annals vol.9,nr.2(10),2009 fulltext(1)

ISSN 2066-575X www.seap.usv.ro/annals

THE ANNALS OF THE"TEFAN CEL MARE"

UNIVERSITY OF SUCEAVA.FASCICLE OF THE FACULTY OF

ECONOMICS ANDPUBLIC ADMINISTRATION

VOLUME 9, NO. 2(10), 2009

Editura Universitii Suceava

Revistcotat

CNCSIS,categoria B+

The Annals of The "tefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration Vol. 9, No. 2(10), 2009

EDITORIAL BOARD:Editor-in-chief: Carmen NSTASEGeneral editorial secretary: Adrian Liviu SCUTARIUEditors: Elena HLACIUC, Carmen CHAOVSCHI, Mariana LUPAN, Ovidiu Florin HURJUI

SCIENTIFIC COMMITTEE:Angela ALBU, tefan cel Mare University of Suceava, RomaniaGeorge P. BABU, University of Southern Mississippi, USAChristian BAUMGARTNER, International Friends of Nature, AustriaGrigore BELOSTECINIC, ASEM, Chiinu, Republic of MoldovaIonel BOSTAN, Alexandru Ioan Cuza University of Iai, RomaniaAurel BURCIU, tefan cel Mare University of Suceava, RomaniaGheorghe CRSTEA, Academ y of Economic Studies, Bucharest, RomaniaSlobodan CEROVIC, Singidunum University, Belgrade, SerbiaSimion CERTAN, State University of Chiinu, Republic of MoldovaCarmen CHAOVSCHI, tefan cel Mare University of Suceava, RomaniaLiliana ELMAZI, Tirana University, AlbaniaCristian Valentin HAPENCIUC, tefan cel Mare University of Suceava, RomaniaElena HLACIUC, tefan cel Mare University of Suceava, RomaniaElena IFTIME, tefan cel Mare University of Suceava, RomaniaMarian JALENCU, State University of Chiinu, Republic of MoldovaMiika KAJANUS, Savonia University of Applied Sciences, Iisalmi, FinlandStefanos KARAGIANNIS, Institute of Tourism Research, Athens, GreeceMaria MUREAN, Academy of Economic Studies, Bucuresti, RomaniaCarmen NSTASE, tefan cel Mare University of Suceava, RomaniaAlexandru NEDELEA, tefan cel Mare University of Suceava, RomaniaIon PRACHI, ASEM, Chiinu, Republic of MoldovaRusalim PETRI, tefan cel Mare University of Suceava, RomaniaAbraham PIZAM, University of Central Florida, Orlando, FloridaIon POHOA, Alexandru Ioan Cuza University of Iai, RomaniaGabriela PRELIPCEAN, tefan cel Mare University of Suceava, RomaniaGheorghe SANDU, tefan cel Mare University of Suceava, RomaniaPetru SANDU, Elizabethtown College, Pennsylvania, USAPavlo SHYLEPNYTSYI, Bucovina State Academy of Finance, Chernivtsi, UkraineDoru TILIUE, tefan cel Mare University of Suceava, RomaniaIon TORONCIUC, National University Yuri Fedcovici, Chernivtsi, UkraineViorel URCANU, ASEM, Chiinu, Republic of MoldovaDiego VARELA PEDREIRA, University of A Coruna, SpainRzvan VIORESCU, tefan cel Mare University of Suceava, RomaniaValeriy YEVDOKYMENKO, National University Yuri Fedcovici, Chernivtsi, Ukraine

Text review: Alina HODOROAB, Adrian Liviu SCUTARIU. Cover design: Adrian Liviu SCUTARIU

Contact:

Faculty of Economics and Public Administrationtefan cel Mare University of SuceavaStr. Universitii nr. 13, Corp H, Camera H108720229 SUCEAVA, ROMANIAPhone: (+40) 230 216147 int. 294E-mail: [email protected] web site: www.seap.usv.ro/annalsFaculty web site: www.seap.usv.roUniversity web site: www.usv.ro


CONTENT

SECTION 1ECONOMY, TRADE, SERVICES ................................ ................................ ................................ ................................ 7DETERMINANTS OF KEY PERFORMANCE IND ICATORS (KPIS) OF PRIVATE SECTOR BANKS INSRILANKA: AN APPLICATION OF EXPLORATORY FACTOR ANALYSIS ................................ .................... 9

Balasundaram NIMALATHASANDepartment of Commerce, Univers ity of Jaffna, Jaffna, SriLanka

CO-OPERATION STRATEGIES ENHANCING THE INNOVATION I N NATURE-BASED TOURISMSERVICES ................................ ................................ ................................ ................................ ................................ ...... 18

Anne MATILAINENUniversity of Helsinki Ruralia Institute, Seinjoki, Finla ndGerhard WEISSUniversity of Natural Resources and Applied Life Sciences, Vienna, AustriaZuzana SARVASOVANational Forest Centre, Zvolen, SlovakiaDiana FELICIANOMacaulay Institute, Aberdeen, ScotlandCarmen NASTASEUniversity tefan cel Mare, Suceav a, Romania

THE EUROPEAN EXPERIENCE CONCERNING REGIONAL DECENTRALIZATION ................................ . 30Associate Professor PhD. Irina-Maria DRGANLecturer PhD. Rodica-Manuela GOGONEAAcademy of Economic Studies, Bucharest, Romania

ECONOMIC GROWTH IN RUSSIA REGIONS: KEY FACTORS ................................ ................................ ........ 35Ph.D. Vitaly ALESCHENKOInstitute of Economy and Organization of an Industrial Production of the Siberian Branch of the Russian Academyof Sciences, RussiaAssociate Professor Ph.D. Alexandru NEDELEAUniversity Stefan cel Mare of SuceavaLecturer Ph.D. Student Oana NEDELEAUniversity Stefan cel Mare of Suceava

APPRECIATIONS ON CRITICS OF THE GLOBALIZATION PROCESS ................................ .......................... 41Lecturer PhD. Student Carmen BOGHEANLecturer PhD. Student Florin BOGHEANLecturer PhD. Mihai POPESCUtefan cel MareUniversity of Suceava, Romania

THE SOCIAL LCA: THE STATE OF ART OF AN EVOLVING METHODOLOGY ................................ .......... 47Luigia PETTIPatrizia CAMPANELLADASTA, G. dAnnunzio University, Pescara, Italy

THE CONNECTION IDENTIFICATION BETWEEN THE NET INVESTMENTS IN HOTELS ANDRESTORANTS AND TOURISTIC ACCOMODATION CAPACITY BY USING THE ANOVA METHOD ..... 57

Assistant Roxana Elena STANLecturer Emilia GABROVEANUAssistant Nicoleta RADNEANTURomanian-American University, Bucharest, Romania

CONSIDERATIONS ON THE NEW COMMUNITY LEG ISLATION REGARDING THE EUROPEANPRIVATE SOCIETY ................................ ................................ ................................ ................................ ..................... 62

Lecturer PhD. Elise Nicoleta VLCUUniversity of Piteti, Romania

A THEORETICAL OVERVIEW ON INSTITUTIONS ................................ ................................ ............................ 70PhD. Student Ana Iolanda VODAL. I. Cuza Univers ity, Iasi, Romania

THE ABILITY TO ASSUME THE DECISIONAL RISK IN THE CONSUMPTION PROCESS ........................ 75Assistant PhD. Student Laura DIACONUAl. I. Cuza University Iai, RomaniaProfessor PhD. Corneliu C. DIACONUGr. T. Popa University Iai, Roma nia


CONCEPTS, MODELS, TECHNIQUES AND PRACTICES OF ECONOMIC AND FINANCIAL ANALYSIS83Ec. PhD. Student Alina BALANASE Bucharest, Romania

SECTION 2MANAGEMENT AND BUSINESS ADMINISTRATION ................................ ................................ ................... 91HUMAN RESOURCES MANAGEMENT CONTROL ................................ ................................ ............................. 92

Professor PhD. Mihaela DUMITRANALecturer PhD. Mdlina DUMITRULecturer PhD.Iulia JIANULecturer PhD.Gabriel JINGALecturer PhD.Gabriel RADUAcademy of Economic Studies, Bucharest, Romania

THE IMPLICATIONS OF THE FDI FLOWS ON THE ECONOMICAL GROWTH IN THE CENTRAL ANDEASTERN EUROPE COUNTRIES ................................ ................................ ................................ ........................... 100

Lecturer PhD. Mariana LUPANStefan cel Mare University of Suceava, Romania

THE MANAGEMENT OF INNOVATION, A CHANCE TO STRENGTHEN THE ORGANIZATION .......... 107PhD. Student Virgil Dan AMZAAcademy of Economic Studies, Bucharest, Romania.Professor PhD. Constantin BRTIANUAcademy of Economic Studies, Bucharest, RomaniaMSc Student Miruna Vladia AMZASNSPA, Bucharest, Romania

THE INFLUENCES FINANCIAL MANAGEMENT IN DEVELOPING THE FUTURE FIRM`S BUSINESS 112Lecturer PhD. Student Valeria Arina BLCEANUEcological Univeristy of Bucharest, Romania

BALANCED SCORECARD AND THE MANAGEMENT INTRUMENTS COMPLEMENTARITY ............... 119Lecturer dr. ing. ec. Sunhilde CUCUniversity of Oradea, Romania

THE WAY IN WHICH METAPROGRAMS AND METAMODELS INFLUENCE LEADERS OFORGANIZATIONS ................................ ................................ ................................ ................................ ...................... 125

Ec. PhD. Student Cornel IOSIFUniversity Al. I. Cuza Iasi, Romania

CURRENT TRENDS IN HRM ................................ ................................ ................................ ................................ ... 134Assistant Otilia ALBUAssistant PhD. Student Lucia MORO AN-DNILUniversity tefan cel Mare, Suceava, Romania

THE OUTSET AND DEVELOPMENT OF PUBLIC RELATIONS (PR) IN ROMANIAN ECONOMY AFTER1990 ................................ ................................ ................................ ................................ ................................ ................ 140

Assistant Raluca ZOLTANProfessor PhD. Ghiorghi PRISCARUAssociate Professor PhD. Romulus VANCEAtefan cel Mare University of Suceava, Romania

HOW TO UNDERSTAND THE NEW ECONOMY ................................ ................................ ................................ . 148Assistant Ph.D. Student Angela-Nicoleta COZORICIAssistant Ph.D. Student Simona BUTAProfessor PhD. Ghiorghi PRISCARUtefan cel Mare University of Suceava, Romania

SECTION 3ACCOUNTING - FINANCES ................................ ................................ ................................ ................................ .. 156EVALUATION AND RECOGNITION OF INTANGIBLE FIXED ASSETS IN ACCORDANCE WITHNATIONAL AND INTERNATIONAL FINANCIAL REPORTING STANDARDS IAS / IFRS ......................... 157

Professor PhD. Dorel MATESWest University of Timisoara, RomaniaProfessor PhD.Elena HLACIUCStefan cel Mare University of Suceava, RomaniaUniversity Assistant PhD. Student Marian SOCOLIUCStefan cel Mare University, Suceava, Romania


MODELS FOR THE ASSESSMENT OF THE ENTREPRISE BANKRUPTY RISK IN CRISIS SITUATIONS................................ ................................ ................................ ................................ ................................ ........................ 163

Professor PhD. Silvia Melania PETRESCUAl. I. Cuza University of Iai, RomaniaLecturer PhD. Camelia Ctlina MIHALCIUCtefan cel Mare University of Suceava, Romania

ACCOUNTING ALTERNATIVE TREATMENTS REGARDING FIXED ASSETS - A NATIONAL ANDINTERNATIONAL APPROACH ................................ ................................ ................................ ............................... 173

Professor PhD. Ion PERESWest University of Timisoara, RomaniaProfessor PhD. Dumitru COTLETWest University of Timisoara, RomaniaUniversity Assistant PhD. Student Veronica GROSUUniversity Stefan cel Mare of Suceava, Romania

ASSESSMENT OF INFLUENCE INFLATION STOCKS ................................ ................................ ...................... 181Associate Professor Ph.D. Mihaela TULVINSCHILecturer Ph.D. Student Mariana V LADtefan cel Mare University of Suceava, Romania

PARTICULAR ASPECTS OF THE PROCESS OF FINANCIAL COMMUNICATION FROM THEPERSPECTIVE OF EXIGENCIES REGARDING THE QUALITY ASSURANCE OF ACCOUNTINGPRODUCTS ................................ ................................ ................................ ................................ ................................ .. 189

Associate Professor PhD. Valeriu BRABETEAssociate Professor PhD. Cristian DRGANUniversity of Craiova, Romania

QUO VADIS INTERNAL AUDIT EDUCATION? ................................ ................................ ................................ ... 197PhD Candidate Cristina BOA-AVRAMPhD Professor Atanasiu POPBabe-Bolyai University, Cluj-Napoca, Romania

THE DISCRETIONARY FISCAL POLICY IN THE EUROPEAN ECONOMIC AND MONETARY UNION................................ ................................ ................................ ................................ ................................ ........................ 206

Lecturer PhD Candidate Cristian PANAEcological University Bucharest, Romania

CONCEPTUAL APPROACHES CONCERNING THE NEW PARADIGM OF THE MONETARY ECONOMY................................ ................................ ................................ ................................ ................................ ........................ 213

Professor, Ph.D Spiridon PRALEAUniversity of Iai Al. I. Cuza, FEAA, RomaniaLecturer Ph.D. Irina tefana CIBOTARIUUniversity Stefan cel Mare, Suceava, RomaniaLecturer Ph. D. Candidate Anioara -Niculina APETRIUniversity Stefan cel Mare, Suceava, Romania

COSIDERATIONS REGARDING THE ORGANISATION OF FINANCIAL MANAGEME NT OF THEECONOMIC ENTITIES................................ ................................ ................................ ................................ .............. 223

Lecturer PhD. Lucia RISTIAurel Vlaicu University Arad, Romania

RELEVANCE AND CREDIBILITY OF THE INFORMATION FROMTHE FINANCIAL-ACCOUNTING STATEMENTS ................................ ................................ ............................... 231

University Lecturer Ph.D. Marilena ZUCARomanian-American University, Bucharest, Romania

THE RELATIONSHIP BETWEEN FINANCIAL MANAGEMENT AND THE INFORMATION SUPPLIEDBY ACCOUNTANCY IN THE PROCESS OF SUBSTANTIATING THE FINANCIAL DECISIONS AT THELEVEL OF AN ECONOMICAL ENTITY ................................ ................................ ................................ ................ 238

Assistant Irina CHIRITAAssistant Claudia GRIGORA -ICHIMUniversity tefan cel Mare, Suceava , Romania

CONCEPTUAL DELIMITATION OF FIXED ASSETS PROCUREMENT IN PROJECTS WITH GRANTFUNDING ................................ ................................ ................................ ................................ ................................ ..... 244

Assistant PhD. Student Mihaela Ntlia LESCONI -FRUMUANUPhD. Student Ec. Ioan Anton PAULESCUUniversity Eftimie Murgu, Resita, Romani a

THEORIES REGARDING FINANCIAL INTERMEDIA TION AND FINANCIAL INTERMEDIARIES ASURVEY................................ ................................ ................................ ................................ ................................ ........ 254

Research Assistant PhD Student Alin Marius ANDRIEAlexandru Ioan Cuza University of Iai, Romania


ACCOUNTING POLICIES APPLIED IN DETERMINING CASH FLOW ................................ ......................... 262PhD Student Florin HOSTIUCAlexandru Ioan Cuza University of Iasi, RomaniaLecturer student PhD Ciprian Dan COSTEAVasile Goldis West University of Arad, Satu Mare branch, Romania

SECTION 4STATISTICS, DATA PROCESSING (INFORMATICS) AND MATHEMATICS ................................ ......... 272A STATISTICAL ANALYSIS OF THE NORTH -EAST REGION OF ROMANIA COMPARED TO THEOTHERS IN TERMS OF TOURIST ACTIVITY ................................ ................................ ................................ ..... 273

Assistant PhD. Student Ioana CIOTIRAl. I. Cuza University of Iai, RomaniaAssistant PhD. Student Adrian Liviu SCUTARIUtefan cel Mare University of Suceava, Romania

DATABASE ACCESS THROUGH JAVA TECHNOLOGIES ................................ ................................ ............... 281Professor PhD. Ion LUNGUInf. PhD. Student Nicolae MERCIOIUInf. PhD. Student Victor VLDUCUAcademy of Economic Studies , Bucharest, Romania

MATHEMATICAL MODELING OF THE DISSEMINATION PHENOMENON CONCERNING THECURRENCY CRISIS OF SUOTH -EASY ASIA ................................ ................................ ................................ ....... 292

Lecturer PhD. Student Tudor COLOMEISCHILecturer PhD. Student Anamaria G. MACOVEItefan cel Mare University of Suceava, Romania

SECTION 5LAW AND PUBLIC ADMINISTRATION ................................ ................................ ................................ ............ 299ROMANIA AND BULGARIA IN THE EUROPEAN UNION: A SPATIAL ANALYSIS OF COUNCILVOTING ................................ ................................ ................................ ................................ ................................ ........ 300

Adjunct Professor PhD. Diego VARELAUniversity of A Corua, Spain

CONSIDERATIONS ON PRE-EMPLOYMENT STAGE SPECIFIC PERSONNEL ADMINISTRATION ..... 310Lecturer Ph.D. Alunica MORARIUStefan cel Mare University of Suceava, RomaniaProfessor Ph.D. Grigore BELOSTECINICAcademy of Economic Studies of Moldova , ChisinauProfessor Ph.D. Ionel BOSTANStefan cel Mare University of Suceava, Romania

THE DISTINCTION BETWEEN DECENTRALIZATION AND DECONCENTRATION OF PUBLICSERVICES ................................ ................................ ................................ ................................ ................................ .... 315

Lecturer Ph.D. Student Irina BILOUSEACUniversity Assistant Petronela ZAHARIA,,tefan cel Mare University of Suceava, Romania

BOOK REVIEW ................................ ................................ ................................ ................................ .......................... 321BOOK REVIEW FOR MACROECONOMICS: FUNDAMENTAL CONCEPTS , Carmen NSTASE, MihaiPOPESCU, Carmen BOGHEAN, Adrian Liviu SCUTARIU ................................ ................................ .................. 322

Professor PhD. Gheorghe CRSTEADean of the Faculty of Management, ASE Buchares t, Romania

INSTRUCTIUNI UTILE PENTRU AUTORI / AUTHOR GUI DELINES................................ ............................. 325


SECTION 1

ECONOMY, TRADE, SERVICES


DETERMINANTS OF KEY PERFORMANCE INDICATORS (KPIS) OF PRIVATESECTOR BANKS IN SRILANKA: AN APPLICATION OF EXPLORATORY FACTOR

ANALYSIS

Balasundaram NIMALATHASANDepartment of Commerce, University of Jaffna, Jaffna, SriLanka

[email protected]

Abstract:An efficient banking system facilitates linkage between mobilization and use of resources, which accel erates

the process of economic growth. It is a widely accepted belief that a banking system which relies on a wide array ofbanking products, is able to carry out this function because it increases the efficiency of a banking systems to a largeextent by offering a broader and flexible arrange of services to the benefits of both borrowers and investors.Meanwhile, there are no comprehensive and empirical researches in that field especially in banking sector.

In an attempt to fill in this gap, the present s tudy is conducted determinants of key performance indicators(KPIs) of private sector banks in SriLanka with samples of hundred respondents in twelve branches in North andEastern Provinces. Data were collected through a five points Likert type summated ra ting scales of questionnaire fromstrongly disagree (1) to strongly agree (5) were adopted to identify indicators. Sophisticated statistical model asExploratory Factor Analysis (EFA) has been used. The results show that eight factors extracted from the analysisthat together accounted 73.781% of the total variance. These factors were categorized as 1) Accident Ratio (AR); (2)Opportunity Succession Rate (OSR); (3) Cash Flow (CF); (4) Return on Capital Employed (ROCE); (5) CustomerSatisfaction Rate (CSR); (6) Overall Equipment Effectiveness (OEE); (7) Return on Investment (ROI); (8) InternalPromotion (IP).

Keywords: Key Performance Indicators; Banking; Measurement; Efficiency

JEL Classifications: M1, M4

INTRODUCTION

Every organisation measures them to some degree. Often these measurements are based onhistorical information. While there is certainly value in historical analysis, it is a fundamentalprinciple of Key Performance Indicators (KPIs) to be current or forward -looking metrics. It is alsocritical that KPIs be closely aligned to strategic company goals and implemented in such a way asto support positive change. KPIs are financial and non-financial metrics used to help anorganization define and measure progress toward organizational goal s. KPIs can be deliveredthrough business intelligence techniques to assess the present state of the business and to assist inprescribing a course of action.

KPIs are quantifiable measurements, agreed to beforehand, that reflect the critical successfactors of an organization. Whatever KPIs indicators are selected, they must reflect theorganization's goals, they must be key to its success, and they must be quantifiable (measurable).KPIs usually are long-term considerations. The definition of what they a re and how they aremeasured do not change often. The goals for particular KPIs may change as the organization's goalschange, or as it gets closer to achieving a goal. The act of monitoring KPIs in real -time is known asBusiness Activity Monitoring (BAM). KPIs are frequently used to "value" difficult to measureactivities such as the benefits of leadership development, engagement, service, and satisfaction.KPIs are typically tied to an organization's strategy (as exemplified through techniques such as theBalanced Score Card).

LITERATURE REVIEW

Performance Indicators (PIs) have been implemented in many countries, from the UnitedKingdom (UK) to Australia labelled as essential management information (Sizer, 1990) and amanagement tool (CVCP/UGC, 1986), as well as claimed to bring about numerous benefits (e.g.,improved accountability and planning), PIs are expected to be increasingly used by the


governments of the future (Carter, Klein & Day, 1992; Hughes, 1994). However, the literature onperformance indicators suggests that their application may bring about dysfunctional effects. Inparticular, authors from countries such as the UK (Barnett, 1992), Australia (Marginson, 1995),United State of America (USA) (Porter, 1988), and the Netherlands (Vroeijenst ijin & Acherman,1990) had voiced their concerns that performance indicators could set the criteria for performance.

Performance measurement and reporting is now widespread across the private sector as wellas public sector of many industrialised and indus trialising countries. The common tool that is usedfor this process, key performance indicators (KPIs), have been argued to provide intelligence inthe form of useful information about a public and private agencys performance (Williams,2003).

So great is this faith in KPIs that many public and private agencies are now mandated bylaw or executive order to use them as one of the primary tools to account for their performance tomain public accountability or reporting authorities, such as the Parliament a nd the Governmentauditor. It is apparent that, the way in which KPIs work to improve accountability is through theinformation they provide to the principal. Performance measurement systems assume that humanscan use the information to make better decisi ons (Cavalluzo & Ittner, 1999). This assumption isconsistent with the rational -comprehensive and bounded rationality perspectives on decision -making (Simon, 1955, 1992). The former perspective describes information as directly related toorganisational goals and the organisational methods by which to achieve these goals. It also viewsinformation as available, unambiguous and directly influential on decisions.

Many scholars have maintained that the implementation of performance measurementsystems possesses important symbolic value (Modell, 2004; Moynihan, 2005; Vakkuri & Meklin,2006). KPIs are viewed as a good management device and a socially constructed tool that makessense (DeKool, 2004 & Weick, 1995). The fact that KPIs tend to be quantitative has helped topromote their image of objectiveness and rationality. The image of KPIs is further enhanced bytheir widespread application across the public sector of many industrialised countries. Theimportance of performance measurement is noted by Ingraham (2005) it is important to expect thatcitizens see and understand the results of government programs. It is necessary that publicemployees and their leaders not play their thumbs when public dollars are wasted on poorly plannedor unrealistic public programs.

Based on the above literatures, there are no comprehensive and empirical researches in thatfield especially in private sector banks viz., EFA. In an attempt to fill in this gap, the present studyis conducted the determinants of key performance indi cators (KPIs) of private sector banks inSriLanka with samples of hundred respondents in twelve branches in North and Eastern Provinces.

OBJECTIVES

The present study has the following objectives1. To examine necessary indicators for the performance of the private sector banks.2. To determine the key indicators for the performance of the private sector banks.

MATERIAL AND METHODS

Sampling procedureThe sample for this study was private sector banks in North and Eastern Provinces of

SriLanka. A stratified random sampling technique was used to select the organizations. Initially weidentified total number of banks which consists of four private sector banks (Seylan bank; HattonNational Bank; Commercial Bank& Sampath bank). Out of 16 branches of above four b anks, 75%of the banks were selected for the study.Utlimately the present study is made with the samples of 12private sector banks. Researchers, then, decided to distribute 10 questionnaires among each branch.In a way 120 questionnaires were distributed, of which only 110 were returned and 100 were usedfor the study as an ultimate samples.


Data sourceThe study was complied with the help of primary data. Primary data were collected through

the questionnaire. Moreover, the desk study covered various pub lished and unpublished materialson the subject.

Questionnaire Development The questionnaire was administrated to banking executives in North and Eastern Province

of SriLanka.The questionnaire was designed by the researchers with some modification fromKaplan & Norton, (1996). A five item scale from strongly disagree (1) to strongly agree (5) wasadopted to identify the indicators.

Statistical Tools UsedIn the present study, we analyse our data by employing EFA. For the study, entire analysis

is done by personal computer. A well known statistical package SPSS (Statistical Package forSocial Sciences) 13.0 Version was used in order to analyze the data.

Results and DiscussionTo identify potential underlying dimensions of the KPIs of private sector ba nks

development used in the current study, responses of the participants were subjected to factoranalysis method. Before applying factor analysis, testing of the reliability of the scale is very muchimportant as its shows the extent to which a scale pro duces consistent result if measurements aremade repeatedly. This is done by determining the association in between scores obtained fromdifferent administrations of the scale. If the association is high, the scale yields consistent result,thus is reliable. Cronbachs alpha is most widely used method. It may be mentioned that its valuevaries from 0 to 1 but, satisfactory value is required to be more than 0.6 for the scale to be reliable(Malhotra, 2002; Cronbach, 1951). In the present study, we, therefor e, used Cronbachs alpha scaleas a measure if reliability. Its value is estimated to be 0.653 , If we compare our reliability valuewith the standard value alpha of 0.6 advocated by Cronbach (1951), a more accuraterecommendation Nunnally and Bernstein (1 994) or with the standard value of 0.6 asrecommendated by Bagozzi and Yis (1988) we find that the scales used by us are highly reliablefor data analysis.

Regarding validity, a research instrument with small modifications from the modeldeveloped by Kaplan & Norton (1996) was used. The statements included in the questionnaire aremost suitable for the variable, because many researchers used these variables to measure theperformance indicators (Kaplan & Norton, 1996; Deming, 1986; Inner & Larcker, 1997) . Hence theresearchers satisfied with the content validity then it was decided to continue the analysis.

After checking the reliability of scale, we tested whether the data so collected is appropriatefor factor analysis or not. The appropriateness of fa ctor analysis is dependent upon the sample size.In this connection, Kaiser Meyer- Olkin (KMO) measure of sampling adequacy is still anotheruseful method to show the appropriateness of data for factor analysis. The KMO statistics variesbetween o and 1. Kasier (1974) recommends that values greater than 0.5 are acceptable. Between0.5 and 0.7 are mediocre, between 0.7 and 0.8 are good, between 0.8 and 0.9 are superb (Field,2000). In this study, the value of KMO for overall matrix is 0.461 (For details pl ease see table no1), it is near to 0.5. Hence the sample taken to process the factor analysis is statistically significant.

Table no 1. KMO and Bartlett's Test

Source: Survey data

Kaiser-Meyer-Olkin Measure of Sampling Adequacy..461

Bartlett's Test of Sphericity Approx. Chi-Square 574.740df 210Sig. .000


Bartletts test of sphericity (Barlett, 1950) is the third statistical test applied in the study forverifying its appropriateness. This test should be significant i.e., having a significance value lessthan 0.5. In the present study, test value of Chi Square 574.740 is significant (as also given intable no.1) indicating that the data is appropriate for the factor analysis.

After examining the reliability and validity of the scale and tes ting appropriateness of dataas above, we next carried out factor analysis to indentify the KPIs of private sector banks. For this,we employed Principal Component Analysis (PCA) followed by the varimax rotation, (Generally,researchers recommend as varim ax). When the original twenty-one variables were analysed by thePCA. Eight variables extracted from the analysis with an Eigen value of greater than 1, whichexplained 73.781 percent of the total variance (For details please see table no 2).

Table no 2. Total Variance ExplainedInitial Eigen values Extraction Sums of Squared Loadings

Component Total % of Variance Cumulative % Total % of Variance Cumulative %1 3.398 16.182 16.182 3.398 16.182 16.1822 2.505 11.927 28.109 2.505 11.927 28.1093 2.073 9.871 37.980 2.073 9.871 37.9804 1.824 8.685 46.666 1.824 8.685 46.6665 1.730 8.237 54.903 1.730 8.237 54.9036 1.428 6.800 61.702 1.428 6.800 61.7027 1.345 6.404 68.106 1.345 6.404 68.1068 1.192 5.675 73.781 1.192 5.675 73.7819 .983 4.681 78.46210 .878 4.182 82.64411 .703 3.349 85.99312 .591 2.816 88.80913 .556 2.647 91.45614 .439 2.090 93.54715 .373 1.777 95.32416 .313 1.490 96.81417 .290 1.382 98.19618 .194 .922 99.11819 .110 .524 99.64220 .057 .271 99.91321 .018 .087 100.000

Source: Survey dataExtraction Method: Principal Component Analysis.

One method to reduce the number of factors to something below that found by using theeigen value greater than unity rule is to apply the scree test (Cattell, 1966). In this test, eigenvalues are plotted against the factors arranged in descending order along the X -axis. The number offactors that correspond to the point at which the function, so produ ced, appears to change slope, isdeemed to be the number of useful factors extracted. This is a somewhat arbitrary procedure (Fordetails please see figure no 1). Its application to this data set led to the conclusion that the first eightfactors should be accepted. Within this solution, Factor 1 had fourteen items with their primaryloadings on that factor, one item, two items had their primary loadings on Factor 2 and Factor 3respectively, but Factor 4 did not contain any primary loadings.


Figure no 1. Scree Plot

It is worth mentioning out here that factor loading greater than 0.30 are consideredsignificant. 0.40 are considered more important and 0.50 or greater are considered very significant.The rotated (Varimax) component loadings for the eight components (factors) are presented inTable no 3. For parsimony, only those factors with loadings above 0.50 were considered significant(Pal, 1986; Pal and Bagi, 1987; Hair , Anderson, Tatham, and Black, 2003).

Table no 3. Principal Component Analysis Varimax Rotation Indicators of PerformanceIndicatorsVariables

Indicator 1IP

Indicator 2AR

Indicator 3ROI

Indicator 4OSR

Indicator 5CSR

Indicator 6OEE

Indicator 7CF

Indicator 8ROCE

IP .968GR .948

FR .947AR .951NOA .926

ROI .759

ILR .675

CL .619OSR .798

CR .774

IWE -.535CSR .822ROE .766

OEE .731

IE .667DPCE -.564CF .930

ET .610

ROCE .749


DPCQ .711

Eigen Value 3.398 2.505 2.073 1.824 1.730 1.428 1.345 1.192

Proportion ofVariance

16.182% 11.927% 9.871% 8.685% 8.237% 6.800% 6.404% 5.675%

CumulativeVarianceExplained

16.182% 28.109% 37.980% 46.666% 54.093% 61.072% 68.106% 73.781%

Source: Survey data

Indicator 1: IP This indicator was represented by three variables with factor loadings rangingfrom .968 to .947. They were internal promotions, gender ratio, and financial result. This indicatoraccounted for 16.182% of the rated variance.Indicator 2: AR Two variables with loadings ranging from .951 to .926 belonged to this factorand they included accident ratio and number of activities. This indicator explained 11.927% of therated variance.Indicator 3: ROI This indicator comprises three variables representing return on investment,illness rate, and customer loyalty. Factor loadings of these variables ranged from .759 to .619. Avariance of 9.871% was explained by this factor.Indicator 4: OSR Three variables were included in this indicator. They were opportunitysuccess rate, customer retention, and internal working environment. Their factor loadings rangedfrom .798 to -.535. The factor explained 8.685%.Indicator 5: CSR This indicator comprised two variables, nam ely customer satisfaction rate,return on equity. They carried factor loadings of .822 and .766. The factor explained 8.237% of thevariance.Indicator 6: OEE Three variables with loadings ranging from .731 to -.564 to this indicator andthem included overall equipment effectiveness, internal efficiency, and deliver performance tocustomer by date. This indicator explained 6.800% of the rated variance.Indicator 7: CF - This indicator consisted two variables representing to cash flow and employeeturnover. Factor loadings of these variables ranged from .930 to .610. A variance of 6.404 % wasexplained by this indicator.Indicator 8: ROCE - This last indicator comprised of two variables relating to the return oninvestment and deliver performance to c ustomer by quality. Their loadings ranged from .749 to.711. The variance explained by this indicator amounted to 5.675%.Ranking of the above eight indicators in order to their importance, along with mean and standarddeviation, is shown in Table no 4. The importance of these indicators, as perceived by therespondents, has been ranked on the basis of their mean values.

Table no.4 Ranking of Indicators according to their importanceIndicators No. of. Variables Mean S.D RankIndicator 1: IP 03 4.1552 .8214 8Indicator 2: AR 02 4.2586 .73294 1Indicator 3: ROI 03 4.1609 .59968 7Indicator 4: OSR 03 4.2529 .51227 2Indicator 5: CSR 02 4.1983 .72511 5Indicator 6: OEE 03 4.1782 .47229 6Indicator 7 : CF 02 4.2500 .69617 3Indicator 8 : ROCE 02 4.2155 .66959 4Source: Survey data

As depicted in table no. 4, the indicators AR; OSR; CF; ROCE; CSR; OEE;ROI; and IP got the ranks of first, to eight respectively and constitute the KPIs of Privatesector banks in North and Eastern Provinces of SriLanka.


CONCLUSIONS

Through an empirical investigation, this study has identified eight indicators that are majorcontributors to the performance of the private sector banks in North and Eastern provinces ofSriLanka. These factors in order to importance are (1) AR; (2) OSR; (3) CF; (4) ROCE; (5) CSR;(6) OEE; (7) ROI and (8) IP.

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Appendix- A:Table no 5: Code Sheet

Code Descriptions of the Indicators

DPCD Deliver Performance to Customer by Date

DPCQ Deliver Performance to Customer by Quality CSR Customer Satisfaction Rate

CL Customer Loyalty

CR Customer Retention

NOA Number of Activities

OSR Opportunity Success Rate

AR Accident Ratio

OEE Overall Equipment Effectiveness

IWE Internal Working Environment

IE Internal Efficiency


IR Investment Rate

IlR Illeness Rate

IP Internal Promotions

ET Employee Turnover

GR Gender Ratios

CF Cash Flow

ROI Return on investment

FR Financial Result

ROCE Return On Capital Employed

ROE Return on Equity


CO-OPERATION STRATEGIES ENHANCING THE INNOVATION I N NATURE-BASEDTOURISM SERVICES

Anne MATILAINEN1), Gerhard WEISS2), Zuzana SARVASOVA3), Diana FELICIANO4), Carmen NASTASE5)1) University of Helsinki, Ruralia Institute, Seinjoki, Finland

2) University of Natural Resources and Applied Life Sciences, Vienna, Austria3)

National Forest Centre, Zvolen, Slovakia4) Macaulay Institute, Aberdeen, Scotland

5) University tefan cel Mare, Suceava, Romani a

AbstractNature-based tourism is rapidly growing industry sector providing new kinds of sources of livelihood to the

rural areas to diversify the traditional economics. However, the level of innovations in nature tourism and recreationservices has not been reported as very high. The innovations in nature-based tourism typically occur not as a result ofspecific innovation systems but rather between existing ones, and as a result of a more spontaneous, project -orientedcooperation of various actors. Therefore, in creating new ideas and opportunities, the role of key actors and co -operation partners is essential. The successful co-operation with the different stakeholder groups has found to haveclear connections on the companys business performance a nd in the long run the company must operate in such a waythat the stakeholder groups are satisfied. To be able to combine all these different types of actors to cross -sectoralnetworks and co-operation is essential and it provides a big challenge especial ly in small and micro company level.

This paper aims to illustrate by using 10 case studies around Europe (AUT, FIN, RO, SLO and Scotland), whatkind of strategies small and micro size nature -based tourism companies have created in order to establish and maintainthe critical co-operation with the main stakeholder groups effecting their business activities and social sustainability ofcompanies. As a result two different strategies, business approach - and community approach -strategy were found. Theresults clearly highlight the important role of informal co -operation and co-operation networks in nature based tourisminnovation process.

Key words: nature-based entrepreneurship, stakeholders, co -operation, multiple use of forests, case study

JEL Classification: L83, O32

1. INTRODUCTION

Nature-based tourism can broadly be defined as tourism, with main activities related tonature (Saarinen 2001). It is a growing industry sector providing new sources of livelihood todiversify the traditional rural econom ics, namely agriculture and forestry. The income generatingform nature tourism typically remains in the rural regions, it usually requires strong localknowledge base and the sector is labor intensive (e.g. Saarinen 2003, Honkala 2001), whichcharacteristics make it especially interesting in respect of rural development.

In general tourism is one of the most rapidly growing industry sectors at the moment.Within it, especially nature -based tourism has had high growth rates and the growth has beenestimated to continue in near future with increasing respect for the pure authentic nature by theconsumers (Ryymin 2006). For example in Finland the growth rate of the turnover of nature safaricompanies exceeded up to 8,5 % during 2003 -2004 and even the growth ra te of smaller naturetourism companies exceeded up to 6 % (Ryymin 2006). At the same time the growth of traditionalsaw mill industry was practically non -existent (Hnninen and Toppinen 2004).

However, even though the nature -based tourism sector is growing rapidly in many respectsin Europe, the level of innovations (both product and process innovations) in nature tourism andrecreation services has not been reported as very high (see e.g. Nybakk et al. 2005, Rametsteiner etal. 2005). This brings out the question, if the possibilities and opportunities have been recognisedand utilised in all their potential. The competition in the nature tourism is increasing concerningespecially foreign niche customer groups. The innovativeness is an important element in thecompetitiveness of companies and has been seen as one of the indicators of the future developmentof the sector (e.g. Rametsteiner et al. 2005).

In creating new ideas and opportunities, the role of key actors and co -operation partners isessential. Those actors, who have the knowledge and access on nature resources, play very


important role. In European context nature-based tourism utilizes typically forests in some form andin many cases the forest areas are not owned by the entrepreneurs. This brin gs out not only thequestions of property rights but also the one of combining the interests of user groups of the forestareas (Matilainen and Lhdesmki 2009). Equally important role have those actors, who have theaccess to customers in the marketing channels. For a nature-based company to be able to combinethese different types of information and actors to cross -sectoral networks and co-operation isessential, and it provides a big challenge to the sector especially in small and micro company level(see e.g. Rametsteiner et al. 2005, Luostarinen 2005, Lunnan et al. 2005). The important questionsin order to support innovation activity in nature -based tourism sector are, how simultaneouslyguarantee the access to the needed natural resource (in this s tudy forest areas) and to the customers,organize the business activities effectively and to combine the interests of different stakeholdergroups, both local and wider, for the use of forest areas in order to successfully generate anddevelop the nature-based tourism sector as part of rural economics.

In order to overcome these problems, the small and micro size companies have to findsuccessful networking and co-operation strategies (Virkkala 2006). Typically rurally located nature -based tourism companies form complex co-operation relationships to ensure their activities, and arecontinuously developing this co -operation, without which their companies would extinct. Inaddition especially in rural regions the social sustainability of business activities p lays an importantrole in success of the company (Lhdesmki 2005)

This paper aims by using cases throughout Europe, to illustrated, what kind of co -operationstrategies nature-based tourism companies have developed for managing the most criticalstakeholder groups in order to reach the local acceptance for their business activities and maintainand develop their innovations further.

2. THEORETICAL BACKGROUND

2.1 INNOVATION RESEARCH AND REGIONAL GOVERNANCE - PROVIDINGBASES TO THE INNOVATION OF RURAL NATURE -BASED TOURISM COMPANIES

Innovation research has often studied innovation processes in large firms that pursue explicitinnovation strategies and run R&D -departments. Scholars, however, have learnt that innovation is aprocess that does not only take pla ce within companies, but also between companies and betweencompanies and many other actors. Besides of various types of private and public actors alsoinstitutional framework conditions are important to form and success of innovation processes. Thesystems of innovation approach (Lundvall 1992, Nelson 1993, Edquist 1997) defines innovation asa result of systems that consist of actors and institutio nal settings whereby actors include besidesof the company and as important as them authorities, interest organisations, consultancy agenciesand research and education institutes. Institutional settings on the other hand are understood asformal and informal rules and norms, e.g. public policies or the innovation and interaction culture incertain regions or sectors. Innovation systems are often understood in a narrower sense asestablished, enduring systems that are explicitly and strategically orient ed at creating innovations ina national economy national innovation system (Nelson 1993), a sector sectoral innovationsystem (Breschi, 1997), or a region regional innovation system (Asheim, 2002). Innovations innature-based tourism are of significantly different in nature: they typically occur not as a result ofspecific innovation systems but rather between existing ones, and as a result of a morespontaneous, project-oriented cooperation of various actors (Kubeczko et al, 2006).

Such kind of innovation processes are particular important in regions with weak economicand institutional structures and crucial for the economic development of such regions. This is oftencase with many rural regions. These proce sses are studied under the headings of regionaldevelopment, regional governance and learning regions.

The early concepts of industrial districts (Harrison 1992) and enterprise clusters (Porter1998) pointed out the importance of interrelationship of regional enterprises. Consequently,


company networks concepts where enlarged to also comprise socio -cultural and politicalnetworks, leading to the concept of the creative or innovative milieu (Cooke and Morgan 1994;Capello 1996; Maillat 1996) . These strands of theorizing assume that innovative regions have to besupported by three network systems: business, social and political networks (Weber 2002; Fornahland Brenner 2003). The regional actors adaptability and their ability to learn is the central questionof the study of learning regions (Florida 1995; Asheim 1996; Morgan 1997) .

Some representatives of the learning regions approach look at innovation processes inregions with weaker capacities. In their analyses they focus on the role of social capital and trust,formal and informal inter-firm networks and the process of interactive learning (Asheim 1996,Morgan 1997). Important resources for innovation and economic development are the capacity ofpeople, organisation, networks and reg ions to learn. Authors often look at network organisedinnovation projects (Asheim, forthcoming). In these studies, the basic features of innovationsystems are used but more broadly interpreted and applied to any co -operations or networks ofactors in innovation projects (innovation systems in a broader sense).

The critical networks and co-operation partnerships for innovation systems in broader sensecan be seen to be formed from different types of stakeholders relating to the innovation initiatives.The crucial issue is, how all the key stakeholders are taken into consideration so that successfulnetworks and partnerships can be formed and social sustainability of the business activities can beguaranteed.

2.2. THE ROLE OF STAKEHOLDERS IN FORMING SUCCESSF UL CO-OPERATION AND CREATING SOCIAL SUSTAINABILITY FOR RURAL BUSINESS

It has been stated that transferring corporate social sustainability of to the business objectivesis best undertaken by using the stakeholder approach (Clarkson 1995). In their operati onalenvironment the rural SMEs have different kind of stakeholder groups influencing their scope ofaction. As a stakeholder can be defined any group or individual who can affect or is affected by theachievement of a corporations purpose. (Freeman 1984 ) for example when companys activities setlimitations to land use of local people. The impact and influence mechanism of to businessenvironment vary depending on the type of stakeholder group. The stakeholders can be dividedinto primary stakeholders , who have formal, official or contractual relationship with the companyand to the secondary stakeholders, who represent the rest of interest groups in the businessenvironment, like local people, forest owners etc. (Carroll 1989 and 1993, Clarkson 1995, Nsi1995).

The influence these stakeholders have to companies activities can be direct or indirect.Frooman (1999) has divided the stakeholder influence between a company and stakeholder groupbased on the resource dependence. If the companys dependen ce on the stakeholders resource e.g.in case of nature tourism forest land, is high, more likely direct influence mechanisms are used inthe co-operation between the company and stakeholders. In cases when the dependence is low andstakeholders do not control the critical resources for companys operations, the indirect influencemethods via other stakeholders are used (Frooman 1999, Sharma and Henriques 2005).

The successful co-operation with the different stakeholder groups has found to have clearconnections on the companys business performance (e.g. Besser 1999). According to Nsi (1995)in the long run the company must operate in such a way that the stakeholder groups are satisfied orthe companys activities will likely cease. Bryson (2004) also h ighlights that it is important tosatisfy the key stakeholders at least minimally according to their own criteria for satisfaction. Thisbrings out the need for entrepreneurs to be able to understand the stakeholders agenda, which issometimes difficult to identify. The failure to understand the unforeseen hidden power andinfluence of stakeholders has led to countless project and business failures (Bourne and Walker2005, Nutt 2002) Typical example of the significant role of stakeholders hidden power ar eplanning and decision making processes of the utilization of nature resources (see e.g. Sharma andHenriques 2005, Bisi 2008).


In rural areas there seem to be more expectations from the stakeholder groups towards thecompanies than in urban areas (Lhd esmki 2005). This highlights the critical role of fluent co -operation between the company and stakeholders. The stakeholder groups are unique for eachcompany and its actions based on e.g. location, line of business, networks, customer base of thecompany. They are also very multiplicity and form a complex network (Neville and Menguc 2006).In many cases it is impossible to satisfy fully all the stakeholder groups. Therefore it is important toidentify the key stakeholders (Bryson 2004). There have been de veloped different kind ofstakeholder analyses and practices to locate the most critical stakeholders for different processesand activities (e.g. Bryson 2004, Bourne and Walker 2005, Cleland 1999, Neville and Menguc2006). According to Mitchell et al 1997 the critical attributes in defining key stakeholders arepower of the stakeholder , legitimacy of the stakeholder concerning the stake and urgency, thestakeholder claims attention to his claims from the entrepreneur.

In this paper the approaches mentione d above are combined in certain extent and a companyapproach was chosen. The stakeholders, without whose acceptance or co -operation the companysinnovation process would not have been possible, or the business activities could not continuesuccessfully on the long run are considered as critical or key stakeholders, regardless whether thestakeholders can be seen primarily or secondary, or whether the influence of the stakeholders isdirect or indirect.

The companies have developed different various co -operation strategies, either strategicallyconsidered or unconscious, in order to sustainable co -operate with and manage different stakeholdergroups. The chosen strategies influence also directly on the business decisions of the operators(Besser and Miller 2001).

3. MATERIAL AND METHODS

In this study interpretative and descriptive perspective was adapted for studying therelationship between the entrepreneurs and their key stakeholder groups in innovation process ofnature-based tourism. This kind of qualitative approach is well justified choice in order tounderstand any phenomena about which little is yet known (Strauss & Corbin 1990). The aim is arather inductive analysis (see Glaser & Strauss 1967; Strauss & Corbin 1990). For studying theinnovation process a case study approach has been chosen, in which the cases are designed asinnovation cases on enterprise level. A case study is considered to be an appropriate researchstrategy to investigate contemporary phenomena within their real -life context, especially when theboundaries between the phenomena and the context are not clearly evident (Yin 2003; Perry 1998),like typical when investigating an innovation process. Furthermore, case studies can be descriptive,explanatory or exploratory in their nat ure (Yin 2003).

The empirical data consist of 10 case studies representing five different European countries(AUT, FIN, RO, SK and Scotland (UK)) providing a collection of cases each representingdifferent institutional settings with regard to access to forest land, innovation support system andforest ownership. The sampling of the interviewees was made by a purposive sampling in order toensure manageable and informative data (see Patton 2002). The case studies have been collected bythe co-authors of the article by using joint semi-structured thematic interview guideline, whichallowed flexible conversations to take place still ensuring that all the main issues were discussed(see e.g Patton 2002). The themes were chosen to cover the critical aspects relating co-operationnetworks of forest based nature tourism companies, especially focusing on mapping out the criticalstakeholder groups and their management.

The interviews were conducted during 2004 - 2009. In most of the cases innovation carrierhas been visited by the case author. The data collection methods comprised personal face -to-face,telephone and e-mail interviews with core actors of the innovation project. In addition writtensources such as internal or official project documentations, pre ss releases, newspaper articles,information on websites, brochures etc were used. The critical key stakeholder groups for each casewere identified by the case authors based on the data (Table 1).


The data was analysed by using analyst-constructing typologies, in which patterns,categories and themes are looked for from the data and based on these, typologies were formed(Patton 2002). For this purpose a common analyzing framework was created. Typologies are builton ideal types rather than complete and d iscrete set of categories and they provide one simple formfor presenting the qualitative comparisons (Patton 2002). Unlike classification systems, typologiesdo not provide rules for classifying. Instead, typologies usually identify multiple ideal types, eachof which represents a unique combination of the attributes that are believed to determine therelevant outcome (Doty and Glick 1994). In other words the typologies and their characteristicsemerge from the data during the analysing instead of being de cided in beforehand. Since thetypologies present complex ideal types, the cases can have elements from several differenttypologies. In analysing, the case descriptions were cross -checked by co-authors in order to ensurethe quality of the results and to avoid the risk of creating analyst -constructed typologies that are toomuch influenced by the analyser (Patton 2002). The summary of cases is presented in the table 1.

3.1. CASE STUDIES AND THEIR INNOVATIVENESS

All the cases, even though representing dif ferent nature tourism activities, represent newinnovative form to utilize forest areas for benefiting economics of the region in a form of privatecompany or wider network of actors. Common to all cases are several critical stakeholder groupswithout whose support the activities could not have been established or maintained.

Almliesl Marketing of forest cottages for tourists, AustriaThe marketing initiative carrier is a regional unit of the Austrian Federal Forests, whose

innovation was to renovate and lease 12 traditional forest houses and hunting cottages to tourists.After severe troubles, the project was reorganised by handing over the marketing to a tourismagency offering quality cottages in Austrian mountain provinces under the brand Almliesl . In thecase traditional heritage cottages has been managed to transform business activities withoutendangering the traditional or social value of the cottages. However, the successful stakeholdermanagement has played significant role in success.

Canopy walkway Sauwald, AustriaThe innovation initiated by a private farmer aiming to diversify his business activities by

offering in his forest a canopy walkway and a forest restaurant. The innovation was carried out asEU Leader+ -project and the canopy walkway is managed by the society Baumkronenweg. Incontrast to other canopy walkways in Europe, the Sauwald was consciously built from wood. In thefirst season the project attracted more than 100.000 visitors and employs 12 people. In the case anew innovative use of forest was created.

Hunting in Eastern FinlandThe private company Finnhunt Oy, organises moose and small game hunting in private and

States forests. The company has managed to transform innovatively a traditional leisure activityholding passionate interests from different stakeholder groups (e.g local recreational hunters andgeneral public) as commercial activity and has been successful in finding suitable customer groupsfor their products. One of the most important success factors has been close co-operation with localhunting clubs and landowners from very beginning in order to maintain the social sustainability ofthe activities and with Central European sales organizations in order to have access to the markets.

Horse back riding tours in FinlandThe private company, Kainuun vaellustalli, organises horseback riding tours utilizing

mainly the privately owned forests. The company organises tours around year on daily basis andhas managed to find successful additional source of livelihood fo r remote rural region as well asmanaged to utilise the customer base of bigger tourism companies of the region. Also they havemanaged to negotiate successfully with several private non industrial forest owners (up to 100) tobe able to establish riding routes long enough for their activities being the only horseback ridingcompany in the region.


Dorna Adventure, RomaniaDorna Adventure is a private company initiated by two partners providing e.g. boats rides

on Bistrita River, mountain climbing, biking , paint ball and horseback riding tours and courses. Theinnovativeness of Dorna Adventure, is to offer something unique in the forest area and developedprerequisites for that. For the enterprise it is essential to collaborate with the private and publicactors actively in order to maintain their activities in the long run in the struggle against the existingrivers pollution destroying the beauty of the area as well as sustaining the economic sustainabilityof the micro company.

The Calimani National Park, RomaniaThe Calimani National Park is a public park with main purpose of protection and

conservation of unique natural elements, giving also the possibility for visits in scientific,educational, recreational and touristic purposes. Its establishment i n 2004 provided also a lot ofopportunities to develop new innovative forest tourism and recreation activities in the area, likehiking, mountain biking, horseback riding, photo safaris, bird watching tours etc. To maintain anddevelop the innovation it is very important sustain fluent co -operation between the National Park,the private companies and the interest groups.

Huntly peregrine wild watch, ScotlandWildlife interpretation centre providing wild watch opportunities is managed and

implemented by the national Forestry Commission in its own woodland. Several animal species canbe seen in the area, but the main attraction is the peregrines nest existing in the site and visited by acouple of peregrines every year. There are cameras filming the peregrine s feeding the chicks andalso their other activities around the nest. The project is considered to be innovative because it usescameras to show on wildlife activities as live recording and it is free of charge for the visitors.

Mountain biking, ScotlandA private enterprise in the Tweed Valley, Scotland provides mountain biking opportunities

and organize biking courses in the forest areas mainly owned by national Forestry Commission.The forested environment plays major role in attractiveness of the servic es by providing uniqueopportunities for the tracks. The company has found an innovative way to works within a networkof businesses in the area and have created a Mountain Biking Hospitality Scheme providing a packof services like bike courses and accomm odation packages, to improve the forest based mountainbike tourism activities in the region.

Forest tourism in Velky Kl forests, SlovakiaUrbarium (shared ownership type) of the village Velk Kl associates about 600 owners of

agricultural and forest land. The most important drivers for innovative new services in area wereaim to diversify production activities, ensure additional income for the members of Urbarium andenhance the development of the municipality by using the existing natural and cultura l potential.The facilities were jointly built to serve for the accommodation of guests and provide base for otherservices offered by Urbarium V. Kl. Nowadays for visitors in urbarial forests various recreationalservices (e.g. accommodation in the foresters house, 9 round trails, forest guides) are provided.

Vydrovsk valley, SlovakiaVydrovsk valley is a touristic destination located in one of the largest villages of Slovakia,

ierny Balog. The valley includes several tourist attractions related to f orestry like the narrow-gauge iernohronsk railway (H), open-air forest museum, primaeval forest . The activities arebased on the work of Vydra-(Rural Development Activity) aiming to contribute to the sustainabledevelopment of the rural region. In co -operation with other similarly oriented NGOs they activelyseek for new initiatives to develop the region further. The trademark Vydrovsk valley was formedbased on the regions attraction and possibilities for tourism.

Table 1. the summary of the case s tudies and the key stakeholder groups of the casesCountry The case The identified key stakeholder groups for the innovationAustria Almliesl

Marketing of forestcottages for tourists

MTS Almliesl tourism agency and other local tourism partners,local people (neighbours), Public authorities


Austria Canopy walkwaySauwald

Firms involved in construction of the canopy walkway,Members of the society Baumkronenweg, Public administration

Finland: Private huntingenterprise

Hunting clubs, Landowners, Selling agencies, Other SMEs, Local people,General public

Finland Horse riding tours Private land owners, Metshallitus, Other SMEs, hunting club, regionaldevelopers

Romania Dorna Adventures,private nature-tourismcompany

Public administration (municipality tourism officials),Other private SMEs, Volunteers, trainers, guides

Romania The Calimani NationalPark

National Administration of Forests (Suceva and TG Mures branch offices),Forest research and management institute,The Association of Forest Owners, Forest Group Josenii Brgului, localSMEs

Scotland Huntly peregrine wildwatch /Wildlifeinterpretation centre

Scottish Agricultural College (SAC), Primary Gartly School,North East Raptors Study Group

Scotland Mountain biking Local tourism consortium, Forestry Commission, Local farmers,Local community council

Slovakia Forest tourism inVelky Kl forests

Local forest owners (Urbarium), Local associations (like hunting clubs),local people, ALEA (association focusing on marketing in web, organizin gexhibitions of tourism etc), Local joiners, Local municipality

Slovakia Vydrovsk valley jointnature tourism

Vydra (Rural Development Activity), Lesy SR state forest enterpriseCierny Balog, H (local company operated narrow-gauge railway), Thelocal municipality, other enterprises

4. ANALYSIS AND RESULTS

When studying the co-operation between the innovation carrier and key stakeholder groups,two clear strategies for stakeholder management were found in all cases, even though the casesrepresented different nature tourism activities in different institutional settings. The strategies werefurther analysed based on 3 characteristics, which were emerged from the data to represent thetypical characteristics and differences of the strategies:

Formality of the relationship (formal-informal): in the formal relationship typicallywritten contracts were issued, when the informal relationships were based on verbal informalagreements or interpretations of discussions.

The communication: the style of the communication between innovation carrier andstakeholder group was analysed based on its regularity and forums it was conducted in. Based onthese it was divided into official and unofficial communication. In official communication, thecommunication between parties is regular and happens based on formal meeting related to businessactions and/or agreements. In some cases even minutes of the meetings are made and distributed tothe participants. The unofficial communication, even though it can be very vivid happens typicallyfrom non regular basis as random chats or discussions. Also the role of personal relationships withthe stakeholder group representatives is big.

Type of co-operation: The co-operation was analysed further in details by using threedifferent concept pairs: horizontal or vertical co -operation; unisectoral or cross sectoral co -operation; and based on the local networks or based on wider networks outside the region or withhigher levels e.g. in a form of political levels or national actors . The horizontal co-operation wasdefined as a co-operation within one level of production, when the vertical co -operation refers tothe co-operation along the production chain. The u nisectoral co-operation was defined as co-operation occurring within one sector, in this study primarily referring to forest sector. By the crosssectoral co-operation on the other hand is meant the co -operation within more than one industrysector.

The first found co-operation strategy can be called business approach strategy. In thisstrategy the co-operation critical for success of the innovation case was established and maintainedstrongly based on business to business activities providing typically monetary benefits to bothparties. Monetary benefits were also used as just ification and favoring arguments for establishing


the co-operation and selling the innovation to the stakeholder group in question. The relationshipcan be described as normal business relationship with written agreements and contractual rights andthey were very formal in nature. In almost all vertical co -operation relationships the businessapproach strategy was applied, since as part of production chain the stakeholder groups in questionwere usually sub-contractors or selling and marketing organizati ons. However, also in horizontalco-operation business approach was used, especially when other local SMEs were in question. Dueto its formality, business approach was used both in managing the local stakeholders as well as thestakeholders outside the region.

The communication in the business approach -strategy was typically official based on thebusiness actions between the innovation carrier and stakeholder group. The personal relationshipswere important in enhancing the co -operation, but they were not highlighted or seen perquisite forit.

In addition to business approach, in the case studies became clearly visible so calledcommunity approach - strategy. In this strategy, the innovation was justified and argumentedwith benefits to whole area a nd improvement of regional economics discourse by theinnovation carrier. Also more general level values like nature conservation, nature educationand increased knowledge on forests were used as arguments for innovation implementation.Regardless, whether the innovation process was carried out by private company aiming formaximizing their benefits, this strategy was used especially in managing local and regionalstakeholder groups in securing the social sustainability of the activities. Even tho ugh this is not assuch very surprising, the cases clearly illustrate the extremely significant role of local stakeholdersas well as community approach strategy in maintaining successful co -operation in forest-basednature tourism innovations.

In co-operation relationships applying community approach -strategy, the compensation forthe stakeholder group for their work, land etc. was not necessary paid. The innovation carrierexpected the stakeholder groups also to contribute for general good and benefit to the wholeregion, even though the direct benefits would be allocated primarily to the innovation carrier. Insome cases the innovation carrier did not seek for profit from their activities, like in Huntlyperegrine watching activities in Scotland. In these cases the role of community approach strategywas even more highlighted. However, the community approach -strategy was not really utilized inmanaging stakeholder groups outside the region.

The communication in community approach strategy could be very vivid or relativelyrandom, but it was typically very informal in nature. Usually the co -operation occurred also inlocal or at most in the regional level and the role of personal relationship between the innovationcarrier and the stakeholder group s was highlighted. In some cases, where the personal relationshipwas non-existing, local mediators were used. The co -operation was both uni-sectoral as well ascross sectoral and typically horizontal co -operation relationships occurred. Also interestingly incases, in which the private forest land was not owned or administrated by the innovation carrier, inorder to gain the access to required forest area, typically the community approach strategy wasused.

In addition to two above mentioned strategies a lso so called ignoring or non existing strategy was found. Concerning some stakeholder groups the innovation carriers did not have anykind of co-operation strategy, even though the stakeholder group was identified as critical to theinnovation success. In some cases the importance of these stakeholder groups was not recognizedproperly by the innovation carrier, but also in some cases these stakeholder groups were seen toomassive, outside of region or difficult to manage by the innovation carrier in orde r to even try tomaintain proper co-operation relationship with them. This was the situation e.g. related to thegeneral public concerning hunting tourism in Finland. The entrepreneur realized the importance ofgeneral public as stakeholders in influencing the business environment, but had not come up withany actual active strategy to apply for this group. In cases same types of stakeholder groups wereco-operated in the local level (usually local people), the community approach -strategy was used.


5. CONCLUSIONS

In all cases there were found both business approach and community approach -strategiesused for managing the co-operation with different stakeholder groups. In general the businessapproach was applied into co-operation with so called business par tners and community approachwas used in managing the local level stakeholder co -operation. This as such is not very surprising,and to be able to define the strategies further there is a need to study both main strategies moreclosely in order to find more detailed, innovative co-operation aspects and tools.

However, the results clearly highlight the important role of informal co -operation and co-operation networks in nature based tourism innovation process (Table 2). Even the cases representdifferent institutional settings and entrepreneurial environment, in all cases the role of informal,local level co-operation was vital for the sustainable innovation activities in the forest based nature -tourism sector. These kinds of relations are important in regard to very different types ofstakeholders, including authorities, neighbors or interest groups. Even if these groups are notformally involved in the business activity, they might put the project at risk, if good relations arenot maintained. The informal c o-operation networks were vital both in cases, in which theinnovation carrier was business focused and in cases in which the innovation carrier did not seekdirect profit from the activities.

In addition to improve the business activities and skills of t he companies and actors, thefocus of public development activities should also be in increasing innovation carriers perquisites toestablish and maintain critical informal co -operation. This brings also out an interesting questionrelated to various innovation support schemes implemented in EU, national and regional levels. Dothey support adequately also this informal co -operation? The co-operation based on businessapproach clearly brings concrete benefits, increased business, for both parties in co -operationrelationship. In the co-operation based on community approach on the other hand, the benefits tothe stakeholder groups are typically not so concrete, at least on short term.

In some cases the stakeholder groups, which typically have been managed b y usingcommunity approach -strategy were in fact managed at least partly by using business approach strategy. By selecting this strategy in the studied cases the social sustainability of innovationcarriers activities was increased significantly. This w as the situation. e.g. in the cases of huntingenterprise in Finland concerning the local hunting club co -operation and forest tourism in VelkyKlz Forests in Slovakia concerning the local forest owners. By recognizing the local stakeholdergroup holding important resource at least partly as a business partner and allocating benefits, evenas a token, to them, the local acceptance for the activities and the status of community approach strategy arguments were improved. The activities were seen in practice to benefit the whole area.

In general, however, even though the forest owners had the vital resource to the innovationactivities, have direct influence mechanism to use in co -operation relationship and the innovation isvery much dependent on the succe ssful co-operation with this stakeholder group, in cases where theforest area was not owned or managed by the innovation carrier the community approach strategy,with no actual compensation was prevailing. The forest owners were not typically seen as bu sinesspartners in the innovation processes, even in some cases there were indications towards thisdirection. In areas where the pressure to use forests for nature tourism and recreation activitiesowned by others than innovation carrier is high, this app roach brings out interesting questionsconcerning the forest owners role as resource provider in the future.


Table 2. The role of business and community approach strategies in co -operation with keystakeholder groups

Case Business approach strategy (formal) Community approach -strategy(informal)

Austria:Almliesl Marketing forestcottages for tourists

MTS Almliesl tourism agencyother local tourism partnerPublic authorities

NeighborsLocal people

Austria: Canopy walkwaySauwald

Firms involved in construction of thecanopy walkway

Members of the society BaumkronenwegPublic administration

Finland: hunting tourism Hunting clubsSelling agenciesOther local SMEs

Hunting clubsLandownersLocal people

Finland: Horse riding tours MetshallitusOther SMEsRegional developers

Private land ownersLocal hunting club

Romania Dorna Adventures, Public administrationOther private SMEs

Volunteers, trainers, guides

Romania: The CalimaniNational Park

National administration of ForestsForest Research and Management InstituteThe Association of Forest OwnersForest Group Josenii Bargaului

Local SMEs

Scotland: Huntly peregrinewild watch /Wildlifeinterpretation centre

Scottish Agricultural College Primary Gartly SchoolNorth East Raptors Study Group

Scotland: Mountain biking Tourism consortium/mountain biking subgroupLocal farmers

Forestry CommissionLocal farmersLocal community council

Slovakia: Forest tourism inVelky Kl forests

Local forest ownersALEA (marketing association)Local joiners

Local forest ownersLocal recreational associationsLocal peopleLocal joinersMunicipality

Slovakia: Vydrovsk valleyjoint nature tourism

State forest enterprise Cierny BalogCHZ (local company operated narrow -gauge railway)Other enterprises

State forest enterprise Cierny BalogLocal municipality

AcknowledgementsThis seminar paper was prepared as part of the European COST Action E51 on the

Integrating Innovation and Development Policies for the Forest Sector. In addition t his work wassupported by the Slovak Research and Development Agency under the contract No. APVV-0692-07.

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