstedt, R. (1970) The Social Order. New York: McGraw Hill. Burckhardt, J. (1948) The Civilization of the Renaissance in Italy. translated by S.Gc. Middlemore. Oxford: Phaidon Press. Burgelman, R.A. et at. (1996) Strategic Management of Technology and Innovation, 2nd ed. Chicago: Irwin. Confucius (1893) Confucian Analects, The Great Tradition and The Doctrine of the Mean (1971) translated by J. Legge. New York: Dover. Davis, M (1976) "A Philosophy of Hindu Rank from Rural West Bengal, " 36, Journal of Asian Studies, 5. Desmond, E.W. (1995) "Multimedia: Can Japan Catch the Wave?" Feb, Time, 35 Dumont, L. (1970) HOIno Hierarchicus. Chicago: University of Chicago Press. Gerth, H. H. and C. W. Mills (eds.) (1946) From Mal; Weber: Essays in Sociology. New York: Oxford University Press. Hay, S. N. (1970) Asian ideas of East & West. Cambridge, Mass.: Harvard University Press. Kanter, R. M. (\ 983) The Change Masters: Innovation and Entrepreneurship in the American COIporation. New York: Simon and Schuster. Khanna, S. R. (1986) "Asian Companies and the Country Stereotype Paradox," 21, Columbia Journal of World Business, 28. Kiely, T. (\ 994) "Innovative Congregations, " April, Technology Review, 54. Kmetovicz, R. E. (J 992) New Product Development: Design and Analysis.' New York: John Wiley and Sons. Lathan, R. (Translated) (1950) The Travels of Marco Polo (By Marco Polo) HarmondswOlth: Penguin. March, A. (1994) "Usability: The New Dimension of Product Design," Harvard Business Review, Sept-Oct. Mumford, L. (1967) The Myth of the Machine. New York: Harcourt Brace. Murray. A. (1978) Reason and Society in the Middle Ages. Oxford: Clarendon Press. O'Dea, T.F. (1966) The Sociology o/Religion. New Jersey: Prentice Hall. Ogburn, W.F. (1964) On Culture and Social Change. Chicago: University of Chicago Press. Panikkar, K.M. (1953) Asia and Western Dominance London: George Allen and Unwin. Peters, T. (1991) "Get Innovative or Get Dead," Winter, California Management Review, 9. Piggott, S. (1952) Prehistoric India. Penguin: Harmondsworth. Pounds; N.J.G. (1974) A n Economic History of Medieval Europe. London: Longmans. Rosenberg, N. and L.E. Birdzell (1986)Howthe West Grew Rich') New York: Basic Books. Russell, B. (1945) A History of Western Philosophy. New York: Simon and Schuster. Saha, A. (1990) "Cultura! Impediments to Technology Development in India," I 0, International Journal of Sociology and Social Policy, 25. Saha, A (1994) "Culture and the Development of Technology in Japan." 16, Technology in Society,225. Saha, A. (1996) "Technological Innovation and the Values of Western Civilization," ProManagement & Change, Volume I, Number 1 (April, 1997)

Saha ceedings of the Fifth International Conference on Management of Technology,

held at

Miami. Sulbarayappa, BV (1971) "Western Science in India Till the End of the Nineteenth Century," in D.M. Bose, S.N. Sen and B. V. Sulbarayappa (eds.) A Concise Histol)' of Science in India. New Delhi: Indian National Science Academy. Weber, M. (1958) The Reiigion of India. translated by H. H. Gerth and D. Martindale. Glencoe Ill: Free Press. Wuthnow, R. et al. (1984) Cultural Analysis. Boston: Routledge and Kegan Paul. Yamamoto, K. (1990), "Customer-Oriented Managcment Policy," Top Management Fan/III . Tokyo: Asian ProductIvity OrganizatIOn, 29.

Arunoday Saha, Ph.D., is presently Professor of Operations Management at the Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003. He received his B. Tech. degree in mechanical engineering and M.Tech. and Ph.D. degrees in industrial engineering. He has twenty-three years of teaching and research expe'rience mostly in Indian universities, including as visiting faculty at the Virginia Polytechnic Institute and State University and as visiting faculty at the University of Leeds. Dr. Saha has published twenty. five papers in various international journals as well as twenty articles in other forums. His current research interests lie in the areas of productivity, cross-cultural management and management of technology.

Management & Change, Volume I, Number 1 (April, ! 997)

LABOUR-MANAGEMENT GLOBALIZATION

c. S. Venkata

RELATIONS

IN AN ERA OF

Ratnam

This paper reflects on the industrial relations implications of the geo-political and socio-economic changes in the world economy. It argues that despite notions of technological determinedness, stereotypes of industrial relations are open to question. The diverse trends in industrial relations are influenced by historical and contextual factors including industrialization strategies, national system of law and practice as well as product and labour market characteristics. It then analyzes. in Indian context, the changing roles of the principal actors in industria! relations, the growing importance of customers, the dynamics of-tripartite and bipartite consultations and summarizes key concerns in industrial relations both at macro and micro levels.

I. THE WORLD IN TRANSITION 1.

CHANGING GEO-POLmCAL

MAP

he geo-political map of the world has been changing rapidly since late 1980s. After the fall of the Berlin Wall and the convulsions in Central and Eastern Europe, very little is left of communism, that too only in Cuba and Northern China. Perhaps the same may happen to capitalism. In any case, today neither communism nor capitalism exist the way they did when Adam Smith, Schumpeter or Karl Marx wrote their famous

treatises. The far reaching changes in the geo-political set up are not without theirramifications on industrial relations. In some countries, industrial relations is on the decline as a result of changes in trade unions, collective bargaining and modem human resource policies and practices. Kaufman

,..'••••••••-="::rr"v

40 Labour-Management

,,,,r>Jln.,,

,,,,.,

Relations

(1993), and Blyton and Turnbull (1994) demonstrate such a shift in their well-researched path-breaking works in the USA and the UK respectively. In contrast, in some others, particularly the Eastern and Central Europe, which did not have a tradition of industrial relations--the way it is understood in democratic societies-industrial relations systems are emerging and taking roots. A basic concern in many countries is that public policies and labour institutions have not adjusted adequately to fundamental changes which have been occurring in the structure and nature of employment (ILO, 1994). This is not a recent phenomena, though. As Schregle (1981) observed, due to several difficulties, in India the legal system of industrial relations remained the same as it was when it became independent in 1947, even though significant reforms were called for in several areas. More recently, Kuruvilla and Venkata Ratnam (1996) found a relationship between industrialization strategies and industrial relations policies. They contrasted the export-oriented industrialization strategies (EOI) in South-east Asia with the importsubstitution policies (lSI) in South Asia. The government's protectionist strategy coexists with industrial relations pluralism, relative inefficiency and high labour costs. In the first stage of EOI, the emphasis shifts to achieving competitiveness in export markets through measures to ensure a compliant labour movement and favourable labour cost structures for inward investors. However, in the second stage, dOWll'Yardpressure on labour costs and repression of trade unions gives way to a reduced role for the state through decentralization; education and training policjes raising the skills levels of. the workforce; and the search for flexible, productive, high performance workplaces. Usually erosion oflabour standards was a transitory phenomenon in South-east Asia and East Asia during the early stage of industrial development. Improvements in labour rights have normally followed industrialization and democratization. There are several instances where even non-union organizations developed progressive human resource policies. 2.

CONVERGENCE TO l\-flXED ECONOMIES

Economic systems are converging and all countries, without exception, are becoming mixed economies. The movement towards market economy is becoming pervasive. In 1978, two-third of the world's labour force lived in countries largely insulated from international markets by prohibitive trade barriers and capital controls, or by planned trade. By the year 2000, fewer Management & Change. Volume I, Number I (April, 1997)

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Vcnkata Ratnam

than 10 percent of workers would live in countries that are disconnected from world markets (World Bank, 1995). Whether such a convergence weakens the role of ideological barriers in industrial relations, and paves way for transforming political unions into business unions and industrial relations into cooperative industrial relations, remains to be seen. Given the limited time-frame and pendulum-like shifts in the fortunes of parties with diametrically-opposite ideological backgrOlmd in several countries. the available evidence is inadequate to permit any broad conclusions. 3.

DEMOCRATIZATION

The surge of democracy, rise in literacy levels, revolutionary developments in micro-electronics, satellite and telecommunication technologies. the integration of financial and product markets and the emergence of new generation of workers with higher expectations to work in high performance organizations in an increasingly competitive global economy are some of the characteristics which are fast becoming ul11versa1.Economic development cannot be explained as a uniform phenomenon. The Asian experience indicates that economic development in the newly industrialized countries was subject to different strategies at different stages and with different outcomes. Unlike in the past however, today there is a greater concern that globalization and resulting changes in macro and micro level mstitutions and organizations should not undermine human rights at work and in the wider society. In other words, the newly industrializing countries should take into account the imperative requirements of a functional democracy as an important ingredient ofthe industrial relation system, even though in the past, it may have been relegated to a back seat or offered as an excuse for slow and low development. These concerns were articulated at the lOth World Congress of International Industrial Relations Association (IIRA), which devoted a full session for discussion on Democracy, Development. and Industrial Relations (Towers, ]996). Today, more than ever before, there IS a growing recognition of the basic human rights and freedoms including freedom of association and collective bargaining. Concern for international labour standards is mani fest in the fonn of social charters and social clauses, the latter seeking to link international trade with compliance to international labour standards. 4.

OWNERSHIP CHANGES

In the 1970s, the political structure of industrial relations has changed with Mallagel1lelll

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42 Labour-Management Relations widespread cases of nationalization particularly in the developing countries. In the 1980s and 1990s, the pendulum has been swinging backwards with denationalization. Along with denationalization, deregulation, decentralization and devolution have become the recurrent themes in most parts of the world. The arguments for limiting and redefining the role of the state have also been gaining currency. Widespread changes in ownership such as the ones taking place in Eastern and Central Europe, have important implications for trade unions and collective bargaining. Several studies point to industrial relations institutions taking contrasting forms (Egorov, 1996; Bamber and Peschanski, 1996; Yenkata Ratnam, 1991). Some of these studies point to the ascendancy in the role of employers' and workers' organizations as the state gradually curtail~ its own role. The need for establishing effective labour relations machinery at the preliminary stage of economic transformation, along with a psychological transformation in the parties' attitude to collective bargaining, was highlighted by Egorov (1996). 5.

STRUCTURAL ADJUSTMENT PRESSURES

In the 1970s, the oil price shocks forced industrialized market economies to restructure themselves and their enterprises. In the 1980s and the 1990s, exchange, debt and deficit crises and widespread inflation and unemployment are forcing most developing countries and economies in transition to transform their economies and enterprises. Structural changes led in several countries to downsizing, decentralized firm level collective bargaining, trade-offs between wages and jobs, and sacrifice of accumulated rights of workers and unions and new human resources policies where industrial relations have a non-union focus (ILO, 1984; Yenkata Ratnam, 1996). Externally~driven transformation is leading towards new and convergent pattern of industrial relations (Aglietta, 1979; Piore and Sabel, 1984; and Kochan et al., 1986). The Taylorist and Fordist systems of work organization is giving way to neo-Taylorist, Post-Fordist, Tayotoism. Piore and Sable (1984) point to a radical disjuncture between a "mass-production economy" and the one based on the principle of flexible specialization, the former signi tying the era of Taylor and Ford and the latter heralding the era ofTayotoism. Tayotoism emphasizes lean production and flexible specialization. The changes in workplace are brought out largely through new responses in collective bargaining that marked assertive, if not aggressive, employers seeking to restore some of the "lost" managerial prerogatives (ILO, 1984; Management & Change. Volume

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Venkata Ratnam

Yenkata Ratnam, 1996). It is not surprising though, that already there IS disenchantment with Tayotoism, and analysts concerned about its weaknesses are exploring "beyond lean production"(IILS, 1993). Unless otherwise stated, most studies being country-specific, the conclusions are based on ethno-centric preoccupations and predilections. Bronstelll (1995) reviewed the changes in the industrial relations system in Latin America since the 1980s. He noted that Latin America has undergone far-reaching changes over the past 10 to 15 years, although not all these changes were along the same lines. On the one hand, Bronstein found an atmosphere of greater respect for human rights, and as a result, new and wider avenues have opened up to freedom of association and autonomous collective bargaining. On the other hand, he also underlined that profound changes in the economic policies had affected the regulatory framework of individual labour relations, which led to other forms of tension. He also pointed out the decline in industrial conflict, the blurring of the ideological divide, lowering of the level of "guaranteeism" of legislation and the advances in social dialogue and tripartite consultation. But, some of these, in Bronstein's view, are the product of an isolated phase from the current economic environment and amount to an interlude that may end any time. Thus, a return to the past is not ruled out. 6.

NEW HUMAN RESOURCE POLICIES

There is a global concern for and about the new human resource policIes and practices and their impact on industrial relations. The broad trends towards decline in manufacturing employment, low-union density in new "sun rise" sectors, decentralized collective bargaining, and direct communications with and involvement of workers can be seen as efforts for political restructuring of industrial relations. Kochan, et al. (1986) identified a trend towards industrial relations without collective bargaining. This is not limited to North America. In Australia and New Zealand, there is concern aboul individualization of contracts which is nullifying the legislative measures concerning pay equity, among others. Blyton and Turnbull (1994) also demonstrate that in the.UK too "the determination of pay and condilions ...is nol solely achieved through collective bargaining."

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44 Labour-Management Relations

DIVERSE TRENDS IN LABOUR-MA~AGEMENT

RELATIONS

Can one visualize a single model of industrial relations which is apt for Burma, Nepal, India, China, Japan and Singapore in Asia in the foreseeable future? Definitely not. Generalizations are misleading, but classifications are at worst problematic, but, as Schregle (1981: 67) reassures, can be "useful for anyone who wants to come to grips with comparative industrial relations." Schregle (1981: 63-64) argues: without going into details, there can be no disagreement that industrial relations in the United States and in Canada (more precisely in its English-speaking provinces) are very different, indeed, from those of Western Europe, in their historical development and concepts, in their basic characteristics, and in their value systems. But even within Europe, the divergence between different countries is enormous. There are worlds between, for instance, the industrial relations system of Italy and that of NonÂĽay, or between that of the Federal Republic of Germany and that of the United Kingdom, or between those of France and Austria .... Suffice it to remind ourselves that even the member countries ofthe European Community have up to now been unable to develop even in a very limited or general way something that could be called an EEC approach to labour relations, in spite of the "harmonization" efforts of the Commission of the EEC in the labour field.

Schregle's observations are as much relevant today as at the time he first made them. Indeed, Hyman (1994) observed more recently that stereotypes of industrial relations in Western Europe are open to challenge: Danes and Norwegians commonly object to being treated as mere variants of the Swedes. Austrians emphasize the contrasts between their system and the German one; the French and Italians may be more conscious of their mutual differences than their similarities. Inherent in such controversies are crucial questions of the value and limitations of cross-national generalization in industrial relations.

In Asian context, likewise, it is difficult to think of one model of industrial relations. Kuruvilla and Venkata Ratnam (1995) identity the following two primary strategies which were adopted by the state in South and South East Asia as circumstances changed: (a) the import substitution industrializatiDn (lSI) strategy which focused on low-technology consumer and industrial goods for local consumption, and subsequently focused on heavy industries; and, (b) the export-oriented industrialization (EO!) strategy which focused on attracting foreign investment into light industry for export, and subsequently on upgrading technology to achieve higher value-added production. The latter required skills development. Another plausible broad Management & Change, Volume I, Number 1 (April, 1997)

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categorization could be three-fold as following: the South Asian contentIous (adversarial), the East Asian consensual (particularly Japan, not Korea or Taiwan), and the South-east Asian compliance models. Yet, if one were to make an in-depth analysis, it is possible to find not only similarities but also glaring contrasts between Singapore and Hong Kong, Singapore and Malaysia, even as Indonesia and Philippines provide conspicuous contrasts on either ends of the continuum of unilateralism and pluralism.Within IndIa itself, if one looks at Bihar, unions have a strong presence in the publJc sector but not in the private sector, except in Jamshedpur. The approach of trade unions to productivity improvement in private sector In West Bengal. for instance, is not the same as it is towards the public sector undertakings owned and controlled by the Central Government, and the differences among the parties in power at the state and central levels contribute in no small measure to such diverse approaches. It is important to consIder if whenever there is a pressure for change, there is a genera! tendency to tryout approaches (concerning trade unions, collective bargaining, tripartlsm/ bipartism, etc.) different from the ones currently in vogue in a partIcular context, irrespective of whether they are going out of fashion in settings where they once worked. 8.

NATIONAL SYSTEMS OF INDUSTRIAL RELATIONS

National systems of industrial relations influence and are intluenced by the manner in which employers (whether the predominant form of capital IS state, proprietary, managerial or collective) and workers are organized (craft, industry or enterprise, labour institutions, legal framework. stage of development, culture, history, etc.). Within a nation, one sees diversity across different provinces or states depending upon the relative need for investment and job creatIOn. Diversity is also discerned across industries or sectors within a nation depending on whether they are labour-intensive or capital-intensive and whether they operate in protected or competitive markets. Within an industry, at the enterprise/firm/plant level, diversity can be discerned depending upon the influence of cyclical forces (birth, growth, maturity and decline). Locke (1992) argues that the strategic choices oflabour an~ management lead to outcomes that challenge the concept of national industrial relations. His explanation is that the diversity within industrial relations systems will, in certain industries or sectors, be greater than the diversity across systems. Smith (1994) quotes Tolliday and Zeitlin (1991: 277) to assert that national Management & Change, Volume 1, Number 1 (April,

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46 Labour-Management

,__,."~e,__,"._ •• ft_ •••

,._._ •••••• ", •••••••••••

Relations

models oflabourregulation "should be understood not as homeostatic and self-producing systems of action but as complex and contingent historical constructions whose unity and coherence always remains open empirical question. "(sic) Thus, it can be said that wider the unit of analysis of industrial relations systems and practices, greater the degree of abstraction. At each level of analysis- international, national, regional, sectoral, enterprise-the subunit differences become pronounced. Industrial relations are not only culture-specific, but vary widely on account of historical, institutional, technological and other differences.

II. EMERGING TRENDS 1.

MYRIAD PARADOXES AND TENSIONS

Globalization seems to co-exist with growing regionalization: the European Union, the North American Free Trade Agreement, the ASEAN Free Trade Association, and the more recent South Asian Free Trade Association coexist with the signing of the agreement on WorId Trade Organization at Marakash. Doubts persist on the tensions between free trade and fair trade, and the paradox continues to concern how different nations can cope with managed trade. Nations must come to terms with their own sovereignty vis-a-vis autonomy of the ac~ors within an economic system, and deal with the dilemmas that arise in addressing themselves to the twin goals of standardization and flexibility and the pursuit of efficiency and equity. Communism has failed and capitalism in its original form as it existed in earlier centuries has disappeared. We have got used to both state failures and market failures. Therefore, we continue to search for alternative models and ultimately settle down for a middle path that every one seems to be advocating for countries like India. Against such background, one key question is: can industrial relations practitioners ensure that the human resource function is not subordinate to uncontrolled capitalism by developing a standard relating that function to a bipartite or tripartite code of conduct and behaviour? 2.

THE INFLUENCE OF CONTEXTUAL FACTORS AND CRITICAL HISTORICAL EVENTS

Trends in industrial relations are influenced by history, culture and other Management & Change, Volume I, Number I (April, 1997)

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contextual factors which include not only the stage (predominantly agricultural, industrIal, services/high-tech economies), nature (inward or outward looking strategies) and phase (in business cycle) of development. but also values, philosophy, institutions, and leadership. As Fong (1990) argues: distinctive economic features did not develop (in East Asia, for instance) in a vacuum, but are linked to a set of equally distinctive social and cultural features including a this-worldly, culturally homogenous population imbued with an achievement-oriented work ethic, a high degree of respect for education and material success; a strong sense of group and family solidarity; a long period of political stability and social harmony; and effective institutions run on meritocratic principles.

Fong, however, hastens to add that, "The causal nature of the link between economic success and socio-economic features is far from clear." Critical historical events also influence subsequent developments (Collier and Collier, 1991). The developments in most dynamic Asian countries bear this out. The same can be said about the East and Central European countries in transition. If in some dynamic Asian countries it resulted in preemptive state subordination of trade unions (Deyo, 1989) in the latter it IS resulting in liberation of trade unions from state subordination. Kochan (1994) foresees an increased importance of the role of enterprise-specific strategies and decisions, thereby requiring decentralization of industrial relations activity in those countries with traditions of national or industry-wide collective, All this points to the need for better understanding of the complexity of the environment (social/economic; microlinter-organizational; nationallinternational; formallinformal) in which, the practice of industrial relations takes place (Thomson and Warner, 1981: 8). From recent studies of changing employment relations in various countries by teams of national scholars in Asia (Verma, Kochan, and Lansbury, 1995) and OECD countries (Locke, Kochan and Piore, 1995) several general patterns and conclusions emerged. Most countries are experiencing ~c:.epressures to adapt their traditional practices in response to increased â&#x20AC;˘.;t;rm and rapid changes in technology. The general transfor- ., however, without intra- and inter-country variations . 0 S< ,and the degree to which different industrial relations . ~\~ ~';)~\~.ble to adapt through incremental adjustments rather _t--\.\~' rt' o'\iansformations in their systems. There is growing thrust ,,').';)~o.ridustrialrelations activities, and decentralized systems and ~ '" ,. ~~ o0-c)l'industria1relations. Workplace changes reflect a growing con).~<[~xibility and competitiveness. As a result, skills develo),ment and .lgent compensation are gaining importance with attendant effects in

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increasing wage inequities. Trade unions are also experiencing major challenges in all countries as the pace of restructuring intensifies and the workforce becomes more diverse, and as the average size of enterprise declines. They are facing difficulties in maintaining membership in traditional industries and organizing unions in new industries. Trade union difficulties are not only restricted to a steep decline in membership, but also in resisting employer initiatives to wrest job control. Worker representation and worker participation in decision making is under stress, with focus shifting in several cases from union representation to direct participation and worker empowerment. 3.

CHANGING ROLES OF THE PRINCIPAL ACTORS

Government

Government's attitude to business and industry in some countries like Japan and Germany is one of partnership to promote national economy. In others, for political reasons, government views private business with suspicion. In the context of the current emphasis on greater role for private sector, unless the attitude of government towards private business is positive, little could be accomplished through changes in other spheres which will, then, be no more than cosmetic. The government's role is changing. The strengthening of the forces of deregulation, denationalization, and disinvestment is causing the state to gradually withdraw itselffrom some social and economic sectors. Governments are increasingly under pressure to become facilitators than regulators and controllers. Legal reform is under way in many countries and overdue in several others. Madrid's (l994: 287) analysis of the situation in Argentina should provide the much needed caution for the state everywhere. The increase in the powers of employers is "giving a market authoritarian character to the employment relationship. As a result, the principles law have faced a crisis with declining protection affor the disregard, in fact or in law, of the guiding principl Rising levels of unemployment, under-employment, in a ing standards, increasing disparities in incomes, and growing imbalances the development of different regions within a state are influencing some governments to adopt policies aimed at wooing domestic and foreign investment but willy-nilly nullifying accumulated social benefits and rights. Ex. port-oriented production activities and zones where such firms are located Management & Change, Volume I, Number 1 (April, 1997)

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are being exempted by governments in several developing countries from the purview of certain labour laws and trade union and worker rights. Bangladesh, for instance, has been openly advertising about it. This is a matter of great concern for the advocates of labour rights. In Sri Lanka, change in government escalated expectations about the reversal of such regressive policies which led to about 80 strikes in the last quarter of 1994 in the EPZ near Colombo airport alone. In the context of liberalization and globalization, the differences in competition within and across national borders is supposed to vanish, in which case, the relevance of separate EPZs and 100 percent export-oriented units and special conditions for labour standards in such zones/enterprises will and should disappear. In India, labour being in the Concurrent List of the Constitution, some states, where investment is not forthcoming in adequate measure and where job losses are mounting, public policy measures targeted labour market reforms that are particularly harsh on workers and unions. The industrial and labour policy changes in Kerala, the easing of requirements for labour inspection in, Rajasthan, the relatively higher incidence of approvals for closure, retrenchments, etc., in Tamil Nadu (Govt.ofIndia, 1996a) and the cancellation of the registration of a few thousand unions in West Bengal for non-submission of statutory returns to the Registrar of Trade Unions (Sen, 1996) in good time illustrate the changes at state level in India. The central government is also trying to usurp more power from the states by seeking exclusive control over industrial relations matters in regard to multinational corporations and contract labour in the Central public sector and introducing a proposal for a national minimum wage (Govt. ofIndia, 1996b ). Employers

Drawing on the works ofLazonick (1991), Taira (1994) explains: The comparative history of business organization and human resource utilization suggests a linear and upward evolution of capitalism: from England's proprietary capitalism in which an individual capitalist owned a finn, to America's and Germany's managerial capitalism in which numerous individuals subscribed to the capital of a firm managed by professional managers, to Japan's collective capitalism in which control of the firm is democratized and in which workers also take on some managerial functions and assume risks, augmenting the managerial resources of the firm .... Organizational and human resource efficiencies, as well as, scale of organization increase along this evolutionary .path. Firms under managerial capitalism are larger and more efficient than those Management & Change, Volume 1, Number

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50 Labour-Management Relations under proprietary capitalism. Likewise, firms under collective capitalism are larger and more efficient than those under managerial capitalism. The scope of inter-firm coordination of economic activities under collective capitalism is larger than under any other type of capitalism, because of alliances among frrms ....To sum up, managerial capitalism overtakes proprietary capitalism, and collective capitalism overtakes managerial capitalism.

Though in several countries significant sections of employers in the organized private sector have welcomed structural changes, they argue that they should be achieved through policies that encourage local industry to expand and grow. Encouragement to multinationals, easing of restrictions on expatriate employment and ownership of the means of production and other resources bring into the picture the ghost of coloniaJism. Also, employers interests vary depending on whether they represent foreign or domestic interests, large- or small-sized, export- or import-oriented businesses, etc. (Venkata Ratnam, 1994). Some surveys reveal that market reform policies lead to improved business climate and performance. However, the opposite is equally true. In Nigeria, one cement plant incurred substantial foreign debt in the late 1970s in order to finance expansion, but after devaluation the local cost of this debt rose five-fold (ILO, 1984). In India, when liberalization and globalization measures were initiated in parallel, some domestic companies found that their foreign debt on capital investment multiplied overnight due to devaluation, fresh capital for long-term capital and working capital needs could only be borrowed in India at much higher interest rates than their competitors from overseas, and imported materials and components too became costlier. As a result, domestic entrepreneurs had a 30 to 50 percent strategic cost disadvantage in some firms/productions. Also, countries which are in dire need of foreign investment offer incentives that are attractive to foreign investors but considered detrimental to the interests of domestic investors (Venkata Ratnam, 1994). Privatization of Central and East European economies resulted in the emergence of employers as a distinct interest group, separate from the state (Egorov, 1995). For many decades in Central and Eastern European countries, no separate employer function was officially recognized till 1989: since everybody was supposedly united in the construction of socialism. Industrial relations, taken for granted in pluralistic societies, did not exist. The prevailing ideology made no allowance for any possible conflict of interests. Trade unions werbe anything but independent and were as a rule used to organize and administer social services and run personnel departments in the state enterprises. Now employers' organizations are emerging in these countries Management & Change. Volume I, Number 1 (April, 1997)

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The challenges before employers organizations throughout the world are many. The changes in the system of government and economic management, with emphasis on pluralism and economic liberalization, has thrust employers and their organizations into the centrestage of economic development debate and action. The role of the private sector as an engine of development has gained credibility. Recognition of this is one thing, but for the government to divest themselves of some of the tools of power will take time. The struggle for true partnership in development will notbe easy (ILO, 1994b: 61). Trade Unions

Over the years, the labour movement is changing from craft unionism to industrial unionism to enterprise unionism. Taira (1994) argues that, "One may graft stages of production technology and the labour movement on the Lazonick model of capitalist evolution." Production technology has changed from craft production, to mass production, to lean production, roughly covarying with proprietary, managerial, and collective capitalism. Koji further argues: For lean production, workplace innovations are largely firm-specific and often carefully guarded as intellectual property. Productivity and gain-sharing are maximized when employees put in long years of service and get involved in continuous Kaizen. To ensure employment security and improve terms of employment, the union is just as much concerned about the conditions of the firm as management. The union then becomes increasingly localized and autonomous.

The ultimate localization of a union is an autonomous enterprise union. Enterprise unionism is one of the four pillars of industrial relations system in Japan. The trend towards enterprise unionism is growing in the US too (Weiler, 1990). At one time bringing together workers across an entire industrial sector was considered essential to take wages out of competition and ensure equitable distribution of wealth. But, over the years, in several countries enterprise-based unionism is becoming the predominant form of union orgamzation. Of course, enterprise-based unions do not exist in isolation and still they are, in several cases, federated across sectors or industries and further, at a different level, into national centres. Union membership is declining in traditional industries in several developing and developed countries. Union organization is becoming difficult in new industries. The ILO observes: Management & Change, Volume 1, Number

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new industries. The ILO observes: In the countries that have changed to democracy and are moving towards the market economy, the newly constituted trade unions are coming up against all manner of constraints, their difficulties aggravated by an excessive fragmentation which is scarcely conducive to that of unity of expression and participation so indispensable to these organizations if they aspire to play an effective part in the consolidation of trade union structures and policies and in the genuine participation in their economic and social life (ILO, 1992: 54-55).

Since the 1980s, as in the United States (Strauss, et al. 1991), in Western Europe (Hyman, 1994) as well, unions have been on the defensive. In Japan too, union density declined from 45.3 percent in 1947 to 24.2 percent in 1993 (Tsuru, 1994). Tsuru suggests that the shifts in employment patterns and the disinterest of non-union workers in unionization are the major determinants of decline in union density. The explanations for low or declining union density vary across countries even within Asia (Frenkel, 1993; Verma et aI., 1995; Venkata Ratnam, et al., 1995, ICFTU-APRO, 1995). Revolutionary change in technology is shifting locus of control away from blue collar to white collar workers and managers and the dramatic decline in employment intensity in many sectors of manufacturing is not only eroding the traditional base of the unions but also destabilizing the traditional trade union structures. Standing and Sziraczi (1992) are certain that the overall rate of unionization will decline, particularly as unions find it hard to become established in the type of small-scale firms that are emerging. Organizing the unorganized in the small and tiny sectors will indeed be a major challenge for trade unions in the years ahead. Frenkel's (1993) analysis of factors affecting trade union characteristics in nine countries in Asia-Pacific region tests several hypotheses and theoretical approaches. He portends little change in countries which follow state corporatist policies (e.g. China and Singapore), moderate change in countries which follow state exclusionary policies (Thailand, Malaysia and Hong Kong) and major changes where state collaborativism is nurtured with autonomous market bargained corporatism (New Zealand). The exceptions to his categorization, he notes, are Japan and Australia which, though followed state corporatist and state collaborative policies, may both see moderate change. In India, trade unions may be on the decline in the old industries, and difficult to organize in the new high-tech industries; but the vast untapped informal sector that accounts for 90 percent of the main workers as per 1991 Census holds much promise for the resurgence of trade union movement, should it like to take up this formidable task of organizing the labour . Management & Change, Volume I, Number I (April, 1997)

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force in the informal sector. 4.

NEW ACTORS ON THE HORIZON

Traditionally, it was viewed that all aspects relating to industrial relations are the subject matter for discussion between organizations of employers and workers with (tripartism) or without (bipartism) the involvement of government. But, gradually the consumer and the public are beginning to play an increasingly more decisive role. Also, where the principal social partners are shunning away from addressing themselves to real issues concerning, for instance, child labour, gender issues, unorganized labour, environment. occupational safety, etc., non-governmental organizations and other public interest groups are seeking to step in and fill the vacuum effectively. Where trade union leaders are unable, reluctant or indifferent, social groups and public interest groups are taking up the neglected causes. Pressure 1S building up from all sides for public policy to pay attention to the hitherto neglected sectors and s.ections of society. Information technology and media are also playing a much greater role in bringing into sharp focus the otherwise neglected or suppressed areas. 5.

TRIPARTISM

In several countries with dual economies, tripartism has become the exclusive club of a vocal minority in the formal sector, excluding over 60 percent to 90 percent of those in the informal sector. In periods of major economic pressures, countries with no tradition of tripartite agreements are taking recourse to tripartism and those with tripartite traditions are taking recourse increasingly to bipartism. It appears that we are passing through a period "where several environmental pressures increase the probability that the pattern of relationship among the actors will be re-assessed and modified in fundamental ways"(Kochan, 1983). Tripartism is increasingly under strain, particularly in several cases where it thrived once on the initiative and patronage of the state and where the state is now slowly withdrawing itself from certain sectors of the economy. Freeman (1992) argues that there is not enough evidence of tripartite social pacts having contributed substantively to social and economic development. One sees a trend whereby two of the three major social partners ~lign themselves to achieve something "thatboth feel is collectively desirable. For instance, since 1983, eight versions of Social Accord were reached in Australia without involving the employers. More recently, the Swedish Management & Change, Volume

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54 Labour-Management Relations employers pulled themselves out from tripartite fora. In several economies in transition both workers' and employers' organizations have found themselves in afait accompli situation as the governments first took decisions and later sought to Involve both workers' and.employers' organizations in implementation.The World Bank (1995), while paying attention to workers' concerns makes the case for company unionism and strives to rule out any role for them in the national economic policy formulation. 6.

COOPERATIVE

COILECTIVE

BARGAINING

Collective bargaining occurs at various levels: plant/firm, industry, industrycum-region or at national level. In several countries, the shift from centralized bargaining to decentralized enterprise level bargaining seems to be pervasive and is affected by and affecting some of the changes in union organization described earlier. In the low-income countries where less than 15 percent of the workforce is engaged in formal sector, collective bargaining barely covers two to three percent of the workforce. In the industrialized countries, the weakening of unions, the new technologies and the new human resource policies, as mentioned earlier, seem to cause a shift from collective bargaining to individualized bargaining. At another level, Galbraith (1995: 262-3) envisages a change in the terms of class struggle, when he argues: At one time there was the all-embracing and continuing struggle between capital and labor, employers 'and the working masses. Democracy was a thin disguise for this conflict; political voice was on one side or the other, and most frequently, one cannot doubt, on the side of the capitalists. Unacknowledged but ever present and accepted by all, were the bearded face and long arm of Karl Marx. Capital and labour, capital versus labour; what else is there? ....Now no longer. The capitalist has been swept into the great corporate bureaucracy. International competition has weakened what once were the evident powers of monopoly and oligopoly. Where once in the United States, Canada, Britain and other of the older industrial countries there was fear of corporate power, there is now deep concern for corporate incompetence and weakness. This has greatly changed the terms of what was once the class struggle.

Indeed, there is worry about employer survival and, often, a financial commitment by labour thereto. The class struggle may soon become a pale ghost of its past with workers and unions agreeing to a variety of trade-offs between wages and jobs, and cuts or freezes in their wages, benefits and even basic worker/trade union rights to save companies from liquidation and preserve threatened jobs (ILO, 1985; Venkata Ratnam, 1991). Management & Change, Volume 1, Number 1 (April, 1997)

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The suggested trade-offs may be considered suicide pacts and hence, trade unions may find them unacceptable. However, there is ample evidence to suggest that ifthere is an option, with or without opposition from trade unions, every opportunity is to be availed to avert/minimize job losses and other trade-offs that could adversely affect the interests of the employed. But when it is imperative, particularly in companies in crisis than in . growing and profitable companies, adjustment pressures for survival at enterprise levels are leading to greater involvement oflocal unions and consequently, local union leaders acquiring power at the expense of national union leadership. What Fashoyin (1990) wrote about the developments in Nigeria is applicable to other countries in Asia like, for instance, India (Edgren, 1990; Venkata Ratnam, 1991): There is a discernible trend towards greater cooperation and col1aboration between union and management in their efforts to deal decisively and realistically with the employment consequences of the recession. Management involves opinions and suggestions from unions and workers, and their leaders are allowed access to company data which traditional1y were exclusive to the management. Also, unions have gone out of their way to solve problems traditional1y regarded as the responsibility of management. The current level of cooperation between unions and management (cooperation which has developed for the most part outside the established consultative machinery) is no doubt a transient phase, not destined to lead to an end to adversarial relations. On the other hand, the introduction of fundamental economic restructuring wil1 emphasize the competitiveness of industry through deregulation and privatization and thus increase the need for labour-management cooperation to improve the efficiency of enterprises. In the final analysis, the , question then seems to revolve around the pace of economic recovery and growth and the genuineness of both parties' commitment to security of employment as ajoint union-management objective. 7.

INCREASING DIVERSITY AND TIlE RISE OF ANEW GENERATION OF WORKFORCE

Workforce diversity is increasing. In the industrialized West European and North American countries, industrial worker typically used to be a white male. That is not so any longer. In North America, soon the proportion of white males in the workforce would be less than 20 percent and the share of women is likely to reach 50 percent. Globalization is easing earlier restrictions on expatriate employment. The progressive decline in employment intensity in manufacturing in the wake of use of micro-chip based technologies is resulting in greater Management & Change. Volume I, Number J (April, 1997)

S6 Labour-Management Relations emphasis on skills development. No longer cheap labour provides competitive edge. Sharing information, shedding power at the shop floor level onwards and distributing profits and gains are becoming a necessity, not a choice. The new generation knowledge workers who must use their brain than brawn and mind than muscle can show commitment and exercise initiative only when the management works through consensual processes than through direction and control. Direct two-way communication, proper grievance redressal mechanisms, systems for sharing and empowerment are becoming the trend than the exception, particularly in organizations which have been able to adjust themselves to changing scenario and cope with the rapid pace of myriad changes and resulting challenges. III.

KEY ISSUES IN INDUSTRIAL RELATIONS

MACRO LEVEL 1.

Labour LawlLabour Market Reform

At the heart of the current industrial relations debates in most countries is the concern over the imposition of macro economic policies that surely have a bearing on social and labour aspects as well. In many countries, as a result of structural changes, labour reforms led to a reduction in guarantees, including job security, minimum wages, working conditions and social security provisions. In India, legal reform is stymied for the last half a century due to tender-minded government, politicized polarization among social partners and atrophied tripartism. For far too long many committees and commissions have debated on the subject of legal reform in India. Legislative initiatives in the sphere oflabour-management relations are woefully inadequate if the intention is to promote harmonious industrial relations. Instead of acting on, at least, the Ramanujam Committee recommendations, and the pioneering work of the National Labour Law Association (NLLA) in drafting a labour code (NLLA, 1994), we have constituted yet another committee to consider comprehensive labour law reforms afresh. It is unwise to expect legal reforms on social and labour matters to address squarely to issues of globalization and competitiveness in countries like India because of huge and complex problems of poverty, unemployment and state inaction in the field of social security. Therefore, it is appropriate that without further waste of time barking up the wrong tree, employers and unions collectively strive to promote sound human resource Management & Change. Volume I, Number I (April, 1997)

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interests. The macroeconomic policies and regulations concerning minimum wages, job security and social security have been the subject of hot debate with the World Bank coming heavily against them till recently and the ILO taking an opposite view. The World Bank feels that the above regulations tend to raise not only welfare but also the cost of labour in the formal sector and; result in reduction in the demand for labour (World Bank, 1990: 63). The ILO, on the other hand, considers that, "Minimum wages have an important role to play in protecting low income groups ....structura1 adjustment also calls for a sound industrial relations system and a commitment to tripartite dialogue .... Over the long run, suppression of free industrial relations jeopardizesprospects for economic development (ILO, 1991b: 5).The 1980s highlighted ....the need to regulate the labour market (ILO, 1991a: 65)." Freeman (1992) presents an exhaustive, though somewhat selective. assessment of the contrasting views of the World Bank and the ILO on the value of institutional interventions in developing country labour markets in so far as they relate to government regulation of wages, mandated contributions to social funds, job security and collective bargaimng. The World Bank. he argues, treats them as causing distortions while the economists in the ILO stress the potential benefits of such interventions. Freeman argues that there is little support for the notion that interventions are major impediments to resource allocation, structural adjustment, or stabilization programmes, although in some cases they have sizable costs. Freeman also argues, interestingly, that there is little evidence on the value of social pacts and related consultative modes of adjustment favoured by the ILO. Based on the calculation of standard deviations of log earnings among manufacturing industries using data from the ILO Yearbook of Labour Statistics (ILO, 1991c), Freeman examines the trends in interventionist and non-interventionist economies and observes that interventions reduce rather than increase wage differentials in the industrial sector. As for minimum wages, he argues that many countries set minimum wages too low or are too lax in enforcing the law for the regulation to have much effect. Freeman also quotes the experience of continental European countries where job guarantees resulted in smaller job losses in the declining steel industry than in the laissez-faire UK. 2.

Unemployment and Poverty

In modem welfare states, job creation is seen as a responsibility of the Management & Change. Volume

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58 Labour-Management Relations In modem welfare states, job creation is seen as a responsibility of the state. In several countries, it is also seen as a responsibility of employers. Employers, however, seem to differ in their perception on whether job creation is incidental to or the raison d 'etre for all economic activities. Unemployment is seen in some countries more as a political rather than socio-economic problem. Thereafter, in such countries job creation-indeed, right (right, not duty) to work-becomes a major element of the election manifesto, which, when unfulfilled-as is generally the case in several countries-heightens cynical frustration and loss of credibility in government. The World Bank (1995) argues that it is the demand for labour, not the supply of it, which makes the difference for job and wage growth. Improving real wages of employees, profits of enterprises, real worth for consumers' money and sustainable growth should guide public policies. In matters such as job search, job skills training, placement and outplacement, tripartite initiatives, including the neighbourhood communities at local enterprise level are more likely to produce substantial and substantive results. Active labour market policies including vocational and skills training is better planned and implemented at local level. This seems to be the experience of Japan and Norway. In the wake of California rights, in early 1990s, the Clinton administration promoted the idea of inner-city jobs campaign to minimize social unrest. It does not mean that social dialogue at the national level is futile. The claimed success of the Social Accord in Australia in creating more jobs than what was targetted during the period of Mark VII of the Accord, demonstrate the value of such cooperation even ifit were among only two of the three social partners, in this case, between the union and the government. 3.

Quest for an Egalitarian Society

Today, in modem welfare states, social justice must be an integral part of all developmental planning. Growth first and justice later approaches are as contentious as, "chicken or egg, which came first?" Trickle-down theories are treated as trickery when people do not experience trickle-down, even after decades, whatever be the reasons. Extortions by political bosses to "sacrifice today for a better tomorrow" will fall on deaf ears in societies where the rich continue to get richer and the poor poorer, with the passage of time~_The Philadelphia declaration, "Poverty anywhere is a danger to prosperitY everywhere" has, in most countries, remained an empty rhetoric. Management & Change, Volume I, Number I (April, 1997)

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The stark reality is that labour policy often fails to protect the vulnerable. Although 90 percent of the developing countries have some form of social security system, at best it covers only workers in the formal sector: just 15 percent ofthe labour force in low-income countries, 30 percent in middleincome ones (World Bank, 1995). Every society should strive to enable its entire population share the gains of economic changes that by now have become not only continuous but also rapid. As Reich (1995) cautioned, "Persistent unemployment/underemployment, declining wages and living standards undermine the moral core of capitalism and democracy .... In a democracy, people will vote for economic dynamism only if they have a fair chance of benefitting from it." There is all-round realization about the need, though not the content, for reforming labour policy and labour administration. But maintenance of status quo is often, unfortunately, considered politically less risky than opening the pandora's box. How long can such a scenario sustain itself is an open question. Economic growth can not be an excuse for inhuman exploitation. It is seen that with falling growth rates in the economy, rising inflation and unemployment, governments which are under intense pressure to woo foreign investment and create additional jobs are tempted to adopt competitive labour policies that wipe out part of the accumulated social gains. "When some countries employ forced labour or child labour in export production, or when they repress trade union rights in export processing zones or special economic zones, the effect is to place their neighbours under pressure to implement similar policies in order to compete on the world market. This is particularly evident when governments are striving to attract investment from MNCs (ICFTU, 1995)." The effects can even be seen in the alternative offers to reduce labour rights being made by some states within a country like India (yenkata Ratnam, 1995). 4.

Development Standards

Objects, Basic Human Rights and

International

Labour

Schregle (1981: 186) argues: "The national development ... has its price; it requires sacrifices. The workers' effective right to have their interests represented by strong and efficient trade unions provides the only sure guarantee that the bill of development will not be footed exclusively or primarily by the workers but that the burden will be more or less equitably shared by all." The rapid development of certain dynamic Asian economies may make some wonder about the nexus between democracy and development. Management & Change. Volume

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60 Labour-Management Relations Sengenberg and Campbell (1994) challenge the widespread belief that labour standards impede the functioning of free markets and the consequent assumption of a trade-off between economic growth and labour standards or, in labour market terms, a trade-offbetweenjob creation and high labour standards. They argue that standards are essential supports and enabling devices for superior economic-not just social--outcomes. They hold the view that this is especially the case in situations of industrial decline and harsh competition, because standards prevent a relapse into parochial and short-term behaviour. MICRO LEVEL

The two research projects in Asia and in the OCED (Locke, et aI., 1995; Verma, et al. 1995) referred to earlier, are focusing on four aspects of changes at workplace level in select industries including auto, banking, clothing, steel, textiles and telecom. Kochan summed up the preliminary findings of these study groups at a meeting in Taipei (Kochan, 1994). The results were also shared at the lIRA 10th World Congress at Washington, DC, in his presidential address (Kochan, 1995) and in various meetings of the study groups. What follows is the author's perception of the changes at workplace, which take into account the findings of the study groups/networks referred above along with a consideration of some specific contemporary issues in Indian context: 1.

Work Organization

The major changes in work organization point to a shift away from Taylorism to Tayotoism broadly reflecting the change in the technology from manualmechanical to micro-chips. Flexibility-numeral, functional, locational, pay, etc.-is emphasized. Recent advances in technology and the new international division oflabour seem to result in declining employment intensity in manufacturing and service sectors as well. Competitive strategies invariably seem to emphasize cost cutting through, among others, downsizing. Literature also points to the emergence oflean, mean, green, clean workplace. The new work organization is giving rise, increasingly to new, nontraditional, atypical types of employment relationship which is different from regular, secure, life-time employment based on single skill, single career, single employer. Little wonder, therefore, new concerns have led the ILO Management & Change, Volume I, Number I (April, 1997)

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to adopt a new convention and a recommendation on home workers last year and initiate a debate on contract labour at the 1997 June session of the International Labour Conference in Geneva. Even in India contract labour issue is being looked afresh in the wake of recent judgements relating to some public sector corporations both at central (Steel Authority of India Ltd.) and state (Gujarat State Electricity Board) levels. Media reports about the move of some state governments to abolish contract labour seem to have awakened the Central Government which proposed in its agenda before the 33rd session of the Standing Labour Committee that contract labour In central public sector undertakings and multinational compames may. henceforth, be under the Central List rather than in the State or in the Concurrent List of the 7th Schedule of our Constitution. Development of a flexible. adaptive work organization also warrants workforce adjustment. The issue of exit policy was debated in the first three years of economic reform. There are five elements involved in this: prior notice; inforn1ation sharing: consultation; compensation; prior administrative approval. In any civilized and democratic society the first four aspects f0n11part of a policy on workforce adjustment. In the last one decade in most developing countries in Africa and Latin America, the requirement of pnor administrative approval was done away with, but the notice period and compensation were raised. In India, we have to take a lesson from the German law and relate notice period to the size and scale of workforce adjustment. The notice period should increase progressively as the scale of workforce adjustment increases. Today, there is a difference of a minimum of three times between normal retrenchment compensation and golden handshake. Recently, the Supreme Court raised the compensation for workers in closed polluting units in Delhi to about six years' pay. There is a need to review the issue of notice, infonnation sharing, consultation and compensation in workers' favour. At the same time, prior administrative approvals should be done away to minimize the role of political decisions in busmess. 2.

Skills Formation

The approaches to skill formation seem to vary depending on labour market contexts. Some countries, within Asia itself, experienced labour shortages while many others are finding it tough to grapple with labour surplus and mounting unemployment. The former category of countries are focusing on high skill/high wage and the latter still rely, willy-nilly on low skill/low wage industrialization. Management & Change, Volume

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62 Labour-Management Relations Of course, a particular strategy is contingent not merely on macro situation, but also the logic and circumstances of the sector concerned. Overlj.ll,the direction of change in the world of work points to a shift away from brawn to brain and muscle to mind. This warrants a shift in emphasis in management philosophy based on direction and control to one based on consent and consensus. Also, cost cutting and downsizing approaches require shift in emphasis from mono skills to multi tasks. In India, some changes are taking place in the field of vocational education. But what is being attempted is a mere drop in the ocean. There is talk about charging a levy on the turnover of companies to create a skill development fund on the lines of Singapore and Malaysia. There is also a move to create a statutory body on the lines of the All India Council for Technical Education to facilitate certification of vocational skills. If the proposed human resource development fund or the skills development fund is to be administered by the Government, one should see whether only one party pays for the benefit of a second party with control by a third party over the resources. There is also the need to ensure that a large share of the fund does not go into staff salaries and other overheads. We need to learn from how Singapore and Malaysia kept the overheads to the bare minimum. Private initiative with corporate partnership, both public and private, is essential for skills development that is close to fast changing shop floor reality. 3.

Compensation

Flexible and contingent (with production, productivity or profits) pay is perceived by several firms, across various sectors and countries to be a logical extension off.flexible work organization. The proliferation of knowledge workers in the ranks of the workforce also led to the concept of knowledge pay, particularly in high-tech industries. Sharing plans either or both in stock and profits also is becoming the norm either through state initiative (as in France in particular and Europe in general, the latter in view of a European Commission directive) or the initiative of workers and management (collective bargaining). Scanlon type flexible wage systems are common in Singapore and characterize the flexible wage system that obtains in that country through the initiative of the tripartite National Wages Council (Rosalind). In several countries, opposition to privatization is sought to be contained through free or concessional distribution of shares at the time of ownership change (Venkata Ratnam, 1991). In India, the government's ambivalence to issues relating to public secManagement & Change, Volume 1, Number 1 (April, 1997)

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decentralization policies. In 1993, it decided to decentralize, but now it proposes to set a new commission. It constitutes Wage Boards (for journalists, both working and non-working!) and Pay Commission for civil servants but finds that the subject is too important politically rather than economically to leave it to the Wage Boards or Pay Commissions. The contradictions soon surface. We are likely to witness a terrible time on wage negotiations in 1997 in view of the hope and frustration that the Fifth Central Pay Commission generated, and its fall-out on state governments, private and public sectors. On top of it, the agreements in 240-odd central public sector undertakings, both signed and unsigned, will shortly expire and come up for review in 1997. The issue of maintenance of existing parity between/among different sections of workforce and maintaining real wages will be high on trade unions' agenda. In the informal sector, there is considerabk debate about a daily national minimum wage ofRs.35 which currently the miners are getting. In a country where minimum wage ranges from RS.8 to over RS.70 in Maharashtra alone, this proves a tough goal. 4.

Workplace Governance

Some of the important issues in workplace governance are: information sharing, two-way communications, upward influence mechanisms, representative and direct participation (quality circles, quality control circles, Kaizen, etc.). Consultation and consensual decision making is, however, paid lip sympathy and are, generally not as widespread as the literature suggests. While the changes in the world of work and workforce composition warrant consultation processes, the requirement of speed as a deciding factor in enhancing competitiveness is decelerating the movement towards greater consultation and consensual decision-making processes. In many situations, not only at micro but also macro levels, decisions are taken unilaterally and cooperation is invited at the stage of implementation. Little wonder, then, that in such situations the party (parties) left out at decisionmaking stage resist such moves because it (they) consider it as a fait accompli situation. Notwithstanding such problems, the imperatives of information sharing and consultation have led to twomajor developments on the global scene in recent years. First, the attempts to form world company councils in about 100 multinationals due to the initiative of international trade secretariats of international trade union movement. Second, the European Commission's directive on European Works Councils to be set up not only in Europe but Management & Change, Volume I, Number 1 (April, 1997)

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directive on European Works Councils to be set up not only in Europe but also to extend to European companies outside Europe. There are practical problems in operationalizing these two laudable initiatives which would be watched with keen interest in the years ahead.

VI. CONCLUSION The major transition and transformation in industrial relations can be summed up as follows: democratization offers many opportunities for turning industrial relations systems away from unitarism to pluralism. This means that economic development cannot be at the cost of human rights at workplace and in the wider society. The linkage between labour standards and international trade attempts to achieve this. Even though there is some polarization of views inthis regard between the developed and the developing countries, the workers' organizations in the developing countries chose to oppose such linkage in international fora even as they press their respective national governments for improvement in labour standards. Diversity in industrial relations systems is increasing at national, sectoral and enterprise levels. The context of development and the strategy for industrialization at the national level, the stage of industry at sectoral level and the position of the firm in the business cycle at the firm level, account substantially for such diversity. Industrial relations is on the decline (US and UK, for instance) in some countries which once had a long tradition. Industrial relations systems-as they are understood and practised in democratic world-are emerging and growing in others. Democratic and social pressures cause the scope of industrial relations to be widened beyond trade unions and collective bargaining to incorporate all aspects concerning people at work (Kochan, 1986). In several countries, hitherto formal industrial relations systems and government policies focused their attention on 10 to 15 percent of the workforce in the formal sector. But now, new actors, on the horizon such as customer groups, citizen groups and non-governmental organizations are pressing for the agenda of industrial relations to include such concerns as social clause, social vulnerability, social exclusion, social protection and social security and social action to deal with issues of all forms of discrimination (gender, for instance) and abuse (of child labour, for instance). For long, ILO and other institutions have envisaged and encouraged a role for organizations of both workers and employers even at the firm level in such macro concerns as population planning. Adjustment pressures will last because it is a continuous process. EnManagement & Change. Volume 1, Number I (April, 1997)

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terprise survival becomes imperative for individual well-being. Whatever be the approaches and outcomes for different groups in the short-term, ultimately there has to be a shift towards a value framework that emphasizes fairness and equity, faith in power balance among social partners, concern for individual without neglecting collective interests of the community and above all, integrity and trust. The rationale for it is not so much in doubt as is the modus operandi of achieving it. Employment related issues always dominated industrial relations concerns and continue to do so. In the context of globalization and liberalization, there is a shift in focus. Earlier, under export-oriented industrialization policies, labour's rights were compromised in export-processing zones (EPZs). In a globalized environment, the whole market, both domestic and international, has become an EPZ. Therefore, segmented approach in public policy is not enough. Gradually, there is a trend towards evolving new systems of social security net which provide income security without job security. Trade unions resist this, but are not always able to avoid it. For far too long the output of industrial relations has been measured in terms of network of rules and regulations, strikes and lockouts. grievances and indiscipline, etc.The search for identifying positive parameters has begun because the traditional measures proved inadequate.The new technologies, changing workplace and worker demographics are pointers to changes in workplace governance that will result in greater say and stake for employees and customers in their interest areas.

REFERENCES Adams, R..J. (1993) "All Aspects of People at Work: Unity and Division in the Study of Labour and Labour-Management," in Roy 1. Adams and Noah M. Meltz (eds.) Industrial Relations Theory. Its Nature, Scope and Pedagogy London: IMLR Press/Rutgers University and The Scarecrow Press, Inc. . Aglietta, M. (1979) A Theory of Capitalist Regulation: The US Experience. London: New Lexicon Books. Baldry, C. (1994) "Convergence in Europe: A Matter of Perspective')" 25, Industrial Relations Journal. 96. Bamber, G. and V. Peschanski (1996) 27, Industrial Relations Journal, UK, 74. Bamber, G. (1987) International and Comparative Industrial Relallons: A Study oj Industrialised Market Economies. St. Leonards: Allen and Unwin. Blyton, P. and P. Turnbull (1994) The Dynamics of Employee Relations. Basingstoke: Macmillan. Bronstein, A. S. (1995) "Societal Chang.: and Industrial Relations in Latin America: Trends Management & Change, Volume I, Number I (April, 1997)

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66 Labour-Management Relations Collier, R. B. and D. Collier (1991) Shaping the Political Area. Princeton, NJ: Princeton University Press. Deyo, F. C. (1989) Beneath the Miracle: Labour Standards in the New Asian Industrialism. Berkeley: University of California Press. Dore, R. (1973) British Factory-Japanese Factory: The Origins of National Diversity in Industrial Relations. Berkeley and Los Angeles: University of California Press. Dunlop, J. T. (1958) Industrial Relations Systems. Cambridge, Mass.: Harvard University Press. Edgren, G. (1990) "Employment Adjustment and the Unions: Case Studies of Enterprises in Asia," 129, International Labour Review, 629. Egorov, V. (1995) "Privatization and Labour Relations in the Countries of Central and Eastern Europe," 27; Industrial Relations Journal, 89. Fashoyin, T. (1990) "Economic Recession and Employment Security in Nigeria," 129, International Labour Review, 649. Fashoyin, T. and S. Matanmi (1996) 27, Industrial Relations Journal, 38. Fong, P. E. (1990) "Industrial Restructuring, The State and Employers in Asia-Pacific Countries.''' Paper presented at the ILO/ APINDO South East Asia and Pacific Employers' Symposium on the Role of Employers' Organizations in the Informal Sector and the Industrial Restructuring at Bali, Indonesia, 13-16 March. Bangkok: ILO (Mimeo). Frenkel, S. (ed.) (1993) Organized Labour in the Asia-Pacific Region: A Comparative Study of Trade Unionism in Nine Countries. Ithaca, New York: ILR Press. Freeman, R. B. (1992) "Labour Market Institutions and Policies: Help or Hindrance.'~ Proceedings of the World Bank Annual Conference on Development Economics. Supplement to the World Bank Economic Review and the World Bank Research Observer. Washington, DC: World Bank, 117. Galbraith, J. K. (1995) The World Economy Since the Wars: A Personal View. London: Mandarin Paperbacks. Gladstone, A. et al. (eds.) (1992) Labour Relations in a Changing Economy. New York: Walter de Gruyter. Government oflhdia (1996a) Annual Report, 1995-96: Ministry of Labour. New Delhi. Government oflndia (1996b) Agenda: 33rd Session of the Standing Labour Committee. New Delhi: Ministry of Labour. 13 September. Hyman, R. (1994) "Industrial Relations in Western Europe: An Era of Ambiguity," 33, Industrial Relations, I. ICFTU (International Confederation of Free Trade Unions) (1995) Conclusions of the ICFTU-Asian Pacific Regional Organization (APRO) and Japan Institute of Labour's Regional Symposium on "International Competitiveness, Trade and Investment-Challenges for Trade Unions," 1-5 August, Singapore. ilLS (International Institute for Labour Studies) (1993) Lean Production and Beyond: Labour Aspects of a New Production Concept. Geneva: IlLS. ILO (1984) Collective Bargaining: A Response to Recession. Geneva: ILO. ILO(1991a) World Labour Report. Geneva: ILO. ILO ( 1991b) Report of the Director General to the 78th Session. Geneva: ILO. ILO (199Ic) ILO Year Book of Labour Statistics. Geneva: ILO. ILO (1992) Democratization and the ILO: Report of the Director-General. International Labour Conference. 79 Session. Geneva: ILO. ILO (1994a) Freedom of Association and Collective Bargaining. International Labour Management & Change, Volume I, Number I (April, 1997)

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Conference, 81st session, Report III Part 4 B. Geneva: ILO, ILO (1994 b) Visions of the Future of Social Justice: Essays on the Occasion of the ILO's 75th Anniversary, Geneva: ILO, ILO (1995) World Labour Report. Geneva: ILO, Also the Reports--India (1996a) for the previous years, Kaufman, B, E, (1992) The Origins and the Evolution of the field of Industrial Relations in the Us. Ithaca, New York: ILR Press, Kerr, C. (1961) Industrialism and Industrial Man, Cambridge, Mass,: Harvard University Press, Kerr, C. (J 971) "Postscript to Industrialism and Ind\lstrial Man," 103, International Labour Review, 5 19, Kochan, T. A, (1983) Report for the International Industrial Relations Association, Sixth World Congress (II A), Kyoto, Japan, 28-31 March, Kochan, T. A. (1994) "Shaping Employment Relations for the 21 st Century:' Ch~llenges Facing Business, Labor, and Government Leaders," Key note address at the Conference on Changing Employment Relations and Human Resource Management in Asia held at Chung-Hua Institution for Economic Research, Taipei on 28 June, Kochan, T. A, et af. (1986) The Transformation of American Industrial Relations. New York : Basic Books, Kochan, T. A, and M, Weinstein (1994) "Recent Development in US Industrial Relations," 32, British Journal of Industrial Relations, 484, Kuruvilla, S. and C. S, Venkata Ratnam (1996) "Economic Development and Industrial Relations in South and Southeast Asia: Past Trends a,nd Future Developments," Paper presented at the lIRA IOth World Congress at Washington, DC 31 May - 4 June 1995, 27, Industrial Relations Journal, 9, Locke, R.M. (J 992) "The Demise ofthe National Union in Italy," 45, Industrial and Labour Relations Review, 229, Locke, R, M" T. A, Kochan and M, Piore (eds,) (I 995) Employment Relations in a Changing World Economy. Cambridge, MA,: MIT Press, Locke, R,T., A, Kochan and M. Piore (1995) "Reconceptualizing Comparative Industrial Relations: Lessons from International Research," 134, International labour Review, 139. Lazonick, W. (1991) "What happened to the Theory of Economic Developmenfl" in P, Higgonnet, D. S, Landesand and Henry Rosovsky (eds,) Favorites of Fortune. Cambridge, MA: Harvard University Press. Madrid, J. C. K, (1994) "The ILO and Current Trends in Principles of Labour Law in Argentina," in W, Sengernberger and D. Campbell, International Labour Standards alld Economic Interdependence, Geneva: International Institute for Labour Studies, Maurice, M., F. SeIher and 1. J. Silvestre (1986) The Social Foundations aflndustrial Power, Cambridge, MA: MIT Press, Meidner, R, (1985) Swedish Union Strategies Towards Structural Change, Stockholm: Arbetslivscentrum, NLLA and Freidrich Ebert Stiftung (1994) The Indian Labour Code, 1994 (Draft), New Delhi: NLLA and Freidrich Ebert Stiftung, Piore and Sabel (1984) The Second Industrial Divide, New Yark: Basic Books, Reich, R, (1995) Address to the delegates of the 10th World Congress of International Industrial Relations Association, Washington, DC: IRRA, May 31-June 4. Schregle,1. (1981) Negotiating Developme~t.' Labour Relations in Southern Asia. Geneva: Management & Change, Volume 1, Number I (April, 1997)

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International Labour Organisation. Sen, R. (1996) "Future of West Bengal," June, lIRA Newsletter. Sengenber, W. and D. Campbell (1994) Creating Economic Opportunities: The Role of Labour Standards in Industrial Restructuring. Geneva: International Institute for Labour Standards. Smith, A. E. (1994) "New Technology and the Process of Labor Regulation: An International Perspective," in J. Belanger et at. (eds.) Workplace Industrial Relations and the Global Challenge. Cornell International Industrial and Labour Relations Report NO.25. Ithaca, New York: ILR Press. Standing, G. and G. Sziraczi (1992) "Labour Market Issues in Eastern Europe's Transition," International Labour Review, 142. Strauss, G. et at. (eds.) (1991) The State of the Unions. Madison, WI: Industrial Relations Research Association. Taira, K. (1994) "Workplace Productivity, Macroeconomic Performance and World History," paper presented on the sub-theme "Human Resources Management and Economic Development in Asia." Proceedings of the 1994 Asian Regional Conference on Industrial Relations. Tokyo: JIL. Thirkell, J. et at. (1994) "Labour Relations in Transition in Eastern Europe," 25, Industrial Relations Journal, 84. Thomson, A. and M. Warner (1981) The Behavioural Sciences and Industrial Relations: Some Problems of Integration. London: Grower. Tolliday, S. and 1. Zeitlin (1991) "Conclusion: National Models and International Variations in Labour-Management and Employer Organization," in S. Tolliday and 1. Zeitlin (eds.). The Power to Manage? London: Routledge. Towers, B. (1996) "Report and Commentary to the Special Issue from Track 5 of the lIRA 10th World Congress," 27, Industrial Relations Journal, 4. Tsuru, T. (1994) "Why Has Union Density Declined in Japan?" 1 November, Japan Labour Bulletin, 5. Yenkata Ratnam, C. S. (1991) Unusual Collective Agreements. New Delhi: Global Business Press. Yenkata Ratnam, C. S. (1994) "Appropriate Structural Adjustment Policies: The Perspective of Employers' Organisations in Selected Countries," Working Paper of the Interdepartmental Project on Structural Adjustment. Geneva: ILO. Yenkata Ratnam, C. S. (1995) "International Trade, Investment and Competitiveness-Trade Union Strategies in a Globalizing Economy: A Case Study ofIndia." Singapore: ICFTU/APRO. Yenkata Ratnam, C. S. (1996) "Future of Work: New Paradigm in Labour Management Relations," Indian Journal of Industrial Relations, October. Yenkata Ratnam, C. S. et al. (eds.) (1995) Labour and Unions in a Period of Transition. New Delhi: Friedrich Ebert Stiftung. Verma, A., T. Kochan and R. D. Lansbury (eds.) (1995) Growing Asia: Changing Trends in Employment and Industrial Relations. London: Routledge. Weiler, P. C. (1990) Governing the Workplace: The Future of Labor and Employment Law. Cambridge, MA: Harvard University Press. World Bank (1990) World Development Report 1990. New York: Oxford University Press. World Bank (1995) World Development Report 1995: Workers in an Integrated World. New York: Oxford University Press. Zatapa, F. (1996) "Labour Relations, Economic Development and Democracy in the 21 st Management & Change, Volume 1, Number 1 (April, 1997)

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Zatapa, F. (1996) "Labour Relations, Economic Development and Democracy in the 2151 Century," 27, Industrial Relations Journal, 65.

c. S. Venkata Ratnam, Ph.D., is Professor of Human Resources and Industrial Relations at the International Management Institute, B-10.30 &31. Qutab Institutional Area, Tara Crescent, New Delhi-II 0066. Apart from human resources and comparative industrial relations, he also specializes in diversity management and negotiation skills. He is Founder-Secretary of the Indian Industrial Relations Association. He is the author or editor of several books including Managing People, Unusual Collective Agreements. Industrial Relations in Indian Industry and Industrial Relations in Indian States

Management & Change. Volume 1, Number I (April. 1997)

MARKETING RESEARCH IN INDIA: A PERSPECTIVE

Sanjay K. Jain

Marketing Research in India has undergone metamorphosis during the last two decades. With opening up of the market and hatting up of competition, decision makers have started, increasingly and variedly, relying on marketing research as an important information input for effective decision making The present paper discusses various quantitative and qualitative changes that the Indian marketing research industry has witnessed in the past, and examines problems that continue to hamper itfrom attaining its much coveted position. Some of the developments that the marketing research industry would witness in the coming years have also been identified and a few measures have been suggested to boost the marketing research usage among the Indian business firms.

INTRODUCTION

arketing management is essentially an activity of analyzing, planning, organizing and controlling various marketing programmes and strategies designed to create desired exchanges in the market. When markets are small and manufacturers are in direct touch with the customers, decision making is simple and straightforward. However, when markets grow in size, competition becomes intense, customers acquire sophistication in their outlook and purchase behaviour, and manufacturers become distanced from their customers, decision making no longer remains an easy task. Marketers need to explicitly take into account a plethora of controllable and uncontrollable factors for sound decision making. They cannot base their decisions purely on intuition, gut feelings or personal experiences. They need a variety of information concerning their markets and marketing of products so as to be able to evolve appropriate marketing policies and strategies. Marketing research comes to a great help to the executives in procuring the needed information and improving the quality of

72 Marketing Research in India

their decisions. The present paper endeavours to examine the usage of marketing research in the Indian context. We shall, first, briefly discuss the meaning and nature of marketing research and its role in the management of a firm's marketing operations in section I and 2. It describes different ways in which a firm can organiz,e its research function. How marketing research is being currently conducted and used in India, and what problems researchers face in conducting such studies, shall be discussed next. Future of marketing research in India shall form part of the discussion in the last section. MARKETING RESEARCH: MEANING AND NATURE In his recent book, Malhotra (1993) provides a very simple but succinct definition of marketing research. According to him, marketing research is "the systematic and objective identification, collection, analysis, and dissemination of information for the purpose of assisting management in decision making." From the definition, it is obvious that the focus in marketing research is on a systematic and objective process of information collection. As against the use of a haphazard and casual approach, marketing research entails a well-planned and organized process of information collection and dissemination. The whole process can be viewed as consisting of six basic steps: (i) problem identification and definition, (ii) determination of information needs, (iii) development of research plan/design (i.e., determination of research approach, viz., explorative, descriptive, or experimental research; determination of data sources, viz., primary or secondary; determination of primary data collection methods; questionnaire preparation and determination of sampling plan), (iv) organization of field work and data collection, (v) analysis and interpretation of data, and finally (vi) report writing and its presentation. Attempt is made to sequentially follow these steps so as to minimize mistakes at later stages. Apart from being systematic, marketing research is characterized by objectivity on the part of the researcher. The researcher tries to gather and disseminate information that is accurate and represents a true state of affairs. He goes about collecting data in an impartial manner and tries to report results as they turn out to be without introducing bias of any sort. It may be mentioned here that marketing research is only one of the methods of data collection. Firms make use of other methods too, viz., internal accounting system, marketing intelligence system and management sciManagement

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ence system, for information collection and analysis. Every firm maintains an internal accounting system which if suitably designed becomes useful in supplying valuable result data such as information on firm's sales, inventory, account receivables and payables. Marketing intelligence system is used by the firms to know as to what is happening in the market. Such intelligence is gathered through interpersonal communications like talking to sales people, dealers, wholesalers, retailers and customers; observation of events taking place in the market; purchase of data from marketing research agencies; alert reading and listening; buying and using competitors' products; and making use of ghost shoppers. Marketing management science system, on the other hand, is concerned with building/ using models to analyze the collected information and/or to better understand, predict, and control the marketing process. Taken together, marketing research and other systems constitute what is known as marketing information system (MIS). Cox and Good (1967: 145) define marketing information system as "a set of procedures and methods for the regular, planned collection, analysis, and presentation of information for use in making marketing decisions," (Also see, Kotler, 1992). The basic difference between MIS and marketing research is that while MIS IS a much broader system that collects information of general nature on an ongoing basis, marketing research is only one of the components of MIS and aims at collecting information as relevant to specific marketing problems on a project-to-project basis (Montogomery et al., 1979). ROLE OF MARKETING

RESEARCH

Marketing research plays an important role in effective management of a firm's marketing operations. Especially in view of the shift taking place in the market from local to regional, national and international markets, and from price to non-price competition, marketing research has become an indispensable tool for decision makers in discovering market opportunities and threats, selecting target markets, developing suitable marketing mix strategies and evaluating firm's marketing performance. It helps the firm not only in deciding what product the firm should launch and what its size, colour, quality, packaging; and brand name should be, but also in determining what price the firm should charge, and how it should distribute and promote the product. Exhibit-1 lists some of the specific decision areas where marketing research is found useful.

Management

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74 Marketing Research in India EXlDBIT-l IMPORTANT DECISION AREAS AND TYPICAL QUESTIONS ADDRESSED BY MARKETING RESEARCH Planning

1. What are the basic trends in the domestic economy? How will these affect the market for our products? 2. What changes can we expect 'in customer purchasing patterns? Will these be based upon changes in real income, changing tastes and values, or changes in patterns of distribution? 3. What new markets are likely to open up? What types of products or services will be needed to serve them? Are there promising markets we are not serving now? 4. Are there more efficient channels of distribution for our products? What new type of marketing institutions are likely to evolve? 5. What opportunities exists for our products or services in other countries? Are our international marketing efforts intensive enough? Problem Solving

1. Product (a) Which of the several alternative new product designs is most likely to be successful? What specific features should the final product have? (b) Should we offer the product in cans, bottles, plastic containers, or aerosol spray cans? What should be the colour of containers? (c) What is the reason for our poor sales performance? The product itself? Our service facilities? What changes are necessary? 2, Price (a) How should we price new products? Should we employ a penetration (low) price or skimming (high) price? (b) What about product-line pricing and pricing variations within a single product? (c) Should we strive for lower prices or improved quality as production costs decline? (d) What is the shape of our "demand curve"? Management & Change, Volume I, Number I (April, 1997)

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3. Place (Distribution) (a) What types of intermediate dealers should be used at the agent, wholesale, or retailleve1s? How intensive should this coverage be? (b) What level of discounts or commissions should be made available to the firm's intermediate agents? (c) What decisions should the firm make with respect to consignment sales, sales of its products under-private labels, and cooperative advertising arrangements? (d) What special inducements are necessary to encourage intermediate agents to handle and push the firm's offerings? (e) How many manufacturing and/or warehousing facilities should the firm operate and in what locations? (f) What forms of transportation should be used to ship the firm's products to company warehouses, intermediate agents and to customers buying direct? (g) Where and in what quantities should various stocks of goods be warehoused? 4. Promotion (a) What should the total promotion budget be and how should it be allocated among products, geographic areas, and various forms of promotion (advertising, personal selling and so on)? (b) What specific product attributes and consumer benefits should be featured in advertising and sales presentations? How can these be converted into effective appeals, themes and formats? . (c) To what extent should we use such sales stimulant as coupons, premiums, deals, and contests to increase customer traffic in retail stores? (d) Which one or combination of existing media (TV, radio, magazines, newspapers, and so on) is most suitable for our product or service? (e) How effective have our previous advertising programmes been in mak-_ ing consumers aware of our offerings, stimulating sales, and enhancing image of the firm?

Control

1. What are current sales and/or market shares for each of our product Management

& Change, Volume t, Number

1 (April, 1997)

76 Marketing Research in India

2. 3. 4.

lines? Each geographical area? Each major customer type? Are we covering our various markets or geographical areas as effectively as we should? Are we getting what we should from each segment relative to the potential in that segment? What is our "corporate image" among present customers? Potential customers? Our distributors? Is the product catching on? Are the plans for our new product entry being followed?

Source: Exhibit-] has been adapted from Gilbert A. Churchill, Marketing Research: Methodological Foundations, (Illinois: The Dryden Press), 1979, pp. 9-10.

Notwithstanding its important role in decision maki:lg, marketing research has been found suffering from certain limitations. Late delivery of in formation is one of its major shortcomings. Many a times, market situation demands quick decision on the part of the management for pre-empting the emerging market opportunities. This calls for provision of relevant information to the decision makers at the shortest possible time span which marketing researchers quite fail to do because of time involved in carrying out the research studies. By the time the research is completed, findings become outdated and irrelevant. Infrastructural problems also come in the way of conducting marketing research studies. Marketing research requires trained staff and funds which lTlanyfirms find difficult to provide for. Because of multiplicity of factors affecting a problem and difficulties in conducting experiments, marketing research often produces erroneous results which further erodes the utility of such studies. We shall delve into these and other problems in detail in the subsequent section. It may, however, be mentioned here that many of these problems are not insurmountable. If tackled properly, marketing research studies can become extremely useful in effective planning, decision making and control of firm's marketing operations. ORGANIZATION OF MARKETING RI<:SEARCH CHANNELS

RESEARCH/MARKETING

Exhibit-2 depicts important ways in which marketing research activities of a firm can be organized. Broadly speaking, marketing research studies can be conducted either by firm's own staff or by outside agencies. Many a time, firms use both these modes so as to achieve greater mileage. MWl<1gemen( & Change, Volume I, Number I (April, 1997)

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In-house research can be conducted in two ways. The firm can either have separate marketing research staff/department for carrying out research studies or else it can use its marketing and sales people for getting such studies conducted. The use of separate marketing research staff/department is generally the practice among firms which are large, and which. quite frequently feel the need for carrying out research studies. But when marketing research is not too often needed or firms are not in a position to bear the fixed expenses of maintaining such staff/department, they resort to make-shift arrangements within the organization to carry out research studies. These arrangements can be either making marketing and sales people carry out such researches alongwith their routine duties or else, setting up ad hoc research groups by drawing people from marketing and other departments. These groups are formed when a need arises for a research study, and the group members join back their respective departments once the research task is over. EXHIBIT-2 ORGANIZATION

OF MARKETING RESEARCH/MARKETING CHANNELS

RESEARCH

In-house MR Doers

Out-side MR Doers

In-house MR Sales/Marketing staff / People Department

I MR Agency

Advertising Agency

Consultant

I------~-------l Customized Research Service

Syndicated Research Service

Many firms, especially those lacking trained staff to do research, prefer hiring research services of outside marketing research agencies, advertising agencies or consultants. These outside organizations which collectively Management

& Change, Volume

1, Number

I (April, 1997)

78 Marketing Research in India

comprise marketing research industry act like business firms and earn money by conducting research studies for their clients. Services provided by mar.keting research agencies can be of two types: customized and syndicated research services. Customized research is custom-made, i.e., it is conducted as per the specifications and needs of an individual client. Syndicated research, on the other hand, is conducted by a research agency on its own to collect and sell common pools of data to meet the information need of a number of clients. Unlike customised research, the results of syndicated research are not the prerogative of a single client and are shared among a number of firms. Syndicated research is fast gaining importance among the business firms because it costs much less to a single client and is, moreover, available on an ongoing basis to the clients. There is no best approach to organizing a firm's marketing research activities. Depending upon the frequency, nature, and extent of firm's information needs and availability of funds and trained staff within it, firms can select one or a combination of marketing research channels. As the firm grows in size and its information needs change, its way of organizing its marketing strategy also gets suitably modified over time. MARKETING RESEARCH IN INDIAN CONTEXT Despite immense importance of marketing research in decision making, its usage had conspicuously been. low among Indian business firms in the past. Only a few big firms (especially those subsidiaries of multinational corporations) were making use of marketing research in the fifties and sixties. Even among such firms, only a select few were carrying out research studies on a continuous basis or had set up marketing research departments within the firms. Anumber of reasons have been responsible for this phenomenon. Protected nature of the market is amongst the important reasons. Because of industries' inability to cope with the growing demand, markets for most of the products in India during the fifties and sixties were characterised by product shortages. A highly restrictive industrial licensing policy pursued during this period and restrictions imposed on capacity expansion virtually blocked the entry of new firms into the market. Constant scarcity of products and lack of market competition provided a sort of monopolistic and oligopolistic powers to the then existing firms. As the firms were able to easily sell all that they produced, there was hardly any incentive for these firms to be innovative and use marketing research. Bajaj scooters in the two-wheeler market and Ambassador and Fiat cars in the automobile marManagement & Change, Volume 1, Number 1 (April, 1997)

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ket constitute but just two examples of the sellers' markets present in the country at that time. Coupled with lack of technological and other changes, an assured market for the products introduced a sort of complacency among Indian business firms. Firms focused on maximization of profits in the short-term and paid little attention to long-term planning. No wonder that firms felt little need for marketing research for environmental scanning, consumer tracking or determination of market potential and sales forecasting. Excepting few firms, a majority of the Indian firms were operating on a small scale. As the firms were in direct touch with their customers, decision making was quite straightforward and these firms hardly felt any need for marketing research. Even a few firms which were desirous of usmg marketing research could not do so because of paucity offunds resulting due to their relatively small sizes. Indian firms, moreover, did not show much interest in marketing research as they lacked a professional approach to decision making. The firms were managed largely by people who did not have professional qualifications or specialized training in marketing. Since the managers did not know much about marketing research, they failed to appreciate its usefulness in decision making and considered any expenditure on it as a total waste of money. Oflate, however, the situation has changed. Especially since the eighties, the Indian market has undergone metamorphosis as a result of changes in the government policies and other developments in the country. Due to entry of a large number of Indian as well as foreign firms in the market, competition has considerably hot up. The erstwhile sellers' markets have now started giving way to buyers' markets for a variety of products. Technological up gradation has received a new thrust in the economy and has provided a spurt to product innovations. Product life cycles have started becoming shorter and firms are increasingly getting interested in diversification of their business and their exploration of rural and foreign markets. New means of communication and channel arrangements have emerged on the scene. A shift from price to non-price competition has also started taking place in the market. As a result of these and other changes, marketing tasks have become greatly complex and risky. Marketers, especially those in the organized sector, have started finding it difficult to make decisions solely on the basis of their past knowledge and experiences. They have started realizing the need for marketing research as an aid to better market understanding and decision making. Management

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80 Marketing Research in India

MARKETING TIONS

RESEARCH

EXPENDITURE

AND APPLICA-

In the absence of a comprehensive and latest survey, it is difficult to tell how much the firms are currently spending on marketing research in India. Nonetheless, based on whatever information available in the empirical studies in the past, it seems that marketing research expenditure in the country is quite low. For instance, a study of 130 firms by Consulting and Research Enterprise (CORE), Hyderabad, revealed that expenditure on marketing research (both in-house and outside research) ranged from a low of Rs. 10,000 toa maximum ofRs.1 crore in 1985-86 (Rao, 1986: 17). More specifically, while about 40 percent of the firms spent less than RS.1 lakh,46 percent were spending between RS.1 lakh and RS.10 lakhs. Only about four percent made expenditure exceeding RS.10 lakhs. As a percentage of sales, the expenditure on marketing research turns out to be much lower. It ranged from less than 0.01 percent to a maximum of 1.3 percent. For the majority of the firms (viz., 91 percent), the expenditure was just 0.4 percent or even less. Only about nine percent of firms were found spending more than 0.4 percent of their sales on marketing research (see Table-I). The study further reported that as against industrial goods fiITl).s,the consumer goods firms were spending more on marketing research. A similar conclusion was arrived at by Chib. According to his estimate, a majority of regular research spenders (150 out of 170) had a research spending budget between just Rs.20,000 and RS.5 lakh. Only about 19 firms were spending more than RS.5 lakh on marketing research (Chib: 1988) (see Table-2). It is, thus, obvious that majority of the Indian firms have so far been small research-spenders. The Table-3 contains information about major uses of marketing research in India. New product decisions constitute the most frequent usage of marketing research, followed by applications such as estimating market share, gathering competitive information, demand estimation, product modification, measuring customer satisfaction, and diversification decisions. It is quite surprising that despite heavy advertising expenditure, firms do not make much use of marketing research for advertising theme message decisions. Use of marketing research for evaluating advertising effectiveness is much less. Customer service decisions also do not appear among the major applications of marketing research in the country.

Management

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----IIU

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TABLE-l MARKETING RESEARCH EXPENDITURE' BY INDIAN FIRMS IN 1985-86

Expenditure

Respondents (Percent)

Marketing Research Expenditure Less than RS.l lakh RS.l lakh to RS.l 0 lakh More than RS.l 0 lakh

40.0 46.0

14.0 100.0

Marketing Research Expenditure as a Percent oj Sales Upto 0.01 0.02 to 0.09 0.10to0.40 More than 0.40

Source:

Based

on Sushila

Business India, November */nclusive

28.0 34.0 29.0 09.0 100.0

Rao, "Marketing Research 17-30, 1986, pp. 111-1 12.

of expenditure

on in-house

in India:

as well as outside

The State of research

the Art,"

agencies.

TABLE-2

VOLUMEWISE BREAK-UP OF THE REGULAR SPENDERS ON MARKETING RESEARCH' IN INDIA

Category

Volume of Spending

Al A2 Bl B2 Cl C2 D1 Source:

Approximate Number of Companies' 1 1 5 10-12 18-20 30 100

More than RS.50 lakh RS.25-50 lakh RS.I0-251akh RS.5-10 lakh RS.2-51akh RS.I-21akh RS.20,000- RS.l lakh Ranjit

Solus, February,

Chib's 1988.

*[nclusive

Management

presentation

of expenditure

& Change, Volume

at a seminar

on Marketing

on both in-house

I, Number

1 (April,

and outside

1997)

Research research.

as reported

~~~~-----------------~~-...â&#x20AC;˘ '-..

82 Marketing Research in India

--------------TABLE-3

AREAS OF MOST FREQUENT USE OF MARKETING RESEARCH IN INDIA

Percent of Firms*

Area New product decisions Estimating market share Gathering competitive information Demand estimations Product modification decisions Measuring customer satisfaction Product positioning decisions Diversification decisions Market segmentation decisions Advertising theme/message decisions Pricing decisions Customer service decisions Product elimination decisions Evaluating advertising effectiveness Channel modification decisions Source:

58 49

47 46 44 43 42

40 38 31 30 27 21

20 09

Same as of Table-I . â&#x20AC;˘ Refers to firms that reported using marketing research frequently/always

in the

given area.

Information regarding channels which Indian firms use for getting research conducted is presented in Table-4. It is evident that the firms often use more than one channel. Use of firms' own sales stafftops the list. The other important channels include marketing research agencies and in-house marketing researchers, with only 44 percent of the firms having their own in-house research staff. Advertising agencies, consultants and syndicated research services come next in order of importance. It may be mentioned here that while the figure of sales has been used by the firms of all sizes, in-house marketing researchers, marketing research agencies and syndicated research services have been used more often by the larger rather than medium and smaller firms. The use of advertising agencies has been more prevalent among smaller firms. Important differences have also been found among firms selling different types of Management & Change, Volume I, Number I (April, 1997)

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products. Industrial goods and service firms have tended to more often use their own sales staff and in-house marketing research than consumer goods firms, which show preference for marketing research agencies and syndicated research services to meet their research requirements (Rao, 1986). SPURT IN DEMAND FOR OUTSIDE RESEARCH SERVICES The last two decades have witnessed phenomenal growth in the importance of outside agencies for meeting the marketing research needs of the Indian firms. The guesstimate is that presently the turnover of the marketing research industry is anywhere between RS.15 and 20 crore as against RS.10.06 crore in 1988-89, RS.3 crore in 1983 and RS.l crore in the early 70s. Especially during the 80s, the research business of the outside agencies attained the highest ever achieved growth rate of about 25 percent per annum (Jain, 1993). TABLE-4 MARKETING RESEARCH CHANNELS IN INDIA

Channel

Percent of Firms'

Firms' sales staff

Marketing research

In-house marketing researchers Advertising agencies Consultants Syndicated research servIces

Source:

Same as of Table-I

Nature of Firms Preferring the Channel Firms of all sizes, industrial goods and service firms Large firms, consumer goods agencies firms Large firms. mdustrial goods and service firms Smaller firms

35 34 22

Larger firnls and consumer goods firms

* Since upto

the firms use more than one channel, 100.

the percentage

figures

will not add

Seeing growth in demand for various types of marketing research services, a number of marketing research agencies have been set up in the country. There are at present more than a dozen specia!Jzed research agenManagement

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84 Marketing Research in India

cies which are actively engaged in providing customized as well as syndicated research services to their clients. An illustrative list of some important research agencies in India is provided in Table-5. TABLE-5 MAJOR MARKETING RESEARCH AGENCIES IN INDIA'

Operations Research Group (ORG) Indian Marketing Research Bureau (IMRB) Marketing and Research Group (MARG) Indian Marketing Research Service (IMRS) Marketing Operations Design and Enquiry Service (MODES) Pathfinders Advertising Consultants (India) Pvt. Ltd. Concept Marketing and Advertising Pvt. Ltd. Marketing and Business Associates (MBA) Research Consultants and Marketing Services Pvt. Ltd. Consulting and Research Enterprise (CORE) Marketing Research and Data Processing Consultancy A. F. Ferguson & Co. Tata Consultancy Services (TCS) National Council of Applied Economic Research (NCAER) Indian Institution of Public Opinion Indian Institute of Foreign Trade (lIFT) Feedback Marketing Services Research Consultancy Group C. Marck (India) Pvt. Ltd. Quantum Market Research Pvt. Ltd. Research International India

* The

Jist is only illustrative

and not exhaustive.

Among various research agencies operating in India, Baroda-based Operations Research Group (ORG) is the oldest research agency. Set up as an in-house research agency by Sarabhais in 1960 for retail audit of their pharmaceuticals division, ORG's list of retail audit today coversmore than 75 consumer products and 7,500 pharmaceutical formulations. In addition to Management

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1 (April, 1997)

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I' Jain

retail audit which provides information about brand off-takes and market shares, ORG collects and disseminates information relating to areas such as family planning, agriculture, urban development and health economy (Jain, 1993). Indian Marketing Research Bureau (IMRB) is another leading marketing research agency in the country. It was set up in 1971 by Hindustan Thompson Associates (RT A)--a leading advertising agency in India. During the eighties, some ofthe executives ofIMRB left the agency and set up their own research firms. Of these, the largest three are: the Bombaybased Marketing Research and Advisory Services (MRAS), Marketing and Research Group (MARG) and the Calcutta-based Marketing Operations Design and Enquiry' (MODE). Marketing and Business Associates (MBA) is also an offshoot of such splits. It was set up by Lintas India-'-the advertising agency of the Levers Group (Jain, 1993). Besides specialized research agencies, a few management consultancy firms and advertising agencies also carry out researches for their clients. Among advertising agencies, the important ones include: Lintas India (Pvt.) Ltd., Ogilvy and Mather, Ulka Advertising (Pvt.) Ltd., Clarion Advertising Services Ltd., Chaitra Advertising, R. K. Swamy Advertising Associates, Advertising and Sales Promotion Company, National Advertising Services (Pvt.) Ltd., and Tara Sinha Associates. In order to serve their interests better and provide a professional edge to their activities, Marketing Research Society of India has been set up in the country. The society was formed in 1988 and it has, since its inception, been playing an active role in holding discussions and seminars, and developing a reliable data base about the country's marketing research llldustry. CHANGING NATURE AND APPLICATIONS RESEARCH IN INDIA

OF MARKETING

In recent years marketing research has undergone several changes both on the demand and supply fronts in India. It remains no longer preoccupied with rudimentary data collection and analysis tasks. It has rather come up as a versatile tool for market analysis, planning, and control. Marketing researchers have not only recast many of their old methods and tools. but have also developed and acquired several new ones to cope with the fast changing nature of demand for the market information. Some of these and other changes concerning marketing research users and doers are discussed below. Management

& Change, Volume

I, Number

I (April. 1997)

86 Marketing Research in India (A) INCREASING ROLE OF MARKETING RESEARCHERS MAKING

IN DECISION

With growing market sophistication and complexity in decision making, marketing researchers have started assuming a new role. So far marketing researchers were no more than data providers. As such anyone who had the knowledge of statistics was considered capable enough to conduct research studies. But today a change has started emerging. Marketing part of marketing research which for long time was missing has come into prominence, and marketing researchers as well as research agencies have gradually started donning the role of "problem solvers" and "consultant". To accomplish this objective, firms have started employing more of management graduates (as against hiring only pure statisticians) who not only are capable oflooking deeper into figures but can also offer solutions to marketing problems. In the wake of this change, a few research agencies have even gone to the extent of setting up separate divisions or units to handle the clients' decision making tasks. MARG, for instance, established a few years back a separate wing called "Start-edge" to exclusively take up such advisory assignments. It is reported to have already completed projects for NELCO, Titan Watches, R Enterprises and Dodsal group (Sharma, 1990: 135). (B) GREATER USE OF MARKETING RESEARCH FOR STRATEGIC DECISIONMAKING

As compared to erstwhile use of marketing research mainly for finding answers to tactical problems such as packaging, pricing and promotion decisions, marketing research is now being increasingly used for making strategic decisions such as exploring new markets or evaluating market entry and expansion decisions. A natural consequence of this development has been a surge in demand for strategic marketing-research studies. (C) CHANGES IN USERS' PROFILE

In the past, only big companies used to be the users of marketing research. But oflate; even small companies are using marketing research. The number of firms using research in small towns has also considerably increased.The number of regular research users is also growing. Since onetime clients have been turning to marketing research agencies for help onl y in developing a new product, research agencies have now begun offering Management

& Change, Volume

1, Number

1 (April,

1997)

Jain

many a new service to their clients in order to retain them on a permanent basis, and thus, maintaining a steady flow of their research business (Kumar, 1985: 119). Another noteworthy change pertains to a decline in the relative importance of multinational firms as major users of marketing research. A fall In the share of these firms in the commercially available research in India is a pointer to this fact. Their share which was about 67 percent two decades ago has been steadily declining and is expected to touch a level of 45 percent by the end of the nineties (Ahluwalia, 1990: 44). The share ofIndian firms, on the other hand, is on rise and these firms are fast emerging as major research users in the country. Industrial goods firms have also started showing interest in marketing research. A number of research agencies have already executed such projects and many more are to follow suit. Since marketing research projects for rndustrial products are highly specialized and technical in nature, a trend is emerging towards the recruitment of engineers and other specialized staff for carrying out the industry specific research projects. (D) APPLICATION OF MARKETING RESEARCH TO NON-TRADITIONAL AREAS

Another notable development is the entry of marketing research agencies into areas which so far were considered preserves of the social scientists, economists, journalists, and various other experts. Research agencies are no,\\' being increasingly used for carrying out researches in non-traditional areas such as family planning, immunization programme, literacy campaign, energy conservation, nutrition, and hygiene plans. Various government departments and social organizations have started realizing that such studies are imperative for effective development as well as execution of the welfare schemes (see Jain, 1993). Marketing research is, thus, coming up today as something which could do more than help selling soaps. It is gradually becoming a part and parcel of the process of social change and better governance of the country (Bijapurkar, 1988).

(E) GROWfH OF INDEPENDENT MARKETING RESEARCH AGENCIES

The other major development is that most of the new marketing research Management

& Change, Volume

J. Number

1 (April, 1997)

P'"'''''t'''

88 Marketing Research in India agencies have been set up by the professionals on their own. As these agencies are not mothered by business houses or advertising agencies, they are able to function quite independently and are entering into newer research areas with greater degree of professionalism and innovativeness. (F) RAPID EXPANSION OF SYNDICATED RESEARCH SERVICES

Phenomenal growth of syndicated research services is, indeed, a significant achievement for the research industry. With marketing research costs soaring up, both the clients and research agencies have started showing interest in syndicated research. There are certain research projects which entail national coverage and/or longitudinal studies like retail audits and national readership surveys. Data collection costs for such projects are so enormous that it is well beyond the means of a single client. Only through adoption of syndicated research approach, such projects have become viable. Since the syndicated research is considerably cheaper than customized research, their lower prices have not only stimulated demand for marketing research services but have also injected a fair degree of profit stability into an otherwise insecure industry. To the clients, the major advantage is that not only the initial cost of obtaining information is low, but they are also able to get the updates regularly at a nominal cost. ORG, IMRB, Pathfinders, MODE, MRAS, MARG, NCAER, MudraSAMIR etc., are the important research agencies in the country that provide syndicated research services to business firms. They maintain panels of consumers, retailers and other respondents spread all over the country to collect data on a continuous basis about the brand's off-takes, dealer penetration (i.e. reach or distribution of products) and market shares of different kinds of consumer as well as industrial products at all India, zonal and state levels (Jain, 1993). Besides collecting product-specific information, a few syndicated research studies have been conducted in the country to gather data about general marketing issues such as emerging valu~s and attitudes of the youth ofthe eighties, likes and dislikes of children, psychographic profiles of urban housewives, effect of dealer promotion campaigns, working women's awareness and attitudes towards various saving schemes. Syndicated studies have also made a dent in the area of media research. The most important one is the National Readership Survey (NRS). So far, four NRSs have been completed. The first NRS was conducted by ORG itself in 1970. The second one was carried out jointly by ORG and Management

& Change, Volume

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1 (April,

1997)

,,"2"11''''111

Jain

IMRB in 1978, covering press as well as radio, cinema and TV. The third one was exclusivelyconductâ&#x201A;Ź:d by IMRB in 1983. The report also provided a consumer profile of300 newspapers and magazines. In 1989. ORG once again independently conducted an NRS, but its survey suffered from some incorrect projections in some areas. In view of the errors in ORG survey. IMRB and MARG brought out a new survey report in 1991. known as NRS-IV, which is a very comprehensive study and provides vIewershIp data on video and cable TV too. In addition to NRS, several other syndicated media research studIes have come up in the country. ORG's advertisement audit, for instance. gIves information on competitive advertising in terms of estimates of expendi ture and exposures achieved by each of the brands advertised in press and TV (Sonia and Mehta, 1993: 108). IMRB has also initiated Businessmen's ReadershIp Survey to study readership habits and profiles of various professionals. Television Rating Point (TRP) and Telefacts are its two other syndicated media research services. While the former provides TV viewers' profile, the latter provides data about current installation and users of EPABX system. Pathfinder India is also intensively involved in syndicated media research. Its two regular syndicated research services include P: PULSE (monthly assessment of brand specific advertising salience and wear out) and P: TCRS (monitoring of product category specific TV commercial exposure). (G) COLLABORATION TION

WITH INTERNATIONAL

RESEARCH ORGANIZA-

Oflate, some of the research agencies have entered into tie-ups or collaborative arrangements with international research agencies. MRAS's affihation with Burke Research Services of United States in October 1987 to provide internationally tested proprietary services such as Bases (Burke Advanced Sales Estimating System) and Ad-Visor (a specialized technique for advertising evaluation) is one such example. Such tie-ups would enable the Indian research agencies not only to provide marketing research services of international standards in India, but would also help them in getting some of the clients of international research organizations.

Management

& Change, Volume I, Number I (April,

1997)

90 Marketing Research in India (H)1HRUST

TO QUALITATIVE

RESEARCH

Qualitative research is also fast gaining importance in India. In the wake of market place getting too cluttered with products and advertisements, marketers are finding pure demographic profiles of their customers highly insufficient in carving out a niche for themselves. Today's consumer is more than simply a male or female of a particular age and income group. He or she has a unique personality, life style and aspirations. He or she is, moreover, a person with feelings, emotions and distinct preferences. In terms of demographics, customers may appear same but in terms of psychological make-up, they differ substantially. Instead of solely depending on demographics and other quantitative inputs, the marketers have, therefore, now started demanding qualitative descriptions of their customers. Psychographies, as it has come to be called, is being increasingly used to develop a qu?litative profile of the customers in terms of their psychological characteristics. Customers' needs, motivations, aspirations, activities, interests, opinions and life styles are being increasingly researched. Coupled with demographic inputs, such insights have turned out to be extremely helpful in decision areas such as market segmentation, product positioning and copy development. For instance, when a marketer was struggling hard in India to arrive at different advertising stances for two different kinds of sanitary napkins-one with a belt and another without it, use of psychographies (coupled with demographics) greatly obviated his task. The user of "with-belt sanitary napkin" was found to be traditional, conservative, married, probably living in a joint family with children and more likely, a housewife. The beltless sanitary napkin user, on the other hand, turned out to be aggressive, sophisticated, single, holding her own in a world of men, calling the shots, leading an active social life, knew what she wanted and how to get it. The results considerably helped the marketer in identifying additional dimensions for effective product positioning and product development. Demographics alone would not have provided such insights(Sridhar, 1991: 145). A similar shift from quantitative to qualitative inputs has occurred in respect of media research. Media research is no longer simply a number crunching exercise. "OTS," "reach," "page traffic," etc., were so far the only quantitative inputs for use in media planning. Even the first three NRS surveys were designed to provide largely demographic profiles of the readers/viewers/listeners. But this has now changed. Qualitative research inputs are making. inroads. Research agencies have started providing psychographic profile of the readers/viewers/listeners of different publicaManagement & Change, Volume 1, Number 1 (April, 1997)

Jain

tions/TV and radio programmes. Media owners have also started commissioning studies to ascertain as to what image the readers hold about their publications. Since the receptivity of a medium largely depends upon its image in the minds of audience, media owners ha ve found such information quite useful In identifying opportunities for new publications or increasing the image of their existing publications (Ayer, 1987: 83). (I) CHANGES IN RESEARCH MEmODOLOGY

Research methodology has also undergone changes in terms of improvement or adaptation of existing tools and techniques as well as the addition of new ones. TV meter, people meter, psychodrawing, synetics, neuro-linguistic programming (NLP) are but a few examples. Use of TV meter and people meter constitute a significant improvement over the traditional "recall" and "diary method" which the research agencies like SAMIR, MRAS and IMRB have used for measuring programme audience. Psychodrawing is another technique that has come to be used for gaining a better understanding of the consumer behaviour. This technique enables the consumer to express their feelings towards a product or company through pictures or drawing. Synetics and neuro-linguistic programming, on the other hand, are somewhat more sophisticated data collection techniques that have been borrowed from the field of psychology to penetrate deeper into the consumer thought process. Synetics, for instance, gives the researcher an access to intuitive or emotional impressions of the customers for either a brand or a campaign by unleashing creative side of the people. People under such a study are asked to go through a series of games designed to lower their inhibitions which help in unleashing the child present in every adult. And since the creativity works at the child level, the exercise comes out with original ideas for use in advertising campaign to enable the marketers to get consumers' real feelings about a product. In India, Quantum Market Research Pvt. Ltd. (a splinter group from MARG) is given the credit of being the first research agency to have used this technique. Lintas India has also been reported to have made use of this technique (Chirawari, 1991: 130). Neuro-linguistic programming is another technique which tries to get at the root of what consumers feel about an advertisement rather than what he superficially recalls, and thus provides an invaluable insight into the nonverbal impact of the advertisement on the audience. This is achieved by analyzing as to which of the five senses a person uses to recall an adverManagement

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92 Marketing Research in India

tisement. IMRB was the first agency in India to use this technique. Onida campaign is a classic example where use of this technique was able to reveal strong sensory effect of the advertisement such as rasping voice and shattering glass. Application of conventional qualitative research, on the other hand, would not have gone beyond the "envy" and "nazar business." In the area of product research, simulated test marketing technique has made a beginning. Since the full scale test marketing is quite expensive and is also not considered much secretive, research agencies have started showing preference for miniaturized and closed door version of test marketing. Simulated test marketing technique is not only cheaper, but also gives faster results and requires smaller samples. Even in the field of data analysis, some changes have taken place. With increasing market complexity, univariate analysis is giving way to multivariate analysis. Cluster analysis, conjoint techniques and perceptual mapping have no longer remained esoteric concepts taught in business schools alone. These have rather come up as important methods for finding sensible solutions to complex problems (Bijapurkar, 1988). In-house computers have also come up more as a necessity than luxury. Research agencies have started employing advanced software packages to speed up the data recording and analysis processes. PROBLEMS INDIA

FACED

BY MARKETING

RESEARCHERS

Though marketing research is gaining importance in India and has also undergone several qualitative changes, yet all is not well in this sphere. Marketing researchers continue to face various problems. Apart from socioeconomic and infrastructure problems that hamper timely and effective execution of the research projects, researchers also fail to get full support from managers. It is because of such hurdles that the Indian research industry still continues to scratch the surface as against its size which should have been fifteen-fold of what it is today (Sharma, 1990: 33). Some of the major problems currently faced by the researchers in India are as follows: (A) COUNTRY'S LARGE AND HETEROGENEOUS

POPULATION

India's large population does come in a big way in executing the studies within the stipulated time period and budget constraints. Diversity of the population too makes the research task much more arduous. Being a big Management

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and diverse country, a national survey requires India to be divided into at least 1000 sampling districts and interviewing at least 10,000 people spread over a vast area (Kumar, 1985: 121). This means employing a large field force and spending considerable time and money in completing research project or else using a smaller than required sample and compromising with the validity of the information collected. (B) DIVERSITY OF LANGUAGE

Added to the problem oflarge and heterogeneous population is the problem of multiplicity oflanguages. More than 14 language are spoken in the country, with dialects exceeding 1,400 in number. Any major survey in thecountry, therefore, calls for the translation of the questionnaire in a minimum of five or six languages. Such an exercise not only adds to the cost of doing the survey, but it also raises other problems. Since certain phrases and terms (such as "brand" and "model") cannot be meaningfully translated into different languages, it means designing afresh different questionnaires so as to take care of language nuances. Translation of questionnaires by non~research people also sometimes gives rise to problem of data non-comparability across the regions. . (C) INFRASTRUCTURAL PROBLEMS

The research firms in India are greatly constrained in their efforts due to lack of infrastructural facilities. As the communication and transport networks are not yet fully developed, it becomes very difficult to reach the people residing in far-flung areas. And if such people are excluded from the survey, the sample ceases to be the true representative of the country's population. Furthermore, as only few people in India have telephones In their homes arid a majority of the people are illiterate, the researchers are forced to make use of personal interviews which turn out to be quite timeconsuming and expensive. Absence of secondary data is another infrastructural problem that the researchers face in developing suitable sampling frame for conducting sample surveys. Though census is conducted after every ten years in the country, yet the full results are never released in time. To develop sampling frames for industrial surveys, one needs a complete list of manufacturers and traders. But neither the national sample survey nor the industry and trade associations provide production or sales-wise breakdown of the manufacturers Management

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and traders. What to speak of the availability of firmwise production or sales data, it becomes an uphill task in many cases to obtain even a complete list of the firms in a particular industry or trade, especially those operating in the unorganized sector. Absence of suitable sampling frame, in tum, forces the research agencies to make use of non-probability rather than probability sampling methods, and this adversely affects the reliability and validity of the collected data. Many a time, this also precludes statistical testing of the research results. Even the production and sales data made available by the industry and trade associations suffer from the problem of underestimation for obvious reasons, and hence, cannot, be reliably used for purposes of national projections and sales forecasting. (D) MANPOWER PROBLEM

Manpower crunch is another serious problem. Since marketing research has not yet gained much popularity, only a few management graduates opt for specialization in marketing research. In the absence of regular business, very few research agencies in the country maintain permanent field staff and train them. As most of the research agencies use temporary staff to carry out field work and pay them on the basis of per completed questionnaire, these people tend to ignore quality and even do not hesitate in resorting to data fudging in a bid to make more money. (E) METHODOLOGICAL

PROBLEMS

Many of the research toois and techniques used by researchers in the country are not only outdated but are at times borrowed from advanced countries with little or no adaptation. Little basic research is done within the country to assess the validity of different research instruments or to develop new techniques relevant to the country's socio-cultural milieu. Researchers, for instance, resort to structured questioning method which the Indian consumers, especially the housewives or the people living in rural areas, find difficult to comprehend. Even the use of Likert and other scaling techniques has been reported to be somewhat questionable, especially with the less educated people. As pointed out by Chib (1983), it is not only difficult to translate the scale but it is also "often difficult to administer it in regional languages. The questions are difficult to understand or compreManagement & Change, Volume I, Number I (April, 1997)

Jain

hend and hence, answers tend to be erratic, and not meaningful or consistent" (Chib, 1983). Overuse of certain cities for test marketing of new products is also a major problem. Excessive use of Bangalore as a test city by the research agencies is a glaring example. If several new products or too many products in the same category are tested at the same time, this makes consumers less responsive and distorts test results (Khanna et at.. 1990: 110). (F) AITITUDINAL PROBLEMS

Besides large size of the country and infrastructural barriers, another major problem is the lack of sufficient demand for marketing research services. Unlike a high incidence of marketing research usage in other countries, Indian firms continue to spend very little on marketing research. Besides protected nature of the market, attitudinal problems have been responsible for this phenomenon. The study by Consulting and Research Group (CORE) in this respect brought to the fore many interesting results (Rao, 1986: Ill). Though more than 91 percent of the surveyed executives' opined that marketing research is helpful in their work, only about 67 percent felt that marketing research findings represent the real world and the marketing research data are reliable enough to be used in decision making. Further, only 58 percent of the executives expressed disagreement with the statement that "costs incurred on marketing research are low related to benefits that accrue from it." , Disagreement with the statement "gut feeling is more important than the marketing research," by only 57 percent of the executives shows that the rest of them did not have a favourable attitude towards the need for marketing research. The disagreement with the statement was found to be more prevalent among the consumer goods companies, large firms and public sector undertakings than their counterparts, viz., the industrial companies, small firms and private sector companies. This means that the latter type of companies still continue to attach more importance to gut feelings in decision making. The managers also appeared quite concerr..;::dwith the time involved in marketing research. Only 42 percent disagreed with the statement that "marketing research often takes too long to be of any real use". Marketing research in Indiawas, furthermore, viewed by a majority of the executives as less sophisticated. In terms of quality too, marketing research was reported to be lagging far behind. Only 25 percent of the managers agreed Management

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with the statement that "quality of marketing research services available in India is very good." A few executives also expressed the opinion that relatively fewer number of firms are capabie of undertaking industrial marketing research or have base and penetration in the farming community. They, moreover, complained that the researchers too often make the research findings less categorical by adding qualifying statements or terms such as "under the circumstances" and "within the research universe." A perusal of other reports and write-ups in the area bring to the fore similar perceptual problems. Clients, for instance, have been found less confident with the syndicated research services. Time and again discrepancies have been pointed out between the clients' figures and those of the syndicated research agencies. Estimates of brand share and market size have been reported going awry often to the extent of 10 to 20 percent (Kumar, 1985). Accuracy, moreover, has been found to be differing from product to product. In view of such discrepancies, many firms use such syndicated data for purposes of looking at trends only rather than making any specific use of these figures (Sonia and Mehta, 1990: 108). . Marketing research agencies have also been reported to be highly selling-oriented, and often work in isolation. Even if some agencies appreciate clients' involvement in different stages of research, some clients find it difficult to interact with them because of their offices being easily accessible to them. This sometimes results in totally skewed information, not borne out of the actual experiences of the clients (Rao, 1986: Ill). Advertising agencies in particular constitute the clients which have not showed much interest in marketing research. In 1988, about RS.l 078 crore were spent on advertising (The Economic Times, December 15, 1988). Even assuming one percent of the turnover as expenses on research, the expenditure on research by the advertising agencies alone comes out to the order of RS.l 0.78 crore. But this is not true, as the total size of the marketing research industry itself was just RS.I0.06 crore in 1988-89. The feeling in the advertising industry is that advertising being an art does not need much of research. Gut feelings and creative intuition are considered more important. Therefore, little research is commissioned, and also the results ofthe studies conducted are not held in high esteem. Advertising professionals, more often, view marketing research as an interference in their creative work because of the lack of appreciation of research techniques and value of advertising research. Shortage of resources, especially in the case of small advertisers and advertising agencies, has also Mallagement & Change, Volume I, Number I (April, 1997)

Jain

been an important reason for low expenditure on advertIsing research. But the problem seems to exist more on account of mental barriers than lack of funds.On the whole, the above discussion brings to the conclusion that although many a company perceive marketing research as of great need to them, it is yet considered to be operating at an elementary level and lacking much of sophistication. FUTIJRE OF MARKETING RESEARCH IN INDIA With recent liberalization of the government's industrial and trade policies and competition hotting up in the country, the use of marketing research in India will undoubtedly register a phenomenal upsurge. As per a projection made by the Marketing Research Society of India, the demand for outside research services alone is expected to go up to about RS.70 crore by the turn of the century. In addition to a quantum leap, marketing research in India ISexpected to witness several other developments. Both the marketing research users and uses will undergo significant changes. While the manufacturers of consumer goods in the private sector would continue to dominate the scene, many other types of companies dealing in services, consumer durables, agricultural, industrial and pharmaceutical produc;ts would emerge as the important users of marketing research. With delicensing of many industries and an ever increasing drive for diversification, more and more new products would enter the market, thus requiring greater new product positioning research. Instead of enlarging in-house research facilities, a larger number of advertising agencies would also start commissioning out-side research. Public utilities and othernon-governmental non-profit making organizations would also start making greater use of marketing research in theIr decision making. With comparative testing of various products becoming popular in the country, consumer organizations would also emerge as important users of marketing research. Rural markets in the country are also in transition. With increased prosperity, development of mass media and greater exposure to urban culture, demand for a variety of products has already increased manifold in the rural areas. As many of the marketers are interested in venturing into rural markets, they will increasingly demand data about rural markets which are at present conspicuously lacking in the country. In a similar vein, many more Indian firms would enter into international markets. As international markets are more competitive and buyers are Management

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more sophisticated, a wide variety of data wouldperforce come in demand for effective international marketing decision making. In the wake of these changes, marketing research industry would also undergo a metamorphosis. Not only the number of marketing research agencies operating in the country would increase, but many of them would also grow into regional and national research agencies. With more specialists and professionals entering into the industry and many more research agencies entering into tie-up arrangements with the international research firms, research methodology and quality of marketing research services would considerably improve. Indirect questioning techniques such as psychodrawing, synetics, neurolinguistic programming and other projective techniques would gain importance to uncover consumers' true feelings and expectations. In addition to audiometer and peoplemeter, other mechanical devices such as psychogalvanometer, eye-camera, tachistoscope and Automatic Scanning of Universal Product Codes (ASEPTIC) as in vogue in other developed countries would gain acceptance among the Indian research agencies for a speedy and accurate measurement of programme audience, store traffic and consumer reactions to various marketing stimuli. Psychographics and simulated test marketing techniques would also become more popular. All these developments coupled with greater use of computers and other hardware would inevitably make the industry highly capital intensive-well.beyond the need of small players in the market. To capitalize the emerging market opportunities, marketing research firms will have to make heavy investments in both equipments and people. Since it will be well beyond the means of a single research agency to take up the entire task, the problems to a great extent can be overcome by forming some sort of consortium of research agencies for developing data banks and other infrastructural facilities for common use by the research agencies. Such a move on the part of the research agencies would not only avoid duplication of research efforts and facilities (such as developing separate sampling frames and maintaining separate field force and consumers/ dealers panels in the same location), but it would also substantially reduce the data collection costs and time. Another major task which the marketing researchers are required to seriously take up is to improve the reliability and validity of research results. Instead of blindly applying various instruments and techniques, researchers would have to start making use of reliability and validity tests for deciding as to which of the given instruments or techniques best meets the research Management & Change, Volume 1, Number I (April, 1997)

Jain 99

requirements. As many Indian firms still continue to be un favourably disposed to marketing research, something urgently needs to be done to change this attitude. A closer interaction with the decision makers at all the stages of study can go a long way in making the research findings really useful to the decision makers. Marketing researchers would also have to develop a broader perspective of their role. Instead of simply acting as data providers, they would also have to undertake the job of educating the decision makers as to what the collected data mean and how the same can be utilized in decision making. The researchers would, moreover, be required to get properly equipped and trained in the art of decision making because in future more and more firms would expect them not only to provide data but also to assist them in solving their problems and formulating marketing strategies.

REFERENCES Ahluwalia, Titoo (1990) "Random Thoughts," January, Advertising and Marketing, 44.

Ayer, Basker S. (1987) "Media Research: Qualitative Inputs Too," August 9, Business India, 83. Bijapurkar, Rama (1988) Presentation made at a Seminar on Marketing Research, February, Salus. Chib, Ranjit (1988) Presentation made at a Seminar on Marketing Research, February, Salus. ----(1983) "Problems in Market Research in India," September 14, The Economic Times. Chiravari, Sreya (1991) "The Questions of Quality," The Best of Brand Equity, An Economic Times Publication, 130. Cox, Donald F. and Robert E. Good (1967) "How to Build a Marketing Information System," May-June, Harvard Business Review. 145. Jain, Sanjay K. (1993) "Marketing Research Services Marketing," in Ravi Shankar (ed.) Services Marketing' The Indian Experience. New Delhi: Manas Publications. Khanna, Indira, Deaprasad Purokayastha and Dharni K. Pani (1990) "Test Marketing: Feeling the Market Pulse," November 26-December 9, Business India, 110. Kotler, Philip (1992) Marketing Management.' Analysis, Planning, Implementation and Control, 8th ed. New Delhi: Prentice Hall of India Ltd .. Kumar, P. Shiva (1985) "Market Research," July 1-14, Business India, I J 9. Malhotra, Naresh K. (1993) Marketing Research: A n Applied Orientation. New Jersey: Prentice Hall. .Montogomery, David B. and Charier B. Weinberg (1979) "Toward Strategic Intelligence Systems," Fall,Journal o.fMarketing, 41: and Brian, Richard H. and James E. Stafford (1968) "Marketing Information System: A New Dimension for Marketing Research." July, Journal of Marketing, 19. Rao, Sushila (1986) "Marketing Research in India: The state of the Art," November 17-

Management

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100 Marketing Research in India 30, Business India, 111.

Sharma, Rahul (1990) "Market Research: Keeping up with Business," March 4, Business India, 135.

Sonia and Dushyant Mehta (1990) "ORG-A Front Runner in Market Research," December, 10- 23, Business India, 108. Sridhar, R. (1991) "Arriving at the Right Profile," The Best of Brand Equity, An Economic Times Publication, 145.

Sanjay K. Jain, Ph.D., is Reader in International Marketing in the Department of Commerce, Delhi School of Economics, University of Delhi, Delhi-II 0007. Earlier, he was Associate Professor at the Indian Institute of Foreign Trade, New Delhi. He specializes in the areas of marketing, marketing research, and international marketing. He has authored more than sixty research papers presented at national and international conferences, and published in journals in India and abroad. He is the author of the book, Export Marketing Strategies and Performance: A Study of indian Textiles (Volumes I & II). Presently, he is working on a UGC sponsored research project on "Internationalization of Indian Business Firms: An Empirical Investigation. "

Management

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RELATIONSHIP MARKETING IN INDIAN SERVICE ORGANIZATIONS: THE NATURAL FACILITATORS AND THE LEVELS

Mohan L. Agrawal

Marketing discipline is under massive throes of a transition. Its "mid-life crisis, " as McKinseys put it in 1993, seems to havefuelled, rather furiously, a search for those paradigms of marketing that would work better in the developing environment One outcome of this effort appears to be the stress on relationship marketing (RM) It has been branded as a viable marketing strategy. The core of RM is "to direct all marketing efforts towards establishing, developing and maintaining successfz" relational exchanges with the target customers. " Service organizations can particularly benefit byfollowing the RM approach. The paper, thus, seeks to explore the nexus between naturalness of RM and the characteristics of services industries more closely. It does so in the context o('three types of services industries in India. They are: equipment-dominant services; people-dominant services; and the services where both cllstomer and marketer play an equal role in producing the service. Similarly, three levels of RM are examined. They are: economic incentives-oriented RM; emotions-oriented RM; and the structure-oriented RM. The paper asks several questions. For instance, when is relationship marketing most natural to happen and in which services industry? What role does service typology play in deciding If the RM would work? What forms ofRM are practised in these organizations? Why do companies prefer oneform ofRM over the other? These very questiollS are asked and answered with empirical evidences from India in this work-in-progress paper

THE BACKGROUND was t in the mid-eighties that relationship marketing was proposed as an mdlCatlOnof the emergence of a new marketmg paradIgm (Gummesson. 1987). Sinee then, the view has been confirmed by several authors in a variety of perspectives (Gronroos 1990,1994,1995; Webster, 1991;

This paper was submitted to the Eighth Biennial World Marketing Congress, at Kuala Lumpur. Malaysia, (track: Sales management. Business to Business and Relationship Marketing), June 24-27, 1997. Management & Change, Volume I. Number I (April, 1997) 1997 by Institute for Integrated Learning in Management. All Rights Reserved,.

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I02 Relationship Marketing

Gummesson, 1993). The latest state-of-the-art articles on marketing record it as an established fact of the contemporary marketing life around the world (Brady and Davis, 1993; Denison, Tim and McDonal, 1995; and Lynch 1996). Kotler (1992) asserted that the companies must "move from a shortterm transactional goal to a long-term relationship-building goal." Many, however, believe that relationship marketing was visible in the sixties itself, albeit in the context of business to business marketing, when the University ofUppsala investigated what it called "the interaction approach" to industrial markets (Blois, 1996:163). The major assumed benefits of the relationship marketing are: lower cost of marketing exchange over a long period; decreased search cost for the customer; creation of trust and commitment in relationship; creation of common growth for the customers and marketers; higher customization in the marketing efforts; increased customer satisfaction; better employee retention and pride in work; customer loyality; and insulation from competitors, etc. According to several marketing strategists, relationship marketing is the answer to the niche marketing environment of the nineties. THE CONCEPT

OF RELATIONSIDP

MARKETING

(RM)

Relationship marketing or RM, as it will be used in the rest of the article, has been described in the marketing literature by a variety of names such as retention marketing, loyalty marketing, long-term marketing, Key account selling, etc. Although the terms are not exactly interchangeable, they have the same intent. After a decade or more of hearing about RM, one would have assumed that the term has a clear definition. Unfortunately, as Gummesson (1994) noted, "Its operational contents are (still!) unclear." Most authors have accentuated in their prescriptions ofRM, on its output measures, i.e., what a RM can or should yield. Thus, RM addresses "the dual concern '.gf getting and keeping the customers" (Christopher, 1991);or, RM "refers to all marketing activities directed towards establishing, developing, and maintaining relational exchanges" (Morgan and Hunt, 1994). They also believe that RM seeks to create "trust and commitment on part of customers and marketers for each others." Thus, the essence ofRM is sincerity, trust, hard work, and long-term horizon and desire to yield common goals, in pursuing a relationship with customers. RM is not to be confused with family terms like marketing relationship or marketing of relationships (Agrawal, 1996). Thus, a marketing relationship refers to "a managed context within which formal transactions between a customer and a supplier (in the form of Management & Change, Volume I, Number 1 (April, 1997)

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manufacturer, retailer or service provider) are supplemented by voluntary and reciprocated actions by both parties, the effect of which is that the probability of future transactions between the two parties is increased" (Christy, Oliver and Penn 1996: 177). Thus, marketing relationship merely indicates "the existence of a real or potential continuity in transactions between a customer and manufacturer, which may not be necessarily based on the pholisophy and aims of RM' (Agrawal, 1996). Similarly, RM is also not to be confused with the marketing of relationships (Agrawal, 1996). Essentially, marketing of relationships is like a new tool in the promotion armoury of a marketer. It refers to "a marketing desire and efforts to encash as well as leverage on the relationships." By this description, marketing of relationships is said to occur when a company practices relationship marketing for a purpose that goes beyond the essence 0 f RM. THE SERVICE TYPOLOGY Services, by nature, are essentially intangible (Kotler, 1995). They differ from products significantly, since they may not have a physical form leading to an uncertainty in their definition, outcome, and evaluation. The key challenge of the services marketing is to tangibilize the services as much as possible, communicate their benefits to customers effectively, and regulate the quality of services (Berry, 1991). All services are not the same since the element of tangibility varies from one service to another (Palmer, 1995). Thus, medical consulting is not the same as X-t:.ay tests done on medical advice. The former is persondominant service while the latter is equipment-based service. In the same manner, psychiatric treatment is different from both medical consultation and the medical X-ray examination, even though all the three belong broadly to the category of medical care industry and that, all of them may be suggested by one service provider, may be the physician. Psychiatric treatment requires an immense degree of participation and input from the patient. This is a classic case of the customer as the co-producer of the service. Parallel examples can be found in the IT industry, education and training, cargo services, insurance, and banking services, etc. The message is unmistakable: don't treat services the same as they are not the same even though they may belong to a broad category.

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LEVELS OF RM Relationship marketing or RM is multi-dimensional. As Gronroos (1995) cautioned, "there is no single paradigm of relationship marketing nor should one expect it to work that way." Hence, different forms ofRM are available and practised. Parasuraman, Berry and Zeithaml (1991) have detailed this aspect and have identified the following three levels ofRM with the broad description as mentioned below: RM Levell: Price-preference based or the economic incentives to the relationship customers. The examples of this relations approach are the frequent-flyers schemes; price-off coupons to the repeat purchaser; credit facility, etc. RM Level 2: Feelings-based or emotional-gains oriented. Here, the relationship customers get such emotional rewards like easy recognition, greetings on personally and professionally important dates and the like. RM Level 3: Structure-oriented. Here, the total organization is oriented to the concept ofRM. Specific individuals are no longer critical in achieving relationship marketing in the organization since the structure takes over and is re-engineered to the RM. This is an organization where relationship orientation is practised at all levels and in all departments (Day, 1994; Fipo 1991; Gronroos, 1990; Ruckert & Walker, 1987). In other words, RM too has a continuum (Gronroos, 1995) that can suit the various needs and intents of different service organizations. RM: THE NATURAL FACILITATORS Even though there is no doubt about the effectiveness and the need ofRM irrthe modem organizations (Hoy & Uhlamann-Maier 1996; Hunt 1994; Denison, Tim and McDonal 1995), it will be wrong to say that every organization is a natural candidate for adopting RM (Blois, 1996; Christy, Oliver and Penn, 1996). Instead of being natural, RM may be foisted or forced in the organization. The natural facilitators of RM can be categorized under three broad heads: they are, customer related facilitators (e.g.; customer's demographic and psychological needs for being a relationship customers; customer's level of involvement shown in the purchase); product related facilitators (e.g. the after-sales needed in the product; need of a periodic upgrading of the product); environment related facilitators (such as the extent of customer awareness; Management & Change, Volume 1, Numberi

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customer orientation; trust and commitment; quality consciousness). When these facilitators are not present and still the RM is sought to be practised. RM will be deemed to be foisted or forced on the organization. VULNERABILITY

OF SERVICE ORGANIZA nONS

Service organizations are most vulnerable to the charm and the attractiveness of RM. For one thing, the word service is seen as another name for relationship. For another, the fixed costs are extremely high and one-time while the variable costs are hardly any unlike in products; hence, the service organizations need to have several transactions before they break even. In India, as per one study, a customer must have at least twenty transactions with a credit card in a year before the credit card issuing company could break even the cost of issuing the card. Such examples are not unique to banking; air travel industry is another area where repeat business is most crucial for their operative profits and survival. THE RESEARCH

HYPOTHESES

The research is testing the following hypothesis: HI. RM intent varies from one service to another. H2. RM is more widespread in the people-based services than in equipmentbased services. H3. RM is not widespread in the services that require customersto produce servIces. H4. The level ofRM Jaries not only across the services industries but also within firms in the same services industry. H5. RM needs natural facilitators to flourish. H6. Wherever RM is forced, it is due to the fad for the RM. THE RESEARCH

METHODOLOGY

A mix of research strategies is in use for obtaining data and testing the specific hypotheses. Thus, a thorough media scan of leading journals of India like the India Today, Business India. Business World, Business Today, The Economic Times, and The Times of India is being set up for identifying advertisements that relate to RM, and which appeared during the year 1995 and 1996. Attempts are on to identify the key criteria that will clearly determine the typology of the services used in the research as well Management & Change, Volume I, Number

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Relationship Marketing

as the levels ofRM. This will answer hypotheses I to 3. Hypotheses 4 to 6 are sought to be investigated through a set of structured questionnaires.

THE EXPECTED CONTRIBUTION The proposed research has several expected benefits. First, it should clarifY that the relationship marketing is not a fashionable term, and that it has its own boundaries. Secondly, it will clarifY to many of us that relationship marketing is not to be practised forcefully when natural facilitators are not supporting it. It will have sub-optimum output. Thirdly, it will help us know which level of RM is most common or most preferred in which type of service industry. Fourthly, the research should caution the practising companies of relationship marketing that it is not a promotional gimmick only. Finally, the research will provide a flavour of the practice of relationship marketing in a country like India which is trying to integrate fast with the world economy as well as showing very unmistakable drift towards customer orientation. REFERENCES Agrawal, M. L. (1995) "You Haven't Seen All: Customer satisfaction Research," EMAC, Paris Conference Proceedings. ___ ( I996) "Relationship Marketing or Marketing of Relationships: Disturbing Evidences from India." A paper submitted for the EMAC Conference. Blois, K.1. (1996) "Relationship Marketing in Organizational Markets; When it is appropriate?" 12, Journal of Marketing Management, 161. Brady, 1. and I. Davis (1993) "Marketing's Mid-life Crisis," 2, The McKinsey Quarterly, I7. Copulski, J. R. and M. 1. Wolf, (1994) "Relationship Marketing: Positioning for the Future," July-August, Journal of Business Strategy, 16. Christy, R., G. Oliver and 1. Penn (1996) "Relationship Marketing in Consumer Markets," 12, Journal of Marketing Management, 175. Day, G. S. (1994) "The Capabilities of Marketing Driven Organizations," 58, Journal of Marketing, 37. Denison, Tim and McDonal (1995) "The Role of Marketing: The Past, Present and Future," I, Journal of Marketing Practice/Applied Management Science, 54. Ffpo, J. P.( 1991) "Service Firms: Interdependence of External and Internal Strategies," 20, European Journal of Marketing, 4. Gronroos, C. (1990) "Relationship Approach to Marketing in Service Contexts: The Marketing and Organization Behaviour Interface," 20, Journal of Business Research, 3 ___ .(1994) "From Marketing Mix to Relationship Marketing: Towards a Paradigm Shift in Marketing," 32, Management Decision, 4. ___ (1995) "Relationship Marketing: The Strategy Continuum," 24, Journal of Management & Change, Volume I, Number I (April, 1997)

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107

Academy of Marketing Science, 252. ( 1994) "Quo Vadis, Marketing? Towards a Relationship Marketing," 4, Journal of Marketing Management, 113. Gummesson, E. (1987) "Using Internal Marketing to Create New Culture: The Casc of Ericssion Quality," 21, Journal of Industrial Marketing Management, 299. ____ ( 1987) "The New Marketing-Developing Long-term Interactive Relationships," 20, Long Range Planning, 77. ____ (1993) "Relationship Marketing: A New Way of Doing Business," 3Q, European Business Report, 52. Harrel, G. D. and M.F. Fors (1992) "Internal Marketing of a Service," 2, Journal 0/ Business and Industrial Marketing, 23. Hoy, D. S. and A. Uhlamann-Maier (1996) "The Role of Marketing Department and Marketers in Organizations of the Future." EMAC Conference Proceedings. Hunt, S. D. (1994) "On Rethinking Marketing: Our Discipline; Our Practice; Our Methods," 28, European Journal of Marketing, 13. Lynch lE. (1996) "Marketing in Transition." EMAC Conference Proceedings. Kotler, Philip (1995) Marketing Management: Planning, Analysis, Control and Implementation. New Delhi: Prentice Hall. Morgan, R.M. and S. D. Hunt (1994) "Commitment and Trust Theory in Relationship Marketing," 57, Journal of Marketing, 20. Palmer, Adrian (1995) Marketing of Services. McGraw Hill. Parasuraman, L., A. Berry, and L. Zeithaml (1985) "A Conceptual Model of Service Quality and its Implications for Future Research," 49, Journal of Marketing, 41. Percy, N. E. and R.M. Morgan (1990) "Internal Marketing: Making Marketing Happen," 8, Marketing Intelligence and Planning, 4. ____ (1991) "Internal Marketing: The Missing Half of Marketing," 24, Long Range Planning, 82. Ruckert, R. W. and Walker Jr.( 1987) "Marketing's Interaction with the Other Functional Units: A Conceptual Framework and Empirical Evidences," 51 ,Journal of Marketing, 1. Tuominen, M. and Kristian Moller (1996) "Market Orientation: The State of the Art Review." EMAC Conference Proceedings. Webster, F. E. (1991) "The Changing Role of Marketing in the Corporation," 56,Journal 01 Marketing, 1.

____

Mohan Agrawal, Ph.D., is Professor of Marketing and Coordinator of the Centre for Services Management at Xavier Labour Relations Institute (XLRI), Circuit House Area, Jamshedpur-83I 00 I, Bihar. He obtained his M. Com. (Allahabad University with a Gold Medal); M.Phi!. (Glasgow); Ph.D. (Kurukshetra); and Dip. in Marketing (Chartered Institute of Marketing, London). He is in XLRI Jamshedpur since 1984. Prior to that, he was with the Reserve Bank oflndia, Bombay; G. N. D. University, Amritsar; and Kurukshetra University, Kurukshetra. He specializes in the field of marketing, services marketing and customer satisfaction. He has published widely in India and overseas on a variety of marketing issues including customer service and satisfaction.

Management & Change, Volume 1, Number 1 (April, 1997)

ROLE OF EXPORTS IN LOCAL ECONOMIC DEVELOPMENT: AN APPLICATION OF THE PITTSBURGH REMI MODEL

Kamlesh Misra

This paper concerns the performance of export activity in Allegheny County in the PitlsburRh Metropolitan Region of the United States. Its objective is to offer perspective on the role of exports in local economic development and the policy options available to stimulate such activity. The empirical basis of this analysis is the Pittshurgh Regional Econometric Model Inc. (REM!)

INTRODUCTION

Ilegheny County and the surrounding Pittsburgh metropolitan region have experienced significant economic change in the last two decades. A transformation of the local economy has occurred as a result of differential growth rates among activities in the region. Many manufacturit:lg sectors have declined in absolute terms over this period, while the non-manufacturing sector has shown some growth, albeit modest in comparison to national trends for the metropolitan regions in the United States.The causes and consequences of such a change are welldocumented, and attention among policy makers in the region has turned to the renewal of the economic base of the region. This paper concerns the performance of export activity in Allegheny Country. Its objective is to offer some perspective on the role of export activity in local economic development and on the policy options available to stimulate such activity. The empirical basis for this analysis is the Pittsburgh REMI Model. Its data bank provides estimates of regional exports. 1 Also, the model's equation system makes it possible to forecast export activity in the region and to simulate policy options intended to encourage export sales. Section 2 of this paper provides a brief discussion of the Pittsburgh REMI Management & Change, Volume 1, Number I (April, 1997) @ 1997 by Institute fo( Integrated Learning in Management. All Rights Reserved.

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110 Role of Exports in Local Economic Development

Model. Section 3 discusses the role of exports in regional economic growth, Section 4 documents current trends in Allegheny County's exports using historical data and forecasts based on the REMI model. Section 5 discusses some policy options and presents results of REM I simulation designed to illustrate the consequences of export expansion in different industries, Section 6 draws conclusions from this study. THE PITTSBURGH

REMI MODEL

To carry out this study, the regional forecasting and simulation model developed by Regional Economic Models Inc. (REMI) for the Pittsburgh region is selected. The model is composed of two sub-models; one "core" region comprised of Allegheny county, and one "peripheral" region comprised of five contiguous counties surrounding this core. In contrast to traditional econometric models which rely on time series data to estimate structural parameters, the Pittsburgh REMI model "calibrates" the vast majority of equations on the basis of cross-sectional data available for the United States economy as a whole. The model is designed, however, to make use of available information on regional trading and purchase patterns, thus making it unique. While the region is assumed to apply production techniques that characterize the United States economy as a whole, each region has a set of trade relationships with other regions that determine the ultimate character oflinkages with the national markets. These linkages map o,ut the nature of policy impacts on regional activities. The basic theory behind the REMI modelling procedure is that economic units in one region of the country have similar behavioural characteristics to those in another; that is, there are no unique inter-regional differences in the firm or household motivations or behaviour. Observed differences among regions in reaction to exogenous shocks or policy changes can be explained by differences in industrial composition and regional purchase coefficients, and other variables which can be modelled (Treyz and Stevens, 1985; Treyz, Rickman and Shao, 1992). Therefore, the REMI model starts with a model structure based on economic theory (assuming economic units have similar behavioural characteristics) where economic response parameters are estimated and are valid for all regions of the nation. This provides the maintained structure used along with data for the local region to yield the specific calibration coefficients particular to the region. So, while people in other cities respond in the same way to incentives as those in Pittsburgh, we will find that the same national policy change will play out differently in the Management & Change. Volume I, Number 1 (April, 1997)

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Pittsburgh region than in, say, Los Angles because the mdustrial mix in the region is different. There are differences in the local resources, the purchase pattern from the local suppliers differs and for a variety of other reasons specific to the Pittsburgh region. This modelling procedure makes REMI unique in a variety of ways amongst the class of regional econometric models. It is also unique because of its complexity and dependence on interindustry links. It provides a very good basic structure with which to analyze policy questions and generate short- and long-term forecasts. Models, of course, are just models of the real world. They are simplifications of complicated underlying processes that attempt to identify the essential features of real world phenomena. Since only the essential features of a process are modelled, simulation forecasts and future forecasts cannot be expected to predict with exact precision. Therefore, the model provides a framework which will guide the policy analysts in their quest for answers. Indeed, herein lies, perhaps, the greatest strength of the REMI model: its structure is very complete with respect to demand and supply relationships underlying regional economics. Because of this, policy questions can be addressed in a consistent way, and fundamental economic issues associated with these questions can be exposed for analysis and public debate. ROLE OF EXPORTS IN REGIONAL DEVELOPMENT It is, perhaps, overly simple to describe the factors associated with regional growth by the economists' well-worn dichotomy, supply and demand. These categories encompass diverse factors affecting economic growth. Concerning sources of growth on the supply side one must consider the demographic profile of a region's population, its endowment of educational resources, the adequacy of its financial institutions, the efficiency of production and much more in understanding a region's competitIve prospects in national and international markets. Demand factors, too, are complex as they involve working out the play of forces involved in such trends as the spatial distribution of nations' population and international exchange rates on local producers. So to single out one element of growth-regional exports-for special analysis involves special risk; the risk that too much emphasis may be placed on this element as a causal factor in determinmg the economic fortune of the region. Exports are, nevertheless, an important element of growth. The stimulation of this source of demand has multiplicative effects on a regional economy. As the needs oflocal producers for factors of production such as Management & Change. Volume

1, Number

1 (April,

1997)

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BlI

114 Role of Exports in Local Economic Development here reflect the fact that the United States economy is growing more rapidly than that of the Pittsburgh region. Therefore, Allegheny county's export market is becoming oriented more towards national demands and less towards the demand for goods and services generated by economic activity in the Pittsburgh region. Table-3 shows the export experience of the rest of the Pittsburgh (the peripheral counties in the region) reflect very much the same factors that have influenced export growth in the urban core. Allegheny CountY has become less important export market for the peripheral counties, and export sales outside the Pittsburgh region account for an increasing share of all export activity. Table-4 and 5 discuss the industrial composition of Allegheny County's export activity by broad industry categories. Focusing first on the county's economic role in the larger region, Table-4 shows that in 1979 approximately 53 percent of all sales from firms in Allegheny County to the rest of the Pittsburgh region were accounted for by manufacturing activities (durable and non-durable goods combined). With the decline of Pittsburgh's manufacturing industries that followed in the early 1980s came a decline in this export market. By 1991, only 18 per cent of export sales from Allegheny County to the rest of the Pittsburgh were accounted for by manufacturing. In contrast, Allegheny County's export sales to the peripheral counties for a number of non-manufacturing sectors have shown absolute as well as relative growth. Most notable in this respect are export sales in finance, insurance, and real estate and in services. This shift from manufacturing to nonmanufacturing export sales within the region reflects the increaseQ importance of Allegheny County's traditional central place function in the Pittsburgh area. As the region's central county, it has always provided essential business and personal services to surrounding counties, and this function now clearly dominates its role as the centre for the larger region's manufacturing linkages. Table-5 shows the performance of Allegheny County's exports to areas beyond the Pittsburgh region by major industrial categories. In 1979, manufacturing activities accounted for 64 per cent of the county's export sales to other regions of the country and abroad. This sector's share in exports to external markets has fallen steadily since that peak. By the year 2000 manufacturing sales are projected to account for just over 44 per cent of such exports. It may be noted, however, that all of this decline is concentrated in the durable goods industries. Non-durable goods exports are projected to surpass the 1979 export levels in relative and absolute Management & Change, Volume 1, Number 1 (April, 1997)

11 I

II.

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Table 4 : Industrial Composition of Allegheny County's Exports to the rest of Pittsburgh Region

1979

Exports Percent

DURABLES NONDURABLES MINING CONT CONSTURCTION TRANSPORT + PUB UT FINANCE, INS + RE RETAIL TRADE WHOLESALE TRADE SERVICES AGRI/FORIFISH SVCS TOTAL

1987

Exports Percent

1991

Exports Percent

1995

Exports Percent

2000

Exporu

Percent

0.28

5.91

0.14

4.11

0.13

3.92

0.15

3.79

0.15

3.66

2.2

46.68

0.62

0.48

14.22

0.55

14.22

0.57

13.47

0.02

011

0.1

0.09

0 .0

0.1

0 0.2

4.34

0.2

0.26

7.73

0.3

7.82

0.33

0 7.82

0.66

13.97

0.71

6 21.6

0.72

21.52

0.82

2123

0.89

0.34

7.1

0.38

11.45

038

1136

0.43

ILl8

0.48

21 13 1]31

0.17

3.61

0.15

4.68

0.16

4.67

0.18

4.62

019

4.5]

0.87

18.36

1.09

33.06

122

36.48

1.43

37.05

1.61

38.01

0 4.72

0 3.29

100

0 3.86

100

0 4.23

100

0 335

100

Table 5 : Industrial Composition of Allegheny County's Exports to Areas beyond the Pittsburgh Region (Billions of 1987$)

I DURABLES NONDURABLES MINING CONT CONSTURCTION TRANSPORT + PUB UT FINANCE, INS + RE RETAIL TRADE WHOLESALE TRADE SERVICES AGRI/FORIFISH SVCS TOTAL

1979

Exports

Percent

8.02 4.4 002 0.42

41.4]

153 1.9 0.26 0.81 2.02 0 1937

22.7 0.11 2.15 7.91 9.81 1.33 4.16 10.42 0 100

1987

Exports Percent 5.39 3.86 0.12 0.47 1.69 2.37 0.35 0.92 2.89 0 18.06

1991

Exports Percent

2986 21.4 0.69 2.6 9.37 73.1

5.16 3.78 0.12 0.45 2.45 2.49

1.91 5.07

035 0.98 3.28

5.11 17.22

0 1908

0 100

16 0 "100

27.07 19.84 0.64 2.38 12.84 13.04 1.85

1995

Exports Percent

2000

Export, Percent

5.57 3.95 0.12 0.54 2.74 2.8

26.63 18.86 0.58 2.59 43.09 13.35

038 LI 3.73

1.82 5.24 17.83

3.18 0.43 1.23 4.28

1.87 5.28 '18.45

0 100

0 23.22

0 ]00

2993

607 429 0.12 06 3.02

2615 18.47 052 2.58 13 13.69

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116 Role ofExports in Local Economic Development

terms. Export growth is also projected in several other sectors, notably, transportation and public utilities, finance, insurance and real estate, and servIces. In order to understand the changing character of export sales in Allegheny county more fully, an analysis of detailed industry categories is necessary, For this purpose, the focus is on export sales to both peripheral areas and the national and international markets, which are the county's total exports. Table-6 provides summary statistics on exports for 48 industry categories. The data are based on estimation of exports for 1979-1991. For each industry, the average value of exports over the period (measured in constant 1987 dollars) was calculated and used to rank the industries by size. The industry ranks and average exports are presented in column 1 and 2 of the above mentioned table, The profile of exporting industries provided by this ranking is instructive. Figure- I shows this distribution in a graphical form. It demonstrated that a very small number of industries account for a large measure of Allegheny County's exports. Indeed, the first-ranked industry, primary metals, is clearly of dominant importance even after the major restructuring in this industry that took place in the last decade. Industries ranked 2 through 11 in size are also clearly grouped as important exporters. The remaining industries are in two categories; rank 12 through 35 are of moderate size, while the exports of the remaining industries are negligible.What stands out in this figure, however, is the dominance of a very small number of industries in determining the export performance of the region. At least in terms of size, it is very easy to identify important export sectors. 'Figure-2 uses the data presented in Table-6 to relate industry size and growth in exports. The average annual (compound) growth rate was calculated for each industry over the period 1979-1991. Each of the industries ranked in that table are then classified in 1\voways: (1) as to whether their export sales were above or below the average for the region as a whole, and (2) as to whether their export growth rates were above or below the average for the region as a whole. For each industry, average exports and average growth rates over the study period were calculated and the difference was taken between each of these values and the regional average. Figure-2 plots the difference from the mean export growth and the difference from mean export sales for each industry, As export sales are measured on the vertical axis, any observation lying to the right afthe midway point on the horizontal axis indicates above average growth in exports. For selected observation, the industry rank in terms of size is noted just above Management & Change. Volume 1, Number 1 (April, 1997)

"IIII'_1Il'1U'.

Figure -1 : Distribution of Exporting Activities By Average Export Sales, 1979-1991

2.5

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n fJ,fJ,fJ,n,n,o 35

'. . 37

,--1 45

Figure -2 : Outlying Export Activity as Identified by Export Sales and Export Growth in Allegheny County, 1979-1991 ~5

•

1.5

•

•• <II

.•

•• 8

• 10

•

~ E

-05

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-~,

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-5

5 Difference

from mean growth rate

Table -6 :Export Sales and Export Growth by Industry in Allegheny County, 1979.1991 (Exports in Billions of 1987$)

Industry

Difference Average Annual from mean Growth Rate size

Average Exports

Rank

-373

1.83

-548

1.58

-066

1.09

1.31

-0.66

-6.71

085

-846

065

-296

PRIMARY METALS

2.29

REAL ESTATE

2.04

CHAMEICALS

1.77

PETRO PROD

131

FdoD

1.11

-1.21

MEDICAL

1.06

5.33

WHOLESALE

1.05

1.24

FABRICATED METALS

ELECT. EQUIPMENT

0.98

MACH. & COMPUTERS

MISC PROF

Difference from mean Growth

1.09

0.6

3.58

059

-0.51

-3.58

0.54

-533

-4.2

0.52

-5.95

0.84

1.1

038

-0.65

0.82

4.39

0.36

264

AIR TRANSPORTATION

0.63

1347

0.17

11.72

EDUCATION

054

5.34

0.08

359

PRINTING

047

-0.05

0.01

-1.8

CONSTRUCTION

044

0.76

-0.02

-1.05

MISC.BUSi. SERVICES

041

645

-0.05

4.7

BANKING

3.98

-0.06

2.23

0.4

REST OF RETAIL

0.4

1.51

-0.06

-0.24

PUBLIC UTILITIES

0.36

0.62

-0.1

-1.13

STONE, CLAY ETC.

0.35

-0.72

-0.11

-2.47

INSTRUMENTS

0.34

-045

-0.12

-2.2

EATING/DRINKING

0.28

236

-0.18

0.61

COMMUNICATION

0.26

1.23

-0.2

-0.52

REST TRANS EQUIPMENT

0.24

-0.99

-0.22

-2.74 -3.71

0.24

-1.96

-0.22

0.24

6.35

-0.22

4.6

PER SERIREPR

0.24

3.52

-0.22

1.77

CREDIT & FINANCE

0.23

8.6

-0.23

6.85

TRUCKING

0.22

041

-0.24

-1.34

INSURANCE

0.21

2.62

-0.25

0.87

RUBBER (30)

0.19

2~28

-0.27

0.53

AUTO REP/SERV

0.19

0.5

-0.27

-1.25

RAILROAD

0.15

-2.58

-0.31

-4.33

NON-PROFIT

0.15

5.17

-0.31

3.42

HOTELS

0.12

-1.29

-0.34

-3.04

MISC. MANUFACTURING

0.1

1.24

-0.36

-0.5.1

FURNITURE

008

1.95

-0.38

MINING

0.07

34.07

-0.39

3232 ,1.68

PAPER . OTHER TRANSPORTATION

0.2

LOCAUINTERURBAN

0.06

0.07

-0.4

AMUSE & RECREATION

0.06

4.59

-0.4

2.84

MOTION PICTURES

0.06

-0.08

-04

-1.83

LUMBER

0.04

3.36

-0.42

1.61

MOTOR VEHICLES

0.04

-4.24

-042

-5.99

APPAREL

0.03

-0.56

-0.43

-2.31

TEXTILES

0.01

-1.12

-045

-2.87

LEATHER

0.01

-6.21

-045

-7.96

PRIV. HOUSEHOLD

0.01

043

-045

-1.32

AGRIIFIF SERV

0.01

-1.54

-045

-3.29

0.46

1.75

AVERAGE

120 Role of Exports in Local Economic Development the plotted values. Several c<msequences can be drawn from this figure. First, the majority of the very large exporters in the region have had below average growth in export sales over the 1979-1991 period. The industries ranked 1 (primary metals), 5 (food processing), 8 (fabricated metals), 9 (electrical equipment) in terms of size, each fall into this category. Second, industries ranked 6 (medical) and 11 (miscellaneous and professional services) exhibit the best performance in terms of growth among the group of very large exporters. Finally, two of the fastest growing exporters (industries ranked 28 and 39) are of negligible size. SOME POLICY CONSIDERATIONS The discussion to this point has been largely descriptive. When one's attention turns to matters of policy, descriptions can playa useful role in helping to focus on areas of possible concern, but the motivation for policy action should follow from understanding based on analysis of the causes and consequences of export problems. On the demand side of the problem, there is little that regional policy makers can do to encourage regional export activity. This depends largely on the behaviour of national and international markets. On the supply side, the competitiveness of the local industry is at issue, and local governments may have a useful role to play in this regard. In particular, they can address questions concerning the quality and availability of public goods as well as access to public goods that can have important effects on the efficiency oflocal producers, and in this way have a dynamic effect on a region's competitive position. With the idea of promoting export activity in mind, one must first understand the problems and advantages faced by local producers from a public goods perspective. This involves careful study of local exporting activities to understand why they are growing or declining, to learn from that experience, and to promote further growth based on that knowledge. It would, for example, be worthwhile to examine in more detail some of the exporting activities (large or small) identified in Figure-2 as growing at an above average growth rates (e.g. medical, miscellaneous and professional services) to understand further the nature of their export markets and production characteristics, and to learn why they have successfully performed counter to prevailing trends in the region. Of particular interest in this respect would be the nature of their inter-industry linkages and the . advantages or constraints that they find in local markets for the supply of Management & Change. Volume I, Number I (April, 1997)

Table - 7 : REMI Forecasts for Allegheny Summary of Control Values

1991 HIST 1

TOTAL EMPLOYMENT 805.0.45

1993 FCST 1

County,

1995 FCST 1

2000 FCST1

838.766

870.521

924.271

MANUFACTURE NON MANUFACTURE TOTAL GOVERNMENT FARM EMPLOYMENT

77.164 646.039 81.128 0.714

73.751 681.939 82.389 0.687

74.721 709.649 85.49 0.66

73.169 761.463 89.041 0.599

GRP 1987 $ PERSONAL INCOME DISPOSABLE INCOME REAL DISP. INCOME POPULATION

29.246 28.998 25266 20.713 1337.6

31.752 32.678 28.495 21.636 1360233

33.448 37.004 32.22 22.319 1385.305

37.107 49.824 44.18 24.299 1438.321

Note: Dollar concepts are in billions of nominal dollars unless otherwise labled. Employment and population in thousands of people

Table - 8 Selected REMI Occpational Projections, Summary of Control Values

Engineers Scientists/Anaylsts Technicians Office

Support

Construction

Trades

Equipment

Workers

Precision

Workers

Machine

ODerators

TransDortaion

9.481 7.787 34.407 254.926 21.251 33.272 15.213 21.01 28.846

9.917 8.403 37.388 265.677 23.943 35.009 15.147 20.5 30.025

10.516 9.082 39.197 274.169 26.566 36.328 15.554 20.704 31.454

11.536 10.498 43216 287.466 28.757 38.126 15.717 20.285 33.452

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122 Role of Exports in Local Economic Development essential inputs, as this may affect their competitive position nationally. To the extent that such findings reflect issues related to functions of local governments, public policy may have a positive effect on export production. In order to demonstrate the effect of export growth on the local economy, simulations are conducted by forcing an expansion of operations in two industries, namely, the Fabricated Structural Metals and the Surgical and Medical Instruments.3 In each simulation, it is assumed that production would expand by an amount that would generate 500 new jobs in the industry in question. Of course, an expansion of this magnitude will affect many industries in the county, and the simulation makes it possible to estimate the total impacts associated with such a change.The simulations involve several steps. First, a "control" forecast was generated to the year 2000. Second, simulations were performed for each industry expansion such that 500 new jobs were added to each year of the forecast period. Finally, the difference between the simulated model solution and the control solutions were calculated.Table7 and 8 show the control values for a number of key variables. Table-7 provides information of a summary nature on employment, gross regional product, income and population in Allegheny County for several years. These forecasts are based, in part, on projections for the national economy made by the Bureau of Labour Statistics (BLS), United States Department of Labour. Since the BLS forecasts do not include any recession to the year 2000, an upward movement in employment growth is projected for the region over the forecast period. Table-8 provides projections of employment for selected occupational categories. These estimates are just another dimension of the employment forecast shown in the previous Table. Table-9 shows the regional impacts associated with each hypothetical employment expansion. An increase in employment of 500 workers in fabricated structural metal industry would yield total employment growth of 1,062 workers in year 2000; this amounts to an indirect gain of562 workers in support of the initial 500 workers in steel fabrication. Also, this translates into gains in regional output (GRP) of $49 million, and a new disposable income of $54 million. Population gains of more than 1,668 also could be expected in the county as a result of the expansion. A similar initial stimulus (500 new workers) to activity in surgical and medical instruments industry involves indirect job gains of only 506 workers, combined with the initial stimulus to account for a total employment effect of 1,006 new jobs. The very different character of employment needs, associated with expansion in each of these industries, can be seen in Table-l O. This table summarizes information provided by the REMI model on detailed job Management & Change, Volume

1. Number

1 (April,

1997)

'l'lf3!Hmlftl'

••

U""

"r="'~"-~'-----~' ~~~-~-~-~-~---------------------~---------

Table - 9: Forecast

for-Allegheny

County,

Ch'anges in Forecast growth

Fabricated

1995

Summary

Associated

of Simulatd

Impact

with employment

of one 500 workers Instruments

Metals

1995

2000

HIST

FCST

TOT Al EMPLOYMENT

1.096

1.062

1.074

1,006

MANUFACTURE

0,52 0.525 0,051 0

0,51 0,476 0,075 0

0,489 0.536 0049 0

0,472 0,463 0.07 0

0.048 0.048 0.041 0.023 1.155

0,049 0.062 0.054 0.026 1.668

0.054 0.051 0.043 0.024 1.108

0.055 0.065 0.057 0.026 1.557

NON MANUFACTURE TOTAL GOVERNMENT FARM EMPLOYMENT GRP 1987 $ PERSONAL INCOME DISPOSABLE

INCOME

REAL DISP. INCOME POPULATION

Note: Dollar concepts are in billions of nominal dollars unless otherwise labled. Employment and population in thousands of people

Table.10

Selected Summary

Changes

in Forecast growth

REMI Occpational of Simulated Associated

Projections,

Impacts with employment

of one 500 workers

Instruments 1995

2000

FCST

0,015 0.007 0.033 0.257 0.043 0.046 0.075 0.146 0.04

0.015 0.007 0,033 0.241 0,034 0.043 0.075 0.14 0.039

0.062 0.014 0.067 0,281 0.037 0.Q35 0.075 0.04 0.023

0,063 0,015 0,065 0.257 0.026 0,031 0:069 0,036 0.02

1995

Engineers Scientists!

Anaylsts

Technicians Office Support Construction Equipment

Trades Workers

Precision

Workers

Machine

operators

Transportaion

~_~~~~

"'_""'='''''''''M, .••• = ••••• "m •••

'.= •••••••

•••• llWlliIIl ••.••.. 1

124 Role of Exports in Local Economic Development

categories.4 As one might expect, the higher skill content of jobs associated with the production of surgical and medical instruments means greater need of engineers and techmcians. The hypothetical expansion in fabricated metals production places relatively larger demand on worker in the construction trades, machine operations, and transportation--the traditional "blue collar" jobs. . The difference between the size of the indirect effect associated with two hypothetical industry expansions can be traced, in large part, to differences in the character of the two industries. Each industry requires a unique mix of goods and services to carry on its operations, and the mix of skills required of workers differs markedly among industries, as has been shown by the simulation results. Also, the ability of each industry to satisfy its needs for goods and services by buying from local producers is an important factor determining the impact associated with expanded export sales. In this comparison, the fact that steel fabrication is strongly tied to the local steel industry production means that a high percentage of the inputs needed in fabricating operations can be satisfied by local sellers. "Buying locally" has important multiplier effect on the local economy, and this results in net job gains. These results highJjght the fact that careful analysis is required before one can speculate about the total local impact of such an expansion as a policy by local governments.

CONCLUSION This description and analysis document the changing character of export activity in Allegheny County. It is found that in recent years, exports from the county to the peripheral areas in the metropolitan region represent a smaller share of the county's total export activity. And, while the growth of exports from the county to areas outside the metropolitan region has been slow, these sales have, or soon will, surpass the levels achieved prior to the major restructuring that took place in the early 19805. When data are analyzed for major industrial groups, the effect of decline in the region's manufacturing base is evident. For export sales within the metropolitan area, the share accounted for by manufacturing activity has declined substantially, exposing the importance of Allegheny County's role as provider of financial and other services to the larger region. While export sales to areas outside the region are still dominated by manufacturing activity, growing importance can he attributed to non-manufacturing exports. Management & Change. Volume 1, Number 1 (April, 1997)

WlIIl'IIl'~_.lIIf __

III!.IIII'm

Misra

125

At a more detailed industry level, it is evident that a very small number of sectors account for much of the export activity in the region, sale of primary metals still dominate the mix of export goods and services. But five or six other sectors are also of notable size. Of these, three--i"eal estate, chemical, and health--have shown significant growth in the last decade. Supply side policy options should be explored by public authorities hoping to enhance export sales. The efficiency of local producers may depend upon availability and quality of public goods. Only a careful and detaIled analysis of the problem faced by local exporters and the advantages that they enjoy in the Pittsburgh region can provide the information necessary for successful public policy in rebuilding Pittsburgh's economic base in the future.

NOTES I.

For this study, exports are defined as sales by activities in Allegheny county to buyers located in other areas. Distinction is made between exports to other counties in the Pittsburgh metropolitan region, exports to the rest of the Umted States and the rest of the world. It should be noted, however, published data on regional exports are not available, and estimates of regional exports sales must be based on other data. Of course, there is error inherent in any such estimation procedure, but the REMI model makes use of accepted practices in measuring regional exports. The last historical year of data in the REMI data base is 1991. For this srudy, information on current regional employment growth patterns for 1992 was obtained from the office of Employment Security ES202 data tapes, and was used to update the REMI forecasts for 1992-2000. In order to conduct the simulation, the REMI model's capability to perform impact studies for a very detailed industries is used. However, within the model it is not possible to estimate export sales at such disaggregated levels. The REMI model provides estimates of employment for approximately 100 job categories. We have taken selected job titles from the list of those available in the model and aggregated employment into larger job categories for the purpose of summarizing the simulations.

REFERENCES Regional Economic Models, Inc. (1993) The Pittsburgh REM! Two-Area Forecasting and Simulation Model. Amherst, Mass. Treys, G. I. and B. H. Stevens (1985) "The TFS Regional Modelling Methodology," 19,

Management & Change. Volume I, Number I (April, 1997)

-----------------------'~

••••

'••• !•••• "..ll"••••• U __ •__

126 Role of Exports in Local Economic Development Regional Studies, 547. Treyz, G. I., D. S. Rickman, and G. Shao (1992) "The REMI Economic-Demographic Forecasting and Simulation Model," 14, International Regional Science Review, 221.

Kamlesh Mishra, Ph.D., is Dean and Professor, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003. His interest areas include strategic management, economics of industry and financial management. He has held teaching positions at Norteastern University, University of Pittsburgh, USA and National Institute of Public Finance and Policy (NIPFP), New Delhi. He has authored more than six reports of national significance at NIPFP, New Delhi on areas oflocal finance and state-local relations, and a book-Housing the poor in Third World Cities.

Management & Change, Volume 1, Number 1 (April, 1997)

'•••• -

AN EMPIRICAL TEST OF RANDOM-WALK THE INDIAN STOCK MARKET

MODEL ON

O. P. Gupta

Stock market efficiency has become a central paradigm in the finance literature for explanation of share price behaviour. Despite the existence of a well-established stock market in India for over hundred years, research efforts to study share price behaviour under the efficient market framework have rather been scanty It is only in the past two decades that some efforts have been made to test the applicability of the random-walk hypothesis (the weak variant of EMH) to describe share price behaviour under the Indian conditions The evidence produced by these studies supported the applicability of the hypothesis as a valid description of share price behaviour even for a developing country like India. In recent years, however, doubts have been expressed about the efficiency of the Indian capital market. This paper has been aimed at testing the applicability of the random-walk model ill explaining share price behaviour in India during the period JanuQ/)! /990 to February 1992 on a sample of 44 equity shares. The independent hypothesis of the random-walk model has been tested in terms of serial correlation analysis. In general, the results of serial correlation analysis were largelyfound to be supportive of the random-walk hypothesis, though some of the observed serial coefficients were larger than those obtainedfor studies abroad.

INTRODUCTION tock market efficiency has become a central paradigm in the finance literature for explaining share price behaviour ..The development of the concept of market efficiency, popularly referred to as efficient market hypothesis (EMH), owes its genesis to researchers' concern whether or not share prices follow a random-walk. Thus, any empirical evidence as to the conformity of share price movements to randomwalk model is taken as corroborative of the weak variant of the efficient market hypothesis. The EMHtheorists argue that in a competitive market such as a stock market, the prices of financial assets should "fully reflect" all available information and that these prices should adjust instantaneously

-------------------""

,,-IIlD.l.lI1IJ!iIII'III

128 Empirical Test of Random-Walk Model to new information. Market efficiency has, thus, two dimensions: (i) the type of information that the market is reflecting in prices, and (ii) the speed and accuracy of adjustment of prices to that information. Thus, in finance literature, efficiency is used in a much narrower sense, being concerned with the informational efficiency of the securities market. Naturally, those markets 'that adjust more rapidly and accurately to information are considered more efficient. Dyckman and Mores (1986: 2), however, question the "instantaneous" adjustment property of prices to information for " ... instantaneous price adjustment is impossible because trading does not occur continuously in securities market." Viewed in this manner, " ... a market is considered efficient if an investor with normal access to the market cannot take advantage of any delays in price adjustments reflecting new information" (ibid).Thus, it is argued that in a perfectly efficient market, one cannot use available information to obtain consistently higher than normal returns on investments. Being an extreme hypothesis, market efficiency cannot be tested directly. This is because the correctness of security prices cannot be directly observed. However, by postulating some security price behaviour that is implied by market efficiency, one can do so. Accordingly, three forms of EMH have been postulated in the literature: (a) the weak-form; (b) the semi-strong form; and (c) the strong- form. They tend to describe different degrees of market efficiency according to the type of information being reflected in prices. In the weak-form, the information set includes information contained in past prices of the security under consideration while for semistrong efficiency, it comprises all publicly available information. In the strong form, it refers to both publicly and privately available information. The EMH has been extensively tested in its various forms in the USA UK, Australia and to a lesser extent in other European countries too such as former West Germany, Sweden, Norway, Greece, and Brazil. In general, the available evidence so far indicates that the stock markets in these countries are weak-form efficient.The US, UK and Australian markets are also found to be semi-strong form efficient. In recent years, however, some anomalous price behaviour has been reported in the literature. In so far as stock markets of developing countries such as India are concerned, not much research .has been undertaken to study share price behaviour under the efficient market framework. It is only in the past two decades that some efforts have been made to test the applicability of the randomwalk hypothesis (the weak variant ofEMH) to describe share price behaviour under the Indian conditions. Major efforts in efficiency research in India Management & Change, Volume 1, Number 1 (April, 1997)

.'.,.

-r--~~----------~--~---~----

Gupta

have been those ofRao and Mukherjee (1979:14); Rao (1988: 203); Sharma and Kennedy (1977); Sharma(1983); Gupta (1990; 1989; 1985); Gupta, Amitabh (1991). The evidence produced by these studies supported the applicability of the hypothesis as a valid description of share price behaviour even for a developing country like India. In recent years, however, doubts have been expressed about the efficiency of the Indian capital market by several researchers (Barua and Raghunathan, 1986; Maheshwari and Vanjara, (1989: 335-352; and Pande and Bhatt, 1989: 279). This paper is aimed at further testing the appropriateness of randomwalk model in explaining equity share price behaviour at the Indian stock market during the period January 1990 to February 1992. The remaming part of the paper is organized into three sections. Section I spells out details of the research design followed in the study. Empirical results are presented in Section II. Section III summarizes the major findings of the study. SECTION

RESEARCH DESIGN

This section spells out details of data and their sources, model used and the procedure followed to test the independence hypothesis of the randomwalk model. DATA AND SOURCES

The statistical results presented in this paper are based upon weekly prices of 44 actively-traded equity shares from amongst 100 shares included in the Bombay Stock Exchange's (BSE) National Index of Equity Prices with 1983-84 as base. The sample shares are both from specified and nonspecified categories. It is noteworthy that only shares included in the "specified" category enjoy the facility .of carrying forward the transaction from one settlement period of 14 days to another. This is akin to forward trading though not called by the same name. The shares in the ~"nonspecified" group are popularly termed as cash shares. The sample shares, included in the study constitute a large percentage in terms of tumover-both value and volume-and as such seem appropriate in terms of representativeness. Weekly closing prices have been collected from the Management & Change, Volume 1, Number 1 (April, 1997)

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IBW'JEII!'L:JJ!"UI' •••

130 Empirical Test of Random- Walk Model Bombay Stock Exchange's official price list. The period covered from January 1990 to February 1992 returned 112 observations in respect of each of the scrips. Price quotations were adjusted for bonus and rights issues made by the companies during the period of the study. THE MODEL As is well-known, the random-walk model of share prices implies that suc'cessive price changes are independent and are identically distributed. Of these two conditions, independence of price changes is regarded as most important since a test of independence amounts to a test of weak variant ofEMH. There are three most important forms of the random- walk model, viz., Raw Random-Walk Model (RRWM), Log Random-Walk Model (LRWM), and Capital Returns Random-Walk Model (CRRWM) [See, Elton & Gruber: (1975)]. In this study, RRWM and LRWM versions have been used. Briefly, these models would imply that past prices cannot be used to predict mean price changes (RRWM), or log price changes (LRWM). Symbolically, RRWM may be stated as:

Where, E(et) = 0, Cov. (et, et) = 0, all s :;t:0,Pt being the price and et being the residual series. Taking its natural logarithmic transformation, one gets:

Where, E(et)

= 0, Cov. (et, et.s) = 0, all s:;t:O.

TESTING PROCEDURE The model is testable in terms of both uncorrelatedness as well as independence of price changes defined as: et = Pt-Pt.) for RRWM and Log et = Log PI-Log PH for LRWM. It may be noted that while the random-walk model is so called, the majority of empirical investigations of the model have concentrated on the observed correlation between et and et.s' all s:;t:O which describes a series as conforming to a martingale process. Strict random-walk occurs when et and et•s' all s:;t:0 are independent. In this study the independence of successive price changes/log price changes has Management & Change, Volume 1, Number 1 (April, 1997)

".~

Gupta

\31

been tested by means of serial correlation analysis. TIIE NULL HYPOTIIESIS

In consonance with the requirements of the martingale process, this paper too concentrates on correlation between et and et_s' all s:;t:O.The number of time periods that separates the successive pairs of observations in time series is called the order of serial correlation. The serial correlation coefficient of order k, that is, rk is hypothesized as zero. Thus, in symbolic terms, Ho: rk = 0, (k=I,2,3,.,.,.,20)

for each of the 44 scrips.

SECTION

EMPIRICAL RESULTS

This section discusses the results of serial correlation analysis of .sample shares included in the stuay. Serial Correlation

Analysis:

As noted earlier, in this study the random-walk model has been tested by computing correlation coefficients for lags 1-20 in respect of (a) simple price changes, and (b) log price changes. a)

Simple Price Changes:

Results of correlation analysis of simple price changes for lags 1-10 are presented in Table-l.The corresponding figures for lags 11-20 are presented in Table-2. A perusal of these tables would reveal that, out of a total 880 coefficients, only 57 were found to be statistically significant. While this in itself is a satisfactory evidence for the acceptance of the null hypothesis, one must note that as the time period separating the successive pairs of observations increases, i.e. as the lag is increased, correlation is likely to fade out. Thus, the coefficient to watch is the first order coefficient correlating the successive terms et and et_1â&#x20AC;˘ A reference to Table-I would show that only 4 first order correlation coefficients out of a total 44 were found to be in excess of2 times their standard errors. Thus, the results of serial correlation Management & Change, Volume I, Number 1 (April, 1997)

SERIAL CORRELATION

COEFFICIENTS

TABLE-1 OF THE SIMPLE PRICE CHANGES (LAGS 1-10) LAG

S.NO. COMPANY NAME

S 6

-0.257 **-0.069 -0.117 0.101 0.016 0.019 0.039 1. ACC. -0.055 0.172 -0.08 0.004 0.065 -0.006 0.022 2. BAJAJ AUTO 0.212 * -0.038 0.037 -0.024 0.018 -0.062 0.044 3. BARODA RAYON 0.011 -0.156 -0.008 -0.039 0.014 0.129 0.164 4. BAYER -0.005 -0.167 0.151 0,098 0.036 0.141 0.027 5. BOMBAY DYEING 0.101 -0.024 -0.063 -0.07 -0.170 0.057 0.085 6. BIRLA JUTE -0.02 0.018 0.006 -0.067 0.001 0.446 **0.053 7. BALLARPUR IND. 0.067 0.009 0.017 0.113 0.116 0.003 0.052 8. CEAT 0.187 * 0.277 **0.08 0.027 0.031 0.149 0.022 9. CENTURY ENKA 0.049 -0.301 **0.008 -0.133 0.054 -0.124 0.116 10. CHLORIDE INDIA -0.016 0.015 -0.043 -0.094 0.044 -0.047 0.121 11. COLOUR CHEM -0.026 -0.178 -0.059 -0.033 0.100 0.027 12. BEST & CROMPT. 0.078 -0.008 -0.018 -0.113 -0.026 0.211 * -0.016 0.021 13. DUNLOP -0.149 0.369 ** 0.220 *0.009 14. EAST INDIA HOTEL 0.286 **0.109 0.098 0.042 -0.092 0.077 0.063 -0.023 -0.031 0.046 15. ESCORT -0.052 -0.091 0.089 -0.026 -0.012 0.105 0.098 16. FOOD SPECIAL. -0.008 -0.097 -0.108 -0.205*cO.124 -0.087 0.110 17. GSFC -0.111 -0.169 -0.044 0.031 18. HINDUSTAN COCO. 0.051 -0.193 * 0.003 -0.083 0.201 * 0.074 -0.036 0.002 0.141 0.120 19. HIND MOTOR

-0.187 * 0.008 0.145 0.076 0.034 -0.183 -0.064 -0.063 0.043 0.136 0.03 0.023 0.072 0.183 0.052 -0.019 -0.275 *0.102 -0.007 -0.006 0.010 0.009 0.035 0.023 0.006 0.027 0.030 -0.119 0.074 -0.049 -0.017 -0.047 -0.084 -0.006 -0.032 0.029 -0.010 0.071 0.024 -0.011 -0.014 0.042 -0.075 0.074 -0.029 -0.051 -0.016 0.046 -0.004 -0.005 0.015 -0.073 0.054 0.146 0.058 0.056 -0.013

-0.091 -0.055 0.109 20. HIND LEVER 0.273** 0.046 0.004 21. INDIAN HOTEL 0.003 0.060 0.022 22. INDIAN CEMENT 0.253 **-0.095 -0.134 23. INDIAN RAYON -0.188 24. INGERSOLL RAND -0.053 0.031 0.096 -0.063 0.025 25. JK INDUSTRIES -0.090 0.039 0.124 26. KESORAM 27. KIRLOSKAR CUMM. 0.236 * -0.027 -0.102 -0.096 -0.075 0.050 28. KSB PUMPS 0.039 0.016 29. LARSEN & TURBO 0.019 0.238 0.160 30. MADRAS CEMENT 0.043 0.006 -0.1330.112 31. MADURA COATS -0.073 -0.070 0.092 32. MAFFATLAL IND. 0.136 -0.162 0.019 33. MC LEOD 34.MAHINDRA&MAH. -0.134 -0.150 0.109 0.034 -0.1560.105 35. MODI RUBBER -0.005 0.006 0.000 36. NOCIL -0.390 -0:021 0.174 37. PEICO -0.048 -0.060 0.113 38. RAYMOND -0.089 -0.141 -0.017 39. SANDOZ -0.080 -0.055 0.138 40. SIEMENS 0.224 0.123 0.172 41. TATATEA -0.190 -0.1050.138 42. TATA POWER -0.088 -0.110 0.060 43. WIMCO -0.062 0.088 0.070 44. ZUARI AGRO *

Significant at 5% level of significance.

0.034 0.254 **0.011 0.197 * -0.008 0.135 -0.170 -0.023 -0.064 -0.052 0.059 0.041 -0.023 0.019 * 0.016 0.028 -0.023 0.032 -0.008 0.090 0.097 -0.040 -0.125 0.055 -0.099 -0.060 0.081 -0.117 -0.157 0.069 0.040 * -0;042 0.003 -0.042 0.012 0.041 -0.100 0.099 0.092 -0.119 0.069 0.014 -0.039 -0.053 -0.034 -0.087 -0.1500.116 0.190 * -0.061 0.020 **0.146 -0.225 *0.123 -0.033 0.062 0.035 0.057 0.002 0.110 -0.029 0.267 **0.142 0.069 0.143 * 0.159 -0.083 -0.014 *0.016 0.055 -0.156 0.045 0.351 **cO.015 -0.114 .

Significant at 1% level of significance.

0.007 0.075 -0.073 0.014 -0.044 -0.097 0.057 0.012 0.026 0.038 -0.019 0.078 -0.004 0.044 0.004 0.175 0.037 -0.030 -0.076 0.008 -0.008 -0.048 -0.071 0.036 -0.107 -0.043 -0.176 0.008 -0.060 -0.012 -0.Of4 -0.180 0.034 -0.098 -0.024 0.055 -0.187 * 0.008 0.145 0.101 -0.089 -0.167 -0.230 * 0.000 -0.223 * -0.025 -0.203 * 0.090 -0.145 -0.132 -0.061 0.066 -0.096 -0.018 -0.031 -0.048 -0.191 * 0.119 0.085 0.012 -0.001 -0.024 -0.041 0.060 -0.037 -0.075 -0.001 0.066 -0.173 0.084 -0.129 0.091 -0.111 -0.074 -0.001 0.018 -0.014 -0.077 0.048 -0.079 -0.004 0.060 -0.044 0.131 -0.016 -0.003 -0.141 -0.031 -0.025 0.002 -0.005 0.021 0.106 0.008 0.023 -0.035 -0.045 -0.013 0.081 -0.049

TABLE-2 SERIAL CORRELATION COEFFICIENTS OF THE SIMPLE PRICE CHANGES (LAGS 11- 20) S.NO. COMPANY NAME 11

LAG 12

1. ACC -0.124 0.073 -0.069 -0.080 2. BAJAJ AUTO -0.050 -0.127 -0.099 -0.076 3. BARODA RAYON 0.016 -0.184 -0.048 -0.094 4. BAYER -0.067 -0.088 0.016 0.078 5. BOMBAY DYEING -0.290 **-0.030 -0.042 0.136 6. BIRLA JUTE 0.013 -0.038 -0.012 0.004 7. BALLARPUR INDU. -0.002 -0.009 -0.048 0.008 8. CEAT -0.062 -0.071 -0.0Â£1.5 -0.013 9. CENTURY ENKA -0.133 0.078 -0.241 *-0.116 10. CHLORIDE INDIA -0.061 -0.004 0.062 0.007 11. COLOUR CHEM 0.176 -0.042 -0.003 0.004 12. BEST & CROMP. -0.031 -0.240 * 0.070 0.074 13. DUNLOP -0.091 -0 198 * -0.043 -0.001 14. EAST INDIA HOTEL-0.144 -0.108 0.099 0.080 15. ESCORT -0.033 -0.105 -0,032 -0.139 16. FOOD SPECIALIT 0.002 0.014 -0.038 -0.036 17. GSFC 0.094 0.062 0.081 -0.045 18. HINDUSTAN COCO -0.121 -0.035 0.099 -0.015 19. HIND MOTOR -0.077 -0.172 -0.124 0.071

0.013 0.004 -0.106 -0.105 -0.153 -0.052 0.027 0.116 0.009 -0.111 0.028 -0.039 -0.020 0.052 -0.037 -0.173 0.002 -0.007 -0.016 0.061 -0.288 **0.140 -0.061 0.022 -0.029 -0.144 0.034 -0.070 -0.091 0.053 0.175 -0.054 0.096 0.066 -0.074 *0.112 -0.202 -0.111

17 0.100 0.024 0.121 0.093 0.036 0.034 -0.032 0.050 0.001 -0.039 -0.097 -0.164 0.010 0.106 0.048 0.033 0.037 0.068 -0.013

-0.241 -0.038 -0.269 0.041 0.055 -0.061 0.015 0.002 -0.074 -0.005 -0.114 -0.040 -0.060 0.272 -0.110 0.052 -0.098 -0.070 -0.116

* -0.039 -0.081 -0.051 0.087 **0.008 0.043 0.048 -0.105 0.019 -0.052 -0.004 -0.210 * -0.010 -0.002 -0.051 -0.156 -0.161 -0.121 -0.099 0.005 0.262 **-0.055 -0.002 -0.124 0.146 -0.046 ** 0.189 *-0.063 -0.069 0.031 0.104 -0.078 -0.001 -0.031 0.005 -0.104 0.067 -0 150

,.-I

20. HIND LEVER 21. INDIAN HOTEL 22. INDIAN CEMENT 23. INDIAN RAYON 24. INGERSOLL RAND 25. JK INDUSTRIES 26. KESORAM 27. KIRLOSKAR CUM. 28. KSB PUMPS 29. LARSEN & TURBO 30. MADRAS CEMENT 31. MADURA COATS 32. MAFFATLAL IND. 33. MC LEOD 34. MAHINDRA & MAH. 35. MODI RUBBER 36. NOCIL 37. PEICO 38. RAYMOND 39. SANDOZ 40. SIEMENS 41. TATA TEA 42. TATAPOWER 43. WIMCO 44. ZUARI AGRO *

-0.078 0.020 -0.030 -0.082 -0.058 -0.062 -0.157 -0.055 -0.003 0.001 -0.018 0.052 -0.026 -0.091 -0.059 0.028 -0.124 -0.084 -0.124 0.073 0.024 0.005 -0.001 -0.115 0.013 -0.072 -0.109 0.031 -0.117 0.092 0.017 0.086 -0.143 -0.086 0.085 0.007 -0.112 0.029 -0.193 *-0.128 -0.003 0.089 -0.139 -0.055 -0.010 0.009 -0.099 0.002 0.055 0.057

Significant at 5% level of significance.

0.040 0.128 0.006 -0.022 -0.073 0.009 0.077 -0.122 -0.009 -0.110 0.016 -0.077 -0.016 -0.112 -0.001 -0.151 -0.104 -0.052 -0.023 -0.163 -0.093 0.234* 0.238*0.137 -0.056 0.004 -0.071 -0.069 -0.08 0.013 0.015 -0.026 -0.023 -0.031 0.023 -0.017 -0.003 0.084 0.031 0.035 -0.125 0.037 0.045 -0.025 0.054 -0.026 -0.171 0.007 -0.044 0.066 -0.046 -0.003 0.001 0.047 0.037 -0.056 0.000 0.117 0.011 -0.097 0.116 0.008 -0.003 -0.138 -0.035 -0.078 -0.013 0.008 -0.118 -0.218 * 0.083 0.068 0.185 -0.013 0.086

-0.Q18 -0.Q11 -0.099 0.005 -0.058 -0.040 0.015 -0.035 0.035 -0.173 -0.010 -0.002 0.045 -0.048 0.026 -0.021 -0.044 0.025 -0.037 0.096 -0.091 0.174 -0.037 0.003 -0.017 -0.088 -0.055 -0.017 0.064 0.083 -0.054 -0.025 -q.014 -0.031 ~0.042 0.037 0.004 0.100 -0.241 * -0.039 0.007 -0.212 *-0.188 *-0.065 0.116 -0.095 0.074 0.058 -0.003 0.101 -0.203 * -0.06 0.02 -0.115 0.07 0.092 0.008 -0.031 -0.042 -0.143 -0.084 -0.014 -0.167 -0.113 -0.019 0.170 -0.132 0.048 -0.026 0.013 -0.065 0.061 0.034 -0.143 -0.018 0.016 0.082 0.887 -0.007 0.002 -0.083 0.112 0.125 0.088 -0.096 -0.170 -0.055 0.011 0.008 -0.123 0.048 0.024 -0.053 0.037 -0.04 0.047 0.065 -0.093 -0.003 0.112

** Significant at 1% level of significance.

-0.007 0.023 -0.263 ** 0.032 0.002 -0.063 -0.015 -0.142 -0.155 -0.081 -0.212 * 0.234 * 0.064 -0.146 0.029 0.038 -0.072 0.043 0.050 0.029 -0.144 -0.114 -0.011 -0.132 0.011

SERIAL CORRELATlqN

COEFFICIENTS

TABLE-3 OF THE LOGS PRICE CHANGES (LAGS 1-10) l

S.NO. COMPANY NAME 2 1. ACC 2. BAJAJ AUTO 3. BARODA RAYON 4. BAYER 5. BOMBAY DYEING 6. BIRlA JUTE 7. BAllARPUR lNDU. 8. CEAT 9. CENTURY ENKA 10. CHLORIDE INDIA 11. COLOUR CHEM 12. BEST & CROM. 13. DUNLOP 14. EAST INDIA HOTEL 15. ESCORT 16. FOOD SPECIAL. 17. GSFC 18. HINDUSTAN COCO. 19. HIND MOTOR

0.035 0.009 -0.0310.017 -0.254 **0.050 0.132 0.083 -0.0250.041 -0.194 * 0.095 -0.495 **0.012 -0.040 0.058 0.081 0.071 -0.104 0.107 0.Q11 0.057 0.116 0.082 -0.001 -0.101 0.206 * 0.021 -0.028 0.038 0.012 0.086 -0.102 0.061 -0.138 0.044 -0.059 0.099

A 5

S 6

-0.209 * -0.017 0.132 -0.099 0.104 -0.032 -0.173 0.090 0.072 0.205 * -0.058 -0.087 0.082 -0.166 -0.009 0.087 -0.011 -0.091 -0.026 -0.001 -0.075 0.183 0.022 0.039 0.018 0.096 0.022 0.047 -0.022 -0.026 -0.017 0.011 -0.208 * 0.155 0.014 -0.056 0.000 0.006 0.063 0.095 0.039 0.006 -0.266 **0.119 -0.068 0.073 -0.045 0.008 -0.001 -0.003 -0.001 0.001 0.001 -0.014 -0.001 0.005 0.021 -0.003 0.095 -0.014 0.035 0.026 0.160 0.083 0.347 * 0.060 0.033 -0.027 -0.02 -0.023 -0.006 0:147 -0.140 0.078 0.079 -0.056 -0.270 **0.015 -0.120 0.027 -0.015 -0.046 -0.524 ** -0.017 -0.113 -0.009 -0.007 0.009 0.009 -0.057 -0.127 -0.079 -0.030 0.01 0.046 0.036 0.178 . 0.005 -0.006 0.061 0.007 0.016 0.029 0.005 0.011 0.296 ** 0.211 * -0.020 -0.127 0.078 0.027 0.034 0.061 -0.045 0.093 -0.030 -0.078 0.074 0.036 0.066 -0.072 -0.061 -0.087 -0.050 0.001 -0.013 0.055 0.014 -0.035 -0.124 -0.146 0.062 0.000 0.020 -0.189 * 0.080 -0.039 -0.033 -0.133 -0.178 -0.051 0.033 0.123 0.020 -0.073 0.069 0.011 -0.033 0.092 0.215*-0.095 0.167

-0.081 0.050 -0.040 0.153 -0.033 0.037 20. HIND LEVER -0.058 -0.049 0.295 **0.022 0.137 0.130 21. INDIAN HOTEL -0.037 0.064 0.134 0.142 -0.169 0.161 22. INDIAN CEMENT 0.017 0.113 0.130 -0.045 0.042 0.026 23. INDIAN RAYON -0.127 -0.005 -0.023 0.032 24. INGERSOLL RAND -0.056 0.028 -0.157 0.039 0.126 0.022 -0.039 -0.048 25. JK INDUSTRIES 0.020 -0.040 0.108 0.141 0.092 0.018 26. KESORAM 0.009 -0.025 0.044 0.018 -0.104 27. KIRLOSKAR CUM. 0.068 -0.088 -0.042 0.035 -0.064 -0.058 0.025 28. KSB PUMPS 0.035 -0.032 -0.173 0.090 -0.099 29. LARSEN & TURBO 0.009 0.067 0.189 * 0.173 0.143 0.014 30. MADRAS CEMENT 0.001 -0.100 0.120 0.015 0.647 **-0.009 0.023 31. MADURA COATS -0.081 -0.043 -0.015 cO.001 -0.052 0.086 32. MAFFATLAL IND. -0.181 0.064 0.079 -0.128 0.071 0.009 33. MC LEOD 34. MAHINDRA& MAH. -0.073 -0.167 0.096 -0.045 -0.101 -0.075 0.134 0.121 0.044 -0.135 0.091 -0.071 35. MODI RUBBER -0.040 -0.018 0.051 -0.002 0.201 * -0.072 36. NOCIL 0.145 -0.227 -0.038 -0.012 0.105 0.100 37. PEICO -0.055 -0.109 -0.040 -0.032 0.054 0.040 38. RAYMOND -0.115 -0.087 0.040 0.099 -0.040 -0.049 39. SANDOZ -0.101 -0.011 . 0.114 0.004 -0.095 0.108 40. SIEMENS 0.157 0.228*0.141 0.030 0.114 0.119 41. TATATEA -0.030 0.103 -0.041 0.052 0.058 0.009 42. TATA POWER -0.118 -0.095 0.116 -0.130 0.065 0.038 43. WIMCO -0:096 0.070' 0.067 -0.109 0.006 -0.061 44. ZUARI AGRO , Significant at 5% level of significance. *' Significant at 1% level of significance.

-0.083 0.024 -0.044 0.124 -0.054 0.028 0.049 -0.032 0.027 0.104 -0.027 0.075 -0.072 -0.089 0.082 -0.003 -0.037 0.028 -0.147 0.018 -0.105 -0.020 0.010 0.048 -0.036

0.093 -0.001 0.028 -0.040 -0.162 0.026 -0.157 0.093 0.066 -0.010 -0.021 0.024 -0.102 -0.008 0.042 -0.076 0.045 0.034 -0.022 -0.125 -0.166 -0.072 -0.084 -0.131 -0.091 0:033 0.014 -0.209 * -0.017 0.132 0.166 0.004 0.005 -0.155 -0.027 -0.197 * -0.077 -0.190 * 0.113 0.011 -0.036 -0.024 -0.1640.125 0.122 -0.014 -0.041 0.071 0.051 -0.070 0.006 -0.010 -0.185 -0.008 -0.022 -0.034 0.003 -0.062 -0.073 0.004 0.094 0.121 0.006 -0.158 -0.033 0.071 -0.006 0.014 0.057 0.023 -0.042 0.115 -0.018 0.022 0.020

SERIAL CORRELATION COEFFICIENTS

TABLE-4 OF THE LOGS PRICE CHANGES (LAGS 11-20)

S.NO. COMPANY NAME 11

L 12

1. ACC -0.119 0.075 -0.048 -0.065 2. BAJAJ AUTO -0.'054 -0.116 -0.079 -0.015 3. BARODA RAYON 0.078 -0.123 -0.003 -0.094 4. BAYER -0.067 -0.155 -0.016 0.060 5. BOMBAY DYEING -0.236 * 0.025 -0.120 0.017 6. BIRLA JUTE -0.025 0.029 -0.045 0.025 7. BALLARPUR IND. 0.000 0.000 -0.010 0.002 8. CEAT -0.045 -0.057 -0.075 0.010 9. CENTURY ENKA -0.100 0.077 -0.193 *-0.114 10. CHLORIDE INDIA -0.038 -0.027 0.045 0.003 11. COLOUR CHEM 0.144 0.010 0.020 0.006 12. BEST & CROMP. -0.012 -0.267 **0.056 0.046 13. DUNLOP -0.083 -0.194 * -0.060 0.002 14. EAST INDIA HOTEL-0.105 -0.099 0.135 0.090 15. ESCORT -0.031 -0.104 -0.028 -0.142 16. FOOD SPECIAL. -0.055 0.018 -0.088 -0.075 17. GSFC 0.062 0.043 0.080 -0.034 18. HINDUSTAN COCO. -0.091 -0.028 0.064 -0.051 19. HIND MOTOR -0.081 -0.172 -0.086 0.091

A 15

S 16

0.Q19 0.023 0.102 -0.116 -0.115 0.066 -0.081 -0.081 0.167 -0.101 0.056 0.014 -0.030 -0.120 -0.029 0.034 -0.043 0.064 0.004 0.012 0.008 -0.051 -0.200 * -0.005 0.022 0.004 -0.001 -0.034 0.076 -0.042 -0.294 **-0.158 -0.106 -0.099 -0.015 -0.195 -0.041 -0.154 0.016 0.060 -0.064 0.119 -0.097 0.053 0.066 -0.112 -0.060 0.071 0.067 0.050 0.038 -0.078 0.101 0.074 -0.200 *0.081 0.019

-0.238 * -0.008 -0.095 -0.038 -0.070 0.067 -0.278 **0.033 0.089 0.021 0.073 -0.037 -0.051 -0.007 -0.102 -0.047 0.006 0.223 * 0.004 -0.004 0.000 0.01 -0.083 -0.171 -0.047 -0.184 -0.098 -0.008 -0.121 -0.008 -0.051 0.202 * -0.010 -0.025 -0.003 -0.134 -0.065 0.123 -0.040 0.211 * 0.123 -0.124 -0.119 -0.089 0.035 0.052 0.141 -0.074 -0.124 0.009 -0.025 -0.077 0.013 -0.109 -0.177 0.094 -0 119

_.~~-

~--

20. HIND LEVER 21. INDIAN HOTEL 22. INDIAN CEMENT 23. INDIAN RAYON 24. INGERSOLL RAND 25. JK INDUSTRIES 26. KESORAM 27. KIRLOSKAR CUM. 28. KSB PUMPS 29. LARSEN & TURBO 30. MADRAS CEMENT 31. MADURA COATS 32. MAFFATLAL IND. 33. MC LEOD 34. MAHINDAA & MAH. 35. MODI RUBBER 36. NoelL 37. PEICO 38. RAYMOND 39. SANDOZ 40. SIEMENS 41.TATATEA 42. TATA POWER 43. WIMCO 44. ZUARI AGRO *

-0.079 0.033 -0.016 -0.126 -0.060 -0.020 -0.199 * -0.095 -0.01 -0.019 0.045 0.097 0.033 0.041 0.050 -0.056 -0.119 -0.106 -0.119 0.075 0.017 0.085 -0.027 -0.099 0.027 -0.023 -0.130 0.025 0.075 -0.125 0.003 0.046 -0.132 -0.09 -0.044 0.043 -0.061 -0.09 -0.214*-0.129 -0.040 0.001 -0.149 -0.066 -0.035 0.006 -0.099 0.001 0.026 0.096

Significant at 5% level of significance.

0.052 -0.022 0.146 -0.075 -0.049 -0.144 -0.088 0.035 -0.085 -0.048 -0.038 -0.076 -0.049 0.016 -0.004 0.005 -0.073 0.023 0.021 0.125 0.094 -0.143 0.015 -0.169 0.099

0.111 -0.094 -0.072 0.039 -0.122 -0.032 0.134 0.110 0.029 -0.065 0.009 0.042 0.045 -0.140 -0.016 -0.150 0.069 -0.045 -0.039 -0.065 -0.036 -0.043 -0.004 0.104 -0.033 **

-0.01 0.008 0.084 -0.066 -0.003 -0.058 -0.103 -0.012 -0.090 0.019 0.051 -0.046 -0.015 0.031 0.059 0.008 -0.083 0.016 -0.076 -0.084 -0.037 -0.110 -0.142 -0.012 0.086

••.

-0.020 -0.007 -0.151 -0.090 -0.052 0.060 '0.098 -0.079 0.021 -0.021 -0.049 -0.076 -0.027 0.024 -0.054 -0.107 -0.013 -0.054 -0.037 -0.106 -0.071 -0.039 0.070 -0.157 -0.011 -0.011 -0.073 0.023 0.102 -0.238 -0.068 -0.045 -0.171 0.147 -0.132 0.115 -0.026 0.096 -0.239 0.009 -0.135 0.079 0.049 -0.017 -0.034 -0.780 **-0.025 -0.187 -0.12 0.178 -0.197 -0.109 0.018 -0.112 0.055 -0.132 -0.053 0.076 0.006 0.055 -0.116 0.124 0.128 -0.090 -0.196*-0.063 -0.065 -0.125 -0.044 -0.086 0.066 -0.108 0.118 0.085 -0.049

Significant at 1% level of significance.

~,.',_. __

0.011 -0.068 -0.095 0.050 0.070 -0.023 0.005 0.020 0.049 * -0.008 -0.004 0.015 * 0.027 0.088 0.156 *-0.151 * 0.089 0.021 0.055 0.011 0.153 0.011 0.016 0.084 -0.076

~".

, .•.••..,.~o.;;.;,; ...•'-;;-;.

-0.013 0.028 -0.215* -0.028 0.020 -0.059 -0.128 -0.132 -0.156 -0.095 -0.131 0.221 * 0.110 -0.134 -0.003 0.055 -0.092 -0.031 0.051 0.050 -0.107 -0.100 -0.064 -0.106 -0.003

140 EmpiricalTest of Random- Walk Model

analysis of simple price changes are suggestive of applicability of the randomwalk model to describe share price behaviour in India. b)

Log Price Changes:

Tables-3 and 4 contain the serial correlation coefficients oflog price changes for lags 1-10 and 11-20 respectively. Total number of significant correlation coefficients in case of log price changes was 46 out of a total of 880 coefficients, 11 less than 57 as in case of simple price changes. As for the first order coefficients, the number of significant correlation coefficients was 4 as in case of that for simple price changes. It may be noted that the magnitude of some of the first order serial correlation coefficients is found to be rather high in comparison to those reported in the literature for other markets. Should the significant coefficents be taken as evidence against the random-walk model in respect of the concerned shares, or should one agree with what Granger and Morgenstern (1970) have contended: It should be stated that ... there may well be stocks which, at least during some specific period, appear not to be generated by a random-walk. This may be owing to random events which accidently give rise to some apparent structure or it may be owing to some particular events concerning the company involved or the methods of trading its stocks (p.112).

From the foregoing analysis it may, thus, be concluded that the empirical results reported here generally support the independence hypothesis of the random-walk model. However, these results should be viewed in the light of certain peculiarities of the Indian stock market. It is noteworthy that in terms of volume of business, Indian stock market is dominated by a selected number of securities which happen to be in the specified group. Most of the sample shares included in the study are from the specified category only. Moreover, excessive speculation, imperfections in flow of information, inadequate accounting and auditing standards, etc., may affect the pricing mechanism on the Indian stock exchanges in a manner that may give riseto deviations from the random-walk model. In addition, a peculiar feature of the Indian stock market has been that the rules, bye-laws, and regulations of the stock exchanges do not specify any functional distinction between members acting in their capacity as jobbers and as brokers. Thus, here the members can simultaneously perform the two distinct functions: (a) of a broker acting as an agent buying and selling securities for others on commission basis, and (b) of a jobber acting as a principal buying and selling securities on his account and risk. Absence of such a Management & Change, Volume 1, Number 1 (April, 1997)

Gupta

141

demarcation overlooks the potential role-conflict when the same member acts in two different capacities, viz., as a broker and as a principal jobber. Moreover, it is not too infrequent that the members step into the shoes of the investment advisor and as such are in a position to influence the pricing mechanism of the stock market. Further, the Indian stock market seems to be less competitive in comparison to its western counterparts. Another peculiarity of the Indian stock market has been the lack of investment analysis for making investment decisions. In particular, there has been a dearth of fundamental analysis of security ,prices, though of late some efforts have been initiated in the direction of making technical analysis. In our view, the limited use of technical analysis has only reinforced the speculative tendencies that are already widespread in the market. SECTION

III

SUMMARY AND CONCLUSIONS

Efficiency research in India has not only been scant but has also been undertaken only in the last decade or so. The evidence produced by these studies has largely been supportive of the applicability of the randomwalk hypothesis in explaining share price behaviour. However, some recent studies have doubted the efficiency of the Indian capital market. This study has been aimed at testing the applicability of the random-walk model in explaining the share price behaviour in India during the period January, 1990 to February, 1992. Results of serial correlation analysis carried out in respect of each of the 44 equity shares included in the sample were largely found to be supportive of the random-walk hypothesis, though some of the observed serial correlation coefficients were larger than those obtained in other studies. Thus, in general, Indian stock market may be termed as weakform efficient in pricing shares where market efficiency is understood as generating security prices which fully reflects information contained in their historical records. As such, it is doubtful whether the technical analysis can be used profitably to devise stock market investment strategies. In the light of the peculiarities of the Indian stock market, the results reported in this study, while validating the weak-form of the EMH for a developing country like India, raise several issues. One important question is: is the random character of stock market price behaviour invariant of levels of economic development and the state of capital market? Another related question is: Are stock markets efficient even in the absence of much Management & Change, Volume

1, Number

1 (April,

1997)

142 Empirical Test of Random- Walk Model

of investment analysis for investment decisions? The fundamental analysis, which is so popular in other countries, is virtually absent in the Indian market. The use of technical analysis for making investment decision is a phenomenon only of recent past and that, too, in a limited manner. Finally, the disclosure practices followed by Indian companies have been found to be wanting.

REFERENCES Ball, Ray, et at. (1989) Share Markets and Portfolio Theory. St. Lusia, Queensland: University of Queensland Press. Barua, S. K. and Raghunathan (1986) "Inefficiency of the Indian Capital Market," 11, Vikalpa, 225. Conrad, K. and D. 1. Juttner (1973) "Recent Behaviour of Stock Market Prices in Germany and the Random-walk Hypothesis," 26, Kyklos, 576. Dyckman, Thomas R. and Morse Dale (1986) Efficient Capital Markets and Accounting-A Critical Analysis. New Jersey: Prentice Hall. Elton, Edwin 1. and Martin 1. Gruber (1975) International Capital Markets. Amsterdam: N0I1h-Holland Publishing Company. Errunza, V. R. (1979) "Efficiency and Programs to Develop Capital Markets: The Brazilian Experience," 3, Journal o/Business Finance. Granger, C. W. J. and Oskar Morgenstern (1970) Predictability o/Stock Market Prices. Lexington-Mass: D. C. Heath & Co. Gupta, Amitabh (1991) "An Empirical Study of Weak Level Efficiency in India." An M. Phil. Dissertation, University of Delhi, Delhi. Gupta, O. P. (1985) Behaviour o/Share Prices in India: A Test 0/ Market Ejjiciency. New . Delhi: National Publishing House. ___ (ed.) (1989) Stock Market Efficiency and Price Behaviour: The Indian Experience. New Delhi: Anmol Publications. ____ (1990) "Stock Market Efficiency and Random Character of Share Price Behaviour In India," 7, Asia Pacific Journal 0/ Management, 165. Jennergren, L. P.and P. E. Korsvold (1975) ''The Non-Random Character of Norwegian and Swedish Stock Market Prices," in Elton and Gruber (1975). Keane, Simon M. (1983) Stock Market Efficiency-Theory, Evidence, Implications. New Delhi: Heritage Publishers. Maheshwari G. C. and K. R.Vanjara (1988) "Risk Return Re1ationship-A Study of Selected Equity Shares," in Gupta (ed.) (1989). Niarchos, N. A. (1972) The Stock Market in Greece: A Statistical Analysis. Greece: Athens Stock Exchange. Pandey, I. M. and Ramesh Bhatt (1988) "Efficient Market Hypothesis: Understanding & Acceptance in India," in Gupta (10),279. Rao, N. Krishna and K. Mukherjee (1979) "Random -Walk Hypothesis: An Empirical Study," 14, Arthaniti, 53. Rao, N. Krishna (1988) "Stock Market Efficiency: The Indian Experience," in Gupta (ed.) (1989).

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Sharma,

1. L. and Robert E. Kennedy (1977) "A Comparative Analysis of Stock Price Behaviour on the Bombay, London, and New York Stock Exchanges," Sept., Journal of Financial and Quantitative Analysis; 391. Sharma, J. L. (1983) "Efficient Capital Markets and Random Character of Stock Price Behaviour in a Developing Economy," 31, The Indian Economic Journal, 53.

o. P. Gupta,

Ph.D., is Professor of Finance at the Department of Financial Studies, University of Delhi South Campus, Benito Juarez Road, New Delhi-II 0 021. Cur rently, he is on deputation as Director, Hindu Institute of Management, Sonepat131001, Haryana. His research interests include areas of market efficiency, asset pricing theories, and emerging capital markets. He is a founder member of the AsiaPacific Finance Association, Singapore. He has published over 30 research articles in national and international journals. He has authored or edited several books including Behaviour of Share Prices in India-A Test of Market Efficiency, Stock Market Efficiency and Price Behaviour-The Indian Experience, Dictionary of Commerce, and Encyclopaediac Dictionary of Statistics.

Management & Change, Volume 1, Number I (April, 1997)

COMMUNICATIONS CHANGE MANAGEMENT AND PUBLIC MANAGERS: CAPACITY BUILDING FOR SUSTAINING CHANGE

Neela Mukherjee

ntoday's rapidly changing environment, public managers are required to act as catalysts for change. In an economy where the state plays a dominant role, the role of public managers as agents of change requires no emphasis. Today, the public manager is not only required to enter the domain of change but also manage ways of sustaining such change. For a public manager the prerequisite to enter the domain of change is the changing of "mind set," of attitudes and behaviour from the "know-all" type towards that of a learner. Without this fundamental change, it will be difficult for a public manager to adapt to the new environment and the changes that are coming about. This paper discusses some issues in the context of "change management" with regard to public managers. Much of such changes are beyond the public manager's capacity to influence. Such changes are taking place in the sphere of the country's policy making, in changing contours of regional and global fora, international agreements and obligations, information technology, scientific research translated into action, and the paradigm of development which is becoming more and more people-centred. Hence, the major global changes taking place in societies, ethos, markets and technology are all pervading and are to be reckoned with, appreciated and appropriately adjusted for enhancing functional property of public managers to deal with such changes. The best bet of public managers for adjusting towards such changing contours of socio-economic scenario is to adopt the approach of a learner. It is through sustained understanding of the internal and external environment that the public manager would be able to strengthen his/her capacities for adopting change management. However, adult learning without appropriate attitude and behavioural changes is almost impossible. The issue is what kind of attitudes and Management & Change. Volume 1, Number] (April, 1997) @ 1997 by Institute for Integrated Learning in Management. All Rights Reserved.

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•••••••. ,,,, .•••••. .,,.••.••• , ._ .••.•.• ,.,,"""',,' ••••••. ' 0'••••••,••••••''

146 Change Management and Public Managers

behaviour are required in this context. The answer is, more responsive and client-friendly attitude towards people they serve. The usual approach of public man,agers, as reflected through the framework of socio-economic development, has assumed welfare-oriented roles, and certain beliefs that are the outcome of the working of the system itself. The major ones are that: the people are not well-informed and are less capable of taking decisions concerning their well-being; that the public managers including t~~ planners and administrators have the required knowledge-system concerning all areas and even solutions to the multiplicity of problems. The attitudes are influenced by the beliefs, typical of the public system such as those of public managers as "givers" and people'as "takers," the former having a "higher" status or that of a "privileged" group and the latter having a "lower" status or belonging to the less-privileged sections of society. Such attitudes create blocks in the system and are not congenial for today's public manager trying to cope up with the flood of "changes." Both organizational and individual learning based on such attitudes can block effective communication between public managers and the people where the former may fail to perceive the viewpoints of the latter, while the latter may find the former less communicative and not of much use. With the growing privatization of economic sectors the public managers may lose their relevance. They may be bypassed by their clients in the system in which they earlier played a dominant role.

HOW TO BRING ABOUT CHANGE MANAGEMENT? Changes in attitudes and behaviour can be initiated through trainingworkshops. Undoubtedly, training is a powerful way of influencing human behaviour. However, there are other ways as well, and it is important that public managers and their organizations remain flexible enough to innovate and adopt different ways of effecting behavioural change. Some ways of influencing attitudes and behaviour are: o

training;

building teams of motivated individuals;

encouraging peer-group/mixed group interactions;

forming informal learning groups;

holding workshops with extended groups like client groups/other institutions;

Management & Change, Volume 1, Number 1 (April, 1997)

Mukherjee

arranging periodic brainstorming;

group sharing of experience;

mentoring by seniors;

competing in small groups;

imitating role models;

inculcating self-learning in field; and

1.47

providing organizational incentives and rewards. To start with, quality-oriented training-learning workshops on ways and means of change management can initiate a process of change in the attitudes and behaviour of public managers, which a public organization can attempt to sustain through proper motivation of its staff to improve upon individual and group performance. Such motivation can be provided at different levels and in different ways for all levels of organizational staff. Brain-storming by staff on field-level realities of their organization can help the organization evolve suitable strategy/strategies for translating change management into action. Together with changing attitudes and behaviour, values and vision are equally important. The latter aspect sets the context for changing attitudes and behaviour. After all, why are changes in attitudes and behaviour important? It is because they bring about a change in vision and the accompanying values. At the beginning, training-workshops arranged by public organizations seeking change will provide opportunities for influencing the attitudes and behaviour of public managers. However, there can arise the need for having more than one round of training since changes envisaged in attitudes and behaviour often require reinforcement oflearning from time to time. It is a common experience for an organization to discover different categories of trainees with different training needs, and it is important to recognize such diverse categories of needs. . Quality-oriented training can initiate changes in attitudes and behaviour of public managers, which, however, can be sustained, among others, through proper motivation to improve upon individual/group performance. Such motivation for an individual member of an organization can be provided by seniors, peer groups and juniors, other groups, field-level realities. and through one's own self. Self-propelled learning from the field is a powerful way of inculcating the desired attitudes and behaviour for changing managenal paradigm. With behavioural changes in individual member's approach. the Management & Change, Volume 1, Number

1.(April, 1997)

150

Change Management

and Public Managers

for attending to mundane requirements of the workers. The process of desired managerial change for public managers from a "know-all" organization to a learning organization has its own momentum, in terms of time and progress and would differ across organizations depending on their adaptability, determination and perceived needs. At each stage, diverse ways of strengthening such learning for public managers and others become important. New and uncommon issues can arise which require immediate attention for amicable resolution through mutual discussion and brain storming. The issues can be focused upon through training workshops, seminars, joint-sessions for discussion and consultation with client-groups, peer group meetings and others. It is important for public organizations, embarking on the path of "change management," to either build a support system in its own way or to have: access to it as and when required. This is all the more important because such "change" is essentially learning-by-doing and there are many unknown factors, concepts, issues and situations which cannot be comprehended from the beginning. The support system can be referred to for looking at problematic issues, for identifying concealed factors and suggesting ways of overcoming them. Such a system can consist of groups of experienced individuals drawn from different organizations including client groups and neutral observers, who are willing to lend a helping hand and/or have some stakes/interest in the concerned organizations' path of "change management. " The "top-down" target-oriented command system has lost its practical relevance in a world of privatization and liberalization. The public managers are often handicapped to cope with the policy changes and adjust their performance because of the inflexibility of the system to respond to such changes in an efficient manner. Archaic rules, regulations and practices tend to have a dampening effect on efficiency, innovativeness or risktaking abilities of public managers. Adopting new innovations are met with resistance from both higher and lower levels, inside and outside of the organization for various reasons such as perceived increase in risks, uncertainties involved in adopting changing styles of management, perceived increase in work load, etc. The "change," however, has got to start somewhere from within the public organization, routed through its manager. Today's socio-economic system is no longer dormant and passive. ~ather, it is ccnsiderably demanding and proactive and is trying to build its own measures of accountability to people. Hence, the conventional attitude of public managers in merely meeting targets from above and acting as "givers" of state benefits by distributing Management & Change. Volume 1, Number 1 (April, 1997)

i.!

.1dlll._Iâ&#x20AC;˘â&#x20AC;˘â&#x20AC;˘ ii.iiili~I.Wiillliiii.'.iliiliiljiilJiilii~ijilliiib.luiiiIL~~"I~~Iu.~~j,lli,_i~lidlliillIlIIW. illilll11' ...

Mukherjee

151

goods and services is no longer relevant. Today's public manager needs to have a set of values and vision. That set of values and vision needs also to percolate down to the public staff so as to change and improve the decisionmaking process in an effective manner. Hence, listening and learning skills of public managers are of paramount importance. They also help in motivating junior staff and putting forward their best of efforts. There are not many options available to public managers in today' s world. The quicker is the learning process of public managers and public organizations, the better are the chances of their adapting to the changing environment and thereby, creating avenues for effective performance and bettering chances of sustainability of such change.

Neela Mukherjee, Ph.D., is Professor of Economics, Lal Bahadur Shastri Academy of Administration, Mussoorie-248 179,UP. An alumna of the London School of Economics, London, UK, Dr. Mukherjee's research interests are topical and varied. One of her major areas of research is participatory development. She has undertaken action research and organized training courses in participatory methods. She has special interest in the democratization of the development process and empowerment of the poor. Dr. Mukherjee has written and lectured extensively in her areas of interest and has a number of books and papers to her credit.

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"spend, not earn; waste on oneself; do not invest in the future; tax the poor to benefit the rich; create twin debt traps and mortgage future generations with payc ing heavy debt service charges". Having adopted the new economic policy the government assures us that the crisis is behind us. Patel has discounted this assurance. He argues: "This assurance is built on borrowed money, uncertain exports, 'large debts, heavy debt-servicing, despotic money lenders, erratic monsoons, a weak government, a divided party, a power-hungry opposition, a confused desperate people." He believes that a leap into globalization is not going to improve the matter because, "India is being globalized at the wrong time, under the wrong external government, by a wrong leadership .... We are being sold a wrong strategy of gambling on the greedy, neglecting the needy and sidetracking the speedy." To prove his point Patel shows that the outputs of the New Economic Policy are negative: mounting internal and external debt, increasing ICOR which is indicative of colossal inefficiency, growing corruption, progressive Latin Americanization of the country, increasing unemployment and stagnant export,s. Patel is not dogmatically opposed to industrial growth. He would like that there should be social control over the process of growth. Accordingly, he describes his alternative strategy as follows: "The key element in the new strategy will have to be the rapid expansion of national demand through passing on much larger shares of growth to higher capital formation, enlarged provision of social capital and services, and a rapid expansion of the purchasing power of the overwhelming majority of the poor people in our country" (p. 115). He further elaborates that the strategy "will have to reduce-not increase-our vulnerability to adverse external influences" (p. 116). Patel has provided only a bare outline of this new strategy. It requires to be spelt out in sufficient detail. As a matter of fact, many versions of alternative strategy of development are provided by left-oriented economists. But none of them finds favour with the ruling elites. At present the force of globalization is so powerful that it is blindfolding the policy makers in the country. What is required is to create a political constituency for the new strategy. This constituency will include groups and classes who are likely to be potential beneficiaries ofthis strategy and organize them to generate sufficient pressure on the government to change the policies. Even in Europe and America, there are clear indications that the policies adopted during the eighties have resulted in massive unemployment and therefore, a paradigm shift is taking place regarding economic policy regime. In any case, Surendra Patel's monograph is lucid. It is expected to serve very useful purpose of focusing attention once again on the central issue of economic development. It should help crystallization of the on-going debate on economic policy and prepare the background for a new egalitarian policy regime. Dalip S, Swamy Professor of Business Economics, University of Delhi South Campus. Benito laurez Road, New Delhi-II 0021. Management & Change, Volume

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Om Prakash, The Commercial Society. New Delhi: Westvill Publishing pany, 1994. xiii+302 pp. RsAOOhardback.

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Professor Om Prakash is well-known for his wit, humour and cynicism. These qualities are strewn over the pages of this collage of his essays. But why has he chosen to call it "The Commercial Society?" There is no clear answer to this question. Even if obiter dicta are overlooked, the insightful and analytical pieces do not hang together as an exploration of the premises and pathologies of a society organized essentially around trade and commerce. The themes touched upon are. in fact, too varied. . The heading of the Chapter 4 (Age of Commerce ) promises to provide a clue to the likely core theme, but it is in the first half concerned with asserting that "the age of commerce had its birth on Indian subcontinent (c. 2000 B. C.) ... (and) the Indus valley was its cradle," (p. 49) and with a confidence-building use ofIndia's past as reflected, for example, in Kautilya' s Arthashastra or Irfan Habib's account of "money economy" in Mughal India. The second half is focused on what he calls "management giants" who lent "international significance to the age of commerce during the second half of the twentieth century" (p. 6 I). The short and crisp pen-portraits of five such giants (Harold Green. Lee Iacocca. Konosuke Matsishita, Akio Morita and 1. R. D.Tata) together constitute perhaps the best part of the book under review. The closing remarks are to the effect that 'commerce' had come of age whenJ. R. D. Tata, an Indian, was reckoned among the hundred great men of the world. Confidence-building again. There are several other bits that clearly aim at boosting the morale of fellow Indians. Contrast these essays like Multinationals and Globalization, Money Politics and Crime, and Two Sides of Consumerism in which there is a misplaced scepticism and suspicion towards the West and an undeserved praise for India. Somehow Professor Om Prakash does not get down to be critical of the Indian ethos and the way business or commerce is carried out in India. Emotions of the oppressed are evidently too strong to be overcome. There are, however, some essays-for example, the one on Public Enterprises and portions of other essays-where the tone is very different. These are marked by sensible plain-speaking and worthy prescriptions. They would be better appreciated if juxtaposed with an account of the evolution and the current phase of the so-called age of commerce in India and in the world at large. Alas, this has not been done. The haunting question is still there: Why is the book given the title "The Commercial Society?" Take a look at table 1.1- Three Sister Model (TSM). Here. fourteen different attributes ranging from value-system to operational focus found respectively in the Age of Art, the Age of Science, and the Age of Commerce are listed in separate columns but nowhere analyzed. Two observations can, nevertheless, be made on this table. One, as the author himself admits (p.1 0): "Two or three ages can (and have for long, continued to) subsist side by side." This may, in fact. Management & Change, Volume I, Number I (April,

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oped and developing countries. Section B analyzes the status and section C provides a policy perspective with special emphasis on Indian policy documents. The introductory chapter while surveying research attempts to trace the chronology of various researches done on different aspects of small-scale industries (SSls). For this purpose and for the purpose of analysis, the studies have been divided into two categories: (i) Analytical, and (ii) Descriptive. The former category of studies deals with fundamental and developmental aspects while the latter pro:. vides information on structure and behaviour of SSls. In the analytical group, the studies have again been categorized as: (a) General studies, and (b) Specific studies. The mathematical model-based studies and the studies dealing with fundamental theoretical issues have been included in the general studies category. These studies mainly deal with the issues like choice of technique, scale and size of operation, employment, concentration of economic power, dispersal of industries, and regional disparities. The specific studies deal with relative efficiency of different size groups, comparison of traditional and mod .. ern SSls and relative merits of different types of organizational set-ups ofSSls. The discussion in the chapter is well. documented. While concluding the introductory chapter the author remarks that the differences in conclusion and inadequacy of research necessitates accurate studies, without making clear her conception of "accurate studies": However, she had already recognized the causes of differences in conclusions of various studies in the preceding lines. What I believe is that research is an unending process. Any research is an effort to answer an issue and is not the only answer to it. Section A comprises offour chapters. Chapter one deals with the definition of SSI. In this chapter, the author; has discussed the statistical and' the functional definitions of SSI. The chapter also compares the definitions of SSI in developing and developed countries. One full section has been devoted to the Indian concept of SSI. She also deals with changes in the definition of SSI over time with the change in Indian Policy Perspective. The second chapter attempts to analyze the relationship between investment criterion and the role ofSSls. The author emphasizes that the pattern of investment in an economy determines the role of SSls. She has argued that the pattern of investment is first determined in an economy and thereafter the role of SSI is defined. She also traces how the distinction between SSls and cottage industries came into being. She argues that the difference between small- and large-scale industry is to be associated with the scale of operation and not with the technique of operation. In the third chapter, the author compares the efficiency of small and large units (within the sample) on the basis of employment per unit of output, capital intensity, capital -output ratio and labour-output ratio. She tries to test eight hypotheses and corresponding to these, she coins seven ratios for comparison. She picks up a sample of81 firms pertaining to the period 1979-80, and 76 units for the period 198081. For the purpose of the study, the author has resorted to size group classification Management & Change, Volume

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on the basis of investment, employment and capital intensity and classified the units into seven, five and six size groups respectively. Bhatnagar also resorts to classification on the basis of the structure of organization. She does not, however. make the purpose of this classification clear. Thereafter, she calculates various average efficiency ratios for the groups to show how the ratio varies with the size of groups. She infers that labour productivity increases with the increase in capital intensity and that the capital productivity declines with the increase in capital intensity. However, she does not talk about the theory of return to factors or scale: She tries to support the conclusions drawn above with the help of rank correlation and stepwise regression methodology. The author remarks that stepwise regression will indicate the importance of various ratios on output, employment, surplus. output-labour ratio, capital ratio and output-capital ratio. To conduct stepwise regression, she has given functional forms rather than exact specifications. In the tables of regression also, she gives the parameters of few variables in comparison with functional form expressed earlier. In the tables she quotes "t" values and the adjusted coefficient of determination. She does not analyze the response of the dependent variables to the changes in independent variables. She also does not explain what does she mean by the word "influence" i.e. whether it is the variation explained or the sensitivity of dependent variable due to change in independent variable or the significant detem1inants in the regression equation. In the end of the chapter, she describes the findings in respect of various efficiency ratios. In the fourth chapter, the concept of ancillary units is defined and their role is analyzed. In the analysis, she tries to discuss the linkages and motivation of ancillarization. A small study of ancillary set-up of engineering industry (H industan Machine Tools) in Chandigarh is also discussed. To study the ancillary units. she uses the same efficiency ratios that she used in chapter three. Section B comprises of two chapters dealing with status of SSls" In the fifth chapter, she discusses the growth of SSIs in developed and developing countries. The sixth chapter deals with status ofIndian SSIs. Quoting a World Bank study, the author comments that the share of very small enterprises (less than ten workers) is declining with growth in output. But it still remains high in poor countries. To support her contentions, she picks up data of North America and Taiwan. In developed economies, employment in larger enterprise is growing. For supporting the argument, she quotes the data in respect of SSIs in US, Japan, and UK. She concludes the chapter by saying that in manufacturing, the small sector has an 'unstable future. In the sixth chapter, Bhatnagar argues that the status of SSIs has undergone a sea change due to changes in social, economic and political environment in the country. The qualitative change that she refers to is the ancillarization of SSls which also have the rationale to exist independently. Another important change that is referred to is the advancement in the technology of SSls. To support the growth contentions of SSIs, the author provides data on growth of the number of SSIs and the growth of their output. She uses tables with different starting years. Management & Change, Volume 1, Number 1 (April,

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Part C of the book deals with strategic alliances and provides an overview of the industry perspective followed by functional analysis and country profiles. Chapter five brings out the industry perspective and details on some of the major strategic alliances formed in the automobiles, airlines and high-tech industries. It is shown that in the case of high-tech industries, alliances have been more prevalent in sectors such as telecommunications, computers and software industries. Thus, there seems to be some concentration of alliances in specific sectors. The author, however, has failed to justify why such concentrations take place. It is, however.. clear from the facts presented that most alliances, no matter which industry group one talks about, have some common elements. They may, nevertheless, have many differences depending on the industry group. Chapter six deals with functional integration in relation to marketing alliances. The chapter identifies some of the alliances that are in the nature of co-marketing where a partnership is created to market their products as complements. The author points to power imbalance, relationship advantages and operational logistics as the three most important concepts in understanding the framework for co-marketing alliances. Besides these three factors, the author argues that the companies need to focus on developments that emphasize partnership with their customers, exchange of resources and commitment of investment towards maintaining superior customer relationships. The last chapter of the book examines in great detail the perspectives on alliances in Asia, including a detailed overview of the developments in India in this regard. There are useful lessons to learn from companies, particularly from Japan, South Korea and Singapore who have over a period oftime developed new mechanisms of forming strategic alliances. The author argues, based on the experience of other countries, that companies in India should use discretion in entering alliances. The Indian scenario on strategic alliances is a useful addition to the book and makes it pertinent to the current evolution in India. The author has presented a difficult subject in such a simple way that it could be understood by one and all. The coverage of the book on different aspects of strategic alliance is comprehensive. The book should be an essential reading for business executives and experts interested in the field of international business. It is a very useful source for students and researchers who are trying to develop a deeper understanding of strategic alliances. Kamlesh Misra Professor and Dean, Institute for Integrated Learning in Management, Lodhi InstitutionalArea, Lodhi Road, New Delhi-IIO 003.

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Human Resource Development S.K. Ghosh (cd.), HRD in the Third World-Questfor Empowerment. New Delhi: Vikas & LBSNA, 1996. xix+214 pp. Rs. 295 hardback. At the outset, the reader should know that HRD in this book is equated to training. The book is about training for civil service personnel. Only three articles by foreign authors discuss training iIi general. Perhaps the reason for equating HRD to training in this book is that in government, the concept of HRD has yet to develop. In public administration in India, the comprehensive approach to deVeloping human organization has not come into practice. I am also unable to understand the significance ofthe sub-title because I found little in the book that can promote empowerment of people. I believe that the concept of empowerment is much more than the delegation of powers or training. Empowerment has to necessarily consider issues such as autonomy at work, the result orientation, and many factors relating to work design, systems of control, supervision, etc. Yet another aspect that the reader should keep in mind is that the discussion is confined to India. There is no data except in passing, about other third world countries. Several authors in the book have pointed out that the situational factors should be taken into consideration in designing programmes and in teaching. They have repeatedly suggested that the concepts that apply to the industrialized countries may not apply in India. By the same logic, what may be relevant for India, may not apply to other developing countries. While talking about the third world, we need to present data from different countries, and derive from such data the similarities and differences between one country and another. There is persuasive data in literature to suggest that even in the developed countries, there are many areas of similarity and dissimilarity. For example, within the countries in Europe, the dissimilarities in managerial practices between France, Germany, and Denmark are sharp. Likewise, there are many areas in which certain practices in India are comparable to those in the UK, Germany, and USA. I think sweeping generalization about the developed and developing countries could possibly deprive rather than assist us in understanding the social and organizational reality. I would like to emphasize that none of the comments about the context of the book take away the intrinsic value of the book. I have highlighted these points to prepare the reader to look for what the book contains, and not expect the material that the title suggests, as it did for me. Having briefly mentioned the context of the book, I would now discuss the contents in its twelve chapters. Chapter one by Ghosh, the editor of the book, is a survey of training in govemment. The author analyzes the approach to training and suggests what the previous partners in training should do to make it more effective. The material presented in the chapter is analytical, insightful and comprehensive. Chapters two and three by York and Faulk respectively deal with training in Management & Change, Volume 1, Number 1 (April,

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general. York suggests that training should equip the participant to improve his performance, and for this purpose focus of training should be the system and interconnected processes. Faulk emphasizes the need to identify training needs. The design and the training methodology should essentially meet these needs. He emphasizes the need to evaluate the programme. Neither a trainer nor a manager would disagree with the theme of these articles. The difficulty is that in spite of the agreement on these propositions, most organizations and the trainers ignore these cautions. The question that would have to be examined is, why policy makers and trainers pay lip service to these ideas and fail to put them to work in their organizations. The fourth article by Angadi is on Western theories oflearning. He has categorized these theories in three schools, i.e., Behaviourists, Cognitive and Humanist. The author comes to the conclusion that the Western theories of learning are not applicable to the Indian situation. I find two kinds of problems with the presentation. It is too general and sweeping. The author provides no data from Indian situation to show that the theories are inapplicable and are culture-specific. The theones are based on the analyses of the mental processes obtained from systematic observations, experiments carried out in controlled conditions and clinical experiences. The author does not even present operational data that raise doubt on the inapplicability ofthe learning theories. This implies that the learning theory has something to do with training, as indeed, it must. But the discussion in this chapter doesn't elaborate how the trainer could use the ideas presented in the article. The next three chapters by Mukherjee, Routray and Neela Mukherjee respectively discuss how micro-level planning can improve by using Participatory Rural Appraisal Technique, and how people should be trained for this job. Routray's article highlights the need for strengthening regional people for the job. The third article by Neela Mukherjee suggests that participation of people in rural development produces better results and therefore, training of government officials should develop these skills. All three articles are extremely useful in respect to rural planning and development but do not seem to be relevant for inclusion in this book. In fact, I believe that the importance of these articles is likely to be reduced because the thrust of these very useful articles is different from that of the book. The reference to training in these chapters is incidental. All the three articles are most readable and demonstrate the deep concern of the authors for improving rural development strategies; but on my part, I am unable to fit these articles into the basic theme of the book. Ramkrishnan in chapter nine describes the availability of software packages for teaching hard sciences and, how they can be used by trainers. The social science packages are being developed but lot more work has to be done for them to be cost effective. The article provides useful knowledge in the area of computerassisted learning in teaching institutions. Krishna has briefly discussed in chapter ten some approaches to evaluating training. The next article by Biebel is also concerned with measuring and evaluating Managemell/ & Change, Volume 1, Number 1 (April,

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training. Both these articles deal with the subject that greatly interests both trainers and managers. Some commonly used methods have been discussed in these two articles. This subject was also discussed in the two articles earlier by York and Faulk. The treatment of the subject in the two articles is useful though somewhat limited. Many innovative techniques are employed by organizations in India which could easily have been mentioned here. The last chapter is written by the editor. It highlights the problems that a teacher must recognize while teaching a population drawn from many different countries. The author has suggested ways of overcoming the problems of teaching people from diverse cultures. I am not sure about the target readership of the book. The introduction by the editor is comprehensive and most useful. Trainers would be familiar with the material contained in this volume. The Training Division in the Ministry of Personnel and Administrative Reforms has published many monographs, training abstracts, and papers. Indian Institute of Public Administration, New Delhi, and their journal, Indian Journal of Public Administration have published several articles on the subjects covered in this book. The journal of the Indian Society for Training and Development has also put out useful material. There are many other publications on training design and technology published in India and abroad. Some of these are included in the extensive bibliography provided at the end of the book. While the book does not break new ground, the articles included in it are entirely readable, in particular the two written by the editor. Ishwar Dayal Ex-Director, IIM-Lucknow; Senior Fellow, Shri Ram Centre for Industrial Relations & Human Resources, 4E/16, Jhandewalan Extension, New Delhi-II 0055.

Udai Pareek, Training Instruments for Human Resource Development. New Delhi: Tata McGraw Hill, 1997. xi+625 pp. Rs.595 hardback. P.1.. Rao, HRD Through In~House Training. New Delhi: Indian Society for Training & Development and Vikas, 1995. 286 pp. Rs. 325 hardback. During the last twenty years or so, the discipline of human resource development (HRD) has witnessed the expansion of new ideas, concepts, techniques and their applications. Despite this, it is in a very nascent stage in India and has a very long way to go in harnessing its true image and teacbings. In India, HRD has become synonymous with training in most organizations. Conceptually, even though, HRD is a movement, a philosophy, and a way of thinking. It is also a belief-a belief in people's strengths and growth, and in its impact on organizational effectiveness. Both the books under review deal with human resource development through trainManagement & Change, Volume 1, Number 1 (April. 1997)

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ing. Training, undoubtedly, is also one of the mechanisms ofHRD. Pareek's book, Training Instruments for Human Resource Development forms part of many of his seminal contributions to the knowledge and scholarship of HRD. The work is a compendium of instruments covering a vast spectrum of topics, and is the first attempt of its kind. This is a repertoire of all the HRD instruments he has been involved with for almost half a century, which are being put to use in various institutions and organizations in Indonesia, the Philippines, Ireland, USA and, of course, India. The vast use of these instruments itself proves their validity and credibility. The book is divided into six parts. The first part of the book is introductory which is intended to help the reader as to how to use these instruments. Interestingly, it contains guidelines for preparing new instruments keeping in mind the needs of different groups, organizsations, etc. It also lists out the source books which can be used for developing various HRD instruments. Part II to IV contain instruments covering varied issues. Part II is dedicated to personal orientation and behaviour-related measures, and contains instruments for measuring personal efficacy, effectiveness, locus of control, psychological needs, intrinsic and extrinsic motivation, perseverance, disposition, managerial behaviour, power bases, etc. Surely, these will go a long way in identifying behaviour for the use ofHRD professionals. Part III is exclusively devoted to personal and interpersonal styles and contains 13 instruments covering life styles, managerial styles, training styles, coaching styles, etc. The instruments developed for measuring different roles have been dealt with in Part IV. Part V of the book is one of the important sections and contains instruments pertaining to organization. These instruments will help HRD/ HRM professionals in measuring their organizational culture, climate and atrno .. sphere. Part VI of the book provides-reach to the instruments, which can be used in non-corporate sectors, e.g. agriculture, hospitals, etc. It contains instruments which can measure the behaviour offarmers to a change (i.e. either they are enthusiastic, accepting with reservation, putting on trial or rejecting that very change), patient satisfaction towards the food supplied by the hospitals and hospital's image, etc. The strength ofPareek's book lies in its meticulous presentation and the clarity that it provides to the user of the instruments. Each instrument carries discussions on the theories related to it and provides key information on its applicability and administration. The book is of immense use for managers, consultants, researchers and those interested in understanding individual and group behaviour. The second book under review HRD Through In-House Training is a good endeavour by P. L. Rao. It discusses the issues and dynamics related to the effectiveness of in-company training programme. In-company training based on experientialleaming is the ultimate answer for organizations interested in developing and sharpening their tore competencies for survival and growth, especially in the present competitive environment being fuelled by the liberalization scenario. The book is made up of three sections. The first section deals with the basic concepts of training and learning. Section two elaborates different methods of training. The Management & Change, Volume

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two chapters written on instructional techniques and training of supervisors and managers are quite informative. In section three, the author has penned down the effectiveness of in-company training programmes. He analyzes this through factors like perforn1ance and cost effectiveness of training and appraisal of the trainer. This section also has separate chapters on innovation in training and a brief recapitulation which can serve as a ready reckoner for the whole training function. A good number of pages (67) have been devoted to appendices, which are eleven in number, giving the book somewhat uneven balance. Despite this, the information given in these appendices is quite useful. The association ofISTD make~ the volume worthwhile and justifies its use for, in-house training programme. All in all, the book is quite useful for teachers, trainers, students, and for managers involved in the training function. Sami A. Khan Assistant Professor-HRM & IR Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-I 10 003.

Industrial

Relations

c. S. Venkata Ratnam (ed.), Industrial Relations in Indian States. New Delhi: Global Business Press in association with Indian Industrial Relations Association and Friedrich Ebert Foundation, 1996. xii+476 pp. Rs.300 paperback. It is well known that the mosaic of national industrial relations (IR) picture can be best appreciated and understood by a study of regional IR. Regional IR studies assume added importance in India, given the federal nature of our polity. In the federal structure, the distribution of powers between the centre and the states, as ordained by the Constitution, determines the legal edifice and the management of the system. Centre-State relations is a thorny issue in a federal polity, more so in India, as more states came to be governed by regional parties. The placing oflabour matters in the Concurrent List of our Constitution, the provision of "appropriate government" in various acts (especially in the Industrial Disputes Act), the federal data collection process, the responsibility on the states to maintain law and order and other such factors make the state government an important power centre in our industrial relations system (IRS). This demonstrates how complex is the task of defining an "actor" in the IRS. The role played by the state labour departments in diluting the efforts of the intervention machinery (compulsory conciliation and adjudication) shows the important position they enjoy in the Indian IRS. The existence of federal consultative institutions such as the Labour Ministers' Conference, and the National Development Council attest further to their importance. The constitutional scheme of distribution of powers has created conflict and confusion both in the policy and implementation spheres. Management & Change, Volume

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On the other hand, states differ significantly in terms of level and quality of development, characteristics oflabour market, nature of union movement and conflict-proneness. They respond differently to macro and global forces. Put simply, there is diversity in the TRscenario in the states, despite "the efforts to evolve and institutionalize a national pattern in industrial relations". Two recent happenings in the economy and the polity have aroused greater interest in the state IR. The wresting away of the development initiative from the state (distinct from state government) and placing it in the invisible hands of the market-ironically by the state agencies themselves-have important ramifications for the regions. It is now the ability of the regions concerned to fashion their developments. A region could disrobe itself of its rigid ideological garments and woo the investors to invest in it as did West Bengal, or review the industrial and labour policies to make the region appear investor-friendly as did Kerala, or strengthen the capitalist tendencies, or effect relaxations in the policing of industrial sectors to ease tensions of employers. In short, the states could adopt "any" policy to become competitive and become friendly to the invisible angel, the "market." But, the states are not completely "free"; the ever jealous centre is always there to freeze some of its initiatives. The centre (ab )uses its power of clearing the states' initiatives to maintain its hold over the latter. The Centre-State relations need to be redefined in the new environment. The states demand for increased freedom and less dependence on the centre. The "federal politics era," if it sustains itself, would redefine the relations. Then, the regional IR would assume greater significance. The key issue is: how much divergence (uniformity) is permissible or ideal. In the new political or economic environment, there is an urgent need to review these issues. The discussion by C.S. Yenkata Ratnam on these issues in the book under review is interesting and is worth republication in an expanded version in IR outlets for wider consumption. In the altered circumstances. study of regional IR becomes interesting in itself. This volume, first of its kind, has made an impressive beginning, and is quite timely. The institutions and personalities responsible for the publication of this volume surely need to be congratulated. Now. to the contents of the volume. The volume, containing contributions by academics and practitioners, is the outcome of the seminars organized by the Indian Industrial Relations Association (TIRA), Friedrich Ebert Stiftung (FES) during 1995-96--excepting one, that ofGani (it appears so from the note that his article is reproduced from the IJIR). It IS neither desirable nor practical to review individually the contributions. The interesting nature of the contributions can be gauged by my brief discussion of two of themone concerning Kerala (by K. Ramachandran Nair) and the other West Bengal (by Ratna Sen). Kerala and West Bengal, both share some common features: strong left base in union movement, high conflict-proneness, increasing number of unions, high rate of unemployment, and high level of political consciousness. Both states experiManagement & Change, Volume 1, Number

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enced flight of capital; the blame was largely laid at the doors of union militancy which, among others is said to have caused poor industrial performance. Presently, both are trying to attract investors to their regions by changing industrial and labour policies and reviewing the relationship between the ruling party and unions. IfKerala's labour along with capital goes out, West Benga!- has a greater dose of outside capital and workers. But Kerala's industrial militancy is climbing down, as are strikes in West Bengal-employer militancy has replaced labour militancy in West Bengal. Ramchandran Nair seeks to highlight the positive features ofIR in Kerala and dim the negative publicity. Despite militant tendencies, high potential affinity, recent caste orientedness, friction-proneness, unions in Kerala are said to be cooperative, ever willing to negotiate, willmg to participate in tripartite forums, agree even to zero-strike clause. Unique institutions like Industrial Relations Committee (IRC), Industrial Relations Board (established by the Communist Government in 1957), Conciliation-cum-Arbitration Board (to deal with cases of dismissal), have significant role in toning down militancy in Kerala. Unions and high wages alone could not be responsible for poor industrial performance of this state. But these features are overshadowed by the negative aspects of IR. His basic argument is that the actors should realize that unless the Kerala economy improves, IRS cannot benefit. Ratna Sen draws our attention to various changes that have been taking place since the move ofliberalization in 1991, which need to be, as the author argues, seen in the context of happenings in IRS in the 1980s. The basic message of the paper appears to be that things will not change in West Bengal as impressively as is held out to be. The contributions had to surmount several constraints, non-availability of data at the state level, or incomplete and unreliable data, absence of guiding literature, paucity of resources, among others. Speaking of data, scathing through fully justified comments by the editor on official data (especially union data) are pleasing to read; but they would not pierce the thick skin of the bureaucracy! Given these constraints, the contributions barring a few are excellent and enhance our understanding ofIR in the regions concerned. The paper on Tamil Nadu is truly disappointing, and is in marked contrast to the industry put in by other paper writers. Editorial and write-up slips, printing errors (see, for example, pp. 9, 56-57, 66-7, 439) do diminish the pleasure of reading this finely printed volume; but they are minor irritants, integral to Indian publishing industry! K. R. Shyam Sundar 2, Tulsi Vihar, 8th Road, Chembur, Mumbai-400 071.

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B. R. PatH, Collective Bargaining-Perspectives and Practices. Hyderabad: v~rsities Press (India) Ltd., 1993. xxii+ 539 pp. Rs.225 paperback.

Uni-

It is axiomatic that collective bargaining is the highest virtue in industrial relations (IR), for it is a democratic method of determining the relations between labour and management. The institution of collective bargaining (CB) in the West has developed as a method of private industrial government whereby power relationships have found ways to reconcile conflicting interests, principally due to less hostile legal frameworks. The Indian industrial relations situation, however, has been marked by the dominant influence of compulsory adjudication mechanism which has substantially obfuscated the evolution of voluntary dispute resolution structures. The potentiality ofCB is further diluted by the fact that less than ten percent of the Indian workforce is actually organized, the majority of which too is from the public sector. Indian IR scholars are often heard lamenting that there is hardly any CB in India worth the name. This situation prevails despite a seemingly strong trade union class at the macro level, projecting pro-labour policies, and a large number of labour leaders finding place in central and state legislatures and berths in government. Students of IR have always shown keen interest in gauging a critical understanding of the institution of CB in the Indian situation. There aren't very many well-written books on the subject to answer their queries, especially those related to CB practices in different industries and regions and across cultures. Patil' s book is a well developed text on the subject. The book is divided into 22 imaginatively conceived chapters forming parts of four broad sections. The first eight chapters constitute the first part titled, General (International) Perspectives; and the next seven chapters focus on the Indian Perspective. Part three consisting of six chapters is titled Industry Perspectives, which has been written with a specific focus on the Coimbatore region. The solitary chapter in the concluding part is titled, Collective Bargaining: An Adaptive Institution. The most important strength of Pat iI's work is its linguistic coherence, comprehensive coverage and lucidity of style. An added positive feature is the international perspective of the institution of CB, whose relevance to the Indian perspective he has skilfully articulated. The basic theory oflabour negotiation is the same all over. The differing environments and legal frameworks principally explain the diverse practices. Hence, the need for handling the thematic with a comparative perspective, in which direction Patil has done a good job. His comprehensive discussion of patterns of bargaining in the textile industries in the Coimbatore region-based on his research-is especially revealing to the reader. His attribution to the legal framework of the stunted growth ofCB is quite interesting. The analysis ofCB practices in Britain, Canada, Japan and Australia help the reader in having a fuller understanding of the subject. While Patil' s efforts require commendation, a few shortcomings should also be noted. The book was written when the supply-side economics had already perManagement & Change, Volume 1, Number 1 (April,

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vaded the economic thinking world over, eventually leading to weakening of trade unionism and collective bargaining. Plethora ofiR legislation in the UK and antiunion practices being resorted to by employers in the USA since the eighties have altered trade union and collective bargaining practices. The Indian scene too cannot remain unaffected for long. Human resource management concepts are being used euphorically to dilute union solidarity and to individualize collective labour relations. The new work sites are replete with instances of individual contracting. The concept of Japanization is being much talked about in the European literature on work. Patil's analysis has not taken note of these developments. Another important point that needs sufficient comprehension especially in the Indian context is facades of collective bargaining projections by industries by manoeuvring the inter-union and intra-union relations often with the help of labour administration framework. This point has not been sufficiently accounted for by IR scholars in India, including Pati1. A critical mapping of such practices would add to the value of this book. Further, through careful referencing, the size of the book could have been reduced to about three-fourth of the present length. Despite these, the book is of immense use to the IR academics, students and managers. It contains useful information on almost all connected issues. Debi S. Saini Professor-HRM & IR Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003.

Manik Kher, Coping with Technological Change. New Delhi: Sage Publications, 1997. 205 pp. RS.295 hardback. Technology-related issues have assumed enormous importance during the recent years and have attracted the attention of governments and policy makers, industry and business as well as the academia. The book by Manik Kher is an attempt to address the nexus between technological change and industrial relations in India. The book is based on an inter-industry, inter-region comparative study covering steel, textile and engineering industries from both the private and the public sector. According to the author, a total of22 organizations have been covered in the study. The book is divided into eleven separate chapters, dealing with several dimensions of the relationship that exists between technological change on the one hand, and "human relations" as the author suggests, on the other. In the first chapter, while attempting to define the relationship between technological change and human relations, the author appears to have simplified the issues by equating modernization, with technological change and human relations to subsume industrial relations and human resource management. It would, perManagement & Change, Volume 1, Number J (April, 1997)

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haps, appear more reasonable to accept technological change as an aspect of modernization, and human relations as an important element of industrial relations and human resource management. Chapter two provides an overview of the historical perspectives on the role of government in promoting public sector through legislative and other policy measures. The author holds the view that creation and maintenance of core industries such as steel, coal, cotton textiles, etc. by the government has resulted in overmanning and unskilled workforce. While there is no quarrel on the issue that the protectionist policies of the state have created a non-productive work culture in general, it is not beyond debate whether the private sector had the capacity or willingness to invest in these areas at that point of time. This chapter also refers to some of the major works on technological change and industrial relations, particularly in UK, where mostly technological change was introduced to reduce labour cost and improve flexibility. Global issues of trade union resistance to technological change are also discussed here, though there is evidence of increasingly changing stance of unions towards new technology. Chapter three is an industry-wise discussion on the implementation of technological change. The huge accumulated loss of the steel industry in the public sector is attributed to faulty policies of product mix, poor quality of raw materials, scarcity of energy, poor industrial relations and above all, the lethargic attitude and the delayed decision making processes. On the contrary, despite strikes and lockouts in the private sector steel industry; decision making was much faster and there was an urge to improve continuously. Compared to the steel industry, the level of techno logy and automation has always been higher in the engineering industry, where modernization was a continuous and gradual process. However, the author notes the case of a public sector cable company which lost out to competition due to bureaucratic delays in making timely change. The case of textiles is far too well known as a victim of technological obsolescence. The remaining part of the book discusses various aspects of the links between technological change, on the one hand, and work organization, training, work cui .. ture, union-management dynamics, etc., on the other. The author observes that managements have attempted to improve labour productivity by (a) introducing a multi-skill concept, and (b) making an operative work on multi-machines. In all cases covered in the study, technological change involved differing degrees of reshuffling of manpower and changing of shopfloor layout. Kher's finding is not surprising that despite protection of jobs and wages, workers resisted any form of redeployment and locational shifts, which made change very difficult. Many organizations chose the softer option of allowing the redundant employees to hang around without any assigned jobs. As observed by other studies in different contexts, in the present case too workers were reluctant to undergo training and take on other suitable Jobs. Such resistance was found to be stronger in the case of public sector undertakings (PSUs). It would have been interesting if the author had also investigated the kinds Managemenf & Change, Volume

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of efforts made by management in initiating meaningful training/re-training prior to introduction of technological change. Trade union support to the resisting workers against redeployment and job changes was found to be the most crucial factor making technological change difficult. However, it is interesting to note that the engineering organizations in the western region have had far greater success compared to others. Since the eighties, matters relating to work organization associated with technological change have been kept out of the purview of union negotiation. Managements have incorporated internal redeployment as a managerial prerogative in the wage settlements. Introduction of technological change, new work- methods, work norms and quality standards have been clearly stated in these agreements as management's rights. It has also been observed that the trade union often takes undue advantage of management's lenient attitude towards workers. In an integrated steel plant, although the agreement has been that the union will be consulted only if a change directly affected workers' interests, in effect, no change was possible without union's approval. Often the management's shortsighted pursuit for industrial peace proved to be a financial disaster, particularly in the PSUs, the author observes. At the same time, the uncompromising approach of management on work discipline made modernization easier in the textile mills at Coimbatore. The book ends with a brief discussion on the emerging scenario of industrial relations and their implications for modernization. A combination of an assertive managerial approach vis-a-vis union along with concerted efforts to bring workers closer to the management is likely to reduce the importance of trade unions atthe workplace. Such a scenario, in turn, may make technological change faster and smoother. Manik Kher's book has addressed important issues in a fairly virgin field, and deserves merit. However, though the book is based on data collected from as many as 22 organizations, somehow the reader does not get the benefit of the rich data that the author may have collected. The case illustrations are too brief and cursory to appreciate the complexity of the problem under study. The author has attempted to cover too many important issues in too little a space, perhaps because industrial relations and human resource management have been considered under the simplistic concept of human relations! Kuriakose Mamkoottam Professor, Faculty of Management Studies, University of Delhi, Delhi-lID 007.

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Debi S.Saini (cd.), Labour Law, Work and Development: Essays in Honour of P:G. Krishnan. New Delhi: Westvill Publishing House, 1995. xxxi+ 221 pp. Rs. 350 hardback. Law in any society is supposed to be an apparatus of facilitation in formalizing relationships and orderliness. Laws do not envisage prescriptions to be an end in themselves; rather, they are meant to serve the needs of the society. The Constitution of free India contemplated for the state both the developing and evaluative roles so as to promote equitable mode of development. In the sphere of work, a p1ethora of labour laws were enacted or endorsed to regulate the conditions of work or other aspect of the labour process. Yet much remains to be done for rectifying the lack of balance as we are confronted with a situation of internecine complexities and power differentials in the present dispensation. The book under review needs appreciation for making original contribution to how the above objectives have been realized, and how economic, social and political forces have shaped legal norms and values; and to what effect. It is a festschrift produced in honour of Professor P. G. Krishnan, who served as a professor of labour law at University of Delhi, and as claimed, a respected teacher of Dr. Saini, its editor. He was one such academic who remained quite perturbed by the orthodoxies of labour law. Saini's efforts are certainly a fitting tribute to Dr. Krishnan's scholarship and his sense of socio-Iegal justice, The book reflects interdisciplinary thinking and analysis, articulating grassroot realities and complexities of labour enactments, enforcement and administration. It is made up often essays classified into four sections, besides the introduction. Saini's introduction to the essays is articulate and contains the gist of the book. The issues covered in the book are multi-dimensional and have great relevance for understanding the socio-Iegal dynamics and intricacies of various labour laws and their implications in the new economic scenario, which encompasses a wide range of peculiarities oflndian economy and Indian labour. The first section ofthe book consists of two essays. The first one is by Upendra Baxi, which deals with unorganized labour. He questions the state of "unorganized law" to that effect. Baxi perceives the state of "unorganized labour" as "disorganized labour" and prescribes removal of all traces of naturalism from the descrip .. tion. He argues that the "expression" "unorganized labour" postpones the realization of the terrible truth that some citizen-employers are abusing their constitutional rights with impunity to obscenely exploit their fellow citizen" (p. 5). Saini's paper titled "Compulsory Adjudication Syndrome in India: Some Implications for Workplace Relations" is a path-breaking and thought-provoking piece of research. It uncovers the grass-root realities related to the labour adjudication process, and provides naked eye to the reader through which one can see the gap between legislative aspiration and enforcement realities. Saini's findings surely startle the reader's sense of justice. His evaluation of21 settlement awards showing the manifestation of labour's vulnerability and its submission to the vested interManagement & Change, Volume 1, Number 1 (April, 1997)

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ests of "the alliance" is credible. He is right in his view that the industrial adJudication system does power-dispensation more than settling industrial disputes (p. 34). He uses a term "jurisdification of the workplace" which is likely to excite labour law scholars in the third world. By this term, he means a tendency on the part of actors in industrial relations to put primacy on legally-sustainable alternatives. And the narration unravels the internecine designs of managers, lawyers, management consultants, outside union leaders, who are partners in the "unholy alliance." This revelation is one of the rare documentations available in India on the dynamics of compulsory adjudication and its fall-outs. Section II of the book deals with developmental vision of the Indian Constitution and working of labour laws for rurallilbour. Patel and Desai's paper in this section examines the implementation oflabour laws for migrant labour in Gujarat. They argue that the dominance of vested interests over the executive is so strong that law has become toothless. International competition and technological innovations have radically altered the production process in many countries, and these developments have a vital impact on traditional industrial relations and human resource management practices. In this background, section three of the book examines the IR law in the present economic and social arrangement. Venkata Ratnam accepts privatization as inevitable, as a major element of the Structural Adjustment Programme (SAP) and sheds light on the emerging social and labour issues due to privatization. Mamkoottam's paper on "Industrial Restructuring and Industrial Relations Law" provides an insight into the problems of restructuring and alternatives like NRF: and examines the present IR law in terms of its purposiveness. He contends that the cautious legislative approach and restrictive attitude of trade unions to allow more flexibility in labour matters have been considerably slowing down the pace of change (p. 155). Fourth and the last section of the book points towards altematives in the labour justice dispensation. Justice Mehta presents an alternative model of development and advocates the well-known "Kamani case" to support his formulations. But as far as the attainment of the goal of cooperative development is concerned, it is a harsh reality that Kamani experiment has totally failed in India and should be a terrible blow to the die-hard advocates of labour cooperatives. This reality will certainly question the intensity of Justice Mehta's formulations. The last essay of the book by Advani and Saini discusses the dynamics of the denial to unorganized labour acceSSIbility to the justice system. The 'Chikodara case' studied by the authors highlights the law conferring only as modicum of power to labour, \vhich should activate the sleepy judicial system. I tend to think that it would have been more appropriate if the editor had included the last chapter in section two. It is evident that the sociological account which is the hallmark of the book will serVe as a feedback t9 the policy makers, law makers, interpreters and enforcers. The book is not less important than a text book to the students of labour laws, as it tells the reader how labour law structures actually operate in a given ambience. Apart from Management & Change, Volume

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treading into a novel approach to studying labour law, Saini has demonstrated a high standard of editing, Also, the thematic and narrative coherence of the book despite its varied and wider coverage is remarkable, and makes it rigorously comprehensive though yet readable. Sami A. Khan Assistant Professor-HRM & IR Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003,

Debi S. Saini (cd.), Labour Judiciary, Adjudication and Industrial Justice. New Delhi: Oxford & IBH publishing Co. Ltd., 1994. xi + 257 pp. RS.295 hardback. In the post-Independence India, under the influence of Post-Great depression and post-World-War-II- created global economic environment, we adopted a model of nation building based on statist philosophy. Following this philosophy, we introduced an elaborate structure of regulations to influence the behaviour of social, economic and political agents to achieve the goals mentioned in the Indian Constitution and the process of planned development. The same process of regulation also created different labour market regulations which have conditioned the working of trade unions, workers and managements. Through these labour regulations we have accepted, among others, the model of compulsory adjudication in industrial relations instead of voluntarism based on the concept of collective bargaining. The compulsory adjudication model has given birth to the institution of labour judiciary, which has made significant contribution in shaping the Indian industrial relations system. $ince 1991, when the stance of the policy debate has shifted away from the concept of "market failure" towards "government failure," the policy makers are rethinking about the appropriateness of the regulated policy regime. Government ofIndia has already deregulated commodity, financial and capital markets but has not yet revealed its stand on the deregulation oflabour market. In the recent past, scholars as well as policy makers have developed consensus that unregulated and liberalized economy is not compatible with regulated labour market. Hence, labour judiciary is also subject to the famous Shakespearian dilemma, "to be or not to be". The book edited by Saini makes an important contribution towards understanding various issues that are associated with this dilemma related to labour judiciary in India. Perhaps the most interesting aspect of the book is the reflection of a refreshing break from doctrinal traditions in labour law studies. The book examines labour law issues in societal context. While reviewing another book of Saini, a reviewer wrote of the emergence of a "Debi S. Saini syndrome" in labour law thinking [Indian Journal of Labour Economics Vol. 38(2)]. Surely, Saini's efforts in bringing socio-Iegal scholars, justices, adjudicators and labour law pracManagement & Change, Volume I, Number

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titioners at a common forum and in providing a sociology-of-law perspective to formulations he articulated in his paper as well as in the introduction to this volume are a commendable effort. Most papers have come from leading authorities in various spheres oflabour studies. Since the authors belong to different disciplines and varying backgrounds, the papers included do not belong to either a particular school of thought, methodology or policy bias. This is precisely a major strength of the study that it has included the opinions and methodologies of different shades to help the reader look at the labour judiciary from various vantage points. The twelve papers contained in the book have been classified into four different sections, each section dealing with a specific aspect of the institution of labour judiciary. The classification of the papers is quite thoughtfully done. Also, it is useful because it introduces to the reader the problematic in a stepwise fashion like a guided tour of an unknown destination. It is not possible to provide review of each and every paper that has been included in the book separately. Therefore, what is attempted here is to provide to the reader an understanding of various issues that have been raised and discussed by different authors, giving himlher an assessment regarding range, depth and flavour of the book. The papers included in section I deal with the issues associated with the choice between two alternative approaches of industrial justice dispensation. These alternatives are the approach of compulsory adjudication as evolved by the Industrial Disputes Act 1947 and the approach of voluntary industrial justice through collective bargaining (see the papers by Patel, Justice Mehta, and Saini). The papers by Patel, Justice Mehta, and Barotjustify the adoption ofthe compulsory adjudication model. They have argued that it has served the needs of Indian working classes. The paper by Saini, however, has developed arguments based on a field study to question the potential of this model to comprehensively handle interestrelated industrial justice issues. After the analysis of debate on the above-mentioned issue, the scholars have also tried to assess in detail the working oflabour judiciary in India. While evaluating the role of labour judiciary they have adopted two different methodologies. Some of the authors (Patel, Justice Mehta, and Barot) have studied the role of judiciary through analyzing some of the important judgements made by the Supreme Court and High Courts which have helped the system to move towards a more just society, whereas some others have assessed the role oflabour judiciary with the help of empirical facts (see the papers by Saini, Baxi, Vhora, and G. Patel). This collection also includes some of the papers which deal with the suggestions and improvements that can help increase the efficiency and objectivity in the system oflabour adjudication (Baxi, Justice Desai, and G. Patel). Here the contributors are arguing for judicial person-power planning and development of professionalism among the judges and lawyers. Finally, attempts have been made by some of the presenters to view the institution oflabour judiciary in the context of the new policy scenario in India. These Management & Change, Volume I, Number 1 ( April, 1997)

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authors have addressed themselves to the problems which might emerge in response to the post-1991 shift in the government policy towards deregulation and liberalization. These forces might reduce the scope oflabour judiciary and might require a different emphasis on labour adjudication (see the papers by Cowlagi, Verma, and Sheth). This is so because there will be increasing demand by the new economic reality to make labour market more flexible so that it can respond to the market signals. Looking at the range of issues dealt with and the depth of the analysis, this book will be of immense utility to policy makers, persons associated with labour justice dispensation including conciliators and adjudicators, and scholars and students of labour law and industrial relations. As a reviewer I can say with confidence thatthis collection of papers demonstrates good recipe with the right flavour bon appetite. Vijay K. Seth Director, Asia-Pacific Institute of Management, 5, Press Complex, A. B. Road, Indore452008.

J. S. Sodhi, IndustriaL ReLations and Human Resources in India. New Delhi: B. R. Publishing Corporation [A Division of D. K. Publishers Distributers Ltd.], 1996.111 pp. RS.125 hardback.

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The new economic policies now being in vogue world over postu late market-driven development strategies. They have resulted, among others, in greater competition and dilution of state solicitude to concerns such as socialistic bias, social protection or even social security. Many advanced countries like the U K have enacted a number of statutes to dilute union power, thus, resulting in substantial changes in industrial relations. The tendency for individualization of collective industrial relations has resulted in the added focus on employee development through newer human resource practices. The HRM and IR area is increasingly assuming strategic importance in corporate governance structures. It is argued that the success of the new policies would depend on how efficaciously HR and IR agenda are changed both at the national and enterprise levels. In India, even though virtually no labour law changes have taken place in the post-July 1991 scenario, presumably due to the compulsions of the fragile ruling arrangements at the centre. the past few years are witnessing tremendous pressures for changes in labour laws and IR practices. Likewise, newer HR practices are being resorted to for coping with the issues emanating from the new realities. There is a pervasive belief on the part of actors in IR that for ensuring the success of new policies, the government will have to dilute its rigid postures of the Management & Change, Volume 1, Number

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pre-liberalization era. Have IR practices changed despite the constant labour law framework? The book by Sodhi is the outcome of a global academic concern of gauging the change in IR and HR practices in the post-liberalIzation scenario. It is part of a larger research being undertaken by the Massachusetts Institute of Technology (MIT), USA. A team of scholars is coordinating it, which consists ofProfesSOl'S Thomas Kochan (MIT), Anil Verma (Toronto), and Russel Lansbury (Sydney). The study is being conducted in eight Asian (including the present one on India) and ten OEeD countries to be undertaken in two phases. The book consists of three parts-containing five chapters in a11- and is the outcome of phase I of the study. Part A consisting of three chaprers deals with the macro profile of economic policies and their impact on HR and IR scenario as studied through secondary materia!. The chapter forming part B contains the survey results. The survey was conducted through mailed questionnaires sent to 1600 industrial companies, 84 out of which responded to the request, belonging to public as well as private sector. This chapter analyzes the changes that have taken place in HR and IR policies and practices. The changes reflect compansons between 1983 and 1993. The Phase I study focuses on macro issues; and the Phase 11 study would provide industry-wise analyses. The last chapter contains conclusions and policy implications. The key chapter of the book (chapter 4) focuses on changes with respect to seven areas offocus: work organization; corporate governance; skill fom13tion and development; staffing security/staffing arrangement: compensation-levels. forms, structures; employee involvement; and new economic policies 9n IR and HR. The findings of the survey are on expected lines. They reveal that more companies have effected changes in work organization (job rotation, job enlargement, and job enrichment) and employee involvement (both at workers and managers levels). A significant change is discernible in the strategic role of the HR function in corporate governance. The HR function is now comparable in importance with those performed by marketing and finance departments. The private sector has demonstrated greater urgency to affect changes in its policies consequent to greater pressure of survival in a competitive environment. Undoubtedly, Sodhi's study is a pioneering. authentic, first-hand mapping of the impact ofthe new economic policy on HR and IR practices in the country. One of the most important aspects of his findings (p. 65) is the greater stress being given by post-liberalization HR and IR policies on: training and development: quality control; communication; performance appraisal; career development and manpower planning; employee rationalization and reduction of workforce: role contllct/role ambiguity in work; multi-skilling, job rotation and job enrichment; reorganizatIon of work systems (reducing hierarchies and compensation); and employee involvement. Also a large number of companies are working hard to achieve ISO 9000 certification. The survey has focused on many important aspects ofHR and JR issues. But it has not included in its scope the shift from adversarial1R to cooperativelR. and Management & Change, Volume 1. Number

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the dynamics of this shift. Even though Indian labour laws have remained unchanged in the new era, the signs of employee vulnerability and subjugation are clearly discernible from the industrial disputes profiles. The number of lockouts have exceeded strikes. Data on these issues may not be easily available through a general survey, but may require intensive study of specific disputes. Another point that requires to be focused is how far there is a movement towards recognition both by the employer and the employee of the individual value of the employee, and to what extent the individual employee's voice is shaping the workplace and the production process. For knowing changes in both these directions only an employ-ers' survey may not be enough. Also, a more careful editing would have added to the value of the monograph. All in all, Sodhi's findings are of considerable academic importance and will also help the corporate world in carving out its reform agenda. The reader will anxiously wait for the publication of Phase-II of his study to know the industrywise changes in HR and IR practices. Debi S. Saini Professor-HRM & IR Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003.

Prem Misir, Workers' Participation in Management-Case of Nationalized Enterprises in Guyana. New Delhi: Reliance Publishing House, 1993. ix+151 pp. Rs.200 paperback. The book under review is the XIIIth monograph in the series "Sociological Publications in Honour of Dr. K. Ishwaran." It is on the subject of development of industrial democracy in Guyana. Workers' participation in management (WPM) has been recognized as the sine qua non of industrial harmony throughout the world which is an essential re.quirement for the maintenance and growth of an organization. Yet, in some countries the reasons for failure of efforts made so far to institutionalize workers' participation in management can be traced back into the socio-economic, political and attitudinal background of a country and the attitude of the policy makers. For the success of an organization, it becomes very important that some of the traditional styles of management give way to new modes of management that are based on employees' involvement at all levels. In this background, one may say that the theme and title of the book is timely and appropriately chosen. The book is quite informative and should interest both sociologists and management specialists. It is based on the findings of a survey conducted by the author in three importan~ industries in Guyana i.e. Sugar, Bauxite, and Post Office Corporation. The book is divided into ten chapters. Chapter one elaborates the proposal of documentation ofthe study. In chapter two, the prevailing government ideologies, Management & Change, Volume

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guidelines, etc., are summarized. This chapter takes a note of the socio-political will of the government to implement workers participation in management in selected industries. In the third chapter, the author probes deep into the relationship between workers and management. Institutioanlization of WPM is dealt with in the next chapter. The next two chapters contain detailed information regarding social and managerial power towards workers and managers for the overall development of the industry. A detailed chapter on works council is incorporated. It has been portrayed as a platform for frequent meetings and interactions with workers and managers. Chapter eight contains nature and causes of industrial conflict in all the three industries covered by the study. Here, Misir argues that the ruling politicians or their political delegates and not the managers play the power game. This, in tum, brings imbalance in the industrial scenario. Chapter nine gives "feedback to theory." It highlights that there is polarization and coercive compliance in the work situations. This is mainly due to non-incorporation of the ethics and values in organizations. Chapter ten contains conclusions arrived at by the study. It explains the role of state and the ways in which ruling politicians, managers and trade unions failed in not implementing workers participation scheme. The author has seen prospects for growth of workers participation with organizational support, training and developmentprogramme. As mentioned earlier, this book is based upon the findings ofa survey. The method of inquiry was mailed questionnaire, which was adopted to collect information from managers. Some interviews were also done by the investigator using guidelines of the earlier prepared questionnaire. The Guyana economy has multisectoral structure-it has public, private, co-operative, parallel and foreign enterprises-which has created a conflicting situation between capitalism and socialism. In this milieu, the study becomes even more interesting. The antithesis between Western and socialistic pattern in a multi-sectoral structure, where there lacks political democracy, loaded with social problems, the relevance of workers' participation in management becomes an important issue to be studied about. In this background, the author has deeply analyzed the prevailing political ideology as a determinant of implementing this scheme in Guyana. The author suggests that one must not restrict to the elimination of capitalist power but should also use a process of socialist transition. Through a simple statistical analysis spread over 37 tables, the author shares the findings of the study regarding power distribution in the organizations. It reflects how they have low level of power towards bringing any change in society. Misir suggests that in order to make WPM successful, one of the most important pre-requisites is that "Executive Chainnan and Directors should cease to be integral to the state apparatus." further criticizes the role of trade union leaders and says that "the labour leaders are also part of the repressive state apparatus in the Durkheim usage of "social fact." The author has been very careful in analyzing and elaborating the various factors affecting WPM. He has suggested in a very progressive manner various ways to improve the level and efficiency of workers in

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Guyana. But in the absence of any suitable and effective agency for implementing such programmes, he doubts whether in near future the working class shall take "care of its interests. This fails to indicate towards existence of co-operatives or NGOs working in this direction. I feel that in addition to this, had Misir narrated some examples of successful WPM in Guyana, it would have been easier to under .. stand the prevailing conditions in that country. So far as the methodology of the study is concerned, the method of collecting information through mailing of questionnaires is tedious and time consuming. Instead, he could have gone for direct interview method of gathering information. This would have helped him go deeper in the issues raised by him. Further, case studies of the three industries in depth would have helped the reader in understanding the status of WPM even better. Despite this, the book is useful and informative. It can be of immense value to researchers, academicians, sociologists, behavioural scientists, policy makers and the management personnel. Prem Misir and the publishers need to be complimented for bringing out this book. Manju Bhagat Associate Professor, Shri Ram Centre for Industrial Relations & Human Resources, 4E/16, Jhandewalan Extension, New Delhi-II 0055.

General

Management

Sharu Rangnekar, In The Wonderland of Indian Managers. New Delhi: Vikas Publishing House PvC Ltd., 1996. xix + 143 pp. RS.195 hardback. Sharu Rangnekar, In The World of Corporate Managers. New Delhi: Vikas Publishing House Pvt. Ltd., 1996. xi + 230 pp. RS.275 hardback. It is interesting to note that India, which ranked third behind United States and China, in growth potential category, ranks forty fifth in terms of global competitive.ness, Why does India lag behind when it comes to competitiveness or challenge, even though we have the highest number of technical work-force in the world and such a high potential of growth? To understand the roots of such failures, one has to review the historic as well as the metabolic factors of IndIan management. The above two books of Sharu Rangnekar reveal the practices ofIndian management. They deal with the anthropology of the Indian style of management. Both books by Rangnekar are brilliant pieces of work. Rangnekar has spotted the idiocies and hypocrisies of Indian Management Systems. Both the books are complementary to each other and are superb analyses of the Indian management Management & (,hange. Volume 1, Number I (April,

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scene. I am sure that many of us who have worked m Indian organizations. have certainly encountered similar types of idiocies, in some form or the other. while discharging our managerial responsibilities. One of the outstanding features of these books is the packaging of the dingy management principles and practices with elegant wit and humour. The fine touch of the legendary cartoonist R. K. Laxman and ingenious elicitation of management practices in India by Rangnekar has made these books lively rather than a flavourless rhetoric on management. The first book, In The Wonderland of Indian Managers contains fourteen chapters. Chapters 1 and 2 illustrate how the colonial past of India is still acting as a detrimental factor to our ability to organize and make decisions. Chapters 3. 4 and S spot the idiocies that might exist in many Indian organizations while performing the serious managerial functions like recruitment; training and promotions. Chapters 6 to 9 detect the hypocrisies that are often practised to preach, predict and solve operational problems by Indian managers. Chapters 10 to 12 illustrate the peculiarity of Indian managers' approach towards team huilding and improving operating processes. Chapters 13 and 14 indicate the tactics and mechanisms that are used to twist and confuse the real issues and to grab the power for the self by any means. Understanding these idiocies and hypocrisies of Indian management will certainly help every practitioner of management to avoid these hazards of the corporate minefield. Many of these management practices are still present in many Indian organizations and are the root cause of organizations' failure. The uniqueness of this book lies in its wit and humour of problem elicitation, which not only makes It easy to understand but also interesting to read. without management jargon cluttering the reader's brain. The book is of immense value for managers at all levels-from management trainees to management directors. It is reasonably priced. In my opinion, every working citizen of India must read this book. The second book. In The World oj' Corporate Managers, has spotted the inbuilt idiocies of Indian managerial systems and traditions and blasted them sardonically. A special feature of this book is that Rangnekar writes prescnptlon for improvement in addition to the diagnosis. It is an extension of the first book. The style and techniques of presentation are quite similar to the previous one. The book consists of twenty-one chapters. Chapters 1 to 3 portray the Indian perceptions of management, its role and effectiveness. Chapters 4 to 8 spot the inbuilt idiocies ofIndian styles ofteam building, problem solving and delegation of authority and prescribes the ways they should be properly done. Chapters 9 to 12 depict the hypocrisies of Indian management practices particularly in terms of motivation, communication, decision making and corporate planning and suggest how these functions should be practised. Chapters 13 to 1S discuss the traditional Indian ways of conducting negotiations, supervision and direction and spot the missing links. Chapters 16 to 18 illustrate how and why work ethics and culture, human resource development and training, and the art of listening are not functionManagement & Change, Volume 1, Number 1 ( April,

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ing properly in Indian organizations. Chapters 19 to 21 depict the idiocies ofIndian style of managing stress, leadership and organizations. The book is characterized by Rangnekar's wit and humour, like the first one, is accentuated by the cartoons of the legendary R. K. Laxman. It is reasonably priced and should be an essential reading for all potential practitioners of management. Swapan K Majumdar Professor-Information Technology Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003.

Finance Raj S. Dhankar (ed.), Managing PSU Finance. New Delhi: Westwill Publishing Company, 1995. xiii+ 264 pp. Rs.295 hardback. A respectable, profit making nationalized bank suddenly announces accumulated losses that wipe out its net worth. A successful fertilizer company is involved in a dubious urea deal which costs the exchequer crores of rupees. A municipal corporation's officials are accused of plotting with some private parties to siphonoff funds from electricity and water bills. Loss making State Electricity Boards (SEBs) refuse to pay for fuel: they just do not have the funds to pay up.The list could go on and on. The headlines don't even evoke surprise any more. An average Indian could be forgiven for believing that the trio of politicians, the government and officers of public sector units (PSUs) have colluded to transform PSUs into dens of corruption and bureaucracy. But very few people in this jaded generation can remember or understand the euphoric fifties, when a young nation, led by an enthusiastic prime minister, embarked upon its journey of planned industrial and economic development "through agencies informed by social purpose." Thus was the public sector created. A wellmeaning lawaharlal Nehru, succumbing to the socio-economic imbalances ill wealth distribution and the aspirations of the masses, hailed public sector enterprises as "modern temples of industry" and bade them to occupy commanding heights. As Dhankar points out in Managing PSU Finance, PSUs have largely fulfilled Nehru's wishes. From only five enterprises in 1951 with a total investment ofRs.29 crore, the number rose to 245 in March 1993, with an investment ofRs 14,6971 crore. Amongst themselves, these enterprises have managed to secure a near monopoly in core sectors like coal, steel, zinc, copper and fertilizers. But, not content with creating industrial infrastructure, these enterprises have also moved into the production of consumer goods. In the 1970s, the scope of their operations was widened further with the nationalization of banks and insurance companies. Several sick cement and sugar units were taken over by the public sector, ostensibly to satisfy "Social Motives." This politically motivated unfocused growth of public Management & Change, Volume I, Number 1 (April,

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sector units has led to rampant inefficiency as indicated by the fact that in 1992 -93, 104 units were making losses. This book points out that the reason for the current state of PSUs is financial mismanagement and constant interference by the Government. In the past, they financed their operations through capital provided by the Government. Since debt and equity was taken as provided b j the Government, and not on the basis of prudent financial principles, most PSUs are saddled with bloated equity and abnormally low earning per share (EPS). Inefficient working capital management of t,he units is reflected in large inventory holdings and poor collection of receivables. The situation is worsened by the pricing mechanism which is controlled and arbitrary: abnormally low for agricultural inputs (e.g. fertilizers) and exorbitantly high for so-called luxuries. These factors are making it difficult for PSUs to switch from budgetary support to external financing in the current liberalizeetera. IfPSU finances are in a mess because o.flack of control and planning initiative, the investment decision mechanism suffers from a surfeit of controlling and appraisal agencies. Dhankar outlines, in great detail, the procedural aspects of identifying, approving and implementing projects in the public sector. The entire process is long drawn out and bureaucratized, often leading to heavy cost and time overruns. Evaluation of performances through MOl J (Memorandum of Understanding) or other relevant criteria is generally conducted by the government leading to greater interference into the functioningofPSUs. The author has proposed a simple but efficient measure of performance, namely, comparing actual returns with weighted average cost of capital. A study of 38 undertakings, conducted over a 10 year period (Apr. 1973 -Apr. 1983) reveals that of all the units set up before 1964,58 percent have not been able to earn even their cost of capital. What a waste of scarce economic resources! Fortunately, Dhankar does not offer privatization as a panacea to end all the evils ofPSUs. Instead, he advocates the transformation of public sector undertakings into publicly-owned undertakings through disinvestment to institutions as well as the general public. An admirable solution, but in view of the fact that the government has not been able to meet its disinvestment targets so far, it may not become a reality for some years yet. The book has high information content, contains data based on research of several PSUs, and provides details of some committee reports and papers presented both in India and aboard. An interesting touch is the addition of commentaries by several prominent persons, both from the public and the private sector. To sum up, the book would be quite useful for those interested in understanding the public sector. Deepa Vasudevan

Faculty Member-Finance & Accounting Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-I 10 003.

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R. N. Joshi, Cash Management: Perspectives, Principles & Practices. New Delhi: New Age International (P) Limited Publishers, 1997. \'+248 pp. Price not mentioned, paperback. Till date, there are very few books on cash management; the theme of cash management is confined to a few pages in most books on financial management. The book under review is a very useful contribution in this direction. The book mainly focuses on the principles and practices of cash management in a lucid and simple manner with a non-mathematical approach. The author of the book has comprehensively explained the various areas that require to be analyzed and controlled for efficient management of cash. The book has been divided into 15 chapters, which have dealt with all aspects of cash management in a systematic manner. The first chapter outlines the factors influencing the availability of cash in a business unit as well as the strategies to be adopted for cash management. The second chapter gives a detailed account of the cyclic movement of cash in business. The next three chapters provide guidelines for forecasting the inflows and outflows of cash and procedures involved in the preparation of cash budget. Chapter six deals with a preparation of cash flow state. ments from a given set of Profit and Loss Account and Balance Sheet on a longterm basis. In chapter seven are discussed the cash management techniques which mainly involve the accelerating of receipts and the decelerating of payments. Chapter eight talks about certain specific ratios which can be effectively used to measure the general liquidity position of a business and the efficiency with \vhich the available cash is being managed. Here, besides the ratios which are traditionally being followed to measure liquidity, the author has given some new ratios related to cash sales and operating cash flow (These are again not with relevance or use to the study of liquidity of an organization). The next two chapters deal with the management of two most important components of working capital namely, receivables and inventory. In the eleventh chapter are discussed the avenues open for short- term investment of surplus cash to get profitable returns.The next three chapters relate 10 short- , medium- and long-term sources of finance which can be tapped in case of shortage of funds.Here the author has given the current scenario of debt and money market the information of which can be very useful to the executives practically engaged in day-to-day handling of cash. The last chapter gives a practical insight into the internal control measures for management of cash as well as treasury instruments, which can be suitably adopted by business organizations to safeguard against the possibilities of misappropriations and frauds. This area, though of crucial importance in handling of cash in practical life, has hardly ever been sufficiently dealt with by any other author while dealing with the subject of cash management. A major drawback of the book is its round-about approach and writing about issues which are either immaterial or too general to be mentioned, thereby, failing to Management & Change, Volume 1, Number I (April,

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provide fresh material to the reader. For example, the chapter on "Formatting ofa Cash Budget" could easily have been condensed to a page, at the most, without reducing the core substance of the book. The chapters on "long-term sources of finance" and "preparation of cash flow statements" do not hold much relevance to the management of cash. This is because the cash position of business fluctuates daily so that cash management is an exercise involving short periods of time and topics like long-term sources of finance and cash-flow statements are essentially long-term exercises. Also, the author need not have mentioned the out-dated cash management techniques of Lack-Box System which is no more in practice today and has been replaced by quicker and more sophisticated techniques like "concentration banking" and "pre-authorized debits." The book is, nevertheless, a very useful contribution to cash management in the macro perspective. A comprehensive glossary at the end of the book addsto its utility and readability. The books holds merit on account of being the only book which has covered virtually all facets of cash management in detail. Not only is the book likely to be useful to the students offinance at postgraduate level but also to the executives/managers engaged in the management of cash or working capital. D.K.Mehra Manager-Finance & Accounts, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003.

Public Management P. R. Dubashi, Recent Trends in Public Administration. New Delhi: Kaveri, 1995. 292 pp. Rs.430 hardback. In many developing countries the current trend is to view public administration either as a discipline with no bearing on the process of national development or as an instrument for the maintenance of the existing system of law and order. This poor state of the discipline and practice of public administration raises a plethora of fundamental and interrelated questions concerning the reorientation of public administration in the emerging socio-political and economic environment. The book under review deals with a whole range of issues relating to public administration. The bureaucratic apparatus that India inherited and perpetuated did playa role in national development but failed in transfomling India into a welfare state. Rules, procedures and above all, the elitism of the civil service helped in creating a cobweb in which the common man has remainee trapped. In spite of fifty years ofIndependence, we continue to battle for survival. The book which forms a collection of the author's articles is divided into six parts. The first part gives an account of public administration system in the South Management & Change, Volume

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Asian countries. It also deals with various facets of Indian administration, both past and present. The papers are theoretical in nature and give a good account of the civil service and the system. The author rightly argues that over the years there is an erosion of work ethic and work culture. We have not been able to build a tradition of hard work and sense of purpose has not been built up. In order to improve the efficiency of the civil services, it has been suggested that the focus should be on training, the system of reward and punishment and other areas of personnel management. In the second part, the author deals with the process of policy making and the various agencies involved in it. He argues that policy is an instrument of trans for.. mati on of a given environment into a preferred environment. In this regard he takes up agriculture, technology and education policies as case studies to illustrate the irrelevance of a policy document which evades major issues. He has also presented in nutshell the state of public administration during the prime ministership of Jawaharlal Nehru and Indira Gandhi. In the ongoing process of debureaucratization, the Indian bureaucracy is under tremendous pressure to justify its existence and continuance in the present form. This is the theme of the third part which deals with bureaucracy and the challenges it faces. A brief overview of the causes and consequences of the decline of civil service has also been attempted. As a strategy of personal development and management, training has acquired new dimension since 1985. It helps in developing the human potential and raises the level of efficiency and performance. The fourth part emphasizes the role and significance of training. A survey of the role of premier training institutions and a review of the efforts ofthe Department of Personnel and Training, Government of India, to enhance training capabilities is also attempted. Politics, administration and public interest is the theme of the fifth part of the book. It deals in detail with the relationship between bureaucracy and the political executive. The author being a civil servant of repute has cited a number of examples from the United Kingdom to show the extent and nature of relationship between the two. But he fails to cite any Indian example to dispel the general impression that nexus between the two exists. The concept of accountability has been brushed aside as a matter of attitude of public servants towards the public. However, attitude is just one factor responsible for the erosion of accountability. The last part of the book deals with the administration of public enterprises. Whatever be the argument of the author in favour of public enterprises, it appears to be settled that the era of these bodies is only short-lived. In the changing economic environment, the author's suggestion for improving the efficiency and performance ofthe public enterprises will find not many takers. On the whole, the book is a good addition to the existing literature on public administration. It deals with both theory and practice of public administration, is rich in content and the formulations are based on the actual working of public administration system, as experienced by the author. The book will be useful to Management & Change, Volume I, Number I (April,

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students, administrators, planners and all those who are interested in public administration. Suresh Misra Head, Faculty of Public Administration, Haryana Institute of Public AdministTa.tion,Gurgaon-122 00 I , Haryana.

Marketing Rajagopal, Rural Marketing Administration in India. New Delhi: Kaveri Books, 1995. xiv+135 pp. Rs.200 hardback. The book under review is a noteworthy effort by Rajagopal in which he has focused on an area of the Indian rural economy which has demanded closer attention than has been accorded till date. Rural marketing or rather marketing in the rural context is an important component in the overall economic development of India. The author has started off on the premise that most of the state-initiated (and controlled) developmental efforts in the area of rural industry has been in terms of income and employment generation programmes with emphasis on production. This premise is true as the results of the various state policy-initiatives in the rural sector have had minimal impact. . The book contains extensive sections on: an overview of rural marketing in India, administrative arrangements and institutional linkages, a sectoral study of fibre product marketing through co-operatives, diffusion and adoption of marketing technology, the risk and threats factors in rural marketing, and finally the emerging challenges of rural marketing. The hypothesis that administrative responsiveness to the implementation process of rural development programmes is one of major considerations for effective commissioning of such programmes or schemes, has been supported by the author through empirical evidence based on various case studies of numerous programmes implemented in Andhra Pradesl}., Kamataka, Maharashtra, Gujai-at and Goa states. The most commendable feature of the book is its attempt to apply modem marketing concepts to the sphere of rural marketing, wherein it tries to delineate the important marketing dynamics related to innovation diffusion and adoption, pricing strategies, conimunication and consumer behaviour, andinfrastructural requirements for the supply chain-related logistics. In the section on co-operatives as marketing channels, it would also have been relevant if the author had included a detailed study of the National Dairy Development Board and its network of producer and marketing co-operatives, as it is the prime example of a success story based on the application of modem marketing practices involving communication and distribution coupled with customer-driven product mix. Management & Change, Volume I, Number I (April, 1997)

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Secondly, the utility of non-profit organizations i.e. Non-Governmental Organizations (NGOs) in the area of rural marketing needs to be further analysed in the .context of increasing their role in rural marketing. This would be an incremental step in gradually de-linking the state and its administrative set-up from rural marketing. This is important as whatever evidence that We have clearly indicates that it is imperative to involve people at the grass roots (and those who are directly affected) in market identification and delivery of consumer satisfaction as it is understood in modem marketing. Overall, the book should be extremely helpful to rural administrators and policy makers working towards the development of Indian rural economy, as the author has tried to identify, analyze and describe the missing link between productionoriented state programmes and schemes and the development of rural producers and entrepreneurs.

Venkatesh Umashankar Associate Professor-Marketing Area, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003.

V.C. Chow, The Skill of Managing Time. New Delhi: Sterling, 1996. 102 pp. Rs.85 paperback. V.C. Chow, The Skill of Self Management. New Delhi: Sterling, 1996. 105 pp. Rs.8S paperback. . V.C. Chow, The Skill of Sales Probe. New Delhi: Sterling, 1996.70 pp. Rs. 75 paperback. V.C. Chow, Handling Sales Objections. New Delhi: Sterling,

1997. 62 pp',

Rs.75 paperback. Skills are competencies which can be acquired over a period of time with sustained effort and practice. Training and zeal to excel by an individual can lead to taking up of steps towards improvement of ones~lf. We live in an age of competitiveness where survival through competency is eltremely essential. To achieve excellence, there is a profound need to enhance cort1petitiveness. Skills are a very important element of organizational effectiveness and managerial excellence. Skills enable us to attain speed and proficiency on the job. They are also the means of cultivating the right attitude and sound personal qualities in human beings. The skill series written by y.'c. Chow aims at "building up competencies in different areas." The Skill of Managing Time is an excellent book which brings the reader's attention to proper management oftime. Itemphasizes the fact that time waits for none and one's life is an outcome of how one spends one's time. The book is Management & Change, Volume 1, Number 1 (April, 1997~

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divided into ten chapters, each having a specific theme with concrete suggestions for better management of time. Chow emphasizes proactive management of time with hours devoted for carrying out basics and professional tasks. He lays emphasis on basics of life viz. sustain, nurture, and maintain life itself. The book also delves into value-producing activities and gives a direction for utilizing time more productively. The author brings to light the time-wasting activities and gives specific suggestions for saving time. The book further elaborates on doing things which add meaning to life-appreciation, caring, believing, forgiving. The book helps the reader to discover a purpose in life and makes one aware of how one fritters away those priceless hours in things so lIlsignificant. The reader gets inspired towards action. This is a "must read book" for readers irrespective of age. The Skill of Self Management is an inspirational book which propels one to take charge of one's life for which initiative must come from within. It raises pertinent questions like: what are you doing with your life, what are your achievements, what is your purpose in life, and are you happy. The book is divided into eleven chapters, each havmg a distinct theme. These themes stir one's thought processes to identify sources of happiness. These could be career, occupation, relationships, health, finances, among others. It suggests visualization of roles in which one wants to be so that one is sure of what one wants out oflife. The book also talks of setting milestones for various aspects of life and suggests guidelines for truly assessing oneself and build up constant affirmations to oneself. The book is written in a lucid style and actually makes it easy for a person to take action and have positive mental attitude. It reinforces the view that decision and discipline are two important aspects which contribute to a person's success. It also suggests sources of power for a person that are sources of positive energy which keep one going. These sources are power oflaughter, love, service, caring, genuine appreciation and so on. The book is a pointer towards discovering the essence oflife i.e. what is it which gives it a greater meaning. The Skill of Sales Probe is a book meant for budding individuals who want to excel in sales as a career. The book is a pointer towards the fact that selling is a multiple-skill profession, and that the skill of putting up the right questions is one of the most crucial skills. Divided into ten chapters, it deals with different aspects of the questioning process, the answers to which can lead to a better understanding of the situation. The book describes the types of questions and their purpose. It also enables one to master the act of asking vital questions without sounding interrogative. It gives guidelines on restraining oneself from asking certain questions and framing questions to seek adequate answers. The book is written in a simple and effective style with a practical orientation and with lot of examples and exercises which enable one to master the skill without much difficulty. The Skill of Handling Sales objections is a very useful book, which helps in efficacious handling of sales objections. With its expressive and well-thought of Management & Change, Volume 1, Number 1 (April, 1997)

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definition/meaning are conspicuously missing. The case study section, a somewhat strange inclusion in a handbook, covers cases from seventeen Indian companies, all from the manufacturing industry, except the case of City Transport Undertaking. The authors at the beginning of the case study section justify the inclusion of this part by saying that they will enable the readers to appreciate the particular concepts focused in each of the cases. Much like in the previous chapter, the cases focus on the "hard" factors and the "soft" factors have been ignored. Even in the sole case of the service organization .. i.e., the City Transport Undertaking, it is the maintenance function which is dealt with. The book does list organizations providing rest facilities in India, as an appendix. But what would have been appropriate is a list of organizations providing service in the area of "quality management." On the whole, the book suffers from focus, depth and readability. The lay-out, printing style and presentation also leave much to be desired. In Sidney Sheldon's best-seller Master a/the Game, the reputed art critic Andre d'Usseau says of an exhibition, " ...It was a great learning experience for this critic I have attended so many exhibitions of talented painters that I had forgotten what truly bad paintings look like ...." It.is the same kind offeeling that one gets while reading this book on quality management, a field in which legends like Juran, Deming, Crosby and Ishikawa have contributed immensely. In juxtaposition, this book is not a patch on other handbooks on quality management like that of Gower, ASQC Quality Press, etc. The claim of 'first of its kind in India' is hardly anything to write home about. K. Suryanarayanan Assistant Director--Rcsearch,

National Productivity CounciL Lodhi Road, New

Delhi-l 10003.

Research

Methodology

T. Subbi Reddy and P. Bappa Rao, Research Methodology and Statistical Measures. New Delhi: Reliance Publishing House, 1995. xx+ 514 pp. Rs. 495 hardback. Research is an academic activity which in common parlance refers to a search for knowledge. The methods used to systematically solve the research problem is referred to as research methodology. There has been a wide array of literature on this subject catering to the needs of researchers, so as to make them familiar with the art of using different research methods and statistical techniques while conducting a research. The book under review comes forward as one such reference to help the research students. The book is organized in a set of twenty four chapters besides the epilogue Management & Change, Volume

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and the bibliography. The first half of the book relates to research methods and the second half to statistical methods used in research. The main focus of the book has been on the methods used in research by social scientists encompassing subjects like economics, psychology, management, sociology, commerce, etc. The authors start with a discussion on the meaning and definition of social science research, explaining formulation of a research design, provide information pertaining to review of literature, role of hypothesis in research, setting and testing ofhypotheses, analysis, tabulation and presentation of data collected, report writing, preparation of questionnaires, schedules, etc. and final draft. Apart from this. a separate section on content-analysis is also introduced. which is seen as an important research tool. The second half of the book discusses the use of statistical techniques viz. measures of central tendency, dispersion. conelation and regression techniques. and time-series analysis used in social science research. In addition. there is also a section on the use of computers in research, which deals with different software packages and their usefulness in research. Also. the book contains numerous practical examples at the end of each chapter, which make it easier for the reader to understand the author's objective. It is apparent that the book has been written with the intention to acquaint the students of social science disciplines about the basic fundamentals of research methods and statistical techniques used therein. The most attractive part about the book is that there are a number of examples at the end of each chapter. lucidly written, which would certainly be useful to the reader. With its detailed coverage. it does add to existing literature on social science research methodology. But the book does lack on certain grounds. For example. the language of the text is not sufficiently technical; there are a good number of grammatical en'ors; and the chapters are not ananged in a coherent manner. Besides the research techniques, the wider issues of the role and function of social science research. traditional and scientifiC approaches could also have been addressed to. Nevertheless. the book by Rao and Reddy will prove to be helpful for the beginners in the field of research and postgraduate students. Sujata Chaddha Faculty Member-Economics Area, Institute for Integrated Learning in Manage. ment, Lodhi Institutional Area, Lodhi Road. New Delhi-II 0 003.

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200 Kher, Manik: Coping With Technological Change. New Deihi: Sage Publications, 1997.205 pp. RS.295 hard. Kumar, Ashok (ed.): An Interface Between Planning Practice and Education. New Delhi: Reliance Publishing House, 1996. xi+ 179 pp. Rs.225 hard. Michael, v. P.: Human Resources Management And Human Relations. New Delhi: Himalava 1996. iv+ 731. Rs.160 paper. Misir, Prem: Workers participation in Management-Case of Nationalized Enterprises in Guyana. New Delhi: Reliance Publishing House, 1993. ix+ 151 pp. Rs.200 hard. Patel, Surendra J.: Indian Economy-Towards the Twenty First Century. Hyderabad: Universities Press, 1994. ix+ 158 pp. Rs.130 hard. Patil, B. R.: Collective Bargaining-Perspectives and Practices. Hyderabad: Universities Press, 1993. xxii+539 pp. Rs.225 paper. Prakash, Om: The Commercial Society. New Delhi: Westvill Publishing House, 1994. xii+ 302 pp. Rs.400 hard. Pareek, Udai: Training Instruments for Human Resource Development. New Delhi: Tata McGraw Hill, 1997. xi+625 pp. RS.595 hard. Raina, Roshan: Library Resource Sharing and Networking-An Approach Among Management Schools of India. New Delhi: Vikas, 1997. xxi+ 192 pp. Rs.285 hard. Ramachandran, K. S.: Global Trade: Challenge and Opportunities. New Delhi: Westvill Publishing House, 1996. x+252 pp. RS.350 hard. Ramachandran, K. S.: Challenge of Fiscal Management. New Delhi: WestviJl Publishing House, 1996. x+ 120 pp. Rs.200 hard. Ramachandran, K. S.: Beyond Liberalization. New Delhi: WestviJl Publishing House, 1996. x-H44 pp. RS.200 hard. Ramachandran, K. SO:The Indian Economy: A Ring-Side View. New Delhi: Westvill Publishing House, 1996. x-'-148 pp_ RS.200 hard. Ramnarayan, S. and L M_ Pandey (eds.): Strategic Management of Public Enterprises in Developing Countries. New Delhi: Vikas, 1997. viii+326 pp. Rs.495 hard. Ramu, S. Shiva: Globalization-The Indian Scenario New Delhi: Wheeler Publishing, 1996. xiv+285 pp. Price not mentioned, paper. Ramu. S. Shiva: Strategic Alliances. New Delhi: Sage Publications, 1996.204 pp. Rs. 325 hard. Rangnekar, Sharu: In The Wonderland of Indian Managers. New Delhi: Vikas Publishing House, 1996. xix+ 143 pp. Rs. 195 hard. Rangnekar, Sharu: In The World of Corporate Managers. New Delhi: Vikas Publishing House, 1996. xi+230 pp_ Rs.275 hard_ Rao, P. L.: HRD Through In-House Training New Delhi: ISTD & Vikas, 1996.286 pp. Rs. 325 hard. Rao, P. Subba: Essentials of Human Resource Management and Industrial Relations. New Delhi: Himalaya, 1997. v+495. RS.160 paper. Reddy, T. S. and Bappa Rao: Research Methodology and Statistical Measures. New Delhi: Reliance Publishing House, 1995. xx+514 pp. Rs.495 hard. Saini, Debi S. (ed.): LabourJudiciary Adjudication and Industrial Justice. New Delhi: Oxford & IBH, 1994. xi+257 pp. Rs.295 hard_ Saini, Debi S. (ed.): Labour Law, Work and Development: Essays in Honour of P G. Krishnan. New Delhi: Westvill Publishing House, 1995. xxxi+ 221 pp. Rs.350 hard. Sarma, A. M.: Personnel and Human Resource Management. New Delhi: Himalaya, 1996. ix+213. Rs.88 paper. J

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201 Sengupta, N. K.: Government And Business. New Delhi: Vikas Publishing Housc. 1<)<)(1. xv+648 pp. RS.450 hard. Sengupta, Sailesh: Mallugemeni o(Puhlic Relations and lUlllmllilicatioll Nc\\' Dclhi: Vikas. 1997. xii+250 pp. RS.150 paper. Sherlekar, S. A.: Marketing Management. New Delhi: Himalaya. 1997. \+555. RS.125 paper. Sodhi. 1. S.: Industrial Relations and Humall Resources in India, New Delhi: B. R. Publishing Corporation, 1996. I I 1 pp. RS.125 hard. Srinivasan, R. and S. A. Chunawalla: Management Principles and Practices Ncw Dclhl: Himalaya, 1997. iii+S43. RS.150 paper. Varma, Madhurendra K.: Managing More Ef(ectively-A Professional Approach to Get the Best out 0/ People New Delhi: Response/Sage India, 1997. 287 pp. Rs,295 hard/Rs.185 paper. Venkata Ratnam, C. S. (ed.): Industrial Relations in Indiall States New Delhi: Global Business Press, liRA & FES, 1996. xii+476 pp. RS.300 paper. Verma, J. c.: Venture Capital Financing in India. New Delhi: Response/Sagc India. 1<)97. 374 pp. Rs.425 hard/Rs.225 paper. Vieira, Walter: The New Sales Manager: Challenges/or the 2/" Century Response/Sage India, 1997. 144 pp. RS.95 paper.

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202 .Statement

of Ownership

and Other PartiCulars About the JournalfNewspaper

Management & Change FonnY (Rule 8) Institute for Integrated Learning in Management. Lodhi IrtstihItionalArea, :LodhiRoad,New Delhi-II 0003

I,., Place,?fp,llblic~tion

New Delhi

2. . Periodicity of,Publication

Six-Monthly'

3. Printer's Name Nationality Address

Dr. Kamlesh Misra Indian IILM

4. Publisher's Name

Dr. Kamlesh Misra Indian IILM

Nationality Address 5. Editor's Name Nationality Address

Dr. Debi S. Saini Indian IILM

6. Name and address of individuals who own the newspaper and partners or shareholders holding more than one percent of the total capital

Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-II 0003

7. Printed at

Chaman Enterprises, 1603, Pataudi House, Darya Ganj, New Delhi-II 0002

;

I, Dr. Kamlesh Misra, do hereby declare that the particulars given above are true to the best of my knowledge and belief.

Dated:

Sci/Dr. Kamlesh Misra Dean, nE:M, New Delhi

Guidelines for Contributors The Management & Change invites original, research-based papers, articles, communications and management cases on topics of current concern in the area of management and related social sciences. A general guideline for contributors is listed below: I.

Manuscripts should normally be of up to 10,000 words (20 to 40 A-4 size pages, typed double space). Manuscripts should be submitted ind,!plicate with the cover page bearing only the title of the paper and authors' names, designations, official addresses and phone/ fax numbers. Abstracts. All manuscripts should include an abstract of about ISO words. No abstracts are required for review essays or comments. Tables and Figures. Tables should approximate the appearance of printed tables and preferably submitted in a floppy disk. Tables/figures should be placed at the end of the text, after footnotes, appendices, and references. Tables should contain a source and units of measurement. Their location in the text should be indicated as follows: Table I about here

6. 7'. 8.

9. 10.

I I. 12. 13. 14'.

15. 16.

Footnotes. All footnotes should be indicated by serial numbers in the text and literature cited should be detailed under Notes at the end of the chapter bearing corresponding numbers. References. Place the references at the end of the manuscript following the footnotes. The list should mention only those sources actually cited in the text or notes. Authors' name should be same as in the original source. For more than one publication by the same author, list them in chronological order, with the older item first. For more than one publication in one year by the same author, use small (lower case) letters to distinguish ihem(e.g., 1980a, 1980b). For example: Verma, A.,.T. Kochan and R. D. Lansbury (ed.) (1995) Growing Asia: Changing Trends in Employment and Industrial Relations. London: Routledge. Rangnekar, Sharu (1996) In the World of Corporate Managers. New Delhi: Vikas. Webster, F. E. (1991) "The Changing Role of Marketing in the Corporation," 56, Journal of Marke!,ing, I. Gupta, Amitabh (1991) "An Empirical Study of Weak Level Efficiency in India" M.Phil. Dissertation, University of Delhi, Delhi. Follow British spellings throughout (programme, not program). . Universal 'z' in "ize" "ization" words. Use of numerals: One to twelve.in words, thirteen and above in figures, unless the reference is to percentages (5 percent), distance (5 km), or age (10 years old). Use 1900s and 19th century. No stops after abbreviations (USA, MBA). Use stops after initials (K. S. Singh). Use double quotes throughout. The use of single quotes to be restricted for use within double quotes; e.g., "in the words' of Szell, the 'economic question' is today ... " Quotations in excess of 45 words should be separated from the text with a line space above anlbelow and indented on the left. Quotes should be cited accurately from the original source. should not be edited, and should give the page numbers of the original publication Italicization and use of diacriticals is left to the contributors, but must be consistent. When not using diatricals, English spelling should be followed. Capitalization should be kept to the minimum and should be consistent. An author will receive 10 offprints and a complimentary copy of the issue in which his/her paper appears. Book reviews must provide the following details, arid in this order: Name of author/title of book reviewed/place or'publication/publisher/year of publication/number of pages, in Roman and Arabic figures to include preliminary pages/and price, with binding specifications such as paperback or hardback. For example: . Udai Parek, Training Instruments for Human Resources Development. New Delhi: TataMcgraw Hill, 1997. xi+625 pp. Rs.595 hardback. If papers are accepted for publication, contributors are requested to send floppy disks containing the full text of the paper including notes, references, tables, charts and maps. Manuscripts and all editorial correspondence should be addressed to: Professor Debi S. Saini, Editor, Management & Change, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New 'Delhi-II 0 003, India. Phones: 91-11-4631033, 4647820,4647821, Fax: 91-11-4647796.

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