20

EKONOMSKI VJESNIK / ECONVIEWS

GOD. XXXIII • BR. 1/2020. • STR. 1-316 • OSIJEK, LIPANJ, 2020.
VOL. XXXIII • NO. 1/2020 • PP. 1-316 • OSIJEK, JUNE, 2020 1
Review of contemporary business, entrepreneurship and economic issues

P    ./ U / E B

P   D : Dražen Barković, Đula Borozan, Ivan Ferenčak, Jas-
na Horvat, Mirna Leko Šimić, Marcel Meler, Josip
EKONOMSKI VJESNIK
Mesarić, Sunčica Oberman Peterka, Željko Požega,
Časopis Ekonomskog fakulteta u Osijeku
Domagoj Sajter, Nataša Šarlija, Antun Šundalić,
Marijana Zekić Sušac, all from Josip Juraj Stross-
N / P
mayer University of Osijek, Faculty of Economics in
SVEUČILIŠTE JOSIPA JURJA STROSSMAYERA
Osijek, C, Maja Biljan – August, University
U OSIJEKU, EKONOMSKI FAKULTET U
of Rijeka, Faculty of Economics, C, Suzana
OSIJEKU / JOSIP JURAJ STROSSMAYER
Marković, University of Rijeka, Faculty of Tourism
UNIVERSITY OF OSIJEK,
and Hospitality Management, C, Thomas
FACULTY OF ECONOMICS IN OSIJEK
Cleff and Regina Moczadlo, from Pforzheim Uni-
versity, Faculty of Business and Law, G,
G  / E--C
Erzsebet Hetesi, University of Szeged, Faculty of
Boris Crnković, Josip Juraj Strossmayer University
Economics and Business Administration, H-
of Osijek, Faculty of Economics in Osijek, Croatia
, Antal Szabo, E, H, Helena Maria
Baptista Alves, University of Beira Interior, Depart-
Z   /
ment of Management and Economics, P,
D E--C
Marius Gavriletea, Babes – Bolyai University, Facul-
Sanja Pfeifer, Josip Juraj Strossmayer University of
ty of Business, R, Zsuzsanna Katalin Szabo,
Osijek, Faculty of Economics in Osijek, Croatia
“Petru Maior” University, Faculty of Economics, Ju-
ridical and Administrative Sciences, R, Er-
P  /  
ich Schwarz, Alpen - Adria University of Klagenfurt,
Slavica Singer, Josip Juraj Strossmayer University of
Faculty of Management and Economics, A,
Osijek, Faculty of Economics in Osijek, Croatia
Antti Paasio, University of Turku, Turku School of
Economics, F, Irena Ograjenšek, University
I  / E E
of Ljubljana, Faculty of Economics, S, Mi-
Jasminka Mihaljević, Josip Juraj Strossmayer Uni-
roslav Rebernik, University of Maribor, Faculty of
versity of Osijek, Faculty of Economics in Osijek,
Economics and Business, S, Igor Jakomin,
Croatia
University of Ljubljana, Faculty of Maritime Studies
and Transportation, S, Allan Gibb, Dur-
U  / A E
ham University, U K, Jerome Katz,
Dario Šebalj, Josip Juraj Strossmayer University of
Saint Louis University, USA, Jasminka Ninković,
Osijek, Faculty of Economics in Osijek, Croatia
Oxford College, University of Emory, USA, Nirun-
don Tapachai, Faculty of Business Administration,
T / T 
Kasetsart University Bangkok, T.
Oto Wilhelm, Josip Juraj Strossmayer University of
Osijek, Faculty of Economics in Osijek, Croatia

2
L      /
E L E  T
Ljerka Radoš Gverijeri
L    /
C L E
Emina Berbić Kolar
R      :
/ I :
• Emerging Sources Citation Index, Web of Sci-
ence, Clarivate Analytics, New York, USA
• CAB Abstract, Wallingford, United Kingdom
• Econlit, Pittsburg, USA
• EBSCOhost, Ipswich, USA
• ABI/INFORM, ProQuest, London, United
Kingdom
• DOAJ - Directory of Open Access Journals,
United Kingdom
• CEEOL - Central and Eastern European Online
Library, Frankfurt am Main, Germany
• Index Copernicus, Warszawa, Poland
• Hrčak – Portal znanstvenih časopisa Republike
Hrvatske (MZOS, Srce & HIDD)
Č     /
P 
A  /
A    
Sveučilište Josipa Jurja Strossmayera u Osijeku,
Ekonomski fakultet u Osijeku
Trg Ljudevita Gaja 7
31000 Osijek
Croatia
www.efos.unios.hr/ekonomski-vjesnik
www.efos.unios.hr/ekonomski-vjesnik/en/
ekonomski.vjesnik@efos.hr
Copyright© 2020 Sveučilište Josipa Jurja
Strossmayera u Osijeku, Ekonomski fakultet u
Osijeku

N / E
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3
CONTENTS / SADRŽAJ

O   / I  

1. César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete .............................................9
Sustainability, food topics and weblogs: do they really fit? Targeting and valuing
food-related eWOM generators
Održivost, hrana i weblogovi: kako pronaći i iskoristiti autore elektroničke usmene predaje
2. Mahdi Salehi, Mahmoud Lari Dashtbayaz ............................................................................................... 25
The mediating effect of audit quality on the relationship between earnings
and earnings valuation in Iran
Utjecaj kvalitete revizije na odnos između dobiti i vrednovanja dobiti u Iranu
3. Regina Moczadlo ............................................................................................................................................. 39
Re-industrialization to foster growth and employment in the European Union
Reindustrijalizacija za poticanje rasta i zapošljavanja u Europskoj uniji
4. Željko Pavić, Antun Šundalić ........................................................................................................................ 59
Capitalism, meritocracy and legitimacy: Croatian society thirty years after
Kapitalizam, meritokracija i legitimacija: hrvatsko društvo trideset godina poslije
5. Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić ......................................................................... 71
Training methods in municipal enterprises
Metode edukacije u komunalnim poduzećima
6. Joanna Hernik, Antonio Minguez Vera ....................................................................................................... 83
Gender equality in parliaments - where do we stand in Europe? Considerations
from the economic development and society’s masculinity index point of view
Rodna ravnopravnost u parlamentima – kakvo je stanje u Europi? Razmatranja sa stanovišta
gospodarskog razvoja i indeksa maskuliniteta društva
7. Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović ................................................................ 101
Who attends Christmas Markets and why? Analysis of visitor structure
and motivation for attending two Christmas Markets in Croatia
Tko i zašto posjećuje božićne sajmove? Analiza strukture posjetitelja i motiva
posjete dvaju božićnih sajmova u Hrvatskoj

P  / P 

1. Mile Bošnjak, Ivan Novak, Zoran Wittine ................................................................................................ 117
Hysteresis in the trade flows of some EU member countries
Histereza u trgovinskim tokovima nekih zemalja članica EU
2. Zbigniew Bentyn, Ante Luetić, Neven Šerić .............................................................................................. 133
Development of business strategies based on logistics performance of the Republic of Croatia
Razvoj strategije poslovanja poduzeća za tržište Europske unije temeljen na logističkim performansama
Republike Hrvatske

4
3. Lukša Lulić, Vinko Mostarac, Marinko Jurčević ..................................................................................... 151
The digital transformation of Croatian economy compared with EU member states
Digitalna transformacija gospodarstva Republike Hrvatske u odnosu na države
članice Europske unije
4. Michal Patak, Lenka Branska, Zuzana Pecinova ................................................................................... 165
Importance of reverse logistics services as an antecedent for building a green supply chain
Važnost povratnih logističkih usluga kao preduvjeta izgradnje zelenog lanca opskrbe
5. Ana Štambuk, Ivan Uroda, Nikolina Anđelić .......................................................................................... 175
Adjustment and early retirement intentions of the older workers in the Croatian public sector
Prilagodba i namjere prijevremenog umirovljenja starijih radnika u hrvatskom javnom sektoru
6. Roman Domanski, Michalina Labenda .................................................................................................... 191
Omnichannel of private label grocery products in Tesco and Carrefour retail chains
on the Polish market
Omnikanalna prodaja proizvoda s trgovačkom markom u maloprodajnim lancima Tesco
i Carrefour na poljskom tržištu

R  / P 

1. Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović ....................................................................... 205
Universities’ enrollment challenge: The role of corporate image in higher education
Izazov sveučilišnih upisa: uloga korporativnog imidža u visokom obrazovanju
2. Vlatka Bilas.................................................................................................................................................... 217
Smart specialisation concept as a tool for improving innovation
performance of the European Union member countries
Koncept pametne specijalizacije kao alat za unapređenje inovacijske izvedbe
zemalja članica Europske unije
3. Tina Šugar, Kristina Brščić .......................................................................................................................... 227
Consumers’ perceptions of organic food products in Croatia
Percepcija potrošača o ekološkim prehrambenim proizvodima u Hrvatskoj
4. Mira Lulić, Ivana Rešetar Čulo .................................................................................................................. 243
Poverty: A challenge to the protection of human rights of older persons
in the Republic of Croatia
Siromaštvo: izazov za zaštitu ljudskih prava starijih osoba u Republici Hrvatskoj
5. Katarina Marošević ...................................................................................................................................... 255
Lagging regions: The case of Eastern Croatia
Regije koje zaostaju u razvoju: primjer istočne Hrvatske
6. Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković ..................................................................... 271
Recent trends in sustainability reporting: Literature review and implications
for future research
Najnoviji trendovi u izvještavanju o održivosti: pregled literature i implikacije
za buduća istraživanja

5
S  / P 
1. Marijana Ćurak, Dujam Kovač .................................................................................................................. 287
Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike
sekuritizacije
Risk management of non-life insurance and reinsurance companies applying securitization technique

B  / P 

1. Tihana Škrinjarić .......................................................................................................................................... 305
Financial Econometrics, Mathematics and Statistics: Theory, Method and Application
2. Predrag Bejaković.......................................................................................................................................... 309
Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?

6 God. XXXI, BR. 2/2018. str. 7-20

 O  
I  

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete:

Sustainability, food topics and weblogs: do they really fit? Targeting
and valuing food-related eWOM generators

Mahdi Salehi, Mahmoud Lari Dashtbayaz:

The mediating effect of audit quality on the relationship between earnings
and earnings valuation in Iran

Regina Moczadlo:
Re-industrialization to foster growth and employment in the European Union

Željko Pavić, Antun Šundalić:

Capitalism, meritocracy and legitimacy: Croatian society thirty years after

Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić:

Training methods in municipal enterprises

Joanna Hernik, Antonio Minguez Vera:

Gender equality in parliaments - where do we stand in Europe? Considerations
from the economic development and society’s masculinity index point of view

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović:

Who attends Christmas Markets and why? Analysis of visitor structure
and motivation for attending two Christmas Markets in Croatia
 CC BY-NC-SA

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOMOvagenerators
licenca dopušta d
nekomercijalne svrhe
César Sahelices-Pinto José Luis Vázquez-Burguete Original scientific articlesvoja djela
licenciraju
University of León University of León
Faculty of Economics Faculty of Economics Received: February 19, 2019
and Business Studies and Business Studies Accepted for publishing: September 27, 2019
Campus de Vegazana, s/n, Campus de Vegazana, s/n, Pogledajte sažetak lic
24071 León, Spain 24071 León, Spain
cesar.sahelices@unileon.es jose-luis.vazquez@unileon.es This work is licensed under a
Phone: +34987291000 Phone: +34987291751 Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Ana Lanero-Carrizo Imenovanje-Nekome
University of León CC BY-NC-ND
Faculty of Economics
and Business Studies
Campus de Vegazana, s/n,
24071 León, Spain
Ovo je najrestriktivnija
ana.lanero@unileon.es
Phone: +34987293296

5 od 6

SUSTAINABILITY, FOOD TOPICS

AND WEBLOGS: DO THEY REALLY
FIT? TARGETING AND VALUING
FOOD-RELATED EWOM GENERATORS
A
Without any doubt, the advent of the Internet has substantially transformed the way and rhythm of our
lives. This circumstance reflects directly on our daily behaviours, which are today quite different from what
they used to be only a few years ago. In this sense, the current patterns of search for information and con-
sumption are frequently paced by the eWOM communication. In addition, environmental concerns have
driven consumers to increasingly demand the so-called environmentally friendly products. Considering
both issues together, literature reveals that the study of the interaction between eWOM and sustainable
consumption is still scarce and needs more attention. For this reason, the present research is devoted to
the identification and evaluation of a sustainable food-related eWOM. In this regard, an online survey of
authors of food-related weblogs/videoblogs was conducted containing different questions about their food
consumption styles. Even though the existence of a distinct group of green authors was confirmed, the fol-
lowing examination of centrality levels showed that the influence exerted by this group on the Web 2.0 is
exactly the same as that of the other groups. Jointly, these findings provide information of great importance
that has implications for businesses and professionals in marketing.
Keywords: Sustainable eWOM, food topics, weblogs/video-blogs, cluster analysis, centrality analysis

1. Introduction patterns, which are today quite different from what

The advent of the Internet has substantially trans-
formed the way of life by supplying us with a wide
range of possibilities which are simply unimagina-
ble through traditional offline channels. This cir-
cumstance reflects directly on our consumption
they used to be only a few years ago.
In this regard, the purchasing behaviour represents
a fair example as the online channel is becoming,
for lots of consumers, the most common way of
acquiring many product categories. According to

God. XXXIII, BR. 1/2020. str. 9-24 9

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators
data retrieved from Statista (2018a1; 2018b2), in
2017, 60.2% of global Internet users purchased
products online, a figure which is expected to
grow to 63.0% in 2019. These percentages amount,
in terms of sales, to 2.30 trillion U.S. dollars in
2017 and a projection of 2.84 trillion U.S. dollars
in 2018 and 3.45 trillion in 2019, which confirms
the growing trend.
Moreover, the Internet has also altered the tradi-
tional manner of interaction between individu-
als (King et al., 2014). According to a recent study
(GWI, 20193), a typical Internet user spent around
2:23 hours per day on online social networking in
2018, while it was 1:36 hours back in 2012 (GWI,
20164). Indeed, users worldwide have rapidly in-
tegrated online social networking into their daily
communication routines, their decision-making
processes (Zhu, Zhang, 2010) and, thus, their habits
when searching for information (Litvin et al., 2008).
In this sense, the reviews that consumers post on
the Internet are known to play a noticeable role in
effecting and shaping consumer attitudes and be-
havioural intentions (Park, Lee, 2009), constituting
one of the most effective methods of communica-
tion (also termed as electronic word-of-mouth
communication, eWOM hereafter).
Besides that, but definitely not less important,
today’s world has also caused consumers to be-
come increasingly concerned about the environ-
ment. Such concerns have begun to be displayed
in their decisions and consumption patterns, with
individuals increasingly interested in buying envi-
ronmentally friendly products, a tendency which
has motivated the emergence of a “new market-
ing philosophy”, known as the “green marketing”
(Belz, Peattie, 2009; Kumar, 2016), whose aim is to
achieve a balance between the objectives of sales
and profits of companies and a concern for society
and the environment (Kärnä et al., 2002; Papadas
et al., 2017).
In this sense, companies, seeking to remain com-
petitive in the market and to meet consumer de-
mands, have begun to incorporate these newly
emerging concerns in their management and mar-
keting decisions by paying special attention to mar-
ket segmentation and market orientation (do Paço
et al., 2008; Lu et al., 2013; González et al., 2015).
Considering both issues together, it has been ob-
served that research on eWOM and sustainable
consumption is in its initial phases and needs more
10
attention in order to attract the power of eWOM
communications since, according to some authors,
focusing on dissemination of efficient eWOM re-
sults in influence and impact on consumer behav-
iour (Fan, Miao, 2012; Reichelt et al., 2014). Like-
wise, as Chang and Chang (2017) point out, few
studies have evaluated the interaction between
eWOM and sustainable consumption of food prod-
ucts. Thus, the present study aims at determining
the tone in the content of the food-related eWOM,
and, if sustainable food-related eWOM is identified,
shaping its relevance on the Internet.
The paper is structured as follows. The next two
sections review the essential literature related to
eWOM, food aspects, and sustainability. After this
contextualisation, the main methodological aspects
related to the investigation are presented in the
fourth section. Subsequently, the results are pre-
sented in the fifth section. Finally, the last section
sets out some valuable conclusions.
2. eWOM on the Web 2.0
Online weblogs/videoblogs, microblogs, discussion
forums, opinion websites, social network platforms
themselves, collaborative projects, virtual worlds,…
are all social websites (Aichner, Jacob, 2015) that
consumers frequently visit to read reviews from
other consumers (in such a case, they are opinion
seekers) and/or to generate reviews for other con-
sumers –opinion givers (Gruen et al., 2006; López,
Sicilia, 2013; Luo et al., 2013; Serra, Salvi, 2014).
These are tools that conform to the term Web 2.0,
that is, the participative and interactive web that
emerged in about 2000 and created by and for us-
ers from collective intelligence (Boyd, Ellison, 2008;
O’Reilly, 20055).
For example, in the Spanish market (AIMC, 20186),
it is worth stressing that 77.0% of online custom-
ers stated they read comments and reviews com-
ing from other customers before making a final
decision, with 50.9% of them trusting largely those
reviews. In addition, 58.8% of Spanish Internet us-
ers stated to have posted any kind of review about a
product or service during 2017 (AIMC, 2018).
Marketing researchers have termed this phenom-
enon with the broad appellation of online Word-of-
Mouth communication, Word-of-Mouse commu-
nication, or electronic Word-of-Mouth (eWOM).
Continuing the line adopted by Hennig-Thurau et
al. (2004: 39), eWOM can be defined as “any posi-
God. XXXIII, BR. 1/2020. str. 9-24

tive or negative statement made by potential, actu-
al, or former customers about a product or company,
which is made available to a multitude of people
and institutions via the Internet”.
The significance of eWOM communication re-
search lies in its considerable commercial impact
due to its capacity to influence and to determine
attitudes and behaviour of consumers toward a
product, service, brand or organization (Brown,
Reingen, 1987; Christiansen, Tax, 2000; Nadeem et
al., 2011; Van Noort, Willemsen, 2012), even more
so than the traditional mass media such as radio,
press, and television.
This influence on consumer attitudes and behav-
iour does not reflect uniquely, then, on the purchase
decision, but rather on four different stages of the
decision-making process (Smith et al., 2005; Lee et
al., 2008; Chan, Ngai, 2011; Pan, Zhang, 2011; Jalil-
vand, Samiei, 2012). eWOM has an impact, firstly,
on a cognitive level, facilitating and raising aware-
ness about a product/brand/company hitherto un-
known; secondly, on an affective or emotional level,
where a feeling, sense, or meaning is attached to it;
thirdly, on a conative and behavioural level, motivat-
ing response, either acceptance/purchase, inaction
or rejection; and finally, on a post-behavioural or
feedback level, stimulating an outcome about experi-
ences as a result of consumption/non-consumption.
Apart from that, it should be noted that issues such
as credibility, accuracy, or quality of eWOM com-
munication are, undoubtedly, of high interest in the
great majority of publications (Smith et al., 2005;
Park et al., 2007; Cheung et al., 2008; Park, Lee,
2009; Steffes, Burgee, 2009; Gupta, Harris, 2010; El-
liot et al., 2013; Kim, Park, 2013; Moran, Muzellec,
2017).
Moreover, eWOM transcends local boundaries and
the small, intimate, and private groups in which
traditional WOM usually occurs (from one person
to another); consumers are connected with other
consumers beyond their personal circle (compris-
ing relatives, friends, acquaintances, etc.) and out-
side their geographical and sociocultural borders.
Supported by the worldwide scope of the Internet,
opinions and experiences are transmitted globally
through eWOM from a single person to the entire
world (Dellarocas, 2003; Cheung, Thadani, 2012;
Mauri, Minazzi, 2013; Serra, Salvi, 2014).
Furthermore, eWOM is usually produced in an
asynchronous way, passing from informants to re-
God. XXXIII, BR. 1/2020. str. 9-24
Original scientific article
cipients of information who are separated in terms
of time and space (Hung, Li, 2007; Steffes, Burgee,
2009). This also implies that the information up-
loaded onto the Internet remains available world-
wide, anywhere, and at any time, causing informa-
tion to flow exponentially (Hussain et al., 2017).
3. Food products and sustainability
Debating on sustainability and food consumption,
it is worth mentioning that there is an old rela-
tion between food and sustainability dating back
to the 1980s (Rana et al., 2008). In this context, the
food sector has long been facing a number of chal-
lenges in terms of sustainability (Hartmann, 2011).
Primarily, the food sector is directly influenced
by environmental, human and physical resources.
Moreover, the food sector is diverse and complex
and this reality provides different perspectives of
approaching CSR, which further implies conflict-
ing perspectives in this respect. Costanigro et al.
(2016) gathered a series of nine activities geared
to that accomplishment of sustainability, initially
developed for the dairy industry but adaptable to
different food sectors. These activities were the
pursuit of animal welfare, control of energy con-
sumption, control of water consumption, control
of air pollution, community involvement, promot-
ing employee opportunities, stimulation of local
operations, waste management, and commitment
to sustainable agricultural practices. Moreover, to
these actions one could add the communication of
sustainable information as a sustainable activity it-
self, understood as an exercise in transparency and
reliability (Pérez et al., 2019).
In line with the previous statements, the influ-
ence of sustainability over the consumer decision-
making process in the food sector is more relevant
and appropriate in a context when domestic food
chains are challenged by tightening price competi-
tion which furthermore forces food enterprises to
permanently look for sustainable sources or com-
petitive advantage (Forsman-Hugg et al., 20077;
Heikkurinen et al., 2011).
In this context, many experts have analysed the
main obstacles that may prevent consumers from
choosing sustainable products. For instance,
Grunert (2011) identified six barriers related to
awareness, perceptions or credibility. One of those
obstacles may consist in the idea that exposure does
not lead to perception, which means that custom-
11
César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators
ers may notice the existence of a certain sustain-
able brand but without purchasing it. Moreover,
perception leads only to peripheral processing if we
take into account that customers, although notic-
ing a new brand, do not make the necessary effort
to understand it. However, if we presume that cus-
tomers succeed to see the label, they might still not
understand its meaning or message due to wrong
reasoning. Furthermore, we should not forget that
eco-information is traded off against other criteria.
Thus, potential consumers might be afraid that the
price is higher and maybe the taste is not so good.
For example, when asked about the main barriers
to purchase and use of sustainable products, per-
ceived high price is among the top answers (Röös,
Tjärnemo, 2011). The fifth possible obstacle that
a potential consumer might face in his behaviour
is the lack of awareness or credibility: custom-
ers sometimes hesitate while choosing sustainable
products because they find it difficult to carry such
choices out in practice. That is because consumers
can say that they seek for green food but without
necessarily buying it (Ward, 20128). Ultimately, any
kind of association between products and motiva-
tions can be perceived as a way of enduring per-
sonal values (de Boer et al., 2006). Finally, the last
obstacle or barrier, according to this classification,
consists in the lack of motivation at time of choice.
This barrier is characterized by consumers disre-
garding their positive attitudes related to sustain-
ability while making food choices (Grunert, 2011;
Grunert et al., 2014).
Aside from those above mentioned sustainability
barriers usually faced by the food sector, there are
four relevant rules that could also be considered as
impediments to sustainable consumption (Dzene,
Yorulmaz, 2011). The first of those assertions sup-
ports the idea that the lack of an unsatisfied sus-
tainable need excludes from the start the possibility
to purchase new products created on sustainable
principles. The second statement pleads for the
idea that a negative attitude towards sustainability
will not lead to a sustainable consumer behaviour.
Continuing the list of thoughts that can represent
sustainability barriers, the third one states that the
lack of clear information about sustainable food
products might have a negative impact on the deci-
sion making process. Finally, according to the last
statement, there is a straight relation between the
availability of sustainable products and consumer’s
12
ability to purchase because the first one clearly de-
termines the second one.
As evidenced in this latter, as both the array of
food-related sustainability practices and barriers
are wide and dispersed, the research on sustainable
consumer behaviour has also been inevitably re-
flected in wide-ranging studies about customer loy-
alty, brand image, reputation and credibility (Pivato
et al., 2008; Obermiller et al., 2009; Cha et al., 2016;
Pino et al., 2016), product awareness and product
evaluation (Lotz et al., 2013; Lee et al., 2014; Cos-
tanigro et al., 2016), or purchase intention and will-
ingness to pay (WTP) (Mohr, Webb, 2005; Yoon,
George, 2012; Chen et al., 2016; Pino et al., 2016).
In consideration of the above review, the grow-
ing impact of eWOM on consumers’ behaviour
has been illustrated, as well as the importance and
complexity of implementing diverse sustainability
criteria in food products. In this line, if both ap-
proaches were bound, there would be a great op-
portunity that companies could exploit by focusing
their communication efforts on those individuals
who perform eWOM. Anyway, literature reveals
that little is known whether green or sustain-
able food-related eWOM actually exists, and if so,
what its relevance is in terms of capacity of influ-
ence. These are the main reasons why an eWOM
segmentation is strongly needed. Thus, the present
study presents an approach diving into Web 2.0 and
eWOM with reference to food issues, considered
these within their wider spectrum: gastronomy,
restaurants, cooking, products, etc. For that pur-
pose, two main objectives are established:
1) Firstly, to perform a segmentation of au-
thors of food-related eWOM based on their
food-related lifestyle and determine wheth-
er there is, among them, a distinct group
displaying consistent sustainability features,
2) and secondly, if this condition is fulfilled,
to verify whether the capacity of this par-
ticular group to influence the behaviour of
opinion seekers is higher compared to the
other groups.
4. Methodology
In order to address the purpose previously point-
ed, a survey was conducted with a total sample of
150 authors of food-related weblogs/videoblogs in
Spanish. Initial respondents were randomly select-
God. XXXIII, BR. 1/2020. str. 9-24
 Original scientific article

ed from general online population of weblogs and The questionnaire was auto-administered online
videoblogs through searches performed on “Goog- by respondents themselves but under control of
le” search engine (www.google.es) during March SphinxOnline 3.1.2., software specialized in digital
2013, and authors were contacted via e-mail (usual surveys. Based on these criteria, the total sample
keywords were recipes blog/vlog9, kitchen tools comprised 139 females (92.7%) and 11 males (7.3%),
blog/vlog, gastronomy blog/vlog, nutrition blog/ aged 20 to 59 years old. By age group, 18.0% were 20
vlog, restaurants blog/vlog,…). This initial group of to 29 years old, 48.7% were 30 to 39, 26.0% were 40
participants constituted a directory of 2,951 con- to 49, and 7.3% were 50 to 59 years old. These data
tacted authors, from which 428 responses were re- highlight that the population of authors of food-
ceived. Later, 278 of them had to be discarded since related weblogs/videoblogs is mainly comprised of
no relational structure was established, that is, they women aged between 30 and 49. For more detailed
were isolated individuals in the population of food- information about methodological aspects, see Ta-
related weblogs/videoblogs. ble 1.
Table 1 Technical data
Population Authors of personal food-related weblogs/video-blogs
Sample size 150 individuals
Surveying technique CAWI (computer aided web interview)
Sampling method Simple random sampling
Sampling error (e) ±8.16%
Level of significance (α) 95.5% (p = q = .50)
Date March 2013
Source: Authors.

All respondents answered voluntarily to a question-
naire composed of three main sections. The first
section gathered information about the most basic
demographic variables, such as gender and age.
In the second section, in order to determine and clas-
sify the food-related lifestyle depicted by respondents,
and hence, also in the content they generate and share
through their weblogs, the Food-related Lifestyle in-
strument - FRL was included (Brunsø et al., 2004;
Wycherley et al., 2008). The FRL model has been
widely and successfully applied to various European
and non-European food cultures since its creation
and its validity and reliability are beyond any doubt.
This instrument attempts to explain behaviour toward
food purchase through examining the food-related
lifestyle of individuals by looking at the importance of
five interrelated aspects: ways of shopping, quality as-
pects for evaluating food products, meal preparation
methods, consumption situations, and purchase mo-
tivations. For our survey, the FRL adaptation consist-
ed of 28 statements and the response modality took
the form of a Yes/No type question.
Finally, the third section was devoted to the meas-
urement of centrality. Centrality is a sociometric
measure, meaning that it requires the calculation
of network data, in this instance relationships be-
tween individuals. Centrality (Wasserman, Faust,
2009) refers to the “strategic position of an actor
within a network” (p. 169), which makes him or her
“particularly visible to the other network actors” (p.
171). To this end, the most common procedure is to
ask each respondent about the people they turn to
or would turn to for information, affection, advice,
help or financing, etc., as the case may be (Requena-
Santos, 1996; Rogers, 2003). The standard practice
in this is to state a specific number of contacts to
be cited by each participant. Thus, with the aim of
establishing links between participants, and conse-
quently a database with a grid structure, the indi-
viduals contacted were asked to answer the ques-
tion: “Please name up to five weblogs/video-blogs
to which you most frequently turn or would turn to
obtain information and/or to ask for advice about
food-related topics, such as recipes, nutrition, res-
taurants, kitchen tools, etc.”
Once data were processed, two main techniques of
analysis were performed to respond to the listed ob-
jectives: firstly, by using the software SPSS version
24.0.0.1, a k-means Cluster Analysis was conducted
in order to segment respondents, and secondly,

God. XXXIII, BR. 1/2020. str. 9-24 13

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators
with the intent of facilitating the visualization of
central individuals, a sociogram was generated us-
ing the software Netdraw 2.159 (Borgatti, 2002).
The specific centrality measure selected for the
study was the in-degree centrality (Freeman, 1979).
In its simplest form, in-degree centrality helps to
locate those actors involved to a greater extent in
relationships with other actors. In-degree centrality
provides an easy means to examine the relevance
of network actors, designating as central the ac-
tor with multiple ties. Specifically, an actor is cen-
tral according to in-degree centrality if he or she
exhibits more direct links with adjacent actors in
comparison with other network actors by adding
together the number of received mentions.
In the next section, the main results are presented
under two sections: first of all, the analysis of dif-
ferent food-related lifestyle segments/contents, and
after that, the study of the relation between levels of
centrality and clusters.
5. Results
5.1 Clustering of weblog/videoblog authors
With the aim of accomplishing a meaningful seg-
mentation of authors of food-related eWOM, a
k-means Cluster Analysis was conducted in order
to divide weblog and videoblog authors who were
selected. After several preliminary trials, this sta-
tistical procedure distinguished three groups of
individuals which come together through similari-
ties in various FRL aspects. At the same time, some
variables of the FRL instrument were not statisti-
cally significant (see Appendix I), which means that
these variables are not strong enough to establish
differences between respondents, being aspects
equally shared by all of them.
Taking into account these variables (Appendix I), it
can be stated that authors of food-related weblogs
are, generally speaking, highly impressionable by ad-
vertising and comments of other people about food
topics. Furthermore, they all like everything relating
to the act of cooking itself (they love cooking, try-
ing new products and recipes, and avoid purchasing
ready-to-eat foods). Moreover, our respondents tend
to have and enjoy meals at home with a strong social
component. The authors of food-related weblogs at-
tach, thus, great value to food.
Aside from this, there are particularities that justify
a further distinction among them. On this point,
14
as it was mentioned above, three differentiated
groups were highlighted (Table 2). After interpret-
ing and comparing characteristics and patterns of
each cluster, jointly with scorings obtained from the
cluster analysis (Table 3), different segments were
labelled conservative savers, gourmets, and greens.
Table 2 Clusters’ size
Clusters Cases Percentage
Conservative savers 56 37.33%
Gourmets 42 28.00%
Greens 52 34.67%
Total sample 150 100%
Source: Authors.
Conservative savers, 37.33% of the sample (Table 2),
are very price conscious and hence also the most in-
terested in the price/quality relation. Conservative
savers pay attention to shopping lists and planning
for menus. Moreover, for this segment cooking
does not have to be time-consuming and complex
nor involve the whole family. They value social re-
lationship aspects of having lunch/dinner the most,
and they adhere to mealtimes (Table 3).
Gourmets represent 28.00% of the sample (Table
2). People in this group enjoy shopping for food
the most and use specialty shops more than oth-
ers. On the other hand, this group is not as much
concerned about prices. Gourmets, sybarite and he-
donistic food consumers, consider taste as the most
relevant indicator of quality. They also differ from
other segments in their foresight, since they tend
to be more impulsive and spontaneous when go-
ing shopping and planning menus. Eating between
meals is not particularly common and social inter-
action at mealtimes is also important for this group
(Table 3).
Finally, greens, 34.67% of respondents (Table 2), are
characterized by a strong interest in product infor-
mation and quality aspects such as healthfulness,
freshness, and organically grown food. In contrast,
they attach the least value to taste of all segments.
Eating between meals is not particularly common
for this group. Moreover, greens are more price
conscious and farsighted than gourmets but less so
compared to conservative savers. Greens also tend
to involve the whole family in cooking tasks while
the social side of eating is perhaps not as important
for them as it is for the other segments (Table 3).
God. XXXIII, BR. 1/2020. str. 9-24
 Original scientific article

Table 3 Significant FLR statements’ scoring in clusters

Statement Scoring*
Conservative savers
I always check prices. .8 High
I like buying food products in specialty food shops. .1 Low
Before I go shopping for food, I make a list of everything I need. .7 High
I always try to get the best quality for the best price. .9 High
I prefer fresh products to canned or frozen products. .4 Low
I try to involve the whole family in meal chores. .2 Low
I always plan what we are going to eat a couple of days in advance. .5 High
I attempt to adhere to mealtimes. .9 High
The most important thing when having dinner with friends is that we are together. .8 High
Gourmets
I just love shopping for food. .9 High
I like buying food products in specialty food shops. .6 High
I always check prices. .1 Low
I always try to get the best quality for the best price. .4 Low
I find the taste of food products important. .9 High
I always plan what we are going to eat a couple of days in advance. .3 Low
I attempt to adhere to mealtimes. .7 High
The most important thing when having dinner with friends is that we are together. .7 High
Greens
I read information labels and compare products. .8 High
Before I go shopping for food, I make a list of everything I need. .7 High
I prefer to buy organic products, i.e. products without preservatives. .9 High
I always buy organically grown food products. .8 High
I find the taste of food products important. .1 Low
I try to involve the whole family in meal chores. .5 High
Going to restaurants is a regular part of my eating habits. .3 Low
I attempt to adhere to mealtimes. .9 High
* Significance level of 95%
Source: Authors

At this point, once the data derived from cluster
analysis has been interpreted, it can be reliably con-
firmed that the respondents in the sample retrieved
from the Internet have three differentiated and con-
sistent food-related lifestyles (conservative savers,
gourmets, and greens), which will guide the eWOM
communication through their personal weblogs.
5.2 Group comparison by centrality
Figure 1 shows the sociogram resulting from the
relational data previously gathered and reproduces
the links between participants. Isolated nodes have
been deleted, and the identity of nodes is not shown
to respect their anonymity. As can be seen, there
are considerable differences between the relational
structures of actors at an individual level.
Actors with a high in-degree centrality, such as par-
ticipants 1, 65, 68, 83, 129, 134, and 135 in Figure
2, are considered prestigious and relevant actors,
since the others try to establish links with them –
hence their importance.
This exploratory analysis was followed by the iden-
tification of the cluster to which those central actors

God. XXXIII, BR. 1/2020. str. 9-24 15

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators

belonged, that is, conservative savers, gourmets, or In this sense, a certain balance was found between
greens, in order to check the possibility of exist- cluster memberships among the different central
ence of different levels of influence depending on individuals (Table 4). Presumably, this indicates that
the group of membership, which would imply that greens, just as much as conservative savers and gour-
all these three groups are not equally prominent or mets, show the same power of influence when boost-
relevant on the food-related Web 2.0. ing the flow of information on the Internet about
food-related issues by means of their weblog content.
Figure 1 Relational structure between participants
Figure 1 Relational structure between participants
Figure 1 Relational structure between participants

Source: Sahelices-Pinto, Rodríguez-Santos (2013)

Source: Sahelices-Pinto, Rodríguez-Santos (2013).
Source:Figure 2 Participants
Sahelices-Pinto, with highest
Rodríguez-Santos (2013)levels of in-degree centrality
Figure 2 Participants with highest levels of in-degree centrality
Figure 2 Participants with highest levels of in-degree centrality

Source: Sahelices-Pinto, Rodríguez-Santos (2013)

Source: Sahelices-Pinto, Rodríguez-Santos (2013)

Source: Sahelices-Pinto, Rodríguez-Santos (2013).

16 God. XXXIII, BR. 1/2020. str. 9-24


Table 4 Group membership of central actors
Node Cluster
1 Conservative savers
65 Gourmets
68 Conservative savers
83 Greens
129 Conservative savers
134 Gourmets
135 Greens
Source: Authors
6. Discussion
The results of this study represent information of
great importance that could be reflected in impli-
cations for businesses and professionals in market-
ing, to be considered at the time of making strate-
gic and/or managerial decisions. In this regard, it
should be noted that, to date, while sustainable food
consumption is a noticeable topic in mass media
channels such as newspapers and TV, there are still
few existing studies focusing on the intersection be-
tween this topic and eWOM. For all that, originality
and convenience of this paper denote a value which
is far from negligible.
Apart from that, it is worth of mention that the
methodological approach used in the present paper,
even though it is not a widespread technique in the
professional practice, exemplifies a suitable means
to examine eWOM generators’ food consumption
style in a rather simple and efficient way, especially
as regards the aspects related to the social network
analysis and centrality measurement. By identifying
these central network members, advertising practi-
tioners can encourage positive eWOM and prevent
spreading of negative consumer reviews. In addi-
tion, social network sites allow marketing profes-
sionals to have access to a large number of consum-
ers with worldwide scope at low cost.
In reference to food-related eWOM, whose authors
have been analysed above, there is reason to believe
that those aspects which are in tune with preferences
and opinions of these opinion leaders will most likely
be supported and penalized, in contrast to those
which are not. Anyway, eWOM must be viewed and
treated as opportunity rather than a threat, since it
allows a more efficient communication, capable of
reaching a greater number of consumers and higher
levels of trust and customer loyalty, in the same line
as pointed out by Farzin and Fattahi (2018).
God. XXXIII, BR. 1/2020. str. 9-24
Original scientific article
In particular, related to the two explicit objectives
to which the present study is devoted, its findings
indicate that approximately a third of authors of
food-related weblogs are guided by green princi-
ples when making their decisions about food con-
sumption, and, presumably, also share eWOM in
the same sustainable tone when communicating
through their weblogs/videoblogs.
Nevertheless, considering clustering solutions to-
gether with the in-degree centrality measures, it
is proven that green consumers do not take more
prominent places than conservative savers or gour-
mets in online social networks, and therefore, they
exert the same influence as the other groups.
This circumstance, alluding to the core aim of this
research, does not indicate that conservative sav-
ers or gourmets are less committed to sustainable
production or not prone to sustainable behaviour.
It should not be forgotten that behavioural patterns
are not univocally consistent with attitudes; in oth-
er words, positive attitudes towards organic food
might not necessarily be translated into actual pur-
chases of green products. Therefore, conservative
savers and gourmets are not willing to give up cer-
tain product attributes such as convenience, avail-
ability, price, quality, or taste to purchase a product
only for its environmentally friendly attributes. This
discrepancy is widely known as the ‘attitude-behav-
iour gap’ (Chatzidakis et al., 2006; Chekima et al.,
2017; Wiederhold, Martinez, 2018).
In this vein, as organic food consumption is highly
susceptible to eWOM effects (Chang, Chang 2017;
Allen, Spialek, 2018), it is of critical importance
to increase the audience’s exposure to credible in-
formation about the environment and sustainable
consumption through maintaining higher levels
of self-disclosure and social presence of compa-
nies on social networks (Kaplan, Haenlein, 2010).
The ultimate intention would be to assure the in-
ternalisation of this green knowledge advocated by
marketers, and eventually to stimulate consumers
to purchase green.
Finally, despite the contribution of this study, the
scope of the findings is limited by several aspects.
The first aspect to consider is the issue of longevity
of results in these kinds of study. Social networks,
in this case personal weblogs, are comprised of
transient and changeable populations that grow
and decrease constantly as individuals emerge and
vanish from them. As a consequence, relationships
17
César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators
between actors can reflect different information
in the short term. In addition, the limited sample
size renders it difficult to generalize the final results
across such a huge population. These issues point
to the need to increase the sample size to achieve
a higher scientific strength. Working with a larger
group would produce more representative and sta-
ble results in terms of population and time. Moreo-
18
ver, it should be noted that the research context is
only focused on one particular geographic region
(Spain). This limitation, however, represents a new
opportunity for an enhanced future research, since
this approach, if replicated and expanded (i.e. to in-
ternational contexts), would result in new studies
with greater validity, generalizability and compara-
bility of results.
God. XXXIII, BR. 1/2020. str. 9-24
 Original scientific article

R

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 Original scientific article

Appendix I

- Information from advertising helps me to make buying decisions

- I just love cooking
- I like to try out new recipes
- We use a lot of ready-to-eat foods in our household
- I consider the kitchen to be the woman’s domain
- I used to nibble between meals
- We often get together with friends/relatives to have dinner in a restaurant
- I like to be praised for my cooking skills
- Eating is to me a very exciting sensation
- I only buy and eat foods which are familiar to me

E

1 Statista (2018a), “Digital buyer penetration worldwide from 2016 to 2021”, available at: https://bit.ly/2ruCMpV (Accessed on: May
25, 2018)
2 Statista (2018b), “Retail e-commerce sales worldwide from 2014 to 2021”, available at: https://bit.ly/2QNosqN (Accessed on: May
25, 2018)
3 GWI (2019), “GWI social, Flagship Report 2019”, available at: https://bit.ly/2LIkr4N (Accessed on: July 26, 2019)
4 GWI (2016), “GWI social, summary -Q3 2015-”, available at: https://bit.ly/1O7KZF0 (Accessed on: May 25, 2018)
5 O’Reilly, T. (2005), “What is Web 2.0? Design patterns and business models for the next generation of software”, available at: https://
oreil.ly/2jOvae7 (Accessed on: November 25, 2018)
6 AIMC (2018), “Navegantes en la Red – Encuesta AIMC a usuarios de Internet”, available at: https://bit.ly/2Epaqpt (Accessed on:
December 11, 2018)
7 Forsman-Hugg, S., Katajajuuri, J. M., Mäkelä, J., Paananen, J., Pesonen, I., Timonen, P. (2007), “Enhancing corporate social respon-
sibility in the food chain with a stakeholder dialogue”, Proceedings of the Nordic Consumer Policy Research Conference, available at:
https://bit.ly/2m09PCC (Accessed on: July 26, 2019)
8 Ward, J. I. (2012), “Can companies market greener food choices to consumers?”, available at: https://bit.ly/2SDDOLK (Accessed on:
December 10, 2018)
9 In colloquial language, blog and vlog are synonyms with weblog and videoblog, respectively.

God. XXXIII, BR. 1/2020. str. 9-24 23

César Sahelices-Pinto, Ana Lanero-Carrizo, José Luis Vázquez-Burguete: Sustainability, food topics and weblogs: do they really fit?
Targeting and valuing food-related eWOM generators

César Sahelices-Pinto
Ana Lanero-Carrizo
José Luis Vázquez-Burguete

O,   :   

    
S
Razvoj interneta nesumnjivo je promijenio način i ritam života, što se odražava na naše svakodnevno po-
našanje koje se na više načina razlikuje od onoga prije samo nekoliko godina. U tom smislu, na današnje
načine traženja informacija i potrošnje često utječe elektronička komunikacija, odnosno usmena predaja
na društvenim mrežama (eWOM). Nadalje, zabrinutost za okoliš potiče potrošače na povećanu potražnju
za ekološki prihvatljivijim proizvodima. U literaturi zasad nema dovoljno istraživanja interakcije tih dvaju
područja, održive potrošnje i usmene predaje elektroničkim putem. U ovom će se radu provesti istraživanje
i evaluacija elektroničke komunikacije i usmene predaje povezane s održivošću u prehrani. U tu je svrhu
provedena internetska anketa autora weblogova i video-blogova u kojoj su odgovarali na pitanja o svojem
pristupu hrani i potrošnji hrane. Iako je potvrđeno da postoji definirana skupina „zelenih“ autora, izračun
centralnosti pokazuje da je utjecaj te skupine na Web 2.0 jednak utjecaju ostalih skupina. Ti rezultati daju
informacije koje mogu biti korisne ekonomskim subjektima i osobama koje rade u marketingu.
Ključne riječi: održivi eWOM, elektronička preporuka, hrana, weblogovi/video-blogovi, klasterska anali-
za, analiza centralnosti

24 God. XXXIII, BR. 1/2020. str. 9-24

 CC BY-NC-SA

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
Mahdi Salehi
Ferdowsi University of Mashhad
Economics and Administrative
Sciences
Azadi Square,
9177948974 Mashhad, Iran
mehdi.salehi@um.ac.ir
Phone: +989121425323
Mahmoud Lari Dashtbayaz
Ferdowsi University of Mashhad
Economics and Administrative
Sciences
Azadi Square,
9177948974 Mashhad, Iran
m.lari@um.ac.ir
Ova licenca
valuation in Iran dopušta d
nekomercijalne svrhe
Original scientific articlesvoja djela
licenciraju
Received: July 16, 2019
Accepted for publishing: October 28, 2019
Pogledajte sažetak lic
This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Imenovanje-Nekome
CC BY-NC-ND

THE MEDIATING EFFECT OF AUDIT

Ovo je najrestriktivnija

QUALITY ON THE RELATIONSHIP 5 od 6

BETWEEN EARNINGS AND

EARNINGS VALUATION IN IRAN
A
The main objective of the current study is to evaluate the relationship between earnings, its components
and earnings valuation and, at the same time, to assess the impact of audit quality on these variables of
companies listed on the Tehran Stock Exchange.
The data used in this study were collected for a sample of 141 listed companies on the Tehran Stock Ex-
change from 2010 to 2016. Research hypotheses were analyzed using panel data by means of the panel
method.
Research findings indicated no relationship between earnings, its components and earnings valuation. By
analyzing the effect of audit quality variables, we have also observed that audit firm size has a positive and
significant effect on the relationship between earnings, its components and earnings valuation. Moreover,
the obtained results substantiated the positive and significant effect of auditor tenure on the relationship
between earnings, total discretionary accruals, operational cash flow, non-discretionary accruals, and earn-
ings valuation. In addition, findings revealed that auditor industry specialization has a negative and signifi-
cant effect on the relationship between earnings, its components and earnings valuation.
The study aims to investigate the mediating effect of audit quality on the relationship between earnings and
earnings valuation in Iran, so the outcomes of the current study may be helpful to the developing nations.
Keywords: Audit quality, earnings valuation, earnings elements

1. Introduction
Accounting profit comprises cash flow and accru-
als. The accruals could be divided into discretionary
and non-discretionary accruals. The related litera-
ture on earnings management considers discretion-
ary accruals as opportunistic (Moradi et al., 2015),
a feature that undermines the informativeness of
earnings. However, managers use discretionary ac-
cruals for transferring confidential and inaccessible
information to the users of financial information,
which would allow them to evaluate the future eco-
nomic value of a company more precisely (Habib et
al., 2014). Subramanyam (1996) indicated a positive
correlation between market return and discretion-

God. XXXIII, BR. 1/2020. str. 25-38 25

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran
ary accruals. His findings showed that discretionary
accruals provide useful information in the market.
However, such relationship could not display clear-
ly which discretionary accrual has more disclosure
power.
According to Newman et al. (2005), since the cred-
ibility of financial statements, including earnings,
becomes highly dependent on the applied audit,
the cooperation of market participation and au-
dit quality during the valuation of earnings and its
components is a matter of importance. Auditing, in
addition to its significant role in enforcing and pre-
serving investors’ rights through the identification
of equity ownership, could also yield benefit to the
management through transfer of reliable financial
information (Habib et al., 2014). Krishnan (2003)
argued that high quality auditors are more con-
cerned with proper accounting procedures, report-
ing of financial errors and irregularities than their
low quality counterparts. Professional auditors are
expected to segregate the useful information on dis-
cretionary accrual components from the worthless
data. This could magnify the value of discretionary
accruals. “Income reporting” is one of the items of
financial statements, which is considered as a crite-
rion for performance evaluation and earnings capa-
bility of a non-profit unit. On the one hand, since
most managers are aware of their company’s status,
it is expected to provide and present information in
a way that best reflects the status quo of a company.
On the other hand, due to certain reasons, like stay-
ing in the company, getting a reward, etc., the man-
agement of a non-profit unit may un/willingly ma-
nipulate the earnings to characterize the situation
as desirable. Under these circumstances, the real
earnings are incompatible with the reported one in
the financial statements, which is called earnings
management (Habib et al., 2014).
Announcing the accounting profit provokes a mar-
ket reaction, which shows the effect this compo-
nent has on stock return and decisions of financial
statement users. The higher the earnings stability,
the more the company is able to maintain its cur-
rent earnings and the earnings quality is assumed
to be higher (Perotti, Wagenhofer, 2014).
We could also declare how much future value the
earnings have generated for a certain company and
how earnings affected the stock return. On the oth-
er hand, quality, which determines the audit perfor-
mance, depends on several factors, namely auditor
capability (e.g. knowledge, experience, matching
26
power, technical efficiency) and professional per-
formance (independence, objectivity, due diligence,
no conflict of interest, and judgment). “Auditor
size” is the most important quantitative index for
auditor quality measurement, which has a direct
relationship with the auditor quality, in a way that
larger size would lead to higher audit quality. “Au-
ditor tenure” is another quantitative index of au-
dit quality measurement for the range of auditor’s
due diligence and his/her surveillance capability. A
longer period of tenure could cause the auditor to
be better acquainted with a client and the relevant
industry specialization, which could improve the
audit quality (Myers et al., 2003). Habib et al. (2014)
find that although earnings and its components are
priced positively by the Chinese stock market, Big
4 audit does not provide any incremental benefit
to clients in terms of market pricing of clients’ fi-
nancial numbers. Their research indicates a nega-
tive impact of local Top10 audit on the pricing of
earnings in China. However, their results show no
incremental effect of local Top 10 audit on the mar-
ket pricing of earnings components.
We extend this stream of research using data from
Iran. No research study has been carried out so far
on the relationship between earnings, its compo-
nents and earnings valuation and no project inves-
tigated the effect of audit quality on this relation-
ship in a developing country. Therefore, the main
objective of the present article is to evaluate the
effect of audit quality on the relationship between
earnings, its components and earnings valuation
in companies listed on the Tehran Stock Exchange
and we tried to establish whether audit quality of
these companies could affect such a relationship or
not.
2. Theoretical issues
2.1 The relationship between cash and accrual
components and stock valuation
Accounting profit, which is recognized as an ac-
crual, is dividable into two components of cash and
accrual. Accrual accounting is used in the process
of profit measurement, through which discretion-
ary accruals modify the recognition of cash flow
over a period to better evaluate the firm value by the
modified figures. The said discretionary accruals are
based on estimations and in case they are not cor-
rect, they should be modified in future discretionary
accruals and future profits. The estimation error and
God. XXXIII, BR. 1/2020. str. 25-38

its subsequent modification decrease the usefulness
of discretionary accruals. According to Dechow and
Dichev (2002), the quality of discretionary accruals
decreases with the increase of range of estimation er-
ror. The study of Ball and Brown (1968) indicates that
by announcing the accounting profit the stock price
of the firm undergoes a change. This suggests that
accounting profit has information content. Since
discretionary accruals contribute to the calculation
of the reported profit, we expect the quality of re-
ported profit and discretionary accruals to stimulate
the market response. Richardson et al. (2005) found
that there is a negative and significant relationship
between the discretionary accruals and future stock
return. Hirshlifer et al. (2009) discovered a positive
relationship between the size of discretionary ac-
cruals and the stock return and noticed that the re-
lationship between the size of cash flows and stock
return is negative. Habib et al. (2014) declared that
with the increase of abnormal discretionary accruals,
the possibility of earnings management goes up and
consequently the earnings quality would be lower.
Under such circumstances, the investors are less
likely to rely on the disclosed profit. In other words,
such a situation could depreciate the information
value of the earnings. The inverse is true about cash
components of profit. Dechow et al. (2008) perceived
that the cash component of profit has a significant
relationship with the stock price. Kothari et al. (2005)
declared statistically that higher cash component of
profit could bring about more earnings stability.
2.2 The relationship between audit quality
and earnings valuation
Accounting profit is one of the important pieces of
information provided in the financial statements,
which is known as a factor for measuring the firm
performance. Most of financial analysts use this fig-
ure in the valuation models of the stock market and
models of corporate performance evaluation (Gut-
ierrez, Pombo, 2008). Investors, creditors, and oth-
ers who use earnings and its components through
various methods and for different evaluation pur-
poses, including the outlook of cash flow in invest-
ments or granted loans, and for making investment
decisions, think of profit more than any other cri-
teria (Perotti, Wagenhofer, 2014). In addition to
this problem, which is seen today despite the rising
awareness and general knowledge of financial state-
ment users, there is also overreliance on accounting
report figures (especially accounting profit as one of
the major criteria of performance evaluation) when
God. XXXIII, BR. 1/2020. str. 25-38
Original scientific article
making investment decisions. Such an illogical reli-
ance provides a plethora of motivations for man-
agers to manipulate (manage) the figures to their
own benefit or, more specifically, to embark on the
earnings management. In case managers have some
specific purposes to mislead the users of financial
statements through exercising their own power in
accounting selection, the earnings management is
more probable (Markarian, Santalo, 2014). In fact,
earnings management is used as an effective factor
to misrepresent the economic performance (Chen,
Hsu, 2009). Perotti and Wagenhofer (2014) believe
that announcing the firm profit leads to the market
response, which is indicative of the earnings value
in the capital market. Hence, the reported profit
should be evaluated by an institution independ-
ent of the firm. Generally, auditors and audit firms
take on the responsibility. In fact, by evaluating
the firm performance, in terms of the authenticity
of the disclosed information, they propose their
professional opinions. Since the reported profit is
of the utmost importance for the investors and on
the other hand, audit quality is effective in the in-
crease of profit value in the public opinion, a num-
ber of scholars carried out a study on this topic. For
example, Gul et al. (2009) noticed that the profits
valuated by major audit firms are evaluated posi-
tively in the market. Krishnan (2003) also reported
the same results. Jenkins et al. (2006) stated that by
employing specialized auditors in the industry, the
response coefficient would decline. Garcia-Blendon
and Argiles-Bosch (2017) showed that there is no
significant relationship between employing special-
ized industry auditor and audit quality. Habib et al.
(2014) studied the impact of audit quality on profit
valuation and found that there is a significant rela-
tionship between audit quality and profit valuation.
3. Research methodology
3.1 Research hypotheses
Given the theoretical issues and the proposed lit-
erature, the following hypotheses are postulated in
the study:
H1: There is a significant relationship between
earnings and earnings valuation.
H2: There is a significant relationship between
accruals, operational cash flows and earn-
ings valuation.
27
Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran
H3: There is a significant relationship between
nondiscretionary accruals, operational cash
flow and earnings valuation.
H4: Audit firm size has a significant effect on the
relationship between earnings and earnings
valuation.
H5: Auditor tenure has a significant effect on the
relationship between earnings and earnings
valuation.
H6: Auditor industry specialization has a sig-
nificant effect on the relationship between
earnings and earnings valuation.
H7: Audit firm size has a significant effect on the
relationship between accruals, operational
cash flow and earnings valuation.
H8: Auditor tenure has a significant effect on the
relationship between accruals, operational
cash flow and earnings valuation.
H9: Auditor industry specialization has a signifi-
cant effect on the relationship between ac-
cruals, operational cash flow and earnings
valuation.
H10: Audit firm size has a significant effect on
the relationship between non/discretionary
accruals, operational cash flow and earnings
valuation.
H11: Auditor tenure has a significant effect on
the relationship between non/discretionary
accruals, operational cash flow and earnings
valuation.
H12: Auditor industry specialization has a sig-
nificant effect on the relationship between
non/discretionary accruals, operational
cash flow and earnings valuation.
The present article is an ex-post facto (quasi-exper-
imental) research that is based on the analysis of
the previous and historical information (financial
statements of companies). Moreover, the project is
a type of library research and causal analysis and is
based on the panel data. This paper is called func-
tional, in terms of objective and regression descrip-
tive method. After performing the necessary cor-
rections and classification, the data were gathered
by the Excel Software based on the variables under
study and were put in Eviews 9 and Statal 2 for fur-
ther processing.
28
3.2 Statistical population and sampling method
The statistical sample of the study consists of all
manufacturing listed companies on the Tehran
Stock Exchange. Using the systematic elimination
method, the sample was selected among the com-
panies that:
1. Their end of fiscal year was on March 19;
2. Had no change in their fiscal year during the
study period (2010-2016);
3. Their financial information was available;
4. Were active during the research period.
3.3 Research models
A) The following models, adapted from Habib et
al. (2014), were used to analyze the relationship
between earnings, its components, and earn-
ings valuation:
1) RETit = α0 + α1 Earningit + α2LNAssetsit
+ α3Leverageit + α4Growthit + εit
2) RETit =β0 + β1 ACCit + β2 OCFit +
β3LNAssetsit + β4Leverageit + β5Growthit
+ εit
3) RETit = µ0 + µ1 DAit + µ2 NDAit + µ3
OCFit + µ4LNAssetsit + µ5Leverageit +
µ6Growthit + εit
B) The following models, adapted from Habib et
al. (2014), were used to analyze the effect of
audit quality on the relationship between earn-
ings, its components, and earnings valuation:
4) RETit =α0 + α1 Earningit + α2 BIGit +
α3 BIGit *Earningit + α4ADTNRit + α5
ADTNRit* Earningit +α6 ADEXPit + α7
ADEXPit* Earningit + α8LNAssetsit +
α9Leverageit + α10Growthit + εit
5) RETit =β0 + β1 ACCit + β2 OCFit +β3
BIGit + β4 BIGit *ACCit + β5 BIGit *CFOit
+ β6ADTNRit + β7 ADTNRit* ACCit +
β8 ADTNRit* CFOit + β9 ADEXPit + β10
ADEXPit*ACCit + β11 ADEXPit*CFOit
+ β12LNAssetsit + β13Leverageit +
β14Growthit + εit
6) RETit = µ0 + µ1 DAit + µ2 NDAit + µ3 OC-
Fit + µ4 BIGit + µ5 BIGit *DAit + µ6 BIGit
*NDAit + µ7 BIGit *CFOit + µ8ADTNRit +
God. XXXIII, BR. 1/2020. str. 25-38
 Original scientific article

µ9 ADTNRit* DAit + µ10 ADTNRit* NDAit
+ µ11 ADTNRit* CFOit + µ12 ADEXPit +
µ13 ADEXPit*DAit + µ14 ADEXPit*NDAit
+ µ15 ADEXPit*CFOit + µ16LNAssetsit +
µ17Leverageit + µ18Growthit + εi
3.4 Measuring the research variables
Dependent variables:
RET: is earnings valuation, which is achieved by ad-
justing the annual stock return.
Independent Variables:
Earnings: the net profit of a company, which is ad-
justed by its assets at the beginning of the year.
ACC: the net profit minus the company’s opera-
tional cash flow, which is adjusted by its assets at
the beginning of the year.
DA: the residual of adjusted Jones’ model by Ko-
thari et al. (2005).
NDA: the total accrual minus discretionary accru-
als.
OCF: company’s net cash flow adjusted by its assets
at the beginning of the year.
BIG: equal to 1, if the company is audited by an or-
ganization, otherwise it is 0.
ADTNR: the number of years an auditor has been
in charge of auditing in a company.
ADEXP: equal to 1, if the auditor is industry spe-
cialist, otherwise it is 0.
Control variables:
LNASSET: the natural logarithm of total firm as-
sets.
LEVERAGE: total firm debts on total firm asset.
Growth: the stock market value on stock book val-
ue.
4. The results
4.1 Descriptive statistics
Table 1 displays the obtained descriptive results
of the research, involving mean, median, standard
deviation, minimum and maximum observation,
skewness and kurtosis.

Table 1 Descriptive statistic of research variables

Observation Standard
Variable Mean Median Maximum Minimum skewness kurtosis
No. deviation
RET 987 0.163 0.088 0.701 2.929 -1.740 0.774 5.117

Earning 987 0.163 0.130 0.173 0.98 -0.35 1.318 6.051

ACC 987 0.011 -0.003 0.162 1.058 -0.731 0.770 8.063

DA 987 0.005 0.003 0.279 4.183 -5.133 -2.965 6.123

NDA 987 0.006 -0.004 0.253 4.954 -3.522 2.177 8.759

OCF 987 0.152 0.123 0.162 0.977 -0.482 1.130 6.262

BIG 987 0.210 0 0.408 1 0 1.418 3.012

ADTNR 987 3.234 3 2.11 10 1 1.106 3.814

ADEXP 987 0.098 0 0.297 1 0 2.698 8.284

LNAssets 987 13.899 13.727 1.155 19.009 10.031 0.659 3.799

LEVERAGE 987 0.597 0.611 0.201 1.099 0.012 -0.134 2.909

Growth 987 2.414 2.018 1.550 7.935 0.061 1.161 4.010

Source: Research findings

God. XXXIII, BR. 1/2020. str. 25-38 29

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran

As can be seen in Table 1, the mean adjusted stock
return for dependent variable is about 0.163. In the
sample companies, the earnings is 0.163 on aver-
age and earnings components, including accrual
and operational cash flows have the mean value of
0.011 and 0.152, respectively. Accruals, which are
divided into discretionary and nondiscretionary ac-
cruals, have the mean value of 0.005 and 0.006, re-
spectively. In this case, the total means of earnings
components (accruals and operational cash flows)
is the mean earnings and the total means of non/
discretionary accruals is mean accruals. The calcu-
lated audit quality, audit firm size, auditor tenure,
and auditor industry specialization have the mean
of 0.210, 3.234, and 0.098, respectively. The variable
of size in sample companies is 13.899 on average,
and financial leverage and growth have the respec-
tive mean of 0.597 and 2.414 in the sample.
Results of the hypotheses
Since hypothesis testing is performed using a com-
bined-data regression model, F-Limer test should
be administered initially to determine an appropri-
ate estimation.
F-Limer (Chao) for the models of research hypoth-
eses

Table 2 The results of F-Limer test

F-Limer Test F statistic Range of probability Result
Model 1 1.159 0.0001 Panel model is appropriate
Model 2 1.59 0.0001 Panel model is appropriate
Model 3 1.58 0.0001 Panel model is appropriate
Model 4 1.58 0.0001 Panel model is appropriate
Model 5 1.54 0.0001 Panel model is appropriate
Model 6 1.53 0.0001 Panel model is appropriate
Source: Research findings

The results of the F-Limer test for research models
indicated that the data related to these models fol-
low the panel method.
Hausman test for models related to research
hypotheses
After establishing the panel data model, it is re-
quired to determine whether the model has fixed
effects or whether it has random effects. For this
purpose the Hausman test was employed, the re-
sults of which are depicted in Table 3.

Table 3 The results of the Hausman test

Hausman Test Chi-square statistic Range of probability Result
Model 1 25.98 0.0000 Fixed effect panel method
Model 2 26.09 0.0000 Fixed effect panel method
Model 3 25.73 0.0002 Fixed effect panel method
Model 4 24.85 0.0056 Fixed effect panel method
Model 5 24.32 0.0419 Fixed effect panel method
Model 6 29.01 0.0482 Fixed effect panel method
Source: Research findings

After establishing the required model for testing

research hypotheses, we performed the final fitting
for each hypothesis.

30 God. XXXIII, BR. 1/2020. str. 25-38

 Original scientific article

Estimation of the first hypothesis parameters

Table 4 The results of final fitting of the first hypothesis model
Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -4.557 0.679 -6.709 0.0000
Earnings Earning -0.002 0.045 -0.046 0.9627
Firm size LNAsset 0.328 0.047 6.926 0.0000
Financial leverage LEVERAGE 0.112 0.162 0.689 0.4904
Firm growth Growth 0.060 0.010 5.476 0.000
Coefficient of determination 0.195
F statistic 1.0423
F significance level 0.0017
Source: Research findings

As can be seen, the coefficient of determination in-
dicates that the variable of profit accounts for 19% of
changes of earnings valuation. The significance of F
statistic (1.0423) is indicative of general significance
of the first hypothesis model. In the following, given
the t statistic at the significance level of coefficients
and the symbol of regression coefficient of each vari-
able, we could conclude that there is no relationship
between earnings and earnings valuation. Therefore,
the first hypothesis is rejected. In addition, the vari-
ables of firm size and firm growth have a positive
and significant relationship with earnings valuation,
whereas there is no such relationship between finan-
cial leverage and earnings valuation.

Estimation of the second and third hypothesis parameters

Table 5 The results of final fitting of the second hypothesis
Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -4.493 0.684 -6.568 0.0000
Accruals ACC 0.0504 0.0808 0.624 0.5327
Operational cash flow OCF -0.008 0.0457 -0.184 0.8540
Firm size LNAsset 0.323 0.0478 6.765 0.0000
Financial leverage LEVERAGE 0.119 0.163 0.731 0.4646
Firm growth Growth 0.060 0.0109 5.512 0.0000
Coefficient of determination 0.196
F statistic 1.4173
F significance level 0.0019
Source: Research findings

As can be seen, the coefficient of determination
indicates that the variable of accruals and opera-
tional cash accounts for 19% of changes of earnings
valuation. The significance of F statistic (1.417) is
indicative of general significance of the second hy-
pothesis. In the following, given the t statistic at the
significance level of coefficients and the symbol of
regression coefficient of each variable, we conclude
that there is no relationship between the variable of
accruals and operational cash and earnings valua-
tion. Therefore, the second hypothesis is rejected.
In addition, the variables of firm size and firm
growth have positive and significant relationship
with earnings valuation, whereas there is no such
relationship between financial leverage and earn-
ings valuation.

God. XXXIII, BR. 1/2020. str. 25-38 31

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran

Table 6 The results of final fitting of the third hypothesis

Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -4.487 0.686 -6.537 0.0000
Discretionary accruals DA 0.038 0.103 0.377 0.0705
Nondiscretionary accruals NDA 0.063 0.126 0.502 0.615
Operational cash flow OCF -0.010 0.047 -0.217 0.828
Firm size LNAsset 0.323 0.047 6.739 0.0000
Financial leverage LEVERAGE 0.115 0.163 0.709 0.478
Firm growth Growth 0.060 0.011 5.476 0.0000
Coefficient of determination 0.196
F statistic 1.407
F significance level 0.0023
Source: Research findings

As can be seen, the coefficient of determination
indicates that the variable of accruals and opera-
tional cash accounts for 19% of changes of earnings
valuation. The significance of F statistic (1.407) is
indicative of general significance of the third hy-
pothesis. In the following, given the t statistic at
the significance level of coefficients and the symbol
of regression coefficient of each variable, we could
conclude that there is no relationship between the
discretionary accruals, nondiscretionary accruals,
and operational cash flow and earnings valuation.
Therefore, the third hypothesis is rejected. In addi-
tion, the variables of firm size and firm growth have
positive and significant relationship with earnings
valuation, whereas there is no such relationship be-
tween financial leverage and earnings valuation.

Estimation of the third hypothesis parameters

Table 7 The results of final fitting of the hypothesis 4, 5 and 6
Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -4.423 0.674 -6.557 0.0000
Earnings Earning 0.1096 0.182 0.600 0.5486
Auditor size BIG 0.426 0.170 -2.500 0.0126
Auditor size* earnings BIG* Earning 2.088 0.485 4.303 0.0000
Auditor tenure ADTNR 0.025 0.014 -1.754 0.0798
Auditor tenure* earnings ADTNR* Earning -0.042 0.059 -0.713 0.4755
Auditor industry specialization ADEXP 0.416 0.189 2.198 0.0282
Auditor industry specialization*
ADEXP* Earning -1.855 0.500 -3.705 0.0002
earnings
Firm size LNAsset 0.320 0.047 6.764 0.0000
Financial leverage LEVERAGE 0.238 0.162 1.464 0.1435
Firm growth Growth 0.0564 0.0113 4.991 0.000
Coefficient of determination 0.215
F statistic 1.5320
F significance level 0.0001
Source: Research findings

32 God. XXXIII, BR. 1/2020. str. 25-38

 Original scientific article

As can be seen in Table 7, the coefficient of determi-
nation indicates that the independent and control
variables account for 21% of changes of earnings
valuation. The significance of F statistic (1.5320)
is indicative of general significance of the model.
Concerning the t statistic at the significance level of
coefficients and the symbol of regression coefficient
of each variable, we could conclude that like the first
research model, there is no relationship between
the variable of earnings and earnings valuation. In
the following, the findings indicate that there is a
positive and significant relationship between audi-
tor size and earnings valuation. Furthermore, the
effect of auditor size is positive and significant on
the relationship between earnings and earnings val-
uation. Therefore, the fourth hypothesis is accepted
at 99% of confidence level. Auditor tenure also has
a positive and significant relationship with earn-
ings valuation and the effect of this variable is not
significant for the relationship between earnings
and earnings valuation. Thus, the fifth hypothesis
is rejected. In the following, the analysis of audit
quality variables substantiates a positive and sig-
nificant relationship between auditor industry spe-
cialization and earnings valuation. In addition, the
effect of auditor industry specialization is negative
and significant on the relationship between earn-
ings and earnings valuation. Therefore, the sixth
hypothesis is accepted at 99% of confidence level.
As to the applied control variables and like the pre-
vious hypotheses, the variables of firm size and firm
growth have a positive and significant relationship
with earnings valuation, whereas there is no such
a relationship between financial leverage and earn-
ings valuation.

Estimation of the third hypothesis parameters

Table 8 The results of final fitting of the seventh, eighth and ninth hypotheses
Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -3.987 2.186 -1.823 0.0685
Accruals ACC 0.123 0.174 0.705 0.4805
Operational cash flow OCF -0.258 0.109 -2.364 0.0183
Auditor size BIG -0.278 0.180 -1.541 0.1236
Auditor size* accruals BIG* ACC 1.299 0.450 2.887 0.0040
Auditor size* operational cash flow BIG* OCF 1.357 0.353 3.845 0.0001
Auditor tenure ADTNR 0.040 0.015 -2.684 0.0074
Auditor tenure* accruals ADTNR* ACC -0.0320 0.054 -0.602 0.543
Auditor tenure*operational cash
ADTNR* OCF 0.081 0.037 2.154 0.0315
flow
Auditor industry specialization ADEXP 0.217 0.100 2.160 0.0310
Auditor industry specialization*
ADEXP* ACC -1.088 0.571 -1.903 0.0573
accruals
Auditor industry specialization*
ADEXP* OCF -1.724 0.337 -5.116 0.0000
operational cash flow
Firm size LNAsset 0.291 0.162 1.800 0.0721
Financial leverage LEVERAGE 0.266 0.102 2.611 0.0092
Firm growth Growth 0.0590 0.020 2.943 0.0033
Coefficient of determination 0.213
F statistic 1.465
F significance level 0.0005
Source: Research findings

God. XXXIII, BR. 1/2020. str. 25-38 33

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran

Table 8 shows the coefficient of determination in-
dicates that the independent and control variables
account for 21% of changes of earnings valuation.
The significance of F statistic (1.465) is indicative
of general significance of the model. Concerning
the t statistic at the significance level of coefficients
and the symbol of regression coefficient of each
variable, we could conclude that like the second re-
search model, there is no relationship between the
variable of accruals and earnings valuation. In the
following, findings indicate that there is a negative
and significant relationship between auditor tenure
and earnings valuation, as well as a positive and sig-
nificant relationship between auditor industry spe-
cialization and earnings valuation. However, in this
model, firm size has no relationship with earnings
valuation. The obtained results indicate the positive
and significant effect of firm size on the relation-
ship between accrual and operational cash flow and
earnings valuation. Therefore, the seventh hypoth-
esis is accepted at 99% of confidence level. Auditor
tenure has a positive and significant effect on the
relationship between operational cash and earnings
valuation as well. Thus, the eighth hypothesis is ac-
cepted at 99% of confidence level. In the following,
the analysis of audit quality variables substantiates
the negative and significant effect of auditor indus-
try specialization on the relationship between ac-
cruals and operational cash flows and earnings val-
uation. Therefore, the ninth hypothesis is accepted
at 99% of confidence level. Concerning the applied
control variables, the variables of firm size, firm
growth, and financial leverage have a positive and
significant relationship with earnings valuation.

Table 9 The results of final fitting of the tenth, eleventh and twelfth hypotheses
Variable Symbol Coefficient Standard deviation t statistic P-value
Constant value c -4.025 2.188 -1.838 0.0663
Discretionary Accruals DA 0.0130 0.370 0.035 0.9720
Nondiscretionary Accruals NDA 0.347 0.180 1.918 0.0554
Operational cash flow OCF -0.275 0.162 -1.695 0.0904
Auditor size BIG -0.296 0.185 -1.595 0.1110
Auditor size* discretionary Accruals BIG* DA 1.401 0.504 2.780 0.0056
Auditor size* nondiscretionary Accruals BIG* NDA 1.462 0.401 3.647 0.0003
Auditor size* operational cash flow BIG* OCF 1.006 0.339 2.961 0.0031
Auditor tenure ADTNR -0.038 0.162 -2.385 0.0173
Auditor tenure* discretionary Accruals ADTNR* DA 0.002 0.099 0.029 0.9764
Auditor tenure* nondiscretionary Accruals ADTNR* NDA 0.086 0.052 1.651 0.0990
Auditor tenure* operational cash flow ADTNR* OCF -0.114 0.053 -2.139 0.0327
Auditor industry specialization ADEXP 0.230 0.095 2.428 0.0154
Auditor industry specialization*
ADEXP* DA -1.092 0.607 -1.798 0.0724
discretionary Accruals
Auditor industry specialization*
ADEXP* NDA -1.721 0.335 -4.839 0.0000
nondiscretionary Accruals
Auditor industry specialization*
ADEXP* OCF -0.052 0.938 -0.055 0.9558
operational cash flow
Firm size LNAsset 0.293 0.161 1.815 0.0699
Financial leverage LEVERAGE 0.275 0.105 2.615 0.0091
Firm growth Growth 0.059 0.019 3.021 0.0026
Coefficient of determination 0.214
F statistic 1.431
F significance level 0.0010
Source: Research findings

34 God. XXXIII, BR. 1/2020. str. 25-38


Table 9 shows the coefficient of determination in-
dicates that the independent and control variables
account for 21% of changes of earnings valuation.
The significance of F statistic (1.431) is indicative of
general significance of the model. Concerning the t
statistic at the significance level of coefficients and
the symbol of regression coefficient of each vari-
able, we could conclude that like the third research
model, there is no relationship between discre-
tionary accruals and earnings valuation. The non-
discretionary accruals and operational cash flows,
however, unlike the third hypothesis model, have a
positive and a negative relationship, respectively. In
the following, findings indicate that there is a nega-
tive and significant relationship between auditor
tenure and earnings valuation, as well as a positive
and significant relationship between auditor indus-
try specialization and earnings valuation. However,
in this model, firm size has no relationship with
earnings valuation. The obtained results indicate
the positive and significant effect of firm size on the
relationship between non/discretionary accruals
and operational cash flow and earnings valuation.
Therefore, the tenth hypothesis is accepted at 99%
of confidence level. Auditor tenure has a positive
and significant effect on the relationship between
nondiscretionary accruals and earnings valuation,
as well as a negative and significant effect on the
relationship between operational cash flow and
earnings valuation. Thus, the eleventh hypothesis is
accepted at 99% of confidence level. In the follow-
ing, the analysis of audit quality variables substan-
tiates the negative and significant effect of auditor
industry specialization on the relationship between
non/discretionary accruals and earnings valuation.
Therefore, the twelfth hypothesis is accepted. Con-
cerning the applied control variables, like the previ-
ous model, the variables of firm size, firm growth,
and financial leverage have a positive and signifi-
cant relationship with earnings valuation.
5. Discussion and conclusion
The main goal of the present article is to evaluate
the relationship between earnings, its contributing
components and earnings valuation and to assess
the effect of audit quality on the relationship be-
tween earnings components and valuation in com-
panies listed on the Tehran Stock Exchange. The
first hypothesis was concerned with the existence of
a relationship between earnings and earnings valu-
ation. The results of this hypothesis showed no sig-
God. XXXIII, BR. 1/2020. str. 25-38
Original scientific article
nificant relationship between these two variables.
Habib et al. (2014) found that the coefficient on
EARN is significantly positive and earnings compo-
nents are positive and statistically highly significant
as well.
The second and third hypothesis dealt with the re-
lationship between earnings components and earn-
ings valuation. The results of hypothesis testing for
the first, second and third subsidiary hypothesis,
which was between accruals (non/discretionary)
and operational cash flow and earnings valuation
revealed no significant relationship and the hypoth-
esis was rejected. This result is in contrast with that
of Habib et al. (2014).
In this study, we assessed the effect of audit qual-
ity (audit firm size, auditor tenure, and auditor in-
dustry specialization) on the relationship between
earnings and earnings valuation. The obtained re-
sults showed the positive and significant effect of
audit quality variables on the relationship earnings
and earnings valuation. Furthermore, the results
showed the positive and significant effect of audit
firm size on the relationship between accrual and
earnings valuation. This result is in contrast with
that of Habib et al. (2014), who found a negative ef-
fect of audit firm size on the relationship between
accruals and earnings valuation. Prior research has
found evidence suggesting that high-quality audi-
tors constrain opportunistic earnings management
(Becker et al., 1998) and increase the informative-
ness of earnings and its components (Krishnan,
2003). Habib et al. (2014) find that audit quality
does not play any incremental role in enhancing
such an effect.
In addition, auditor tenure had no effect on the
relationship between accruals and earnings valua-
tion. We have also observed that auditor industry
specialization has a negative and significant effect
on the relationship between accruals and earnings
valuation.
On the other hand, the test results on the effect
of variables of audit firm size, auditor tenure, and
auditor specialization on the relationship between
operational cash flow and earnings valuation indi-
cated a positive and significant effect of audit firm
size on the relationship between these variables.
This result is in contrast with that of Habib et al.
(2014), who found a negative effect of audit firm
size on the relationship between operational cash
flow and earnings valuation.
35
Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran
Furthermore, auditor tenure has a positive and sig-
nificant effect on the relationship between accruals
and earnings valuation. We have established that
auditor industry specialization has a negative and
significant effect on the relationship between op-
erational cash flow and earnings valuation.
The test results on the effect of variables of audit
firm size, auditor tenure, and auditor specialization
on the relationship between discretionary accru-
als and earnings valuation indicated a positive and
significant effect of audit firm size on the relation-
ship between these variables. This result is in con-
trast with that of Habib et al. (2014), who found a
negative effect of audit firm size on the relationship
between discretionary accruals and earnings valua-
tion. Auditor tenure has no significant effect on the
relationship between discretionary accruals and
earnings valuation. In contrast, auditor industry
specialization has a negative and significant effect
36
on the relationship between discretionary accruals
and earnings valuation.
In conclusion, the test results on the effect of vari-
ables of audit firm size, auditor tenure, and auditor
specialization on the relationship between nondis-
cretionary accruals and earnings valuation indicat-
ed a positive and significant effect of audit firm size
on the relationship between these variables. This is
in contrast with the result of Habib et al. (2014) who
found a negative effect of audit firm size on the re-
lationship between nondiscretionary accruals and
earnings valuation. Auditor tenure has no positive
and significant effect on the relationship between
nondiscretionary accruals and earnings valua-
tion. Lastly, auditor industry specialization has a
negative and significant effect on the relationship
between nondiscretionary accruals and earnings
valuation.
God. XXXIII, BR. 1/2020. str. 25-38
 Original scientific article

R

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God. XXXIII, BR. 1/2020. str. 25-38 37

Mahdi Salehi, Mahmoud Lari Dashtbayaz: The mediating effect of audit quality on the relationship between earnings and earnings
valuation in Iran

Mahdi Salehi
Mahmoud Lari Dashtbayaz

U    

      I
S
Glavni je cilj ovoga rada analizirati odnos između dobiti, njezinih komponenti i vrednovanja dobiti te isto-
dobno procijeniti utjecaj kvalitete revizije na te varijable kod trgovačkih društava izlistanih na Teheranskoj
burzi.
Upotrijebljeni podatci odnose se na uzorak od 141 društva izlistanog na Teheranskoj burzi od 2010. do
2016. Istraživačka hipoteza analizirana je na panel podatcima upotrebom panel metode.
Rezultati istraživanja nisu pokazali povezanost između dobiti, njezinih komponenti i vrednovanja dobiti.
Analizirajući varijable kvalitete revizije utvrdili smo da veličina revizorskog društva ima pozitivan i znača-
jan utjecaj na odnos između dobiti, njezinih komponenti i vrednovanja dobiti. Nadalje, rezultati su pokazali
pozitivan i značajan utjecaj duge povezanosti osoblja s klijentom revizije na odnos između dobiti, ukupnih
diskrecijskih obračunanih obveza, operativnog novčanog toka, nediskrecijskih obračunanih obveza i vred-
novanja dobiti. Uz to je utvrđeno da specijalizacija revizorskog društva na određeni sektor ima negativan i
značajan utjecaj na odnos između dobiti, njezinih komponenata i vrednovanja dobiti.
Cilj je istraživanja ispitati kako se kvaliteta revizije odražava na odnos između dobiti i vrednovanja dobiti u
Iranu, a rezultati se mogu primijeniti i na druge zemlje u razvoju.
Ključne riječi: kvaliteta revizije, vrednovanje dobiti, elementi dobiti

38 God. XXXIII, BR. 1/2020. str. 25-38

 CC BY-NC-SA

Ova licenca
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union dopušta d
nekomercijalne svrhe
Regina Moczadlo Original scientific articlesvoja djela
licenciraju
Pforzheim University, Business School
Tiefenbronnerstr. 65, Received: July 5, 2019
75175 Pforzheim, Germany Accepted for publishing: October 17, 2019
regina.moczadlo@hs-pforzheim.de Pogledajte sažetak lic
Phone: +497231286595
This work is licensed under a
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NonCommercial-NoDerivatives 4.0
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Imenovanje-Nekome
CC BY-NC-ND

RE-INDUSTRIALIZATION Ovo je najrestriktivnija

TO FOSTER GROWTH
AND EMPLOYMENT
5 od 6

IN THE EUROPEAN UNION

A
In 2010, as a consequence of the financial crisis, the European Commission (EC) developed the Europe
2020 strategy. Within this strategy the EC emphasized re-industrialization and set the goal to enlarge the
European manufacturing share of the gross domestic product (GDP) from 14% to 20% by 2020. The inten-
tion was to achieve a stronger international competitiveness and to increase the job creation potentials of
the European labor markets. Several initiatives were founded on EU and on country level.
This analysis based on literature and empirical data shows that it is more than doubtful if the EU can reach
the proclaimed re-industrialization aim. Poland is the only EU member country with a clear re-industri-
alization trend since 2000. Furthermore, the influence of industrialization on growth seems to depend
on the size of the manufacturing share. A direct statistical connection between re-industrialization and
employment could not be calculated. De-industrializing countries like Sweden or the United Kingdom also
recovered from the financial crisis within two years and had growth rates above average since that time.
Hence the manufacturing share alone might not generally be the decisive variable for growth and employ-
ment. It seems therefore questionable if the re-industrialization aim of the EC is equally appropriate for all
EU countries.
Keywords: Re-industrialization, de-industrialization, manufacturing, growth, employment

1. Introduction it. Therefore the EC stressed the “…importance of a

strong, competitive and diversified industrial man-
During the financial crisis the production in the Eu-
ufacturing value chain for the EU’s competitiveness
ropean Union (EU) decreased by 10% and three mil-
and job-creation potential.” (European Commis-
lion industrial jobs were lost (European Commis-
sion, 2010)2 and proclaimed a re-industrialization
sion, 2012: 4)1. Shortly after the crisis, the European
aim to increase the share of manufacturing of the
Commission (EC) emphasized the significance of
GDP from 14% in 2010 to 20% in 2020.
manufacturing for the development of the Europe-
an economy, because every fourth job was directly Since the 1970s the globalization of the value chain
in this sector and one more indirectly depended on through offshoring, either via foreign direct invest-

God. XXXIII, BR. 1/2020. str. 39-58 39

Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union
ment or via global sourcing, has been a widespread
internationalization strategy, especially in manu-
facturing. Since the early 1990s concerns started to
be raised about employment impacts (Hurley, Stor-
rie, 2017: 3)3. In recent years, reshoring as a revision
of former offshoring decisions gained attention in
the media, academic research and especially in the
political debate (Backer et al., 2016: 2; Naudé et al.,
2019: 4).
The aim of this paper is to evaluate to which extent
the stated re-industrialization target of the EC is
reached until now by looking at the development
of the manufacturing share in the EU as a whole
and in different member states. Furthermore, an
analysis of the influence of the manufacturing share
on growth and employment is carried out to evalu-
ate the effects of re-industrialization on these two
variables. This paper proceeds as follows: Section
2 gives a brief overview of the used definitions, as
well as the political and theoretical background.
Section 3 explains the data basis and the methodol-
ogy. Section 4 comprises the empirical findings. It
starts with a descriptive look at the development of
the manufacturing share, growth and employment
on country level. After that, the available data for
reshoring from the literature are analyzed. Further-
more, the European countries are clustered and
compared taking into account variables character-
izing the macroeconomic and institutional frame-
work. The paper ends with a conclusion in Section
5.
2. Theoretical background
Industrialization, re-industrialization and de-in-
dustrialization are defined by the changes of the
manufacturing share in the gross domestic product
(GDP) and/or domestic employment (Tregenna,
2011: 5; Peneder, Streicher, 2018: 88; Naudé et al.,
2019: 3). This paper follows the EC approach and
focuses on the GDP share. Offshoring means gener-
ally producing abroad via foreign direct investments
(FDI) or global sourcing (WTO, 2005: 266–267)4.
The European Commission5 defines reshoring as
relocation of parts of the production process previ-
ously offshored to another country. It differentiates
between nearshoring as the relocation to a site near
the home country and backshoring as relocation to
the home country itself.
Re- and de-industrialization are integral compo-
nents of economies’ structural change. In the lit-
erature, one can find several approaches to explain
40 God. XXXIII, BR. 1/2020. str. 39-58
the drivers of these changes, like different income
elasticities of the demand side or technological
developments through innovation (Gabardo et al.,
2017: 400).
Based on a Keynesian perspective Kaldor (1966)
analyzed the influence of manufacturing on eco-
nomic growth. According to Kaldor’s first law, the
growth rate of the real GDP depends on manufac-
turing growth. In his model, manufacturing is the
sector with the highest static and dynamic returns
to scale, the highest productivity gains and capi-
tal accumulation (Keho, 2018: 1). Hence the costs
for manufacturing products fall and due to high
income elasticity for manufacturing goods the de-
mand increases. With a demand growth higher
than productivity gains the sector requires more
labor. The additional workforce is absorbed from
the other sectors having lower returns to scale
or a weak relation between employment growth
and output growth (Thirlwall, 2018: 26). Wages in
manufacturing are above average, so the increasing
income leads again to a higher demand. The ex-
panding demand for manufacturing goods induces
further innovation, technological progress (Rome-
ro, 2019: 37) and human capital creation through
learning-by-doing (Tregenna, 2011: 5). Spillover
effects of output growth in manufacturing lead to
productivity growth in other sectors (Di Meglio et
al., 2018: 1496). When the productivity gains of the
economy through manufacturing growth diminish
and the domestic market for commodities grows
more and more saturated, the GDP growth slows
down. Kaldor’s first law could be confirmed in
several empirical analyses using different data and
methods for different country groups and time se-
ries (Keho, 2018: 1).
The development stage of an economy plays a
major role in this regard. Due to the productiv-
ity effect, industrialization takes place during
an early stage of development whereas in highly
developed countries there is a trend towards de-
industrialization (Stijepic, Wagner, 2017: 103). It
is well known that Fourastié already in 1949 de-
scribed the development stages of economies with
an increasing income per capita. Economies are
transformed from mainly agricultural societies to
industrialized countries and later to service econ-
omies. Drivers on the demand side are changes of
income elasticities and saturation effects, whereas
on the supply side it is different sectoral produc-
tivity developments that drive the transformation.
In highly developed economies, only a higher de-

mand from foreign markets can again lead to high-
er production and employment in manufacturing,
increases in productivity and a higher competi-
tiveness (Thirlwall, 2018: 27).
Romer (1990) developed an endogenous growth
model in which increasing returns to scale are ex-
plained by increased division of labor and innova-
tion spillover effects (Gabardo et al., 2017: 397).
Growth results from the research sector, in which
new designs are produced by human capital. In-
novations are in the long run non-rival goods. In
the short run, innovating companies have a tempo-
rary monopoly from which they temporarily gain
monopoly rents. These rents are the incentives for
further innovations. The determinants of sectoral
development therefore are innovations and the ac-
cumulation of human capital.
Since the early 1990s trade liberalization, upcom-
ing emerging markets like China and India, as well
as market opening of countries, which were at that
time still in transition, changed the production
process in manufacturing. Today the manufactur-
ing sector is characterized by fragmentation and
internationalization of the value chain with conse-
quences for international trade. Companies interact
with international suppliers trading goods, services,
technology and information (Timmer et al., 2019:
1). International trade is shifting towards an in-
creased trade with intermediates (Stijepic, Wagner,
2017: 104). Offshoring of tasks within the supply
chain of multinational companies (MNCs) change
the comparative advantages of economies (van
Neuss, 2019: 318). All these trends influence both
re- and de-industrialization. The eclectic theory of
Dunning is the most frequently used theoretical
framework for analyzing internationalization strat-
egies of companies like offshoring (Di Mauro et al.,
2018: 109).
Dunning (1977) introduced the eclectic paradigm
(EP) to research the international allocation of re-
sources through FDI. The kernels of his so-called
OLI paradigm are three main interdependent de-
terminants: ownership advantage (O-advantage),
location advantage (L-advantage) and internaliza-
tion advantage (I-advantage). Beginning with the
static related activities, the O-advantages result
from different company-specific assets like pat-
ents, brands or trademarks, but can also result
from economies of scale or international transfer
pricing. Consisting of particularities related to a
specific country, L-advantages can be the differ-
ent prices associated with important input factors
God. XXXIII, BR. 1/2020. str. 39-58
Original scientific article
as well as economic or political frame conditions.
I-advantages describe the ability of a company to
exploit and co-ordinate both the O- and L-advan-
tages (Dunning (1980: 10). In the dynamic per-
spective, O-advantages result from technological,
managerial, organizational or institutional compe-
tence and are relatively mobile. The L-advantages
arise from assets of a country or region, which are
location bounded and important for an MNC to
be able to exploit the ownership advantages they
have. The I-advantages emerge from the compe-
tences of the firm to realize O- and L-advantages
better via hierarchy than through market transac-
tions (Dunning, 2003: 4).
For the first time in the internationalization theory,
Dunning combined internal O- and I-advantages of
companies with the external L-advantage (Calvelli,
Cannavale, 2019: 10). The location advantages of for-
eign markets are generally available for all MNE pro-
ducing and sourcing there, but the creation of com-
petitive advantages out of these conditions requires
firm-specific capabilities (Theyel et al., 2018: 301).
3. Methodology and data
Based on the proclaimed aims of the EC and the
theoretical background the following research
questions can be derived:
1. Are there in the EU countries trends to-
wards re-industrialization to observe and
can the manufacturing share in the EU
reach the proclaimed 20% aim by 2020?
2. Did countries with a higher manufacturing
share generally overcome the consequences
of the financial crisis for growth and em-
ployment more quickly than others?
3. Does the manufacturing share generally
have a significant influence on growth and
employment?
4. Which European economies are similar to
each other looking at selected macroeco-
nomic and institutional determinants, re-
flecting L-advantages?
For answering the first two questions, a descriptive
analysis of the development of the manufacturing
share in the EU countries as well as growth and
employment is carried out on the basis of Euro-
stat data6. The EU countries are therefore grouped
by their manufacturing share. These results give
41
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union
also some hints about the hypothesis that coun-
tries with a higher manufacturing share are more
robust against external shocks like the financial
crisis. The description is complemented by curve
fit regression analyses of the development of the
manufacturing share over time with manufactur-
ing share as the dependent variable and time as
the independent variable to calculate the trend of
re- or de-industrialization in the EU in total and in
each of the member countries. All statistics were
calculated with IBM SPSS Statistics 24. The review
period is generally 2000 to 2018 despite the fact
that the EC proclaimed the re-industrialization
aim in 2010. At that time, several countries had
already overcome the financial crisis while oth-
ers needed more time. Hence the influence of the
business cycle could overlay the trend in this time
period. For the third question, a correlation analy-
sis is carried out for all EU countries and for the
country groups with a manufacturing share above
and below average.
Finally, a cluster analysis it carried out with regard
to selected macroeconomic variables reflecting as-
pects of the L-advantage, which are influenced by
the respective economic policies of the countries.
Therefore, data from the Global Competitiveness
Report for institutions, labor costs and infrastruc-
ture (for a detailed description see Schwab, 2018)7
and the country ratings published by Standard and
Poor’s for 2019 (CountryEconomy, 2019)8 are taken
into account. A comparison between the groups
formed according to their manufacturing share and
the cluster analysis show the influence of the L-
advantage of the country-specific macroeconomic
and institutional framework.
4. Empirical analysis
4.1 Manufacturing share
A look at the actual statistics shows clearly that it
is more than questionable if the EU can reach the
aim of a 20% manufacturing share by 2020. With
regard to the period 2000–2018, the average man-
ufacturing share in all EU 28 countries decreased
from 16.7% to 13.3 % in 2009 during the financial
crisis and recovered again to 14.6% in 2018. The
data show that the development of the manufactur-
ing share in the EU28 and in the member countries
is influenced by the business cycle, especially by
the financial crisis. The EU in total shows a slight
trend towards de-industrialization, given a decline
of the manufacturing share since 2000. The average
42
in 2018 is used to group the EU countries into those
with a share above and below average (see Figure 1).
With a 30.8% manufacturing share Ireland ranks
the highest in 2018, followed by Czechia, Germany,
Slovenia, Romania and Slovakia, all with a share of
20% or above.
In 2000, this group was slightly different, Finland
had the highest manufacturing share with 24.2%,
followed by Czechia (23.6%), Ireland (23.1%), Slo-
venia (21.8%), Slovakia (21.4%), Germany (20.7%)
and Sweden (20.3%). The country with the largest
reduction was Finland, which decreased its share
by nine percentage points, followed by Sweden and
Belgium. In these three countries a trend to de-in-
dustrialization can be observed.
Ireland has also had a high dynamic GDP growth,
which has tripled since 1995, whereas the export
share of the GDP has grown sixfold. During this
process, the manufacturing share increased by
nearly eight percentage points. The main rea-
sons for this re-industrialization are seen in the
high degree of openness of the country, the low
corporate tax of 12.5% and high FDI inflows dur-
ing the last twenty years. The Irish gross value
added (GVA) is dominated by MNCs (Casey,
2019: 11). In Czechia, the manufacturing share
is nearly constant with slight fluctuations. That
is also true for Germany, where the automotive
industry, the machinery industry and the chemi-
cal industry are the largest branches, all with an
export share of more than 50%. Czechia, Slovakia
and Romania are traditional nearshore destina-
tions for manufacturing.
Above average but below 20% is the manufacturing
share of Hungary, Poland, Lithuania, Austria, Fin-
land and Italy. Hungary and Poland also belong to
the traditional nearshore countries. The Italian in-
dustry is characterized by small and medium sized,
often family-owned companies. The strength of the
manufacturing sector lies in machinery goods, tex-
tile and clothing as well as the agricultural and food
industries. Italy is particularly well known for lux-
ury products like famous fashion brands and cars
(Kangur, 2018: 11). Main industries in the Austrian
manufacturing sector are machinery, automotive,
agricultural and food production.
God. XXXIII, BR. 1/2020. str. 39-58
 Original scientific article

Figure 1 Development of the share of manufacturing (s) 2000 to 2018*

* The development of s is shown in comparison with the EU28 average in 2018

Source: Own representation based on Eurostat, 20196

The regression analyses show a statistically sig- Figure 2 Curve fit regression for the EU
nificant trend to de-industrialization in the EU 28
since 2000 (see Figure 2 and Figure 7). For Bulgaria,
Czechia, Germany, Greece, Hungary, Lithuania,
Romania and Slovakia the regression results are not
significant. A clear trend towards re- or de-indus-
trialization could not be identified. For Germany,
the plot line is nearly a horizontal straight line, but
the fluctuations are too high for a statistically signif-
icant result. All the other countries with the excep-
tion of Poland have also de-industrialized. Poland
is the only EU member country with a clear trend
of re-industrialization (see Figure 7, Table 5 in the
Appendix).
Hence a trend towards re-industrialization can’t
be observed all EU countries. It is doubtful if the
manufacturing share in the EU will reach the pro-
claimed 20% aim by 2020.

 Observation, Fit line

Source: Own representation based on Eurostat, 20196

God. XXXIII, BR. 1/2020. str. 39-58 43

Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union
4.2 GDP growth
The growth between 2000 and 2018 is influenced by
the financial crisis of 2008/2009 and the Euro crisis
starting from 2010. The causes and effects of both
crises have been extensively analyzed in the litera-
ture. Therefore, the following description focuses on
the potential influence of the manufacturing share
on GDP growth. Generally, countries with a manu-
facturing share higher than 20% overcame the crises
comparably quickly and reached the GDP level of
2006/2007 again in 2011 or 2012 with the exemption
of Slovenia, where it took until 2015 (see Table 1 for
the EU28 average, Figure 3 for countries).
For all other country groups the results are mixed.
The GDP growth of the countries with a manufac-
turing share between 20% and 14.6% is above av-
erage in Lithuania, Hungary and Poland, around
average in Austria and below average in Finland
and Italy. In both of the latter countries there are
dropping manufacturing shares in the same period.
Among the countries with a manufacturing share
between 14.6% and 10%, Estonia and Latvia had the
highest growth and reached over 130 points in 2018
(2010=100). Bulgaria had an impressive growth too
Table 1 GDP growth rate in the EU 28 (2000 to 2018, 2010 = 100)
Year 2000 2001 2002 2003 2004
EU - 28 87.0 89.0 90.2 91.4
Year 2010 2011 2012 2013
EU - 28 100.0 101.8 101.4 101.6
Source: Own representation based on Eurostat, 20196
Figure 3 GDP growth rate 2000 to 2018 (2010 = 100)
44 God. XXXIII, BR. 1/2020. str. 39-58
coming from 64 to 120 points in 2018. The Swed-
ish growth rate was also above average. All four
countries were affected by the crises, but reached
the pre-crisis level of 2006/2007 by 2012 and 2013
respectively; their rates are on par with the coun-
tries with an above average manufacturing share of
more than 20%. The growth rates in Denmark and
Belgium are comparable to the EU 28 average, but
it took Denmark until 2014 to reach the pre-crisis
level, whereas Belgium reached that level already in
2010. Portugal, Spain and Croatia grew below aver-
age and it took Spain until 2017 and Portugal until
2018 to reach the level of 2007. Croatia has not yet
reached the level of 2007.
Among the countries with a manufacturing share
of less than 10%, Malta had the highest growth
and overcame the financial crisis within one year.
The United Kingdom and Luxembourg also had an
above average growth and recovered by 2012 and
2011 respectively. The economic development in
France is in line with the EU 28 average. As com-
monly known, Greece suffered the most during the
financial crisis and was a main contributor to the
Euro crisis, due to the country’s dramatic indebted-
ness of both the government and the private sector.
2005 2006 2007 2008 2009
93.7 95.7 98.8 101.9 102.4 98.0
2014 2015 2016 2017 2018
103.5 105.9 108.0 110.7 113.0

Source: Own representation based on Eurostat, 20196
Figure 4 shows the growth rates of the gross value
added (GVA) in comparison with manufacturing.
One can see clearly that in twenty EU countries the
growth rates of manufacturing were higher than the
ones of the total GVA. The exemptions are Cyprus,
Finland and France with a growth below average in
both total and manufacturing specific terms, and
a manufacturing growth that is smaller than that
of the GVA. In Latvia, Hungary, Romania, Swe-
den and the United Kingdom the manufacturing
growth lies under the total, but the GVA itself grew
above average.
4.3 Employment
In all countries with a manufacturing share above
20% the unemployment rate in 2018 was below the
EU 28 average of 7% (see Figure 5). Worth mention-
ing is the decline of unemployment in Slovakia,
where the rate decreased from 18.9% in 2000 to
6.6% in 2018. Ireland showed a high crisis sensitiv-
ity, the unemployment rate rose from 5.0% in 2007
to 15.5% in 2012, and then sunk gradually to 5.8%
in 2018. Germany started in 2000 with an unem-
ployment rate of 7.9%, which increased over time
to 11.2% in 2005. Due to the labor market reforms
of the Agenda 2010 (Schneider and Zimmermann,
2010) and the positive economic development, this
rate was brought down to 3.4% in 2018. It is remark-
God. XXXIII, BR. 1/2020. str. 39-58
Original scientific article
able that the unemployment rate was nearly stable
during the financial crisis. The German Council of
Economic Experts (Sachverständigenrat zur Begu-
tachtung der Gesamtwirtschaftlichen Entwicklung,
2012: 20–21)9 attributes this development to two
main aspects: the labor market reforms mentioned
above and the institutional reaction of the German
government with more flexible working hours and
more opportunities for short-time working. In the
1990’s and early 2000’s several German companies
offshored parts of the value chain to foreign coun-
tries. During the crisis, companies kept their skilled
German personnel and adjusted their labor force
in foreign subsidiaries because it was more cost-
efficient. The unemployment in Czechia, Romania,
and Slovenia developed on a lower level nearly par-
allel to the EU 28 average.
The situation differs when looking at the other
groups, similarly to the one of the growth rate. In
the group of countries with a manufacturing share
between 20% and 14.6% the unemployment rate
was the lowest in Hungary and Poland with 3.7%
and 3.9% respectively. In this group, Poland was the
most successful because in 2000 the unemployment
rate was 16.1% and among the highest in the EU.
In Greece unemployment today is still the highest
at 19.3% followed by Spain with 15.3%, France with
9.1% and Croatia with 8.5%.
45
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union
Figure 4 Gross value added growth, 2018* (2010=100)
* The lines mark the EU 28 average
Source: Own calculation based on Eurostat, 20196.
The employment growth of the EU 28 (see Figure
6) lies below the growth rate of the GDP, reflecting
an increase in labor productivity (107, 2010=100).
In the countries that joined the EU in 2004 or later
(Bulgaria, Czechia, Croatia, Lithuania, Poland, Ro-
46
mania, Slovakia and Slovenia), but also in Portugal,
the growth rate of the employment in manufactur-
ing was higher than in the economy in total. Hence
in all the other countries the employment increase
was higher in non-manufacturing sectors.
God. XXXIII, BR. 1/2020. str. 39-58
 Original scientific article

Figure 5 Unemployment rate 2000 to 2018 (2010 = 100)

Source: Own representation based on Eurostat, 20196.

Figure 6 Development of Employment 2000 to 2018 (2010 = 100)

Source: Own calculation based on Eurostat, 20196.

God. XXXIII, BR. 1/2020. str. 39-58 47

Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union

In conclusion of the descriptive analysis, there are
some aspects which indicate that the manufacturing
share influences the economic development of the
EU countries. A Pearson’s correlation analysis over all
EU member countries shows a significant correlation
of the manufacturing share with the GDP growth and
manufacturing employment both for persons and
hours worked (see Table 2). For the total employment
and the unemployment rates the correlation is not
significant. For countries with a share of manufac-
turing below average there are no significant correla-
tions assessed. In contrast, for countries with a share
of manufacturing above average the correlation is
significant for growth, total hours worked and hours
worked in manufacturing. The influence of manu-
facturing on macroeconomic variables depends, as
expected, on the size of the share. One can conclude
that it is not a necessity to increase the manufacturing
share to achieve rising growth and employment and
to overcome a crisis in a relatively short time.

Table 2 Correlations between manufacturing share, employment and growth

EU and all member countries
Employment
Share of Growth Unemployment
Persons Hours worked
manufacturing rate rate
Total Manufacturing Total Manufacturing
Correlation
1 0.462* -0.316 -0.064 0.567** 0.015 0.623**
coefficient
Sig. (2-sided) 0.012 0.095 0.740 0.001 0.940 0.000
N 29 29 29 29 29 29 29

Countries with a manufacturing share below average

Employment
Share of Growth Unemployment
Persons Hours worked
manufacturing rate rate
Total Manufacturing Total Manufacturing
Correlation
1 0.166 0.010 -0.397 0.144 -0.398 0.187
coefficient
Sig. (2-sided) 0.539 0.971 0.128 0.595 0.127 0.488
N 16 16 16 16 16 16 16

Countries with a manufacturing share above average

Employment
Share of Growth Unemployment
Persons Hours worked
manufacturing rate rate
Total Manufacturing Total Manufacturing
Correlation
1 0.762** -0.434 0.498 0.502 0.668* 0.665*
coefficient
Sig. (2-sided) 0.004 0.158 0.099 0.096 0.018 0.018
N 12 12 12 12 12 12 12
** Correlation is significant on the 0.01 level
* Correlation is significant on the 0.05 level
Source: Own calculation based on Eurostat, 20196

4.4 Country clusters
The cluster analysis classifies the European coun-
tries into similar groups. Therefore the previously
used variable was enhanced by manufacturing la-
bor costs, the GCI for institutions, skills and in-
frastructure, and the Standard and Poor’s country
rating. A hierarchical cluster analysis showed the
number of clusters to be six. In the next step, a K-
means cluster analysis was performed (see Table
3).
In the cluster analysis, the country groups are
formed according to the distance of the variables be-
tween them. SPSS gives for each ANOVA table (see
Table 4) in a cluster analysis the hint that the F-test
can only be used for descriptive purposes. Nonethe-
less, the differences between the F-ratios show the

48 God. XXXIII, BR. 1/2020. str. 39-58

 Original scientific article

influence of the different variables in building the
clusters. Obviously, the growth rate has the highest
influence followed by labor costs in manufacturing
and the Standard & Poor’s rating. The share of manu-
facturing had only a low influence. That is also true
for the development of the total employment. The
CGI infrastructure was more or less ignored.
Obviously, the country clusters differ from the
groups built by the manufacturing share. Ireland
(1) and Greece (6) are each in a separate cluster on
their own. Ireland has high growth in both in GDP
and employment, a moderate unemployment rate
and lies in the upper field of the GCI variables and
the country rating. For Greece the situation is the
opposite. The second cluster contains most of the
Western European countries. They are all stable in
a majority of the macroeconomic variables, have
comparably high labor costs and a country ranking
of at least AA, but the importance of manufacturing
in these economies differs a lot. Cluster 3 is com-
posed of countries that joined the EU in 2004 with
a manufacturing share above average, comparably
low labor costs combined with sufficient skills and
mostly rated between AA– and A-, the exception
being Hungary with BBB. Besides Malta, Estonia
and Lithuania, these countries are all traditional
nearshoring destinations comparable to Romania
in cluster 4. However, the countries of cluster 4 are
rated worse in the GCI variables and the country
rating. The manufacturing share in Latvia lies below
average. Cluster 5, containing Croatia, Cyprus, Ita-
ly, Portugal and Spain, is characterized by countries
with economic difficulties, high unemployment
rates and mostly a low country rating between BBB
and BB+. Furthermore, they have a low rank in the
GCI indicators.

Table 3 Country clusters

No. Countries
1 Ireland
2 Austria, Belgium, Denmark, Finland, France, Germany, Luxembourg, Netherlands, Sweden, United Kingdom
3 Czechia, Estonia, Hungary, Lithuania, Malta, Poland, Slovakia, Slovenia
4 Bulgaria, Latvia, Romania
5 Croatia, Cyprus, Italy, Portugal, Spain
6 Greece
Source: Own calculation based on of Eurostat, 20196, Schwab, 20187 and CountryEconomy, 20198

Table 4 ANOVA of the cluster analysis

Cluster Error
Variable F Sig.
Sum of squares df Mean Square df
Share of Manufacturing 107.175 5 26.663 22 4.020 0.010
Growth Rate 1076.631 5 29.745 22 36.195 0.000
Unemployment Rate 52.703 5 4.155 22 12.684 0.000
Total employment (persons) 264.359 5 67.639 22 3.908 0.011
Manufact. employment (persons) 397.519 5 28.213 22 14.090 0.000
Labour costs in manufacturing 837.846 5 29.910 22 28.012 0.000
GCI Institutions 346.816 5 18.781 22 18.466 0.000
GCI Skills 165.236 5 19.419 22 8.509 0.000
CGI Infrastructure 29.864 5 45.413 22 0.658 0.659
Standard & Poor’s Rating 64.817 5 2.379 22 27.244 0.000
The F tests should be used only for descriptive purposes because the clusters have been chosen to maximize the diffe-
rences among cases in different clusters. The observed significance levels are not corrected for this and thus cannot be
interpreted as tests of the hypothesis that the cluster means are equal.
Source: Own calculation based on of Eurostat, 20196, Schwab, 20187 and CountryEconomy, 20198.

God. XXXIII, BR. 1/2020. str. 39-58 49

Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union
5. Discussion and conclusion
The stated aim of the European Commission was to
enlarge the manufacturing share to 20% by 2020. It
is not foreseeable yet that this aim could be reached.
The manufacturing share increased since the finan-
cial crisis from 13.3% in 2009 to 14.6% in 2018, but
is still on a lower level than in 2000 when it stood at
16.7%. In the observation period from 2000 to 2018
a clear trend of de-industrialization was found. Re-
industrialization took place only in Poland.
During the last decade countries with a manufac-
turing share of more than 20% were quite successful
in terms of both economic growth and decreasing
unemployment.
In addition, they overcame the financial crisis quite
quickly. Nonetheless, other countries with a com-
parably low manufacturing share were also suc-
cessful, for example, Sweden, Luxembourg or the
United Kingdom with competitive advantages in
the service sector. Countries with a development
level below the EU 28 average have manufacturing
shares both above and below average. Between the
manufacturing share and economic growth a low
but statistically significant correlation was found
for the EU in total and for countries with a manu-
facturing share above average, but not for those
below average. Such a correlation could not be cal-
culated with employment variables. As is generally
well known, unemployment is influenced by a wide
range of determinants, which were not included in
this study.
50
Hence it could be questioned if the EC’s general re-
industrialization advice is adequate for all member
countries. The result of the cluster analysis shows
that similarities between EU countries are influ-
enced by several institutional and macroeconomic
determinants. The manufacturing share plays a mi-
nor role.
In this paper the emphasis was laid on the re-in-
dustrialization aim and the EC’s associated expec-
tations. One limitation of this paper is the fact that
other influencing determinants on growth and
employment were not taken into account. Another
limitation is the fact that the manufacturing sec-
tor was considered as a whole. A detailed analysis
of particular branches might give deeper insights.
Furthermore, the influence of EU and country-spe-
cific political programs was not taken into account.
Further research can look more closely at the devel-
opment of the increasing intra-industrial trade in
manufacturing between the EU countries referring
to branches. This could show economic intercon-
nections between manufacturing operators within
the EU countries. In addition, it would be interest-
ing to analyze the indirect effects of manufactur-
ing on growth and employment in other sectors.
Moreover, strong offshoring connections between
some branches in different EU countries due to FDI
flows and global sourcing might influence the L-ad-
vantage of different production agents within and
between the European countries.
God. XXXIII, BR. 1/2020. str. 39-58
 Original scientific article

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52 God. XXXIII, BR. 1/2020. str. 39-58

 Original scientific article

Appendix

Figure 7 Curve fit regression: Observations and fit lines for re- and de-industrializations*
Austria Belgium Croatia Estonia

Finland France Italy Latvia

Luxembourg Malta Poland Portugal

Slovenia Spain Sweden United Kingdom

*plots are displayed only for significant regressions

 Observation, Fit line
Source: Own calculation based on Eurostat, 20196

God. XXXIII, BR. 1/2020. str. 39-58 53

 Table 5 Curve fit regressions

54
Model Summary Coefficients ANOVA
Standar-
Std. Error Unstandardized dized
Adjusted of the Coefficients Coefficients Sum of Mean
R R Square R Square Estimate B Std. Error Beta t Sig. Squares df Square F Sig.
EU - 28 0,732 0,535 0,506 0,043 Year -0,008 0,002 -0,732 -4,295 0,001 Regression 0,034 1 0,034 18,443 0,001
Constant 19,474 3,909 4,982 0,000 Residual 0,029 16 0,002
Total 0,063 17
Austria 0,820 0,672 0,652 0,023 Year -0,006 0,001 -0,820 -5,729 0,000 Regression 0,017 1 0,017 32,820 0,000
Constant 14,635 2,058 7,110 0,000 Residual 0,008 16 0,001
Total 0,025 17
Belgium 0,942 0,888 0,881 0,043 Year -0,022 0,002 -0,942 -11,266 0,000 Regression 0,232 1 0,232 126,918 0,000
Constant 46,627 3,903 11,946 0,000 Residual 0,029 16 0,002
Total 0,261 17
Bulgaria 0,396 0,157 0,104 0,058 Year 0,005 0,003 0,396 1,726 0,104 Regression 0,010 1 0,010 2,979 0,104
Constant -6,477 5,250 -1,234 0,235 Residual 0,053 16 0,003
Total 0,063 17
Croatia 0,831 0,691 0,671 0,040 Year -0,011 0,002 -0,831 -5,978 0,000 Regression 0,056 1 0,056 35,738 0,000
Constant 24,116 3,606 6,688 0,000 Residual 0,025 16 0,002
Total 0,081 17
Cyprus 0,930 0,866 0,857 0,094 Year -0,043 0,004 -0,930 -10,157 0,000 Regression 0,908 1 0,908 103,171 0,000
Constant 88,679 8,562 10,357 0,000 Residual 0,141 16 0,009
Total 1,049 17
Czechia 0,135 0,018 -0,043 0,048 Year 0,001 0,002 0,135 0,545 0,593 Regression 0,001 1 0,001 0,297 0,593
Constant 0,748 4,373 0,171 0,866 Residual 0,037 16 0,002
Total 0,037 17

God. XXXIII, BR. 1/2020. str. 39-58

Denmark 0,522 0,273 0,227 0,071 Year -0,008 0,003 -0,522 -2,450 0,026 Regression 0,030 1 0,030 6,001 0,026
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union

Constant 18,307 6,449 2,839 0,012 Residual 0,080 16 0,005

Total 0,110 17
Estonia 0,724 0,524 0,494 0,048 Year -0,009 0,002 -0,724 -4,196 0,001 Regression 0,041 1 0,041 17,605 0,001
Constant 21,124 4,400 4,801 0,000 Residual 0,037 16 0,002
Total 0,078 17

The independent variable is year The depending variable is ln(country) The independent variable is year
6
Own calculation based on Eurostat, 2019
 Table 5 (continued) Curve fit regressions

Standar-
Std. Error Unstandardized dized
Adjusted of the Coefficients Coefficients Sum of Mean
R R Square R Square Estimate B Std. Error Beta t Sig. Squares df Square F Sig.
Finland 0,940 0,883 0,876 0,070 Year -0,035 0,003 -0,940 -10,991 0,000 Regression 0,592 1 0,592 120,808 0,000
Constant 73,111 6,386 11,448 0,000 Residual 0,078 16 0,005
Total 0,670 17
France 0,940 0,883 0,876 0,043 Year -0,021 0,002 -0,940 -10,990 0,000 Regression 0,223 1 0,223 120,773 0,000
Constant 45,533 3,921 11,612 0,000 Residual 0,030 16 0,002
Total 0,253 17
Germany 0,159 0,025 -0,036 0,037 Year 0,001 0,002 0,159 0,645 0,528 Regression 0,001 1 0,001 0,416 0,528
Constant 0,820 3,402 0,241 0,813 Residual 0,022 16 0,001
Total 0,023 17
Greece 0,363 0,132 0,077 0,083 Year -0,006 0,004 -0,363 -1,557 0,139 Regression 0,017 1 0,017 2,424 0,139
Constant 13,949 7,575 1,842 0,084 Residual 0,110 16 0,007
Total 0,127 17
Hungary 0,337 0,113 0,058 0,039 Year 0,003 0,002 0,337 1,430 0,172 Regression 0,003 1 0,003 2,044 0,172
Constant -2,155 3,564 -0,605 0,554 Residual 0,024 16 0,002
Total 0,028 17
Italy 0,817 0,667 0,646 0,046 Year -0,012 0,002 -0,817 -5,665 0,000 Regression 0,069 1 0,069 32,088 0,000
Constant 26,629 4,221 6,309 0,000 Residual 0,034 16 0,002

God. XXXIII, BR. 1/2020. str. 39-58

Total 0,103 17
Latvia 0,647 0,418 0,382 0,087 Year -0,013 0,004 -0,647 -3,393 0,004 Regression 0,087 1 0,087 11,514 0,004
Constant 29,348 7,931 3,700 0,002 Residual 0,121 16 0,008
Total 0,208 17
Lithuania 0,162 0,026 -0,035 0,057 Year 0,002 0,003 0,162 0,658 0,520 Regression 0,001 1 0,001 0,433 0,520
Constant -0,610 5,241 -0,116 0,909 Residual 0,053 16 0,003
Total 0,054 17
Luxembourg 0,905 0,818 0,807 0,128 Year -0,049 0,006 -0,905 -8,493 0,000 Regression 1,173 1 1,173 72,126 0,000
Constant 100,689 11,639 8,651 0,000 Residual 0,260 16 0,016
Total 1,434 17

The independent variable is year The depending variable is ln(country) The independent variable is year

Own calculation based on Eurostat, 20196

55
Original scientific article
 Table 5 (continued 2) Curve fit regressions

56
Standar-
Std. Error Unstandardized dized
Adjusted of the Coefficients Coefficients Sum of Mean
R R Square R Square Estimate B Std. Error Beta t Sig. Squares df Square F Sig.
Malta 0,956 0,913 0,908 0,085 Year -0,050 0,004 -0,956 -12,976 0,000 Regression 1,228 1 1,228 168,376 0,000
Constant 103,577 7,794 13,289 0,000 Residual 0,117 16 0,007
Total 1,345 17
Netherlands 0,883 0,779 0,765 0,041 Year -0,014 0,002 -0,883 -7,509 0,000 Regression 0,094 1 0,094 56,390 0,000
Constant 30,366 3,719 8,165 0,000 Residual 0,027 16 0,002
Total 0,120 17
Poland 0,714 0,510 0,480 0,042 Year 0,008 0,002 0,714 4,083 0,001 Regression 0,029 1 0,029 16,672 0,001
Constant -12,797 3,817 -3,353 0,004 Residual 0,028 16 0,002
Total 0,057 17
Portugal 0,718 0,516 0,486 0,064 Year -0,012 0,003 -0,718 -4,129 0,001 Regression 0,069 1 0,069 17,051 0,001
Constant 26,563 5,822 4,563 0,000 Residual 0,065 16 0,004
Total 0,135 17
Romania 0,137 0,019 -0,043 0,060 Year -0,001 0,003 -0,137 -0,552 0,589 Regression 0,001 1 0,001 0,304 0,589
Constant 6,050 5,447 1,111 0,283 Residual 0,057 16 0,004
Total 0,058 17
Slovakia 0,456 0,208 0,159 0,068 Year -0,006 0,003 -0,456 -2,050 0,057 Regression 0,019 1 0,019 4,203 0,057
Constant 15,658 6,176 2,535 0,022 Residual 0,073 16 0,005
Total 0,093 17
Slovenia 0,528 0,279 0,234 0,066 Year -0,007 0,003 -0,528 -2,486 0,024 Regression 0,027 1 0,027 6,182 0,024
Constant 17,940 6,010 2,985 0,009 Residual 0,069 16 0,004
Total 0,096 17

God. XXXIII, BR. 1/2020. str. 39-58

Spain 0,891 0,795 0,782 0,046 Year -0,016 0,002 -0,891 -7,869 0,000 Regression 0,128 1 0,128 61,921 0,000
Constant 35,290 4,155 8,494 0,000 Residual 0,033 16 0,002
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union

Total 0,162 17
Sweden 0,974 0,948 0,945 0,030 Year -0,024 0,001 -0,974 -17,146 0,000 Regression 0,272 1 0,272 293,985 0,000
Constant 50,400 2,776 18,155 0,000 Residual 0,015 16 0,001
Total 0,287 17

The independent variable is year The depending variable is ln(country) The independent variable is year

Own calculation based on Eurostat, 20196

 Table 5 (continued 3) Curve fit regressions

Standar-
Std. Error Unstandardized dized
Adjusted of the Coefficients Coefficients Sum of Mean
R R Square R Square Estimate B Std. Error Beta t Sig. Squares df Square F Sig.
United 0,825 0,680 0,660 0,071 Year -0,019 0,003 -0,825 -5,837 0,000 Regression 0,173 1 0,173 34,071 0,000
Kingdom Constant 40,258 6,509 6,185 0,000 Residual 0,081 16 0,005
Total 0,255 17

The independent variable is year The depending variable is ln(country) The independent variable is year

Own calculation based on Eurostat, 20196

God. XXXIII, BR. 1/2020. str. 39-58

57
Original scientific article
Regina Moczadlo: Re-industrialization to foster growth and employment in the European Union

Regina Moczadlo

R    

  E 
S
Zbog posljedica financijske krize Europska komisija je 2010. donijela strategiju Europa 2020. U toj je stra-
tegiji Komisija naglasila potrebu za reindustrijalizacijom te kao cilj postavila povećanje udjela europske
proizvođačke industrije u bruto domaćem proizvodu (BDP) s 14% na 20% do 2020. Namjera je bila ostvariti
veću međunarodnu konkurentnost i ojačati potencijal otvaranja novih radnih mjesta na europskim trži-
štima rada. Pokrenuto je više inicijativa na razini EU-a te na nacionalnoj razini pojedinih država članica.
Analiza u ovome radu, koja se temelji na literaturi i empirijskim podatcima, pokazuje da je vrlo upitno
može li EU ostvariti zacrtani cilj reindustrijalizacije. Poljska je jedina država članica EU-a sa zamjetnim
trendom reindustrijalizacije nakon 2000. Nadalje, čini se da utjecaj industrijalizacije na rast ovisi o veličini
udjela proizvođačke industrije. Nije se mogla utvrditi izravna povezanost reindustrijalizacije i zapošljava-
nja. Zemlje poput Švedske i Ujedinjene Kraljevine, koje su prolazile kroz deindustrijalizaciju, također su se
oporavile od financijske krize za dvije godine i otada imaju iznadprosječne stope rasta. Prema tome, udio
proizvođačke industrije sam po sebi vjerojatno nije uvijek odlučujuća varijabla za rast i zapošljavanje. Sto-
ga je upitno je li cilj reindustrijalizacije, kako ga je postavila Europska komisija, jednako prikladan za sve
države članice EU-a.
Ključne riječi: reindustrijalizacija, deindustrijalizacija, proizvodnja, rast, zapošljavanje

58 God. XXXIII, BR. 1/2020. str. 39-58

 CC BY-NC-SA

Ovayears
Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty licenca
after dopušta d
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Željko Pavić Antun Šundalić Original scientific articlesvoja djela
licenciraju
Josip Juraj Strossmayer Josip Juraj Strossmayer
University of Osijek University of Osijek Received: September 13, 2019
Faculty of Humanities Faculty of Economics in Osijek Accepted for publishing: December 5, 2019
and Social Sciences in Osijek Trg Ljudevita Gaja 7, Pogledajte sažetak lic
Lorenza Jagera 9, 31000 Osijek, Croatia
31000 Osijek, Croatia tuna@efos.hr This work is licensed under a
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CAPITALISM, MERITOCRACY ANDOvo je najrestriktivnija

LEGITIMACY: CROATIAN SOCIETY 5 od 6

THIRTY YEARS AFTER

A
Starting from the System Justification Theory, the aim of this paper is to explore levels of general system
legitimation, inequality perception and meritocracy perception among Croatian citizens, as well as to de-
termine whether there is a difference between social groups of lower and higher social standing in this
regard. Survey research on a sample of the Croatian general population (N = 353) revealed that on balance
the respondents do not perceive the Croatian social system as legitimate, equal and meritocratic. Regres-
sion analyses showed that retired persons express a substantially higher level of system legitimation and
meritocracy perception when compared to employed persons, while higher religiosity was also a significant
predictor in this regard. When it comes to the inequality perception, only female gender was a significant
predictor. The results are discussed within the framework of the contemporary theories of meritocracy and
system legitimation, as well as with reference to specific social and economic characteristics of the Croa-
tian society, such as the Croatian War of Independence, transition to capitalism, welfare state development
and labour market situation. Overall, the study results provide only a partial confirmation of the System
Justification Theory.
Keywords: Meritocracy, legitimacy, social inequality, crony capitalism, Croatia, system justification theory

vated many vulnerable social groups in seeking the

1. Introduction – two waves of discontent in
the Croatian society
The last decade of the twentieth century in Europe
was marked by the decline of socialism and new op-
portunities for the countries behind “the iron cur-
tain“. The Croatian society at the time found itself
in very specific circumstances. Already in the first
years of transition, many companies were collaps-
ing and unemployment was rising. The state was
consequently expected to have effective social jus-
tice and social sensitivity mechanisms. The stratifi-
cation of society into the narrow strata of the rich
and the majority population of the poor had acti-
right to a decent life. According to Haramija and
Njavro (2016), dissatisfaction with the transition
was the result of unsatisfactory circumstances re-
sulting from five factors: poor economic structures
inherited from socialism, the institutional legacy of
socialism, hasty privatization, the failed policies of
the market shock therapy, and finally, the underde-
veloped nature of investments that went mainly to
the financial sector. It is no wonder, therefore, that
the results of a research project in the late 1990s
showed widespread dissatisfaction with the social
consequences, efficiency and fairness of privatiza-
tion (Peračković, 1999).

God. XXXIII, BR. 1/2020. str. 59-70 59

Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after
In a nutshell, Croatian society has been living in a
state of permanent dissatisfaction since the inde-
pendence, which was rooted in dissatisfaction with
the reforms in the socialist society. The first wave
of dissatisfaction - dissatisfaction with the transi-
tion and its effects - can be dated from the mid-
1990s until the start of the Great Recession, whose
intensity in Croatia began to be felt in 2008, when
the second major wave of discontent began. From
the onset of the crisis to the present, the discon-
tent with political governance and the inefficient
public sector has begun to dominate, and to slowly
counteract the dissatisfaction with the social effects
of capitalism. Croatia, either intentionally or unin-
tentionally, has chosen the middle road between
liberal market economies (such as those of the Bal-
tic countries) and coordinated market economies
(such as Slovenia). However, such choices have led
to double unfavourable outcomes - lagging behind
in economic growth while increasing poverty risks
comparable to those of the countries that have cho-
sen more consistent and thus socially insensitive
market reforms (Lučev, Babić, 2012).
The developmental problems of the Croatian so-
ciety in these two waves of dissatisfaction can be
linked to the social deficiencies highlighted by
Franičević (2002), which arise from specific social
ties that have had a pronounced impact on eco-
nomic processes. Thus, in the period of political
capitalism as Županov called it (1995), it is noted
that the influence of kinship, political, ethnic and
regional ties impeded economic and social devel-
opment. In the context of clear and effective social
norms, such relationships can act as a generator of
social capital and promote trust leading to lower
transaction costs. But in the opposite situation, the
impact is less positive. On the other hand, strong
social ties in the Croatian context were manifested
through pronounced national-political identifica-
tion, which can also have double effects. On the one
hand, such identification can increase the level of
generalized trust and consensus around a socioeco-
nomic development strategy. On the other hand,
the strong identification and image of the cohesive
community can block the changes and necessary
sacrifices that any reform effort must require. The
growing discourse on the need for reform and the
“weakening” of the state may be precisely the re-
sult of the weakening national identification. From
a socio-anthropological perspective, it could be
claimed that in the Croatian society the processes
60
described by Dinko Tomašić in the 1930s have con-
tinued to exist. Tomašić writes that cities were con-
quered by villages whose population significantly
influenced the change in the social structure of cit-
ies. Something similar happened to the Croatian
society in the early years of independence. A large
population (mostly rural) came to Croatian cities,
and from such heterogeneous population the new
management elite was recruited. Kinship, regional
and political ties became a common criterion for
social advancement. The rapid enrichment of in-
dividuals, accompanied by an increasing number
of the unemployed, had become a frequent media
topic. As Šundalić (2010: 54) pointed out, “cities, as
administrative-political centres, had become hubs
of the homo novus with unnatural mix of socially
responsible functions and socially insensitive be-
haviour, ..., The accelerated social stratification gen-
erated social discontent and existential insecurity,
which was also confirmed by the growing distrust
of institutions. The experience of the past years of
transition has caused scepticism among the citi-
zens when it comes to the state and prospects for
the economy, democracy, civic values, and the like“.
2. Theoretical framework and research
questions
It could be expected that the aforementioned social
circumstances reflect differently on various social
groups. It would also be very intuitive to posit that
beliefs of social groups correspond to their real
social circumstances and interests. For example,
in a study from the late 1990s, Magdalenić (1998)
found that the perception of social justice fulfil-
ment in Croatia was lower for those workers who
were less satisfied with their current circumstances
and estimated their standard of living being lower
than before the war. However, the system justi-
fication theory (SJT; Jost, Banaji, 1994; Jost et al.,
2013; Jost et al., 2004) holds that people oscillate
between ego-justification, group-justification and
system-justification. In other words, in some cases
people will espouse beliefs that promote their real
material interests or the feeling of self-worth. In
other cases, group justification will be more pro-
nounced. As proposed by the social identification
theory (e.g., Tajfel, 1978, 1981), people tend to have
negative out-groups beliefs and positive in-group
beliefs in order to maintain the sense of self-worth
or to promote group interests. However, SJT pro-
ponents argue that there are epistemological rea-
God. XXXIII, BR. 1/2020. str. 59-70

sons, primarily related to reducing of anxiety and
uncertainty, which lead individuals to justify the
existing social system. In some cases, especially
when there are strong ideological legitimizing be-
lief systems, social beliefs will mirror and legitimate
the real positions of the social group. Sometimes,
especially when measured with implicit measures,
low status social classes (or groups in general) will
hold negative in-group beliefs and tend to hold the
system as just and legitimate, mainly because of the
cognitive dissonance process. It is natural to think
that persons in disadvantaged social position would
hold negative beliefs about the contemporary Croa-
tian society, but the aforementioned mechanism of
cognitive dissonance might counteract such beliefs.
Additionally, according to SJT, such justification
beliefs are more often to be found when lower class-
es have no strong group interests in a particular
case (Owuamalam et al., 2017), which is surely the
case when holding beliefs about the contemporary
Croatian society and its characteristics. In sum, as
Brandt (2013) noted, SJT can be distinguished from
the competing theories, such as the aforementioned
social identity theory and social dominance theory
(Sidanius, Prato, 1999), precisely by the assertion
that lower status persons provide more legitimacy
to the system due to cognitive dissonance (the so-
called status-legitimacy hypothesis).
Empirical confirmation of SJT is relatively scarce,
and almost exclusively found with regard to dif-
ferences between ethnic and racial groups (Henry,
Saul, 2006; Sengupta et al., 2015). On the other
hand, Brandt (2013) tested the system justification
theory in three multi-year studies with large and
representative samples and found no confirmation
for the status-legitimacy hypothesis. Using various
measures of low status (class, education, gender,
race) and different measures of legitimacy (mainly
trust and confidence in the system and social in-
stitutions), he also found no support for the con-
tention that the status-legitimacy takes place only
in specific circumstances such as high inequality
and high opportunities for social protest. In other
words, even such social circumstances did not pro-
duce cognitive dissonance that would lead to the
status-legitimacy. Chang and Kang (2018) analysed
the data from the World Values Survey (WVS)
2005-2007 and found that as a person’s income lev-
el rises, the preference for redistribution becomes
weaker, albeit with moderating impact of national
identification. These results were fully confirmed
God. XXXIII, BR. 1/2020. str. 59-70
Original scientific article
by Caricati (2016) using the data from the Inter-
national Social Survey Program (ISSP). He found
that lower status individuals, measured by social
class, income, and self-position in social hierarchy,
were more likely to perceive the income differences
as too large. This relation is even stronger in more
democratic countries, which is contrary to the pre-
dictions of the SJT.
Therefore, contrary to SJT, it seems that the re-
search evidence is in line with the real-conflict the-
sis which posits that persons in lower social posi-
tions, in accordance with in-group interests, tend
to show lower levels of willingness to legitimize the
social system in which they live, as well as the fact
that they are more critical about inequalities and
lack of meritocracy. This position is often labelled
as the “realistic group conflict theory“. Having this
in mind, the aim of this paper is to explore levels of
general system legitimation, inequality perception
and meritocracy perception among Croatian citi-
zens, and to determine whether there is a difference
between social groups of lower and higher social
standings in this regard. With this in mind, in the
research three research questions were proposed:
RQ1. Do Croatian citizens perceive the social
system as legitimate, equal and meritocratic?
RQ2. Are the aforementioned constructs simi-
lar of distinct?
RQ3. Are there any differences between social
groups with higher and lower social standing
when it comes to legitimacy, inequality and
meritocracy perception?
3. Methods
3.1 Measurements
The inequality perception was measured by a
scale consisting of two items whereby respond-
ents should indicate their level of agreement on a
five-point Likert type response format. Similar, al-
beit one-item measures of inequality, were used in
Larsen (2016) and Roex, Huijits and Sieben (2019).
The results on the items were summed in order to
obtain the summary measure of inequality percep-
tion (Cronbach’s α = 0.72).
The items were as follows:
Croatian society is polarized – there is a gap be-
tween the rich and the poor
61
Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after
Croatian society is insensitive towards the less for-
tunate – some social groups are struggling (unem-
ployed, retired persons, disabled persons, etc.).
The perception of meritocracy was measured by
means of an item/statement, whereby respondents
also indicated their level of agreement on a five-
point Likert type response format. The statement
was as follows:
Croatian society is meritocratic – people get ahead
by hard work, knowledge and ability.
Economic and political legitimacy perception was
measured by a four-item scale consisting of two
items which measured the level of economic devel-
opment and two statements which measured the
level of political development of Croatian society.
Here as well the respondents were asked to indicate
their level of agreement with statements on a five-
point Likert type response format. The statements
were as follows:
Croatian society is economically developed
Croatian society is economically rich
Croatian society is fully democratic
In Croatian society there is a high level of awareness
about citizens’ political rights
The results on the items were also summed in order
to obtain a summary measure of general system le-
gitimisation (Cronbach’s α = 0.66).
Gender was measured with participants’ self-re-
ported gender (coded 0 = women and 1 = men).
Level of education was measured on a five-point
scale ranging from 1 (elementary school or less) to
5 (graduate or postgraduate degree). Place of resi-
dence was measured as a binary variable, with rural
= 0; urban = 1. Religiosity was measured on a five-
point scale (1 – not religious at all, 5 – fully reli-
gious). Veteran status was measured by asking the
respondents whether they or at least one of their
parents had participated in the Croatian War of In-
dependence (Yes = 1; No = 0).
3.2 Sampling
In the study, a non-random sample of the Croatian
population was used (N = 353). Namely, under-
graduate students from the Faculty of Economics,
Josip Juraj Strossmayer University of Osijek (Croa-
tia), collected the data by F2F interviewing in their
place of residence by means of a snowball sampling
procedure. Having that in mind, it can be assumed
62
that most of the respondents are residents of Slavo-
nia and Baranja region. The data were collected in
January 2019.
In the sample, there were 54.0% of female and 46.0%
of male respondents.1 The average age was 39.66
years (SD = 17.20). About 65.63 % of the respond-
ents live in urban areas and the remaining 34.38 %
in rural settlements. When it comes to employment
status, the data are as follows: employed – 46.02%,
unemployed – 15.34%, retired – 13.92%, and stu-
dents – 24.72%. Regarding the war veteran status,
48.58% of the respondents personally participated
in the Croatian War of Independence or at least
one of their parents was a participant. The average
religiosity on 1 to 5 scale amounted to 3.46. Only
5.97% of the respondents were people with elemen-
tary school or less. Almost a half of the respondents
(45.17%) completed a four–year secondary school,
while a three-year secondary school was completed
by 7.67% of the respondents. The share of respond-
ents with undergraduate degree was 26.99%, while
the remaining 14.20% had graduate or postgraduate
degree.
4. Results
Our analysis plan included descriptive statistics
(RQ1), correlational analyses (RQ2), and hier-
archical multiple regression analyses (RQ3). As
noted in measurements section, we measured
economic and political legitimacy perception with
four items and summed up the results in order to
obtain a total score of legitimacy. Such a score had
a minimum of 4 and a maximum of 20. The aver-
age result was 11.45 (SD = 2.86). The least accept-
ed statement was the one concerning the aware-
ness about citizens’ political rights (M = 2.43, SD
= 1.01), followed by the statement about economic
development (M = 2.63, SD = 0.92), the statement
about the economic richness of Croatian society
(M = 2.91, SD = 1.08), and the level of democracy
in Croatian society (M = 3.49, SD = 1.06). When it
comes to inequality perception, the average result
on the two-item scale (the minimum was 2 and
maximum 10) was 7.84 (SD = 1.60). Both state-
ments had similar levels of agreement – the po-
larisation statement with the average of 3.99 (SD =
0.88) and the insensitivity statement with 3.85 (SD
= 0.94). The average meritocracy perception on a
1 to 5 scale was 2.43 (SD = 0.98). The intercorrela-
tions (Pearson’s r) were as follows:
God. XXXIII, BR. 1/2020. str. 59-70
 Original scientific article

Table 1 Intercorrelation matrix

Items Economic and political legitimacy Meritocracy Inequality
Economic and political legitimacy 1 0.37 - 0.20
Meritocracy 0.37 1 - 0.20
Inequality - 0.20 - 0.20 1
Source: Authors

As the first criterion in the regression analyses the
system legitimation was entered. Before the analy-
sis, we checked that all the requirements of the mul-
tiple linear regression were satisfied. Namely, there
was no autocorrelation (Durbin-Watson statistics
was 1.52), residuals were approximately normally
distributed with no apparent heteroscedasticity,
and there were no multicollinearity issues (all the
variance inflation factors were between 1 and 2).
From Table 2, we can note that only religiosity and
employment status (retired vs. employed persons)
proved to be significant predictors. More precisely,
a one point rise in religiosity leads to the 0.58 rise
in the political and economic legitimation scale (β
= 0.24) when all other predictors are held constant.
Retired persons had 1.18 points higher result on the
scale. It could be also noted that education is close
to the significance level of .05 (p = 0.09).

Table 2 Hierarchical linear regression with system legitimation as a criterion variable

Model 1 Model 2
Variable b SE B β b SE B β
Gender 0.02 0.31 0.01 0.18 0.32 0.03
Age (in years) -0.00 0.01 -0.01 -0.01 0.01 -0.04
Residence 0.44 0.32 0.07 0.36 0.33 0.07
Religiosity 0.59 0.13 0.25** 0.58 0.13 0.24**
Empl. status – unemployed -0.05 0.45 -0.01
Empl. status – retired 1.18 0.56 0.14*
Empl. status – student 0.03 0.46 0,01
War veteran 0.30 0.32 0.05
Education -0.29 0.17 -0,10
R2 0,06 0,08
Adjusted R2 0,05 0,06
R2 - change 0,06 0,02
F for change in R2 5.54** 1.58
Gender: Female = 0, Male = 1; Employment status: employed as the reference category; War veteran status: Yes = 1; No
= 0; Residence: Rural = 0; Urban = 1.
*p < .05, **p < .01
Source: Authors

In the second analysis, meritocracy perception was
entered as the criterion variable. In this case as well
all the requirements of the multiple regression were
satisfied. Durbin Watson statistics was 1.52, the
residuals were normally distributed, there was no
heteroscedasticity judging from the residuals distri-
butions, and there were no multicollinearity suspi-
cions (VIFs ranged from 0 to 1).
The data show that religiosity and employment sta-
tus (retired persons and students when compared to
employed persons) led to higher meritocracy per-
ception. Religiosity was not as strong a predictor as
in the case of economic and political legitimisation
(b = 0.10, β = 0.12). Retired persons had 0.53 points
higher meritocracy perception than employed per-
sons, while students’ results was 0.37 points higher.

God. XXXIII, BR. 1/2020. str. 59-70 63

Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after

Table 3 Hierarchical linear regression with meritocracy perception as a criterion variable

Model 1 Model 2
Variable b SE B β b SE B β
Gender 0.12 0.11 0.06 0.14 0.11 0.07
Age (in years) 0.00 0.00 0.01 0.00 0.01 0.03
Residence 0.10 0.11 0.05 0.10 0.11 0.05
Religiosity 0.11 0.05 0.13* 0.10 0.05 0.12*
Empl. status – unemployed 0.16 0.16 0.06
Empl. status – retired 0.53 0.20 0.19**
Empl. status – student 0.37 0.16 0.17*
War veteran 0.12 0.11 0.06
Education 0.05 0.06 0.05
R2 0.02 0.07
Adjusted R 2
0,01 0.05
R2 – change 0.02 0.05
F for change in R2 2.14* 3.34**
Gender: Female = 0, Male = 1; Employment status: employed as the reference category; War veteran status: Yes = 1; No
= 2; Residence: Rural = 1; Urban = 2.
*p < .05, **p < .01
Source: Authors

In the end, we also conducted a hierarchical linear re- a significant predictor. Namely, women had 0.42 points
gression with the perception of inequality as the crite- higher results than men (β = 0.13), i.e. they more often
rion variable. In this case, only gender happened to be see Croatian society as polarised and insensitive.

Table 4 Hierarchical linear regression with inequality perception as a criterion variable

Model 1 Model 2
Variable B SE B β B SE B β
Gender 0.47 0.18 0.15** 0.42 0.19 0.13**
Age (in years) 0.10 0.01 0.10 0.01 0.01 0.06
Residence -0.20 0.18 -0.06 -0.21 0.19 -0.06
Religiosity -0.03 0.08 -0.02 -0.02 0.08 -0.02
Empl. status – unemployed -0.01 0.26 -0.01
Empl. status – retired -0.21 0.33 -0.05
Empl. status – student -0.33 0.27 -0.09
War veteran -0.27 0.18 -0.08
Education 0.02 0.10 0.01
R 2
0.04 0.05
Adjusted R2 0.03 0.03
R2 – change 0.04 0.01
F for change in R 2
3.20* 1.03
Gender: Female = 0, Male = 1; Employment status: employed as the reference category; War veteran status: Yes = 1; No
= 2; Residence: Rural = 1; Urban = 2.
*p < .05, **p < .01
Source: Authors

64 God. XXXIII, BR. 1/2020. str. 59-70


5. Discussion
From the descriptive results it can be concluded
that the respondents do not perceive the social sys-
tem as legitimate, equal and meritocratic, thus giv-
ing the answer to the RQ1 posed in this study. First,
the respondents judge the current level of econom-
ic inequality in Croatian society as unacceptable, as
the average result on a 2 to 10 scale was 7.84. This
does not come as a surprise, having in mind that the
citizens of former socialist East-European countries
are very critical towards inequality in their societies
(e.g., Kelley, Zagorski, 2004) and hold a non-meri-
tocratic perception of their societies (e.g., Redmond
et al., 2002). It is interesting to note that the income
inequality rose in Croatia in comparison to the so-
cialist times, but not at levels that are observable in
some other transition countries. Namely, the Gini
coefficient rose dramatically in the Slavic republics
of the former Soviet Union, as well as in the Baltics.
For instance, the Gini for Lithuania rose from 23 in
the period 1987-1988 to 37 in the period 1993-1995
(Milanović, 1998: 42-43). As Nestić (2003) showed,
in Croatia the rise was almost negligible, from 0.286
in 1988 to 0.297 in 1998. Nestić attributed this to
the slow economic development that was not con-
ducive to significant wage differentials and property
earnings, as well as to early retirement schemes and
other indirect social and capital transfers. The first
point is very interesting since the perception of so-
cial differentiation was very widespread because
of the property redistribution and the crony capi-
talism at the time. However, the share of property
income was probably still very low in the entire
income distribution (Nestić, 2003: 15). In the last
ten years, Gini has even shown a slightly decreasing
trend, from 31.6 in 2010 to 29.7 in 2018.2
From the results it can also be inferred that the
respondents judge Croatian society to be slightly
non-meritocratic since the average results on a 1
to 5 scale was 2.43. Meritocracy is usually defined
as a system where social positions are awarded by
a transparent and impartial system that rewards
merit – a combination of capabilities and effort
– rather than social class origin or other ascriptive
characteristics (for different approaches to defin-
ing meritocracy, see Kim, Choi, 2017). Coupled
with a just distribution of wealth, this can be seen
as a necessary constituent of a just society. How-
ever, all contemporary societies represent a mix
of meritocratic (education, ability, effort, etc.) and
non-meritocratic (corruption, family wealth, politi-
God. XXXIII, BR. 1/2020. str. 59-70
Original scientific article
cal influences, random life circumstances, etc.) ele-
ments. It is no wonder that a large number of recent
studies show that citizens often do not see societies
in which they live as meritocratic. Reynolds and
Xian (2014) found that Americans more often hold
meritocratic than non-meritocratic beliefs. How-
ever, almost a quarter of them simultaneously hold
both meritocratic and non-meritocratic beliefs. In
Bubak’s (2019) study based on the WVS data, even
in the Confucianism-permeated Chinese culture
the statement that personal success is determined
by forces outside of one’s control (luck determines
success) had the average of 3.7 on a 1 to 10 scale.
A similar mix of meritocratic and non-meritocratic
perceptions was also found in a study conducted on
a sample of Croatian student population (Šundalić,
Pavić, 2011). Non-meritocratic elements are more
often to be found in times where old institutional
arrangements are abandoned, i.e. when individual
aspirations are boundless and not integrated into
legitimate social goals. In classical sociological the-
ories, this situation is often labelled as anomy (Dur-
kheim, 1997). In other words, the transition from
one system to another always carries the uncertain-
ty of the unknown. At first, the “misinterpretations”
of the new system are happening. They can be in-
tentional and sometimes due to the circumstances
in which the transition occurs. The transition of
Croatian society began in the circumstances of the
Croatian War of Independence that destabilized life
throughout Croatia. In addition, the experience of
the legacy of socialist economic policy and social-
ist culture of collectivism and egalitarianism repre-
sented an unfavourable climate for the takeover of
civic culture and market economy.
The level of system legitimisation is also quite low
– the average of 11.45 on a 4 to 20 point scale. This
finding is not a surprise, given the developmental
and political problems described in the introduc-
tion, as well as the results of previous research that
indicated very low and declining trust in the main
institutions of Croatian society (Baloban, Rimac,
1999; Sekulić, Šporer, 2010). As an illustration, ac-
cording to the public opinion research of Ivo Pilar
Institute of Social Sciences (the so-called Pilar’s
barometer of Croatian society) conducted in 2016,
only 3 of the 11 listed institutions were rated with
an average higher than 5.0 on a 1 to 10 point scale.
As can be noted in the intercorrelational matrix, the
three constructs are interrelated, especially when it
comes to economic and political legitimisation and
65
Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after
perception of meritocracy. In consequence, our an-
swer to the RQ3 would be that Croatian citizens see
lack of meritocracy as one of the important reasons
for the current problems related to political and
economic development.
In order to provide an answer to the RQ2, we con-
ducted three regression analyses, which revealed
some differences between social groups with regard
to the outcome variables. The most striking find-
ing is that retired persons perceived the system as
more legitimate and meritocratic as compared to
the employed persons. As a possible explanation,
we can note that Croatia fits nicely into the group of
societies with high elderly-biased welfare spending
focus. Welfare systems in those societies, of which
Southern European countries such as Italy, Greece
and Spain are good examples, are focused on main-
taining social services for the elderly (mainly gen-
erous retirement schemes) as opposed to provision
of services for younger cohorts such as child care
or youth-targeted employment programs (Henjak,
2008). Even though pension allowances in Croatia
are not high, early retirement schemes and special
pensions provisions (war veterans, etc.) probably
create some complacency among older generations
and divert resources from possible social programs
for the youth. This further translates into high lev-
els of youth unemployment and dependence on
families for housing provision and income. For in-
stance, in 2018, youth unemployment rate in Croa-
tia amounted to 23.8%, putting Croatia in the fourth
place in the EU.3 In addition, the estimated average
age of leaving the parental home was over 31 years,
the second highest in the EU.4 Greater satisfaction
of retired persons can also be interpreted through
relative deprivation (Runciman, 1966; Townsend,
1979), according to which pensioners no longer
have such a critical attitude to the existing social
situation since they have resolved their life priori-
ties. However, an important theoretical note should
be made. Specifically, there is a growing body of
evidence showing that citizens are also oriented to-
wards supranational criteria in assessing their sta-
tus (Watson et al., 2010; Berthoud, 2012). In other
words, in this case, the unfavourable assessment of
Croatia might have drawn down the satisfaction,
hiding the possible differences that arise from the
different position within the Croatian society. Thus,
relative deprivation is a term that operates at dif-
ferent levels of analysis, whereas groups with which
individuals and groups are compared are manifold
66
and variable, with different comparison criteria
being included in different contexts (Fahey, 2010).
In the context of our research, given the accession
to the European Union and the increasing promi-
nence of European issues in Croatian society, it can
be assumed that all categories of citizens compare
Croatia to other, primarily developed, European
countries. For example, an analysis conducted by
Berthoud (2012) shows that one third of percep-
tions of poverty can be explained by income relative
to the country average and two-thirds by income
relative to average income in the European Union.
This implies that the overall assessment of the situa-
tion may affect different estimates of intra-national
deprivation.
Also unexpected is the finding that there is no
greater dissatisfaction among unemployed persons
when compared to employed persons. Namely, the
polarisation in the perception of inequality could be
affected by the general level of meritocratic percep-
tions in a country. La Roex et al. (2019) found that
a country level of meritocratic perceptions is con-
nected to higher polarisation between lower and
higher socioeconomic strata with regard to income
inequality. Having in mind low meritocratic per-
ceptions in the current study, therefore, we would
expect that employment status and education sig-
nificantly impacted the perception of inequality
in Croatian society. However, it can be assumed
that in the situation of intensive emigration a large
number of individuals who were unemployed and
dissatisfied with this fact either left the country
or found employment. Furthermore, it is possible
that employee dissatisfaction also prevails with the
existing situation, that is, the mere fact of employ-
ment does not significantly reduce it due to insuf-
ficient salaries and inadequate working conditions.
Older age in previous research was often con-
nected to less meritocratic perceptions (Barnes,
2002; Reynolds, Xian, 2014). The usual explanation
is the so-called exposure thesis, which posits that
experiences of unfair treatment and other non-
meritocratic experiences accumulate over time and
produce cynicism about meritocracy. However, the
age effect was not found in the current study. The
probable explanation is that the age-effect in this
case was not linear, but curvilinear. Namely, the
aforementioned higher perception of economic
and political legitimacy and meritocracy among
retired persons has surely affected the relationship
between age and these outcome measures.
God. XXXIII, BR. 1/2020. str. 59-70

The lack of differences in attitudes with relation
to the war veteran status can be explained in two
ways. One relates to the proportion of measure-
ment error that we agreed to when designing the
question in such a way that it included not only
veterans but also veterans in the family. Such a
decision was conditional on a relatively small
planned sample, but it led to the stated measure-
ment error resulting from differences in attitudes
between the veterans themselves and their family
members, since in some cases these views would
not coincide. The second interpretation may re-
fer to the very ambivalence of attitudes that may
stem from veterans’ experience and from warfare
in general. On the one hand, suffering can lead to
greater dissatisfaction regarding the social situa-
tion. But on the other hand, the same experience
can lead to the activation of cognitive dissonance,
which entails a selective perception that focuses
more on the more positive aspects of the achieved
state, especially on the attainment of state inde-
pendence. Thus, for example, in a study of the per-
ception of privatization Peračković (2000) found
that war victims had a somewhat more positive
perception of the privatization process than other
citizens.
With regard to gender, the direction of the possible
theoretical hypothesis is not clear. On the one hand,
exclusion from the labour market could lead to “ac-
quired helplessness“ and the attitudes that social
positions are gained through forces beyond one’s
control, which was confirmed in a research based
on the WVS data (Fisman, O’Neill, 2009), but also
disconfirmed in a study based on the USA General
Social Survey data (Reynolds, Xian, 2014) wherein
the correlation ran in the opposite direction. On the
other hand, in the Croatian socioeconomic context,
precisely the same factor can lead to unfavourable
experiences and resentment due to unemployment,
low pay, substandard working conditions, etc. In
other words, increased participation in the labour
market could lead to the perception of a lack of
meritocracy and disappointment with the current
social and economic development.
God. XXXIII, BR. 1/2020. str. 59-70
Original scientific article
With regard to religiosity and meritocratic beliefs,
our results confirm research indicating that reli-
gious persons tend to espouse individualistic be-
liefs about individual success (Hunt, 2002) and that
atheists hold meritocratic perceptions about their
society less often than religious persons (Reynolds,
Xian, 2014). In other words, religiosity might foster
the feeling of personal responsibility that translates
into higher levels of legitimacy and meritocracy
perceptions. In the Croatian society there is also
an additional contextual factor related to the right-
wing political orientation and religiosity. Namely,
in Croatia, higher religiosity is connected to the
right-wing political values and attitudes (e.g., La-
bus, 2005; Sekulić, Šporer, 2006), with affirmative
views about the Croatian statehood and negative
views about the Yugoslav state being an important
part of such attitudes. Consequently, holding af-
firmative views about the Croatian statehood and
negative views about contemporary Croatian soci-
ety at the same time would represent a dissonant
state of mind, thus leading to higher legitimacy and
meritocracy perceptions.
6. Conclusion
As expected, the results of our pilot study showed
a low level of meritocratic beliefs and political and
economic legitimisation, as well as high intolerance
to the current level of inequalities in Croatian so-
ciety. When it comes to group differences in per-
ception, we did not find consistent support for the
social justification theory, the only exemption being
more legitimacy and meritocratic perceptions of
the retired persons. However, we believe that such,
somewhat surprising, finding might be explained
by evoking the peculiarities of the Croatian labour
market, such as early retirement and war pensions.
Given the multitude of possible measures of the
aforementioned constructs, future studies with
different measures should check the robustness of
our findings when it comes to Croatian society. In
addition, since our study was conducted on a non-
random sample, future studies with random sam-
ples are warranted.
67
Željko Pavić, Antun Šundalić: Capitalism, meritocracy and legitimacy: Croatian society thirty years after

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E

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2 For a comprehensive review of evidence on both points, see Janmmat (2013).
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June 4, 2019)

Željko Pavić
Antun Šundalić

K,   :

    
S
Polazeći od teorije opravdanja sustava, cilj je ovog rada istražiti razinu opće legitimacije sustava, percepciju
nejednakosti i percepciju meritokracije među hrvatskim građanima, kao i utvrditi postoji li razlika između
socijalnih skupina nižeg i višeg društvenog položaja u ovome smislu. Anketno istraživanje na uzorku opće
populacije Hrvatske (N = 353) pokazalo je da ispitanici hrvatski društveni sustav ne smatraju legitimnim,
jednakim i meritokratskim. Regresijske analize pokazale su da umirovljenici iskazuju znatno viši stupanj le-
gitimacije sustava i veću percepciju meritokracije u usporedbi sa zaposlenima, a veća je religioznost također
značajan prediktor u tom pogledu. Kad je u pitanju percepcija nejednakosti, samo je ženski spol bio znača-
jan prediktor. Rezultati se u radu stavljaju u okvir suvremenih teorija meritokracije i legitimacije sustava,
a objašnjavaju se i specifičnim socijalnim i ekonomskim karakteristikama hrvatskog društva, kao što su
Domovinski rat, tranzicija u kapitalizam, razvoj socijalne države i stanje na tržištu rada. Ukupno gledajući,
rezultati studije pružaju samo djelomičnu potvrdu teorije opravdanja sustava.
Ključne riječi: meritokracija, legitimacija, društvene nejednakosti, kapitalizam, Hrvatska, teorija opravda-
vanja sustava

70 God. XXXIII, BR. 1/2020. str. 59-70

 CC BY-NC-SA

Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises
Dominika Crnjac Milić
Josip Juraj Strossmayer
University of Osijek
Faculty of Electrical Engineering,
Computer Science and Information
Technology Osijek
Kneza Trpimira 2b,
31000 Osijek, Croatia
dominika.crnjac@ferit.hr
Phone: +38531224600
Domagoj Pavić
VODOVOD-OSIJEK d.o.o.
Poljski put 1,
31000 Osijek, Croatia
domagoj.pavic@vodovod.com
Phone: +38531330738
Bruno Mandić
Josip Juraj Strossmayer
University of Osijek
Faculty of Economics in Osijek
Trg Ljudevita Gaja 7,
31000 Osijek, Croatia
bruno.mandic@efos.hr
Phone: +358994754800
Ova licenca dopušta d
nekomercijalne svrhe
Original scientific articlesvoja djela
licenciraju
Received: October 24, 2019
Accepted for publishing: December 9, 2019
Pogledajte sažetak lic
This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Imenovanje-Nekome
CC BY-NC-ND
Ovo je najrestriktivnija

5 od 6

TRAINING METHODS
IN MUNICIPAL ENTERPRISES
A
The impact of change on the contemporary business is immense. Regardless of their position in an or-
ganisation, employees face changes every day. Change can cause uncertainty, anxiety and discouragement.
Given that business processes are becoming increasingly specialised, businesses need to be able to adapt
successfully to the demands of the market and changes in the business environment. Targeted and continu-
ous training helps employees acquire skills and knowledge needed to respond to the challenges they face
in the workplace.
The main goal of a business is to create value. Increasingly, businesses are starting to realise that human re-
sources are one of the most important resources in achieving that goal. In today’s business environment, the
success of a company greatly depends on the competences and motivation of its employees. It is becoming
increasingly difficult to maintain employee motivation and engagement, and achieve the desired business
outcomes. Employee training is an important factor in meeting this challenge.
The paper presents the results of a survey on employee training methods used by municipal service compa-
nies in the Republic of Croatia. An analysis is given of various training methods, explaining the importance
and purpose of some of them.
Keywords: Education, municipal service companies, business organisation, motivation

1. Introduction companies have recognised the importance of con-

The development of technology and globalisation
of markets are increasing competitive pressures on
businesses, forcing them to continuously improve
their performance. Businesses are becoming in-
creasingly aware that their success depends on their
ability to stay abreast of new trends, to adopt new
technologies, and develop all segments of business.
In view of all that has been mentioned so far, many
tinuous training of their employees.
Knowledge and competitive advantage are closely
related in modern business. We live in the age of
knowledge, i.e. the knowledge society or knowledge
economy, as the new economy is called (Glavaš,
2012). Despite the growing awareness of the im-
portance of continuous training, this topic is still
under-researched.1 The present paper aims to ex-

God. XXXIII, BR. 1/2020. str. 71-82 71

Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises
amine the availability of employee training oppor-
tunities in companies with complex organisational
structures such as municipal service companies in
the Republic of Croatia. Changes in these types of
organisations are extremely frequent due to fre-
quent changes in regulations.2 A review of recent
research shows that no previous studies have inves-
tigated this issue. Thus, there is a need to address
this research gap and analyse the training opportu-
nities provided to employees of such companies as
well as their participation.
Primary research was conducted by means of a
survey to examine the training methods and oppor-
tunities currently available to the employees of the
observed companies. The paper identifies key fac-
tors as well as training methods aimed at improv-
ing company performance. Specifically, the paper
aims to determine the relationship between the
management of a municipal service company and
employee training management. Moreover, the pa-
per explores and describes contemporary theoreti-
cal approaches to employee training in municipal
service companies. The research points to the need
for identifying the training needs of employees and
developing training methods. Further empirical
research is needed to analyse management percep-
tions about the impact of employee training on the
performance of a company.
For the purpose of this paper, both off- and on-the-
job training are examined. On-the-job training is de-
livered by a person who works for the company, usu-
ally one of the employees who has been trained and
has specific qualifications, competences and skills
needed for transferring his/her knowledge to other
employees. Off-the-job training is provided by per-
sons who do not work for the company. The training
is delivered by external training providers either at
the company premises or at an outside location.
A survey was done of a random sample of employ-
ees of municipal service companies. The profile of
the respondents was diverse, in terms of their edu-
cation level and position in the company.
The paper examines the availability of employee
training opportunities in municipal service compa-
nies in the Republic of Croatia. It intends to deter-
mine whether municipal service companies invest
in the training of their employees and whether they
have an allocated training budget for the coming
year. Furthermore, the paper aims to determine
how often such organisations provide training to
72
their employees as well as the employees’ attitudes
towards training. The study also seeks to examine
which training methods are most frequently used
in municipal service companies in the Republic of
Croatia.
2. Research methodology
This paper is based on comprehensive research as
part of a doctoral dissertation defended at Josip
Juraj Strossmayer University of Osijek, Faculty of
Economics Osijek.3
For the purpose of this paper, the following re-
search methods were used: analysis, synthesis,
deduction, induction, abstraction, concretisation,
generalisation, classification, etc. Furthermore, a
descriptive statistical method, comparison, prov-
ing and disproving were used to test the hypoth-
eses. 123 employees of several Croatian municipal
service companies were surveyed. The respondents
were of different age, gender, education level and
work experience. The survey sought to determine
whether municipal service companies invest in the
training of their employees. The respondents were
asked whether organisations they work in invest in
employee training, how often they had an opportu-
nity to participate in the training and which train-
ing methods were used.
3. The importance of employee training for
business organisations
Evidence suggests that the implementation of em-
ployee training programmes contributes consider-
ably to the efficient management and development
of human resources. To survive and prosper in to-
day’s market, companies must meet the challenges
of growing competition. Lack of knowledge and
skills, i.e. adequate training for employees often
leads to companies losing market share or falling
behind their competition. More and more compa-
nies are becoming aware that money, time, and en-
ergy should be invested in the training of their em-
ployees. According to Noe et al. (2006), the growing
use of knowledge is recognised as a highly-efficient
training strategy. The training must develop more
than just the basic skills in order for companies
to achieve competitive advantage. It needs to be
viewed in a more general sense as a way of creating
intellectual capital. As such, it entails developing
skills needed for performing a job, using technology
God. XXXIII, BR. 1/2020. str. 71-82

in the exchange of information with other employ-
ees, and understanding clients and the production
system (Noe et al., 2006). Furthermore, it is neces-
sary to raise employee awareness of the importance
of continuous learning and sharing of information
and knowledge for their performance and thus the
quality of products and services. “Therefore, in an
economy where the only certainty is uncertainty,
knowledge becomes the one sure source of last-
ing competitive advantage. It becomes a major as-
set and lever for development” (Bahtijarević-Šiber,
1999).
In the late 1960s, researchers showed an increased
interest in adult education as a result of attempts to
radically increase learning opportunities for adult
learners. The idea of adult education was conceived
then and there and the concept of recurrent educa-
tion was developed. It sought to provide individu-
als with various forms of education after they have
completed their formal education with the aim
of facilitating their adaptation to the increasingly
complex challenges and conditions of work (Barić,
2004).4
The advancement of technology and the growing
digitalisation of business systems have shifted the
focus from physical strength to human intellect.
“Knowledge management is not a new discipline;
however, the development of information and com-
munication technologies and globalisation trends
have made it of central importance to companies
seeking to respond to the increasing business chal-
lenges” (Aščić, 2016).
Other reasons to provide learning and training op-
portunities to employees are the growing complex-
ity of workplace tasks, the rapidly changing and
increasingly uncertain business environment, as
well as the fact that new skills are required in the
modern workplace.
To stay abreast of the current trends in the business
environment, it is necessary to continually update
employee knowledge and skills, considering the gap
between knowledge acquired through formal edu-
cation and that required in the modern workplace.
The contemporary business environment is becom-
ing increasingly complex, fast-paced, and uncer-
tain. To keep up, it is important for modern busi-
nesses to adopt a proactive approach to employee
development and make it a continuous priority as it
is the only way for a company to survive and thrive.
The human resource (HR) department has an im-
God. XXXIII, BR. 1/2020. str. 71-82
Original scientific article
portant role in the organisation of on- and off-the-
job knowledge and skills training programmes for
employees. The HR department decides which em-
ployees need training keeping in mind the require-
ments of their job. Moreover, the HR department
professionals often take on the role of trainers when
there is a need to inform employees of the changes
in the company’s organisational structure, culture,
etc.
“Various terms are used in the theory and prac-
tice of employee training and development. They
are often used interchangeably, even though they
have different meanings. Frequently used terms
include, among others, learning, training, educa-
tion, and development” (Bahtijarević-Šiber, 1999).
Learning denotes the process of acquiring new
skills and knowledge leading to permanent chang-
es in the behaviour and thinking of an individual.
The acquisition of knowledge, skills, and habits
through training and practice are characteristic
of learning; however, the conclusions on what was
learned can be made only based on the changes
in behaviour. Conclusions can be made about
learning only when workplace behaviour or an
individual’s performance has changed. “Whether
learning was successful can only be determined
after the expected change in behaviour has oc-
curred” (Bahtijarević-Šiber, 1999). Training is the
time a single person or a number of persons spend
engaged in a physical activity or developing or in-
creasing their intellectual or physical capacity. Ac-
cording to Dessler (2015), in order to successfully
conduct employee training, it is important that the
organisation successfully trains managers who will
later be in charge of the training and development
of other employees. Employee training can be more
or less structured. It is always linked to a particu-
lar workplace and aimed at increasing workplace
performance. Therefore, we can say that training
is a planned activity aimed at acquiring skills and
knowledge required for a successful performance
of a particular job or activity. “It is aimed at ac-
quiring specific knowledge, skills, and techniques
needed for a specific workplace and increasing
employee performance” (Bahtijarević-Šiber, 1999).
Education is a much wider notion than learning
and training. Education enhances a person’s overall
cognitive potential and facilitates the acquisition
of knowledge and skills needed for independent
decision-making in various situations. “Educa-
tion equips one with the competencies needed for
73
Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises
performing various jobs and provides a basis for
further development” (Bahtijarević-Šiber, 1999).
The new knowledge, skills and abilities enable
employees to take on more demanding tasks and
responsibilities in the workplace, advance their ca-
reer, and prepare them for future challenges. The
entire process starting with learning, to acquiring
knowledge and consequent changes is called de-
velopment. The concept of development is wider
than the concepts of learning, training, and edu-
cation because it includes the changes that occur
as a result. Development involves activities aimed
at preparing employees for future jobs and chal-
lenges. It is therefore important that it is timely
planned and that it caters to the particular needs
of the employee and job requirements.
Modern companies use various training methods
and programmes, such as the following:
- Managerial skills training programme;
- Computer skills training programme;
- Communication skills training programme;
- Supervisory skills training programme;
- Professional skills training programme;
- Methods and procedures training
programme;
- Consumer-relations training programme;
- Personal skills training programme;
- Employee relations training programme;
- Sales skills training programme.
The training and development of employees is a
core HR department function which should be
carefully considered and executed. Given that it
is used to develop skills and expand knowledge in
various fields, it is also a complex one. McCourt
and Eldridge define managing human resources as
“the way organisations manage their staff and help
them to develop” (McCourt, Eldridge, 2003). “The
end result of individual modules is important as the
result of the entire training process depends on the
success of each module” (Bahtijarević-Šiber, 1999).
Companies today are aware of the importance of
knowledge management and the need to identify
knowledge gaps, and seek to help employees ac-
quire new knowledge at the least possible cost. To
achieve this goal, first they need to perform a train-
74
ing needs analysis. To this end, several analyses are
carried out:
1. Organisational analysis - an analysis of the
company’s attitudes, culture, practices,
goals, organisational structure, changes in
business operations, market and competi-
tion, and available training resources, i.e.
time and funds. The aim of this analysis is to
identify company needs as well as attitudes
towards the existing training programme.
2. Work analysis - analysis of the work as well
as the tasks performed by employees based
on which it is determined whether there is
a need for training, what it should include,
and what type of programme should be
implemented. Work analysis focuses on
the specific tasks performed by employees,
i.e. job description. In this phase, it is very
important to assess employees’ current per-
formance. Based on this analysis, it can be
determined what knowledge, skills, abili-
ties and personality characteristics employ-
ees need to have to perform their job. This
analysis is also referred to as the analysis of
tasks, knowledge, skills, and abilities.
3. Person analysis - identifies employees who
need training. It is also called employee anal-
ysis. One should bear in mind that employ-
ees differ in their individual characteristics
as well as knowledge and skills they possess.
Thus, not all employees need the same train-
ing. Fey, Björkman and Pavlovskaya (2000)
highlight that employees who possess a high
level of skills and knowledge significantly
contribute to the performance of their or-
ganisations, which clearly makes investing
into their training and development a ne-
cessity. This analysis gives an answer to the
question about the subject of training, i.e. the
knowledge and skills it needs to focus on.
Based on the results of these analyses, the training
objectives are set. Objectives are important because
they allow the management to evaluate the effec-
tiveness of training in terms of acquired knowledge
and skills.
We differentiate between training goals and objec-
tives. Training goals are defined in line with the
goals of the company. They include, among others,
increasing competitiveness, developing soft skills,
God. XXXIII, BR. 1/2020. str. 71-82

induction training to help new employees settle in
their new roles, etc. According to Mayo (2001), soft,
i.e. intangible assets are the most important new
source of added value for an enterprise.
Training objectives describe how the acquired
knowledge and skills will be translated into innova-
tive solutions in everyday work and in the introduc-
tion of new products and services to avoid knowl-
edge obsolescence. Training objectives are readily
measurable outcomes because they relate to specif-
ic knowledge and skills which are commonly read-
ily applicable in everyday work. To achieve these
objectives, the content of the training programme
needs to be customised to suit the specific needs of
the business. Often, various training methods are
combined.
“Training needs can be categorised into four
groups. The content and methods of training are
decided upon based on the identified needs. The
four categories of needs are:
1. Training for the current role;
2. Acquisition of new knowledge and skills
aimed at facilitating the process of adapting
to changes in business operations and tech-
nology;
3. Career development and training aimed at
advancement in the organisation or taking
on more complex tasks and responsibilities;
4. Training and preparing of employees for
future changes and tasks; training for the
future and flexibility” (Bahtijarević-Šiber,
1999).
All these types of training are inherent parts of em-
ployee growth in the workplace and together make
up a continuing process of training and develop-
ment of an individual in a company.
4. Training venues
An essential part of training programme develop-
ment is choosing the training venue. There are two
types of training methods: on-the-job-training and
off-the-job-training. The latter can be categorised
into two groups: training provided in the company
and outside the company, i.e. at education and re-
search institutions, education centres, etc.
The choice of the training method depends on
the identified training needs. An effective training
God. XXXIII, BR. 1/2020. str. 71-82
Original scientific article
programme needs to identify the participants, the
instructors, required skills and knowledge, knowl-
edge gaps, venue and the most appropriate, i.e. ef-
fective delivery method. “Essentially, the company
needs to identify employee training needs, training
objectives, and target groups, and then create and
implement the training programme” (Bahtijarević-
Šiber, 1999).
4.1 On-the-job training methods
There are different methods of on-the-job train-
ing. Companies intending to implement on-the-job
training programmes must have a clearly defined
training policy in place with clearly defined roles
and responsibilities. If the training is delivered by a
manager, he/she must also be involved in assessing
its outcomes. On-the-job training requires careful
planning. The training programme must be ade-
quately tailored and structured, the training materi-
als must be created, and the procedure for monitor-
ing and evaluating post-training performance must
be set. Furthermore, it is very important that per-
sons delivering the training are trained themselves.
“The choice of the training method depends on the
training objectives, time available for the prepara-
tion and delivery of training, available tools, as well
as professional, didactic and pedagogical compe-
tencies of the trainer” (Vujić, 2008).
According to Bahtijarević-Šiber (1999), there are
various on-the-job training methods:
a) Upskilling
b) Coaching
c) Job rotation
d) Internship
e) Traineeship
f ) Mentoring
g) Student practice.
4.2 Off-the-job training methods
The most common and most traditional off-the-
job training method is a lecture. In addition to
lectures, various methods use various technology
tools to facilitate learning. Depending on the learn-
ing aid used, we can distinguish between audio-
visual training, programmed learning, computer-
based training, video training, etc. Some training
methods, such as simulation and case studies, use
75
Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises

real-life situations or imitate real-life experiences role play are best suited for developing interper-
to facilitate learning. A more traditional method sonal skills” (Bahtijarević-Šiber, 1999).
of off-the-job training is a conference, i.e. discus-
sion. Other off-the-job training methods include
5. Results of the survey
formal education, group training, and distance
learning. The surveyed municipal service companies use
The success of the training programme does not various training methods. The distribution of re-
The surveyed
depend municipal
solely on service
the choice companies
of the spondents’
use various
training meth- answers in
training methods. Theterms of the frequency
distribution of of
od. However, the appropriate choice will facilitate use of specified training methods in their company
respondents’ answers in terms of the frequency of use is of specified
presented training
below. Themethods in their
respondents were allowed
learning and the achievement of learning outcomes
company
and is presented
it is therefore madebelow. The respondents
by taking were allowed to choose more than one answer. most fre-
into considera- to choose more than one answer. The
tion the particular situation and training objectives. quently used methods include upskilling (42.7%),
The most frequently used methods include upskillingtraineeship (42.7%), traineeship (44%), internship
(44%), internship (34%), and mentor-
Evidence suggests that some methods are more
(34%), for
suited and acquiring
mentoringnew (32%). 44% of the
knowledge andrespondents
skills, ing
reported using coaching, 47% usedreported
(32%). 44% of the respondents job using
while others are better suited for changing employ- coaching, 47% used job rotation, while 40.5% used
rotation, while 40.5% used other training methods. other Programmed learning was
training methods. used rarely
Programmed learning was
ee attitudes. Some are suited for developing prob-
(29.2%), while
lem-solving 27.1%
skills; of the
others arerespondents used
reported rarely
used for developing rarely
using (29.2%),
video while
training and27.1%
caseof the respondents
studies.
interpersonal skills. For instance, the most effective reported rarely using video training and case stud-
29.9% of the respondents reported never using simulation ies. 29.9% and caserespondents
of the studies, while 26.3%
reported never using
training methods for developing and increasing
simulation and case studies, while 26.3% reported
reported never using
problem-solving skillsaudio-visual techniques.
are case studies The described data is presented in Figure 1.
and business
games, “while sensitivity training (T-groups) and never using audio-visual techniques. The described
data is presented in Figure 1.
Figure 11 Frequency
Figure Frequency of
of use
use of
of different
different training
training methods
methods

Source: Authors' research

Source: Authors’ research.

The76most frequently used training methodsGod.

include
XXXIII,upskilling and
BR. 1/2020. str. traineeship. 8.5% of the
71-82

respondents have never used upskilling, while 7% of them have never used traineeship.
Upskilling was used rarely by 12%, and traineeship by 8% of the respondents. Upskilling and

The most frequently used training methods include
upskilling and traineeship. 8.5% of the respondents
have never used upskilling, while 7% of them have
never used traineeship. Upskilling was used rarely
by 12%, and traineeship by 8% of the respondents.
Figure 2 Upskilling
Source: Authors’ research.
Figure 3 Traineeship
Source: Authors’ research.
God. XXXIII, BR. 1/2020. str. 71-82
Original scientific article
Upskilling and traineeship were used sometimes
by 36.8% and 40% of the respondents, respectively.
Upskilling and traineeship were used very often by
35% and 31% of the respondents, respectively. The
results of the analysis are shown in Figures 2 and 3.
77
Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises
The next three paragraphs contain the results of anal-
ysis for internship, mentoring, and student practice.
21% of the respondents reported never or rarely us-
ing internships, while 25% of them reported never
or rarely using mentoring. 33.6% of the respondents
reported using student practice never or rarely.
Internship was used by 44%, mentoring by 43%, and
student practice by 42.90% of the respondents.
Figure 4 Frequency of use of training methods
Source: Authors’ research.
A lecture is the most traditional training method.
It is cost-effective and suited for presenting mate-
rial to large groups of employees. However, it is
rarely used in comparison to other methods, as
can be seen from Figure 5. Only 25.4% of the re-
Figure 5 Lecture
Source: Authors’ research.
78
Internship was used very often or always by 34%,
mentoring by 32%, and student practice by 23.6% of
the respondents.
If we compare these three theoretically similar
training methods, we can see that internship
was the most frequently used method, while
student practice was the least frequently used
method.
spondents reported using it very often or always.
From the data in Figure 5, it is apparent that this
method was used sometimes by 39.30% of the re-
spondents, while 35.3% reported using it never or
rarely.
God. XXXIII, BR. 1/2020. str. 71-82

Considering that there are many different training
methods, not all of them could be included in the
survey questionnaire. This is why the option “Other
training methods” was added to answer choices.
The results of the analysis indicate that 40.5% of the
Figure 6 Other training methods
Source: Authors’ research.
Furthermore, the results indicate that combined on-
and off-the-job training maximises exploitation of
tacit knowledge in municipal service companies.
When it comes to employer-sponsored training, 55
respondents (44.7%) received training both on and
Figure 7 Training venue
Source: Authors’ research.
God. XXXIII, BR. 1/2020. str. 71-82
Original scientific article
respondents reported using other training meth-
ods sometimes. 20.7% of them reported using them
very often or always, while 38.7% used them never
or rarely.
off the job, 20 (16.3%) received on-the-job train-
ing, while 38 (30.9%) participated in the off-the-job
training. Ten respondents (8.1%) reported not hav-
ing received any training at all.
79
Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises
6. Conclusion
The findings of this study provide guidance on
how to implement effective employee training
programmes and encourage employee participa-
tion. Employee training is a vital function of any
company, municipal service companies included.
The paper defines employee training as the pro-
cess through which new knowledge and skills are
acquired. To survive and prosper, companies need
to continuously reinvent their business models,
improve their performance, agility and efficiency
through continuous training of their employees.
For a training programme to be successful, training
needs analyses have to be performed first, taking
into consideration the needs of the company and
the employees, as well as the gaps in terms of skills
needed for the performance of particular tasks. The
needs analyses serve as the basis for designing the
training plan and formulating the training objec-
tives. Once the objectives have been set, a decision
must be made on the most appropriate training
method. The two most commonly used methods
include on- and off-the-job training. The research
has shown that both of these training methods have
advantages and disadvantages. The managers are
responsible for choosing the training method that
will cater to the particular needs of the company
and employees in terms of closing employee knowl-
edge and skills gaps. Outside professional trainers
may not be well acquainted with the company’s
specific operations, procedures and organisational
culture. This is not the case with on-the-job train-
ing. Even though on-the-job training may seem
80
more cost-effective, managers who deliver it have
to take time away from their everyday tasks. Thus, it
is important that they delegate their tasks to others
for the duration of the training. The results of the
survey show that the most commonly used training
methods were lectures and traineeships, followed
by student practice, mentoring and internships.
These methods are particularly suited for persons
with very little or no experience. The study found
that once they reach a certain level of competence,
employees are left to their own devices in terms of
developing their skills and acquiring new knowl-
edge.
The study raises the question whether companies
provide their employees with sufficient training op-
portunities to increase their knowledge and skills,
thus enhancing their professional and personal de-
velopment and career prospects. Further research
should be done to investigate the advantages and
disadvantages of on- and off-the-job training and
make recommendations as to their appropriateness
for specific situations.
Companies should continually strive for business
excellence. Based on the data collected, it can be
concluded that municipal service companies still
significantly lag behind other modern companies in
terms of the implementation of employee training
programmes. Companies should invest in the train-
ing of their employees with the view of improving
their performance and satisfaction, thereby im-
proving the performance of the company. This will,
in turn, increase the satisfaction of service users.
God. XXXIII, BR. 1/2020. str. 71-82
 Original scientific article

R

1. Aščić, A. (2016), “Značaj i uloga upravljanja znanjem u novoj ekonomiji”, paper presented at XIV In-
ternational conference “Corporate security in B&H and the Western Balkan countries from economic,
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2. Bahtijarević-Šiber, F. (1999). Management ljudskih potencijala. Zagreb: Golden marketing.
3. Dessler, G. (2015). Upravljanje ljudskim potencijalima. 12th edition. Zagreb: Mate.
4. Fey, C. F., Björkman, I., Pavlovskaya, A. (2000), “The effect of human resource management practices
on firm performance in Russia”, The International Journal of Human Resource Management, Vol. 11,
No. 1, pp. 1-18.
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Faculty of Economics in Osijek.
6. Hammer, M., Champy, J. (1997). Reengineering the Corporation: A Manifesto for Business Revolution.
London: Nicholas Brealey Publishing.
7. Mayo, A. (2001). The Human Value of the Enterprise: Valuing People as Assets – Monitoring, Measur-
ing, Managing. London: Nicholas Brealey Publishing.
8. McCourt, W., Eldridge, D. (2003). Global Human Resource Management. Cheltenham: Edward Elgar.
9. Noe, R. A., Hollenbeck, J. R., Gerhart, B., Wright, P. M. (2006). Menadžment ljudskih potencijala:
Postizanje konkurentske prednosti. 3rd edition. Zagreb: Mate.
10. Vujić, N. (2008), “Oblici i metode organizacije u poduzećima”, Obrazovanje odraslih, Časopis za obra-
zovanje odraslih i kulturu, Vol. 2, No. 2, pp. 89-108.

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1 Jurković, R. (2011), “Tvrtke ne smiju zanemarivati poslovnu edukaciju” available at: http://poslovna.edukacija.hr/vijest/tvrtke-ne-smi-
ju-zanemarivati-poslovnu-edukaciju/106/ (Accessed on: November 19, 2019)
2 Paliaga, M. (2006), “Strateško planiranje i outsourcing – budućnost Hrvatskih komunalnih poduzeća” available at: http://poslovna.
edukacija.hr/vijest/tvrtke-ne-smiju-zanemarivati-poslovnu-edukaciju/106/ (Accessed on: November 19, 2019)
3 Pavić, D. (2019), “Upravljanje edukacijom u komunalnim poduzećima Republike Hrvatske”, available at: https://dr.nsk.hr/en/islan-
dora/object/efos%253A2737 (Accessed on: September 16, 2019)
4 Barić, V. (2004), “Temeljne odrednice investiranja u obrazovanje odraslih”, available at: https://epale.ec.europa.eu/hr/resource-cen-
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God. XXXIII, BR. 1/2020. str. 71-82 81

Dominika Crnjac Milić, Domagoj Pavić, Bruno Mandić: Training methods in municipal enterprises

Dominika Crnjac Milić

Domagoj Pavić
Bruno Mandić

M    

S
Utjecaj promjena na suvremeno poslovanje je velik. Neovisno na kojem radnom mjestu zaposlenik radi
svakodnevno se susreće s promjenama koje mogu izazivati strah od nepoznatog, nervozu te demotiviranje
za nove uspjehe u radu. Sve je više specifičnosti u poslovnim procesima te se sve više traži fleksibilnost
poslovnih subjekata pri odgovoru na zahtjeve tržišta i poslovne okoline. Ciljana i kontinuirana edukacija
pomaže stjecanju znanja potrebnih za nošenje s navedenim izazovima u poslovanju te omogućava zaposle-
nicima lakše nošenje s izazovima koji nastaju pri njihovom obavljanju svakodnevnih aktivnosti.
Tvrtkama je glavni cilj poslovanja stvaranje vrijednosti, a sve više dolaze do spoznaje da je jedan od najvaž-
nijih resursa za postizanje toga cilja ljudski potencijal. Uspjeh tvrtke danas uvelike ovisi o kompetencijama
i motivaciji zaposlenika. Sve izazovnije je motivirati zaposlenike i održavati njihov angažman, te imati
realizaciju posla na željenoj razini. Jedan od značajnih čimbenika prema tome je svakodnevno pružanje
podrške u obliku edukacije.
Ovim su radom dani rezultati statističke obrade anketno prikupljenih podataka vezanih za metode eduka-
cije zaposlenika u komunalnim poduzećima Republike Hrvatske. Dana je analiza različitih vrsta edukacije
prisutne na tržištu te je ukazano na važnost i svrhu određenih metoda.
Ključne riječi: edukacija, komunalna poduzeća, poslovna organizacija, motivacija

82 God. XXXIII, BR. 1/2020. str. 71-82

 CC BY-NC-SA

Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
Ova
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nekomercijalne svrhe
Joanna Hernik Antonio Minguez Vera JEL: J16, D72, O52svoja djela
licenciraju
West Pomeranian University of Murcia Original scientific article
University of Technology in Szczecin Faculty of Economics and Business
Faculty of Economics Campus de Espinardo, s/n, Edificio 2, Received: July 29, 2019
Zolnierska street 47, 30100 Murcia, Spain Accepted for publishing: January Pogledajte
2, 2020 sažetak lic
72-210 Szczecin, Poland minver@um.es
jhernik@zut.edu.pl Phone: +34868888477 This work is licensed under a
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CC BY-NC-ND

GENDER EQUALITY IN PARLIAMENTS

Ovo je najrestriktivnija

- WHERE DO WE STAND IN EUROPE?

CONSIDERATIONS FROM THE 5 od 6

ECONOMIC DEVELOPMENT AND

SOCIETY’S MASCULINITY INDEX
POINT OF VIEW
A
It is often emphasized in literature that women constitute half of all societies, but their needs and rights are
not reflected in social decisions. The UN and other international institutions aim at changing the position
of women in the world, which was reflected in the so called Millennium Development Goals, and currently
in the Sustainable Development Goals, one of the latter being promoting gender equality and empowering
women. Authors of gender and development literature often write about women as an untapped factor of
economic growth. In this paper, we want to reverse the point of view and look at women whose activity is
conditioned by the economic development of the country. Therefore, this article presents a certain diagno-
sis of the current state, but on the other hand, it looks for an explanation of some dependencies.
Today, the reasons for women’s presence or absence in politics are unclear; therefore, we want to inspect
the basic determinants, which, in our opinion, are the wealth of the society and its character (masculin-
ity vs. femininity). Consequently, the aim of the following article is to determine women’s participation in
European parliaments and to verify the hypothesis that the presence of women in European parliaments
is directly proportional to the economic development, measured by GDP per capita. Apart from the main
hypothesis, the auxiliary one regarding the masculinity of society is also examined (Hofstede model).
The conducted analysis allows us to conclude that the participation of women in European parliaments
remains low and it is on average 28.04%, and no European country reached 50%. The calculations confirmed
the statistical significance of both hypotheses, so we can say that the presence of women in European par-
liaments depends on the economic development of a given country and the type of society. These deter-
minants are difficult to change, which is why Europe is facing further challenges. It is obvious that changes
occur relatively slowly (although the upward trend is visible) and have their causes. Our analyses show that
the main ones include the level of economic development and the nature of society. No relationship was
found between the number of women in parliaments and other economic factors, such as unemployment.
Keywords: Europe, economic development, gender equality, Hofstede index, parliamentary elections, Sus-
tainable Development Goals

God. XXXIII, BR. 1/2020. str. 83-99 83

Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view
1. Introduction
Despite the fact that the awareness of the role of
women in politics and the complexity of this issue
have been growing recently, there are still few stud-
ies proving specific dependencies. Furthermore, there
are no works covering Europe as a whole (i.e. 51 coun-
tries and disputed territories). Therefore, this article
provides novel insights into the debate on women in
politics by combining two elements: economic devel-
opment and masculinity index of societies.
In 2019, Europe celebrated the centenary of wom-
en’s rights in politics. However, women’s participa-
tion in political and social life remains an ongoing
issue. In most countries, women are underrepre-
sented in the political arena and face difficulties
in obtaining public positions. The gender equal-
ity index elaborated by the European Institute for
Gender Equality in order to measure the differences
between genders over time shows that although
“power” is an area where the most progress has
been made in the recent years, it is also an area in
which the gender gap remains the largest1. This is-
sue is tackled by various organizations, such as the
UN. In September 2000, world leaders met in the
UN headquarters in New York to adopt the United
Nations Millennium Project. It was decided that
by 2015, eight Millennium Development Goals
should have been reached. These were: to eradicate
extreme hunger and poverty; to achieve universal
primary education; to promote gender equality
and empower women; to reduce child mortality;
to improve maternal health; to combat HIV/AIDS,
malaria and other diseases; to ensure environmen-
tal stability, and to create a global partnership for
development2. The issues concerning women and
their rights had already been debated in an inter-
national forum, for example at the UN General As-
sembly in December 1952, when the Convention on
the Political Rights of Women was approved.
As the development paradigm began to change
course towards sustainability (Frajman-Jakšić et al.,
2010), Sustainable Development Goals were adopt-
ed in January 2016, covering as many as 17 areas3,
among them: no poverty, zero hunger, good health
and well-being, quality education, decent work and
economic growth, and gender equality. The afore-
mentioned Development Goals are the continu-
ation of the Millennium Development Goals and
they should be reached by 2030, thus the work on
84 God. XXXIII, BR. 1/2020. str. 83-99
the position of women in economy and politics will
be continued.
The data and analyses presented in the Millennium
Development Goals Report 20154 prove that owing
to targeted interventions, sensible strategies, suffi-
cient resources, and political will, even the poorest
countries can make great progress. For instance, the
number of school-age children who could not go to
school dropped by almost half worldwide – from
100 million in 2000 to about 57 million in 2015. De-
spite successes, it turns out that goal #3 (Promoting
gender equality and empowering women) is diffi-
cult to achieve. That is because women are still fac-
ing discrimination in access to economic assets or
in the area of public decision making (Braunstein,
2008). Moreover, women live in poverty more of-
ten than men do5, which stems from the fact that
women are still at a disadvantage in the labour mar-
ket compared to men. On a global scale, about 75%
of men of working age have employment, compared
to only 50% of women. What is more, on average,
women earn 24% less than men6 (Booth et al., 2003;
Gherghina, 2015). In many countries, women with
the same education as men have higher unemploy-
ment rates and therefore find it more difficult to
access job offers. On the other hand, women live
longer and should gain more authority and reputa-
tion (Hinek et al., 2019). Thus, despite evident pro-
gress in achieving the Millennium Goals, the area
of gender equality still requires attention and work,
especially in terms of enabling women to make in-
dependent decisions in private and public life.
The arguments for gender balance in economy and
politics are numerous and show that women can
positively influence politics and societies them-
selves. Therefore, for example, the EU has commit-
ted itself to achieving gender balance in political
representation and participation in justice, equal-
ity and democracy. Member States have been given
specific recommendations on how to achieve this
objective, including actions that the EU institu-
tions, national governments, political parties, civil
society, and the media can take. Today, the Euro-
pean Union comprises 28 countries, but outside
the EU, there are 22 other European countries that
are also undertaking similar initiatives. Therefore,
the aim of this article is to determine the degree of
women’s participation in European parliaments,
which will show the implementation of one of the
main Millennium Goals. Our research included all

countries and territories (including disputed ones)
of Europe.
Today we can observe the shortage of women in
public life, and, on the other hand, the need to ob-
tain a certain critical mass that determines whether
the voice of women in parliaments and politics will
matter (Wängnerud, 2009; Krook, 2015). It is the
analysis of this critical mass that is the keynote in
this article. As Dingler et al. (2019) say, women in
parliaments change the policy, and thus the future
of a given society. For example, feminist issues are
more often brought to the fore, as well as childcare,
access to employment and equal pay, participation
of women legislators in selected assemblies, bal-
anced private and professional life, holidays, social
security, and so on. This seems to be an important
issue, and that is why it is raised in many national
forums, as well as included in the mentioned Mil-
lennium and Sustainable Development Goals.
These are the reasons for addressing this topic in
our article.
As today the reasons for women’s presence or ab-
sence in politics are unclear, we want to examine
the basic determinants, which, in our opinion, are
the wealth of the society and its character. Despite
the fact that the awareness of the role of women in
politics and the complexity of this problem have
been growing recently (Krook, 2015; Coller et al.,
2018), there are still few studies proving specific
dependencies. Furthermore, there are no works
covering Europe as a whole. Therefore, in these two
aspects we see the value of this work.
2. Literature review
2.1 Participation of women in parliaments
Views on the existing division of power and opin-
ions as to whether there should be more women
in decision-making positions are very diverse and
conditioned by many factors, including gender. Ac-
cording to Felger and others (2017), the arguments
for making more women present in politics can be
divided into six groups: 1) justice argument, accord-
ing to which women constitute about half of the
population, and therefore have the right to be rep-
resented as such; 2) experience argument – because
women’s experiences differ from men’s experiences,
hence they should be represented in discussions
leading to the creation and implementation of poli-
cies; 3) interest argument, stating that the interests
of men and women are often different and even
God. XXXIII, BR. 1/2020. str. 83-99
Original scientific article
contradictory, and therefore women are needed in
representative institutions to express the interests
of their group; 4) the critical mass argument, stat-
ing that in order for the role of women to be no-
ticed, their presence must reach a certain critical
mass; 5) symbolic argument: women are attracted
to political life if they have the right role models;
6) democracy argument that equal representation
of women and men strengthens the democratiza-
tion of governance both in countries undergoing
political changes and in well-established democra-
cies7. Gender researchers have repeatedly pointed
out that the decisions of women’s representatives
to provide public goods are different than those of
men, and that women’s decisions are more likely to
address issues that are of importance to voters (Ka-
beer, Natali, 2013; Coka et al., 2017).
Research of Henderson and Jeydel (2014) show that
women reach political positions in four ways:
1) Political family – women on this path come
from families with long histories of political
engagement.
2) Substitution – women who take over posi-
tions, often temporarily, after their recently
deceased fathers, husbands, or brothers.
3) Party member – women start at the bottom
of the political ladder and work their way
up, performing necessary functions to show
their loyalty and usefulness to the party.
4) Political outsider – women usually lack
political experience, but they keep up with
new political changes and are an alternative
to the status quo.
L. Wängnerud (2009), who focuses on women in
parliaments in established democracies, writes
that nowadays there is a global quota trend. This
is due to the fact that equal voting rights are not
strong enough to guarantee participation of wom-
en in parliaments, and there must also be direct
equality among those elected to office. Currently,
the threshold for the representation of women or
men in any decision-making body in public and
political life in the European Union is set at 40%8.
In other European countries, those decisions are
the responsibility of parliaments, which can adopt
legislation and establish institutions to monitor the
situation of women (Elomäki, 2015; Sophia, 2016).
Some countries, such as Slovenia and France, made
85
Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view
significant progress, but the fact that the results of
other countries have worsened shows that the in-
crease in women’s political representation is not
necessarily permanent and obvious.
It would seem that the model for other European
parliaments should be the EU Parliament – howev-
er, here, too, there are fewer women than men: only
35.8%9 (Macedo, Santos, 2013). Although admit-
tedly in Europe much has been achieved in this re-
spect, taking Finland as an example, where already
in 1906 Finnish women were the first to gain the
privilege to vote, and the first women in the world
with the right to stand for election to parliament in
full terms (Franceschet et al., 2019).
Nonetheless, it should be noted that there are two
types of representation to be achieved through
gender equality: descriptive and substantive10. Ac-
cording to descriptive representation, the aim is to
achieve the required number of women in political
leadership, and the presence of women in politics
is important in itself because it gives legitimacy
to the governing institutions. On the other hand,
substantive representation analyses the results that
may be achieved owing to a better representation of
women and emphasizes that women’s participation
increases the probability that both the interests of
women will be appropriately represented and the
governing institutions will work more effectively
thanks to distinctive women and their styles of
governance. However, as has been mentioned, one
hundred years after the suffragettes’ protests, gen-
der equality in politics has still not been achieved
(Galligan, Coleman, n.d.).
2.2 Women vs. political system of the state
Today there is a wealth of literature on gender rela-
tions and democratic consolidation in Central and
Eastern Europe, discussing the ways in which gen-
der inequalities have been built and later overcome
(Hughes and Paxton 2008; Rueschemeyer and Wol-
chik, 2009; Kubbe, 2018; Chiva 2018). Undoubtedly,
changes have been observed throughout Europe in
recent years, as according to Chiva (2005, 2018),
after the first election after the fall of socialism,
the participation of women in the lower legisla-
tive chambers of post-communist countries ranged
from 4.6% in Romania to 10% in the Czech Republic
and 15% in Latvia. Currently (2019), it is 18% in Ro-
mania, 18.9% in the Czech Republic, and 30% in the
unicameral parliament of Latvia. Initially, research
would explain the absence of women in politics as
86
stemming from the lack of political ambitions in
women. However, it is now recognized that other,
more complex structural and social barriers make it
difficult for women to fulfil their electoral mandates
or to gain access to managerial positions (Austen,
Mavisakalyan, 2016). There are also more specific
obstacles for various groups of women based on
their age, social class, ethnicity, religion, disability,
or sexual orientation. S. Austen and A. Mavisakaly-
an (2016) argue that women’s representation in par-
liament is higher in countries whose constitutions
protect the citizens against discrimination based
on gender, i.e. in countries where the prohibition of
discrimination is enshrined in the highest legal act.
Thus, the presence of women in politics, as well as
in the economy, is not only a result of ambition or
lack thereof, but also of the adopted political solu-
tions (Beaurain, Masclet, 2016).
2.3 Women vs. socio-economic development
It should also be noted that there is a strong cor-
relation between women and socio-economic de-
velopment, as discussed by Jütting (2006) and Sim-
sek (2014). They emphasize that on the one hand,
women can stimulate economic development, and
on the other hand – the socio-economic status of
women depends on a given economy’s level of de-
velopment. In other words, the relation between
women and development is directly proportional
and reflexive, because for example increased em-
ployment of women can increase the average level
of income in society. The economic role of women
naturally depends on other conditions, such as the
family model and family code, a woman’s physical
independence, civil liberties, as well as property
rights (Beugelsdijk et al., 2017; Ndinda, Ndhlovu,
2018; Arif, 2019).
The gender and economic development literature
highlights a correlation of different factors that
constrain women’s representation in politics. Spark
et al. (2019) say that without a doubt, women lack
sufficient financial resources to compete with men,
which is connected to family wealth and educa-
tion possibilities. Institutional barriers, including
the educational systems and economic systems, fa-
vour male candidates. Finally, culture and religion
are important as well, because they shape attitudes
which work against candidates, and often they re-
strict women’s participation in the job market and
public sphere to the ‘traditional’ place in the society.
God. XXXIII, BR. 1/2020. str. 83-99

2.4 Women vs. nature of a society (Hofstede model)
As Gwiazda (2017) writes, in communist states
gender equality was declared (everyone worked for
the benefit of the party and the country), and yet
there were no women in senior political positions.
This was a result of traditional gender roles, which
is reflected in the masculinity index designed by G.
Hofstede (2001). Thus, the issue of the presence of
women in parliaments is also associated with the
masculine nature of a given society (Dimitrov, 2014;
Minkov, 2018). Of course, the question of mascu-
linity should be approached more broadly, so one
needs to take into account the generally understood
culture of the place. This means that religion, val-
ues, perception of the future, attitude to authori-
ties and power, and so on, are important and they
shape the roles of men and women. It should be
remembered that the Hofstede model is not per-
fect, because it was based on a white middle-class
male study, and ignores e.g. non-cultural determi-
nants and level of gender emancipation (Touburg,
2016; Minkov, 2018). The model is also criticized
for the lack of presence of women in its creation,
as if women did not create a national culture (Mou-
lettes, 2007); however, the general assumptions
were repeatedly verified and its usefulness has been
confirmed (Gorodnichenko, Roland, 2011; Minkov,
2018). Hofstadter’s study led to the extraction of a
specific “cultural key” that was assigned to a given
country. The factors identified in the model are
individualism and collectivism, distance to power,
avoiding uncertainty, and a tendency to adapt to the
prevailing conditions.
2.5 Gender inequity consequences
It is often emphasized in literature that women
constitute half of all societies, but their specific
needs and rights are not reflected in politics and
social decisions (Elomäki, 2015). One can even talk
about societies that are oppressive towards women,
where sexism constantly draws attention to the dif-
ferences between men and women to the disadvan-
tage of the latter (Brennan, 1988; Hughes, Paxton
2008; Wejnert, Rodriguez, 2015). Such an approach
later results in differences in the socio-economic
status of men and women (Simsek, 2014). More-
over, the socially accepted gender inequality might
diminish women’s access to employment, financial
services, education, and health care, and of course
also the access to higher managerial positions, in-
cluding politics11 (Kabeer, Natali, 2013; Polman,
God. XXXIII, BR. 1/2020. str. 83-99
Original scientific article
2017). Therefore, gender inequity has many social
and economic consequences, and of course, it is in-
efficient because it does not maximize productive
capacity, but on the other hand - it does not allow
equal opportunities to come true in life. Accord-
ing to Kabeer and Natali (2013), it results from the
fact that when women are set aside of the salaried
labour market, mediocre labour force quality will
be lesser than if they are not, as more creative and
hardworking female workers are kept from work in
favour of less effective male employees. As a result,
societies must deal with unused labour, worse eco-
nomic development, and unfulfilled aspirations of
people. These consequences also apply to the socio-
political sphere.
3. Methodology
3.1 Data
Our intention was to explore all countries and ter-
ritories forming Europe. Therefore, we collected the
data for Albania, Andorra, Austria, Azerbaijan, Be-
larus, Belgium, Bosnia and Herzegovina, Bulgaria,
Croatia, Republic of Cyprus, Turkish Republic of
Northern Cyprus, Czech Republic, Denmark, Es-
tonia, Finland, France, Georgia, Germany, Greece,
Hungary, Iceland, Ireland, Italy, Kazakhstan, Koso-
vo, Latvia, Liechtenstein, Lithuania, Luxembourg,
North Macedonia (FYROM), Malta, Moldova,
Monaco, Montenegro, Netherlands, Norway, Po-
land, Portugal, Romania, Russia, San Marino, Ser-
bia, Slovakia, Slovenia, Spain, Sweden, Switzerland,
Transnistria (Transnistrian Moldovan Republic),
Turkey, Ukraine, and United Kingdom. In total,
there are 51 countries and territories (Table 1), and
the data reflecting the situation in parliaments are
from 2019, while the data on economic situation are
from 2018.
Data sources were as follows:
1) In case of GDP, data they were extracted
from CIA World Factbook12, and from
OECD13.
2) Indicators regarding masculinity of societ-
ies were taken from Hofstede Insights14.
3) Data on countries’ populations were re-
trieved from Population of the world and
countries15.
87
Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view

4) Data on parliaments were extracted from the upper and lower houses can be an indicator of
PARLINE database on national parlia- gender equality, as well as the general development
ments16. of society, which refers to the Table 1.
The possibility of making independent decisions
and participating in political life has its reflection
in parliaments, therefore the number of women in

Table 1 The division of European countries according to the percentage of women in parliaments
(n=51)
Countries Countries
Countries – Share of Share of Share of Countries – Share of
– group – group
group under women women women group over women
between 20 between 30
20% [in %] [in %] [in %] 40% [in %]
and 29.9% and 39.9%

Czech
Transnistria 4.65 20.64 Latvia 30 Norway 41.42
Republic

Ukraine 11.58 Slovakia 20.67 Kosovo 31.67 Finland 42.5

Hungary 12.06 Moldova 20.79 Germany 32.01 Sweden 46.71

Georgia 14.67 Lithuania 21.99 Netherlands 32.89

Malta 14.93 Kazakhstan 22.08 Belarus 33.13

Liechtenstein 16 Ireland 22.15 Italy 34.65

Russia 16.12 Slovenia 22.31 Austria 34.84

Azerbaijan 16.8 San Marino 23.33 Portugal 36.52

Turkey 17.48 Montenegro 23.46 France 36.76

Tur. Rep. of 18 Poland 24.82 Serbia 37.65

Cyprus

Gre. Rep. of 17.86 Luxembourg 25 Andorra 37.93

Cyprus

Greece 18.67 Bulgaria 25.83 Denmark 37.99

Bosnia and
19.3 Switzerland 28.05 Iceland 38.1
Herzeg.

United
Romania 19.57 29.06 N. Macedonia 38.33
Kingdom

Croatia 19.87 Monaco 29.17 Belgium 39.05

Albania 29.29 Spain 39.45

Estonia 29.7
Source: Own calculations based on PARLINE database on national parliaments, http://archive.ipu.org/parline-e/parli-
nesearch.asp (Accessed on: April 20, 2019).

Unfortunately, not all information was acces- which the masculinity index or GDP was not
sible for all countries, which is why we had to calculated. The final sample includes 36 coun-
remove from the final sample 16 countries for tries (Fig. 1).

88 God. XXXIII, BR. 1/2020. str. 83-99

 Original scientific article

Figure 1 Women in the parliaments of selected European countries (in %; n=36)

Ukraine 11,58
Hungary
Malta
Russia
Turkey
Greece
Bosnia and Herzegovina
Romania
Croatia
Czech Republic 20,64
Slovakia
Lithuania
Ireland
Slovenia
Poland
Luxembourg
Bulgaria
average 28,04
Switzerland
United Kingdom
Albania
Estonia
Latvia
Germany
Netherlands
Italy
Austria
Portugal 36,52
France
Serbia
Denmark
Iceland
Belgium
Spain
Norway
Finland
Sweden 46,71

0 10 20 30 40 50

Source:OwnOwn
Source: calculations
calculations based
based on PARLINE on PARLINE
database database
on national on http://archive.ipu.org/parline-e/parli-
parliaments, national parliaments,
nesearch.asp (Accessed on: April 20, 2019). (Accessed on: April 20, 2019).
http://archive.ipu.org/parline-e/parlinesearch.asp

3.2 Research procedure avoidance, long-term orientation, and indulgence)

3.2. Research
Firstly, procedure
using the official websites, we collected were collected as well.
data using
Firstly, about the
parliaments – in particular,
official websites, data data
we collected on about
We parliaments
conclude that
– indespite numerous
particular, data oneducational
the number of houses, total number of members, campaigns, political appeals, and changes in the
theand
number of houses,
number total Itnumber
of women. of members,
is significant and number
that all of women.
law, in the It is of
parliaments significant that countries
the European
European countries and the disputed territories
all European countries and the disputed territories have their own parliaments (there are and
which deem themselves developed no providing
have their own parliaments (there are no coun- equal opportunities, there are still fewer women
countries without parliamentary
tries without parliamentary systems,
systems, with
withthe exception
the of theDeterminants
than men. Vatican City).
ofThe
suchdata on
a situation could
exception of the Vatican City). The data on GDP
GDP and data about all Hofstede dimensions (powerbedistance,
discussed, but it seemsmasculinity,
individualism, that among the main
and data about all Hofstede dimensions (power ones are those mentioned earlier: the economic
uncertainty
distance, avoidance, long-term
individualism, orientation,
masculinity, and indulgence)
uncertainty were collected
development as well.index. Therefore, we
and masculinity

God. XXXIII, BR. 1/2020. str. 83-99 89

Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view

propose the following hypotheses (the first is the
main hypothesis and the second is auxiliary):
1) The presence of women in European parlia-
ments is directly proportional to the eco-
nomic development measured in GDP per
capita; and
2) The number of women in parliaments de-
pends also on the type of society measured
by the masculinity index.
Masculinity index is determined on the basis of
factors such as: people being ego-oriented, impor-
tance of money and things, living to work, high eco-
nomic growth as a priority, solving conflicts with
force, religion being the most important in life, men
earning more than women, traditional family struc-
tures, failure in life being perceived as a catastrophe
(Hofstede, 2001: 297). Thus, the index describes the
mentalityPERWOMENPA
of society and its i = β0 +
RLIattitude β1LGDPC
towards the i + β 2 MASCULINITYi + u i
present and the past. We believe that apart from
economic development, these are the key factors
shaping the situation of women, and thus we as-
sume that the lower the masculinity index in a given
society, the higher the number of women in parlia-
ments.
The level of development of a given country can, of
course, be assessed by means of various indicators,
such as unemployment, inflation, or investments,
depending on the adopted priorities. One of such
indicators is also the GDP, which provides answers
to many important questions concerning economic
activity (Jütting et al., 2006). Of course, this is by no
means a perfect measure, as it does not reflect ev-
erything that happens in a country’s economy, but
it is widely used and therefore allows international
comparisons (Saunders, Dalziel, 2017).
In order to assess the degree of gender equality in
European parliaments, we collected data on all Eu-
ropean countries, including those which are only
partially located in Europe (Russia, Turkey) or are
disputed territories (Transnistria). As previously
mentioned, data were collected for 51 European
countries and territories for which the participa-
tion of women in parliaments was calculated. In
the analysis we included the following: percentage
of women in national parliaments (PERWOMEN-
PARLI); gross domestic product per capita (GDPC);
masculinity dimension of the Hofstede cultural dif-
ferences index (MASCULINITY), and we also used
the Ordinarily Least Squares method (OLS) for sta-
tistical calculations. All data is for 2018.
The model we propose is as follows:
PERWOMENPARLI i = β 0 + β1LGDPCi + β 2 MASCULIN
where i = 1,..., n, denotes the country, PERWOM-
ENPARLI refers to the percentage of women in
national parliaments, LGDPC is the logarithm of
Gross Domestic Product per capita, MASCULIN-
ITY is the masculinity dimension of the Hofstede
cultural differences index. Finally, ui represents
the error term. The logarithm is used here to re-
spond to skewness towards large values, i.e. a case
in which one or a few values are much larger than
the bulk of the data.
As a dependent variable, we calculated the percent-
age of women in national parliaments (lower and
upper houses), marked as PERWOMENPARLI. The
basic indicators calculated for the sample are shown
in Table 2. Data for the sample were obtained from
resources listed in Methodology part (3.1).

Table 2 Main statistical indicators calculated for the sample (n=36)

Standard
Mean Median Minimum Maximum
Deviation
PERWOMENPARLI 28.04 28.55 9.24 11.58 46.71
GDPC 39531.24 37092.45 19395.71 8800 107525.20
LGDPC 10.46 10.52 0.51 9.08 11.58
MASCULINITY 44.86 43.00 24.29 5.00 100.00
Variables: PERWOMENPARLI (percentage of women in national parliaments); GDCP (Gross Domestic Product per
capita); LGDPC (logarithm of Gross Domestic Product per capita); MASCULINITY (masculinity dimension of the
Hofstede cultural differences index).
Source: Own calculations based on CIA World Factbook17, OECD18, Hofstede Insights19 and PARLINE database on natio-
nal parliaments20 (all accessed on: April 20, 2019)

90 God. XXXIII, BR. 1/2020. str. 83-99


According to our assumptions, as a dependent
variable we calculated the percentage of women
in national parliaments (PERWOMENPARLI) for
lower and upper houses. We also included two
independent variables: the logarithm of the Gross
Domestic Product (GDP) per capita of each coun-
try (LGDPC), and the masculinity dimension of the
Hofstede cultural differences index (MASCULIN-
ITY). For statistical calculations, due to the fact
that we only had one period of data (year 2018), the
ordinary least squares (OLS) method was used to
estimate regression.
Table 2 presents main statistical indicators of the
sample (n=36), and, as we can see, the mean of
women in parliaments is only 28.04%, which is far
from the equality value of 50%. In fact, the maxi-
mum value observed in our sample is only 46.7%.
Thus, in all the studied countries men constitute a
majority in the parliaments. As regards the mascu-
linity dimension, we observed a large variation with
values from 5 to 100. This table also shows signifi-
cant differences in the GDP per capita.
4. Results and discussion
In our considerations, we intend to establish the
degree of implementation of the millennium goal
concerning the promotion of gender equality and
empowerment of women. It is a very complex
problem, which manifests itself differently in dif-
ferent countries. Therefore, we began with estab-
lishing the basic information and measures for
the selected countries (Table 2). As mentioned
above, for the detailed analysis and calculation,
the countries with the calculated masculinity in-
dex have been selected, which is why their number
has been reduced to 36. In Table 3, we calculated
women’s participation in parliaments, and includ-
ed information on GDP per capita and Hofstede’s
masculinity index. For bicameral parliaments, the
share of women in each chamber was calculated
separately, and then the average of two values was
God. XXXIII, BR. 1/2020. str. 83-99
Original scientific article
calculated. It should be noted here that the higher
the PERWOMENPARLI variable (close to 100),
the better; and the higher the GDPC variable, the
better, while the lower MASCULINITY variable,
the better (the country is more feminine). It can be
noticed that the country with the largest represen-
tation of women in the parliament is Sweden. As it
was mentioned before, Sweden is the most devel-
oped country in terms of gender equality, and it is
also developed in terms of economic performance
(it ranks 12th in Europe in terms of GDP). On the
other side, there are countries like Ukraine, Hun-
gary or Russia – former communist states, still
struggling with problems and striving to improve
their economic situation.
As far as the masculinity dimension is concerned,
again Sweden has the best result with a low value
of 5. Noticeable are also the good figures of Norway
and Latvia. However, Slovakia presents the maxi-
mum masculinity dimension with a figure of 100,
followed by Hungary and Albania. Also noteworthy
are the surprisingly high masculinity indexes pre-
sented by Germany, Switzerland, Italy, and Austria.
In terms of GDP per capita, the richest country is
Luxembourg, followed by Norway, Switzerland,
and Ireland, while Ukraine is the poorest country,
followed by the majority of the former Yugoslav
states.
The calculations of women’s participation in the
parliaments of European countries presented in
Table 3 show that the three countries with the
highest participation of women are Scandinavian
countries (Sweden: 46.71%, Finland: 42.5%, and
Norway: 41.42%), where the GDP per capita is
very high, while the masculinity index is very low
(Sweden, Norway), or quite low (Finland). It is
worth recalling that the average share of women
in parliaments is 28.04% (as given in Table 2).
This means that the two factors mentioned (GDP
and masculinity index) can be of key importance
here.
91
Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view

Table 3 Women in national parliaments, gross domestic product per capita and masculinity dimensi-
on of the Hofstede cultural differences index by country (n=36)
Country PERWOMENPARLI GDPC MASCULINITY
Albania 29.29 12500.0 80
Austria 34.84 50000.0 79
Belgium 39.05 46600.0 54
Bosnia and Herzegovina 19.30 12800.0 54
Bulgaria 25.83 21800.0 40
Croatia 19.87 26261.7 40
Czech Republic 20.64 38021.5 57
Denmark 37.99 54337.4 16
Estonia 29.70 31700.0 30
Finland 42.50 44500.0 26
France 36.76 44100.0 43
Germany 32.01 52574.3 66
Greece 18.67 27800.0 57
Hungary 12.06 28798.6 88
Iceland 38.10 55322.1 10
Ireland 22.15 76889.3 68
Italy 34.65 38200.0 70
Latvia 30.00 28378.1 9
Lithuania 21.99 32400.0 19
Luxembourg 25.00 107525.0 50
Malta 14.93 41900.0 47
Netherlands 32.89 53900.0 14
Norway 41.42 62182.5 8
Poland 24.82 29574.0 64
Portugal 36.52 30500.0 31
Romania 19.57 24600.0 42
Russia 16.12 27900.0 36
Serbia 37.65 15100.0 43
Slovakia 20.67 32376.2 100
Slovenia 22.31 36163.4 19
Spain 39.45 38400.0 42
Sweden 46.71 51404.8 5
Switzerland 28.05 66299.6 70
Turkey 17.48 28606.9 45
Ukraine 11.58 8800.0 27
United Kingdom 29.06 44909.1 66

Variables: PERWOMENPARLI (percentage of women on national parliaments); GDPC (gross domestic product per
capita); MASCULINITY (masculinity dimension of the Hofstede cultural differences index).
Source: Own calculations based on CIA World Factbook 21, OECD22, Hofstede Insights23 and PARLINE database on natio-
nal parliaments24 (all accessed on: April 20, 2019)

92 God. XXXIII, BR. 1/2020. str. 83-99


Calculations also show that in terms of GDP per
capita Luxembourg (over USD 107,500), Ireland
(76,889.3) and Switzerland (66,299.6) have the
highest level, while in these countries women’s par-
ticipation in parliaments is quite average (22-28%).
This is due to the high masculinity index, which is
around 50-70. The countries with the lowest rates
of women in parliaments are Ukraine, Hungary,
and Malta. Ukraine has a low masculinity index
(27), but it also has a very low GDP per capita, so it
seems that the weak economic level has influenced
the role of women in politics and society, because
this country has the lowest number of women in
parliament (11.58%). This is confirmed by the sta-
tistical calculations presented in Table 4.
Table 4 OLS regression of LGDPC and
MASCULINITY on PERWOMENPARLI
Variables Model
6.829***
LGDPC
(2.52)
-0.124**
MASCULINITY
(-2.15)
-37.865
CONSTANT
(-1.32)
F statistic 5.91***
Adjusted R Squared 0.219
Notes. (*) and (**) indicate significance levels of 5%, and
1%, respectively. T statistic in brackets.
Variables: PERWOMENPARLI (percentage of women on
national parliaments); LGDPC (logarithm of Gross Do-
mestic Product per capita); MASCULINITY (masculinity
dimension of the Hofstede cultural differences index).
Source: Own calculations based on data in Table 3.
In Table 4, instead, we are searching for the rela-
tionship between GDP and the number of women
in parliament, and the calculations show that such
a dependency does exist (and is statistically signifi-
cant). As we can see, the beta coefficient presents a
value of 6.8 and it is significant at 99% level. We ob-
served that European countries with a higher GDP
per capita have more women in their parliaments.
This finding confirms that gender equality is higher
in more economically developed countries and it
is in line with the arguments of Blair (2012), and
Panda (2018). We have thus proven that there is a
positive correlation between the number of women
in parliament and GDP, and a negative correlation
between the number of women and the masculin-
ity index.
God. XXXIII, BR. 1/2020. str. 83-99
Original scientific article
As the main contribution of our paper we perceive
the evidence that throughout Europe, the level of
social and political activity of women is associated
with economic development, however, we real-
ize that this is not the only factor. Thus, we have
also proven that countries with lower masculinity
dimension have more female representatives in na-
tional parliaments. In fact, we obtained a beta coef-
ficient of -0.124 and the relationship is significant at
95% level. This finding is important because, as we
demonstrate, lower masculinity dimension helps to
improve the gender equality politics, but also “the
dominant values in a masculine society are achieve-
ment and success; the dominant values in a femi-
nine society are caring for others and quality of life”
(De Mooij, Hofstede, 2001: 89). This argument as-
sumes that countries with more women in top posi-
tions can create better conditions for living, which
means better development in the future.
One can, of course, wonder if other factors are (ir)
relevant, such as the way parliamentary elections
are conducted and the existence of gender quotas.
However, among the top ten countries in Table 2
(Sweden, Finland, Norway, Spain, Belgium, Iceland,
Denmark, Serbia, France, and Portugal) there is no
one dominant political solution. Electoral parity for
women is in force in France and Belgium (constitu-
tional), and in Spain and Portugal (statutory). The
internal party regulations were applied in Sweden,
while in the other five countries there are no for-
mal regulations in this area (Gorzelany-Plesinska,
2011; Lu, 2016). Thus, we can say that political
solutions are not a key determinant. However, it
seems that the significance of two factors can cer-
tainly be demonstrated: prosperity measured by
GDP per capita, and cultural specificity measured
by the society’s masculinity/femininity index, while
the role of gender quotas introduced by law is not
fully evidenced. Poland can serve as an example. In
2011, gender quotas were introduced while prepar-
ing electoral lists. In the elections of 2011 and 2015
more women did indeed appear on the lists, but
the number of women elected to the parliament or
performing important political function did not in-
crease (Millard, 2014; Gwiazda, 2017). This means
that the mere presence of women on electoral lists
does not guarantee their election.
Figure 2 shows differences between two groups of
countries: group A comprises 10 European coun-
tries with the largest number of women in parlia-
ment (39.61 on average), while group B comprises
10 countries with the smallest number of women
(17.02 on average).
93
countries with the largest number of women in parliament (39.61 on average), while group B
comprises 10 countries with the smallest number of women (17.02 on average).
Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view

Figure 2 Differences between countries with the largest (A) and smallest (B) number of
Figure 2 Differences between countries with the largest (A) and smallest (B) number of women in par-
women in parliaments
liaments

MASCULINITY Av 27,8 49,3

GDPC / 1000 Av 26,54887 44,24468 group A
PERWOMENPARLI Av 17,02 39,61
group B
0 10 20 30 40 50 60

Notes.Notes.
Variables: MASCULINITY
Variables: MASCULINITY AvAv (average
(average masculinity
masculinity dimensiondimension of cultural
of the Hofstede the Hofstede
differencescultural
index); differences
index);GDPC/1000
GDPC/1000 Av (average
Av (average Gross Domestic
Gross Domestic Product perProduct per capita
capita divided divided
by 1000); by 1000); PERWOMENPARLI
PERWOMENPARLI Av (average per- Av
(average percentage
centage of womenofinwomen in national parliaments).
national parliaments).

Source: Own calculations.

It can be concluded that larger numbers of wom-
en in parliaments are accompanied by a higher
GDP index and a lower masculinity index, while
the low numbers of women in parliaments are ac-
companied by a low GDP and a high masculinity
index. This means that the achievement of the new
Sustainable Development Goals, in particular the
situation of women, is not only dependent on the
good will of politicians or promotional campaigns
for gender equality, but also on the development of
the economy, and the values of societies (Booth et
al., 2003). Obviously, changes in both those areas
require time.
In the following paragraphs, the considerations
pertain to all of Europe, i.e. countries that are some-
times ignored in literature on Europe, such as Tur-
key, Georgia, or the Balkan states remaining out-
side the EU. Although Turkey has GDPC at the level
of USD 28,606, it is still much lower than the Euro-
pean average (USD 39,531); it also has an above-av-
erage masculinity index (45), therefore the share of
women in the Turkish parliament is low (17.48%).
Unfortunately, not all countries have calculated
Hofstede indexes, which limited the possibility of
precise calculations for all the countries of Europe.
Among them is Georgia, whose society is nonethe-
less similar to those of other post-communist states
such as Ukraine or Poland (Tkeshelashvili, 2009); it
can thus be assumed that Georgia will have a high
masculinity index, which, along with low GDPC
(USD 10,700) explains the very low share of women
in the country’s unicameral parliament (14.67%).
Among the Balkan states, the situation is diversi-
fied. Significant progress has been noted in North
Macedonia, Kosovo, and Serbia, where gender quo-
tas were introduced for the political representation
of women. For instance, in Serbia, where GDPC
is only USD 15,100, the parliament consists of
37.65% of women (with the average for Europe be-
ing 28.04%). This can be explained by the fact that
in 2006 the quotas for women’s participation were
put in the Serbian constitution and in the adopted
electoral law, in accordance with which every third
candidate on the list for the parliament had to be
a person of the underrepresented gender (Lendák-
Kabók, 2013). In addition, Serbia has applied for
membership in the EU, and so it has to meet various
requirements, among them those related to gender
equality. Thus, similar to France or Belgium, wom-
en have access to parliament guaranteed by the Ba-
sic Law. Other Balkan countries, such as Albania,
Bosnia and Herzegovina, Montenegro, also tackled
the issues of gender equality. In those countries, the
share of women in parliaments is 29.3%, 19.3%, and
23.5% respectively, so it is higher than in Ukraine
(11.58%), Hungary (12.06%), Turkey (17.48%), and
even Greece (18.67%). Analysing the changes oc-
curring in the Balkan countries, what should be
emphasized are the law reforms and adjustments to
the requirements of the EU.
Next to the most essential data, we have also col-
lected information on the sex ratios and unemploy-
ment levels in each country. We wanted to verify
whether women really do constitute half of each
population and whether it was an important factor

94 God. XXXIII, BR. 1/2020. str. 83-99


determining the number of women in parliaments.
It turns out that the average sex ratio in European
countries is 50.95% of women to 49.05% of men.
Andorra (41.59%), Cyprus (47.4% and 48.91%) and
Kosovo (48.5%) have the smallest proportion of
women. In Estonia, Belarus, Lithuania, Ukraine,
Transnistria, and Latvia, women constitute over
53% of the population. However, there is no statisti-
cally significant correlation between the number of
women in a given country and the number of wom-
en in the country’s parliament. There is also no rela-
tion between the number of women in parliaments
and unemployment. Therefore, it seems that what
can be certainly proven is the relationship between
the number of women in the parliament and the
level of GDP together with the masculinity index.
5. Conclusions and recommendations
As it was mentioned in the beginning, in 2019, Eu-
rope celebrated the centenary of women’s rights in
politics. At the beginning, it was a matter of rights
themselves, but since the 1950s, the issue of wom-
en’s participation in public life has become more
prominent. This is evident in the declarations of in-
ternational organizations and the European Union
on social and political priorities.
The analysis of data collected for 51 European
countries prove that although women constitute
50% of the population, their participation in public
life remains small. Our calculations allow us to state
that the participation of women in European parlia-
ments is still low and on average it is 28.04%. Only
three countries achieved a level above 40% (Swe-
den, Finland, and Norway). No European country
reached the index of 50%. As many as 15 out of
51 parliaments in Europe (29.41%) have a female
participation rate below 20%. Determining clear
reasons for this can be difficult, because societies
are very different, however, two measures of a uni-
versal nature can be used here: GDP per capita and
masculinity index. So, the aim of this article was to
determine the participation of women in European
God. XXXIII, BR. 1/2020. str. 83-99
Original scientific article
parliaments and to verify two hypotheses, namely:
1) the presence of women in European parliaments
is directly proportional to the economic develop-
ment measured by GDP per capita; and 2) the lower
the masculinity index in a given society, the higher
the number of women in parliaments.
The presented calculations confirm our hypotheses
that the participation of women in parliaments de-
pends on the economic level of the country and on
the “masculinity” of society. Changes in both these
areas are difficult and require time, so quick trans-
formations should not be expected. Certainly, an
appropriate information policy and the introduc-
tion of legal regulations defining a specific level of
women’s presence in politics (for example, the ex-
istence of gender quotas) may also be of some im-
portance, but the research to date does not prove
a close relationship. It should be added that our
calculations did not show any relationship between
the total number of women in the country and the
number of women in the parliaments, nor is the lat-
ter related to factors such as rate of unemployment.
Undeniably, the number of women in parliaments is
a result of numerous conditions. In addition to eco-
nomic factors, the political system should be men-
tioned here, including the constitution containing
a non-discrimination clause covering gender. There
are also other considerations involved such as the
dominant religion (or lack thereof ), ethnic struc-
ture of society, activity of non-governmental organ-
izations, and electoral regulations, i.e. the method
of electing representatives to parliaments and the
existence of gender quotas. It can be assumed as
well that other factors play some role too, for exam-
ple, the level of internationalization of the economy,
which brings different gender perceptions; how-
ever, this also seems to be related to the economic
development. The above issues can be the subject
of further research, however today it can be stated
that the richer the country, the more women in
parliaments, and the lower the masculinity index,
again the more women in parliaments.
95
Joanna Hernik, Antonio Minguez Vera: Gender equality in parliaments - where do we stand in Europe? Considerations from the
economic development and society’s masculinity index point of view

R

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Acknowledgments
Antonio Mínguez-Vera acknowledges financial support from Fundación CajaMurcia and Spanish Govern-
ment (Project RTI2018-093884-B-I00).

E

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es/1954/07/19540707%2000-40%20AM/Ch_XVI_1p.pdf (Accessed on: April 20, 2019)
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undp/en/home/sustainable-development-goals.html (Accessed on: April 20, 2019)
4 United Nations (2015), “The Millennium Development Goals Report 2015”, available at: https://www.un.org/millenniumgoals/2015_
MDG_Report/pdf/MDG%202015 %20rev %20(July%201).pdf (Accessed on: April 20, 2019)
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(Accessed on: April 20, 2019)
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15 Population of the world and countries, available at: https://countrymeters.info/en (Accessed on: April 20, 2019)
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98 God. XXXIII, BR. 1/2020. str. 83-99

 Original scientific article

18 Gross domestic product,  available at: https://data.oecd.org/gdp/gross-domestic-product-gdp.htm (Accessed on: April 20, 2019)
19 Hofstede Insights, available at: https://www.hofstede-insights.com/product/compare-countries/(Accessed on: April 20, 2019)
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2019)
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(Accessed on: April 20, 2019)
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23 Hofstede Insights, available at: https://www.hofstede-insights.com/product/compare-countries/(Accessed on: April 20, 2019)
24 PARLINE database on national parliaments, available at: http://archive.ipu.org/parline-e/parlinesearch.asp (Accessed on: April 20,
2019)

Joanna Hernik
Antonio Minguez Vera

R    – 

   E R  
    


S
U literaturi se često naglašava kako žene čine polovinu svih društava, ali se njihove potrebe i prava ne uzi-
maju uvijek u obzir u odlukama koje ta društva donose. Ujedinjeni narodi i druga međunarodna tijela trude
se promijeniti položaj žena na svjetskoj razini putem različitih programa kao što su „Milenijski razvojni
ciljevi“ i trenutačni „Ciljevi održivog razvoja“. Promicanje rodne ravnopravnosti i osnaživanje žena ubrajaju
se u te ciljeve. Autori koji se bave rodnim i razvojnim pitanjima često ističu kako su žene nedovoljno isko-
rišten čimbenik gospodarskog rasta. U ovome radu želimo situaciju sagledati iz druge perspektive i istražiti
kako je aktivnost žena uvjetovana gospodarskim razvojem određene zemlje. Stoga je ovaj rad dijagnoza
trenutačnog stanja, ali i traženje objašnjenja za neke međuovisnosti.
Razlozi za prisutnost ili odsutnost žena u politici nisu sasvim jasni; stoga će se ispitati glavne odrednice
koje po mišljenju autora na to utječu, a to su bogatstvo društva i njegov karakter (maskulinitet ili feminitet).
Cilj je rada analizirati sudjelovanje žena u parlamentima europskih zemalja i provjeriti hipotezu je li posto-
tak žena u parlamentu izravno proporcionalan gospodarskom razvoju izraženom kao BDP po stanovniku.
Osim glavne hipoteze ispituje se i pomoćna hipoteza koja se odnosi na maskulinitet društva (Hofstedeov
model).
Na temelju analize može se zaključiti da je sudjelovanje žena u europskim parlamentima i dalje nisko (u
prosjeku 28,04%), a nijedna europska zemlja nije došla do 50%. Potvrđena je statistička značajnost obje
hipoteze te se može ustvrditi da sudjelovanje žena u europskim parlamentima ovisi o gospodarskom razvo-
ju određene zemlje i vrsti društva. Jasno je da je te odrednice teško promijeniti, odnosno da su promjene
relativno spore (iako je zamjetan rastući trend), te da imaju specifične uzroke. Nije utvrđen odnos između
broja žena u parlamentima i drugih gospodarskih čimbenika, npr. nezaposlenosti.
Ključne riječi: Europa, gospodarski razvoj, rodna ravnopravnost, Hofstedeov indeks, parlamentarni izbori,
ciljevi održivog razvoja

God. XXXIII, BR. 1/2020. str. 83-99 99

 CC BY-NC-SA

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
Ovainlicenca
motivation for attending two Christmas Markets Croatia dopušta d
nekomercijalne svrhe
Dina Lončarić Tihana Cegur Radović Original scientific articlesvoja djela
licenciraju
University of Rijeka Karlovac University
Faculty of Tourism and of Applied Sciences Received: December 13, 2019
Hospitality Management Trg J.J. Strossmayera 9, Accepted for publishing: March 8, 2020
Primorska 42, 47000 Karlovac, Croatia Pogledajte sažetak lic
51410 Opatija, Croatia tcradovic@vuka.hr
dinal@fthm.hr Phone: +385917301596 This work is licensed under a
Phone: +38551294187 Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
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Zagorska 43, Imenovanje-Nekome
10000 Zagreb, Croatia CC BY-NC-ND
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Phone: +385915587087
Ovo je najrestriktivnija

WHO ATTENDS CHRISTMAS 5 od 6

MARKETS AND WHY? ANALYSIS

OF VISITOR STRUCTURE AND
MOTIVATION FOR ATTENDING TWO
CHRISTMAS MARKETS IN CROATIA
A
There are various motives for visiting a festival or an event. Motivations explain why people behave in a
certain way and are therefore of particular interest in the context of meeting consumer expectations and
needs. In this paper, the authors investigate the motives for attending two increasingly popular Christmas
Markets in Croatia. The study compares the demographic structure of visitors, their travel behaviour and
motivation for visiting the two markets and determines the level of their satisfaction and intentions for
future behaviour. The overall aim is to identify visitors’ needs and help destination managers organise ac-
tivities that appeal to the target market. To this end, the authors have conducted desk and field research.
Empirical research was conducted on the samples of Christmas Market visitors in Zagreb and Karlovac.
The samples were selected using the convenience sampling method. Data analysis was performed using de-
scriptive, inferential and multivariate statistics. The results of the research show that the travel behaviour of
visitors and their motives for coming to the Christmas Markets differ, as well as their satisfaction level and
loyalty. However, for both fairs a strong link was found between the visitors’ satisfaction with the visits and
their intentions to revisit the two markets, recommend them, and share their experiences. This study makes
a small contribution to the field of consumer behaviour by enhancing our understanding of the motivations
for visiting different tourist events. The findings of this study may benefit festival and event managers by
helping them deliver relevant customer experiences.
Keywords: Tourist events, festivals, Christmas Markets, tourist motives, satisfaction, loyalty

and special events are the cultural resources of a

1. Introduction
Festivals are cultural events (Frisby & Getz, 1989)
that are considered a form of cultural tourism (For-
mica & Uysal, 1998; Mahika et al., 2015). Festivals
destination that make possible the successful host-
ing of visitors (Uysal et al., 1993: 5). They provide
communities with a way to celebrate their unique
cultural traditions and attract tourist and local

God. XXXIII, BR. 1/2020. str. 101-114 101

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia
visitors (Tanford: Jung, 2017: 209). These events
are usually organized to create a positive image of
a place and bring in money to the local community
(Uysal et al., 1993: 5). Festivals offer various ben-
efits to local communities because of their signifi-
cant impact on the local economy (Getz, 1993) and
reinforcement of social cohesion within commu-
nities (Rao, 2001; Yoon et al., 2010). Local events
have been known to boost sustainable tourism by
facilitating learning about unique cultural herit-
ages, ethnic backgrounds, and local customs (Yoon
et al., 2010: 335). Tourism is often seen as having
a negative impact on the cultural content and “au-
thenticity” of cultural events (Richards, 2007). As
the events grow, the budget also increases and the
organization becomes more professional, the entire
organization of the event depends on the sponsors’
will. Richards (2007) studied a traditional cultural
event in Barcelona and found significant differences
between different visitor groups and between dif-
ferent groups of residents, suggesting the need for a
more sophisticated analysis of the consumption of
cultural festivals and its effects. Residents tend to
have a constructive view of authenticity linked to
cultural and social references, whereas visitors em-
ploy a more existential view of authenticity related
to their enjoyment of the event and experience of
difference (Richards, 2007: 33). Varičak et al. (2019)
examined the Karlovac Advent visitors’ experience
and spending intention, and found that the correla-
tion between “the hospitality of the local residents”
and “spending intention” was higher among the
visitors (trippers and tourists) than among the resi-
dents. There is also a negative impact on the local
residents caused by the influx of visitors that pro-
duces congestion and noise (Brida et al., 2017). The
event could become so commercial that its original
authentic traditions may be lost.
The motivations of hosts must be identified in a timely
and appropriate moment, as well as their views of a
particular event, in order to keep them participating.
Marketing strategies may have an important role in
the organization of events (Ferreira, Sarmento, 2015).
The success of events depends on the collaboration
and coordination between all stakeholders, public and
private, and the local residents themselves. Other-
wise, its sustainability is uncertain.
There are many studies on event motivations (Meang
et al., 2016), customer segmentation (Chang, 2006),
satisfaction (Sohn et al., 2016) and loyalty (Yuan,
Jang, 2008; Tanford, Jung, 2017). There is also abun-
102
dant research on visitors’ motivations for attending
festivals and special events (Uysal et al., 1993; Getz,
2008; Getz, 2010; Matheson et al., 2014; Meang et al.,
2016; Tanford, Jung, 2017).
However, there are only a few papers exploring the
motivation for visiting Christmas Markets (Brida et
al., 2012; Brida et al., 2014; Brida et al., 2017; Bri-
da, Tokarchuk, 2017; Marković et al., 2018; Vitner
Marković et al., 2019). Christmas Markets have be-
come very popular events in Croatia. They attract
different types of visitors, such as families with chil-
dren, young middle-aged and older people. In order
for the organizers of Christmas Markets to come
up with effective marketing plans, it is important
they know who their visitors are, and why they have
decided to visit these events. The purpose of this
research is to contribute to the debate on the mo-
tivation for attending Christmas Markets. To that
end, an analysis of the visitor structure and their
motivation to attend the two Christmas Markets in
Croatia was conducted. This research seeks to an-
swer the following questions: 1) Is there a difference
in the visitor structure between the two analysed
Christmas Markets? 2) Do the visitors’ motives for
attending various Christmas Markets differ? 3) Do
visitors differ in terms of the level of satisfaction
and loyalty, i.e. do they intend to revisit the events,
recommend and share the experience with friends
and acquaintances? 4) Does satisfaction with a
Christmas Market affect the visitors’ loyalty?
The paper consists of five chapters. The introduc-
tory part, explaining the purpose and objectives of
the research, is followed by a description of the ba-
sic concepts used in the paper, a description of the
methodology, and the presentation of the results of
the empirical research. Discussion and conclusions
of the research are given at the end of the paper.
2. Literature review
This section explains the motivations for attending
different festivals and the concepts of satisfaction
and loyalty of tourists.
2.1 Motivation to attend the festivals
To identify the reasons why tourists or other visitors
decide to visit a particular destination, it is important
to look at different motivation theories. Most au-
thors use Maslow’s theory of motivation which pos-
its that people are motivated by five basic categories
of needs, extended by cognitive and aesthetic needs
God. XXXIII, BR. 1/2020. str. 101-114

(Šimková, Holzner, 2015); and constructs like Iso
Ahola’s push-pull theory (Iso Ahola, 1980). Push fac-
tors (internal motives) are present as escaping mo-
tives and pull factors (external stimulation) as seek-
ing motives (Šimková, Holzner, 2014). Dann’s (1977)
push and pull theory of motivations is another wide-
ly accepted theoretical framework used for identify-
ing tourists’ motivations. According to this theory
people travel because they are “pushed” by internal
drives (push/intrinsic factors) or “pulled” by exter-
nal drives (pull/extrinsic factors) such as destina-
tion attributes (Khuong, Ha, 2014; Albayrak, Caber,
2018). These theoretical frameworks have been used
in the development of motivation scales for festivals
and special events by researchers like Mannal & Iso-
Aloha (1987), Uysal et al. (1993), Formica & Uysal
(1996), Formica & Uysal (1998), Crompton & McKay
(1997), Chang (2006), Lee & Beeler (2009), Yolal et
al. (2012), Matheson et al. (2014). The motives that
pull the tourist towards a destination are the factors
that make it attractive to potential visitors, such as
festivals, arts and culture, and other events. Some of
the main motives for travelling are to escape, get in
touch with oneself, relieve stress, do what you like,
strengthen family relationships, socialize, acquire
prestige, do something new and exciting, and to
learn.
McIntosh et al. (1995) analysed motivation using
four categories of motivators: physical, cultural,
interpersonal and motivators of status and prestige
(Cooper et al., 2008). Physical motivators involve
refreshment of body and mind, health purposes and
sports; cultural motivators inspire a person to learn
something new about other cultures; interpersonal
motivators include a desire to meet new people, so-
cialize with family and friends; status and prestige
motivators include the desire for recognition from
others (Cooper et al., 2008).
Studies have found that gender and age significantly
affect the perceived image of tourist destinations.
There are also interpersonal reasons and wishes to
be physically active s which appear to be the promi-
nent motives today. The perceived image is the im-
pression of the destination and it plays a crucial role
in the tourists’ decision to visit a particular destina-
tion (Jönsson, Devonish, 2010).
Uysal et al. (1993) examined the theoretical frame-
work of event motivation dimensions among differ-
ent groups of individuals. The study has revealed
that older visitors tend to place more importance
on Event Novelty than younger visitors. It is inter-
esting that Friday visitors placed significantly more
importance on socialization than Saturday visitors.
God. XXXIII, BR. 1/2020. str. 101-114
Original scientific article
In today’s modern world we can say that the main
reasons for choosing a destination are influenced by
online reviews. Potential tourists can be motivated
to visit a destination based on images they found
online, but the visit can change their impression of
the destination. Measurement of tourist motivation
is seen as the key to satisfied visitors, attracting more
visitors, predicting future demand and developing
products and services that meet the tourists’ needs
(Wolfe, Hsu, 2004; Albayrak, Caber, 2018). Differ-
ences in motivation are evident according to the
visitor type; key differences have been identified be-
tween domestic and foreign visitors where the mean
scores for all motivation factors of foreign visitors
were found to be consistently higher than those of
domestic visitors (Lee, 2000; Matheson et al., 2014).
Maráková et al. (2018) identified the main factors
which motivate visitors to attend traditional cultural
events in Slovakia, and examined their viability as
the basis for festival market segmentation (recon-
nection seekers, experience and equilibrium seekers,
multi-purpose seekers and change and togetherness
seekers). The present study investigates the motiva-
tions of visitors to the Advent in Zagreb and Karlo-
vac. A study by Vitner Marković et al. (2019) which
looked into the motivation for visiting the Karlovac
Advent concluded that it varies depending on the
visitor’s age (Vitner Marković et al., 2019).
Brida et al. (2012) used the sequential non-linear
clustering method to analyse primary data collect-
ed at three Christmas Markets in Northern Italy:
Torino, Bolzano and Brunico (Brida et al., 2012).
The analysis identified three cluster segments ‘busi-
ness people’, ‘Christmas fans’ and ‘general tourists’
(Brida et al., 2012). Brida et al. (2014) used the
Bagged Clustering method to identify motivation
and expenditure clusters for Christmas Market in
Merano, North Italy (Brida et al., 2014). The objec-
tive of another study by Brida et al. (2017) was to
estimate the economic or social value of the Christ-
mas Market to understand in what way the event
creates a benefit for society (Brida et al., 2017). The
findings of that study suggest that the use and rec-
reational values for tourists differ according to trav-
el costs, the type of visit experience and perceived
authenticity. They also depend on whether tourists
visit for one or several days (Brida et al., 2017).
2.2 Satisfaction with festivals
In recent years, many authors have shown interest
in examining the motivation – satisfaction relation-
ship. Satisfaction has proven to have a positive influ-
ence on the tourists’ post-purchase behaviour such
as recommendations (Hui et al., 2007; Prebensen et
103
Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia
al., 2010; Albayrak, Caber, 2018) and intention to
revisit (Bigné et al., 2005; Alegre, Cladera, 2009;
Albayrak, Caber, 2018). According to Oliver (1997),
satisfaction is considered as consumer judgment
about goods and services (Kim et al., 2010). It is the
outcome of a subjective evaluation about whether
the selected alternative meets or exceeds expecta-
tion (Kim et al., 2010). The researchers have used
different approaches to investigate the relation-
ship between tourist motivation and satisfaction.
One group of authors propose that motivation is
the sole determinant of overall satisfaction (Yoon,
Uysal, 2005; Pan, Ryan, 2007; Schofield, Thomp-
son, 2007; Qiao et al., 2008; Prebensen et al., 2010,
Savinovic et al., 2012; Battour et al., 2012; Lee, Hsu,
2013; Lee et al., 2014; Caber, Albayrak, 2016; Al-
bayrak, Caber, 2018). Anderson et al. (1994) define
overall satisfaction as an overall evaluation based
on the total purchase and consumption experience
with a good or service over time (Yoon et al., 2010).
The second group of researchers use motivation
together with other variables as the antecedents of
overall satisfaction (Meng et al., 2008; Huang et al.,
2014; Tang, 2014; Albayrak, Caber, 2018). The third
group of researches use the same items of motiva-
tion for the measurement of respondents’ satisfac-
tion (Ross, Iso-Ahola, 1991; Thomas, Butts, 1998;
Fluker, Turner, 2000; Severt et al., 2007; Kao et al.,
2008; Correia et al., 2013; Albayrak, Caber, 2018).
All of these approaches assume that there is a linear
relationship between motivation and satisfaction
(Albayrak, Caber, 2018).
Satisfaction in the context of festivals is defined as
the visitor’s overall satisfaction with the festival,
as satisfaction with specific attributes is classified
in the relevant attribute category (Tanford, Jung,
2017). However, merely understanding the visitors’
motives is insufficient to guarantee visitor satisfac-
tion and loyalty. The motives also need to be consid-
ered when creating attractive festival qualities and
features which will influence visitor behaviour (e. g.
satisfaction and loyalty) (Yoon et al., 2010). Baker
and Crompton (2000) took the initiative in inves-
tigating the relationships between festival quality,
satisfaction and loyalty (Yoon et al., 2010). Building
on four dimensions of festival quality, they discov-
ered that the quality of a festival affected behav-
ioural intentions, attitudinal loyalty to the festival,
and the willingness to pay more, more significantly
than visitor satisfaction. The satisfaction of festival
visitors has been described as a useful predictor of
their future behavioural intentions (Baker, Cromp-
ton, 2000; Kim et al., 2010).
104
Many studies have found that key elements that af-
fect tourist satisfaction with festivals and events are
various motivations (e.g., novelty, escape, event at-
tractions and socialization) (Lee et al., 2004; Kim et
al., 2010). Past studies have emphasised that satis-
faction is a significant direct factor influencing cus-
tomer loyalty in tourism and hospitality (Kim et al.,
2010). The customers are more likely to have a bet-
ter service experience if they take part in producing
the experience themselves (Harris et al., 2001; Or-
gan et al., 2015). This co-creation through customer
interaction leads to greater satisfaction levels (Bij-
molt et al., 2010; Brodie, Hollebeek, 2011; Organ et
al., 2015). Research has also suggested that festival
visitors’ emotions are related to their satisfaction
levels (Grappi, Montanari, 2011; Lee et al., 2008;
Mason, Paggiaro, 2012; Organ et al., 2015).
2.3 Loyalty to festivals
Loyalty is defined as repeating purchase behaviour
and is characterised in terms of repurchase inten-
tions, WOM communications and recommen-
dations (Lee et al., 2006: 218). Oliver and Burke
(1999) showed that creating loyalty depends on
achieving customer satisfaction, which is affected
by expectations (Kim et al., 2010). They suggested
there is a significant positive correlation between
the consumers’ satisfaction and their future inten-
tions (Kim et al., 2010). Past studies have suggested
that perceptions of service quality and value affect
satisfaction. Satisfaction furthermore affects loy-
alty and post-purchase behaviours (Oliver, 1980;
Cronin, Taylor, 1992; Fornell, 1992; Andresen, Sul-
livan, 1993; Tam, 2000; Bignie et al., 2001; Choi,
Chu, 2001; Petrick, Backman, 2002; Chen, Tsai,
2007; Chen, 2008; De Rojas, Camarero, 2008; Chen,
Chen, 2010). Satisfied tourists may revisit a desti-
nation and recommended it to other tourists, or
express favourable comments about the destina-
tion and not recommend it to others. Dissatisfied
tourists may express negative comments about a
destination and damage its market reputation (Re-
isinger, Turner, 2003; Chen, Chen, 2010). The de-
gree of destination loyalty is frequently reflected in
the tourists’ intentions to revisit the destination and
in their willingness to recommend it (Oppermann,
2000; Chen, Tsai, 2007; Chen, Chen, 2010).
In the hospitality and tourism field, several studies
have been conducted to investigate the relationship
between consumer satisfaction and consumer loy-
alty (Kim et al., 2010). Loyalty is most often defined
by behavioural intentions (Mason, Paggiaro, 2012),
which include intentions to revisit the festival (Choo
et al., 2016) and recommend it to others (Croes, Lee,
God. XXXIII, BR. 1/2020. str. 101-114

2015; Tanford, Jung, 2017). A few studies measure
loyalty as expenditures, which include wine buying
at an Australian wine festival (Brower, 2014) and in-
tentions to donate at a charity festival (Inoue, 2016;
Tanford, Jung, 2017). Some studies report significant
relationships between satisfaction and loyalty, sup-
porting the well-documented relationship between
these two variables in the hospitality literature (Tan-
ford, 2016; Tanford, Jung, 2017).
A study by Tanford and Jung (2017) confirmed that
tangible festival attributes (activities, authenticity,
environment, concessions) are more strongly re-
lated to satisfaction, whereas intangible attributes
(escape, socialization) are more important for loy-
alty. Tangible attributes are experienced “in the mo-
ment” and contribute to visitors’ satisfaction with
the experience. Because of its strong relationship
with loyalty, overall satisfaction may in turn influ-
ence intentions to return. Escape and socialization
may evoke an emotional reaction so that visitors
want to attend the festival again to experience the
same feelings. In a study into Zagreb Christmas
Market by Marković et al. (2018) tourist loyalty is
defined as visitors’ intention to return to the food
festival and recommend it to other people.
3. Methodology
To achieve the research objectives and answer the
research questions, an empirical study was con-
ducted on two Christmas Markets, one in Zagreb
and another in Karlovac, Croatia, in the period
from December 1, 2018 to January 6, 2019. We
chose the Zagreb Advent since it is the largest and
best-organized Christmas Market in Croatia, which
is attracting more and more visitors every year. It
is a city-wide street party in the Christmas spirit.
It offers a variety of events, plenty of fun, excellent
food, unique events, art, and unforgettable Christ-
mas atmosphere and experience. Visitors can visit
the ice park, the Advent in Zrinjevac and the Euro-
pean Square, the Advent in the Tunnel, the Advent
at Stross and Vranyczany Platou. The Zagreb Ad-
vent was voted the best Christmas Market in Eu-
ropa for three years in a row (2016, 2017 and 2018).
The first Karlovac Advent took place in December
2017. For now, it is a small local Christmas Mar-
ket. The program for families with children starts in
the morning and consists of workshops, storytell-
ing, concerts for children and concerts by children
attending Karlovac School of Music. In the after-
noons there are performances of folk ensembles
and students of Karlovac School of Music, while
God. XXXIII, BR. 1/2020. str. 101-114
Original scientific article
the evenings are reserved for concerts by popular
Croatian singers.
A self-administered survey was conducted as a data
collection technique. The questionnaire was com-
piled in English and translated into Croatian. In ad-
dition to demographic questions about gender and
age, the questionnaire included questions about the
number of previous visits, duration of stay, travel
companions and accommodation. The respondents
could choose one of the offered answers. Scales
from the literature were used to measure motiva-
tion, satisfaction, and loyalty. Visitors responded by
expressing their agreement on a Likert-type scale
from 1 (strongly disagree) to 5 (strongly agree).
Event motivation scale (Mohr et al., 1993), consist-
ing of 22 items, was used to determine the moti-
vation for attending the two fairs. Satisfaction with
the experience was measured by four items taken
from the paper written by Prebensen et al. (2015)
to which a fifth item was added (“I will revisit the
Zagreb/Karlovac Advent in the future.”). Visitor
loyalty was measured using three scales: inten-
tion to recommend the destination (three adapted
items taken from Kim et al., 2016), intention to re-
visit destination (three items taken from Kim et al.,
2015), and sharing the experience (two items taken
from Buonincontri et al., 2017).
The survey was conducted on a purposive sample
of visitors. A purposive sampling method was used
since the accurate size of the population could not
be determined. Trained researchers approached the
people who visited the fair. Domestic visitors com-
pleted the questionnaire in Croatian and foreign
visitors completed it in the English language. A to-
tal of 249 valid questionnaires were collected (113
in Karlovac and 136 in Zagreb). The descriptive, in-
ferential and multivariate statistics were used in the
data analysis using a software package SPSS v. 25.
4. Findings
To answer the first research question, a descrip-
tive analysis of the sample (Table 1) was carried
out and the differences between the visitors were
determined using the chi-square test. The sample
comprised 249 respondents. There were more
women (62.7%) than men (36.8%). Most visitors
(49%) were aged 18-25 years, while those aged
55or more accounted for only 8.8% of the sample.
No differences were found among Advent visitors
in Karlovac and Zagreb in terms of gender and age
structure. In addition, most of them had already
105
Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia

visited the Advent. However, the sample varied in
other characteristics. Domestic visitors accounted
for 47.8% and foreign 52.2% of all tourists who
visited the Zagreb Advent. The Advent in Karlo-
vac was visited mostly by domestic visitors. The
difference in the structure of visitors (domestic
vs. international) for both Christmas Markets is
statistically significant (χ2 = 82.523; df=1, p<0.01).
Statistically significant differences between the
visitors of the Zagreb Advent and the Karlovac
Advent were also found in the number of over-
nights (χ2 = 46.002; df=3, p<0.01), travel partners
(χ2 = 26.576; df=5, p<0.01), and the type of accom-
modation (χ2 = 11.328; df=3, p=0.01).

Table 1 Sample structure (N = 249)

Zagreb Karlovac Total
Characteristics Test
N % N % N %
Gender
Female 86 63.2 70 61.9 156 62.7 χ2 = 0.027; df=1
Male 50 36.8 43 38.1 93 37.3 (p>0.05)
Age
18 – 25 71 52.2 51 45.1 122 49.0
26 – 35 24 17.6 13 11.5 37 14.9
36 – 45 18 13.2 25 22.1 43 17.3 χ2 = 6.186; df=5
46 – 55 11 8.1 14 12.4 25 100 (p>0.05)
56 – 65 8 5.9 7 6.2 15 6.0
66 and more 4 2.9 3 2.7 7 2.8
Country
Croatia 65 47.8 113 100 178 71.5 χ2 = 82.523; df=1
Other countries 71 52.2 0 0 71 28.5 (p<0.01)
The number of visits
First visit 22 16.2 22 19.5 44 17.7 χ2 = 0.460; df=1
One or more visits before 114 83.8 91 80.5 205 82.3 (p>0.05)
The number of overnight
stays
1 night 24 17.6 62 54.9 86 34.5
2-3 nights 75 55.1 22 19.5 97 39.0 χ2 = 46.002; df=3
4-7 nights 16 11.8 9 8.0 25 10.0 (p<0.01)
More than 7 nights 21 15,4 20 17.7 41 16.5
Travel partners
Alone 10 7.4 27 23.9 37 14.9
With a partner 11 8.1 18 15.9 29 11.6
Family (with children) 28 20.6 29 25.7 57 22.9 χ2 = 26.576; df=5
Family (without children) 11 8.1 3 2.7 14 5.6 (p<0.01)
Friends/colleagues 71 52.2 33 29.2 104 41.8
Organised group of people 5 3.7 3 2.7 8 3.2
Accommodation
Hotel 21 15.4 18 15.9 39 15.7
Hostel 33 24.3 23 20.4 56 22.5 χ2 = 11.328; df=3
Private accommodation 49 36.0 24 21.2 73 29.3 (p=0.01)
Relatives and friends 33 24.3 48 42.5 81 32.5
Source: Research results.

106 God. XXXIII, BR. 1/2020. str. 101-114

 Original scientific article

Visitors to the Zagreb Advent stayed longer
(82.3% stayed longer than one night) than visi-
tors to the Karlovac Advent (45.2% stayed lon-
ger than one night). The Zagreb Advent visitors
usually come with friends and acquaintances
(52.2%) as opposed to the Karlovac Advent
visitors (29.2%). Most of those who attended
the Karlovac Advent stayed with relatives and
friends (42.5%), while those who visited the Za-
greb Advent stayed in hotels (24.3%) and private
accommodation (36%).
The second research question focused on identify-
ing the motives for visiting the two Christmas Mar-
kets. To reduce the number of manifest variables
to a smaller number of factors, explorative factor
analysis was performed. Five factors were extracted
that explain 59.42% of the variance (Table 2).

Table 2 Results of the explorative factor analysis (N = 249)

Item Factor Total variance Alpha
Item
number loadings explained (%) coefficient
FACTOR 1- Unique experience (event novelty) 25.80 0.798
m_11 Because the Advent in Zagreb/Karlovac is unique. .833
m_13 Because it is stimulating and exciting. .779
m_12 Because I like the variety of things to see and do. .732
m_10 Because I enjoy arts and crafts. .525
m_15 To enjoy the food. .477
Because I heard about the Advent in Zagreb/
m_20 .459
Karlovac and it sounded like fun.
m_16 To get away from everyday life. .403
FACTOR 2 – Family togetherness 13.03 0.955
m_8 To help bring the family closer together. .964
m_9 Because I thought the entire family would enjoy it. .950
So that all family members could do something
m_7 .948
together.
FACTOR 3 – Hanging out with friends 8.33 0.930
m_2 So that I could do things with my companions. .954
m_1 So that I could be with my friends. .951
FACTOR 4 - Excitement/thrill 6.50 0.704
m_19 Because I was curious. .739
m_17 Because I enjoy the Advent crowd. .639
m_14 To observe other people attending the Advent. .576
m_21 To experience new and different things. .531
m_18 To change my daily routine. .421
m_22 Because I enjoy special events. .412
FACTOR 5 - Socialization 5.75 0.643
m_6 To be with people who enjoy the same things I do. .679
m_5 For a change of pace of everyday life. .620
For a change to be with people who are enjoying
m_4 .577
themselves.
m_3 To see the entertainment. .374
Source: Research results

God. XXXIII, BR. 1/2020. str. 101-114 107

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia

By applying the t-test for independent samples, among Advent visitors in Zagreb and Karlovac (Ta-
the difference in the mean values was established ble 3).
Table 3 Results of the t-test for the main motive for attending the Advent (N = 249)
Zagreb Karlovac
Factors F t sig
M* SD** M SD
Unique experience 4.16 0.45 3.79 0.85 45.189 4498 0.000
Family togetherness 2.41 1.59 3.85 1.25 23.043 7838 0.000
Hanging out with friends 4.43 0.91 4.24 0.95 0.157 1611 0.108
Excitement/thrills 3.84 0.61 3.73 0.84 20.078 1152 0.251
Socialization 3.85 0.72 4.06 0.73 0.301 2232 0.027
* M = arithmetic mean, ** SD = standard deviation
Source: Research results

The main motives of the Zagreb Advent visitors are
‘Hanging out with friends’ (M = 4.43, SD = 0.91) and
‘Unique experience’ (M = 4.16, SD = 0.45), and the
lowest average mean was obtained for the motive
‘Family togetherness’ (M = 2.41, SD = 1.59). The pri-
mary motives of the visitors to the Karlovac Advent
include ‘Hanging out with friends’ (M = 4.24, SD
= 0.95), ‘Socialization’ (M = 4.06, SD = 0.73) and
‘Family togetherness’ (M = 3.85, SD = 1.25). Statisti-
cally significant differences were found in the mean
values of the three factors that reflected the motives
for attending the Advent: Unique experience (t =
4498, p < 0.01), Family togetherness (t = 7838, p <
0.01) and Socialization (t = 2232, p < 0.05).
Furthermore, visitor loyalty and satisfaction with
the experience measured by intention to recom-
mend the destination, intention to revisit the des-
tination and share the experience were explored to
answer the third research question. The results are
shown in Tables 4 and 5.

Table 4 Results of the reliability test for satisfaction and loyalty (N = 249)
Item number Construct / item Alpha coefficient
SATISFACTION WITH THE EXPERIENCE 0.901
s_1 I am glad that I have decided to visit Zagreb/Karlovac Advent).
s_2 I have enjoyed this experience..
s_3 I will participate in similar types of experiences in the future.
s_4 I will revisit the Zagreb/Karlovac Advent in the future.
s_5 I will recommend the Zagreb/Karlovac Advent to others.
INTENTION TO RECOMMEND THE DESTINATION 0.914
rec_1 I would like to recommend others to visit Zagreb/Karlovac.
rec_2 I would say positive things about Zagreb/Karlovac to others.
If someone is looking for a good travel destination, I would suggest to him/her to visit Zagreb/
rRec_3
Karlovac.
INTENTION TO REVISIT THE DESTINATION 0.813
rev_1 Revisiting Zagreb/Karlovac would be worthwhile.
rev_2 I will revisit Zagreb/Karlovac.
rev_3 I would like to stay longer in Zagreb/Karlovac.
SHARING THE EXPERIENCE 0.674
sh_1 I have shared my experience of the visit with others.
sh_2 I will tell others about my experience of the visit.
Source: Research results

108 God. XXXIII, BR. 1/2020. str. 101-114

 Original scientific article

The research results in the above table indicate ing Cronbach alpha coefficients between 0.67 and
that all constructs are reliable (Taber, 2018), hav- 0.91.

Table 5 Results of the t-test for satisfaction and loyalty (N = 249)

Zagreb Karlovac
Construct F t sig
M* SD** M SD
Satisfaction with the experience 4.64 0.56 4.27 0.82 15.345 4.193 .000
Intention to recommend the destination 4.52 0.84 4.14 1.04 135.771 7.321 .000
Intention to revisit the destination 4.51 0.76 4.20 0.92 50.090 6.203 .000

Sharing the experience 4.55 0.69 3.92 1.08 31.251 5.571 .000

* M = arithmetic mean, ** SD = standard deviation

Source: Research results

It is evident that the mean scores for visitor satisfac-
tion and intentions are higher for the Zagreb Ad-
vent compared to Karlovac Advent in all measured
constructs. Furthermore, all differences are statisti-
cally significant.
A correlation analysis using a Pearson’s correlation
coefficient was also performed to determine wheth-
er there was a correlation between visitor satisfac-
tion and loyalty (Table 6).

Table 6 Results of the correlation analysis (N = 249)

Satisfaction with Intention to recommend Intention to revisit Sharing of
the experience the destination the destination the experience
Satisfaction with the experience 1
Intention to recommend the
0.692* 1
destination
Intention to revisit the destination 0.684* 0.856* 1
Sharing the experience 0.483 *
0.631 *
0.615* 1
* Correlation is significant at the 0.01 level (2-tailed).
Source: Research results

The correlation analysis showed that there were
statistically significant correlations between the ob-
served constructs. The magnitude of the correlation
coefficient ranges from 0.483 to 0.692. (p<0.001).
Visitor satisfaction is highly correlated with inten-
tion to recommend (r = 0.692, p<0.001) and inten-
tion to revisit the destination (r = 0.684, p<0.001),
while the correlation with intention to share the
experience is somewhat lower (r = 0.483, p<0.001).
5. Conclusions
Christmas markets have become quite popular
winter events in almost all major cities in Croa-
tia. Zagreb was one of the first Croatian cities that
recognised the importance of Christmas Markets
for tourism, and turned the Zagreb Advent into a
recognisable brand. This is supported by the fact
that it has been voted the best Christmas Market in
Europe for three years in row, based on the survey
conducted by European Best Destinations organi-
sation. Since many other cities are faced with the
problem of tourism seasonality, organising such
events during winter, which for Croatia is the low
season, is a good opportunity for creating a holi-
day atmosphere for the locals and attracting visitors
from other cities and countries.
Empirical research has been conducted to answer
the research questions concerning two Christmas
markets in Croatia of which one is recent and local
and the other was the best in Europe several times.

God. XXXIII, BR. 1/2020. str. 101-114 109

Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia
The first research question aims to determine
whether there are differences in the visitor struc-
ture between the two Christmas Markets. It may be
concluded that there is a difference in the demo-
graphic structure of visitors and their travel behav-
iour. The visitors to the Zagreb Advent were mainly
foreign visitors (52.2%), while all of the visitors to
the Karlovac Advent were domestic (100%). There
is also a statistically significant difference in the
number of overnights, travel partners and the type
of accommodation. The Zagreb Advent visitors stay
longer and usually come with friends and acquaint-
ances (52.2%) compared to the visitors of the Ad-
vent in Karlovac (29.2%). The Karlovac Advent visi-
tors mainly stay with relatives and friends (42.5%),
while the Zagreb Advent visitors are more likely to
stay in hotels (24.3%) and private accommodation
(36%). This confirms that the Zagreb Advent is an
internationally recognized tourist event, while the
Advent in Karlovac is still a local event.
The second research question asked whether the
visitors’ motives for attending various Christmas
Markets differ. The Zagreb Advent visitors’ main
motives were ‘Hanging out with friends’ and ‘Unique
experience’, while the visitors to the Karlovac Ad-
vent were mainly motivated by ‘Hanging out with
friends’, ‘Socialization’ and ‘Family togetherness’. In
their study into traditional cultural events in Slova-
kia, Marâkovâ et al. (2018), identified six domains
of visitors’ motivations: to experience something
new and different, to be with friends and family,
to reconnect with culture and tradition, to social-
ize, to restore equilibrium, and for a change from
everyday life. The study by Vitner Marković et al.
(2019) found that the motivation factors of the Ad-
vent visitors varied depending on their age. Some
came for entertainment, others came to enjoy the
Christmas atmosphere, food and wine, and yet oth-
ers came to buy souvenirs and local products. An
understanding of the socio-demographic structure
of tourist event visitors, the tourist and consumer
habits, as well as motivations for visiting fairs is of
extreme importance for destination marketers and
market segmentation. Understanding what moti-
vates visitors to attend a certain event is essential
for the development of attractive event offerings
and an effective marketing mix aimed at increasing
visitor numbers.
The third research question inquired whether visi-
tors differ in terms of their satisfaction and loyalty
that manifests by the intention to revisit, intention
110
to recommend it to friends and acquaintances, and
intention to share the experience. Research re-
sults indicate that the mean scores for visitor sat-
isfaction and intentions are higher for the Zagreb
Advent than the Karlovac Advent in all measured
constructs, and all the differences are statistically
significant. This additionally justifies the higher sta-
tus of the Zagreb Advent which has won multiple
awards and become recognisable on a global level.
Furthermore, it shows that the visitors of a smaller
local market have high expectations and are likely to
compare a local Christmas market with other mar-
kets, including the Zagreb Advent fair. Therefore,
in order to enhance visitor satisfaction, the quality
of tourist offerings should be increased which will
result in their intention to revisit the event, recom-
mend it to friends and acquaintances, and share the
experience.
The fourth question seeks to establish whether sat-
isfaction with a Christmas Market affects visitors’
loyalty. As anticipated, visitor satisfaction is strong-
ly correlated with the intention to recommend and
intention to revisit the destination, while the cor-
relation with the intention to share the experience
is somewhat weaker. A study into the Strasbourg
Christmas Market conducted by Castéran and
Roederer (2013) concluded that if a tourist site is
perceived as authentic, the frequency of visits in-
creases. It can be concluded that the satisfaction of
market visitors determines their loyalty to the des-
tination, which means that they are more likely to
visit it during other periods of the year.
The data and information obtained through this
research may be useful to managers of tourist des-
tinations in creating high-quality tourist offerings
and positioning the destination. The Zagreb Advent
is already recognised as one of the best in Europe.
It is branded as a Christmas Market which com-
petes with other Advent destinations in Europe. To
maintain that position, it is necessary to continu-
ously innovate and diversify the tourist offerings to
attract old and new visitors. To attract more tour-
ists to smaller Christmas markets, destination man-
agers should develop marketing strategies that will
promote it to a wider audience so that it does not
remain a local seasonal event, and enhance the visi-
tor experience by extending the tourist offer. In the
case of the Karlovac Advent, there is a possibility of
recommending the visitors of the Zagreb Advent to
visit Karlovac for a day since it is only 50 kilometres
away.
God. XXXIII, BR. 1/2020. str. 101-114

The present study has several limitations which have
to be taken into consideration in future research.
Different demographic characteristics of the visi-
tors might have influenced the visitors’ perception
of event experience, satisfaction and loyalty. Thus,
future research could conduct market segmenta-
tion on the basis of socio-demographic variables
as well as determine the differences between tour-
God. XXXIII, BR. 1/2020. str. 101-114
Original scientific article
ist experience, satisfaction and loyalty. It could also
include a comparative analysis with other cities in
Croatia, both inland and along the coast. Further-
more, it would be interesting to investigate the dif-
ferences in tourist consumption among different
types of Christmas Market visitors. The results of
this research might help in developing targeted
marketing strategies.
111
Dina Lončarić, Tihana Cegur Radović, Patricia Skendrović: Who attends Christmas Markets and why? Analysis of visitor structure and
motivation for attending two Christmas Markets in Croatia

R

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Dina Lončarić
Tihana Cegur Radović
Patricia Skendrović

T     

A    
     H
S
Postoje različiti motivi zbog kojih se posjećuju određena događanja. Uglavnom je motivacija ta koja odre-
đuje ponašanje potrošača i dolazi do izražaja kada potrošači očekuju da pružatelji usluga zadovolje nji-
hove potrebe. Autori ovog rada usredotočili su se na motive zbog kojih posjetitelji posjećuju dva božićna
sajma u Hrvatskoj, a koji su sve veći po broju posjetitelja. Ciljevi su bili usporediti demografsku strukturu
posjetitelja i njihovo ponašanje na putovanju, motivaciju za posjećivanje božićnih sajmova i utvrditi ra-
zinu zadovoljstva posjetitelja te njihovo buduće ponašanje, a sve to u svrhu utvrđivanja aktivnosti koje bi
subjekti koji rukovode turističkim destinacijama mogli organizirati. Autori rada proveli su sekundarno i
primarno istraživanje. Empirijsko istraživanje provedeno je na uzorcima posjetitelja Adventa u Karlovcu i
Zagrebu korištenjem namjernog prigodnog uzorka. Analiza podataka provedena je uz pomoć deskriptivne,
inferencijalne i multivarijantne statistike. Rezultati istraživanja pokazali su da se ponašanje posjetitelja i
njihovi motivi dolaska na božićni sajam razlikuju, kao i razina njihova zadovoljstva i odanost. Ipak, kod oba
božićna sajma pronađena je snažna veza između zadovoljstva posjetitelja, namjere za ponovnim dolaskom
i preporukom te dijeljenjem iskustva. Ovaj rad predstavlja maleni doprinos znanstvenom istraživanju na
polju ponašanja potrošača s fokusom na motivaciju za posjećivanje različitih turističkih događanja. Nadalje,
rezultati ovog istraživanja od koristi su i subjektima koji rukovode raznim festivalima i događanjima u svrhu
poboljšanja kvalitete usluga.
Ključne riječi: turistička događanja, festivali, božićni sajmovi, motivi turista, zadovoljstvo, odanost

114 God. XXXIII, BR. 1/2020. str. 101-114

 P 
P 

Mile Bošnjak, Ivan Novak, Zoran Wittine:

Hysteresis in the trade flows of some EU member countries

Zbigniew Bentyn, Ante Luetić, Neven Šerić:

Development of business strategies based on logistics performance of the Republic of Croatia

Marinko Jurčević, Lukša Lulić, Vinko Mostarac:

The digital transformation of Croatian economy compared with EU member states

Michal Patak, Lenka Branska, Zuzana Pecinova:

Importance of reverse logistics services as an antecedent for building a green supply chain

Ana Štambuk, Ivan Uroda, Nikolina Anđelić:

Adjustment and early retirement intentions of the older workers in the Croatian public sector

Roman Domanski, Michalina Labenda:

Omnichannel of private label grocery products in Tesco
and Carrefour retail chains on the Polish market
 CC BY-NC-SA

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries dopušta d
Mile Bošnjak
University of Zagreb
Faculty of Economics and Business
Trg J. F. Kennedy 6,
10000 Zagreb, Croatia
mbosnjak1@net.efzg.hr
Phone: +385953987366
Ivan Novak
University of Zagreb
Faculty of Economics and Business
Trg J. F. Kennedy 6,
10000 Zagreb, Croatia
inovak1@net.efzg.hr
Phone: +385976891891
Zoran Wittine
University of Zagreb
Faculty of Economics and Business
Trg J. F. Kennedy 6,
10000 Zagreb, Croatia
zwittine@efzg.hr
Phone: +38598271437
Ova licenca
nekomercijalne svrhe
Preliminary communication
licenciraju svoja djela
Received: July 8, 2019
Accepted for publishing: September 9, 2019
Pogledajte sažetak lic
This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Imenovanje-Nekome
CC BY-NC-ND
Ovo je najrestriktivnija

HYSTERESIS IN THE TRADE FLOWS 5 od 6

OF SOME EU MEMBER COUNTRIES

A
The paper tests for the existence of hysteresis in the net export development patterns of five EU member
countries - the Czech Republic, Latvia, Hungary, Slovakia and Slovenia. Based on the quarterly data sam-
ples from 1996q1 to 2017q2, country-specific estimates are obtained and tested. Time series estimates
point to the fractionally integrated series of net exports for the Czech Republic and Latvia, while the net
exports of Hungary, Slovakia and Slovenia are best explained by SETAR (1) model specification. The re-
search results indicate long memory property in the net export series for the Czech Republic and Latvia,
thus supporting the existence of hysteresis. The net export dynamics of Hungary, Slovakia and Slovenia are
found to be nonlinear and threshold dependent but still slightly different. The paper also found heterogene-
ity in the dynamics and properties of net exports for the countries examined in this paper. Furthermore, the
paper showed an indicative similarity in the change of the contemporary net export development patterns
in the sample countries.
Keywords: Net exports, fractional integration, nonlinearities, European Union

1. Introduction become a problem, not only of the country, but also

Export performance of a country has been the fo-
cus of scholarly interest since the age of mercan-
tilism. Contemporary global environment and
regional integration make the issue of net exports
extremely important from a country perspective as
well as from the perspective of the European Union
(EU). It is well known that persistent and unsus-
tainable trade deficit violates international budget
constraints over time and if the trade deficits per-
sist, the domestic interest rates could increase con-
siderably. Therefore, an economy with a persistent
trade deficit can transform into a heavily indebted
country that may adversely affect the welfare of the
citizens. Eventually, the persistent trade deficit may
of the EU. Some of the countries considered in this
research are part of the Economic and Monetary
Union (EMU). Therefore, a similar net export pat-
tern among the EMU members would be at least a
desirable property. Furthermore, international trade
is a channel of macroeconomic spillovers and net
exports present a good synthetic measure that cap-
tures the change in exports as well as the change in
imports. Baldwin (1986) pointed to the weak under-
standing of how the determinants of trade patterns
change over time. Baldwin’s assertion is still true
and is becoming more and more important in the
global as well as regionally integrated environments.
It is a well-documented fact that the terms-of-trade
shocks represent a major source of business cycles

God. XXXIII, BR. 1/2020. str. 117-132 117

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries
in emerging and developing countries; however, the
persistence of shocks has been under-examined.
Therefore, the main research question in this paper
is the following: is there hysteresis in the interna-
tional trade flows of the EU member countries? The
paper aims to obtain country-specific estimates and
provide a comparison among sample countries. To
achieve that, the paper investigates the dynamics
and properties of the net export development pat-
terns for the five EU member countries.
The remainder of the paper is organized as follows:
Section 2 briefly summarizes the existing literature
related to the topic under consideration and illus-
trates hypothesis development. Section 3 presents
the empirical procedure, methodology and re-
search data, while Section 4 contains the empirical
results and discussion. The final section provides an
overview of the main findings of the research.
2. Literature review and hypothesis
development
This paper presents another approach to examining
the sustainability of trade flows. Therefore, the base-
line literature for this paper relies on the foundations
laid down by Husted (1992) who examined the re-
lation between imports and exports and reported
that there is cointegration between them. Follow-
ing Husted’s work (1992), cointegration between
exports and imports has been identified for many
countries and groups of countries using various
econometric time series approaches. Antwi-Boateng
(2015) examined the case of Ghana and presented
an extensive literature review on different estima-
tion methods. Balaz and Hamara (2016) established
a long-term equilibrium relationship between Slovak
exports and imports of goods to Germany. Bošnjak
et al. (2018) used a panel co-integration approach
and reported the unsustainable merchandise trade
between Croatia and other EU member countries.
Franc and Peulić (2017) reported a long-run equi-
librium in Slovenian exports and imports. However,
the topic of net exports is insufficiently examined
for the countries considered in this research. Baek
(2016) reported cointegration between exports and
imports for seven G-7 countries. Del Barrio Castro
et al. (2016) examined a group of OECD countries
and found a long-run relationship between exports
and imports for the majority of them. Some recent
papers reported a nonlinear and regime-dependent
relationship between exports and imports. Topalli
and Dogan (2016) employed the Markov-switching
118
model specification to explain the relationship be-
tween Turkish exports and imports from 1990 to
2014. Khadaroo (2016) used a self-exciting thresh-
old autoregressive (SETAR) model on a seasonally
adjusted series to establish the relationship between
Mauritian exports and imports. One strand of litera-
ture pointed to the link between financial and trade
liberalization to explain the trade deficit of European
post-communist economies. European transition
countries experienced current account deficits often
explained by a rise in the domestic demand financed
by the inflow of foreign loans and the real apprecia-
tion of domestic currencies (Aristovnik, 2008; Bak-
ker, Gulde, 2010; Obadić et al., 2014; Zakharova,
2008). However, contemporary literature has exten-
sively examined the topic of international trade. Jens-
en et al. (2018) found that shipping appears to be a
barrier to international trade. Larue (2018) discusses
the new (anti)integration issue, the winners and los-
ers of economic integration, and reports that there
is no economic justification for maintaining interna-
tional trade barriers in some of Canada’s agri-food
industries. Degiannakis et al. (2014) examined the
time-varying correlation among the EU12 in terms
of business cycle, and reported de-synchronization
of their business cycles in the period following the
Great Recession of 2007. Foellmi et al. (2018) provid-
ed evidence for the theory of international product
cycle as proposed by Vernon (1966). Haidar (2012)
explained how a currency crisis can be transmitted
through the channel of international trade. Zervoy-
ianni and Anastasiou (2009) showed that trade flows
affect the cross-country transmission of shocks in
Europe. However, aside from very few seminal pa-
pers, the persistence of shocks in international trade
flows is under-examined. Ljungqvist (1994) pointed
out that temporary exchange rate fluctuations can
have persistent effects on trade flows. Campa (2004)
documented the phenomenon of hysteresis for Span-
ish manufacturing firms; the paper found sunk costs
hysteresis in entry and exit to be an important factor
in determining export market participation, but un-
related to exchange rate uncertainty. The mentioned
research paper focused mainly on exports and its de-
terminants. Kannebley (2008) found nonlinear and
threshold dependent adjustment between relative
price changes and Brazilian industrialized exports,
thus supporting the existence of hysteresis in Bra-
zilian industrial exports. Belke and Kronen (2016)
found the hysteresis in the effects of real exchange
rates on Greek exports. Belke et al. (2015) found ex-
port hysteresis to exchange rate dynamics for many
God. XXXIII, BR. 1/2020. str. 117-132

Eurozone countries. Evidently, hysteresis in interna-
tional trade flows is under-examined and there is a
gap in the international trade literature. This paper
tests for the existence of hysteresis based on the ana-
lytical framework provided by Husted (1992). Thus,
the research hypothesis of this paper states: there is
hysteresis in the net exports of the EU member states.
The paper tests for the existence of hysteresis in the
net exports and determines its development patterns
for the five EU member states - the Czech Republic,
Latvia, Hungary, Slovakia and Slovenia. In doing so,
the paper contributes to literature dealing with trade
sustainability and issues relating to the EU.
3. Empirical procedure and methodology
The research is based on the quarterly data on im-
ports and exports from the first quarter of 2000 to
the second quarter of 2017. The series are obtained
from national bureaus of statistics, X-13 ARIMA
seasonally adjusted and taken in (natural) log val-
ues. (Figure 1 in the Appendix). The observed series
(NX) for each sample country is given by the equa-
tion (1):
(1)
where net export ( ) is given as the difference
between exports ( ) and imports ( ) in its
log levels.
The unit root tests are well known for their low pow-
er. Therefore, to improve the validity of the results,
the paper employs several different unit root tests
- the Augmented Dickey Fuller (1979) (ADF) test,
the Phillips–Perron (1988) (PP) test, the General-
ized Least Squares and Dickey-Fuller (DF-GLS) test
developed by Elliott et al. (1996), the Kwiatkowski et
al. (1992) (KPSS) test and the Zivot-Andrews (1992)
unit rot (ZA) test. The ADF test, the PP test and the
DF-GLS test under null hypothesis assume the pres-
ence of a unit root, while the KPSS test assumes the
stationary under the null hypothesis and the pres-
ence of a unit root as the alternative hypothesis. The
standard unit root tests are biased towards non-re-
jection of unit root, in case of a structural break in
the series under consideration. The null hypothesis
of the ZA test assumes that the data follow a unit
root process and the alternative hypothesis is a trend
stationary process that allows for a one-time break in
the level, the trend, or both.
The mixed results of unit root tests for net ex-
ports of some countries raise the question of long
God. XXXIII, BR. 1/2020. str. 117-132
Preliminary communication
memory in net exports series and strength of the
long-range dependence. The literature recognizes
two measures of the long-range dependence - the
Hurst or self-similarity parameter (H), originally in-
troduced by Mandelbrot and van Ness (1968), and
the fractional integration parameter (d), introduced
by Granger and Joyeux (1980). The fractionally in-
tegrated autoregressive moving average (ARFIMA)
model is presented by the equation (2):
(2)
where:
d – fractional integration parameter allowed to as-
sume any real value,
– the backward operator and
– need to be independent and identically distrib-
uted with finite variance.
The relationship between the self-similarity param-
eter (H) and the fractional integration parameter
(d) is given by the equation (3):
(3)
The estimates of the self-similarity parameter (H)
and the fractional integration parameter (d) can be
obtained using a number of developed estimators.
This paper employs the GPH estimator by Reisen
(1994) and Reisen et al. (2001), first developed by
Geweke and Porter-Hudak (1983), the Whittle
estimator for fractional Gaussian noise (Beran,
1994) and the Beran estimator, introduced by Be-
ran (1993) and Beran (1994). Other employed es-
timators can be found in Taqqu et al. (1995) and
Montari et al. (1999). Eventually, diagnostic checks
are performed to examine invertibility, stationar-
ity, and identifiability of a given set of parameters.
However, unit root test results show that net export
for some countries is a stationary time series. Based
on the unit root test results using a univariate time
series approach, several models were estimated
and tested. First, the ARMA model specification
in equation (2) with assumed fractional integra-
tion parameter (d=0) was estimated and tested.
Diagnostic checks indicated misspecification and
pointed to integrated series and ARIMA model.
Considering the results of unit root tests, ARIMA
estimates could be biased due to over-differencing.
Consequently, several nonlinear specifications were
estimated and tested - the Markov Switching speci-
fication (Hamilton, 1989), the Smooth Transition
Autoregressive specification (Van Dijk et al., 2002)
and the Self-Exciting Threshold Autoregressive
119
Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

specification (Tong, 1986). Given that Tong’s model
specification (1986) was the only one that passed
the diagnostic checks, the remaining sections pro-
vide more details on this approach.
The Self-Exciting Threshold Autoregressive
model (SETAR) represented by the following
equation (4) is the only one that passed the diag-
nostic checks.
where and represent delay and threshold, respec-
tively. The equation (4) illustrates the specification
for the two-regime SETAR process. The delay value
is obtained by minimizing the sum of squared errors
among values between 1 and 10, while the threshold
value is given by the variation of the variable under
consideration. As already stated, in the SETAR proce-
dure Tong’s model specification (1986) was used.

4. Empirical results and discussions

(4) Based on the presented empirical procedure and
methodology, Table 1 summarizes linear unit root
test results.

Table 1 Unit root test (ADF test, PP test, DF-GLS test and KPSS test) results
Levels First difference
Variable and test (Country)
Constant Constant and trend Constant Constant and trend
ADF test t-stat.
NX (Czech Republic) -2.020681 -3.021837 -10.25495 -10.25494
NX (Hungary) -0.594320 -3.297262 -11.27681 -8.568201
NX (Latvia) -1.979371 -2.330311 -10.36255 -10.42012
NX (Slovakia) -2.681080 -4.822021 -11.11103 -11.03450
NX (Slovenia) -1.139591 -4.937236 -9.406286 -9.417045
PP test Adj. t-stat.
NX (Czech Republic) -1.952020 -2.972442 -10.29727 -10.32016
NX (Hungary) -0.692785 -3.120029 -11.96950 -13.46647
NX (Latvia) -2.044586 -2.347012 -10.30084 -10.37880
NX (Slovakia) -2.420910 -4.839902 -18.12502 -17.70542
NX (Slovenia) -1.425096 -4.869987 -17.37895 -19.69646
DF-GLS Adj. t-stat.
NX (Czech Republic) -0.162942 -2.485535 -9.875864 -10.16815
NX (Hungary) -0.725829 -1.577520 -10.91516 -11.53222
NX (Latvia) -1.864718 -2.018040 -1.862514 -2.854431
NX (Slovakia) -0.973586 -4.733331 -1.433231 -2.944516
NX (Slovenia) -0.734220 -4.598878 -12.33928 -9.132649
KPSS test LM-stat.
NX (Czech Republic) 1.138033 0.143808 0.097551 0.044200
NX (Hungary) 0.909535 0.236238 0.341504 0.138465
NX (Latvia) 0.400479 0.237248 0.103960 0.045588
NX (Slovakia) 1.084542 0.061998 0.500000 0.500000
NX (Slovenia) 1.131084 0.182595 0.225452 0.118306
Source: Authors

120 God. XXXIII, BR. 1/2020. str. 117-132

 Preliminary communication

The Czech Republic ADF, PP and DF-GLS test
results indicate I(1), while KPSS test results indi-
cate trend stationary series. ADF, PP, DF-GLS and
KPSS test results indicate I(1) series for Hungary.
Latvia ADF, PP and DF-GLS test results indicate
I(1), while KPSS test results indicate stationary
series around the constant. ADF, PP, KPSS and
DF-GLS test results indicate trend stationary se-
ries for Slovakian and Slovenian net exports. It is
a well-documented fact that unit root tests may be
biased in the presence of a structural break. Table
2 provides the results of the ZA test that takes into
account the possibility of structural breaks in the
observed series.

Table 2 ZA test results

Country Alternative Test statistic Critical values (significance level)
Level -4.589 -5.34 (1%) -4.8 (5%) -4.58 (10%)
Czech
Slope of the trend -4.3402 -4.93 (1%) -4.42 (5%) -4.11 (10%)
Republic
Level and slope of the trend -4.4898 -5.57 (1%) -5.08 (5%) -4.82 (10%)
Level -4.3024 -5.34 (1%) -4.8 (5%) -4.58 (10%)
Hungary Slope of the trend -4.6474 -4.93 (1%) -4.42 (5%) -4.11 (10%)
Level and slope of the trend -5.1895 -5.57 (1%) -5.08 (5%) -4.82 (10%)
Level -4.2548 -5.34 (1%) -4.8 (5%) -4.58 (10%)
Latvia Slope of the trend -3.1939 -4.93 (1%) -4.42 (5%) -4.11 (10%)
Level and slope of the trend -4.2585 -5.57 (1%) -5.08 (5%) -4.82 (10%)
Level -5.4078 -5.34 (1%) -4.8 (5%) -4.58 (10%)
Slovakia Slope of the trend -4.9924 -4.93 (1%) -4.42 (5%) -4.11 (10%)
Level and slope of the trend -5.7317 -5.57 (1%) -5.08 (5%) -4.82 (10%)
Level -5.9797 -5.34 (1%) -4.8 (5%) -4.58 (10%)
Slovenia Slope of the trend -6.0376 -4.93 (1%) -4.42 (5%) -4.11 (10%)
Level and slope of the trend -6.4023 -5.57 (1%) -5.08 (5%) -4.82 (10%)
Source: Authors

Based on the Zivot and Andrews (1992) unit root
test results, the net export of the Czech Republic is
stationary with a break in the level or trend at a 10%
significance level. In the Hungarian case, the series
is stationary with a break in the slope of the trend.
The results for Latvia revealed non-stationary se-
ries, while Slovakia and Slovenia are stationary se-
ries in all of the tested forms.
In the case of the Czech Republic and Latvia, the
ADF test for the observed series in levels does not
reject the null hypothesis, so there is evidence that
net exports series of these countries behave as I(1)
processes. The KPSS tests for the observed series
do not reject the null hypothesis of I(0). Thus, mod-
eling these series either as I(0) or I(1) is too restric-
tive and shows characteristics typical of fraction-
ally integrated processes.  The Hungarian case is
completely different. The ADF, PP and KPSS test
results indicate that the series is integrated of order
one (I(1)). However, the ZA test showed that the
series is stationary with a break in the slope of the
God. XXXIII, BR. 1/2020. str. 117-132
trend. The Slovakian and Slovenian cases are more
clear and for these countries the net export series
are found to be stationary (I(0)). The presented unit
root test results lead to the conclusion that the net
exports of the Czech Republic and Latvia might be
fractionally integrated. The net exports of Hungary
might be stationary with a break in the slope of the
trend, while the Slovakian and Slovenian net ex-
ports are trend stationary series.
A large peak in the periodogram of seasonally ad-
justed series across zero frequency indicates pos-
sible fractionally integrated structure of the net
export series for Latvia and the Czech Republic.
Furthermore, the correlograms also provide ad-
ditional evidence of possible fractional integra-
tion of the net export series for both Latvia and
the Czech Republic Autocorrelation for the series
under consideration decreases slowly as the lag
length increases, indicating that current values
are dependent on its own past distant values.
121
Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

The aim of the ARFIMA models is to estimate d or
H parameter. One of the estimators most frequent-
ly used in the literature is the Geweke and Porter-
Hudak (GPH) Estimator (Geweke, Porter-Hudak,
1983). The GPH estimator is based on the regres-
sion equation using the periodogram function as
an estimate of the spectral density. Estimates of
the fractional or memory parameter d for the net
exports of the Czech Republic and Latvia are sum-
marized in Table 3.

Table 3 GPH estimates for net export series of the Czech Republic and Latvia
Asymptotic standard Standard error
Country GPH estimate (d) Diagnostics
deviation deviation
Czech Republic 0.6743327 0.317623 0.1574761 FALSE
Latvia 0.7575384 0.317623 0.1597435 FALSE
Source: Authors

The results in Table 3 show that 0.5<d<1, suggesting
that shocks in the net exports of both countries are
highly persistent. However, diagnostic checks indi-
cate that estimates cannot be accepted. The results
in Table 3 are consistent with Labys (2016), who
pointed out that regression-based GPH estimates
in levels tend to be higher and therefore biased. An-
other frequently used estimator of H is the Whittle
estimator for fractional Gaussian noise (see Beran,
1994). The estimates for the net export series of
the Czech Republic and Latvia obtained using the
Whittle estimator are given in Table 4.

Table 4 Whittle estimates of fractional Gaussian noise for the net export series of the Czech Republic
and Latvia
Country Estimate (H) Std. Error z value p-value Diagnostics
0.98293591 0.07329122 13.41137 < 2.22e-16
Czech Republic TRUE
d = H - 1/2 = 0.483 (0.073)
0.98444224 0.07329957 13.4304 < 2.22e-16
Latvia TRUE
d = H - 1/2 = 0.484 (0.073)
Source: Authors

The estimates obtained using the Whittle estimator
presented in Table 4 show that 0<d<0.5, suggesting
that both series display a long-term memory but also
have a tendency to revert to the mean. Furthermore,
diagnostic checks indicate no misspecification.
The Beran estimator, introduced by Beran (1993)
and Beran (1994), was also employed, and the re-
sults are summarized in Table 5.

Table 5 Beran’s Fractional EXP estimates for the net export series of the Czech Republic and Latvia
Country Estimate Std. Error t value p-value Diagnostics
intercept -8.6123455 0.1122076 -76.75370 < 2.22e-16

Czech 1 - 2*H -1.9477688 0.1457652 -13.36238 2.4539e-16

FALSE
Republic H = 1.474 (0.073)
d = H - 1/2 = 0.974 (0.073)
intercept -7.4351143 0.1437682 -51.71600 < 2.22e-16
1 - 2*H -1.8333568 0.1867645 -9.81641 3.2865e-12
Latvia FALSE
H = 1.417 (0.093)
d = H - 1/2 = 0.917 (0.093)
Source: Authors

122 God. XXXIII, BR. 1/2020. str. 117-132

 Preliminary communication

The results presented in Table 5 indicate that the
estimates obtained using the Beran estimator are
similar to the estimates obtained using the GPH
estimator. Diagnostic checks indicate misspecifica-
tion.
Given the mixed results obtained from the three
presented tests, more estimates needed to be made.
Table 6 summarizes the results obtained using vari-
ous other estimators that can be found in Taqqu et
al. (1995) and Montari et al. (1999).

Table 6 Self-similarity parameter estimates for the net export series of the Czech Republic and Latvia
Method Country Estimate (H) Std. Error t -value p-value Diagnostics

Czech 0.9590563 0.0155772 61.56796 2.461977e-47

TRUE
Republic β = -0.08188734
Aggregated
Variance 0.8242079 0.07653461 10.76909 2.118252e-14
Latvia TRUE
β = -0.3515842

Czech 1.625766 0.5422815 2.99801 0.01712353

FALSE
Differenced Republic β = 1.251531
Aggregated
Variance 1.4217836 0.3621807 3.925619 0.002014558
Latvia FALSE
β = 0.8435672

Czech 1.1107106 0.03855989 28.80482 6.02621e-32

FALSE
Aggregated Republic β = 0.1107106
Absolute Value/
Moment 0.90033865 0.06104119 14.74969 1.864663e-19
Latvia TRUE
β = -0.09966135

Czech 0.6263314 0.05112957 12.24989 2.204283e-16

TRUE
Republic β = -1.3736686
Higuchi or Fractal
Dimension 1.077646 0.1058935 10.1767 1.423005e-13
Latvia FALSE
β = -0.9223536

Czech 1.533734 0.0810637 18.9201 6.156417e-19

FALSE
Republic β = 3.067468
Peng or Variance of
Residuals 1.134875 0.1076667 10.54063 6.15534e-12
Latvia FALSE
β = 2.269749

Czech 0.9386678 0.02065782 45.43885 9.910894e-35

TRUE
Republic β = 0.9386678
The R/S Method
0.8124809 0.04259175 19.07602 4.649364e-21
Latvia TRUE
β = 0.8124809

Czech 1.469797 0.3255098 4.515367 0.006309685

FALSE
Republic β =-1.939593
The Periodogram
Method 1.731015 0.3049846 5.675746 0.002363764
Latvia FALSE
β = -2.462030

Czech 1.592605 0.08004514 19.89634 6.780113e-37

The Boxed FALSE
Republic β = -2.185210
or Modified
Periodogram 1.568580 0.08275256 18.95507 3.352545e-35
Method Latvia FALSE
β = -2.137161
Source: Authors

God. XXXIII, BR. 1/2020. str. 117-132 123

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

Diagnostic checks examine invertibility, stationar-
ity, and identifiability of a given set of parameters.
The results show that fractional integration param-
eter ranges between 0 and 0.5 (0<d<0.5), suggest-
ing that the net exports series displays a long-term
memory and that it will revert to the mean. The
process is considered to be stationary with long
memory. It can be concluded that the net exports of
the Czech Republic and Latvia are weakly station-
ary and exhibit persistence, long memory, mean
reversion and covariance stationarity with no sig-
nificant short-term effects. Therefore, there is hys-
teresis in the net exports of the Czech Republic and
Latvia and the research hypothesis is supported in
these two cases.
Unit root test results for Hungary indicate station-
ary series with a break. Therefore, nonlinear models
need to be considered. Nonlinear models are piece-
wise linear models that capture the dynamics of a
series before and after a certain point in time.

Table 7 SETAR Hyper parameters for net exports of Hungary, Slovakia and Slovenia
SETAR Hyper parameters Number Number of Threshold
Country Threshold Threshold Pooled of Possible Values tested with
m mL mH Threshold Value Hyper Parameters
Delay Value AIC
Hungary 1 0 1 1 0.04469050 -433.2192 58 58
Slovakia 1 0 1 1 0.02558082 -316.8609 55 55
Slovenia 1 0 1 1 -0.00179273 -355.7206 58 58
Source: Authors
Note: m denotes the autoregressive level of the whole model; Threshold Delay denotes the delay level of the Self-exci-
ting model and mL denotes low regime level, mH: High regime level.

The results in Table 7 indicate lag one in low and was estimated. Following the equation (4), SETAR
high regime for each of the three countries. In the estimates for the Hungarian net exports are sum-
light of these hyper parameters the SETAR model marized in Table 8.

Table 8 SETAR model with one threshold for the Hungarian net exports dynamics
Regime Variable Coefficient t- Statistic p-value
-0.0030634
-1.0889 0.279406
(0.0028132)
Low
0.8392533
11.5292 < 2.2e-16
(0.0727939)
0.0353410
2.7755 0.006843
(0.0127332)
High
0.5978437
3.9331 0.000176
(0.1520015)
Proportion of points in each regime
Threshold Value Residuals variance = AIC
= 0.03584 0.0002922 = -682 Low regime High regime
= 63.86% = 36.14%
Diagnostic tests for the estimated SETAR specification:
ARCH Test statistic: 0.018879 p – value: 0.891100
Ljung-Box Test statistic (12): 0.7707 p – value: 0.380000
Jarque-Bera Test statistic:1.307505 p – value: 0.520090
Source: Authors

124 God. XXXIII, BR. 1/2020. str. 117-132

 Preliminary communication

Based on the results presented in Table 8, SE-
TAR specification passed the diagnostic checks
in the Hungarian case. Trend component is not
found to be significant either in low or in high
regime. Hungarian net export converges either
to deficit in low regime dynamics or to surplus
in high regime dynamics. Figure 2 in the Appen-
dix illustrates the dynamics of net exports for
Hungary.
In contrast, the net export series for Slovakia and
Slovenia are found to be trend stationary series.
Consistent with unit root test results, SETAR esti-
mates indicate a significant trend in the low regime
of Slovakian net export. For Slovenia, the trend
component is significant in both the low and high
regime. SETAR estimates and corresponding diag-
nostic tests for the Slovakian net exports are pro-
vided in Table 9.

Table 9 SETAR model with one threshold for the Slovakian net exports dynamics

Regime Variable Coefficient t-statistic p-value

-0.14521111
-4.9088 5.107e-06
(0.02958150)

0.00277193
Low 5.0706 2.719e-06
(0.00054666)

0.19302130
1.2005 0.233665
(0.16078110)

-0.03223104
-1.6503 0.103009
(0.01953045)

0.00057554
High 1.5435 0.126858
(0.00037288)

0.65381217
3.1975 0.002021
(0.20447523)

Proportion of points in each regime

Threshold Value Residuals variance AIC
= -0.05321 = 0.001064 = -547 Low regime High regime
= 38.27% = 61.73%

Diagnostic tests for the estimated SETAR specification:

ARCH Test statistic: 0.021118 p – value: 0.8848

Ljung-Box Test statistic (12): 0.80972 p – value: 0.3682

Jarque-Bera Test statistic: 3.317910 p – value: 0.190338

Source: Authors

The results in Table 9 show that the constant and
trend are significant in the low regime, while the
autoregressive component obtains no signifi-
cance at the usually accepted significance level.
In the high regime, the autoregressive component
is the only one that appears with significance.
Diagnostic test results indicate that the SETAR
model is not misspecified in the case of Slovakia.
Slovakian net export converges to deficit in both
high and low regimes. Figure 3 in the Appendix
illustrates the dynamics of net exports in the case
of Slovakia. The estimates of the SETAR model
specification for Slovenia are presented in Table
10.

God. XXXIII, BR. 1/2020. str. 117-132 125

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

Table 10 SETAR model with one threshold for the Slovenian net exports dynamics
Regime Variable Coefficient t- Statistic p-value
-0.03334176
-3.4780 0.0008245
(0.00958637)
0.00075955
Low 3.0907 0.0027580
(0.00024576)
0.39988748
3.0338 0.0032679
(0.13181221)
-0.09346728
-3.0661 0.0029680
(0.03048376)
0.00207750
High 3.1839 0.0020793
(0.00065250)
0.37022295
1.5192 0.1327076
(0.24369809)
Proportion of points in each regime
Threshold Value Residuals variance AIC
= = 0.0006332 = -612 Low regime High regime
= 60.71% = 39.29%
Diagnostic tests for the estimated SETAR specification:
ARCH Test statistic: 0.317382 p – value: 0.5748
Ljung-Box Test statistic (12): 0.079862 p – value: 0.7775
Jarque-Bera Test statistic:1.390317 p – value: 0.498995
Source: Authors

The results presented in Table 10 indicate that Slo-
venian net exports converge to deficit in both high
and low regimes, similarly to the case of Slovakia.
The Jarque-Bera test indicates normal distribution
of residuals only when the observation from 1999q1
is left out of the sample. Therefore, the sharp de-
cline of Slovenian net exports in 1999q1 can be
considered as an outlier that violates the assump-
tion of normality among residuals. Figure 4 in the
Appendix illustrates the dynamics of net exports of
Slovenia.
The research results support the existence of hys-
teresis in the net exports of the Czech Republic
and Latvia. The net exports of other considered
countries exhibit a nonlinear development pat-
tern. Furthermore, the results clearly indicate that
the sample countries exhibit different dynamics
and properties of net exports series. Therefore,
the transmission of shocks from abroad probably
differs among the considered countries given that
international trade is an important transmission
channel. Additionally, the structure of the consid-
ered economies might be heterogeneous although
all of the countries are in the same regional integra-
tion (EU). A potential explanation for this might be
the differences in the process of transition among
the considered countries (Podkaminer, 2013). The
reviewed literature suggests that hysteretic trade
flows often arise as a consequence of exchange rate
dynamics. Nusair (2016) employed nonlinear ap-
proach and documented the existence of J-curve
phenomenon within a sample of European transi-
tion economies. However, the results of this study
show different development patterns of net exports
among the sample countries. Nonetheless, there is
one obvious similarity. The data series in Figure 1
suggest that all of the countries under consideration
experienced an increase in the net exports after the
crisis that started in 2007. Another logical explana-
tion that warrants further empirical testing may be
the structure of products in exports and imports.
Well-known phenomena in the microeconomic
theory are income elasticity of demand and price
elasticity of demand. Demand for a more sophis-
ticated good often exhibits higher income elastic-
ity of demand for that good. Consequently, there
should be lower income elasticity of demand for
a less sophisticated good. Therefore, if a country

126 God. XXXIII, BR. 1/2020. str. 117-132


exports less sophisticated products and imports
more sophisticated products, the same decrease in
income within a country and abroad will result in
a higher decrease in imports compared to exports.
Based on this assumption, a country with a trade
deficit as a consequence of the crisis could move to-
ward the equilibrium. Nonetheless, these assump-
tions still need to be tested and therefore there is
a need for further research on this topic. The bal-
ance of payments for the sample countries could be
examined using the monetary and absorption ap-
proaches. However, this issue also requires further
investigation.
5. Conclusions
Several conclusions can be drawn based on the
research presented in this paper. The research re-
sults support the existence of hysteresis in the net
exports of the Czech Republic and Latvia. The net
exports of these two countries were found to be
fractionally integrated. Their fractional integra-
tion parameters range between 0 and 0.5. The net
exports of the Czech Republic and Latvia were
God. XXXIII, BR. 1/2020. str. 117-132
Preliminary communication
also found to be weakly stationary, exhibiting per-
sistence, long memory, and mean reversion, as
well as covariance stationary with no significant
short-term effects. In contrast, the net exports of
Hungary, Slovakia and Slovenia exhibit nonlin-
ear and threshold dependent dynamics. The SE-
TAR(1) model specification was found to be the
best model for explaining the development pattern
of the net exports of Hungary, Slovakia and Slo-
venia. The results are quite unexpected given that
the considered countries share a similar history
and a similar position in the EU. External posi-
tion in terms of trade balance for all of the sample
countries has improved after the crisis 2007. This
finding may be explained with the role of exchange
rates and sticky prices, different structure of prod-
ucts in imports and exports and the elasticity of
demand. However, further research is needed
to empirically confirm these findings. Future re-
search should focus on the role of exchange rate
in the hysteretic nature of net exports. Moreover,
given that this paper examines net exports only,
future research should examine hysteresis in both
imports and exports.
127
Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

R

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APPENDIX

Figure 1 Net export (NX) of five European countries

Source: Authors

130 God. XXXIII, BR. 1/2020. str. 117-132

 Preliminary communication

Figure 2 Hungary SETAR (1)

Source: Authors

Figure 3 Slovakia SETAR (1)

Source: Authors

God. XXXIII, BR. 1/2020. str. 117-132 131

Mile Bošnjak, Ivan Novak, Zoran Wittine: Hysteresis in the trade flows of some EU member countries

Figure 4 Slovenia SETAR (1)

Source: Authors

Mile Bošnjak
Ivan Novak
Zoran Wittine

H   

   EU
S
U radu se ispituje postojanje histereze u obrascima neto izvoza pet zemalja članica EU-a, odnosno Češke,
Latvije, Mađarske, Slovačke i Slovenije. Na kvartalnim podatcima od 1996q1 do 2017q2 za svaku zemlju
su postignute procjene koje su testirane. Procjene vremenskih serija ukazuju na djelomično integrirani niz
neto izvoza za Češku i Latviju, dok se neto izvoz Mađarske, Slovačke i Slovenije najbolje objašnjava specifi-
kacijom modela SETAR (1). Rezultati istraživanja otkrili su obilježje dugotrajnog pamćenja u vremenskim
nizovima neto izvoza za Češku i Latviju koji podupiru postojanje histereze. Dinamika neto izvoza u Mađar-
skoj, Slovačkoj i Sloveniji je nelinearna i ovisna o pragu, ali još uvijek malo drugačija. U radu se otkriva hete-
rogenost dinamike i svojstava neto izvoza za zemlje ispitane u ovom radu. Međutim, rad otkriva indikativnu
sličnost u promjeni suvremenog modela razvoja neto izvoza unutar uzoraka zemalja.
Ključne riječi: neto izvoz, frakcijska integracija, nelinearnosti, Europska unija

132 God. XXXIII, BR. 1/2020. str. 117-132

 CC BY-NC-SA

Ovaoflicenca
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic Croatia dopušta d

nekomercijalne svrhe
Zbigniew Bentyn Neven Šerić JEL: A11, D39svoja djela
licenciraju
Poznań University University of Split Preliminary communication
of Economics and Business Faculty of Economics
al. Niepodległości 10, Cvite Fiskovića 5, Received: March 30, 2019
61-875 Poznań, Poland 21000 Split, Croatia Pogledajte
Accepted for publishing: October 31, 2019 sažetak lic
zbigniew.bentyn@ue.poznan.pl nseric@efst.hr
Phone: +48501010882 Phone: +38521430659 This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
Ante Luetić International License
Tommy d.o.o. Imenovanje-Nekome
Domovinskog rata 93, CC BY-NC-ND
21000 Split, Croatia
ante.luetic@st.t-com.hr
Phone: +38521536293
Ovo je najrestriktivnija

DEVELOPMENT OF 5 od 6

BUSINESS STRATEGIES BASED

ON LOGISTICS PERFORMANCE
OF THE REPUBLIC OF CROATIA
A
Croatia, as a moderately new member of the EU, has recognized the prospects offered by the membership. The
participation of Croatian enterprises in European supply chains is an important opportunity for the country’s
economic growth. The analysis of its logistics performance, based on the World Bank data, suggest a positive
change in recent years. That proves a beneficial evolution of the business environment in Croatia. The primary
research presented in the paper considers the improved logistics infrastructure and other subfactors included in
the analysis, the support offered to business activities and the increased readiness of the country for a potential
upturn of logistics services. Using logistical advantages of Croatia as a location or improved infrastructure may be
a stimulus for creating relationships with business partners in the EU. A country that applies the adaptable con-
cept of a logistics platform is in a good position to use new possibilities on the EU market, especially the growing
e-commerce sector. Free flow of information on the Internet and unrestricted access to customers in the single
market, guaranteed by EU law, opens new possibilities for trade development and finding one’s niche. Recently the
European Parliament adopted the regulation forbidding geo-blocking and thus created potential for e-commerce
growth in Europe. Croatia may benefit from its location and rise in logistics performance. In this relatively new
sector, the ability to use all logistical advantages has become an asset. Employing advanced analytical techniques
of simulation and visualization for logistics applications has become a prerequisite for growing e-commerce on
the EU market. The questions arising from such a perspective concern the abilities of the Croatian business to
exploit the described potential. How should managers of business entities adjust their strategies to logistics stand-
ards? How strongly is business intelligence correlated with supply chain management? The purpose of this paper
is to formulate a protocol for creating a logistics strategy for Croatian enterprises. Preliminary research for this
article included logistics performance index (LPI) analysis, literature, and data mining. Variables examined in the
primary research of Croatian companies’ practice were categorized as business intelligence, supply chain manage-
ment, information visibility and integration of logistics function. Factor analysis was used to connect these vari-
ables, i.e. to reduce the number of variables. The authors have tested the correlation between variables. There was
a significant statistical correlation between business intelligence, supply chain management, information visibility
and integration as prerequisites for a competitive logistics strategy of the company.
Keywords: Logistics, strategy, international trade, market

God. XXXIII, BR. 1/2020. str. 133-149 133

Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia
1. Introduction
Modern market requirements focus on fast and
cost-effective delivery of products and services.
Competitiveness between supply chains is becom-
ing one of the most important paradigms of modern
business. The business excellence of supply chains
is directly correlated with the increase in value for
shareholders (Slone et al., 2010; ECAP, 2013; Mur-
ray 2018; Ju et al., 2019). Time is a critical factor
in the process of serving a modern customer who
appreciates the effort in providing reliable delivery
and other additional services. Information man-
agement and the ability to exchange it represent a
strategy for achieving the cohesion of all functions
among parties in the flow of materials and services
(Luetić, 2017). Business logistics services are an im-
portant factor of creating a strategic advantage over
traditional distribution (Min, Mentzer, 2004; Mur-
ray, 2018; Ju et al., 2019). The innovative web-based
approach to the process of serving the customer
increases the requirements posed to the logistics
Figure 1 European Traffic Corridors in Croatia
Source: Stanković et al., 2013
134
services of the company or its supply chain. Since
the accession in 2013, Croatia has become a valuable
partner for business development in the European
single market. Its location and availability to trans-
ship cargo, thanks to the access to the Adriatic Sea,
opens up new possibilities in term of logistics ser-
vices and business opportunities. Connecting west-
ern and central Europe, the Black Sea region with
south-eastern Europe and Baltic regions while pass-
ing central Europe, with Pannonian and Mediter-
ranean region – all this determines the multidirec-
tional character of this country (Figure 1). Moreover,
access to the Adriatic Sea creates the shortest and
the most cost-effective route between Europe and
Africa and Asia via the Suez Canal (Popescu (Bîzoi)
and Sipos, 2014; Roso et al., 2015: 501). The location
of the port Rijeka provides excellent opportunities
for transshipment to rail, road and inland waterway,
which may by important due to the development of
Central European Boomerang region of intensive
logistic and manufacturing activities (Bentyn, 2016).
God. XXXIII, BR. 1/2020. str. 133-149

The area in the map spans from Gdansk through
Prague, reaching Budapest and reflects the develop-
ment of a similar structure in Western Europe called
Blue Banana (Gorzelak, 2012: 127; Nicita et al., 2013).
Local advantages open up new perspectives for busi-
nesses to access the European supply chain. The trend
to improve logistics performance is a clear indicator
of business activities that began in the region after the
series of accessions to the European Union in years
2004, 2007 and 2013. The opportunity that has been
created allows Croatian companies to participate in
the European supply chain. Thanks to the improve-
ments in the logistics performance, it is possible to
take advantage of the location of the country and to
provide services on the European level.
The investment in the logistic infrastructure, both
private and through European funds has a positive
influence on basic logistic activities, fulfilling in this
way the requirements of modern customers. The
EU business creates a unique opportunity by elimi-
nating physical barriers between merchandise and
the customer. Similarly, virtualization of business
practices allows for faster flow of information, thus
improving agility in the supply chain. Employing
Internet applications helps supply chain partners
to improve its performance and at the same time
to better connect the whole supply net with the fi-
nal customers. Transferring the basic commercial
operations to the virtual world opens up new pos-
sibilities for the customer such as:
• Searching for products and services;
• Comparing them in a multicriterial way;
• Assessing the availability of required value.
The relative ease of acquiring goods and services in
e-commerce draws the attention of growing num-
bers of customers. Since Croatia’s accession to the
EU in 2013, commerce started to grow. It took five
years to reach the current level. The data describing
this market, gathered in 2017, indicate a promising
perspective1:
•• •The number of online buyers in Croatia is
1,75 million;
• The growth rate in 2017 is 18%;
• 60% of all internet users are e-customers;
•• •6-10% of those e-customers buy at least once
a month;
•• •The value of the e-commerce market in Croa-
tia is estimated at $446 million;
•• •Online transactions generate approximately
$30 million in revenue yearly.
God. XXXIII, BR. 1/2020. str. 133-149
Preliminary communication
In view of this information, conservative logis-
tics strategy in Croatian companies needs to be
changed. The alterations noted in 2017 assure the
increase in the trends. The observed 9% increase in
the number of regular e-customers illustrates the
growth rate in this market. Still, the comparison of
the Croatian market to the markets of other Euro-
pean countries offers a perspective on the size and
potential ahead.
Figure 2 Share of global online grocery sales
based on value in leading European Union (EU)
countries in 2017
Source: Statista - The Statistics Portal (2018), “Share
of global online grocery sales based on value in leading
European Union (EU) countries in 2017”, available at:
https://www.statista.com/statistics/614717/online-gro-
cery-shopping-in-the-european-union-eu (Accessed on:
September 18, 2018)2
Changes in business philosophy of companies
which are the result of the global impact of a highly
competitive external environment and the internal
characteristics and factors of the micro environ-
ment are strongly reflected in the functioning and
management of supply chains (Luetić, 2017; World
Bank, 2018). The steady growth of customer’s in-
terest implies the need for reliable logistics services
(Lee, Hau, 2004; Yildiz, 2014; Ju et al., 2019). The
performance in delivering the expected value is a
precondition for the development in this area of
business. All physical activities including transport,
warehousing and additional value-adding logistics
services are critical for providing the customer sat-
isfaction. The superiority of e-distribution derives
from expected convenience and price attractive-
135
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia
ness. As expected, prices are the most appreciated
advantage of e-commerce. E-customers expect
lower prices than in the physical store. Moreover,
the added cost of delivery should be minimized as
much as possible, concerning the fact that 28% of
e-customers expect free shipping3. Additionally, the
e-channel of distribution should provide detailed
information about the product, customer reviews
and feedback, maintaining the exchange of infor-
mation and securing the transfer of the value. A
characteristic feature of e-distribution is the abil-
ity to return the product. National and European
laws secure the rights of customers in this matter
and build the trust in this new way of distribution.
On the other hand, they increase the requirements
on the logistics services designed for e-commerce.
Return policy of e-business should be clearly stated
on company website because e-customers pay ad-
ditional attention to this fact. Unreliability in the
process of return of the products is the most criti-
cized behavior by e-shoppers in Croatia. A part of
this depends on logistics performance in the region.
Modern distribution centers are a crucial part of
the logistics systems. Thanks to the available space
and functional opportunities, it is possible to pro-
cess many orders in the right way, saving time by
the way and gaining competitive advantage over
the physical, traditional way of distribution. The
existing infrastructure, both logistical and infor-
mational, determines the time and cost of logistics
operations. Therefore, the era of e-customers relies
heavily on readiness of logistics services. The ad-
vantage of geographical location of Croatia may be
critical for the future development of e-business.
Already an estimated 40% of Croatian e-customers
order from e-shops outside of Croatia, such as Chi-
na and other EU countries. Online retailers from
Croatia provide services locally and globally (about
40% for local customers and 60% for global mar-
kets). The already globalized trade relations may
become even more pronounced thanks to the abol-
ishing of geo-blocking. In February 2018, the Euro-
pean Parliament adopted the regulation forbidding
geo-blocking and other forms of discrimination
based on customer nationality, place of residence
or place of establishment4. This may unlock the
potential for e-commerce to grow in Europe while
Croatia may benefit from its location. The idea of
maintaining cohesion inside the Single European
Market may further decrease the barriers and pro-
duce the impulse for supplementary development
in trade relations. New business perspective lying
in the location and status of Croatia as an EU mem-
ber is supported by the development of e-business
136
speeding the trade relations and describing a new
competitive area based on the logistics advantages.
However, the readiness of Croatian enterprises
requires adjusting their strategies in a certain way
(ECAP, 2013; European Bank, 2019).
It is expected that better performance of a company
will be based on logistics performance, which de-
mands high quality information sources and relia-
ble data, thus building agility in supply chain (Mur-
ray, 2018; Ju et al., 2019).
Business intelligence variables such as intuition and
time improvements are direct logistical values lead-
ing to better performance of a company. Addition-
ally, advanced analytics used in logistics activities
of a business will lead to adaptability and improved
responsiveness of the company. All the above state-
ments should be verified by the research, providing
information concerning enterprises in Croatia.
2. Methodology
The preliminary research explains the rising logis-
tics performance in Croatia.
The logistics performance index measures the abil-
ity of a country to participate actively in the trade
exchange and global supply chains. The measure-
ment is designed and repeated every two years by
the World Bank (World Bank, 2018). Thanks to
that, it helps to assess the position of the country
and the development in the given time. Investors
use the LPI to make sure that the location of in-
tensive production activities will meet the logistics
competence in the region. That may be precognition
to further business development and participation
of the local business in global supply chains. The
analysis will compare the change in Croatian over-
all LPI from 2010 to 2018 (Figure 4) and describe
changes according to two subfactors: Infrastructure
(Figure 5) and Timeliness (Figure 6). Measurements
for Croatia across the observed years, as presented
by the World Bank, show a steady development in
LPI. A greater increase occurred between the years
2010 and 2012. This change may be caused by the
development of neighboring countries, which were
already members of the EU, namely Slovenia and
Hungary. Both countries joined the EU in the big-
gest accession in this part of Europe in 2004. That
was a great stimulus to start the development of
the Central European Boomerang (CEB), an area
described by Gorzelak (2012: 127), and Croatia
benefited as a logistics partner. Croatia is an EU
member from 01.07.2013. Since its accession to the
God. XXXIII, BR. 1/2020. str. 133-149

EU, Croatia has ranked 55-51 in the global ranking
in logistics performance. According to the most re-
cent research in 2018, the country’s LPI of 3.16 is
identical to the 2012 measurement.
The primary research consists of two stages. In
the first stage, the authors verified claims related
to variables of business intelligence required for
improving the logistics potential of an enterprise.
Among them are the sources and reliability of data
and information, access to data and information,
advanced analytics, intuition and time and the or-
ganization of business intelligence. The second
stage allowed us to analyze the correlation of varia-
bles chosen in the first stage related to the variables
associated with logistics strategy and supply chain
management. Among them are agility, adaptability,
alignment, proactivity, performance.
For the purpose of this paper, the most interesting
empirical statistical research involves survey sam-
pling. The questionnaire was verified by general
managers of Croatian companies that have experi-
ence in export business. Before the final definition
of the survey, preliminary research was conducted
to test the questions for the primary research. The
purpose of the preliminary research was to verify
the research instrument. In addition to the imple-
mentation, the purpose was to determine its clarity
and appropriateness for the research. In total 321
companies responded to the questionnaire. The
main instrument of this study was a questionnaire
consisting of closed questions with multiple-choice
answers that involve using a Likert scale with five
degrees of intensity. Likert scale attitude is based on
the assumption that every statement/particle on the
scale has equal importance and weight in terms of
how much it reflects the attitude toward a particu-
lar issue or problem. The survey participants have
to choose the answer from 1 = strongly disagree to 5
= strongly agree. For this research, a measurement
of the perception of respondents was employed.
A deliberate sample was used to conduct this em-
pirical research, and the population is represented
by the set of 1000 largest companies in the Republic
of Croatia by revenue in 2010. The survey was con-
ducted in 2018. The purpose of this research was to
cover companies that apply the concept of business
intelligence in their business.
Several recent studies that have explored business
intelligence or supply chain management were tak-
en into account and only companies that apply the
concept studied were included in the sample. Teo
and Choo (2001) investigated only those companies
God. XXXIII, BR. 1/2020. str. 133-149
Preliminary communication
that use the internet, while Howson (2008) used
as a sample companies whose names she received
from business intelligence tool manufacturers, or PI
consultants. Taskov (2009) chose a random sample;
however, in the cover letter, he explained the defini-
tion of business intelligence and asked respondents
who do not practice business intelligence not to an-
swer the questionnaire but to return it. Grawe et al.
(2011) in their cover letter asked a question about
the relevance of the company so that it can partici-
pate in the research. Isik (2009) also chose a sample
consisting of businesses that apply business intel-
ligence to making strategic, tactical or operational
business decisions.
Based on the above findings, a pre-test memo was
drafted explaining business intelligence. In the con-
text of research, business intelligence is seen as the
concept of the conscious, organized, continuous,
legal and legitimate collection, analysis and use of
data and business information. It is implemented
using information technology but also in other
ways. It provides insights about customers, suppli-
ers, competitors, industry, technology, institutional
regulation and other factors that directly or indi-
rectly affect the business of the enterprise, in order
to support the management in decision making.
Four findings were made and respondents were in-
vited to participate in the survey if they could give at
least one affirmative answer to the following state-
ments:
1) Apply business intelligence at the system
level or at the strategic level of certain busi-
ness units (e.g. marketing, development,
finance and accounting, manufacturing,
commercial, procurement, etc.);
2) Apply business intelligence only to specific
business processes or projects;
3) Use one of the storage technologies and
platforms in your business (Data Ware-
house), Data Mining, OLAP tools;
4) Use advanced analytical techniques, and
simulation and visualization programs.
This form has been verified by several professors at
the Faculties of Economics in Split and Zagreb, Fac-
ulty of Humanities and Social Sciences in Zagreb and
practitioners of business intelligence (Šerić, Luetić,
2016).
For the purposes of this research, measurement of
respondents perceptions was conducted (Akintoye
137
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia

et al., 2000; Wixom, Watson, 2001; Skjoett-Larsen swers of 25 companies were excluded before pro-
et al., 2003; Vickery et al., 2003; Benton, Maloni, cessing when the companies that made the most re-
2005; Wieder et al., 2006; Sanders, 2007; Elbashir cent PI, claimed in the questionnaire that business
et al., 2008; Sodhi, Son, 2009; Trkman et al., 2010). intelligence has not yet been systematically organ-
This is the chosen tool for two reasons: (1) the ef- ized. In addition to these companies, another three
fects of using business intelligence are intangible, were excluded, which did not answer the above
but rather qualitative, which is why they are not question. Finally, there were 293 usable responses,
suitable for objective measurement, (2) most infor- that is, a response of 29.3%.
mation in its own right is of a confidential or stra-
tegic nature and are therefore not appropriate for
public disclosure (Williams, Williams, 2007; Elba- 3. The preliminary research
shir et al., 2008).
The survey started with three basic indicators re- 3.1 Participation of Croatian businesses in the Euro-
garding the company: its activity, number of em- pean supply chain
ployees and legal form. The evaluation of the importance of Croatian lo-
gistics performance could be seen through its
Activity Frequency % participation in the European supply chains. The
Primary production 10 3.4 direction of cooperation in supply chains and lo-
Manufacturing 107 36.5 cation of the countries who are critical partners
for Croatia support the ongoing effort to improve
Trade 91 31.1
its logistics potential. The report presented by
Tourism and 6 2.0 the Croatian National Bank mentioned the most
hospitality industry
important partners (Figure 3). Germany repre-
Construction 17 5.8 sents the most balanced partnership in terms of
Banking, insurance 26 8.9 equilibrium between forward and backward par-
and financial services ticipation. Italy is similar in this position but on a
Telecommunications 10 3.4 smaller scale. These two countries, thanks to the
Business services 18 6.1 equal backward and forward participation, create
the movement of cargo in both directions, increas-
Other 8 2.7 ing the importance of transport corridors between
Total 293 100.0 them and Croatia and logistics infrastructure
along the way. Austria and Slovenia are slightly
Number of employees
away from previous balanced positions but are
Up to 10 2 0.7
also important for Croatia because of their scale
11 to 50 27 9.2 of participation. The location of these countries
51 to 250 98 33.4 covers the directions designated for Germany and
Over 251 166 56.7 Italy, which is helpful in assessing the importance
Total 293 100.0 of those transport corridors. For example, Russia,
USA and China represent a weak forward partici-
Legal form
pation. It translates to much bigger imports (up to
Joint-stock company 122 41.6
several times) of intermediaries from these coun-
Limited liability 159 54.3 tries. The Location of these countries entails the
company
necessity of developing marine ports and addi-
Foreign founder 5 1.7
tional logistics infrastructure in case the reported
Institution 6 2.0 imbalance would change for greater participation
Other 1 0.3 of export from Croatia. The scale of trade in this
Total 293 100.0 case proves the international role Croatia plays in
the global supply chains and is promising for the
The intention was to research those businesses that development of other trade exchange partner-
use business intelligence in their operations. An- ships.

138 God. XXXIII, BR. 1/2020. str. 133-149


Figure 3 Main GVC partner countries for Croatia in 2014 in %
Source: Vidaković-Peruško I., Kovač K., Jošić, M. (2018), “Croatia in Global Value Chains”, Surveys S-32, Croatian Na-
tional Bank, available at: https://www.hnb.hr/documents/20182/2348886/s-032.pdf/3edf751b-07a1-45ab-997e-ff7de-
8ce76cf (Accessed on: February 6, 2019)5
After Slovenia, there are other countries noticeable
as partners in global value chains from the CEE part
of the Europe (Hungary, Belarus, Poland and the
Czech Republic). The developing partnerships in
supply chains among those countries support the
concept of CEE boomerang located between Gda-
nsk, Poznan, Prague, Brno, Bratislava, Vienna and
Budapest. Central European Boomerang (CEB) de-
scribed in 2012 was divided into a more attractive
and developed southern part near Budapest and
Prague and less developed infrastructural part of
the northern part starting in Gdansk and including
Poznan and Wroclaw (Gorzelak, 2012: 127). Gor-
zelak pointed out the directions of transport from
the industrial part of the CEB zone. It should con-
nect the area between Bratislava and Budapest to-
wards Zagreb and the ports of Rijeka and Trieste on
the Adriatic Sea (Bentyn, 2016). The development
of this area of logistic and manufacturing coopera-
tion would create an axis starting from the port of
Gdansk, passing corridor VI along important distri-
bution hubs: Poznan, Lodz, Wroclaw, Tychy, Brno,
Bratislava, Budapest and Zagreb. At the other end,
the axis would finish in the Croatian port of Rijeka
and promote the development of the international
logistics hub located there. Croatia offers a greater
share of domestic value added in the production
of food, beverages, tobacco industry, pharmaceuti-
God. XXXIII, BR. 1/2020. str. 133-149
Preliminary communication
cal products, and computers and electronics. Being
a part of global supply chains nowadays means to
cope with requirements of modern markets and
at the same time optimizing costs of logistics ser-
vices. These demands become more important in
the FMCG (Fast-Moving Consumer Goods) mar-
kets which reveal the tendency to search for time-
based competitiveness (Nicita et al., 2013; Šerić
et al., 2014; European Bank, 2019; Ju et al., 2019).
Therefore, goods may be distributed by e-commerce
channels and, thanks to the above-mentioned link-
age between partner countries, they can bring great
benefits to the Croatian economy. For this reason,
conservative logistics strategy needs to be changed6.
3.2 Current logistics performance index (LPI) 2018
and future perspective
In the global ranking of Logistics Performance In-
dex based on research carried out by the World
Bank, Croatia rose from No. 51 in 2016 to No. 49
in 2018. Although the overall LPI score decreased
from 3.16 to 3.10, the comparative position in the
ranking is dependent also on the outcome of oth-
er countries. Since 2010, when most neighboring
countries were EU members, Croatia noted a bigger
improvement in logistics performance. Joining the
European supply chain on the terms of EU member
139
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia

became possible from 1 July 2013. Creating greater portant stimulus to increase foreign investment
cohesion among the CEE countries with access to and adequately manufacturing and logistics opera-
the developed western part of Europe was an im- tions (Yildiz, 2014; Ju et al., 2019).

Figure 4 Croatia overall LPI 2010 - 2018

Source: Own, based on The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed
on: January 8, 2019)7

What is critical for the logistics performance of a
country is the development of logistics infrastruc-
ture (European Bank, 2019). Moreover, modern
distribution requires a quick reaction and reliable
time of performed logistic operations, which is an
additional argument for further infrastructural de-
velopment (Murray, 2018). Figure 5 represents con-
secutive research in infrastructural subfactor of LPI
and shows that 2012 was significant for the logistics
infrastructure. Another three measurements after
that year indicate a steadily growing trend. Those
translate into a more balanced increase rather than
a radical change visible in the years around the ac-
cession to the EU.

Figure 5 Infrastructure developments in Croatia 2010-2018

Source: Own, based on The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed
on: January 8, 2019)8

140 God. XXXIII, BR. 1/2020. str. 133-149


The undertaken infrastructural projects such as Ri-
jeka Gateway Project, Zagreb Pier Deep Sea Con-
tainer Terminal (ZCT), Waterdrome Network and
Air Carrier, Port of Ploče, as well as the construction
and upgrading of infrastructure at the inland port of
Slavonski Brod, may make a difference in next peri-
ods under research. Some specific objectives written
in the Transport Development Strategy of the Re-
public of Croatia (2017 – 2030) include the develop-
ment of the following main logistics centers:
• Rijeka maritime port,
• Ploče maritime port,
• Split maritime port,
Figure 6 Timeliness subfactor of LPI in Croatia 2010-2018
Source: Own, based on The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed
on: January 8, 2019)10
The important factor from the perspective of e-
commerce is timeliness. This subfactor has im-
proved significantly in two recent measurements
(Figure 6). The reliability of cargo flow is in fact the
result from all subfactors of logistics performance
combined. The time-based competitiveness is a
condition forcing cooperating enterprises to create
synchronized supply chains. Customers compare
and choose the better offer, also in terms of delivery
and standard of logistics services (Yildiz, 2014). The
effort in this area is visible in Croatia and may be
an important factor for the future development of
modern distribution centers ready for serving the
most valuable branches of Croatian industry.
God. XXXIII, BR. 1/2020. str. 133-149
Preliminary communication
• Vukovar inland port,
• Osijek inland port,
• Zagreb hub.
Another objective is even more promising for the
development of an international logistics hub. A
strategic goal is the strengthening of Croatia as a
logistics hub for the wider region, with focus on
Zagreb. This statement leads to the logical impli-
cation of aiming to harmonize transport opera-
tions with neighboring countries: Bosnia and Her-
zegovina, Slovenia, Serbia, Italy, Montenegro and
Hungary9.
4. The primary research
4.1 Findings of the first stage
The primary research was a part of another re-
search by one of the authors (Šerić et al., 2014), but
this part was conducted on the sample of export
Croatian companies. Claims related to logistics po-
tential are divided into five groups. Internal consist-
ency was examined using Cronbach’s alpha.
The first group includes claims related to the sources
and reliability of data and information. Initially, there
is a total of eight variables. Cronbach’s alpha was
calculated to examine internal consistency and it
was concluded that one variable should be dropped.
141
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia
Thereafter, a satisfactory size Cronbach’s alpha
(0.715) was obtained. The second group includes
claims related to access to data and information.
There were four claims. Cronbach’s alpha was 0.77.
The third group of variables is made up of claims
relating to advanced analytics. There were also four
claims. Cronbach’s alpha was 0.778. The fourth
group includes claims related to intuition and time
and consists of five claims. Cronbach’s alpha was
0.765. The fifth group consists of claims related to
the organization of business intelligence and consists
of five claims of which one was dropped because of
internal inconsistencies. Cronbach’s alpha was 0.64.
Having tested the internal consistency, factor anal-
ysis was performed in order to create five latent
variables to facilitate handling in the later stage of
analysis. All the results were satisfactory in accord-
ance with the requirements of factor analysis. The
main indicators considered about the validity of
factor analysis were Kaiser-Meyer-Olkin measure
of sampling adequacy, Bartlett’s test of sphericity,
Kaiser’s criterion on the size of eigenvalues and the
percentage of variance explained. Factor loadings
were all greater than 0.5, which is very satisfactory.
Claims relating to the management of the sup-
ply chain were grouped into five dimensions. The
first dimension was related to agility and had four
claims. Cronbach’s alpha was 0.894. The second
dimension was related to the adaptability and had
three claims. Cronbach’s alpha was 0.817. The
third dimension was related to the alignment and
had three claims. Cronbach’s alpha was 0.732. The
fourth dimension was related to the proactivity and
consisted of four variables. Cronbach’s alpha was
0.900. The fifth dimension was related to the per-
formance and consisted of six statements. Cron-
bach’s alpha was 0.896. After testing the internal
consistency, the factor analysis was performed in
order to create five latent variables in order to fa-
cilitate handling in the later stage of analysis. All
the results were satisfactory in accordance with the
requirements of factor analysis.
4.2 Conclusions of the second stage
Creating a logistics strategy represents a crucial
phase in management. The research has shown that
different strategies are used in Croatian business
practice (Šerić, Luetić, 2016). According to the find-
ings of the first stage, the most complex phase in
creating a competitive logistics strategy is linked to
possibilities of its implementation. Different criteria
can be considered as prerequisites for an effective
logistics strategy, such as – accuracy, measurability,
142
and applicability of information. Another impor-
tant aspect is the suitability of information which is
used in existing marketing information system of a
company. Companies that satisfy those criteria make
prompt decisions to eliminate business risks and ful-
fill the goals of the Supply Chain Management de-
fined as follows: “The task of coordinating material
flow and information across the supply chain to meet
end-customer needs” (Harrison, Hoek, 2011).
Business intelligence and supply chain management
contribute to the competitiveness of the logistics
strategy. Such competitiveness assumes constant
collection of information on competitors’ supply.
Devising a successful logistics strategy based on the
application of business intelligence in the manage-
ment of supply chain is more efficient and responsi-
ble. All logistic tools need to be adapted in accord-
ance with the strategy.
The research has shown that creating a competitive
logistics strategy based on business intelligence is
generally conducted through four phases. The first
phase is the analysis of the company’s environment.
The second phase includes defining the frames of
the final marketing decision. In the third phase,
correction decisions are made according to the
feedback. In the fourth phase, consequences of the
final marketing decision are estimated.
The logistics strategy should perform the func-
tion of maximizing the perception of the value of
the company. The efficiency of data collection and
analysis of competition in this sense are imperative.
Positive experiences of several companies in the re-
search sample indicate the convenience of business
intelligence analysis for creating the logistics strat-
egy through five levels: early warning intelligence,
intelligence as support for creating a logistics strat-
egy, intelligence as support in tactical logistics op-
erations on the market, evaluation of competitors,
and intelligence as support in planning and creating
the logistics strategy.
Although Herring (1999) was the first one who, ac-
cording to the results of the conducted research,
had formed important intelligence application ar-
eas for logistics decisions, in this approach access
stratification through multiple platforms is evident.
The research conducted for the purpose of this
study confirmed that relevant information about
consumers, competitors, potential partners, sup-
pliers and other influential groups is the first and
the last line in defending the market position. As a
result, here is a suggested protocol for creating the
logistics strategy (Table 1).
God. XXXIII, BR. 1/2020. str. 133-149
 Preliminary communication

Table 1 Recommended protocol for creating the logistics strategy

1. Estimation of tactical and strategic competitor’s logistic activities.

2. Estimation of competitor’s SCM praxis.

3. Guidelines for improving own SCM praxis.

4. Decisions related to the business development.

5. Guidelines for improving company image on the market.

6. Guidelines for shaping competitive logistics strategy.

7. Simulations and evaluation of the implementation for logistic decisions.

Source: Original, based on the conducted research

After reducing the number of variables in the busi- ness intelligence and supply chain management was
ness intelligence and supply chain management, the investigated. The following matrix of Pearson’s corre-
association between latent variables related to busi- lation coefficients was obtained as shown in Table 2.

Table 2 Correlation between business intelligence and supply chain management for creating the logi-
stics strategy

SCM SCM SCM SCM SCM

Agility Adaptability Alignment Proactivity Performance

Pearson Correlation 0.400** 0.465** 0.321** 0.287** 0.429**

BI Reliability
of data and Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000
information
N 270 275 270 273 270

Pearson Correlation 0.330 **

0.330 **
0.211 **
0.201 **
0.252**
BI Access to data
Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000
and information
N 283 289 283 285 280

Pearson Correlation 0.247 **

0.380 **
0.162 **
0.397 **
0.295**
BI Advanced
Sig. (1-tailed) 0.000 0.000 0.004 0.000 0.000
analytics
N 274 280 274 278 273

Pearson Correlation 0.420 **

0.473 **
0.313 **
0.296 **
0.402**
BI Intuition and
Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000
time
N 282 288 282 285 280

Pearson Correlation 0.308** 0.333** 0.235** 0.242** 0.265**

Organization
Sig. (1-tailed) 0.000 0.000 0.000 0.000 0.000
of BI
N 276 282 275 280 275
** Correlation is significant at the 0.01 level (1-tailed).
Source: Original, based on the conducted research

God. XXXIII, BR. 1/2020. str. 133-149 143

Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia
As can be discerned from Table 2 above, in all cases
there is a statistically significant correlation between
variables that are related to business intelligence
and variables related to supply chain management
(p < 0.001). It may also be noted that correlation co-
efficients are not very large. The difference has been
investigated in the arithmetic means of business in-
telligence through one-way analysis of variance in
relation to the company’s activity, number of em-
ployees, and legal form. Statistically significant dif-
ferences in the mean of business intelligence were
obtained only in the analysis of the activity of the
company shown in Table 3.
Table 3 Analysis of variance of business intelli-
gence with respect to the activity of the company
for creating the logistics strategy
Variable Significance
Source and reliability of data
0.013
and information
Access to data and information 0.080
Advanced analytics 0.061
Intuition and time 0.927
Organization of business
intelligence
0.967
Source: Original, based on the conducted research
The differences among companies that have signifi-
cantly more developed business intelligence were
found in the first three groups of questions related
to business intelligence and were statistically sig-
nificant. As regards the number of employees and
legal form of companies, there was no statistically
significant difference regarding the application of
the concept of business intelligence, and thus these
results are not displayed.
In Table 4, all variables showed a statistically sig-
nificant difference except proactivity. As with
business intelligence, better results were achieved
in services companies. As with business intelli-
gence, there was no statistically significant differ-
ence considering the number of employees and
legal form of enterprise, therefore these results are
not displayed.
144
Table 4 Analysis of variance of supply chain ma-
nagement regarding the activity of the company
for creating the logistics strategy
Variable Significance
Agility 0.007
Adaptability 0.062
Alignment 0.001
Proactivity 0.394
Performance 0.002
Source: Original, based on the conducted research
5. Conclusion
Traditional supply chains are increasingly turning
into supply networks, which is best characterized
by their complexity. The added complexity of the
relationship is noted when analyzing the levels of
established relationships within the enterprise and
between the company and its partners in the chain
itself. The research presented here is based on the
experience of Croatian companies. The chosen
variables are assessed to be useful toward creating
a competitive logistics strategy for the EU market.
The results show that there is a statistically sig-
nificant correlation between variables that are re-
lated to business intelligence and variables related
to supply chain management. Facilitating strate-
gies of enterprises toward these values may fulfill
the constructed protocol for a logistics strategy of
Croatian enterprises. It was found that there are not
enough experiences in creating a logistics strategy
on the platform of the main variables (such as busi-
ness intelligence etc.) in Croatian business practice.
In many approaches analyzed in the research, the
most complex phase is where business decisions are
made for logistics strategy implementation.
To time-prove planned changes in the strategies of
enterprises, it would be advisable to employ values
critical for the development of e-business as a ris-
ing sector in the European economy. Therefore, it
is necessary to ensure accuracy, measurability, and
applicability of information on the basis of which
logistics decisions are made. Companies included in
the sample, which fulfill these criteria, take prompt
measures to eliminate different market risks. The
research has shown that business decisions in lo-
God. XXXIII, BR. 1/2020. str. 133-149

gistics based on business intelligence implementa-
tion in supply chain management is efficient and
responsible. Creating a logistics strategy for the EU
market has to be in the function of maximizing the
perception of the company’s value supply.
Aggregate correlation coefficients show a statisti-
cally significant correlation between the two actual
sets of variables. Correlation dimensions that con-
stitute the observed variables also indicate some
interesting elements:
•• •Quality of sources and reliability of data and
information is effectively connected with
better agility, adaptability and better perfor-
mance of the company;
•• U
• se of intuition and time improvements based
on the use of business intelligence is effective-
ly connected with better agility, adaptability
and better performance of the company;
•• •Widespread use of advanced analytics is ac-
tually associated with better adaptability and
greater supply chain proactivity of the com-
pany.
God. XXXIII, BR. 1/2020. str. 133-149
Preliminary communication
With the exception of the correlation between ad-
vanced analytics and compliance, which is defined
as low, all other mutual correlations are strong
and statistically significant. It can be concluded
that there is a positive correlation between the use
of business intelligence and efficient supply chain
management. Croatian companies do not have
enough time to adapt and their efforts need to go
in several directions: towards the development of
integration (vertical and horizontal), to achieve
greater visibility between the involved process
participants, to achieve greater flexibility, better
matching and adaptability to the conditions in
which they operate. Such an effort may lead to an
improvement in logistics performance of a coun-
try and create synergy for economic development.
Further analysis may verify an occurrence of the
described relation.
The relationship between business intelligence and
supply chain management should be strengthened
in order to maximize the correlation coefficients in
the practice of creating a competitive logistics strat-
egy of Croatian companies for the EU market.
145
Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia

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Analyses, 1st edition, pp. 43-73.

God. XXXIII, BR. 1/2020. str. 133-149 147

Zbigniew Bentyn, Ante Luetić, Neven Šerić: Development of business strategies based on logistics performance of the Republic of Croatia

E

1 Export.gov (2018), “Croatia – eCommerce”, The U.S. Department of Commerce’s International Trade Administration.
2 Statista - The Statistics Portal (2018), “Share of global online grocery sales based on value in leading European Union (EU) countries
in 2017”, available at: https://www.statista.com/statistics/614717/online-grocery-shopping-in-the-european-union-eu (Accessed on:
September 18, 2018)
3 Enterprise Europe Network European Commission, (2018), “A guide to e-commerce in Europe”, available at: https://een.ec.europa.
eu/sites/default/files/een_guide_ecommerce_2018.pdf (Accessed on: January 16, 2019)
4 The European Parliament (2018), “Zakupy online: PE przyjął przepisy zakazujące nieuzasadnionego geoblokowania”, available at:
http://www.europarl.europa.eu/news/pl/headlines/economy/20180126STO94142/zakupy-online-pe-przyjal-przepisy-zakazujace-nieu-
zasadnionego-geoblokowania (Accessed on: September 19, 2019)
5 Vidaković-Peruško I., Kovač K., Jošić, M. (2018), “Croatia in Global Value Chains”, Surveys S-32, Croatian National Bank, available at:
https://www.hnb.hr/documents/20182/2348886/s-032.pdf/3edf751b-07a1-45ab-997e-ff7de8ce76cf (Accessed on: February 6, 2019)
6 Copacino, W. (2008), “Better Supply Chain Collaboration Through Business Intelligence”, available at: http://archive.constantcon-
tact.com/fs063/1101354287228/archive/1102191437752.html (Accessed on: February 6, 2019)
7 The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed on: January 8, 2019)
8 The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed on: January 8, 2019)
9 Ministry of the Sea, Transport and Infrastructure (2017), “Transport Development Strategy of the Republic of Croatia (2017 – 2030)”,
p. 188.
10 The World Bank (2018), “Logistics Performance Index”, available at: lpi.worldbank.org (Accessed on: January 8, 2019)

Zbigniew Bentyn
Ante Luetić
Neven Šerić

R   

  E  
   R H
S
Republika Hrvatska, kao relativno nova članica Europske unije, spoznaje i nove mogućnosti koje članstvo
pruža razvoju nacionalne ekonomije. Rast udjela hrvatskih gospodarskih subjekata u europskim opskrbnim
lancima je jedan od načina poticanja nacionalnoga ekonomskog rasta. Analiza logističkih performansi Re-
publike Hrvatske temeljena je na recentnim podatcima Svjetske banke te ukazuje na pozitivne promjene,
kako u užem, tako i u širem poslovnom okruženju. Unaprjeđenje logističke infrastrukture i njezinih temelj-
nih sastavnica obuhvaćenih ovom analizom u radu, podrška razvoju gospodarstva i jačanje kompetencija u
logističkoj sferi predstavljali su okvire za primarno istraživanje autora čiji su nalazi također predstavljeni u
radu. Postojeće logističke prednosti Republike Hrvatske i kontinuitet unaprjeđenja logističke infrastrukture
preduvjet su uspostavi novih poslovnih kontakata i poslovne suradnje hrvatskih tvrtki s europskim partne-
rima. Implementacija koncepta logističke platforme nacionalnoga gospodarstva prilagodljivog poslovnim
standardima tržišta ekonomske integracije preduvjet je iskorištenju novih poslovnih mogućnosti. Ovo se
posebno odnosi na područje e–trgovine. Sloboda razmjene informacija putem svemrežja, kao i sloboda
izravnog pristupa kupcima na tržištu Europske unije sukladno definiranim regulativama pružaju svakom
gospodarskom subjektu nove mogućnosti za razvoj i rast poslovanja, te pozicioniranje u konkurentnoj tr-

148 God. XXXIII, BR. 1/2020. str. 133-149

 Preliminary communication

žišnoj niši. Ovome doprinose i nove regulative Europske unije koje zabranjuju ograničavanje e-trgovine na
nacionalnim tržištima svojih članica. Perspektivi gospodarskog rasta Republike Hrvatske doprinosi njezina
geografska pozicija i izgrađenost cestovne mreže, ali se pri tome ne smije zanemarivati unaprjeđivanje lo-
gističkih performansi gospodarskih subjekata, kako bi se optimalno prilagodili standardima nacionalnih
tržišta članica Unije. O ovome posebno treba voditi računa u segmentu e-trgovine koja pokazuje visoki
trend rasta. Implementacija naprednih analitičkih tehnika i simulacija u logističkim aplikacijama prerasta
u preduvjet održavanja i rasta ostvarenog udjela u području e-trgovine na tržištu Europske unije. Predmet
istraživanja ovoga rada je fokusiran na procjenu koliko hrvatsko gospodarstvo može iskoristiti mogućno-
sti koje danas pruža tržište Europske unije. Na koji način menadžer poslovnog subjekta treba prilagoditi
poslovnu strategiju logističkim standardima u cilju održavanja i rasta tržišnog udjela na razini Europske
unije? Koliko je značajan utjecaj business intelligencea i kako korelira s postojećim modelima opskrbnih
lanaca? Svrha i cilja rada su bila oblikovati preporučljiv protokol za kreiranje generalne logističke strategije
za hrvatska poduzeća koja teže rastu tržišnog udjela u postojećim europskim opskrbnim lancima. Preli-
minarna istraživanja su obuhvatila analizu indeksa logističkih performansi (LPI), recentna istraživanja ove
problematike, te deskriptivnu analizu prikupljenih sekundarnih podataka. Konstrukti istraženi u primar-
nom istraživanju provedenom na relevantnom uzorku hrvatskih poduzeća koja posluju na tržištu Unije su
kategorizirani kao business intelligence, upravljanje opskrbnim lancem, te vidljivost i integracija logističke
funkcije poslovnog subjekta. Za povezivanje ovih varijabli korištena je faktorska analiza, autori su testirali
i korelaciju među navedenim varijablama. Nalazi istraživanja su dokazali značajnu statističku korelaciju
među varijablama business intelligencea, upravljanja opskrbnim lancem, vidljivosti i integracije logističke
funkcije kao temeljenim sastavnicama u kreiranju konkurentne logističke strategije gospodarskog subjekta
koji teži rastu udjela na tržištu Europske unije. Nalazima je potvrđena kompetentnost predloženog modela
kreiranja logističke strategije za hrvatska poduzeća.
Ključne riječi: logistika, strategija, međunarodna trgovina, tržište

God. XXXIII, BR. 1/2020. str. 133-149 149

 CC BY-NC-SA

Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EUOva licenca
member states dopušta d

nekomercijalne svrhe
Marinko Jurčević Vinko Mostarac Preliminary communication
licenciraju svoja djela
University of Zagreb Croatian Chamber of Economy
Faculty of Transport Roosveltov trg 2, Received: September 25, 2019
and Traffic Sciences 10000 Zagreb, Croatia Accepted for publishing: November 11, 2019
Vukelićeva 4, vmostarac@hgk.hr Pogledajte sažetak lic
10000 Zagreb, Croatia Phone: +38514561562
marinko.jurcevic@fpz.hr This work is licensed under a
Phone: +38512380230 Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Lukša Lulić Imenovanje-Nekome
Zagreb School of Business CC BY-NC-ND
Ulica grada Vukovara 68,
10000 Zagreb, Croatia
dekan@pvzg.hr
Phone: +38516310844
Ovo je najrestriktivnija

THE DIGITAL 5 od 6

TRANSFORMATION OF
CROATIAN ECONOMY COMPARED
WITH EU MEMBER COUNTRIES
A
The modern world is witnessing change on an unprecedented scale, driven by rapid technological advance-
ment and increasingly unpredictable economic and social landscape. Against this background of increasing
complexity and volatility of change, there is a need to embrace it and take advantage of the opportunities it
brings. Changes brought about by the emergence of digital technologies have prompted the need for digital
transformation, not only of the economy, but also of society as a whole. The aim of this paper is to analyse
the state of digitalisation in the economy of the Republic of Croatia and compare its digital competitiveness
to the economies of other European Union Member States. An analysis of the digital competitiveness of
Croatia was conducted using the Croatian Digital Index (Hrvatski Digitalni Indeks), the Digital Economy
and Society Index (DESI), and the IMD World Digital Competitiveness Ranking. The results indicate that
the Croatian economy has not yet reached the expected level of competitiveness compared to other EU
economies.
Keywords: Economy, digital competitiveness, Croatia, European Union

1. Introduction
The simplest way to define the European Union
(EU) would be to call it an association or communi-
ty of a number of European countries which, strive
to achieve common and individual goals through
mutual synergies. However, the EU is much more,
or at least it should be.
The history of the European Union dates back to the
period after the World War II when economic co-
operation was encouraged because it was believed
that countries as trading partners would become
economically interdependent and therefore more
likely to avoid conflicts. This assumption led to the
establishment of the European Economic Com-
munity (EEC) in 1958, which initially included six
countries: Belgium, Germany, France, Italy, Luxem-
bourg, and the Netherlands. What began as a purely
economic union has developed over the years into
an organisation spanning numerous policy areas,
ranging from climate issues, environmental protec-
tion, and health to external affairs, security, justice,
and migration. In 1993, the EEC changed its name
to the European Union (European Union, European
Commission1).

God. XXXIII, BR. 1/2020. str. 151-164 151

 Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states

As of 2019, the European Union is a unique eco- EU are human dignity, freedom, democracy, equal-
nomic and political union of 28 countries which ity, the rule of law, and human rights (European Un-
together cover a large part of the continent. The ion, European Commission).
Member States of the European Union are (in al- The Republic of Croatia joined the European Un-
phabetical order): ion on 1 July 2013, becoming the 28th full Member
- Austria State.
- Belgium Both before and since its accession to the EU, Croa-
- Bulgaria tia has used certain EU countries as a benchmark,
- Croatia i.e. a point of reference to compare to. The aim of
this paper is, therefore, to analyse the state of digi-
- Cyprus
talisation in the Croatian economy. To this end, an
- Czechia analysis is carried out of the secondary data col-
- Denmark lected during previously conducted survey among
- Estonia Croatian companies. Finally, the digital competi-
- Finland tiveness of Croatia is compared to the digital per-
formance of other EU Member State economies
- France based on the results of internationally-recognised
- Germany rankings and indices.
- Greece
- Hungary 2. Definition of the term “digital
- Ireland transformation”
- Italy Before examining the digital transformation of the
- Latvia Croatian economy and the economies of other EU
- Lithuania Member States, it is necessary to define and dis-
- Luxembourg cern the meaning of certain terms related to digital
transformation, which are used in everyday dis-
- Malta
course.
- Netherlands
The term “digital” is an adjective that describes the
- Poland
intensity of information and comprehensive inter-
- Portugal penetration and interactivity of various physical
- Romania devices and resources. Physical resources, such as
- Slovakia buildings, plants, automobiles, items, processes,
- Slovenia people or teams, become digital with the use of
technologies that display the information about
- Spain their situation and forward it to other devices in
- Sweden their surroundings. The intensive adoption of digi-
- United Kingdom. tal technology has brought about numerous chang-
es, in particular to business models and their adap-
The main goals of the EU are to promote peace, its tation to the digital age. One of the most important
values and the well-being of its citizens, guarantee features of digitalisation is the ability to transform
freedom, security and justice without internal bor- and change the ways of doing business and to create
ders, work for sustainable development, a highly completely new digital business models that revolu-
competitive market economy and environmental tionize the way business processes are implement-
protection, combat social exclusion and discrimi- ed. Digital business models encompass all business
nation, promote scientific and technological pro- activities that take place electronically using digital
gress, strengthen economic, social and territorial technologies, through intensive electronic connec-
cohesion and solidarity among EU countries, re- tivity with the environment with the aim of creating
spect its rich cultural and linguistic diversity, and new value and taking advantage of digital opportu-
establish an economic and monetary union whose nities. In other words, digital business models refer
currency is the euro. The fundamental values of the to the adaptation of existing business models to the

152 God. XXXIII, BR. 1/2020. str. 151-164


requirements of the digital economy with the aim
of finding sustainable sources of income and added
value of the new business model that heavily relies
on digital technology (Spremić, 2017).
Digital transformation is characterised by a fusion
of advanced technologies and the integration of
physical and digital systems, the predominance of
innovative business models and new processes, and
the creation of smart products and services (Digital
Transformation, European Commission2). It refers
to a broad concept that encompasses the changes
facilitated by the increased availability and use of
digital technologies in almost every domain of hu-
man activity. For businesses, this implies that digital
technologies contribute to the change of their busi-
ness models, products and services, production
methods and delivery, as well as to the required
skills with the aim of maintaining competitiveness
in a fast-changing environment (Digital Transfor-
mation Scoreboard 2018, Interreg Europe3).
Digital transformation of business is the intensive
application of digital technologies and digital re-
sources with the aim of creating new sources of
income, new business models and, generally, new
ways of conducting business. It is created when an
organisation, simultaneously and in a very short
period, carries out fundamental changes in its
most important business activities, such as strat-
egy, structure, business processes, business model,
and organisational culture. Organisations that have
managed to transform their business to digital have
been successful in adapting their business model
and operation to the requirements of the digital
economy, which often results in taking a leading
position and increased competitiveness in the mar-
ket (Spremić, 2017).
Digital transformation involves changes in opera-
tion, roles, and business offers, as well as challenges
related to digital technologies in an organisation or
its business environment on several levels: the pro-
cess level (adopting new digital tools and stream-
lining processes by reducing manual steps), the
organisational level (providing new services and
doing away with outdated practices and provid-
ing existing services in a new way), the business
domain level (changing roles and value chains in
ecosystems), and the social level (changing social
structures) (Parviainen et al., 2017).
The digital economy is an umbrella term used to
refer to new models of business, processes, ser-
God. XXXIII, BR. 1/2020. str. 151-164
Preliminary communication
vices, markets and fast-growing economic sectors,
particularly the ones that use digital technologies
as their underlying business infrastructure. Digi-
tal economy is often identified with terms such as
industrial revolution 4.0, new economy, internet
economy. It refers to the economy of knowledge,
the economy of innovations, the economy of infor-
mation, which means an economy in which people
work using their intellectual rather than physical
power and effort (Spremić, 2017).
Digitalisation is a phenomenon similar to globali-
sation –in that it must be managed and governed.
Institutions and enterprises must, therefore, be able
to rise up to the challenges arising from digitalisa-
tion (Digitalization is like globalization: it needs
to be managed and governed, European Commis-
sion4).
These definitions of the term “digital” confirm that
the concepts of digital economy and digital trans-
formation of business adhere to the following key
principles:
- integration and simultaneous application of
independently developed technologies and
opportunities they provide;
- integration of progressive business concepts;
- use of digital business platforms;
- successful and robust digital business models;
- management based on entrepreneurial
organisation culture, innovation, and cre-
ation of added value (digital management)
(Spremić, 2017).
3. A comparative analysis of the digital
competitiveness of the Croatian economy
and the economies of EU Member States
In order to present the state of digitalisation and
digital transformation of the Croatian economy, the
following chapter analyses in detail the results of
the Croatian Digital Index (HDI). In addition, the
Digital Economy and Society Index (DESI) and the
IMD World Digital Competitiveness Ranking will
be used in determining the position of the Croatian
economy in terms of digitalisation compared to the
economies of other members of the EU.
3.1 Croatian Digital Index (HDI)
The Croatian Digital Index is based on a survey
carried out among 300 medium and large Croa-
153
 Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states
tian companies between October 2018 and March
2019. The aim of the survey and publication of the
index was to provide an assessment of the state of
digital transformation in the Croatian economy,
i.e. to analyse and assess the digital readiness of
Croatian companies from various economy sec-
tors, and draw up a proposal of recommendations
and guidelines for improving their digital capaci-
ties and thus of the economy in general. There are
four key areas of digital transformation that the re-
search has covered: the state of digitalisation and
digital transformation in Croatia, digital readiness,
digital strategy and internal processes, and the im-
pact of digital transformation on business (Digital
Transformation in Croatia 2019, Apsolon5).
The results of the study Digital Transformation in
Croatia 2019 (sorted according to the basic areas)
point to the following key indicators (Digital Trans-
formation in Croatia 2019, Apsolon):
A. The state of digitalisation and digital trans-
formation
a. 84% of the respondents believe that digital
transformation refers to the digitalisation of
existing business models and/or analogue
processes;
b. The state of the digitalisation in Croatian
economy was rated with a 2 (weak).
c. The key elements (social/political) for the
improvement of digitalisation in Croatia are:
i. the digitalisation of administration and
promotion/active participation in the
development of key digital technologies;
ii. expanding e-services for citizens and le-
gal entities;
iii. broadband internet connectivity and
digital education for schools.
B. The digital readiness of companies
a. 47% of the respondents reported that digital
transformation is among their top 10 priori-
ties;
b. 35% assessed their company’s preparedness
for digital transformation as good;
c. 53% perceive digital transformation as a sig-
nificant opportunity for the improvement
of the company’s business, while only 1%
perceive it as a minor threat.
154
d. The most common obstacles encountered
in the process of digital transformation are:
i. focus predominantly on the existing
business priorities;
ii. financial reasons (costs);
iii. lack of time for digital transformation.
C. Digital strategy and processes
a. 15% of the respondents have developed a
strategy for digital transformation, whereas
65% do not but plan on developing it.
b. The most significant measures and activities
companies use to carry out digital transfor-
mation are:
i. increased training of employees on digi-
tal topics;
ii. use of external consulting;
iii. integration of methods that focus on the
user;
iv. integration of methods for agile product
development;
c. the majority of the respondents reported
that costs relating to the development of
employees’ digital skills account for 25% of
the total investment costs;
d. 94% of the respondents believe that the lack
of digital transformation will have an im-
pact on their company’s business.
D. The impact of digital transformation on
business
a. 20% of the respondents believe that the pro-
cess of digital transformation will lead to
the creation of new employment opportu-
nities, while 59% think the process will not
affect the number of jobs.
b. The percentage of respondents who believe
that digital transformation will not change
the company’s revenue in the next two years
and those who believe that it will increase it is
roughly the same, 38% and 39% respectively.
c. The most significant outcomes achieved
by implementing digital transformation in-
clude:
i. digitalisation of business processes;
ii. adoption of new technologies/market
trends;
God. XXXIII, BR. 1/2020. str. 151-164
 Preliminary communication

iii. efficiency/lower costs as a result of Table 1 The rankings of EU Member State econo-
streamlining business processes; mies based on the Digital Economy and Society
iv. optimisation of user experience. Index for the period 2014 – 2018
Member
The results of analysis of the digital transforma- 2014 2015 2016 2017 2018
State
tion in the Croatian economy and the Croatian
Austria 11 11 10 11 11
Digital Index show that companies in Croatia are
not familiar enough with digital transformation. Belgium 7 7 7 6 8
Consequently, for most companies, digital trans- Bulgaria 27 26 26 26 26
formation is not among their top priorities and Croatia 23 24 23 23 22
only a few respondents believe their company has
developed a strategy for digital transformation. Cyprus 24 22 20 21 21
More than half of the respondents believe that Czechia 19 16 19 17 17
the digital transformation process will not impact Denmark 1 1 1 1 1
the overall number of job positions in companies,
Estonia 8 8 8 8 9
and the number of those who believe that digital
transformation will affect the company’s revenue Finland 3 2 2 2 3
is almost equal to the number of those who believe France 16 17 17 18 18
that it will not. Germany 10 12 13 14 14
Greece 26 27 27 27 27
3.2 Digital Economy and Society Index (DESI)
Hungary 21 21 21 22 23
Since 2014, the European Commission has been
monitoring EU Member States’ digital competitive- Ireland 12 10 9 9 6
ness with the annual Digital Economy and Society Italy 25 25 25 25 25
Index (DESI). The DESI summarises the relevant Latvia 18 19 18 19 19
indicators and monitors the performance of EU
Member State economies in the domain of digi- Lithuania 13 14 12 13 13
talisation and digital competitiveness. The overall Luxembourg 5 5 6 5 5
DESI is calculated on the basis of the weighted av- Malta 9 9 11 10 12
erage across 5 main dimensions of the index: Con-
Netherlands 4 4 4 4 4
nectivity, Human Capital, Use of Internet Services,
Integration of Digital Technology, and Digital Public Poland 22 23 24 24 24
Services.* The main dimensions include over 34 in- Portugal 15 15 15 15 16
dicators (European Commission, Digital Economy Romania 28 28 28 28 28
and Society Index6).
Slovakia 20 20 22 20 20
* The Connectivity dimension measures the deploy-
Slovenia 17 18 16 16 15
ment of broadband infrastructure and its quality.
The Human Capital dimension measures the skills Spain 14 13 14 12 10
needed to take advantage of the possibilities offered Sweden 2 3 3 3 2
by a digital society. The Use of Internet Services di- United
mension accounts for a variety of online activities. 6 6 5 7 7
Kingdom*
The Integration of Digital Technology dimension
*The United Kingdom is hereinafter abbreviated as the
measures the digitisation of businesses and e-com-
UK.
merce. Digital Public Services dimension measures Source: Authors, based on the Digital Economy and Soci-
the digitisation of public services, focusing on eGov- ety Index (DESI) 2014 – 2018
ernment and eHealth.
Below are the rankings of EU Member State econo- It is clear from Table 1 that Denmark ranked first
mies based on the Digital Economy and Society In- each year, followed closely by Finland and Sweden.
dex for the period from 2014 to 2018 (Table 1). Croatia ranked below the EU average and remained
at the bottom of the ranking throughout the pe-
riod. Economies that have consistently ranked be-

God. XXXIII, BR. 1/2020. str. 151-164 155

 Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states

low Croatia in the last five years are Italy, Bulgaria, For a more detailed analysis of the individual scores
Greece, and Romania. In the 2018 report, Croatia and rankings of the EU member economies, we
placed 22nd, which is a step up compared to the need to look at their rankings in the main dimen-
previous year. In 2018, Croatia ranked higher than sions. Therefore, the following charts illustrate the
Hungary, Poland, Italy, Bulgaria, Greece, and Ro- 2018 rankings in DESI and its main dimensions
mania. (Figure 1, 2, 3, 4, and 5).

Figure 1 DESI dimension– Connectivity

30 28
27
26
25
30 28 24
25 27 23
22
26 21
25
19 2420
25 23 18
20 17 22
16 21
15 20
19 14
20 13 18
15 17 12
16 11
15 10
9 14
15 13 8
10 12 7
11 6
5 10
9 4
10
5 3 8
2 7
61
5
4
05 3
2
1

Portugal
Germany
Belgium

Greece

Ireland

Slovenia Spain
CyprusCyprus
AustriaAustria

Sweden UK
CroatiaCroatia

Denmark

Finland

Hungary

Lithuania

Malta
Netherlands
Italy

Poland

Slovenia

Sweden
Bulgaria

Czechia

Estonia

France

Latvia

Romania
Slovakia
Luxembourg

Portugal
Germany
Belgium

Greece

Ireland

Spain

UK
Denmark
Bulgaria

Hungary

Lithuania

Malta
Netherlands
Italy

Poland
Czechia

Estonia
Finland
France

Latvia

Romania
Slovakia
Luxembourg

Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018
Source:
Source:Authors,
Authors,based
basedononthe
theDigital
DigitalEconomy
Economyand
andSociety
SocietyIndex
Index(DESI)
(DESI)forfor
2018
2018
In Connectivity dimension, the highest-ranked was the Netherlands, followed by Luxembourg
th
Inand Denmark. dimension,
InConnectivity
Connectivity Croatia is in
dimension, the
thethe 27 place (ofwas
highest-ranked
highest-ranked 28).
was The only country
the Netherlands,
only country that ranked
that followed
ranked by lower
lower than in this
Luxembourg
than Croatia
the Netherlands,
Croatia followed
in this dimension by Luxembourg and dimension is Greece.
and Denmark.
Denmark. CroatiaCroatia isisin
is in the
Greece.
27ththe
place
th
place
27 (of 28). (of
The28). The only country that ranked lower than
Croatia2inDESI
Figure this dimension
dimension is Greece.Capital
– Human
Figure 2 DESI dimension – Human Capital
Figure 2 DESI dimension – Human Capital 28
30 27 26 25
24 23
25 22 28
30 27 21 20
26 25 19
20 18 24 17
25 23 22 16 15
21 20 14
15 12 13 19
20 18 11 17
10 9 16 15
10 7 8 14
15 12 13 6 5
10 11 3 4
5 9 2
10 7 1 8
6 5
0 4
5 2 3
1
Portugal
DenmarkDenmark

Germany

UK
BelgiumBelgium
BulgariaBulgaria

Finland

Greece
Hungary

Lithuania

Malta
Cyprus Cyprus

Estonia Estonia

Ireland
Italy

Luxembourg

Poland

Slovenia
Slovenia Spain
Spain Sweden
Austria Austria

Czechia Czechia

France

Slovakia
Croatia Croatia

Netherlands
Latvia

Romania

0
Portugal
Germany

UK
Finland

Greece
Hungary

Lithuania

Malta
Ireland
Italy

Luxembourg

Poland

Sweden
France

Slovakia
Netherlands
Latvia

Romania

Source:
Source:Authors,
Authors,based
basedon
onthe
theDigital
Digital Economy
Economy and
and Society
Society Index
Index (DESI)
(DESI) for
for 2018
2018

The
156highest
Source: ranking
Authors, based onEU
the countries in Human
Digital Economy andGod. Capital
Society BR.dimension
Index
XXXIII, (DESI)str.
1/2020. for 2018 are Finland, the
for151-164
2018
Netherlands and Sweden. Croatia is in the 18th place (of 28), ranking higher than Lithuania,
The highest ranking EU countries in Human Capital dimension for 2018 are Finland, the
Poland, Hungary, Portugal, Latvia, etc.
th
 Preliminary communication

The highest ranking EU countries in Human Capi- 28), ranking higher than Lithuania, Poland, Hun-
tal dimension for 2018 are Finland, the Nether- gary, Portugal, Latvia, etc.
lands and Sweden. Croatia is in the 18th place (of

Figure
30
3 DESI dimension – Use of Internet Services
28
27
26
25
30 24 28
25 27 23
26 22
25 21
20 24
25 19 23
20 22 18
17 21
20 16
19 15
20 14 18
15 13 17
12 16
11 15
14 10
15 13 9
10 8 12
11 7
10 6
5 9
10 8 4
5 3 7
6 2
1 5
4
5 3
0 2
1
Austria

Germany

Portugal
Belgium

Greece
Cyprus

Ireland

Latvia

SwedenSpain
Sweden
Denmark

Netherlands

Romania

UK
Bulgaria
Croatia

Finland

Hungary

Lithuania
Italy

Luxembourg
Malta

Slovenia
Czechia

Estonia

Poland
France

Slovakia
0
Austria

Germany

Portugal
Belgium

Greece
Cyprus

Ireland

Latvia

Spain
Denmark

Romania

UK
Bulgaria
Croatia

Hungary

Lithuania
Italy

Luxembourg
Malta
Netherlands

Slovenia
Czechia

Estonia
Finland

Poland
France

Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018 Slovakia
Source: Authors,
Source: Authors,based
basedon
onthe
the Digital Economy and
Digital Economy andSociety
SocietyIndex
Index(DESI)
(DESI)for
for2018
2018
The DESI rankings in the dimension Use of Internet Services for 2018 show that Denmark,
The
The DESI
DESI
Sweden rankings
rankings
and ininthe
thedimension
the Netherlands dimension UseofofInter-
rankedUse
highest Internet Services
in this sion. forCroatia
Croatia
dimension. 2018
is in ashowin that
isveryagoodDenmark,
very 11
goodplace
th
11th (of 28),
net Services for 2018 show that Denmark, Sweden ranking higher than its neighbouring EU th Member
Sweden
place and
28),the Netherlands ranked highest in this dimension.
MemberCroatia
States.is in a very good 11
and the (of ranking
Netherlands higher
ranked than its
highest neighbouring
in this dimen- EU States.
place (of 28), ranking higher than its neighbouring EU Member States.
Figure 4 DESI dimension – Integration of Digital Technology
Figure 4 DESI dimension – Integration of Digital Technology
Figure 4 DESI dimension – Integration of Digital Technology
30 27 28
26
30
26 24 25 23
27 28
25 25 22
21 24
25 19 2023 22
20 21 18
17 19 20
16 15 18
20 17 14
15 13 16 15
12 11 14
15 10 13
12 9 11
10 10 8 7
9 6
10 5 8 7
3 6 4
5 5 2
1 3 4
5 2
1
0
0
Portugal
Denmark

Germany

UK
Belgium
Bulgaria

Finland

Greece
Hungary

Lithuania

Malta

Poland

Slovenia
Spain
Sweden
Austria

Cyprus
Czechia

Estonia

Ireland
Italy
France

Slovakia
Netherlands
Croatia

Luxembourg
Latvia

Romania
Portugal
Denmark

Germany

UK
Belgium
Bulgaria

Lithuania

Malta

Poland

Slovenia
Spain
Sweden
Austria

Cyprus
Czechia

Estonia
Finland

Greece
Hungary
Ireland
Italy
France

Slovakia
Netherlands
Croatia

Luxembourg
Latvia

Romania

Source: Authors,
Source: Authors,based
basedononthe
theDigital
DigitalEconomy
Economyand
andSociety
SocietyIndex
Index(DESI)
(DESI)for
for2018
2018
Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018

God. XXXIII, BR. 1/2020. str. 151-164 157

 According to the
Marinko Jurčević, 2018
Lukša Lulić, DESI rankings,
Vinko Mostarac: in transformation
The digital the Integration of economy
of Croatian Digitalcompared
Technology dimension,
with EU member states

the highest-ranked Member States are Denmark, Finland and Ireland. Croatia is in the 21st
According to the 2018 DESI rankings, in the Inte- and Ireland. Croatia is in the 21st place (of 28), rank-
place of(of
gration 28), Technology
Digital ranking higher than the
dimension, Luxembourg,
high- Latvia,than
ing higher Greece, Hungary,
Luxembourg, Bulgaria,
Latvia, Greece, Poland
Hun-
est-ranked Member States are Denmark, Finland gary, Bulgaria, Poland and Romania.
and Romania.

Figure 5 DESI dimension– Digital Public Services

Figure 5 DESI dimension– Digital Public Services

30 28
27
26
25
24
25 23
22
21
20
19
20 18
17
16
15
14
15 13
12
11
10
9
10 8
7
6
5
4
5 3
2
1
0
Austria

Denmark

Germany

Portugal
Belgium
Bulgaria
Croatia

Greece
Hungary
Cyprus

Ireland

Latvia

Slovenia
Spain
Sweden
Lithuania

Malta
Netherlands

Romania
Italy

Luxembourg

UK
Czechia

Estonia
Finland

Poland
France

Slovakia
Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018
Source: Authors, based on the Digital Economy and Society Index (DESI) for 2018

The highest-ranked EU countries in the DESI dimension Digital Public Services for 2018 are
The highest-ranked EU countries in the DESI di- public services, business models, and society as a
Finland,
mension Estonia
Digital andServices
Public Denmark. Croatia
for 2018 is in the
are Fin- 25thThe
whole. place (of 28),
ranking an unfavourable
is based position
on three key factors,
land, Estonia and Denmark. Croatia is in the 25 th
nine sub-factors, and a total of fifty criteria. The
given
place (ofthat
28), only Romania, Hungary
an unfavourable and Greece
position given that ranked
key lower
factors than Croatia
are ‘Knowledge’ in this category.
, ‘Technology’ , and ‘Fu-
only Romania, Hungary and Greece ranked lower ture readinesses. The Knowledge factor refers to the
than
TheCroatia in this
analysis of category.
the results of the Digital Economy know-howandneeded
Society to discover,
Index for understand
2018 andand itscre-
main
The analysis of the results of the Digital Economy ate new technologies; it comprises three sub-fac-
dimensions
and Society Indexindicates
for 2018that Scandinavian
and its countries
main dimensions tors:– Talent,
Denmark, Finland
Training and Sweden
& Education, ranked the
and Scientific
indicates concentration. The Technology factor is the all-en-
highest.that Scandinavian
Croatia achievedcountries – Denmark,
its highest score in the dimensions
compassing Usethat
context of enables
the Internet
the Services and
development
Finland and Sweden ranked the highest. Croatia
HumanitsCapital.
achieved On inthe
highest score the other hand,Useinof the ofdimensions
dimensions digital technologies, with sub-factors Regulatory
Connectivity and Digital Public
the Internet Services and Human Capital. On the framework, Capital, and Technological framework.
hand, Croatia
Services,
other is close to Connectivity
in the dimensions the bottom ofandthe ranking.
The Future readiness factor is the preparedness
Digital Public Services, Croatia is close to the bot- of a country to exploit digital transformation; its
tom sub-factors are Adaptive attitudes, Business agility,
3.3ofThe
the ranking.
IMD World Digital Competitivenessand Ranking
IT integration (IMD World Competitiveness
Center, IMD World Digital Competitiveness Rank-
3.3 The IMD World Digital Competitiveness Ranking
The Institute of Management Development (IMD) ing 2018 carries
7
). out research to analyse and rank
The Institute of Management Development (IMD)
Below are the rankings of EU Member States based
countries
carries all over
out research to the world
analyse and based on their ability to adopt digital
rank countries technologies leading to
all over the world based on their ability to adopt on the IMD World Digital Competitiveness Rank-
transformation
digital technologiesinleading
publictoservices, business
transformation in models, andperiod
ing for the society
2014as a whole.
- 2018 (Table The
2). ranking is

based on three key factors, nine sub-factors, and a total of fifty criteria. The key factors are
158 God. XXXIII, BR. 1/2020. str. 151-164
 Preliminary communication

Table 2 The rankings of EU Member States ba- Member

sed on the IMD World Digital Competitiveness 2014 2015 2016 2017 2018
State
Ranking for the period 2014 - 2018 Romania 54 51 49 54 47
Member Slovakia 40 43 41 43 50
2014 2015 2016 2017 2018
State Slovenia 37 39 36 34 34
Austria 24 26 19 16 15 Spain 29 30 30 30 31
Belgium 25 19 18 22 23 Sweden 3 5 3 2 3
Bulgaria 53 54 47 45 43 United
12 12 12 11 10
Cyprus - - - 53 54 Kingdom
Croatia 45 46 44 48 44 Source: Authors, based on the 2018 IMD World Digital
Czechia 31 31 32 32 33 Competitiveness Ranking
Denmark 7 8 8 5 4
Over the last five years, Sweden has been among the
Estonia 23 27 27 26 25 top three highest-ranked EU Member States, with
Finland 4 3 6 4 7 the exception of 2015 when Finland ranked third. In
France 22 20 22 25 26 the same period, Croatia mostly occupied the bot-
Germany 14 17 15 17 18 tom part of the ranking. In the 2018 report, Croatia
Greece 48 40 45 50 53 ranked 44th (a four-place improvement compared to
the previous year). Only Hungary, Romania, Slova-
Hungary 36 44 42 44 46
kia, Greece, and Cyprus ranked lower. As evident
Ireland 17 25 20 21 20
from Table 2, Malta is the only EU Member State
Italy 41 36 34 39 41 which is not included the IMD research.
Latvia 33 34 33 35 35
For a more detailed analysis, the paper looks at the
Lithuania 32 28 29 29 29 rankings of EU Member States in the main factors.
Luxembourg 19 16 21 20 24 The following figure illustrates the position of EU
Malta - - - - - countries in the 2018 IMD report that includes over
Netherlands 6 6 4 6 9 63 countries across the world (Figures 6, 7 and 8).*
Poland 39 38 38 37 36 * At the top of the IMD World Digital Competitive-
Portugal 30 29 31 33 32 ness Ranking 2018 are: the USA, Singapore, Sweden,
Denmark, and Switzerland.

Figure 6 EU Member States’ rankings in the Knowledge factor

60 55
51
48 49
50 45
43 42
41
38
40 34
32 33
31
29
30 27 26
25
22 23
20
20 14
13 12
9 10
8 7
10

0
Germany
Belgium

Greece
Cyprus

Portugal
Austria

Denmark

UK
Bulgaria
Croatia

Finland

Hungary

Lithuania

Netherlands
Ireland
Italy

Poland

Slovenia
Spain
Sweden
Czechia

Estonia

France

Latvia

Romania
Slovakia
Luxembourg

Source:
Source:Authors,
Authors, based on the
based on the2018
2018IMD
IMDWorld
World Digital
Digital Competitiveness
Competitiveness Ranking
Ranking

God.
In the IMD factor Knowledge for XXXIII,
2018, theBR.highest-ranking
1/2020. str. 151-164countries were the Scandinavian 159

countries (ordered by ranking, from the highest- to the lowest-ranking): Sweden, Denmark,
and Finland. Croatia was in the 43rd place, above Romania, Hungary, Slovakia, Greece, and
 Cyprus.

Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states

In the IMD factor Knowledge for 2018, the highest- est-ranking): Sweden, Denmark, and Finland. Croa-
ranking countries were the Scandinavian countries tia was in the 43rd place, above Romania, Hungary,
(ordered by ranking, from the highest- to the low- Slovakia, Greece, and Cyprus.

Figure 7 EU Member States’ rankings in the Technology factor

Figure 7 EU Member States’ rankings in the Technology factor

60 56
49 51
47
50 44
42 40 41
37 36 38
40 33
31 32 30
29
30 26 24
20 19 21
20 15 13
10 8
10 4 5

0
Denmark

Germany

Portugal

UK
Bulgaria

Finland

Hungary

Italy

Slovenia

Sweden
France
Austria

Lithuania
Belgium

Croatia

Greece

Luxembourg
Netherlands
Cyprus
Czechia

Estonia

Ireland

Latvia

Poland

Romania
Slovakia

Spain
Source: Authors, based on the 2018 IMD World Digital Competitiveness Ranking
Source: Authors, based on the 2018 IMD World Digital Competitiveness Ranking

The highest-ranked EU countries in the Technology factor for 2018 were Finland, Sweden and
The
thehighest-ranked EU countries
Netherlands. Croatia rankedin49the
th Technology mies that showed
. The only EU economies lower lower
that showed performance in this factor
performance
factor for 2018 were Finland, Sweden and the Neth- are Greece and Cyprus.
in this factor
erlands. Croatiaareranked
Greece49and
th Cyprus.
. The only EU econo-

Figure
Figure 8 EU
8 EU Member
Member States’
States’ rankings
rankings inin
thethe Future
Future readiness
readiness factor
factor

58 57
60 55 54 53
50 44 46
39 37
40 34 36 35
33 32 30
26 27
30 23
20 21
20 14 13
8
10 4 5 3
1
0
Portugal
Denmark

Germany

UK
Belgium
Bulgaria

Finland

Greece
Hungary

Lithuania

Slovenia

Sweden
Austria

Cyprus
Czechia

Estonia

Ireland
Italy

Poland
France

Slovakia
Croatia

Luxembourg
Netherlands

Spain
Latvia

Romania

Source:
Source:Authors,
Authors,based
basedononthe
the2018
2018IMD
IMDWorld
WorldDigital
DigitalCompetitiveness
CompetitivenessRanking
Ranking

160 God. XXXIII, BR. 1/2020. str. 151-164

In the IMD factor Future readiness for 2018, the highest-ranked EU countries were Denmark,
the UK and the Netherlands. Croatia ranked 54th, with only Bulgaria, Romania and Hungary

In the IMD factor Future readiness for 2018, the
highest-ranked EU countries were Denmark, the
UK and the Netherlands. Croatia ranked 54th, with
only Bulgaria, Romania and Hungary showing low-
er performance, among the EU countries. Consid-
ering IMD World Digital Competitiveness Ranking
for 2018 and its main factors, Croatia was at the
very bottom of the ranking in the factors Knowl-
edge, Technology and Future readiness compared to
other EU countries. The only notable area in which
Croatia gained a competitive advantage is Knowl-
edge, in particular in Education & Training and Sci-
entific concentration.
4. Conclusion
Digital transformation refers to a broad concept
that encompasses the changes facilitated by the in-
creased availability and use of digital technologies
in almost every domain of human activity. This im-
plies the change to business models, products and
services, production methods and supply, as well as
to the skills needed to remain competitive in a fast-
changing environment. Given that many countries
seek to adapt their economies to the new conditions
and exploit new opportunities as soon as possible,
research is conducted to evaluate their progress in
terms of digitalisation – both on national and global
levels.
The Croatian Digital Index, which represents the
results of the analysis of digital transformation of
the Croatian economy, indicates that companies in
Croatia are not familiar enough with the term digi-
tal transformation. Moreover, for most companies,
it is not even among their top priorities. In fact, very
few companies report that they have developed a
strategy for digital transformation. More than half
of the respondents believe that the digital transfor-
mation process will not impact the overall number
of jobs in companies. The number of respondents
who consider that digital transformation will have
an impact on the revenue and those who consider
that it will not are almost equal.
According to the Digital Economy and Society
Index (DESI) for 2018, Croatia occupies the 22nd
position (one position higher compared to the pre-
vious year) among the EU countries. The only EU
members that ranked lower than Croatia are Hun-
gary, Poland, Italy, Bulgaria, Greece and Romania.
Croatia obtained its highest score and achieved its
highest ranking in the Use of Internet Services and
God. XXXIII, BR. 1/2020. str. 151-164
Preliminary communication
Human Capital dimensions. In contrast, Croatia
ranked at the very bottom in the Connectivity and
Digital Public Services dimensions.
The analysis of the IMD World Digital Competi-
tiveness Ranking for 2018 reveals that Croatia is in
the 44th place (advancing by four places compared
to the previous year). The only EU countries that
ranked lower than Croatia are Hungary, Romania,
Slovakia, Greece and Cyprus. Compared to other
EU countries, Croatia is at the bottom of the rank-
ing in the Technology and Future Readiness factors.
An area in which Croatia still remains competitive,
compared to other EU countries, is the Knowledge
factor in particular in the Training & Education and
Scientific Concentration sub-factors.
The overall performance and digital competitive-
ness of the Croatian economy, compared to other
EU members, show that Croatia is not in an unfa-
vourable position. Although individual results are
not favourable for Croatia, there is some advance-
ment compared to the results from the previous
year.
According to the recently published study on digiti-
sation in Croatia by a consulting firm McKinsey &
Company, Croatia has a long-term automation po-
tential to generate as many as 800,000 new jobs by
the year 2030. The potential is based on three avail-
able factors: a great number of students with a de-
gree in ICT in Croatia, a competitive advantage on
the macroeconomic level and competitive labour
costs in the ICT sector, and success stories from the
private and public sector recognised on the interna-
tional level. Additional efforts are necessary to sup-
port digital growth that should focus on four areas:
the education system, ICT infrastructure, digital
skills, and entrepreneurial environment. In addi-
tion, recommendations are given for actions aimed
at accelerating digitisation of the public and private
sectors, and of the individual. Some of these recom-
mendations are: build skill set for the future, sup-
port technology adoption in the public and private
sectors, invest in human capital, use the advantages
of adopting digital tools in everyday life, strengthen
regional digital cooperation, and others (McKinsey
& Company 20188).
For the last few years, the Government of the Re-
public of Croatia has been promoting digitalisa-
tion through the project entitled Digital Croatia.
The Central State Office for the Development of
the Digital Society is the state administration body
161
 Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states

responsible for monitoring and promoting the de- ready been signed (The Central State Office for the
velopment of digital society and the harmonisation Development of the Digital Society9, Ministry of
of national rules and regulations with the guidelines Public Administration of the Republic of Croatia10).
and regulations of the European Union in the do-
Carrying out the planned projects and activities
main of digital society and economy. Among other
requires the synergy of all stakeholders from the
activities in this context, it is necessary to point out
public, real, and social sectors, and the results are
that the Ministry of Public Administration has de-
expected to improve Croatia’s digital competitive-
veloped e-Croatia 2020 Strategy and Action Plan
ness ranking in the coming period.
for its implementation, and that several financing
agreements for the digitalisation project have al-

162 God. XXXIII, BR. 1/2020. str. 151-164

 Preliminary communication

R

1. Parviainen, P., Tihinen, M., Kääriäinen, J., Teppola, S. (2017), “Tackling the digitalization challenge:
how to benefit from digitalization in practice”, International Journal of Information Systems and Proj-
ect Management, Vol. 5, No. 1, pp. 63-77.
2. Spremić, M. (2017). Digitalna transformacija poslovanja. Zagreb: Faculty of Economics and Business.

E

1 European Commission, “The European Union”, available at: https://europa.eu/european-union/about-eu_hr (Accessed on: May 24,
2019)
2 European Commission, “Digital transformation”, available at: https://ec.europa.eu/growth/industry/policy/digital-transformati-
on_en (Accessed on: May 24, 2019)
3 Interreg Europe (2018), “Digital Transformation Scoreboard 2018: Are EU companies adopting digital technologies?”, available at:
https://www.interregeurope.eu/policylearning/news/3917/digital-transformation-scoreboard-2018-are-eu-companies-adopting-digi-
tal-technologies/ (Accessed on: May 24, 2019)
4 European Commission (2017), “Digitalization is like globalization: it needs to be managed and governed”, available at: https://
ec.europa.eu/digital-single-market/en/blog/digitalization-globalization-it-needs-be-managed-and-governed, (Accessed on: May 24,
2019)
5 Apsolon (2019), “Digital Transformation in Croatia 2019: Croatian Digital Index”.
6 European Commission (2019), “The Digital Economy and Society Index (DESI)”, available at: https://ec.europa.eu/digital-single-
market/en/desi, (Accessed on: May 28, 2019)
7 IMD World Competitiveness Center (2018), “IMD World Digital Competitiveness Ranking 2018”, Institute for Management Deve-
lopment, Lausanne.
8 McKinsey & Company (2018), “Croatia – Emerging Digital Challenger: Digitization as the new growth engine for Croatia”, available
at: https://digitalchallengers.mckinsey.com/files/Digital-Challengers-Perspective-on-Croatia.pdf (Accessed on: May 30, 2019)
9 The Central State Office for the Development of the Digital Society, available at: https://rdd.gov.hr/ (Accessed on: May 30, 2019)
10 The Ministry of Public Administration, the Republic of Croatia, available at: https://uprava.gov.hr/ (Accessed on: May 30, 2019)

God. XXXIII, BR. 1/2020. str. 151-164 163

 Marinko Jurčević, Lukša Lulić, Vinko Mostarac: The digital transformation of Croatian economy compared with EU member states

Marinko Jurčević
Lukša Lulić
Vinko Mostarac

D   R

H      E 
S
U sadašnjem vremenu svjedoci smo promjena koje se, kao nikada do sada, neprestano, nepredvidivo i ve-
likom brzinom odvijaju oko nas. To nas dovodi do razmišljanja o tome kakva je budućnost, koja je nedvoj-
beno kao nikada prije, podložna velikoj nesigurnosti i neizvjesnosti. U kontekstu toga, globalna pojava di-
gitalnih tehnologija zahtijeva promptnu prilagodbu novom digitalnom dobu te digitalnu transformaciju, ne
samo gospodarstva već i društva u cjelini. Cilj ovog rada je utvrditi i analizirati poziciju gospodarstva Repu-
blike Hrvatske u području digitalizacije, odnosno digitalne transformacije te tzv. digitalnu konkurentnost
u odnosu na ostale zemlje članice Europske unije. Kao osnova za analizu stanja i digitalne konkurentnosti
hrvatskog gospodarstva korišteni su: Hrvatski Digitalni Indeks (HDI), Indeks digitalnog gospodarstva i
društva (DESI) te IMD svjetska ljestvica digitalne konkurentnosti. Rezultati i zaključci analize ukazuju da
hrvatsko gospodarstvo po pitanju digitalne spremnosti i transformacije još uvijek nije dosegnulo očekivanu
razinu konkurentnosti u odnosu na ostale države članice Europske unije.

Ključne riječi: gospodarstvo, digitalna konkurentnost, Hrvatska, Europska unija

164 God. XXXIII, BR. 1/2020. str. 151-164

 CC BY-NC-SA

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Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green licenca
supply chain dopušta d

nekomercijalne svrhe
Michal Patak Zuzana Pecinova licenciraju svoja djela
University of Pardubice University of Pardubice Preliminary communication
Department of Economy Department of Economy
and Management of Chemical and Management of Chemical Received: October 3, 2019
and Food Industry and Food Industry Pogledajte
Accepted for publishing: February 5, 2020 sažetak lic
Studentska 95, Studentska 95,
53210 Pardubice, Czech Republic 53210 Pardubice, Czech Republic This work is licensed under a
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Lenka Branska CC BY-NC-ND
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Department of Economy
and Management of Chemical
and Food Industry
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Studentska 95,
53210 Pardubice, Czech Republic
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Phone: +420466036178 5 od 6

IMPORTANCE
OF REVERSE LOGISTICS
SERVICES AS AN ANTECEDENT FOR
BUILDING A GREEN SUPPLY CHAIN
A
An important antecedent for building a green supply chain are customer requirements. For the time being,
however, it is unclear how the demands for providing reverse logistics services contribute to green sup-
ply chain building. The aim of the research was therefore to specify the degree of importance of reverse
logistics services compared to typical services provided by the supplier during order fulfilment. Based on
the survey of purchasing managers’ attitudes in 100 food companies, reverse logistics services were found
to have a significant role in the portfolio of services evaluated. Return of defective goods was evaluated as
the most important reverse logistics service. At the same time, it was found that the perception of the im-
portance of the services provided is affected by the item purchased. Reverse logistics services are more im-
portant when purchasing chemicals than when purchasing the main raw material. Thus, primary research
has shown that the greatest opportunity to build a green supply chain will arise when purchasing items that
inherently show environmental hazards.
Keywords: Reverse logistics, green supply chain, logistics service, food industry, chemicals

1. Introduction
resents the integration of environmental thinking
Currently, green supply chain management (GSCM) into SCM activities (Ahi, Searcy, 2013). Building a
is gaining ground both in theory and managerial green supply chain (GSC) requires the application of
practice, combining environmental management an array of green practices. These are environmen-
and supply chain management (SCM) (Srivastava, tally friendly activities that reduce environmental
2007; Zhu et al., 2008; Yang et al., 2013). GSCM rep- impacts and capture added value from these activi-
God. XXXIII, BR. 1/2020. str. 165-174 165
Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green supply chain
ties (Ryoo, Koo, 2013). At the same time, they con-
tribute to lean manufacturing (Dües et al., 2013)
and according to Ryoo and Koo (2013), they enable
a firm to sustain competitive advantages. Many of
these practices are applicable at the level of a single
enterprise, others require the cooperation of several
partners in the chain (Hofmann et al., 2012). Envi-
ronmentally proactive manufacturers directly and
positively affect environmental behaviour of their
business partners (Green Jr. et al., 2012) and imple-
ment internal green practice with an extension to
external supply chain partners (Zhu et al., 2013),
thereby increasing the chances of their successful
implementation (Yen, 2018). Greater or lesser in-
volvement of business partners in joint efforts in-
volves setting, coordinating, and achieving environ-
mental goals that will lead to reduced environmental
impacts (Green Jr. et al., 2012; Zhu et al., 2013; Yen,
2018; Vachon, Klassen, 2006). Developing external
green collaboration improves the firm’s green per-
formance considerably (Ahmed et al., 2018).
One of the green practices that require a greater
or lesser degree of cooperation between business
partners in the chain is reverse logistics. According
to the literature (Cox, 1999), reverse logistics cycle
manages packaging as well as returns of defective
or discarded products. Reverse logistics is a tool
for developing the level of recovery and return of
the used products (Shi et al., 2015), serving to re-
duce pollution and product waste through activi-
ties like refurbishing, repairing, remanufacturing,
recycling, disposal and parts recovery (Zarbakhsh-
nia et al., 2019). Rogers and Tibben-Lembke (1999)
define reverse logistics as designing, scheduling,
and controlling the productive and beneficial flow
of products that are at the end of life, inventory and
information of the used products from consumer to
producer so as to recover, recycle or dispose of the
used products. However, reverse logistics should be
considered for the entire life cycle of the product,
including as part of the product design. The basic
life cycle of a product encompasses the following
stages: concept, design, manufacture, use, return,
recycle and/or disposal in landfills (Guarnieri et
al., 2016). The implementation of a reverse logistics
network is a strategic decision. This decision seeks
to achieve a single objective or multiple objectives
of cost minimization, profit maximization, custom-
er satisfaction, or environmental benefit (Shi et al.,
2017; Abdulrahman et al., 2015; Bazan et al., 2015;
Li et al., 2017).
166
As far as reverse logistics research is concerned,
it has been conducted essentially since 1992 when
Stock (1992) acknowledged reverse logistics as a
topic of societal interest. The interest of research-
ers is mainly focused on the strategic management
of the reverse logistics, especially the application of
management methods and approaches to reverse
logistics, the implementation of the reverse logis-
tics system and the development of cooperation
between business partners in the supply chain, es-
pecially with third-party logistics partners (Li et al.,
2018; Liao, 2018; Agrawal et al., 2015; Ghadimi et
al., 2019).
In research focusing on cooperation of supply chain
partners in the implementation of green practices
(including reverse logistics), it was found that en-
vironmental cooperation and monitoring between
customers and their suppliers improves environ-
mental and business performance (Green Jr. et al.,
2012). Moreover, Gimenez and Sierra (2013) found
that the effect on environmental performance is
positive and synergistic and can also be enhanced
by environmental assessment of suppliers. The pos-
itive relationship between green practices, green
supply chain and environmental (and economic)
performance has also been revealed in food retail
research (Petljak et al., 2018).
Dangelico and Pontrandolfo (2015) found that
business performance is significantly influenced
by the ability to develop environmental coopera-
tion and to carry out environmental activities, not
only with commercial, but also non-commercial
entities. Moreover, it has already been revealed that
the success of implementing green practices is sig-
nificantly stimulated by integrations in the supply
chain (Vachon, Klassen, 2006), application of envi-
ronmental management in the companies involved
in the chain (Wong et al., 2012), coordination of
internal business processes of individual partners
and implementation of an information system to
support green activities (Ryoo, Koo, 2013). Also,
differences in the expansion of green supply chain
management in the B2B (business-to-business) and
B2C (business-to-consumer) sectors have been ex-
amined as well as the conditions in which firms in
the B2B sector implement environmental processes
into their individual buyer-supplier relationships
(Hoejmose et al., 2012).
Yen (2018) addresses internal and external ante-
cedents to the application of green practices, spe-
cifically which of them affect the supplier-customer
God. XXXIII, BR. 1/2020. str. 165-174

collaboration and how. He develops the results of
previous research (Caniëls et al., 2013) that sug-
gested that the main drivers to engage suppliers in
green activities are supplier readiness and customer
requirements. The role of customers in the applica-
tion of green activities has also been confirmed in
research by Chavez et al. (2016). They discovered
that customer pressure has a significant impact on
the implementation of green initiatives, which in
turn leads to a multiple increase in operational per-
formance. However, so far no one has investigated
to what extent customer requirements for provid-
ing reverse logistics services contribute to building
a green supply chain. Therefore, primary research
was carried out. It was based on the basic idea that
if the requirements for reverse logistics services
were found to be important, suppliers would be
motivated to provide them. This will create an op-
portunity for building reverse logistics systems. As-
suming at the same time that reverse logistics is a
key activity in building a green supply chain (Liao,
2018), the importance of reverse logistics services
will be directly linked to building a green supply
chain (the high importance of reverse logistics ser-
vices will increase the chances of building a green
supply chain).
The aim of the research was to compare the impor-
tance of reverse logistics services with other servic-
es provided by the supplier during order fulfilment.
The more important they are compared to other
services typically provided during order fulfilment,
the greater the opportunity for building a green
supply chain. Customer attitudes to the importance
of services, however, can vary significantly depend-
ing on the customer’s position in the supply chain
and on the type of industry. That is why the research
focused on measuring attitudes only for B2B cus-
tomers in an industry we had chosen, specifically
on measuring the importance of services provided
with the deliveries of raw materials to food compa-
nies. Food companies had been deliberately chosen
because improving backflows in the food supply
chain not only brings environmental and economic
effects, but also social effects resulting from saving
food resources.
2. Methodology
The starting point for the specification of the ser-
vices included in the research was the literature
(Christopher, 2016; Rabetino et al., 2015) and the
God. XXXIII, BR. 1/2020. str. 165-174
Preliminary communication
results of our research focused on the purchasing
processes and the process of forecasting demand in
food companies (Branska et al., 2017; Pecinova et
al., 2017; Patak, Vlckova, 2012).
The following reverse logistics services are consid-
ered to have the greatest potential to reduce envi-
ronmental impacts (i.e. the volume of waste of raw
materials and packaging, but also the use of addi-
tional energy and raw material resources):
− Return of defective goods,
− Return of unused goods (by reason of incor-
rect forecast),
− Return of expired goods,
− Return of packaging.
In order to compare the perceived importance of
reverse logistics services with the perceived im-
portance of other services, usually provided during
order fulfilment, the following services were exam-
ined:
− Consultation on delivery innovations,
− Fixed quantity ordering,
− Fixed period ordering,
− Automatic replenishment,
− Inventory availability information,
− Order status information,
− Flexible order sizes,
− Flexible delivery times,
− Short delivery times,
− On-time deliveries,
− In-full deliveries,
− Error-free deliveries.
Subsequently, it was determined in which purchas-
ing operations the importance of the services would
be examined. Since the biggest opportunity to build
a green supply chain is generally with key suppli-
ers, the first chosen situation was the purchase of
the main raw material. It was a logical choice also
because these are the most important items to buy
in manufacturing companies. The other item for
research was chemical products (chemicals). It is
also of utmost importance for food companies –
167
Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green supply chain

these are usually cleaning and hygiene products ers of the main raw material and chemicals to the
that can significantly affect the quality and safety enterprise (92%), half of the respondents declared
of food produced. The second important reason for having worked as purchasing managers for over 10
the inclusion of chemicals in the research was the years (52%). Therefore, the sample of respondents
environmental aspect thereof – unused chemicals is considered to be sufficiently representative for
require a specific disposal method and so does the generalizing the results (see the structure of the re-
packaging in which they are delivered to compa- search sample in Table 1).
nies.
The research was organized as a quantitative one Table 1 The structure of the research sample
using a statistical survey. A simple random selec-
tion technique was used to select respondents. Characteristics Category Frequency
The selection was based on the public database Small 46
of Czech tax entities ARES, from which all the
Enterprise size Medium-sized 40
companies registered with the main business area
“Production of food products” (corresponding to Large 14
the CZ-NACE classification) were selected. The
Influence on the Direct 92
database of Czech food companies thus created
was randomly sorted and, based on the order of choice of suppliers Participation 8
the companies in the database, suitable respond-
Up to 5 years 29
ents (purchase managers) were gradually ap-
Years of experience
proached and involved in the research (ensuring 5 – 10 years 19
in the current
random sampling). First, the companies were ap- position More than 10
proached by telephone with a request to partici- years
52
pate in the research. If a company refused, it was
replaced by the next one until data of 100 compa- Source: Authors’ calculations
nies were collected. The required sample size was
determined as a compromise between methodo- Data analysis was based on descriptive and infer-
logical requirements (sample error size, form of ential statistics using the IBM SPSS Statistics soft-
the statistical analysis) and available sources for ware. The average importance scores calculated
data collection. from all individual responses were used to evaluate
Data collection was carried out in written form us- the importance of services. To compare the impor-
ing an e-questionnaire. In the first part of the ques- tance of reverse logistics services in the portfolio of
tionnaire, the respondents were asked to evaluate all the services surveyed, a box-plot of average im-
the importance of 16 pre-specified services (see portance scores was chosen. Statistical significance
above), first in the context of purchasing the main of differences in the average importance scores of
raw material and then in the context of purchasing deliveries of the main raw material and chemicals
chemicals. Given the broad portfolio of services be- was verified using a paired-samples t-test at the
ing evaluated, the respondents used a seven-point 0.05 level of significance.
scale (where 1 = absolutely unimportant, 7 = ex-
tremely important) to evaluate importance. The
survey also included questions related to the size
3. Results
of the company, the respondent’s competence in
selecting the supplier and the respondent’s experi- The research results can be divided into two parts.
ence (length of practice as a purchasing manager or The first part of the results describes the position
at a similar job position). of reverse logistics services in the portfolio of all
The research sample included 46% of small enter- the services surveyed related to the deliveries of the
prises (with up to 49 employees), 40% of medium- main raw material and chemicals to food compa-
sized enterprises (with up to 249 employees) and nies. To compare the importance level, box-plots of
14% of large enterprises (with 250 employees or average importance scores were chosen, in which
more). The majority of the respondents declared the position of reverse logistics services is indicated
having a direct influence on the choice of suppli- by dashed lines (see Figure 1).

168 God. XXXIII, BR. 1/2020. str. 165-174


Figure 1 The position of reverse logistics services in box-plots of average importance scores for main
raw material and chemicals
Source: Authors’ calculations
Both box-plots show the high importance of the re-
turn of defective goods service, which significantly
exceeds the importance of other reverse logistics ser-
vices. However, when comparing box-plots, we can
also notice a change in the position of reverse logistics
services in the portfolio of all the services surveyed
(reverse logistics services have a more prominent po-
sition in the portfolio of all services in the case of deliv-
eries of chemicals). The biggest change was observed
with the return of expired goods service (in the case of
the main raw material it is in the fourth quartile of ser-
vices, while in the case of chemicals it is in the second
quartile of services). In contrast with the case of the
main raw material, return of defective goods ranked
among the four most important services in the case
of chemicals (along with in-full deliveries, error-free
deliveries, and short delivery times).
The second part of the results focuses on identifying
differences in the importance of services depending
God. XXXIII, BR. 1/2020. str. 165-174
Preliminary communication
on the type of item purchased. Already in Figure
1, there was a noticeable drop in the position of
box-plots in the case of deliveries of chemicals. In
addition, a comparison of the average importance
scores for individual services in Table 2 shows that
chemicals saw a significant decline in average im-
portance for 15 of the 16 services surveyed. In ten
cases it was a significant decrease in importance, in
five cases this decrease was at the limit of signifi-
cance (P-value close to 0.05). With the exception of
reverse packaging, services related to the deliver-
ies of chemicals are perceived to be less important
than those provided with the delivery of the main
raw material. For both types of purchased inputs, a
group of services with a high perceived importance
can be identified, namely in-full deliveries, on-time
deliveries, error-free deliveries, flexible delivery
times, short delivery times, flexible order sizes, and
return of defective goods.
169
Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green supply chain

Table 2 Differences in average importance scores for services provided with the main raw material and
chemicals
Average Importance Score Paired t-test
Element of collaboration Main raw
Chemicals Difference t-value P-value
material
Reverse logistics services:
Return of defective goods 5.93 5.57 -0.36 -1.96 0.05
Return of unused goods 4.92 4.35 -0.57 -2.89 <0.05
Return of expired goods 4.82 4.43 -0.38 -1.89 0.06
Return of packaging 4.26 4.25 -0.01 -0.06 0.95
Other services:
Consultation on delivery innovations 4.59 3.92 -0.67 -3.11 <0.05
Fixed quantity ordering 4.88 3.92 -0.96 -3.54 <0.05
Fixed period ordering 5.05 4.11 -0.94 -4.55 <0.05
Automatic replenishment 3.96 3.46 -0.50 -1.82 0.07
Inventory availability information 5.17 4.14 -1.03 -4.89 <0.05
Order status information 4.89 4.05 -0.84 -4.28 <0.05
Flexible order sizes 6.06 5.41 -0.65 -2.94 <0.05
Flexible delivery times 6.23 5.51 -0.71 -3.48 <0.05
Short delivery times 6.22 5.65 -0.56 -2.83 <0.05
On-time deliveries 6.35 5.38 -0.98 -5.07 <0.05
In-full deliveries 6.49 6.16 -0.33 -1.76 0.08
Error-free deliveries 6.33 5.93 -0.40 -1.97 0.05
Source: Authors’ calculations

4. Discussion of results respondents’ interest in their own environmental

The research results confirmed some of the find-
ings of the previous research and also yielded new
findings. Regardless of the purchased item, typical
transaction services, i.e. services providing on-time,
in-full, error-free and flexible deliveries with short
delivery times (Christopher, 2016) were logically re-
garded as the most important. Such services are the
basis that customers would normally expect as they
have a major impact on reliable deliveries and con-
sequently the ability to meet similar requirements
with other customers in the supply chain. Surpris-
ingly, return of defective goods also ended up in
the group of the most important services. This is
probably related to customers’ demand for perfect
order, which has an immediate impact not only on
the environmental, but especially on the economic
success of the customer. The assessment of the im-
portance of this service thus probably reflected the
as well as economic success. Other reverse logistics
services have ranked among the less important ser-
vices, but they occupy an important position in this
group. Therefore, the demands for reverse logistics
services will naturally motivate suppliers to provide
them. Thus, the conclusions of previous research
can be elaborated to the effect that customer re-
quirements for reverse logistics services contribute
to building a green supply chain.
The research results showed that the type of item
purchased affects the level of perceived importance
of each service. The services provided with the de-
liveries of the main raw material are perceived as
more important than those provided with the de-
liveries of chemicals used mainly for the cleaning
and hygiene needs of the food companies. This is
probably because the purchase of the main raw ma-
terial affects customers’ commercial interests much

170 God. XXXIII, BR. 1/2020. str. 165-174


more. For customers who are in the position of a
manufacturer, it is much more important to have
an error-free supply system for the main raw ma-
terial as this ensures that the plan for production
and deliveries to their own customers is met. While
possible problems with deliveries of chemicals may
increase the complexity of operations management,
they usually do not require operations to stop and
do not jeopardize the fulfilment of terms of con-
tracts. The service is equally important with the
purchase of chemicals only if the packaging ma-
terial is returned. Based on the knowledge of the
purchasing process in food companies, it is esti-
mated that the main reason for this finding may be
the level of hazard of the item purchased. As the
process of eco-friendly disposal of packaging waste
with chemicals can be not only more demanding
but also more expensive, the customer will appreci-
ate the possibility to return the packaging material
to the supplier. It can therefore be estimated that
the importance of an environment-friendly service
is assessed from both an environmental and an eco-
nomic point of view.
Finally, it is also clear that reverse logistics services
have a different position in the portfolio of all ser-
vices, depending on the item concerned. In the
portfolio of all the services surveyed, reverse logis-
tics services are more important in the purchasing
of chemicals. It can therefore be expected that there
is a greater opportunity for building green supply
chain between food enterprises and manufacturers
of consumer chemical products as their suppliers.
However, it can be estimated that the environmen-
tal impact of implementing or improving reverse
logistics for chemicals will not be as significant as
in the case of improving the return flow of the main
raw material that is purchased in incomparably
larger volumes. However, experience with reverse
flow management of chemicals will create a knowl-
edge base to manage the return flows of other items,
especially that of the main raw material. Making
use of this experience will then be a prerequisite for
further reducing the environmental burden.
God. XXXIII, BR. 1/2020. str. 165-174
Preliminary communication
5. Conclusion
The primary research was designed to specify to
what extent customer requirements for providing
reverse logistics services contribute to building a
green supply chain. To achieve this goal, the impor-
tance of services provided in connection with the
purchase of the main raw material and chemicals in
the food industry was examined.
In the portfolio of reverse logistics services, it is re-
turn of defective goods that is of utmost importance
for customers. If the supplier seeks to strengthen
relationships with its customer through reverse lo-
gistics services, it is necessary to focus primarily on
complaint management. From the point of view of
the purchased item, this conclusion is even more
important when purchasing consumer chemical
products than the main raw materials. Other re-
verse logistics services are also important for cus-
tomers. They have ranked among the less important
services, but they occupy an important position in
this group. Therefore, it can be concluded that there
is an opportunity to implement or improve reverse
logistics systems for supplies to food companies,
which is essential to building a green supply chain.
However, it cannot generally be assumed that this
opportunity is greater for supplies of the main raw
material. Rather, it can be estimated that it is great-
er when purchasing an item that, by its very nature,
poses environmental hazards.
There are some opportunities for further research.
Given that the importance of services provided in
connection with the purchase was examined in a
selected segment of industrial customers, it would
be beneficial to carry out the research in another
(preferably significantly different) industry. This
would make it possible to assess whether there are
any sector-specific differences. It would also be ap-
propriate to conduct research with other members
in the supply chain. This would make it possible
to discover in what part of the chain there are the
greatest opportunities for building a GSC through
reverse logistics practices.
171
Michal Patak, Lenka Branska, Zuzana Pecinova: Importance of reverse logistics services as an antecedent for building a green supply chain

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Michal Patak
Lenka Branska
Zuzana Pecinova

V    

    
S
Važan čimbenik u izgradnji zelenog lanca opskrbe su zahtjevi kupaca. Zasad, međutim, nije sasvim jasno
kako zahtjevi za povratnim logističkim uslugama doprinose izgradnji zelenog lanca opskrbe. Stoga je cilj
istraživanja bio utvrditi stupanj važnosti povratnih logističkih usluga u usporedbi s uobičajenim uslugama
koje dobavljač pruža pri ispunjavanju narudžbe. Provedena je anketa kako bi se ispitali stavovi direktora na-
bave u 100 prehrambenih poduzeća, a rezultati pokazuju da povratne logističke usluge imaju važnu ulogu u
portfelju ocijenjenih usluga. Prema stavovima ispitanika, vraćanje neispravne robe najvažnija je usluga po-
vratne logistike. Nadalje, utvrđeno je da na percepciju važnosti pruženih usluga utječe vrsta kupljene robe.
Povratne logističke usluge važnije su pri nabavi kemikalija nego pri nabavi sirovina. Prema tome, primarno
istraživanje pokazuje da se najbolja prilika za izgradnju zelenog lanca opskrbe pruža kad se nabavlja roba
koja sama po sebi predstavlja rizik za okoliš.
Ključne riječi: povratna logistika, zeleni lanac opskrbe, logističke usluge, prehrambena industrija, kemi-
kalije

174 God. XXXIII, BR. 1/2020. str. 165-174

 CC BY-NC-SA

Ova
Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian licenca
public sector dopušta d

nekomercijalne svrhe
Ana Štambuk Nikolina Anđelić Preliminary communication
licenciraju svoja djela
University of Rijeka Mannheimer Strasse 100,
Faculty of Economics and Business 68723 Schwetzingen, Germany Received: November 15, 2019
Ivana Filipovića 4, nikolinaandelic@gmail.com Accepted for publishing: February 10, 2020
51000 Rijeka, Croatia Phone: +491760516920 Pogledajte sažetak lic
ana.stambuk@efri.hr
Phone: +38551355132 This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
Ivan Uroda International License
University of Rijeka Imenovanje-Nekome
Faculty of Economics and Business CC BY-NC-ND
Ivana Filipovića 4,
51000 Rijeka, Croatia
ivan.uroda@efri.hr
Phone: +38551355151
Ovo je najrestriktivnija

ADJUSTMENT AND EARLY RETIREMENT

5 od 6

INTENTIONS OF THE OLDER WORKERS

IN THE CROATIAN PUBLIC SECTOR
A
Croatian population and, consequently, Croatian labour force is rapidly ageing. With ageing comes the change
in abilities e.g. decreasing productivity and declining cognitive ability. In the modern world, new applications
of technologies transform requirements of jobs, thus workers have to adjust to those novelties. The problem
is that older workers are ‘digital immigrants’ who started using a Personal Computer (PC) later in their lives,
often during employment, so they had to change their approach to work i.e., they had to adjust to different
requirements of today’s jobs. Required adjustments accompanied by decreasing abilities may lead to early
retirement. The authors have investigated the influence of 1) the need to adjust to the requirements of today’s
jobs (approximated by requirements to use a PC) and 2) the ability to adjust to the requirements of today’s
jobs (approximated by ratings of PC skills) on early retirement intentions of population aged 50+ employed in
the Croatian public sector. A logistic regression model in the context of complex samples was created by the
authors, whereby both analysed variables were found to be related to the early retirement intentions. Finally,
those who were required to use a PC and thus to adjust to changes were more likely to want to retire early
than employees who did not have the same obligation. Those with low PC skills, i.e. employees whose ability
to adjust was low, were also more likely to retire early than those who have adjusted better.
Keywords: Population ageing, older workers, early retirement, Personal Computer (PC) related require-
ments and skills, public sector, early retirement intentions and decisions

1. Introduction Actually, those values are the reflection of long-last-

According to the United Nations estimates (United
Nations, 2019)1, out of 201 regions, subregions,
countries and areas in the world, in 2020, the Re-
public of Croatia will have the tenth oldest popula-
tion in the world, i.e. 21.25% of its population will
be aged 65+ (for comparison, Japan will have the
highest ratio of 28.4%, the United Arab Emirates the
lowest 1.26%, and the world average will be 9.33%).
ing demographic trends in Croatia.
Consequently, the Croatian labour force is also ag-
ing. Thus, the percentage of workers aged 50+ in
Croatia was 29% on March 31, 2017 as calculated
with the data by the Croatian Bureau of Statistics
(2018)2. Such ageing labour force, inevitably, experi-
ences changes in their abilities, such as decreasing
productivity and declining cognitive ability.

God. XXXIII, BR. 1/2020. str. 175-190 175

 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

In the meantime, new applications of technology
are rapidly evolving and expanding, and thus being
increasingly introduced in various jobs. In those
terms, the introduction of PCs (Personal Comput-
ers), linked to computerization, remains one of
the major changes for older workers. It is mainly
because those older workers have entered the la-
bour force prior to or at one of the early stages of
PC development and utilisation. Hence, for older
workers, who have started using PCs later in life, all
changes related to PC are much more challenging
than for younger workers who have started using
PCs at an earlier age.
To put it briefly, the problem is that older workers
have to adjust to the new job-related requirements,
while, at the same time, their abilities to do that are
decreasing. For that reason, older workers who find
it more difficult to adjust to those requirements
may want to retire earlier.
These requirements-related issues have motivated
the authors to investigate the influence of: 1) the
need to adjust to the requirements of today’s jobs
(approximated by the job requirement to use a PC)
and 2) the ability to adjust to the requirements of
today’s jobs (approximated by ratings of PC skills)
on early retirement intentions.
Because of the large number of employees in the
Croatian public sector, the research in this paper
was focused on population aged 50+ employed
within the public sector in Croatia. For that pur-
pose, the authors used designated data sets origi-
nating from the Survey of Health, Ageing and
Retirement in Europe (SHARE) Wave 6, data set
(Börsch-Supan, 20183; Börsch-Supan et al., 2013;
Malter, Börsch-Supan, 20174; Orso et al., 20175).
The aim was to investigate how early retirement in-
tentions are impacted by obligations to adjust to the
requirements of today’s jobs that were approximated
by the job requirement to use a PC and the ability to
adjust to the requirements of today’s jobs that were
approximated by ratings of PC skills. To perform the
research, the authors have created logistic regression
model in the context of complex samples.
2. Conceptual framework
With the purpose of establishing the compre-
hensive conceptual framework, the authors have
considered and elaborated the following: 1) main
trends of population ageing in Croatia, 2) age-relat-
ed decrease of productivity potential and decline of
performance measures, 3) PC requirements and PC
skills for population aged 50+, as their adjustments
to today’s jobs, and 4) key statistical figures on old
age pensions and early retirement pensions.
2.1 Main trends of population ageing in Croatia
Population ageing in Croatia in the last 30 years is
shown in Figure 1. All of the data were based on the
same source, United Nations (2019)1, with the nu-
merical scale for population-related trends shown
on the left vertical axis (L) and the percentage scale
for %-population-related trend shown on the right
vertical axis (R).

Figure 1 Total Population, Population aged 65+ and % of Population aged 65+ in Croatia in the period 1990-2020
5,000,000 25.00%
4,500,000
4,000,000 20.00%
3,500,000
3,000,000 15.00%
2,500,000
2,000,000 10.00%
1,500,000
1,000,000 5.00%
500,000
0 0.00%
1990 1995 2000 2005 2010 2015 2020
Total population (L) 4,776,370 4,616,763 4,428,075 4,378,066 4,328,163 4,232,874 4,105,268
Population aged 65+ (L) 552,899 631,820 689,264 755,105 760,038 814,657 872,462
% Population aged 65+ (R) 11.58% 13.69% 15.57% 17.25% 17.56% 19.25% 21.25%

Source: Created by the authors, based on the United Nations, 20191

176 God. XXXIII, BR. 1/2020. str. 175-190


Based on the numerical data from Figure 1, three
demographic trends in Croatia over the last 30
years were identified as:
1) continuous decrease of total population
2) continuous increase of population aged 65+
3) continuous increase of percentage of popu-
lation aged 65+.
In those terms, both continuous decrease of total
population and continuous increase of population
aged 65+, consequently contribute to continuous
increase of the percentage of population aged 65+.
Such population ageing figures for Croatia within
Figure 2 Productivity potential index by age, based on US data on job abilities, 1960 and 1998
Source: Skirbekk, 2008
According to Figure 2, the pivotal age group were
the 25-34 year olds, with the value of productivity
potential index at the pivotal 0.0. Expectedly, the
lowest value of this index was for the age group
16-19 at -0.43. Consequently, from this age group
onwards, individuals start to learn and develop
job-related skills as well as to gain work experi-
ence, therefore the value of this index is continually
increasing until it peaks in the age group 35-44 at
0.07. However, from the next age group onwards,
i.e. from the age group 45-54, the value of this index
is continually decreasing to the extremely low val-
ue, namely the one for the age group 55-65 at -0.34.
Even though a certain decrease of productivity po-
tential was expected and inevitable with age, based
solely on research findings by Skirbekk (2008), such
significant decrease of productivity potential was
not explicable per se.
God. XXXIII, BR. 1/2020. str. 175-190
Preliminary communication
this 30-year period were primarily results of fertility
decline, emigration and increased longevity (Biljan-
August, Štambuk, 2005; Hinek, et al., 2019); howev-
er, these were irrelevant in the context of this paper.
2.2 Age-related decrease of productivity potential and
decline of performance
Population ageing inevitably leads to the ageing of
the labour force. An ageing labour force is prone to
changes in productivity and changes in cognitive
abilities that happen with ageing.
In that regard, changes in productivity can be ob-
served from the index of productivity potential by
age groups, as shown in Figure 2.
This decrease of productivity potential could be the
result of age-related changes in cognitive abilities
in the broadest sense, which can affect individuals
from the older age groups i.e. 45-54 and 55-65. This
is in line with the research by Park et al. (2002). That
extensive research considered various types of cog-
nitive measures i.e. memory-related, processing-
related and verbal-related, across the lifespan of an
individual, measured in ten-year age groups from
the twenties to the eighties and scored with z score
ranging from -1.5 to 1.5. However, in the specific
context of this paper, the most relevant z scores
were the composite ones, i.e. scores of the average
of all sub-measures that form five measures (Work-
ing Memory, Short-Term Memory, Long-Term
Memory, Speed of Processing and Verbal Knowl-
edge), as shown in Figure 3.
177
 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector
Figure 3 Composite view of life span performance
measures
Source: Park et al., 2002
The five performance measures included in Figure 3
were associated with cognitive ageing i.e. age-related
cognitive decline. This especially goes for four of these
measures (Working Memory, Short-Term Memory,
Long-Term Memory and Speed of Processing). The
fifth (Verbal Knowledge) is an exception, since it, ac-
cording to Park et al. (2002), actually mostly increases
during the lifetime i.e. into people’s seventies.
Age-related cognitive decline of these four out of
five performance measures can also be related to the
productivity potential index mentioned above, since
they both decrease with age. In that regard, such
(quite inevitably) decreasing values for productivity
potential index and performance measures i.e. their
combination, can have multifaceted consequences in
both private and working life of an individual.
2.3 PC requirements and PC skills for population
aged 50+ as adjustment to today’s jobs
Modern working life, i.e. today’s jobs, either im-
plicitly or more explicitly require cognitive skills
related to PCs i.e. PC skills. Still, in the context of
this paper, the authors have taken into account PC
skills of Croatian population aged 50+, since they
are actually digital immigrants “who were not born
into the digital world but have, at some later point
in our [authors’ remark: their] lives, become fasci-
nated by and adopted many or most aspects of the
new technology” (Prensky, 2001). Since they were
born before the technological era, i.e. before 1980,
they “had to learn to adjust to technology” accord-
ing to Zenios & Ioannou (2018). Therefore, for the
purposes of the approximation of: 1) the obligation
to adjust to requirements of today’s jobs and 2) the
178
ability to adjust to requirements of today’s jobs, for
Croatian population aged 50+ whose productivity,
theoretically grounded, was expected to decrease,
according to the index of its potential for related
age groups, the authors have selected these two var-
iables: 1) job requirement to use a PC (personally
answered by individuals aged 50+) was considered
as the approximation of the obligation to adjust to
the today’s jobs, and 2) PC skills (personally rated
by individuals aged 50+) were considered as the ap-
proximation of the ability to adjust to today’s jobs.
Thus, four out of five performance measures listed
(Working Memory, Short-Term Memory, Long-
Term Memory and Speed of Processing) are those
performance measures that can also be associated
with the individual’s usage of PCs. In that specific
regard, the remaining performance measure (Ver-
bal Knowledge) is less important for PC usage,
since the majority of modern operating systems
and various applications associated with them have
an intuitive Graphical User Interface (GUI) and/
or comprehensible text options and menus, which
makes them user-friendly regardless of the level of
Verbal Knowledge of the user.
Moreover, PCs are needed to do numerous jobs
worldwide. In that regard, certain jobs require
low(er) level of PC skills such as the most basic usage
of simple applications, whilst some specific jobs re-
quire high(er) level of PC skills such as programming
of complex applications. As previously elaborated,
individuals aged 50+ have specific issues regarding
PCs and PC skills, since they had to adjust to them
in the course of their personal and/or working lives.
To investigate PC requirements placed on em-
ployees aged 50+ and their PC skills, the authors
have utilised the available designated data, taken
from the relevant data set SHARE Wave 6 (Börsch-
Supan, 20183; Börsch-Supan et al., 2013; Malter,
Börsch-Supan, 20174; Orso et al., 20175).
In order to get representative distribution of all
answers to the survey questions, the authors have
performed probability weighting using calibrated
cross-sectional individual weights, for each of the
selected countries, as shown in Table 1, Table 2, Ta-
ble 4 and Table 5. In those terms, the selected coun-
tries were those for which it was possible to obtain
the resulting values. The selected countries are the
same as the 13 countries presented in all the tables
containing countries: Austria, Belgium, Croatia,
Czechia, France, Greece, Israel, Italy, Poland, Por-
tugal, Slovenia, Spain and Sweden.
Besides, all the percentages in Table 1, Table 2, Table 4
and Table 5 were calculated based on assessments by
God. XXXIII, BR. 1/2020. str. 175-190
 Preliminary communication

population aged 50+, from the data by Börsch-Supan PC required Yes No

(2018) 3. Table 1 and Table 4 contain percentages of two
Country
possible answers related to whether PCs were required
in certain jobs. Similarly, Table 2 and Table 5 contain France 70.10% 29.90%
percentages of six possible ratings related to PC skills. Greece 45.52% 54.48%
The authors have grouped ratings of PC skills as Israel 70.74% 29.26%
follows: Excellent, Very Good and Good have Italy 60.31% 39.69%
been grouped as High PC skills, while ratings Fair, Poland 45.78% 54.22%
Poor and (I) Never Used (a computer) have been
Portugal 40.45% 59.55%
grouped as Low PC skills. These two groups were
used to enhance the appearance and to provide a Slovenia 67.27% 32.73%
more detailed summary of Table 2 and Table 5, as Spain 44.68% 55.32%
well as in the model that was created by the authors Sweden 98.35% 1.65%
(in chapters 4. Data and methodology and 5. Re-
Note: Weighted by calibrated cross-sectional individual
sults and discussion).
weights
Accordingly, Table 1 contains the relative distribu- Source: Created by the authors, based on Börsch-Supan,
tion of the requirement to use a PC in jobs of em- 20183
ployed population aged 50+, shown jointly for the
private sector and the public sector. Based on the data from Table 1, it can be observed
that regarding whether PC was required in jobs
Table 1 PC required in jobs of employed popula- of population aged 50+ employed in both the pri-
tion aged 50+, selected countries, weighted data vate and public sectors, Sweden had the maximum
PC required Yes No 98.35%, Portugal had the minimum 40.45%, while
Croatia with 59.33% was 39.02pp worse than Swe-
Country
den and 18.88pp better than Portugal, thus ranking
Austria 66.79% 33.21% as the 9th among 13 selected countries.
Belgium 76.61% 23.39%
Additionally, Table 2 shows relative distribution of
Croatia 59.33% 40.67%
ratings of PC skills of employed population aged 50+,
Czechia 63.40% 36.60% jointly for the private sector and the public sector.

Table 2 PC skills of employed population aged 50+, selected countries, weighted data
PC Skills Grouped PC skills
Country Excellent Very Good  Good Fair Poor Never Used TOTAL High Low
Austria 6.87% 22.74% 28.38% 23.16% 10.99% 7.86% 100.00% 57.99% 42.01%
Belgium 9.34% 18.67% 33.94% 24.92% 10.23% 2.90% 100.00% 61.95% 38.05%
Croatia 13.98% 18.99% 20.97% 18.83% 11.31% 15.92% 100.00% 53.94% 46.06%
Czechia 5.12% 18.60% 29.09% 24.09% 14.60% 8.50% 100.00% 52.81% 47.19%
France 6.88% 10.73% 30.29% 30.26% 16.61% 5.23% 100.00% 47.90% 52.10%
Greece 8.07% 19.12% 23.13% 18.27% 14.55% 16.86% 100.00% 50.32% 49.68%
Israel 14.63% 22.00% 34.14% 17.32% 5.46% 6.45% 100.00% 70.77% 29.23%
Italy 7.85% 16.43% 32.36% 19.59% 10.34% 13.43% 100.00% 56.64% 43.36%
Poland 2.67% 13.12% 26.64% 14.69% 20.71% 22.17% 100.00% 42.43% 57.57%
Portugal 0.79% 6.73% 19.20% 25.28% 22.43% 25.57% 100.00% 26.72% 73.28%
Slovenia 10.15% 12.40% 41.23% 16.23% 9.66% 10.33% 100.00% 63.78% 36.22%
Spain 5.04% 7.50% 25.03% 33.00% 19.96% 9.47% 100.00% 37.57% 62.43%
Sweden 20.32% 32.71% 31.19% 11.79% 2.34% 1.65% 100.00% 84.22% 15.78%
Notes: Weighted by calibrated cross-sectional individual weights, High = Excellent, Very Good, Good, Low = Fair,
Poor, (I) Never Used (a computer)
Source: Created by the authors, based on Börsch-Supan, 20183

God. XXXIII, BR. 1/2020. str. 175-190 179

 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

According to Table 2, when it comes to the sub-
jective assessment of own PC skills as excellent
among population aged 50+ employed in both, the
private and public sectors, Sweden had the maxi-
mum 20.32%, Portugal had the minimum 0.79%,
while Croatia with 13.98% was 6.34pp worse than
Sweden and 13.19pp better than Portugal, thus
ranking as the 3rd among 13 selected countries.
Yet, when High PC skills are taken into considera-
tion, once again, Sweden had the maximum 84.22%,
Portugal had the minimum 26.72%, while Croatia
with 53.94% was 30.28pp worse than Sweden and
27.22pp better than Portugal, thus ranking as the
7th among 13 selected countries.
However, at this specific point, the authors have de-
cided to focus the research of these matters exclu-
sively on the population aged 50+ employed in the
public sector in all selected countries, especially
Croatia. The rationale behind that decision was the
fact that Croatia has a large number of employees in
public sector as can be seen in Table 3.

Table 3 Number (absolute and relative) of employees in Croatian public sector on December 31, 2018
Groups of employees in Croatian public sector Number of employees
Government bodies 35,343
Ministry of the interior / internal affairs 24,852
Ministry of defence 16,881
Public services 169,487
Simultaneously employee in two or more of the above 2,175
Units of local and regional self-government 14,058
Total number of employees in Croatian public sector (1) 262,796
Croatian Bureau of Statistics Number of employed
Total number of employed in Croatia as per Croatian Bureau of Statistics (2) 1,405,973
=(1)/(2)=higher estimated % of employed in Croatian public sector 18.69%
Croatian pension insurance system Number of insurees
Total number of insurees in Croatia as per Croatian Pension Insurance Institute
1,506,912
(3)
=(1)/(3))=lower estimated % of employed in Croatian public sector 17.44%
Source: Created by the authors, based on data from the Ministry of Public Administration 2019a ; Ministry of Public
6

Administration 2019b7; Government of the Republic of Croatia (2019)8; Croatian Bureau of Statistics, 20199; Croatian
Pension Insurance Institute, 2019a10

According to the data from Table 3, on December
31, 2018 the Croatian public sector accounted for
at least 262,796 employees i.e. minimally approxi-
mately between 17% and 19% of the total employed
population were employed in it. However, accord-
ing to the project by the Croatian Institute of Pub-
lic Finance (2010)11, and the related research by
Bejaković et al. (2011) with further analysis, this
number of employees in the Croatian public sector
could only be larger. The main reason can be found
in those two researches i.e. in the methodology that
they have used and in the analysis that they have
performed. In brief, for the year 2008, they have cal-
culated a total of 388,222 of employees in the Croa-
tian public sector, with a steady increase over three
consecutive years, from 2006 to 2008. Since the
calculation of new(er) comparable Croatian public
sector-related data would require a new research
project, by taking everything previously mentioned
into account, the authors of this paper have decided
to put the Croatian public sector in the focus of
their research, as discussed below.
In accordance with this, Table 4 contains the rela-
tive distribution of the requirement to use PC in
jobs of employed population aged 50+, shown only
for the public sector.

180 God. XXXIII, BR. 1/2020. str. 175-190

 Preliminary communication

Table 4 PC required in jobs of population PC required Yes No

employed in public sector aged 50+, selected
countries, weighted data Country
Spain 71.09% 28.91%
PC required Yes No
Sweden 97.36% 2.64%
Country
Note: Weighted by calibrated cross-sectional individual
Austria 87.92% 12.08%
weights
Belgium 80.97% 19.03% Source: Created by the authors, based on Börsch-Supan,
20183
Croatia 66.66% 33.34%
Czechia 72.81% 27.19% Based on the data from Table 4, it can be seen
that concerning whether PC is required in jobs of
France 83.43% 16.57%
population aged 50+ employed in the public sector,
Greece 68.80% 31.20% Sweden had the maximum 97.36%, Poland had the
minimum 66.50%, while Croatia with 66.66% was
Israel 83.87% 16.13%
30.70pp worse than Sweden and only 0.16pp bet-
Italy 70.00% 30.00% ter than Poland, thus ranking as the 12th among 13
Poland 66.50% 33.50% selected countries.

Portugal 70.63% 29.37% Finally, Table 5 contains relative distribution of rat-

ings of the PC skills of employed population aged
Slovenia 72.21% 27.79% 50+, only for the public sector.

Table 5 PC skills of population employed in public sector aged 50+, selected countries, weighted data

PC Skills Grouped PC skills

Country  Excellent Very Good Good Fair Poor Never Used TOTAL High Low

Austria 11.31% 26.26% 37.08% 13.54% 8.63% 3.18% 100.00% 74.65% 25.35%

Belgium 9.07% 17.80% 40.20% 23.05% 9.12% 0.76% 100.00% 67.07% 32.93%

Croatia 13.47% 23.82% 21.46% 19.84% 9.62% 11.79% 100.00% 58.75% 41.25%

Czechia 8.98% 17.37% 23.66% 33.97% 9.62% 6.40% 100.00% 50.01% 49.99%

France 4.09% 17.06% 35.64% 31.10% 11.61% 0.50% 100.00% 56.79% 43.21%

Greece 14.53% 28.38% 32.60% 9.23% 8.68% 6.58% 100.00% 75.51% 24.49%

Israel 3.11% 21.47% 59.97% 12.02% 2.37% 1.06% 100.00% 84.55% 15.45%

Italy 9.76% 16.89% 36.95% 21.86% 7.58% 6.96% 100.00% 63.60% 36.40%

Poland 4.23% 13.02% 33.34% 14.94% 22.55% 11.92% 100.00% 50.59% 49.41%

Portugal 1.05% 20.94% 23.43% 43.66% 9.07% 1.85% 100.00% 45.42% 54.58%

Slovenia 12.41% 17.79% 46.15% 9.27% 6.32% 8.06% 100.00% 76.35% 23.65%

Spain 2.10% 13.88% 35.24% 27.69% 18.82% 2.27% 100.00% 51.22% 48.78%

Sweden 14.59% 25.25% 38.63% 18.89% 0.00% 2.64% 100.00% 78.47% 21.53%
Notes: Weighted by calibrated cross-sectional individual weights
High = Excellent, Very Good, Good
Low = Fair, Poor, (I) Never Used (a computer)
Source: Created by the authors, based on Börsch-Supan, 20183

God. XXXIII, BR. 1/2020. str. 175-190 181

 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

According to Table 5, when it comes to the subjec- ule (AHM) called Transition from work to retirement
tive assessment of own PC skills as excellent among (Eurostat, 2016)13. Since then, neither Eurostat nor
population aged 50+ employed in the public sector, the European Commission has repeated the same or
Sweden had the maximum 14.59%, Portugal had similar research regarding retirement. The data from
the minimum 1.05%, while Croatia with 13.47% was the module above, specifically the ones on early retire-
only 1.12pp worse than Sweden and 12.42pp better ment (Eurostat, 2019a)14 and old-age pensions (Euro-
than Portugal, thus ranking as the 3rd among 13 se-
stat, 2019b)15, which include exclusively individuals
lected countries. However, when High PC skills are
taken in account, Israel had the maximum 84.55% aged 50 to 69 originating from 28 European Union
and Portugal again the minimum 45.42%, while countries, are jointly presented in Table 6.
Croatia with 58.75% was 25.80pp worse than Israel
and 13.33pp better than Portugal, thus ranking as
Table 6 Individuals aged 50 to 69 who receive
the 8th among 13 selected countries.
old-age pension, Early retirement among indivi-
Altogether, based on the data from Table 1, Table 2, duals who receive old-age pension
Table 4 and Table 5 it is possible to see that Croatia
was nowhere near the best ones among 13 selected Individuals Early retirement
countries. Still, in 12 selected countries (except Swe- who receive among individuals
Country old-age who receive old-
den), as it can be observed from Table 1 and Table pension age pension
4, PC was more required in jobs of population aged
Austria 33.8% 58.5%
50+ employed in, singly, the public sector, than in,
jointly, the private sector and the public sector. In 11 Belgium 25.8% 45.7%
selected countries (except Czechia and Sweden), as it Bulgaria 39.8% 5.2%
can be seen from Table 2 and Table 5, High PC skills Croatia 28.2% 55.8%
were more prevalent in jobs of population aged 50+ Cyprus 27.2% 21.1%
employed in, singly, the public sector, than in, jointly, Czechia 42.0% 53.0%
the private sector and the public sector.
Denmark 32.4% 12.1%
With changing job requirements, employees are Estonia 37.9% 10.9%
obligated to adjust to them. Yet, with ageing, there
Finland 32.1% 26.4%
is a decrease in employees’ abilities such as pro-
ductivity potential and a decline of some cognitive France 36.0% 43.7%
measures. Therefore, it is more difficult for them to Germany 22.4% 11.8%
adjust to those changing job requirements. Due to Greece 40.2% 52.2%
difficulties related to adjustment to changes in job Hungary 32.3% 42.4%
requirements, some employees may want to leave Ireland 21.8% 68.4%
the labour force. Since the previously elaborated
Italy 36.4% 73.5%
decreasing productivity and declining abilities and
the related difficulties arise near the age of early Latvia 39.1% 35.1%
retirement, employees may want to retire early to Lithuania 32.1% 19.1%
leave the labour force and to have a permanent, yet Luxembourg 31.9% 43.6%
smaller, source of income. Malta 39.6% 33.6%
Netherlands 19.9% 55.9%
2.4 Key statistical figures on old-age pensions and
Poland 38.6% 44.2%
early retirement pensions
Portugal 27.6% 57.3%
Due to the population ageing, the ratio between
Romania 41.7% 21.5%
the number of employed and the number of retired
people in Croatia, as of March 31, 2019 (at the end Slovakia 33.3% 28.0%
of the first quarter of 2019), was as low as 1:1.23 Slovenia 41.3% 39.6%
(Croatian Pension Insurance Institute, 2019b)12. A Spain 19.9% 59.3%
clear majority of pensions, more than two-thirds Sweden 35.7% 46.0%
of them (70.32%) were old-age pensions, while United Kingdom 41.8% 23.1%
approximately one-fourth of old-age pensions European Union
(24.41%) were early retirement pensions. 32.4% 41.2%
- 28 countries
In addition, in 2012, Eurostat conducted a labour Source: Created by the authors, based on Eurostat,
force survey (LFS), including the special ad hoc mod- 2019a14, Eurostat, 2019b15

182 God. XXXIII, BR. 1/2020. str. 175-190


From data in Table 6, the following can be conclud-
ed and calculated:
1) As for individuals aged 50-69 who receive
old-age pension, Czechia had the maximum
42.0%, Spain had the minimum 19.9%, while
Croatia with 28.2% was 4.2pp better than
the average of EU-28, which was 32.4%. Yet,
these data are not completely comparable,
due to the differences among countries in
statutory retirement age regarding old-age
pension.
2) Concerning early retirement among the in-
dividuals aged 50-69 who receive old-age
pension, Italy had the maximum 73.5%,
Greece had the minimum 11.8%, while
Croatia with (rather high) 55.8% was 6.8pp
worse than the average of EU-28, which was
49.0%. Since, herein, pensioners aged 50
to 69 were taken into account, there were,
once again, some issues with the data com-
parison within individual countries. On the
one hand, all individuals who retire between
the age of 50 and the statutory retirement
age (maximum 65) are, automatically classi-
fied as taking early retirement. On the other
hand, in the age group 50 to 69 there is a
small percentage of individuals who receive
old-age pension, since most individuals who
receive it are aged over 69.
Still, the previously mentioned statistical data on
Croatian pensions from 2019 officially confirm the
ongoing existence of early retirement in Croatia.
3. Review of previous research (theoretical
framework)
In addition to previous research used to establish
the conceptual framework above, the authors have
used supplementary previous research to establish
the equally comprehensive theoretical framework.
Although the literature on retirement decisions
is extensive, there are not many papers dealing
with the impact of technological skills, particu-
larly PC skills on retirement intentions as well as
choices. Researchers who were investigating early
retirement in Croatia such as Fellmann and Möllers
(2009), Baloković (2011), Pološki Vokić and Grgurić
(2011), Bađun and Smolić (2018), Galić et al. (2019)
God. XXXIII, BR. 1/2020. str. 175-190
Preliminary communication
had not explored the relationship between comput-
er skills and retirement.
Bartel and Sicherman (1993) researched the influ-
ence of technological change on retirement. Their
first important finding was that people who work
in industries with fast technological change retire
later if provided with on-the job training. Further-
more, they found that unexpected change in the
progression of technological change, which leads
to the depreciation of human capital, consequently
contributes to early retirement.
Research of Ahituv and Zeira (2010) was in line
with previous research. They found that technical
change leads to the erosion of human capital i.e. the
erosion effect and consequently to early retirement.
The opposite effect was the so-called wage effect,
which can be explained as follows: since aggregate
technical change leads to better wages, sector-relat-
ed technical change tends to decrease early retire-
ment.
Friedberg (2003) explored the connection between
retirement and computer usage. Consequently, this
author found that older workers kept pace with
younger workers regarding computer use, except
for those jobs that were computerized recently and
quickly, so, this author’s research shows that the
impending retirement affects computer use. On the
other hand, changes in needed skills influence the
retirement decision. It was found in this study that
employees who use computers were more likely to
continue working than those who do not use com-
puters.
Schleife (2006) focuses on male employees in Ger-
many and investigates the determinants of com-
puter use and the influence of computer use on
the employment status i.e. retirement decision.
This author found that it was less likely for older
workers between 55 and 64 to use computers in
comparison to younger workers. The author did
not find evidence to uphold the hypothesis that
older workers who use computers were more likely
to work until statutory retirement age (that is, not
to take early retirement), compared to younger
workers.
Biagi et al. (2013) separated computer use into two
variables: using PC at work and PC literacy. Re-
search focused on male workers in Italy aged be-
183
 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector
tween 47 and 60. These authors investigated the re-
lationship of computer variables and employment
transitions to retirement or to unemployment.
They found that the merged effect of using comput-
ers and being computer literate decreases the prob-
ability of transit from employment.
Cavapozzi et al. (2015) complemented the previous
research and studied the effect of using PC at work
and PC literacy on job satisfaction and retirement
intentions. Workers aged between 50 and 60 from
several European countries have been observed and
analysis was made separately for male and females
and for white-collar and blue–collar employees.
These authors concluded that PC literacy and us-
ing computers at work was negatively related to job
satisfaction and intention to retire early, especially
for white-collar employees.
4. Data and methodology
For this research, the authors have mainly used mi-
cro data from the previously mentioned source i.e.
The Survey of Health, Ageing and Retirement in
Europe (SHARE). SHARE was developed by con-
sidering the context of population ageing. It is a
multidisciplinary, nationally representative survey
designed to provide cross-sectional and longitudi-
nal data on primarily the health, employment and
social conditions of population aged 50 years and
over, from numerous European countries and Israel
(Börsch-Supan, 20183; Orso et al., 20175).
On the whole, SHARE was largely based on the
US Health and Retirement Study (HRS) and the
English Longitudinal Study of Ageing (ELSA).
Therefore, the main principles behind including
particular questions in the SHARE survey were
their multidisciplinary as well as cross-national and
longitudinal nature (Börsch-Supan, 20183; Malter,
Börsch-Supan, 20174).
The authors have used data from SHARE Wave 6,
because that was when Croatia joined the SHARE
survey, therefore no previous data on the country
was available for analysis. All the data in the survey
were collected by using Computer-Assisted Person-
al Interviewing (CAPI). To collect data, interview-
ers conducted personal interviews using a laptop
computer with CAPI software installed. The survey
184
was conducted in 2015, yet the results are still being
released gradually.
For Croatia, a single-stage SHARE survey design
with cluster sampling across six strata was used. A
subpopulation consisting of population employed
in public sector aged 50+ in Croatia was used. Clus-
ters were sampled without replacement.
The authors have created a logistic regression mod-
el, in the context of complex samples. Calibrated
cross-sectional individual weights were used as the
sampling weights, while singleton strata were treat-
ed as missing values. Taylor linearization was used
for estimating standard errors.
Wanting early retirement, with values Yes and No,
was the dependent variable in this model. The au-
thors have used these variables: requirement to use
a computer (Yes and No) and PC skills (their rat-
ings grouped as High PC skills and Low PC skills,
as explained) as independent variables, used as ap-
proximations for the obligation to adjust to the re-
quirements of today’s jobs and the ability to adjust
to those requirements.
Additional control variables were as follows: gen-
der, collar (white collar, blue collar; acquired from
the International Standard Classification of Occu-
pations i.e. ISCO code), age (age in the year of the
interview), age squared, years of education, hav-
ing children (yes, no; calculated from the variable
‘number of children’), numeracy (test of math-
ematical and numerical skills - 5 levels, grouped in
three levels: poor, medium and good), fluency (test
of verbal fluency), self-assessed health (comprised
in two categories: ‘bad’ - includes fair and poor,
and the other category ‘good’ includes good, very
good and excellent) and sector (primary, second-
ary, tertiary; taken from Statistical Classification of
Economic Activities, NACE rev. 1.1). This choice
of control variables was influenced by Cavapozzi
et al. (2015), but the authors have adjusted it to the
specific context of this research.
Characteristics of all the variables weighted by cali-
brated cross-sectional individual weights for the
population aged 50+ employed in the public sector
in Croatia are shown in Table 7.
God. XXXIII, BR. 1/2020. str. 175-190
 Preliminary communication

Table 7 Characteristics of the variables for the Table 8 Results of the logistic regression model
population aged 50+ employed in the public for wanting to retire early of the Croatian popu-
sector in Croatia, weighted data lation aged 50+ employed in the public sector
Variable Values % Coef.
Variables Values
(Std. error)
No 70.88%
Wanting early retirement Current job requires 1.839**
Yes 29.12% Yes
using a computer -0.741
Current job requires No 33.34% 1.202**
using a computer PC skills Low
Yes 66.66% -0.573
High 58.74% -0.287
Gender Male
PC Skills -0.477
Low 41.26%
2.067***
Female 47.78% Collar Blue
Gender -0.778
Male 52.22% -3.373
Age Years
White collar 74.46% -2.131
Collar
Blue collar 25.54% 0.0294
Age squared Years squared
-0.0186
No 14.21%
Having children 0.0694
Yes 85.79% Education Years
-0.0862
Poor 6.12% 1.832
Having children Yes
Numeracy Medium 40.65% -1.308

Good 53.23% 0.232

Medium
-1.446
Good 74.52% Numeracy
Health -0.467
Bad 25.48% Good
-1.444
Primary 8.20% 0.00156
Fluency Fluency score
Sector Secondary 16.33% -0.0388
1.105**
Tertiary 75.47% Health Bad
-0.462
Variable Mean (Std. error)
-0.951
Age (years) 56.51 (0.289) Secondary
-0.859
Sector
Education (years) 12.84 (0.232) -1.622**
Tertiary
Fluency score 21.78 (0.556) -0.818
Constant   91.97
Notes:
Taylor linearized standard error is in parenthesis.     -60.96
Weighted by calibrated cross-sectional individual weights. F   1.995
Source: Created by the authors, based on Börsch-Supan, p   [0.0174]
20183; Orso et al., 20175
Notes: Taylor linearized standard errors are in parenthesis.
The p-values of the F-test is in brackets.
*p<0.1; **p<0.05; ***p<0.01
5. Results and discussion Dependent variable: Wanting early retirement
A logistic regression model, in the context of complex PC skills: reference category - high
Collar: reference category - white collar
samples, for the researched variable ‘wanting early re-
Health: reference category - good
tirement’ was created by the authors of this paper for Numeracy: reference category - poor
the population aged 50+ employed in the public sec- Sector: reference category - primary sector
tor in Croatia, and results are shown in Table 8.
Source: Created by the authors, based on Börsch-Supan,
20183; Orso et al., 20175

God. XXXIII, BR. 1/2020. str. 175-190 185

 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector
The requirement to use a computer has an influ-
ence on wanting early retirement; those who have
to use a computer are more likely to want to retire
early than those who do not have to use a computer.
This shows that an obligation to adjust to today’s
jobs positively influences the desire to retire early.
PC skills, or rather lack of them, have a significant
impact on the desire for early retirement. Those
with Low PC skills are more likely to want to leave
labour force than those with High PC skills. It can
be seen that a lower ability to adjust to require-
ments of modern jobs encourages employees to
seek earlier retirement.
Certain control variables (collar, sector and health)
were also found to be significant, but they were out-
side of the scope of this research. It was expected
that blue collars would want to retire before white
collars, therefore it was also expected that blue col-
lars were more inclined to early retirement than
white collars. This is primarily because of the na-
ture of their jobs, which are more physically de-
manding. Thus, the results that show that blue col-
lars are more likely to want to stop working are in
line with the expectations. The same holds for sec-
tors grouping, where it can be seen that those who
were employed in the tertiary sector were less likely
to have early retirement intentions than those who
were employed in the primary sector. That could
also be attributed to the nature of their jobs, where
jobs in the tertiary sector are in general less physi-
cally demanding.
Bad health is known to be a factor with great influ-
ence on early retirement (for instance, Karpansalo
et al., 2004; de Wind et al., 2013), so the results in
the model showing that employees with bad health
were more likely to seek early retirement were as
expected.
The remaining control variables: gender, age, age
squared, education, having children, numeracy, and
fluency, were not significant in the model.
6. Conclusion
Technological advancements have altered the re-
quirements for today’s jobs. To keep pace with the
new, modern working life, workers have to adjust
to the changes. Thus, the authors have investigated
how the changes and ability to adjust affect retire-
ment intentions. Since older workers are digital im-
migrants who started using computers during their
186
working life and had to, at some point, change the
way of work, i.e. they had to adjust to the altered
conditions of today’s jobs, the authors have used the
requirement to use a PC in job as an approximation
for the obligation to adjust to the requirements of
today’s jobs and PC skills as the ability to the adjust
to those requirements. Moreover, the authors have
focused on employees in the public sector in Croa-
tia aged 50+. In order to investigate the influence of
the discussed variables on early retirement inten-
tions, the authors have created the logistic regres-
sion model within the context of complex samples.
It was found that both of those variables of interest
were related to the retirement intentions. The re-
quirement to use a computer was positively related
to the intention of early retirement i.e. those who
had to use a PC at work were more likely to seek
early retirement, which shows that changed condi-
tions motivate employees to leave labour force and
retire earlier. The level of PC skills was also con-
nected to retirement intentions. For workers with
Low PC skills the probability of the intention to re-
tire early was greater than for those with High PC
skills, which shows that the (in)ability to adjust to
the today’s jobs is important for wanting to leave
labour force.
Obviously, technological changes are inevitable and
necessary; thus, stopping computerisation would
lead to deterioration and decrease of competitive-
ness. The way to act in order to reduce early retire-
ment is to actively work on ICT upskilling, i.e. on
organizing adequate training regarding PC skills.
This is also a message to the policy makers, since
workers, especially older workers need to be pro-
vided with training in order to adjust to the new job
requirements and to be able to use new technology
and meet those job requirements. Trained work-
ers, who can adjust to the requirements, would be
less inclined toward early retirement, which would
eventually: lower the proportion of the early re-
tired among those who receive pensions, shorten
the duration of being retired as well as of receiving
the pension, and increase payments into the pen-
sion system that would reduce the pressure on pen-
sion funds and the country’s budget. Policy makers
should promote active policies toward the labour
market aimed at providing adequate training to
older workers whose cognitive abilities are gener-
ally decreasing with age.
God. XXXIII, BR. 1/2020. str. 175-190

This study has researched the influence of the ob-
ligation and the ability to adjust to today’s jobs on
retirement intentions of older workers in the pub-
lic sector. When the time comes to make a retire-
ment decision, it does not have to be the same as
the earlier retirement intention. For this reason, for
further research the authors suggest to explore the
influence of the factors listed above on retirement
decisions.
This research has its limitations. Retirement in-
tentions and decisions are not always a deliberate
choice of employees; rather, they can also be influ-
enced by external circumstances. In that regard,
changes or even an announcement of changes in
conditions for retirement and early retirement, pe-
nalisation for early retirement and additional ben-
efits for remaining employed longer than necessary
(where it is allowed) are examples of such external
circumstances that have not been included in this
research.
Project Acknowledgements
This paper has been financially supported by the
University of Rijeka, for the project ZP UNIRI 8/17.
God. XXXIII, BR. 1/2020. str. 175-190
Preliminary communication
SHARE Acknowledgements
This paper uses data from SHARE Wave 6 (10.6103/
SHARE.w6.611), see Börsch-Supan et al. (2013) for
methodological details.
The SHARE data collection has been fund-
ed by the European Commission through
FP5 (QLK6-CT-2001-00360), FP6 (SHARE-
I3: RII-CT-2006-062193, COMPARE: CIT5-
CT-2005-028857, SHARELIFE: CIT4-
CT-2006-028812), FP7 (SHARE-PREP: GA
N°211909, SHARE-LEAP: GA N°227822, SHARE
M4: GA N°261982) and Horizon 2020 (SHARE-
DEV3: GA N°676536, SERISS: GA N°654221) and
by DG Employment, Social Affairs & Inclusion. Ad-
ditional funding from the German Ministry of Edu-
cation and Research, the Max Planck Society for the
Advancement of Science, the U.S. National Institute
on Aging (U01_AG09740-13S2, P01_AG005842,
P01_AG08291, P30_AG12815, R21_AG025169,
Y1-AG-4553-01, IAG_BSR06-11, OGHA_04-064,
HHSN271201300071C) and from various nation-
al funding sources is gratefully acknowledged (see
www.share-project.org).
This paper uses data from the generated Job Episodes
Panel (DOI: 10.6103/SHARE.jep.600), see Brugiavi-
ni et al. (2013) and Antonova et al. (2014) for method-
ological details. The Job Episodes Panel release 6.0.0
is based on SHARE Waves 1, 2 and 3 (SHARELIFE)
(DOIs: 10.6103/SHARE.w1.600, 10.6103/SHARE.
w2.600, 10.6103/SHARE.w3.600).
187
 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

R

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E

1 United Nations (2019), “World Population Prospects 2019”, available at: https://population.un.org/wpp/Download/Standard/Popu-
lation/ (Accessed on: June 23, 2019)
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pis/2018/sljh2018.pdf (Accessed on: December 12, 2018)
3 Börsch-Supan, A. (2018). Survey of Health, Ageing and Retirement in Europe (SHARE) Wave 6.
Release version: 6.1.1. SHARE-ERIC. Data set.
4 Malter, F., A. Börsch-Supan (Eds.) (2017). SHARE Wave 6: Panel innovations and collecting Dried Blood Spots. Munich: Munich
Center for the Economics of Aging (MEA).
5 Orso, C.E., A. Brugiavini, D. Cavapozzi, G. Pasini (2017): SHARE Job Episodes Panel. Release version: 6.0.0 SHARE-ERIC. Dataset.
6 Ministry of Public Administration (of the Republic of Croatia) (2019a), “Statistički prikaz Ministarstva uprave 13”, available at:
https://uprava.gov.hr/UserDocsImages/Statistički prikaz/Statistički prikaz Ministarstva uprave - broj 13.pdf (Accessed on: February
28, 2019)
7 Ministry of Public Administration (of the Republic of Croatia) (2019b), “Statistički prikaz Ministarstva uprave 14”,
available at: https://uprava.gov.hr/UserDocsImages/Statistički prikaz/Statistički prikaz broj 14. _ finalni.pdf (Accessed on: May 24,
2019)
8 Government of the Republic of Croatia (2019), “Godišnje izvješće o obrani za 2018. godinu”, available at: https://vlada.gov.hr/User-
DocsImages/2016/Sjednice/2019/Svibanj/158 sjednica VRH/158 - 3.pdf (Accessed on: May 28, 2019)
9 Croatian Bureau of Statistics (2019), “Persons in paid employment, by activities, January 2019”, available at: https://www.dzs.hr/
Hrv_Eng/publication/2019/09-02-01_01_2019.htm (Accessed on: February 24, 2019)
10 Croatian Pension Insurance Institute (2019a), “Key information on the current state of the Croatian pension insurance system -
December 2018 (payment in January 2019)”, available at: http://www.mirovinsko.hr/UserDocsImages/en/pension_insurance/2019/
osnovnipodaci201901EN.pdf (Accessed on: April 07, 2019)
11 Institute of Public Finance (2010), “Istraživački projekt: Analiza sustava zaposlenih u hrvatskom javnom sektoru”, available at:
http://www.nsz.hr/datoteke/09-10/Analiza sustava zaposlenih.pdf (Accessed on: December 12, 2018)
12 Croatian Pension Insurance Institute (2019b), “Key information on the current state of the Croatian pension insurance system - Mar-
ch 2019 (payment in April 2019)”, available at: http://www.mirovinsko.hr/UserDocsImages/en/pension_insurance/2019/osnovnipo-
daci201904EN.pdf (Accessed on: May 06, 2019)
13 Eurostat (2016), “Transition from work to retirement: Evaluation of the 2012 module”, available at: https://ec.europa.eu/eurostat/
documents/1978984/6037334/Evaluation-Report-AHM-2012.pdf (Accessed on: March 08, 2019)
14 Eurostat (2019a), “Early retirement among persons who receive an old-age pension (%)”, available at: http://appsso.eurostat.
ec.europa.eu/nui/show.do?dataset=lfso_12earlyret (Accessed on: February 17, 2019)
15 Eurostat (2019b), “Persons who receive a pension, by type of pension (%)”, available at: http://appsso.eurostat.ec.europa.eu/nui/
show.do?dataset=lfso_12penstyp (Accessed on: February 17, 2019)

God. XXXIII, BR. 1/2020. str. 175-190 189

 Ana Štambuk, Ivan Uroda, Nikolina Anđelić: Adjustment and early retirement intentions of the older workers in the Croatian public sector

Ana Štambuk
Ivan Uroda
Nikolina Anđelić

P    

     
S
Hrvatsko stanovništvo te, posljedično, hrvatska radna snaga ubrzano stari. Sa staranjem dolazi do promjene
u sposobnostima npr. smanjenja produktivnosti i opadanja kognitivnih sposobnosti. U modernom svijetu,
nove primjene tehnologija preobražavaju zahtjeve poslova, stoga se radnici moraju prilagoditi na te novine.
Problem je što su stariji radnici digitalni imigranti i počeli su koristi osobna računala kasnije tijekom života,
često tijekom zaposlenja, stoga su oni morali promijeniti svoj pristup poslu tj. morali su se prilagoditi razli-
čitim zahtjevima današnjih poslova. Tražene prilagodbe zajedno uz, istovremeno, smanjene sposobnosti,
mogle bi dovesti do prijevremenog umirovljenja. Autori su istražili utjecaj 1) obvezu prilagodbe zahtjevima
današnjih poslova (aproksimiranu zahtjevom za korištenje osobnih računala) i 2) sposobnosti prilagodbe na
današnje poslove (aproksimirane procjenama vještina vezanim uz osobna računala), na namjere povezane
s prijevremenim umirovljenjem zaposlenih starijih 50 i više godina u hrvatskom javnog sektoru. Logistički
regresijski model u kontekstu složenih uzoraka je kreiran od strane autora ovog rada, pri čemu je za obje
analizirane varijable pronađeno da su vezane s namjerama povezanim s prijevremenim umirovljenjem.
Zaključno, oni od kojih se zahtijevalo da koriste osobna računala te su zbog toga bili u obvezi prilagoditi se
promjenama, imali su veću vjerojatnost želje za prijevremenim umirovljenjem, u odnosu na one koji nisu
imali tu istu obvezu. Oni s nižom procjenom vještina vezanih uz osobna računala, odnosno za one čija je
sposobnost prilagodbe bila niska, su također imali veću vjerojatnost da će se prijevremeno umiroviti u od-
nosu na one koji su se prilagodili bolje.
Ključne riječi: starenje stanovništva, stariji radnici, prijevremeno umirovljenje, zahtjevi i vještine vezane
uz osobna računala, javni sektor, namjere i odluke povezane s prijevremenim umirovljenjem

190 God. XXXIII, BR. 1/2020. str. 175-190

 CC BY-NC-SA

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
Ova licenca
market dopušta d

Roman Domański
Poznan University of Technology
Faculty of Engineering Management
2 Jacek Rychlewski Street,
60-965 Poznań, Poland
roman.domanski@put.poznan.pl
Phone: +48616653385
nekomercijalne svrhe
Michalina Łabenda Preliminary communication
licenciraju svoja djela
WSAudiology
Sivantos Sp. z o.o. Received: March 11, 2020
6 Bałtycka Street, Accepted for publishing: April 23, 2020
61-013 Poznań, Poland Pogledajte sažetak lic
michalina.labenda@sivantos.com
Phone: +48616536886 This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Imenovanje-Nekome
CC BY-NC-ND

OMNICHANNEL Ovo je najrestriktivnija

OF PRIVATE LABEL
GROCERY PRODUCTS 5 od 6

IN TESCO AND CARREFOUR RETAIL

CHAINS ON THE POLISH MARKET
A
Background: Customers who are operating today in many sales channels pose new challenges to suppliers’
distribution systems. The aim of the article is to identify the state of implementation of omnichanneling of
grocery private labels in Tesco and Carrefour retail chains on the Polish market along with critical remarks
regarding the development of rational logistic product and price policy.
Methods: The subject of the study is one of the methods of modern distribution – private label. The object
of the study covers two comparable retail chains – Tesco and Carrefour. The study focuses only on private
label grocery products (7 categories, in each of them 3 product representatives) and is limited solely to the
Polish market – 21 different product features are studied. The analysis tool is an on-site survey of Tesco and
Carrefour chain stores – brick-and-mortar and online (virtual) – 84 analyses.
Results: From the perspective of the omnichannel strategy, product range availability and the level of price
differentiation should be the same in every distribution channel – in fact, they are varied: Tesco 0.90 vs
Carrefour 0.71 and Tesco 0.47 vs Carrefour 0.60. The results point to the need to revise the theoretical and
practical assumptions of the omnichannel concept.
Conclusions: The subject of customer service is still a topical issue in the area of logistics. Irrespective of
customers’ choice of the form (channel) of contact with the product distributor – the omnichannel vari-
ant, they should always be served at the same service level. The open question is: always, for each product?
Keywords: Omnichannel, private label, grocery products, Polish market, customer service level, om-
nichannel indicators

1. Introduction nel sales – omnichannel. Omnichannel involves

Logistics, like any other field, is susceptible to trends
and fashion. Currently, in the area of distribution lo-
gistics and supply chain management, an extensive
debate is being held on the new form of multi-chan-
full integration of communication channels and
sales channels, while in a multi-channel or cross-
channel such integration does not occur or is only
fragmentary. As usual with novelties, at the initial
stage of development, many views and opinions are

God. XXXIII, BR. 1/2020. str. 191-202 191

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
market
not yet stable and well established. On the wave of
prevailing overoptimism, barriers and restrictions
related to the use of the omnichannel strategy are
held in the background. It should be remembered,
however, that there are no ideal, universal concepts.
Therefore, one should consider for which product
category omnichannel could be rationally used.
Private label brands are nowadays perceived as one
of the forms of distribution (in the broad sense of
the term). Currently, private labels brands have
become a strong tool in competing for customers.
Nowadays, a dynamic increase in the share of goods
sold under the retailer’s own brand can be observed
on the European and global markets. The increase
in sales of these products in relation to other brands
allows us to draw a conclusion about clients’ per-
ception and acceptance of alternative offers among
other market proposals.
In addition to the first purchasing criterion – prod-
uct availability, the second criterion for customers,
equally or maybe even more important, is the price.
These two criteria will constitute the basis for the
omnichanneling assessment.
The aim of the article is to identify the advancement
of the implementation of the omnichannel concept
in trade and distribution of private label grocery
products in Tesco and Carrefour retail chains on
the Polish market based on the assessment of indi-
cators, which is the authors’ original idea.
The article consists of the following parts: a review
of the literature related to private label omnichan-
neling, presentation of private labels of Tesco and
Carrefour retailers available on the Polish market,
description of the authors’ original research meth-
odology, presentation of research results (individual
and group) in terms of: product type and shop type
(brick-and-mortar vs online) and product type and
chain type (Tesco vs Carrefour), discussion of results
(omnichannel indicators) and final conclusions.
2. Review of research and facts about
omnichanneling and private label brands –
theoretical framework
2.1 Omnichanneling of private label brands – based
on Scopus database
Literature research conducted in the Scopus data-
base of scientific articles (searched by title, abstract,
keywords) shows that the highest number of publi-
cations are devoted to various aspects of the Polish
192
market (3,551 articles), followed by private label is-
sues (2,613 articles), and the lowest number devot-
ed to the omnichannel concept (112 articles). This
structure should not come as a surprise, because on
the one hand, it reflects how capacious a given is-
sue is (from general to more specific concepts), and
on the other hand, it reflects history – how long a
concept has existed in the world (from the oldest to
the newest).
However, what is the most interesting is the inter-
relationship of these concepts. The conjunction of
the Polish market and private labels can be found
in only three publications. The first one shows how
chains of modern international retailers can achieve
a competitive advantage by introducing private la-
bels in the organic category and can, in turn, stimu-
late the consumption of food produced according
to sustainability principles (Górska-Warsewicz et
al., 2019). The second one notes that on the con-
sumer wipes market private label wipes are the
frontrunners (Caridad, 2005). The third one em-
phasizes expansion beyond production roots into
brand (private label) development and stresses out-
sourcing as a key to successful expansion (Abend,
2000). As for other conjunctions, the Polish market
and omnichannel as well as private label and om-
nichannel do not appear in any publication in the
Scopus database.
It was, therefore, decided to focus the attention on
the research entity – Tesco and Carrefour chains.
In the Scopus database, there were 866 articles
dedicated to Tesco and 727 articles dedicated to
Carrefour (individual treatment) and 33 articles
in which both chains appear in one publication
(joint treatment). Out of the 33 articles, only two
publications concern the Polish market. The first
one of these shows how the approach grounded on
non-extensive statistical physics can be applied to
describe and distinguish different stages of market
development through asymmetric behaviour of fat
tailed distributions of positive and negative returns
(Bil et al., 2017). The second one concerns active
adaptation in the case of some chains as a factor
that has allowed them to attain leadership positions
on the Polish market (Gwosdz and Sobala-Gwosdz,
2008). Among the 33 articles, only one publication
concerns private labels – description of PLMA’s
2004 “World of Private Label” trade show held in
Amsterdam (NRI, 2004)1. Among the 33 articles,
only one publication concerns omnichannel – B2C
e-commerce has become a mainstream sale chan-
God. XXXIII, BR. 1/2020. str. 191-202

nel, often merged with traditional stores in an om-
nichannel perspective; in this context, “Click and
Collect” (C&C) is gaining importance, especially in
the area of groceries, where big retailers have intro-
duced it (Giuffrida et al., 2017).
Given the above, it was finally decided to analyse
the situation of private labels and omnichannel in
the Scopus database publications (the concepts
were treated individually) separately for Tesco and
separately for Carrefour. In the case of Tesco, six ar-
ticles were identified as those that regarded private
labels (the list features NRI, 2004) and one concern-
ing omnichannel (Giuffrida et al., 2017 is repeated).
Of the five new publications, the first one shows
factors that influence store brand avoidance to-
wards store brands owned by supermarkets and hy-
permarkets (Saad, Ahmad Fauzi, 2017). The second
one traces the evolution of private labels, from their
origin to the present, placing emphasis on the strat-
egies that retail distributors use to obtain and main-
tain competitive positions (Martínez-Ruiz et al.,
2016). The third one emphasizes that food retailers
may need to further consider aspects of culture and
consumer behaviour to determine whether to adapt
their strategies, rather than copy and paste formats
from abroad (Shannon, 2014). The fourth one notes
that private labels often focus on one narrow aspect
of a product’s life cycle (such as transport), which
may present an incorrect view of that product’s
overall implications for climate change (Appleton,
2009). The fifth one concerns sustainable packag-
ing movement – centre on packaging reduction and
the specification of more sustainable packaging ma-
terials (Boettcher, 2007). In the case of Carrefour,
eight articles concerning private labels were iden-
tified (the list features NRI, 2004) and one article
concerning omnichannel (Giuffrida et al., 2017 is
repeated). Of the seven new publications, the first
one shows the introduction of the concept of cus-
tomer’s value to the retailer (CVR – has two com-
ponents: loyalty intentions to the retailer and inten-
tions to try new products or brands that the retailer
offers) from a marketing perspective (Rubio et al.,
2019). The second one investigates factors affecting
consumers’ willingness to buy private label brands
(Mostafa, Elseidi, 2018). The third one notes that
Carrefour increased its market share through incor-
porating a high percentage of private label products
(Di Nucci, 2015). The fourth one points out that at
times private labels may lead to mixed effects and
could reduce consumer welfare in the long run (Ez-
God. XXXIII, BR. 1/2020. str. 191-202
Preliminary communication
rachi, Ahuja, 2015). The fifth one underlines that in
relation to the fear expressed by consumers, some
mass retail companies offer private label products
declared free of Genetically Modified Organisms
(the anti-GMO attitude) (Russo, 2015). The sixth
one presents a marketing research technique as
netnography applied to determine the positioning
of food distribution companies (Clemente-Ricolfe,
Escribá-Pérez, 2014). The seventh one emphasizes
an increase in volume of shelf-ready packaging
(SRP) of private label products as an important as-
pect in retailing and the best solution to fill in the
different demands of merchandise, the supply chain
and the operations (IPBI, 2007).
Summarizing the theoretical part, it can be stated
that as far as the research subject of this article is
concerned, the available literature is not extensive.
Considering individual article titles, it can be stated
that the research problem undertaken in this article
is original and unique.
2.2 Characteristics of private label grocery products
in Tesco and Carrefour retailers present on the
Polish market
The Tesco brand was launched in 1924. It is one of
the oldest brands on the market. Tesco is a retailer
originating in Great Britain. Already at the end of
the 1990s, Tesco was the leader in the food market,
as demonstrated by a survey carried out by “Finan-
cial Times” in which the retailer was viewed as the
best among the British people. In Poland, Tesco has
been operating since 1995 (Pringle, Gordon, 2006).
Tesco ranks second in terms of market share. In
2015, Tesco had 433 stores in the super- and hyper-
market sector. Constant efforts to follow and meet
customers’ expectations resulted in the opening
of the Tesco Ezakupy online shop in 2012, which
two years later led the retailer to obtain the title of
leader in the online grocery market2.
At present, Tesco can boast a well-developed range
of private label products. In Poland, one-third of
the goods offered by this retailer are labelled with
the Tesco brand. Table 1 presents Tesco private
label food brands that are currently available on
the Polish market along with their brief character-
istics.
193
Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
market

Table 1 Tesco private label food brands

Tesco brand Brand description

A brand that offers basic food products. It was created for customers who appreciate the
simplicity of goods and focus primarily on functionality. Packaging usually has a white
Value
background and contains necessary information about the product. Products are covered by
the customer satisfaction guarantee.

A brand that offers premium food products. Created for customers who not only value the
Finest price of the product, but also pay great attention to quality. This brand has a wide range of
products, diversified in terms of taste and origin.

A brand that offers organic food products, vegetables and fruit. The packaging features
Organic appropriate certificates (product number) and the GDA (Guideline Daily Amounts). The
goods also feature the “Organic Farming Product” label.

A brand that offers approximately 150 gluten-free, wheat-free and dairy-free products. It
Free FORM was created mainly for allergy sufferers, who need to be careful about their diet. The brand’s
products also contain a reduced amount of sugar.

A brand that offers 500 products, with much lower levels of fat, sugar and soda than standard
Healthy living products. These are mainly ready meals, yoghurts and healthy snacks. The line is addressed to
buyers who value a healthier product variant.

A brand that offers low-carb products. The youngest among Tesco private label brands.
Carb Control
Aimed at buyers who are interested in low-carb foods.

A brand that offers products that have been awarded the Fairtrade certificate (among other
Fairtrade
things, it means that all employees working on the production of a given product have
International
received adequate pay and have been ensured decent working conditions).

Source: Own work (Lincoln, Thomassen, 2012; Tesco Polska, 20193).

Carrefour is a retailer originating in France. The
first Carrefour store was opened in 1960 in Annecy.
In 1976, the first products with the retailer’s own
brand appeared. The first Carrefour store in Poland
was opened in 1997. Currently, the retail chain has
over 900 stores in Poland. The year 2003 saw the
introduction of the retailer’s private label brand in
Polish outlets. The beginning of 2016 was the time
of the development of an online shop, which began
to offer food products4.
In 2017, Carrefour expanded its product range to
include seven new product categories – these were
not just food items. Currently, there are about 3,500
private label products5. The French chain’s offer for
the Polish market includes thirteen Carrefour pri-
vate label food brands6 – their categories with a
brief description are presented in Table 2.

194 God. XXXIII, BR. 1/2020. str. 191-202

 Preliminary communication

Table 2 Carrefour private label food brands

Carrefour brand Brand description
A brand that offers basic food products. It was created for customers who care about
the price of the product being adequate to quality. As the chain assures, the brand
Carrefour has goods that are about 1/5 cheaper than leading goods on the market. It includes
over 3,000 different goods, including non-food products. The brand also tries to meet
customers’ expectations by reducing sugar or colourings.

Nasza Wędzarnia A brand that offers cold cuts and smoked meats. The production uses the method of
Carrefour (Carrefour hot smoking with hardwood. Carrefour distinguishes five production steps from the
Smokery) receipt of raw material to the emergence of a finished product.

A brand that offers products made from the highest quality ingredients. They are
produced by trusted, not only Polish, but also foreign producers who are long-term
Jakość z natury
suppliers. In the case of vegetables and fruit, focus is placed on sustainable cultivation
Carrefour (Quality from
in accordance with the natural cycle. In the case of animal husbandry, their proper
nature Carrefour)
development is ensured. Removal of chemicals and artificial mixtures of fertilizers and
fodder is important.

A brand that offers a wide range of pasta. Standard products in blue packaging contain
Millo di Pasta pasta for various types of meals. The brand also offers whole grains and 100% spelt
products.

Mleczny przystanek A brand that offers dairy products with a wide range of choice. There are products
(Milk stop) made from cow’s milk without GMOs.

Nasze rarytasy (Our A brand that offers cold cuts. Products are packaged in such a way that portions are
delicacies) tailored to customers’ needs. Products are adapted to the storage method.

A brand that offers French cuisine products. It is characterized by luxury and elegance.
Reflets de France Products are made on the basis of original recipes or according to regional recipes. The
brand offers over 200 products from France.

A brand that offers Italian cuisine products created in cooperation with local
Terre d’Italia producers. Aromatic spices and seasonings originating in Italy allow customers to get
to know new flavours. The brand offers about 50 products.

A brand that offers sweet snacks such as wafers, cakes, cookies and biscuits. It meets
Cookie Place the IFS or BRC requirements. Products undergo stringent quality controls imposed by
compliance with the HACCP system.

A brand that offers chocolate products. The gradual introduction of ingredients

of increased quality, in the case of palm oil, requires the possession of the RSPO
Chocolate Place
certificate. Products feature labels with nutritional value so that customers can make
conscious purchases.

A brand that offers salty snacks. A wide range of products commissioned by and made
Snack Bar for Carrefour. They are basically crisps, nuts, popcorn or salty sticks. They are mainly
bought by people who organize social events.

A brand that offers products such as breakfast cereals and muesli. A wide range of
Crumbies products was created for buyers who want to diversify their breakfast for both children
and adults. The offer includes various flavours.

A brand that offers fish and fish products. For both health-conscious buyers and
those who care for the environment and choose products with the MSC sustainable
Northlantica
fishing certificate. It includes canned, smoked, marinated and frozen fish intended for
demanding buyers.
Source: Own work (Carrefour Polska, 20197).

God. XXXIII, BR. 1/2020. str. 191-202 195

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
market

Retail chains (including Tesco and Carrefour) focus
primarily on everyday products, which are most
often mass-produced. However, more and more
often, private label brands are taking over more de-
manding markets, e.g. luxury or organic products.
This is the future direction of the evolution of pri-
vate labels in retail chains.
3. Research methodology
Step 1. Selection of the research entity.
Two comparable retail chains (hypermarket level)
were examined. Based on industry rankings, Tesco
and Carrefour hypermarkets have been leaders in
this category for several years. The study involved
the analysis of two entities’ individual results and
the possibility to perform a comparative analysis.
Step 2. Selection of the research subject.
Private label products of the retail chains were ex-
amined. Based on industry rankings, food prod-
ucts are the dominant product category. Within
this category, also based on industry rankings,
seven most common subcategories were selected
for analysis that can be found in each chain: dairy
products, frozen products, meat, breakfast prod-
ucts, beverages, sweet products and salty snacks.
In each subcategory, three most popular products
were analysed.
Step 3. Selection of evaluation criteria.
As part of the analysis, 21 product features were ex-
amined. A detailed list of all criteria in the form of a
list of questions is included in Table 3.

Table 3 Criteria for awarding points

Category Description of features (what was to be checked)
Composition Does the product have information about its composition?
Volume / weight Does the product have information about its content in the volume / weight unit?
Way of storage Does the product have information about how to store it?
Use-by date Does the product have information about its use-by date?
Producer information Does the product have information about the producer or place of production?
Recyclable packaging Can the product packaging be recycled?
High-quality ingredients Does the product have information about high quality ingredients?

Certificates held Does the product have quality certificates?

BIO / Gluten-free / Without Does the product belong to at least one of the following categories: BIO, gluten-free,
preservatives / GMO-free without preservatives, GMO-free?
Packaging material Does the packaging have information about the material it was made of?
Ergonomic use Is the product packaging convenient for the user?
Bulk packaging Is the product stored in the collective packaging?
Protection against damage Is the product additionally protected against damage?
Safe transport Does the packaging enable safe transport?
Product name visibility Is the product name visible to the buyer?
Brand logo visibility Is the brand logo visible on the packaging?
Retail chain logo visibility Is the retail chain logo visible on the packaging?
Font legibility Is the font on the packaging legible to the buyer?
Colours used Is the colour used on the packaging eye-friendly?
What is the price of the product? The first is the unit price, i.e. the one the customer
Unit price
sees in the store. The second is the price calculated in relation to the unit of weight
/ volume in which the product is sold (kilogram or litre). When the item was
Price per kg/l distributed in the same unit, the calculation was not added.
Source: Own work.

196 God. XXXIII, BR. 1/2020. str. 191-202

 Preliminary communication

The first five features relate to product informa-
tion, the next four features relate to additional in-
formation, the following five features relate to the
packaging function, the next five features relate to
the product appearance, and the final two features
relate to the price level.
Step 4. Establishing a rating scale (points).
For all categories except the price, the product can
be rated 1 (it has a given feature) or 0 (it does not
have it). The price category reflects the price level
– cheaper products receive more points (3 or 4),
whereas more expensive products receive fewer
points (1 or 2).
Step 5. Conducting research
The research was conducted in Poznań County in
July 2019. The principal offer adopted was the range
of products in brick-and-mortar stores, with the
online stores checked if they offer them as well. Two
actual Carrefour and Tesco hypermarkets located
close to each other (conditions of product and price
competitiveness) participated in the field study (the
assumption resulting from the business strategy of
a retail chain which states that the store’s offer is
constant regardless of its location was adopted).
The virtual study was carried out in July 2019 in
Carrefour8 and Tesco9 online stores.
Step 6. Analysis and interpretation of partial and
collective results (presented in the next section of
the article).
4. Examination of the offer of private label
food products in Tesco and Carrefour
hypermarkets in Poland – results of
research and discussion
Table 4 presents the result of the evaluation of an
exemplary product – natural yoghurt – from the
dairy products category (S – stationary store, I –
online store).

Table 4 Results of the assessment of private label natural yoghurts in Tesco and Carrefour
Name of the retailer Tesco S Tesco I Carrefour S Carrefour I
Composition 1 1 1 1
Information

Volume / weight 1 1 1 1
about the
product

Way of storage 1 1 1 1
Use-by date 1 0 1 0
Producer information 1 1 1 1
Recyclable packaging 1 1 1 0
information
Additional

High-quality ingredients 1 0 1 1
Certificates held 0 0 0 0
BIO / Gluten-free / Without preserva- 1 0 1 1
tives / Without GMOs
Packaging material 1 0 1 0
Packaging

Ergonomic use 1 1 1 1
functions

Bulk packaging 1 0 1 0
Protection against damage 1 1 1 1
Safe transport 1 0 1 0
Product name visibility 1 1 1 1
appearance

Brand logo visibility 1 1 1 1

Product

Retail chain logo visibility 1 1 1 1

Font legibility 1 1 1 1
Colours used 1 1 1 1
Unit price 4 4 2 4
Price

Price per kg/l 4 4 2 4

Total sum of points 26 20 22 21

Source: Own work.

God. XXXIII, BR. 1/2020. str. 191-202 197

 The other two products in this category were subjected to the same procedure. The partial
results ofRoman
the analysis for the dairy products category are presented in Figure 1 (lack of all
Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
market
results for Carrefour I mean that some products are not included in the online store offer of
this chain).
The other two products in this category were sub- sented in Figure 1 (lack of all results for Carrefour
jected to the same procedure. The partial results of I mean that some products are not included in the
Figurethe analysisoffor
1 Results the dairy
private products category
label assessment areproducts
in the dairy online store
pre- category offer
in Tesco andof this chain).
Figure 1 Results of private label assessment in the dairy products category in Tesco and Carrefour
Carrefour
30

25

20

Natural yoghurt
15
Milk 3,2%
10 Kefir

0
Tesco S  Tesco I Carrefour S Carrefour I
 
Source: Own work. Source: Own work.
The remaining 18 products from six other categories analyses were carried out. The final collective results of
were analysed according to the same scheme. Taking theaccording
The remaining 18 products from six other categories were analysed study areto
presented
the samein Table 5 (overview of individual
into account four branches (stores), a total of 84 partial products) and Table 6 (overview of product categories).
scheme. Taking into account four branches (stores), a total of 84 partial analyses were carried
out. The Table
final collective results
5 Final results of of
thethe study areofpresented
evaluation in Table
private label food 5products
(overview of individual
in Tesco and Carrefour by individual products
products) and Table 6 (overview of product categories).
Tesco S Tesco I Carrefour S Carrefour I Total
Natural yoghurt 26 20 22 21 89
Milk 3.2% 22 18 20 0 60
Table 5 Final results of the evaluation of private label food products in Tesco and Carrefour
Kefir 23 20 21 0 64
by individual products
Frozen chips 17 17 17 0 51
Frozen pizza 17 13 25 22 77
Mix of frozen vegetables 20 18 20 0 58
Still water 22 19 18 15 74
100% orange juice 21 16 23 19 79
Cola flavoured sparkling drink 23 18 17 14 72
Milk chocolate 22 13 22 18 75
Wafers 17 15 22 20 74
Biscuits 16 0 18 20 54
Potato crisps 17 14 25 20 76
Salty sticks 20 17 17 18 72
Salted peanuts 18 17 17 16 68
Chicken breast ham 20 17 20 21 78
Pork shoulder minced meat 18 14 20 0 52
Chicken tenderloins 19 0 15 0 34
Muesli 14 13 20 19 66
Corn flakes 18 17 11 14 60
“Chocolate balls” 16 13 20 20 69
Total 406 309 410 277
Source: Own work.

198 God. XXXIII, BR. 1/2020. str. 191-202

 Preliminary communication

Table 6 Final results of the evaluation of private label food products in Tesco and Carrefour by indivi-
dual product categories

Tesco S Tesco I Carrefour S Carrefour I Total

Dairy products 71 58 63 21 213

Frozen products 54 48 62 22 186
Beverages 66 53 58 48 225
Sweets 55 28 62 58 203
Salty snacks 55 48 59 54 216
Meat products 57 31 55 21 164
Breakfast cereals 48 43 51 53 195
Total 406 309 410 277
Source: Own work.

The results of the study can be analysed vertically
(individual stores) as well as horizontally (product
categories).
For both chains (de facto the same level of evalu-
ation – 410 Carrefour vs 406 Tesco), products in
their brick-and-mortar stores have higher values
compared to the offer of online stores (there is a no-
ticeable advantage of Tesco – 309 points over Car-
refour – 277 points). In the case of stationary retail,
Carrefour has an advantage in 4 out of 7 categories,
in the case of e-commerce the situation is exactly
the opposite with Tesco faring better.
Drinks are the highest rated product category (225
points), while meat products are the lowest rated
(164 points). Within individual seven product cat-
egories, products within a given chain, apart from
one singularity (breakfast cereals in Carrefour S –
51 points vs Carrefour I – 53 points), have higher
values in the case of stationary retail (traditional
store) than online retail (virtual store). In the range
of individual product groups, a much larger dispro-
portion in the offer of brick-and-mortar and online
stores (results of the point assessment) is observed
in Carrefour than in Tesco.
5. Conclusions
To summarize the research part, in accordance
with the first postulate, i.e. product range avail-
ability, neither of the hypermarkets fully meets
the conditions for implementing the omnichan-
nel strategy. In the case of Tesco, the online offer,
compared to the stationary offer, lacks one product
from each category of sweets and meat and cold
cuts. In the case of Carrefour, the situation is much
worse – there are two products missing in each of
the three categories in the online offer: dairy prod-
ucts, frozen products, meat and cold cuts. At this
point, one may be tempted to determine the index
of the product range omnichannel, understood as
the ratio of the Internet offer to the stationary of-
fer (the closer the result is to 1, the better, 1 being
the perfect state). The product range omnichannel
of Tesco is 0.90 and of Carrefour 0.71 (noticeable
disproportion of the product offer). Meat and cold
cuts are a common problematic category for both
retail chains. One should consider whether each
single product range may be subject to omnichan-
neling, or whether certain products should be ex-
cluded from the offer.
In accordance with the second postulate – price
comparability – neither of the hypermarkets fully
meets the conditions for implementing the om-
nichannel strategy (only those cases in which prod-
ucts are available in the stationary and online stores
have been compared). In the case of 19 products
from Tesco, price differences were observed in 10
cases, with an increase in price in seven of them and
a decrease in three (online shopping being more
expensive than stationary shopping). In the case
of 15 products from Carrefour, price differences
were observed in six cases, with a decrease in price
recorded for five and an increase for one product
(online shopping being cheaper than stationary
shopping). At this point, one may be tempted to de-
termine the price omnichannel index, understood
as the ratio of the price level of the internet offer to
the stationary offer (the closer the result is to 1, the

God. XXXIII, BR. 1/2020. str. 191-202 199

Roman Domanski, Michalina Labenda: Omnichannel of private label grocery products in Tesco and Carrefour retail chains on the Polish
market
better, 1 being the perfect state) – the direction of
price change (increase or decrease) was not taken
into account. The price omnichannel of Tesco is
0.47 and of Carrefour 0.60 (noticeable dispropor-
tion of the price offer). Due to the lack of a full set
of data (the aforementioned product exclusions, a
full set of data only for three product categories),
a horizontal interpretation of the price level would
be biased; hence it was not carried out. One should
consider how distributors should determine the
price of a product. The price includes distribution
costs, which depend on the type of sales channel,
and therefore they are different, while the customer
expects a fixed purchase price.
To summarize the theoretical and practical parts,
the omnichannel strategy as a new sales (distribu-
tion) strategy keeps evolving by trial and error. At
the current stage of its development, there are still
more research questions than answers, both on the
side of science and practice. The view on shaping
the customer logistics system in the conditions of
implementing the omnichannel strategy from the
perspective of its four main components: time,
200
reliability, communication and convenience was
presented by the authors in (Domański and Hadaś,
2017).
The geographical scope of the authors’ research was
limited only to the Polish market (research limita-
tion). However, the size of the market is not a fac-
tor that differentiates research results. They are de
facto differentiated by the product category or type
of distributors. Hence, the obtained research results
should be treated as preliminary and pilot outcomes.
As part of future research, the authors intend to
re-examine the same problem, but without market
restrictions. Another research intention will be to
conduct a study on a different entity (store format -
discount shop level instead of hypermarket level) on
the example of Biedronka and Lidl retailers.
Acknowledgements
This research was funded by the Ministry of
Science and Higher Education – project No.
11 / 140 / SBAD / 4171.
God. XXXIII, BR. 1/2020. str. 191-202
 Preliminary communication

R

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Roman Domanski
Michalina Labenda

O    

    T
 C   
S
Kontekst: Današnji kupci kupuju putem različitih prodajnih kanala, što je dodatni izazov za distribucijske
sustave dobavljača. Cilj je rada utvrditi koliko se omnikanalna prodaja primjenjuje u maloprodajnim lanci-
ma Tesco i Carrefour u Poljskoj s posebnim osvrtom na proizvode s trgovačkom markom. Nadalje, kritički
će se obraditi razvoj racionalne logistike te politike proizvoda i cijena.
Metode: Predmet je istraživanja jedna od metoda suvremene distribucije, odnosno trgovačka marka, a
provest će se na dva usporediva maloprodajna lanca, Tesco i Carrefour. Istraživanje je usmjereno samo na
prehrambene proizvode s trgovačkom markom (sedam kategorija, u svakoj po tri proizvoda) te ograničeno
na poljsko tržište, a ispitana je 21 značajka proizvoda. Koristili smo anketu u fizičkim trgovinama Tesco i
Carrefour, te u odnosu na njihove internetske, odnosno virtualne trgovine. Ukupno je provedeno 84 analiza.
Rezultati: Iz perspektive omnikanalne strategije cijene i asortimana proizvoda trebali bi biti jednaki u svim
distribucijskim kanalima, no ipak se razlikuju: Tesco 0,90 u odnosu na Carrefour 0,71 te Tesco 0,47 o od-
nosu na Carrefour 0,60. Ti rezultati pokazuju da je potrebno revidirati teorijske i praktične pretpostavke
omnikanalnog koncepta.
Zaključci: Pitanje usluge kupcima i dalje je aktualno u području logistike. Neovisno o tome koji oblik
kupovine tj. kanal kupac odabere za kontakt s distributerom proizvoda, razina usluga trebala bi uvijek biti
jednaka, pa tako i u omnikanalnoj varijanti. Ostaje otvoreno pitanje vrijedi li to uvijek i za svaki proizvod.
Ključne riječi: omnikanalna prodaja, trgovačka marka, prehrambeni proizvodi, poljsko tržište, razina us-
luge, pokazatelji omnikanalne prodaje

202 God. XXXIII, BR. 1/2020. str. 191-202

 R 
P 

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 CC BY-NC-SA

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Lužansko polje 7, School of Economics Review article
71000 Sarajevo, and Business Sarajevo
Bosnia and Herzegovina Trg Oslobođenja – Received: July 9, 2019
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Accepted for publishing: September 10, 2019 sažetak lic
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5 od 6

UNIVERSITIES’
ENROLLMENT CHALLENGE:
THE ROLE OF CORPORATE
IMAGE IN HIGHER EDUCATION
A
This paper focuses on gathering information regarding the importance of the university image for students
and its influence on student satisfaction, loyalty and enrollment intentions. Consequently, the main aim
of the paper is to evaluate whether the corporate image of a particular higher education institution affects
students’ satisfaction, loyalty and enrollment intentions. The results of the MANOVA analysis show a sig-
nificant correlation between corporate image and satisfaction, explaining that corporate image influences
satisfaction among students. Without any doubt, as confirmed in this paper, the corporate image construct
has a strong and remarkable influence on satisfaction, loyalty and enrollment intentions of students. Hav-
ing in mind the importance of the corporate image construct, it is proven to be a strong antecedent for all
three determinants, satisfaction, loyalty and enrollment intentions, whose positive effect is crucial for the
survival of the universities worldwide, which presents the main practical contribution of the paper.
Keywords: Corporate image, satisfaction, loyalty, enrollment intentions, higher education

1. Introduction gaining a positive image from the environment, ed-

Higher education institutions, as an important pil-
lar for human resources development, play a crucial
role in the economic growth and overall develop-
ment of countries worldwide. The upcoming period
brings even more intense scenarios of competition
among educational institutions, where higher edu-
cation institutions need to explore new ways in order
to compete and survive. Landrum et al. (1998) state
that the university’s image may represent a valuable
intangible asset in the competitive area because by
ucational institutions are able to occupy a distinctive
place in the target market. Universities and educa-
tional institutions around the world have spent large
amounts of money on communication campaigns to
attract prospective students. Despite this, they usu-
ally fail to create a recognizable and distinctive cor-
porate image, mostly because of the difficulty to dif-
ferentiate an intangible product, which is education
in the case of universities and schools (O’Loughlin,
Szmigin, 2005; Bravo et al., 2010).

God. XXXIII, BR. 1/2020. str. 205-216 205

Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović: Universities’ enrollment challenge: The role of corporate image in higher education
Moreover, the corporate image sometimes can be
more important than its quality, because it is an
image that actually influences choices made by stu-
dents at a particular institution (Kotler, Fox, 1995).
The image of the educational institution may influ-
ence who applies for studies (Landrum et al., 1998;
Fielder et al., 1993; James et al., 1999), student sat-
isfaction (Clow et al., 1997; Eskildsen et al., 1999)
as well as student loyalty (Eskildsen et al., 1999).
Researchers also claim that image is one of the main
factors influencing students’ willingness to apply for
enrollment (Yavas, Shemwell, 1996; Landrum et al.,
1998; Parameswaran, Glowacka, 1995).
However, literature on the university image as per-
ceived by its students and how this image affects
their behavior remains scarce. In this sense, the
main aim of the paper is to evaluate whether the
corporate image of a particular higher education
institution affects students’ satisfaction, loyalty and
enrollment intentions. The paper consists of several
subsections, beginning with the introduction fol-
lowed by the theoretical conceptualization on cor-
porate image in higher education, satisfaction and
loyalty among students and enrollment intentions.
The hypothesis development and methodology fol-
low, along with the analysis and discussion. At the
end, the authors clarify the limitations of this re-
search and the practical implications.
2. Literature review
2.1 The corporate image in the context of higher
education
Due to the fact that universities are becoming more
aware of how important it is to attract valuable stu-
dents and build a strong perceived image, the whole
concept of corporate image is receiving greater at-
tention (Bok, 1992; Parameswaran, Glowacka, 1995;
Theus, 1993). Throughout the literature, there are
many different definitions of what the corporate im-
age concept represents in the higher education sys-
tem (Liou, Chuang, 2010; Da Costa, Pelissari, 2017;
Amendola, 2004). There has been a broader consen-
sus, since the beginning of the 20th century, when the
corporate image was defined as a set of all important
invisible components of the school (Howcroft, 1991),
to the present, when the corporate image is defined
as a concept that comprises of both, the physical and
non-physical attributes of the school interpreted by
its stakeholders (Nguyen, LeBlanc, 2001).
In educational services management, the corporate
image concept is mostly used as a positioning in-
206
strument that influences the students’ final decision
where to study (Milo et al., 1989; Nguyen, LeBlanc,
2001; Weissman, 1990). A study on the university’s
corporate image published by Kazoleas et al. (2001)
found that the corporate image may vary among
different stakeholders of the university, and as such
sends contradictory signals toward the environ-
ment and community. Many authors agree that the
corporate image has a direct impact on the success
of universities (Golgeli, 2014; Dowling, 1986). Simi-
larly, Fombrun and Shanley (1990) state that gener-
ated advantages of a positive image could be a high
student retention rate and attractive area for better-
qualified applicants to enroll. Moreover, Treadwell
and Harrison (1994) add that maintaining a positive
corporate image as a strategic managerial issue af-
fects the institution’s ability to recruit desired fac-
ulty members and to retain and attract motivated
students. The research findings from different areas,
including marketing, advertising, management and
PR have shown that companies with a good corpo-
rate image usually enjoy a greater record of sales
and market share (Shapiro, 1982), loyal customers
(Andreassen, Lindestad, 1998), positive quality per-
ceptions (De Ruyter, Wetzels, 2000), and increased
customer engagement (Bhattacharya, Sen, 2003).
2.2 Students’ satisfaction
Nowadays, satisfaction is explained as a state of
mind in which the customers’ needs, wants, and
expectations are aligned with his or her expecta-
tions, contributing to future repurchase and loyalty.
In general, the satisfaction concept is the result of
mutual interaction between the consumer’s pre-
purchase expectations and post-purchase evalua-
tion (Gilbert et al., 1982). Hence, these statements
confirm Oliver’s (1980) thinking that satisfaction
is a post choice evaluation judgment concerning a
specific purchase decision.
Assessing the students’ satisfaction level helps
higher education institutions identify those aspects
that set them apart from others and, on the other
hand, discover the areas that cause dissatisfaction,
so they can provide improvements that can answer
to the students’ needs and expectations. Through
measurement of student satisfaction, institutions
are able to get data of how effective they actually are
in terms of providing certain educational services to
the market. There is a chance that one will be loyal
to a certain institution if the student’s satisfaction
exceeds the student’s expectations; any repeated
enrollment intention, positive word-of-mouth and
further use of provided services explains customer
God. XXXIII, BR. 1/2020. str. 205-216

satisfaction (Anderson, Sullivan, 1993). Yeboah and
Atakora (2013) have concluded that institutions,
which have the ability to satisfy students’ needs
through integrated communication, are able to suc-
ceed in the competition market. Napoli and Wort-
man (1998) explain the different factors that are
crucial for students’ increased level of satisfaction,
such as, self-esteem, life events during university
years, social competence, psychological well-being,
social support, and the university academic, social
and administrative systems.
2.3 Students’ loyalty
During the last few years, the financial system for
higher education institutions has been changed
across many countries, whereas institutions’ per-
formances have become increasingly important
when taking into consideration where funds and
money will be allocated (Arnaboldi, Azzone, 2005;
DeShields et al., 2005). Within those performances,
student loyalty has become a very important concept
for higher education institutions (Marzo-Navarro et
al., 2005). Hence, the concept of student loyalty and
drivers for loyalty are a high priority when determin-
ing the most appropriate management strategy of an
institution. Just as the loyalty construct is crucial for
businesses where products are the focus of attention,
the construct is also of high importance for services
(Dick, Basu, 1994). Oliver (1997: 392) defines this
as a “deeply held commitment to rebuy a preferred
product or service consistently in the future, despite
situational influences and marketing efforts having
the potential to cause switching behavior”. Thus, the
loyalty concept implies a certain level of continuity in
how a student relates to a specific institution. This all
influenced loyalty to become one of the key concepts
in higher education institutional management (Hel-
gesen, Nesset, 2007b). Also, Jones and Sasser (1995)
view loyalty as a construct through which students
have a sense of belonging and affection towards a
specific institution.
Moreover, the loyalty concept is really present when
a student resists all the pressures to switch to an-
other institution (Newman, Werbel, 1973). Hence,
loyalty in the service industry is measured as stu-
dents’ faithfulness to a particular higher educational
institution. Therefore, students’ purchasing behav-
ior (i.e. enrollment intentions) is also determined
by the level of their loyalty. Afterwards, true loyalty
was found to be a construct developed when strong
God. XXXIII, BR. 1/2020. str. 205-216
Review article
positive relative attitudes are associated with a high
degree of repeated enrollment decisions.
2.4 University enrollment intentions
The decision-making process made by students in
order to choose the proper institution to study at is
broadly seen as a problem, due to the huge number
of institutions offering the same or similar programs
and opportunities. Therefore, it is up to the higher
education institution to build a strategic model,
incorporated with a positive corporate image to at-
tract students and decrease the number of students
who switch to another university. Decision making
models are usually called the purchase behavior of
consumers, where the same model can be used in a
process of enrollment intentions of students related
to deciding at which university to enroll. Accord-
ing to Kotler and Fox (1995) purchase behavior is
generally a complex process comprised of several
stages, including need arousal, information search
and evaluation of alternatives, purchase decision
and the post purchase feeling.
Chapman (1984) was among the first to apply this
process of buying behavior to education represent-
ing it as enrollment intentions. Servier (1986) re-
vealed that most of the research studies have shown
that the college or university location is one of the
most important factors for the potential student’s
decision to apply and enroll. Absher and Crawford
(1996) and Servier (1994) add that students could be
looking for a university close to their home or work-
place. In addition, a low-cost, nearby university is
usually an important stimulator of a student’s deci-
sion for future education decisions. Academic pro-
gram offerings, its content range and duration were
noted to have a significant impact on a student’s
university selection (Ford et al., 1999). Moreover,
Ford et al. (1999) list important factors students
think about while deciding where to study, includ-
ing the range of study programs, flexibility of degree
program and range of degree options. Most of the
research studies found that the strongest predictor
of university choice is the institutional image (Lay,
Maguire, 1981; Murphy, 1981; Keling, 2006).
3. Hypotheses development
Many authors assessed the corporate image as an im-
portant construct for higher educational institutions
and confirmed its crucial and strong influence on
207
Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović: Universities’ enrollment challenge: The role of corporate image in higher education
students’ satisfaction (Andreassen, Lindestad, 1998).
Alves and Raposo (2010) add that the corporate im-
age is the construct that mostly influences student
satisfaction, but it is also relevant to student loyalty.
Nguyen and LeBlanc (1998) found that satisfaction
through the perceived service value directly effects
the corporate image. This issue was explained by the
assertion of Barich and Kotler (1991) stating that if
students of an institution believe they receive good
value through education, that particular institution
has a strong positive image. Hence, all these contra-
dictions brought up the claim that a clear relationship
between satisfaction and image is obviously missing
(Azoury et al., 2013), while Amendola (2004) found a
strong relationship between the corporate image and
satisfaction. Palacio et al. (2002) explain that the im-
age has a significant effect on students’ satisfaction
and loyalty. Similarly, Alves and Raposo (2010), iden-
tify the corporate image as one of the most impor-
tant determinants of students’ satisfaction and loy-
alty. Besides, the corporate image construct in higher
education institutions is proven to be the most in-
fluential on student satisfaction (Dib, Alnazer, 2013).
Thus, along the same lines, we propose that:
H1: The university’s corporate image influences
students’ satisfaction.
Ostrowski et al., (1993) found a significant relation-
ship between the image of an organization and the
loyalty of its customers. Schlesinger et al. (2015)
confirmed a positive impact of the university image
on the concept of satisfaction and loyalty. Therefore,
results showed that satisfaction and university im-
age are proven to be strong predictions of loyalty,
while behavioral loyalty by students is determined
Figure 1 Conceptual model
Source: Authors
208
not only by satisfaction, but also by their perceived
image of the institution, the level of identification
and the quality of the professor-student relation-
ship. Furthermore, corporate image is seen as a
leading motivation factor to a higher level of stu-
dent loyalty, which in turn confirms that the corpo-
rate image is a leading indicator not only satisfying
and retaining existing students, but also attracting
new ones (Ali et al., 2012).
H2: The university’s corporate image influences
the students’ loyalty
Numerous resources have already recognized the
crucial role that the corporate image concept has
on the process of student’s enrollment intention
(Barich, Kotler, 1991; Zeithaml, 2000). The corpo-
rate image concept is particularly important in de-
veloping and maintaining loyal students, which in
the end will bring higher retention rates and higher
enrollment rates for the university (Dick, Basu,
1994; Raj, 1985). Similarly, Scot (1999) confirms that
many universities depend on their capacity to retain
current students and attract new ones, allocation of
resources, achievement of students, and providing
attractive programs to the external environment.
Hence, it is considered that marketing strategies
and the corporate image are the most remarkable
factors for survival. Other studies also support the
idea that the corporate image is significantly corre-
lated with enrollment intentions (Gatewood et al.,
1993; Mehboob et al., 2012), so we are testing this
hypothesis in our study as well, while Figure 1 pre-
sents the conceptual model of this research.
H3: The university’s corporate image influences
the students’ enrollment intentions.
God. XXXIII, BR. 1/2020. str. 205-216
 Review article

4. Methodology 1996) and enrollment intentions (Ajzen, Fishbein,

The questionnaire that was used within the re-
search process is divided into five separate sections
and is aimed to measure the following constructs:
corporate image (Bravo et al., 2010), satisfaction
(Bitner, Hubbert, 1994), loyalty (Gremler, Brown,
1980), as well as demographics. All of the questions
used a 7-point Likert scale, as suggested by the au-
thors. Furthermore, we checked the scales reliabil-
ity, which is presented in Table 1 indicating accept-
able values of alpha and scale reliability.

Table 1 Reliability statistics for all four constructs in the research model
Construct N of items Alpha
Corporate Image (CI) 17 0.940
Satisfaction (S) 2* 0.800
Loyalty (L) 12 0.933
Enrollment Intentions (EI) 3 0.886
* Variable S2 was excluded from reliability statistics because it represents confirmation of S1 variable in the negation form.
Source: Authors

Data was collected using a sample of students at- 5. Analysis

tending some of the study programs at a school
within the public university in Bosnia and Herze-
govina. A total of 200 students were interviewed
face-to-face (Szolnoki, Hoffmann, 2013) during the
lecture sessions of undergraduate and postgraduate
classes. Descriptive statistics of the sample by age,
show that the mean age of respondents is 23.01. In
addition, descriptive statistics of the sample dem-
onstrate that the majority of respondents were fe-
males (58.5%).
In order to test the previously presented hypoth-
eses, the MANOVA analysis was performed. It is the
multivariate analysis, which is used to test a hypoth-
esis where one independent variable (or more) have
a statistically significant effect on a set of two or more
dependent variables. In the case of this research, the
independent variable is a construct related to the Cor-
porate Image (CI), while the set of dependent vari-
ables include three constructs related to the students’
Satisfaction (S), Loyalty (L) and Enrollment Intentions
(EI). Multivariate Tests are presented in Table 2.

Table 2 Multivariate Testsa

Partial
Hypothesis Noncent. Observed
Effect Value F Error df Sig. Eta
df parameter powerd
squared

Pillai’s Trace 0.989 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000
Intercept

b
Wilks’ Lambda 0.011 3882.757 3.000 134.000 0.000 0.989 11648.270 1.000
Hotelling’s Trace 86.927 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

Roy’s Larg Root 86.927 3882.757b 3.000 134.000 0.000 0.989 11648.270 1.000

Pillai’s Trace 1.499 2.154 189.000 408.000 0.000 0.500 407.191 1.000
Wilks’ Lambda 0.105 2.386 189.000 402.722 0.000 0.528 450.599 1.000
CIT

Hotelling’s Trace 3.805 2.671 189.000 398.000 0.000 0.559 504.799 1.000
Roy’s Larg Root 2.502 5.401c 63.000 136.000 0.000 0.714 340.253 1.000
Note: * a. Design: Intercept + CIT, b. Exact statistic, c. The statistic is an upper bound on F that yields a lower bound on the
significance level, d. Computed using alpha = 0.05
Source: Authors

God. XXXIII, BR. 1/2020. str. 205-216 209

Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović: Universities’ enrollment challenge: The role of corporate image in higher education

As shown in Table 2, it is tested whether the Corpo-
rate Image (CI) as perceived by students at an ob-
served university has a significant impact on three
dependent variables related to their Satisfaction (S),
Loyalty (L) and Enrollment Intentions (EI). The hy-
pothesis of the research is that there will be a signif-
icant multivariate main effect for all four research
constructs. The hypothesis is tested through the
General Linear Model or Multivariate procedure in
software SPSS. Using the matrix algebra, computa-
tions are done with the aim to find the ratio of the
variability of the Between-Groups sums of squares
and cross-products matrix to that of the Within-
Groups SSCP matrix.
In the interpretation process of the MANOVA
analysis, first it is important to look at the overall F
test for all three unique dependent variables Satis-
faction Total (coded ST), Loyalty Total (coded LTx)
and Enrollment Intentions Total (coded PIT). What
is most important to look at is the statistical value
called Wilks’ Lambda (λ) and the F value connected
with it. Lambda is actually an amount of the vari-
ance percentage in the dependent variables that is
not explained by differences in the level of the inde-
pendent variable and it can vary between one and
zero. It is desirable that Lambda be near zero, which
means that there is almost no variance that cannot
be explained by the Corporate Image (CI). In the
case of the collected sample, the Wilks’ Lambda is
0.105 and has an associated F of 2.386, which is sta-
tistically significant at p<0.001 level.
In the next step of examination of given output,
it is important to observe the Partial Eta Squared
value associated with the main effect of the Corpo-
Table 3 Tests of between-subjects effect
rate Image (CI), which has a value of 0.528, and the
Observed Power to detect the main effect, which
in case of the collected data is 1.000. Both of the
above-mentioned computed parameters are at the
statistically satisfactory level. Hence, it shows that
the one-way MANOVA, which was done on the
sample of students revealed a significant multivari-
ate main effect for independent variable Corporate
Image (CI) in which Wilks’ λ = 0.105, associated F
(189, 402.722) = 2.386, p value <0.001, Partial Eta
Squared = 0.528.
The Observed Power to detect the effect was 1.000,
so consequently, this demonstrates that the Corpo-
rate Image (CI) as perceived by students at an ob-
served university has a significant impact on three
dependent variables related to their Satisfaction
(S), Loyalty (L) and Enrollment Intentions (EI). If
the overall value of the F test is significant as in the
case of our collected sample, then it is a common
practice to go further and look at the individual de-
pendent variables with a separate ANOVA test.
However, the experiment-wise alpha protection
provided by the overall or omnibus F test does not
cover the univariate tests, so division of confidence
levels by a number of tests is necessary. Conse-
quently, since it is important to look at the value
of F tests for the three dependent variables, includ-
ing the students’ Satisfaction (S), Loyalty (L) and
Enrollment Intentions (EI), it is required that p is
less than 0.017 (0.05/3). This particular statistical
procedure ignores the fact that variables might be
inter-correlated, so these separate ANOVAs do not
take variables’ inter-correlations into account. The
output of analysis is shown in Table 3.

Dependent Type III Sum Mean Partial Eta Noncent. Observed

Source df F Sig.
variable of squares square squared parameter powerd
ST 53.511a 63 0.849 3.265 0.000 0.602 205.706 1.000
Corrected
model

LTx 147.105 b
63 2.335 4.685 0.000 0.685 295.149 1.000
PIT 186.618c 63 2.962 3.160 0.000 0.594 199.072 1.000
ST 2244.888 1 2244.888 8629.780 0.000 0.984 8629.780 1.000
Intercept

LTx 3507.125 1 3507.125 7036.630 0.000 0.981 7036.630 1.000

PIT 3266.436 1 3266.436 3484.415 0.000 0.962 3484.415 1.000
ST 53.511 63 0.849 3.265 0.000 0.602 205.706 1.000
CIT

LTx 147.105 63 2.335 4.685 0.000 0.685 295.149 1.000

PIT 186.618 63 2.962 3.160 0.000 0.594 199.072 1.000
Note: * a. R Squared = 0.602 (Adjusted R Squared = 0.418), b. R Squared = 0.685 (Adjusted R Squared = 0.538), c. R
Squared = 0.594 (Adjusted R Squared = 0.406), d. Computed using alpha = 0.05
Source: Authors

210 God. XXXIII, BR. 1/2020. str. 205-216


Table 3 presents a segment of the output table,
which represents a report of the ANOVA test on
the three dependent variables students’ Satisfaction
(S), Loyalty (L) and Enrollment Intentions (EI). As
the table shows, the F values for all three dependent
variables are statistically significant at our criterion
of 0.017. Hence, this confirms that, given the sig-
nificance of the overall test univariate main effects
for the Corporate Image (CI), the following results
were obtained for students’ Satisfaction (S): F (63,
136) = 3.265, p value < 0.001, Partial Eta Square =
0.602, Observed Power = 1.000, then for Loyalty
(L), F (63, 136) = 4.685, p value < 0.001, Partial Eta
Square = 0.685, Observed Power = 1.000 and for
Enrollment Intentions (EI), F (63, 136) = 3.160, p
value < 0.001, Partial Eta Square = 0.594, Observed
Power = 1.000.
Thus, according to the results of the analysis all
three hypotheses are confirmed. The university’s
corporate image influences the students’ satisfac-
tion (H1), loyalty (H2) and enrollment intentions
(H3).
6. Discussion
Basically, the results of the MANOVA analysis
show the significant correlation between the cor-
porate image and satisfaction, explaining that the
corporate image of the school influences satisfac-
tion among its students. As the literature review
shows, most of the empirical works which inves-
tigated the mutuality between the concept of the
corporate image and satisfaction found a positive
influence. More precisely, the corporate image is an
antecedent of the satisfaction construct. Azoury et
al. (2013) research confirms the first hypothesis by
claiming that both existing components of the cor-
porate image, cognitive and affective, have crucial
effects on the formation of satisfaction in students’
minds. Also, conclusions made by Azoury et al.
(2013) confirm the positive influence of the service
offering quality and recognition in the overall stu-
dent satisfaction.
Strong effects of the corporate image on the satis-
faction concept were demonstrated also by Palacio
et al. (2002). These conclusions imply once more the
positive influence and strong relationship between
the corporate image and the satisfaction concept
in the university environment. As a matter of fact,
Alves and Raposo (2010) argue that the corporate
image is one of the most important determinants
God. XXXIII, BR. 1/2020. str. 205-216
Review article
of satisfaction and loyalty, both contributing to in-
creased and repeated enrollment intentions. With-
out any doubt, as confirmed in this paper, the cor-
porate image construct has a strong and remarkable
influence on satisfaction, loyalty and enrollment in-
tentions of students.
Similar findings, which were elaborated using the
MANOVA method, are also confirmed by many
authors in the literature. For example, Dib and Al-
nazer (2013) found a strong relationship in higher
education institutions between the corporate im-
age and student satisfaction, loyalty and enrollment
intentions. Observing the correlation among the
corporate image and dependent variables, results
from the paper imply a statistically significant in-
fluence between the independent construct of the
corporate image and each dependent construct,
i.e. students’ satisfaction, loyalty and future enroll-
ment intentions. It is important to bear in mind
the importance of satisfied, loyal students and their
repeated enrollment intentions at the same educa-
tional institution. In addition to these conclusions,
Alves and Raposo (2010) and Helgesen and Nesset
(2007a) identified in a similar way the relationship
between the corporate image and all three depend-
ent variables, i.e. satisfaction, loyalty and enroll-
ment intentions.
Schlesinger et al. (2015) confirm these positive re-
lationships among the university image and satis-
faction, loyalty and enrollment intentions, stating
that the corporate image as an important construct
will have an influence if students are satisfied and
loyal to a particular university. This is accomplished
through keeping promises and translating them
into practice. Students will then have a better un-
derstanding due to the validity of the service qual-
ity and the opportunities offered after graduation at
the particular university.
The corporate image, as the only independent vari-
able in this research, has a positive influence on all
three dependent variables, i.e. satisfaction, loyalty
and enrollment intentions of students. Having in
mind the importance of the corporate image con-
struct, it is proven to be a strong antecedent for all
three determinants whose positive effect is crucial
for the survival of universities worldwide.
There are certain limitations of this research which
could have to some extent a significant impact on
the conclusion itself and its absolute acceptance
by other researchers as well as practitioners in the
211
Nejla Manov, Alisa Mujkić, Melika Husić-Mehmedović: Universities’ enrollment challenge: The role of corporate image in higher education
field. One of the largest constraints of the collected
data set is the sample size considering the number
of students who answered the questionnaire. Al-
though statistically significant for this paper, the
total sample size (N=200) is enough to make con-
clusions only for that specific university where the
research was conducted. Further studies on the
subject matter should increase the sample size in
order to make more reliable conclusions and have
at least two different universities as a control vari-
able.
Another limitation is related to the type of data
analysis used in this paper. Based on the sample
and structure, the MANOVA method was used.
This particular statistical method was useful to pro-
vide conclusions and confirm all three hypotheses
defined at the beginning of the research. However,
the SEM (Structural Equation Modeling) method
could be added in future research because it would
provide additional confirmation of the hypothesis,
including more details about the intensity and di-
rection of the relationship between the university’s
corporate image and its students’ satisfaction, loy-
alty and enrollment intentions.
The third limitation concerns antecedents of the
corporate image. This paper did not take into con-
212
sideration all the possible effects that could lead to
a positive corporate image. In this sense, further
research should explore a wider range of potential
antecedents. That also includes not only applying
quantitative techniques, but also the qualitative ap-
proach as an appropriate basis for further quantita-
tive research.
Nevertheless, there are several practical recom-
mendations derived from this study that should be
addressed by the universities’ management. Edu-
cational institutions need to become well aware of
how important image management is, as a process
that needs to be aligned with the strategy and vi-
sion of the institution. As a part of the management
function, PR must be incorporated into the organi-
zational structure of educational institutions, since
it is one of the main tools for creating a positive
corporate image. Although, the number of market-
ing departments whose main task it is to commu-
nicate and exchange information with stakeholders
has increased, the PR function is more complex and
needs to be strategically positioned and incorpo-
rated in all decision-making processes of a higher
educational institution.
God. XXXIII, BR. 1/2020. str. 205-216
 Review article

R

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Nejla Manov
Alisa Mujkić
Melika Husić-Mehmedović

I  :

     
S
Ovaj je rad fokusiran na prikupljanje informacija koje se odnose na važnost sveučilšnog imidža te njegovog
utjecaja na zadovoljstvo, lojalnost i namjere upisa studenata. Posljedično, glavni je cilj ovoga rada istražiti
utječe li korporativni imidž određene visokoškolske institucije na zadovoljstvo, lojalnost i namjere upisa
kod studentske populacije. Rezultati MANOVA analize pokazuju korelaciju između korporativnog imidža
i zadovoljstva studenata, upućujući na to da korporativni imidž ima utjecaj na studentsko zadovoljstvo. Bez
ikakve sumnje, a što se potvrđuje i ovim istraživanjem, korporativni imidž ima jak i snažan utjecaj, ne samo
na zadovoljstvo, već i na lojalnost i namjere upisa. Imajući u vidu značaj korporativnog imidža, dokazano je
da je kao takav, zapravo snažan prediktor za sva tri zavisna konstrukta ovoga istraživanja, a to su: zadovolj-
stvo, lojalnost i namjeru upisa te predstavlja temeljni elemenat za preživljavanje sveučilišta širom svijeta, što
predstavlja glavni praktični doprinos ovoga rada.
Ključne riječi: korporativni imidž, zadovoljstvo, lojalnost, namjera upisa, visoko obrazovanje

216 God. XXXIII, BR. 1/2020. str. 205-216

 CC BY-NC-SA

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University of Zagreb Review article
Faculty of Economics and Business
Trg J. F. Kennedya 6, Received: September 12, 2019
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SMART SPECIALISATION Ovo je najrestriktivnija

CONCEPT AS A TOOL FOR

IMPROVING INNOVATION 5 od 6

PERFORMANCE OF THE
EUROPEAN UNION MEMBER STATES
A
Globalisation brings significant challenges to economies worldwide. Smart specialisation is one of the tools
that helps countries improve their innovation potential, thus improving their economic performance and
competitiveness. Smart specialisation involves identifying a country’s competitive advantages in order to
develop targeted strategies aimed at enhancing its competitiveness. The main objective of the paper is to
identify innovation and smart specialisation challenges the European Union economies are facing. The pa-
per aims to provide an overview of current innovation performance of the European Union Member States,
as well as their smart specialisation strategies, focusing on their chosen thematic priority areas. In doing so,
the contribution of the paper is twofold. First, it gives an overview of the main features of smart specialisa-
tion concept. Second, it provides an overview of innovation performance of the European Union Member
States and their smart specialisation strategies.
Keywords: Smart specialisation, strategy, innovation, European Union

1. Introduction tion strategies which set priorities in order to build

Innovations are considered to be a source of com-
parative and competitive advantages of both coun-
tries and companies (Bilas et al., 2016). Many
regional governments invest in certain areas of
science, technology and innovation without taking
into consideration the particular features of their
region (Arranguren, Wilson, 2013). Smart speciali-
sation involves fostering innovative and entrepre-
neurial initiatives which are well tailored to the lo-
cal context (McCann et al., 2017).
Smart specialisation strategy is defined by the EU
Regulation (2013)1 as “national or regional innova-
competitive advantage by developing and matching
research and innovation own strengths to business
needs in order to address emerging opportunities
and market developments in a coherent manner,
while avoiding duplication and fragmentation of ef-
forts”. The idea or concept of smart specialisation is
based on classical economic theories of growth and
trade specialisation. It was proposed in 2008, and
quickly became a very important policy factor, espe-
cially in the place of its origin, the European Union.
It is important to stress that the smart specialisa-
tion process, as one of the main features, includes
entrepreneurial discovery process that identifies

God. XXXIII, BR. 1/2020. str. 217-226 217

Vlatka Bilas: Smart specialisation concept as a tool for improving innovation performance of the European Union member countries

priority areas or what a country or region does best
in terms of research, development and innovation
(Foray et al., 2011).
The smart specialisation approach was developed as
an answer to the deepening research and develop-
ment (R&D) gap between the European Union and
its trading partners (Camagni and Capello, 2013).
The main issues identified in the European Union
countries were smaller share of high-tech R&D-
intensive sectors and spatial dispersion of the R&D
activities. Camagni and Capello (2013) stressed
that this spatial dispersion resulted in insufficient
critical mass, investment duplications, inefficient
resource allocation, weak learning processes, etc.
Smart specialisation has a strong regional dimen-
sion because regions are increasingly important as
sources of innovation activities, especially when the
impacts of agglomerations are taken into account
(Foray and Goenaga, 2013). Hence, regions can-
not do everything; they need to focus on develop-
ing distinctive and original areas of specialisation
(Foray, 2012)2. Smart specialisation is a process of
identifying and selecting desirable areas for inter-
vention where a cluster of activities should be de-
veloped. This implies that opportunities and areas
of specialisations should be discovered by entrepre-
neurs (Foray, 2012). Smart specialisation must not
be associated with a strategy of the simple indus-
trial specialisation of a particular region, but rather
with R&D and innovation. It focuses on all regions,
no matter their strength and performance (Foray et
al., 2011).
Recently, the effectiveness of smart specialisation
has been globally recognised, which is evident from
the fact that many other countries around the world
have followed the example of the European Union
in terms of implementing smart specialisation (Bi-
las et al., 2018).
The main objective of the paper is to identify inno-
vation and smart specialisation challenges the EU
economies are facing. The paper aims to provide
an overview of current innovation performance of
the European Union Member States, as well as their
smart specialisation strategies, focusing on their
chosen thematic priority areas.
The paper has been divided into five parts. It begins
with the introduction, which is followed by the re-
view of literature on smart specialisation concepts
and strategies. The third section is concerned with
the methodology used for this study, while the
fourth gives an overview of the innovation perfor-
mance and smart specialisation strategies of EU
countries. Finally, the fifth section is the conclusion.
2. Smart specialisation concept - literature review
Given that smart specialisation is a rather new con-
cept, the literature on the specific features of this
approach is fairly scarce. The evaluation of the con-
cept, i.e. of ongoing smart specialisation strategies
is still not possible.
According to Foray et al. (2018)3 “innovation-relat-
ed policies seek to enhance knowledge generation,
absorption and diffusion in the economy (and soci-
ety) so as to support an innovation-driven economy
and to solve major societal problems”. Radosevic
and Stancova (2018) characterise smart specialisa-
tion as the largest innovation policy experiment.
According to Gianelle et al. (2019)4, smart speciali-
sation is a place-based and experimentalist policy.
The rationale of smart specialisation is shown in
Table 1.

Table 1 The rationale of smart specialisation

Concentrating knowledge resources for economic specialisation and linking them to a limited number of
What?
priority economic activities - competitiveness in the global economy
Regional innovation policies have often demonstrated a lack of efficiency in identifying priorities and
Why?
forms of practical cooperation
Entrepreneurs discover what a country or region does best in terms of research, development and
Who?
innovation
Regional change through modernisation, diversification and/or transition from an existing sector to a
How?
correlated field
Smart specialisation concept can be used in all regions, even though some are more advanced in terms of
Where?
knowledge production
Source: Foray et al. (2012), pp. 11-165

218 God. XXXIII, BR. 1/2020. str. 217-226


Smart specialisation requires setting vertical priori-
ties and is distinctively selective. The main feature of
smart specialisation is the definition of the limited
set of priority areas for public investment which can
best provide opportunities for growth and respond
to social and economic challenges (Gianelle et al.,
2019). According to Haegeman et al. (2019)6, a key
feature of smart specialisation is a clear thematic fo-
cus on research and innovation, through the selec-
tion of a limited number of priorities.
At a minimum, smart specialisation strategies
should transform less advanced regions into good
followers (Foray, 2012). Foray and Goenaga (2013)
defined the main principles of smart specialisation
as follows: granularity, entrepreneurial discovery,
continuous possibility of change of thematic priori-
ties, inclusiveness and experimental nature of the
policy, and the need for evaluation. The principle of
granularity means that the level on which thematic
priorities are identified should not be too high, be-
cause otherwise smart specialisation would become
a process of sectoral prioritisation. As for the sec-
ond principle, i.e. the principle of entrepreneurial
discovery, priorities are identified where and when
opportunities are discovered by entrepreneurs.
These choices are not so difficult since activities not
currently selected still retain a chance of being sup-
ported in the future, which is covered by the third
principle. Inclusiveness means that every sector is
considered and it implies that policy is implement-
ed at different speeds in different sectors. Finally,
because of its nature, this policy is experimental
and not all investments in new activities will pay
off. Therefore, Foray and Goenaga (2013) claim that
evaluation is a central policy task.
Cooperation for smart specialisation involves a
wide variety of stakeholders. The involvement of the
so-called quadruple helix of the academic world,
public authorities, the business community, but
also a range of innovation users and civil society is
very important for the successful implementation of
smart specialisation.
The engagement of universities in smart specialisa-
tion strategy (S3) is of high importance (Arregui-
Pabollet et al., 2018)7. This is especially the case in
countries or regions with underdeveloped innova-
tion systems. The role of universities, which encom-
passes education, research and innovation, makes
these institutions one of the key stakeholders in any
innovation system. Their role and commitment to
S3 directly influence the functioning of the innova-
God. XXXIII, BR. 1/2020. str. 217-226
Review article
tion system as well as the successful achievement
of S3 objectives. Reforms of the higher education
system in the EU countries seek to strengthen the
collaboration between the business and academic
sectors. Arregui-Pabollet et al. (2018) analysed 74
university governance systems across the European
Union. The main reason for performing this study
was an assumption that effective governance of
these institutions would facilitate their involvement
in the S3 process implementation. One of their main
conclusions is that embedding S3 coordination as-
pects into HEI governance system could contribute
to the successful implementation of S3 and facilitate
access to EU funding.
Smart specialisation aims to boost regional and
national innovation, contributing to growth and
prosperity and enabling territories to focus on their
competitive advantages (Gómez Prieto et al., 20198;
Tolias, 20199). The identification of thematic prior-
ity areas and vertical measures are characteristics
which represent the main difference between the
smart specialisation concept and prior innovation
strategies (Foray and Goenaga, 2013).
The concept of smart specialisation was conceived
in the European Union as part of the European
cohesion policy (Gómez Prieto et al., 2019). This
“made in Europe” concept is slowly spreading be-
yond EU borders to the rest of the world. Gómez
Prieto et al. (2019) see no obstacles to the successful
implementation of S3 around the world. Their main
argument is that this concept proved to be effective
in the territorial diversity of the EU and different
socio-economic contexts. Smart specialisation can
contribute to building regional innovation ecosys-
tems around the world.
Smart specialisation is an innovative policy ap-
proach. It combines industry and innovation policy.
The key characteristics of this approach are (Gómez
Prieto et al., 2019): territorial dimension, bottom-
up approach fostered via quadruple helix, entrepre-
neurial discovery process and flexibility which al-
lows modifications and improvements throughout
the intervention process. Smart specialisation aims
to develop competitive advantages by the conjuga-
tion of the economic, innovative and scientific po-
tential of a territory, and to address societal chal-
lenges (Gómez Prieto et al., 2019).
Smart specialisation methodology consists of six
steps (Sörvik, 201210; Gómez Prieto et al., 2019): (1)
the analysis of the potential for innovation through
219
Vlatka Bilas: Smart specialisation concept as a tool for improving innovation performance of the European Union member countries
an entrepreneurial discovery process, (2) the estab-
lishment of the governance system, (3) the design of
a strategic territorial vision, (4) the identification of
selected priorities, (5) the definition of a policy mix
and implementation mechanisms, and (6) the es-
tablishment of monitoring and evaluation system.
There are strong theoretical arguments that the
quality of institutions has a key role in explaining
the innovative performance at the regional level
(Marinelli et al., 2019)11. Marinelli et al. (2019)
maintain that regions and Member States should
identify competent institutions for the governance
of the smart specialisation strategy.
Tolias (2019) points out the big differences between
smart specialisation strategy evaluations in the pro-
gramming periods 2014-2020 and 2021-2027. In
the first programming period there was no need
for regulatory compliance and S3 evaluation (and
monitoring), while these represent one of the ex-
plicit criteria for the 2021-2027 period. No regula-
tory compliance resulted in different reactions from
territories. Some of them complemented S3 moni-
toring and evaluation, some of them did nothing.
However, for the new programming period, there is
a regulatory need for S3 evaluation, but territories
can decide by themselves how to plan, execute and
use S3 evaluation results, especially in relation to
the Operational Programmes.
Larrea et al. (2019)12 identified four pillars for the
construction of multilevel governance of S3: (1)
complexity, (2) emergence, (3) context specificity
and (4) reciprocity. Complexity is not related only
to the number of actors. Multilevel governance is
complex because different government levels have
different perspectives on S3 issues. Emergence re-
lates to the fact that it is impossible for policy mak-
ers to know what the expected outcome of their S3
would be, as a result of the learning and negotia-
tion processes. The third pillar, context specificity,
means that S3 strategies as well as their multilevel
governance arrangements have to be tailored to the
specific context of each territory. The fourth pillar
stresses that mutual recognition among different
governments, according to attributed roles, is a sig-
nificant factor in the successful S3 processes.
Gianelle et al. (2019) analysed to what extent the
principles of smart specialisation are actually trans-
lated into policy implementation. The main con-
clusion of this study is that regions and countries
use the selective approach of smart specialisation
220
and that only partial transition occurred from prior
industrial policy to the smart specialisation ap-
proach. Main divergences are broadly defined pri-
ority areas, loose alignment of policy instruments
with priorities, and scarce customisation of policy
measures to the specific innovation needs. Ganielle
et al. (2019) believe that one of the possible reasons
is that incentive structure at the European Union
level does not fully support the intervention logic of
smart specialisation, and advise that this structure
should be revised for the next programming period.
Other possible reasons are lobbying activities, high-
er political return from widespread public support
measures, etc.
It is considered that smart specialisation partner-
ships will foster a strategic approach to innovation
and encourage cooperation between authorities,
companies and industry at the regional level (Euro-
pean Commission, 2019).
3. Methodology
Many tenets of smart specialisation have not yet
been confirmed by empirical work and there is a
gap between policy practice and theory. The paper
gives an overview of existing data and literature in
the field of smart specialisation. Although it is a
rather new concept, it has already been implement-
ed in the current European Union programming
period (2014-2020). Due to data scarcity and imple-
mentation time period, it is still not possible to con-
duct quantitative analysis or ex post evaluations.
The paper aims to contribute to existing knowledge
through descriptive research and systematic collec-
tion, interpretation and evaluation of existing data,
studies, processes, trends and developments.
4. Overview and discussion
The Global Innovation Index13 ranks the innovation
performance of nearly 130 economies around the
world (Cornell University et al., 2019)14. According
to the rankings for 2019, the top five global innova-
tion leaders were: (1) Switzerland, (2) Sweden, (3)
the United States of America, (4) the Netherlands
and (5) the United Kingdom. This means that four
European countries, of which three were members
of the European Union, positioned among the five
best-ranked innovation economies. Three more EU
countries ranked among the top ten (Finland, Den-
mark and Germany), and another three (France,
God. XXXIII, BR. 1/2020. str. 217-226
 Review article

Ireland and Luxembourg) ranked between the 10th
and 20th place. Seven more EU countries (Austria,
Belgium, Cyprus, Czech Republic, Estonia, Malta
and Spain) positioned between the 20th and the 30th
place. Between the 30th and 40th place, there were
eight EU members (Hungary, Italy, Latvia, Lithua-
nia, Poland, Portugal, Slovakia and Slovenia), while
three more (Bulgaria, Croatia and Greece) posi-
tioned between the 40th and 50th place. Romania was
the lowest-ranking EU country, occupying the 50th
place. In conclusion, the European Union countries
were rather heterogeneous in terms of their innova-
tion performance. The average ranking of the Euro-
pean Union as a whole did not change from 2013
to 2019, positioning around the 25th place. Table 2
shows the Global Innovation Index rankings of the
EU countries for the period 2013-2019.

Table 2 Global Innovation Index rankings of the European Union countries 2013-2019
Country 2013 2014 2015 2016 2017 2018 2019
Austria 23 20 18 20 20 21 21
Belgium 21 23 25 23 27 25 23
Bulgaria 41 44 39 38 36 37 40
Croatia 37 42 40 47 41 41 44
Cyprus 27 30 34 31 30 29 28
Czech Republic 28 26 24 27 24 27 26
Denmark 9 8 10 8 6 8 7
Estonia 25 24 23 24 25 28 24
Finland 6 4 6 5 8 7 6
France 20 22 21 18 15 16 16
Germany 15 13 12 10 9 9 9
Greece 55 50 45 40 44 42 41
Hungary 31 35 35 33 39 33 33
Ireland 10 11 8 7 10 10 12
Italy 29 31 31 29 29 31 30
Latvia 33 34 33 34 33 34 34
Lithuania 40 39 38 36 40 40 38
Luxembourg 12 9 9 12 12 15 18
Malta 24 25 26 26 26 26 27
Netherlands 4 5 4 9 3 2 4
Poland 49 45 46 39 38 39 39
Portugal 34 32 30 30 31 32 32
Romania 48 55 54 48 42 49 50
Slovakia 36 37 36 37 34 36 37
Slovenia 30 28 28 32 32 30 31
Spain 26 27 27 28 28 28 29
Sweden 2 3 3 2 2 3 2
United Kingdom 3 2 2 3 5 4 5
Source: Global Innovation Index (2019); author’s compilation

God. XXXIII, BR. 1/2020. str. 217-226 221

Vlatka Bilas: Smart specialisation concept as a tool for improving innovation performance of the European Union member countries

It is of note that in the group of upper-middle in- ion country, ranking third in the world (Bilas et al.,
come countries, the top five global innovation lead- 2018).
ers were: (1) China, (2) Malaysia, (3) Bulgaria, (4) There are obvious disparities among the European
Thailand, and (5) Montenegro (Cornell University
Union Member States, and the gap has not been
et al., 2019). Of the two European countries in this
narrowing (European Commission, 2018d)16. It is
group, one is a member of the European Union
likely that today’s increasing inequality is the result
(Bulgaria), and the other is a candidate for future
membership (Montenegro). of insufficient uptake of technological innovations
and their wide diffusion (European Commission,
China improved its ranking in the Global Innova- 2018d).
tion Index considerably, moving up from the 35th
place it occupied in 2013 to the 14th place in 2019. There are 19 European Union countries and 180
regions registered on the Smart Specialisation
According to the European Innovation Scoreboard
Platform (Smart Specialisation Platform, 2019)17.
for 2019, in terms of innovation performance, the
According to the available data from the Platform,
European Union continues to lag behind South Ko-
rea, Canada, Australia and Japan, but it has over- there are around 120 smart specialisation strate-
taken the United States. The EU countries are di- gies developed in the European Union by Member
vided into four groups based on their performance. States and regions (Gómez Prieto et al., 2019). Since
Innovation leaders’ performance is well above the many regions already have experience with innova-
European Union average, while the performance of tion strategies, it was a good basis for the develop-
strong innovators is above or close to the EU aver- ment of smart specialisation strategies (Foray et al.,
age. Moderate innovators’ performance is below the 2012). According to the level of adoption of these
EU average, and modest innovators’ performance is strategies, the EU countries can be divided into
well below the EU average (Table 3). three groups: (1) countries which have adopted
only national smart specialisation strategies, (2)
Table 3 Performance of the European Union countries which have adopted only regional smart
Member States’ innovation systems according to specialisation strategies and (3) countries which
the European Innovation Scoreboard 2019 have adopted both national and regional smart spe-
cialisation strategies (Polverari, 2016).
Performance
Country The most frequent S3 priority areas identified in the
group
Innovation Denmark, Finland, the Netherlands, European Union countries are agri-food, key ena-
leaders Sweden bling technologies (KETs), health, energy and digi-
Austria, Belgium, Estonia, France, tal growth (Table 4).
Strong
Germany, Ireland, Luxembourg, the
innovators
United Kingdom Table 4 S3 priority areas in the European Union
Croatia, Cyprus, the Czech countries included in the Smart Specialisation
Moderate Republic, Greece, Hungary, Italy, Platform on national and regional levels
innovators Latvia, Lithuania, Malta, Poland,
Portugal, Slovakia, Slovenia, Spain Priority area Total %
Modest
Bulgaria and Romania Agri-food related 272 22
innovators
Source: European Commission (2019)15 KETs related 267 21
Health related 192 15
Compared to 2018, Estonia is the only country
that improved its performance and moved from Energy related 178 14
the group of moderate innovators to the group of Digital agenda related 144 11
strong innovators. A few countries dropped in their
rankings. Specifically, Luxembourg and the United Environment related 59 5
Kingdom dropped from the group of innovation Creative /cultural related 48 4
leaders to the group of strong innovators, while Slo-
venia dropped from the group of strong innovators Transport and logistics 38 3
to the group of moderate innovators. Social innovation, organisational
25 2
models, others
According to the Global Competitiveness Index
4.0, Germany is the best-positioned European Un- Source: Gnamus (2017: 15)18

222 God. XXXIII, BR. 1/2020. str. 217-226


Gnamus (2017) identified the overlaps in S3 related
priority areas. The most common ones were found
in KETs and energy; KETs and agri-food; agri-food
and health; digital agenda and energy, and digital
agenda and health. In total, in the five most fre-
quent thematic priority areas, Gnamus (2017) iden-
tified 128 overlaps.
Haegeman et al. (2019) analysed collaboration be-
tween joint undertakings and national and regional
European Structural and Investment Funds manag-
ing authorities. They define joint undertakings (JU)
as a form of public-private partnership set up in
strategic European Union research and innovation
areas. It is of note that in their report the authors
stressed the possibility of synergies between Struc-
tural and Investment Funds and other EU funding
programmes. The synergies are clearly encouraged
in the proposal of the European Commission for
the next Multi-annual Financial Framework 2021-
2027, which is yet to be approved by the European
Parliament and the Council. For instance, should
they choose to do so, EU Member States would be
able to transfer 5% of ESI funds to any other EU in-
strument to fund a project. This opens the possibil-
ity for some countries and regions to benefit from
closer collaboration with JU, as well as for other
types of partnerships, and for the integration of in-
dustry in the S3 process (Haegeman et al., 2019).
Recent industrial policies assume active govern-
ment role in facilitating innovations (Benner, 2019).
For the past three decades, the EU has experiment-
ed with some new approaches to industrial policy,
of which Horizon 2020 and smart specialisation
represent two major policy frameworks (Benner,
2019).
It can be stated that research and innovation strate-
gies for smart specialisation have been a useful tool
in developing innovation ecosystems in the Europe-
an Union countries (European University Associa-
tion, 2018). According to the European University
Association (2018)19, key success factors of these
strategies are: investing in human talent and skills,
enhancing the strategic involvement of universi-
ties, promoting the engagement of all EU regions,
strengthening collaboration, and reinforcing multi-
level governance.
There is a consensus about the main reasons why
innovators find it hard to start up and scale up their
businesses in the European Union. Most of these
reasons include: universities that lack expertise,
God. XXXIII, BR. 1/2020. str. 217-226
Review article
adverse attitudes to entrepreneurship, underdevel-
oped venture capital markets, the incomplete single
market, access to adequate human capital, and reg-
ulatory barriers (European Commission, 2018a)20.
The promotion of innovation should play a key role
in delivering on all the European Union policy pri-
orities. The European Union countries and regions
focus on their strengths in research and innovation
by establishing a strategy for smart specialisation,
which is a condition to receive Structural Funds
support via the European Regional Development
Fund (European Commission, 2017)21.
The EU countries should invest smartly and sus-
tainably in R&D and innovation at national level,
focusing investments on building human capital
and infrastructures for R&D and innovation and
prioritising those areas where they are strongest
(European Commission, 2017).
European Commission (2018b)22 announced that
the next long-term European Union budget 2021-
2027 will be focused on key investment priorities:
innovation, support to small businesses, digital
technologies and industrial modernisation, low-
carbon, circular economy, and the fight against cli-
mate change. For this period, the European Com-
mission is proposing a budget of €100 billion for
research and innovation (European Commission,
2018c)23.
5. Conclusion
Smart specialisation concept, although rather new,
has become an integral part of research & develop-
ment and innovation policies in all countries of the
European Union, where it originated. However, this
concept is becoming increasingly important out-
side the borders of the EU. Innovations are recog-
nised in this regional economic integration as one
of the main sources of economic growth and de-
velopment, i.e., a source of competitive advantage
which European Union seeks to maintain in an in-
creasingly competitive world.
Innovation performance strongly varies between
European Union Member States as does the speed
of implementation of the concept of smart spe-
cialisation into relevant policies. Consequently, the
speed of implementation of smart specialisation
strategies varies too. Due to data scarcity, it is still
not possible to compare the results of policy actions
taken thus far or still ongoing in the EU countries.
223
Vlatka Bilas: Smart specialisation concept as a tool for improving innovation performance of the European Union member countries
However, so far, it can be concluded that most of
the regions/countries of the European Union have
identified similar S3 priority areas to focus on (ag-
ri-food, key enabling technologies, health, energy,
digital agenda, etc.). One of the key factors which
will contribute largely to the achievement of the
desired results of the implementation of smart spe-
cialisation strategies is the ability of key stakehold-
ers (quadruple helix) to collaborate in all phases of
smart specialisation, from identifying the priority
areas to implementing policy actions.
224
The limitations of this paper lie in the fact that it
does not present concrete data and analysis, as it
is too early to conduct any evaluation of ongoing
policy actions. In terms of future research, it would
be interesting to gather data and compare policy ac-
tions and performance of the EU Member States in
order to identify best practices and thus contribute
to smart development policies.
God. XXXIII, BR. 1/2020. str. 217-226
 Review article

R

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E

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“Guide to Research and Innovation Strategies for Smart Specialisation (RIS 3)”, Publications Office of the European Union, Luxem-
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Brussels.

Vlatka Bilas

K    

    
 E 
S
Globalizacija predstavlja znatne izazove za sve zemlje, a pametna specijalizacija jedan od alata za unapre-
đenje inovacijskog potencijala zemalja što vodi poboljšanju ekonomske izvedbe i konkurentnosti. Pametna
specijalizacija obuhvaća identificiranje i ciljano jačanje konkurentskih prednosti zemlje s ciljem poduzima-
nja ciljanih strateških napora u svrhu poboljšanja konkurentnosti. Cilj rada je utvrditi izazove inoviranja i
pametne specijalizacije s kojima se suočavaju zemlje članice Europske unije. Rad pruža pregled trenutne
inovacijske izvedbe zemalja članica Europske unije, kao i njihovih strategija pametne specijalizacije, s po-
sebnim naglaskom na odabrana tematska prioritetna područja. Slijedom navedenoga, doprinos rada ogleda
se u dva ključna pravca. Prvo, u radu se daje pregled glavnih značajki koncepta pametne specijalizacije.
Drugo, pruža se pregled inovacijske izvedbe zemalja članica Europske unije i njihovih strategija pametne
specijalizacije.
Ključne riječi: pametna specijalizacija, strategija, inovacije, Europska unija

226 God. XXXIII, BR. 1/2020. str. 217-226

 CC BY-NC-SA

Ovainlicenca
Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products Croatia dopušta d
nekomercijalne svrhe
Tina Šugar Kristina Brščić licenciraju svoja djela
Institute of Agriculture and Tourism Institute of Agriculture and Tourism Review article
Department of Tourism Department of Tourism
Karla Huguesa 8, Karla Huguesa 8, Received: April 24, 2019
52440 Poreč, Croatia 52440 Poreč, Croatia Accepted for publishing: December Pogledajte
11, 2019 sažetak lic
tina@iptpo.hr kristina@iptpo.hr
Phone: +385981855054 Phone: +385994121813 This work is licensed under a
Creative Commons Attribution-
NonCommercial-NoDerivatives 4.0
International License
Imenovanje-Nekome
CC BY-NC-ND

CONSUMERS’ Ovo je najrestriktivnija

PERCEPTIONS OF ORGANIC
FOOD PRODUCTS IN CROATIA 5 od 6

A
In recent years, there has been an increasing interest in the development of organic farming, as people have
started to rethink their eating habits. Consumers perceive organic products as conducive to good health
and associate them with a healthy lifestyle. The paper aims to study consumers’ perceptions of organic
food products in Croatia. For the purpose of this research, a survey was conducted among visitors to the
organic food fair in Pula and members of Solidarity Ecological Groups (SEGs) in Croatia (Pula, Rovinj, and
Osijek). A total of 232 questionnaires were completed and returned. The collected data were analysed with
SPSS (22) software, and the results were presented using descriptive statistics, t-test, One-way ANOVA
and Principal Component Analysis (PCA). The results indicate that the typical organic food buyers are
university-educated women aged 25 to 44 years. The most frequently bought products include fresh fruit
and vegetables, honey, cereal and cereal products, milk and dairy products and olive oil. Consumers have
confidence in the certification of organic production and eco-labels. Moreover, the PCA results show that
the most important factors that influence organic consumer purchase behaviour are confidence and quality.
The results of this study add to the understanding of consumers’ preferences with regard to organic food
products and could be a useful aid in devising marketing strategies for such products.
Keywords: Consumers’ perceptions, organic food products, Croatia, Solidarity Ecological Groups (SEGs)

1. Introduction
In the last few years, the European Union countries
have seen a significant increase in the organic land
area (ha) and the number of organic producers. The
latest EU policies focus on the development of organ-
ic farming as an activity that contributes to sustain-
able development and considers natural resources,
the environment, animal welfare, i.e. the entire eco-
system. The number of organic consumers and con-
sumer demand for organically produced goods show
growth because of the increased awareness of the
health and environmental benefits of such products.
Organic production is defined as “a holistic pro-
duction management system which promotes and
enhances agro-ecosystem health, including biodi-
versity, biological cycles, and soil biological activ-
ity. It emphasises the use of management practices
in preference to the use of off-farm inputs, taking
into account that regional conditions require lo-
cally adapted systems. This is accomplished by
using, where possible, agronomic, biological, and
mechanical methods, as opposed to using synthetic
materials, to fulfil any specific function within the
system.” (FAO/WHO Codex Alimentarius Com-
mission, 19991).
In 2016, there were 57.8 million hectares of or-
ganic agricultural land worldwide, which accounts
for 1.2% of the total agricultural land, and 2.7 mil-

God. XXXIII, BR. 1/2020. str. 227-241 227

Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia
lion organic producers. The value of the global
organic market reached 89.7 billion US dollars
(FiBL&IFOAM-Organics International, 20182). The
top three countries with the largest share of organic
agricultural land were Australia, Argentina and Chi-
na (FiBL&IFOAM-Organics International, 2018).
In 2016, the EU-28 had a total area of 11.9 million
hectares under organic agricultural production and
295,618 organic producers (Eurostat, 20163).
According to the data on the official website of the
Ministry of Agriculture of the Republic of Croa-
tia4, in 2007, 7,577 ha were under organic agricul-
tural production, which accounts for 0.63% of the
total agricultural area. Croatia has seen significant
growth in organic farming over the years. Accord-
ing to the latest available data (2016) 93,814 ha of
land were under organic production, i.e. 6.07% of
the total agricultural area. A total of 3,546 produc-
ers were registered. In 2016, Croatia was among the
top 10 countries with the highest relative growth of
organic agricultural land which increased by 23.3%
from the previous year and by 846.2% compared to
2007. The retail sales of organic products in Croatia
reached €99 million, according to the latest avail-
able data for 2014 (FiBL&IFOAM-Organics Inter-
national, 2018). Gugić et al. (2017) analysed the data
on organic farming in Croatia over an eleven-year
period (2005-2015) and found that the area under
organic farming and the number of farms had in-
creased. Given the growing importance of organic
farming and environmental protection and an in-
crease in the production and demand for organic
products, the paper looks at the consumers’ percep-
tions of organic food products in Croatia. A field
study was conducted to explore consumer needs
for such products. The paper seeks to examine con-
sumers’ habits of purchasing organic food prod-
ucts, i.e. how often, where and which organic food
products they purchase the most. In that context,
the paper also explores whether consumers trust or-
ganic producers, eco-labels and the organic control
system in Croatia and attempts to determine their
opinions about the quality of organic food in com-
parison to conventional food. The main purpose of
the research was to gain a better understanding of
consumer perceptions of organic food products.
The findings may help in developing new marketing
strategies that would allow the producers to meet
the demand and increase consumer satisfaction
with their products.
228
2. Literature review
The market for organic products
In recent years, consumers have become more
aware of the benefits of organic production and
organic products, and of the need to protect the
environment for future generations. Therefore, the
demand for organic products in the EU countries
has increased. Nucifora (2001) concluded that the
demand for organic fruit and vegetables is likely
to remain relatively small unless the prices are re-
duced, and an effort is made to increase consumers’
understanding of organic products and their cer-
tification. Srinieng and Thapa (2018), pointed out
that the distribution of organic products should be
improved in order to increase their availability to a
larger number of consumers. Suppliers need to sat-
isfy consumers’ wishes for product availability and
faster delivery (Mozas-Moral et al., 2016).
In Croatia, Gugić et al. (2017) wrote about the state
and perspectives for the development of organic
farming in Croatia, concluding that the domestic
market is not well organised and that it is necessary
to increase investments in the market infrastructure
and organic control. To produce their products and
promote their placement on the market, organic
farmers need to be aware of the consumers’ prefer-
ences with regard to such products. Petljak (2010)
emphasises that organic products represent a grow-
ing product category in the offer of leading food re-
tailers in Croatia; however, the majority of organic
products is imported. Furthermore, consumers in
Croatia face the reduced availability and insufficient
supply of locally produced and sourced organic
products. Petljak (2010) suggests that in order to
enhance the development of the organic product
market in Croatia, it is necessary to educate con-
sumers, promote cooperation with domestic pro-
ducers, expand the fresh fruit and vegetable offer,
increase production volumes and lower the prices.
Renko and Bošnjak (2009) pointed out that on the
Croatian market, it is necessary to establish an um-
brella organisation of organic producers to facilitate
the placement of organic products on the market.
Consumer perceptions and attitudes towards
organic food products
Several authors have explored consumer satisfac-
tion with the supply of organic food products, and
the motives and factors that influence the purchase
God. XXXIII, BR. 1/2020. str. 227-241

of organic products (Brčić-Stipčević et al., 2010;
Brčić-Stipčević, Petljak, 2011; Chiciudean et al.,
2012; Kopić et al., 2008; Sharma et al., 2014; Zanoli,
Naspetti, 2002). Paul and Rana (2012) investigated
consumer satisfaction with the taste, quality, fresh-
ness, availability, packaging, size, variety, informa-
tion provided and delivery of organic products. They
concluded that consumers were satisfied with or-
ganic food for a variety of reasons. ‘Healthy content’,
followed by ‘environmental safety’ were reported as
the main reasons for purchase. Consumers tend to
prefer organic food for intrinsic characteristics such
as taste and quality (Chiciudean et al., 2012).
Several authors have used the Theory of Planned
Behaviour to examine consumers’ attitudes, behav-
iour, and intentions to purchase organic food (Ar-
vola et al., 2008; Yadav, Pathak, 2016; Yazdanpanah,
Forouzani, 2015; Zagata, 2012). Arvola et al. (2008)
indicated that “many consumers experience organic
food choice as the morally right thing to do” and
confirmed the usefulness of moral norms in under-
standing consumer intentions to buy organic food.
Yadav and Pathak (2016) concluded that moral at-
titude and health consciousness positively influence
the consumer’s intention to purchase organic food.
Koivisto Hursti and Magnusson (2003) found that
organic foods were positively described by consum-
ers and associated with “no concern, little reluctance
and no risks, and they were seen as ‘healthy’, as ‘not
used for profit only’, ‘serving a good purpose’, ‘nec-
essary’, and most of the respondents felt that they
are well aware of the consequences”. Based on pre-
vious studies by various authors, and considering
the trend in the literature that portrays sustainable
consumption and purchase of organic food as a way
for consumers to engage in socially desirable behav-
iour, Ham et al. (2018) used the Theory of Planned
Behaviour to examine and explain the discrepancy
between the intention to purchase organic food and
actual purchase behaviour in Croatia. They con-
cluded that consumers are aware that the purchase
of organic products is socially desirable but realise
that this behaviour is not yet mainstream.
Consumer perceptions and attitudes towards or-
ganic food products have been extensively studied
over the last decade (Buder et al., 2014; Bryła, 2018;
Hashem et al., 2018; Koivisto Hursti, Magnusson,
2003; Mehra, Ratna, 2014; Midmorea et al., 2011;
Mukul et al., 2013; Paul, Rana, 2012; Peštek et al.,
2018; Roitner-Schobesberger et al., 2008; Sangkum-
chaliang, Huang, 2012; Shafie, Rennie, 2012; Xie et
God. XXXIII, BR. 1/2020. str. 227-241
Review article
al., 2015). Shafie and Rennie (2012) emphasized that
“consumer perceptions of organic food are highly
subjective”. Based on his empirical study conducted
in Taiwan, Chen (2009) concluded that health and
environmental concerns are the main determinants
of a positive consumer attitude towards organic
foods. ‘Health consciousness’ was also found to
be a major contributor to the positive attitude to-
wards organic foods. According to Ueasangkomsate
and Santiteerakul (2016), consumers’ attitudes to-
wards organic food are influenced by the follow-
ing factors, ranked in order of importance: health
concerns, local sourcing, environmental concerns,
food safety and animal welfare. Lockie et al. (2002)
found that the main motivating factors for purchas-
ing organic food include, first and foremost health
concerns, followed by natural content, price, and
animal welfare. Mehra and Ratna (2014) identified
the following as significant factors affecting con-
sumer attitude towards organic food: perceptions
towards organic food, health consciousness, prod-
uct information, value for money, accessibility and
trust A similar conclusion was made by Croatian
authors Brčić-Stipčević et al. (2010) who found that
the main motives for choosing organic products are
health, environmental protection, animal welfare
and support for local farmers. The results of the
study conducted by Sangkumchaliang and Huang
(2012) also indicate that the main motives for pur-
chasing organic food are health and environmen-
tal benefits and support for local producers. These
findings are consistent with the results of a number
of other studies which indicated that health is the
primary motivation for purchasing organic prod-
ucts and that there is a need to regulate prices as a
major factor in the purchase decision (Annunziata,
Vecchio, 2016; Callieris et al., 2016; Ham, 2019;
Paul, Rana, 2012; Srinieng, Thapa, 2018; Xie et al.,
2015; Yiridoe et al., 2005).
Several studies that analysed the differences in the
demographic profile of consumers found that “or-
ganic buyers tend to have a higher education level
and disposable incomes, be families with children
and be older than those who have not bought them”
(Xie et al., 2015). Similarly, Roitner-Schobesberger
et al. (2008) reported that “the respondents who
have bought organic vegetables tend to be older,
have a higher education level and a higher fam-
ily income than those who have not bought them”.
In terms of gender, women show preference and
have a more favourable attitude towards the pur-
229
Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia
chase and consumption of organic food compared
to men (Sivathanu, 2015; Ureña et al., 2008). Fur-
thermore, the results of the study by Koivisto
Hursti and Magnusson (2003) show that women
are significantly more positive about organic food
than men and perceive organic food as a healthier
option (Mehra, Ratna, 2014). Mostafa (2007) con-
cluded that the majority of green consumers are
well-educated young adult women, who have more
money to spend. Chiciudean et al. (2012) concluded
that women are influenced by the fact that organic
food is trendy, while men pay more attention to the
brand. The study by Ureña et al., (2008) found that
men are inclined to pay a higher price for organic
food compared to women. Fillion and Arazi (2002)
concluded that the level of awareness of the benefits
of organic food is high, especially among consumers
living in urban areas.
A number of studies have examined consumer will-
ingness to pay higher prices for organic products on
different markets (Batte et al., 2007; Charatsari, Tzi-
mitra-Kalagianni, 2007; Gil et al., 2000; Krystallis et
al., 2006; Pellegrini, Farinello, 2009; Rödiger et al.,
2016). The results of several of these studies show
that consumers with a higher level of education
buy organic food more frequently (Brčić-Stipčević,
Petljak, 2011; Lockie et al., 2002; Sivathanu, 2015)
and are willing to pay a higher price for such prod-
ucts (Charatsari, Tzimitra-Kalagianni 2007; Mehra,
Ratna, 2014). Charatsari and Tzimitra-Kalagianni
(2007) concluded that women are willing to pay
more for organic vegetables, while Srinieng and
Thapa (2018) highlighted that women exhibit a
higher level of awareness of the benefits associated
with organic vegetables than men. The results of re-
search conducted in Romania indicated that most
of the respondents are willing to pay 20% more for
organic products than for conventional products;
however, the price of organic products was reported
to be the main limiting factor in the purchase deci-
sion (Bozga, 2015). Charatsari and Tzimitra-Kalagi-
anni (2007) concluded that consumers in Greece are
willing to pay, on average, 27.53% more for organic
vegetables than for conventional vegetables. Laheri
and Arya (2015) reported that the primary barriers
to organic product purchase are high prices and low
availability. In the study by Lockie et al. (2002) the
focus group suggested that the limiting factors for
consumption of organic food are cost, availability,
and convenience. Zagata (2012) found that consum-
ers who had bought organic food in the past con-
230
sider high prices and the availability of organic food
as only moderate obstacles to purchase.
Brčić-Stipčević and Petljak (2011) identified two
main reasons why consumers do not buy organic
food in Croatia: high prices and lack of information.
The results of this research show that consumers are
not quite sure about the definition of organic food
(Brčić-Stipčević, Petljak, 2011). Roitner-Schobes-
berger et al. (2008) confirmed that the lack of in-
formation on organic farming is a major limiting
factor for purchasing organic products. Therefore
it is essential to inform and raise awareness among
consumers about organic production and certifica-
tion. Furthermore, many researchers pointed to the
need to continually raise understanding and aware-
ness among consumers about the health benefits of
organic products and advantages of organic farm-
ing (Brčić-Stipčević, Petljak, 2011; Fotopoulos et al.,
1999; Gil et al., 2000; Laheri, Arya, 2015; Srinieng,
Thapa, 2018).
3. Methodology
Field research
The paper aims to investigate consumers’ percep-
tions of organic food products in Croatia. Second-
ary data were collected from the websites of the
Ministry of Agriculture of the Republic of Croatia,
Eurostat and IFOAM organisation. A survey was
undertaken for the purpose of this empirical study.
The survey questionnaire focused on the following
aspects of organic consumer behaviour: frequency
of purchase, place of purchase, most frequently
purchased products, willingness to pay for organic
products and level of agreement with a number
of statements about organic products. The survey
was carried out at an event called “Watch what you
eat” which took place in Pula on 7 and 8 November
2015. The respondents were visitors to the organic
food fair. In total, 83 questionnaires were returned.
To increase the sample size an online questionnaire
created on Google forms was administered. The link
to the survey was sent to the members of Solidar-
ity Ecological Groups (SEGs) in Istria County (Pula
and Rovinj) and Osijek-Baranja County. The survey
was active from November 2015 until April 2016.
The respondents were asked to fill in the question-
naire if they are active members of SEGs, i.e. if they
buy organic food products. This was done because
some of the members joined SEGs just to show
their support. In total, 149 online questionnaires
God. XXXIII, BR. 1/2020. str. 227-241

were returned. The respondents were instructed
not to take the online survey if they have already
filled in the questionnaire at the food fair. A total
of 232 questionnaires were returned and analysed.
A 5-point Likert scale (where 5 means strongly
agrees and 1 means strongly disagrees) was used
to assess the respondents’ level of agreement with
specific statements on organic products. A 5-point
Likert-type scale was used to rate the importance of
several organic food attributes in their decision to
purchase the product. The data were analysed with
SPSS (22) software and the results were presented
using descriptive statistics, t-test, One-way ANO-
VA and Principal Component Analysis (PCA).
Solidarity Ecological Groups
In the second phase, the survey examines the atti-
tudes of Solidarity Ecological Group (SEG) mem-
bers. The following section of the paper explains
what SEGs are. The Community-supported agricul-
ture (CSA) model was first introduced in Croatia
only a few years ago. Thus, few studies have investi-
gated this topic in Croatia. Sarjanović (2014) wrote
about the role of Community Supported Agricul-
ture in the development of organic agriculture and
concluded that the introduction of CSA in Croatia
could have a positive impact on the economic de-
velopment of rural areas and sustainable develop-
ment of agriculture.
Solidarity Ecological Groups in Croatia have
been modelled after similar groups in the world,
such as GAS (Gruppi di Acquisto Solidale-) in
Italy and AMAP (Association pour le Maintien de
l’Agriculture Paysanne) in France, which support
the development of small certified organic farms.
Fonte (2013) wrote about GAS as an alternative
system of food provision which enables consumers
to purchase healthy products directly from the pro-
ducer at affordable prices, respecting the environ-
ment and the principle of solidarity. GAS members
collectively plan the purchase and distribution of
goods. They also discuss the production planning
with producers and how to solve possible problems
during all stages of production. GAS members in-
sist on the just price, i.e. the price that is fair both for
the consumer and the producer. The goal is to make
organic food sustainable, so it is essential that or-
ganic products are accessible to everyone at afford-
able prices (Fonte, 2013). As stated by Sarjanović
(2014), the AMAP system is based on selling weekly
God. XXXIII, BR. 1/2020. str. 227-241
Review article
baskets of fruit and vegetables to consumers, and,
commonly, consumers are involved in agricultural
work. Furthermore, he emphasised that the most
positive change brought by these groups is the im-
provement of the relationship between producers
and consumers.
SEG in Croatia is an informal citizen’s initiative
developed on the principle of solidarity and sus-
tainability, which encourages the development of
organic farming to generate enough organic food
for all group members. The goal of SEGs is to pro-
mote a healthy lifestyle and raise awareness of the
benefits of organic products for both health and the
environment. The principles of SEG work are soli-
darity, mutual trust, cooperation, tolerance, trans-
parency and protection of producers and consum-
ers. The first SEG was founded in Pula in 2013. It
was followed by SEGs founded in Rovinj and Osijek
in 2014 and SEGs in Novigrad and Vukovar, which
were founded in 2016. Initially, they were called
Solidarity Exchange Groups but in 2015 their name
was changed to Solidarity Ecological Groups due
to changes in their work practices. In 2018, they
had about 300 registered members in Istria (Pula,
Rovinj and Novigrad), about 250 members in Osi-
jek and about 20 members in Vukovar. It is impor-
tant to note that the frequency of purchasing organ-
ic products differs among SEG members. The main
advantages for consumers are affordable prices of
organic food, direct contact with producers and
an informal agreement with producers about pro-
duction planning, depending on which products
consumers intend to buy. Members participate in
the work and decision-making on a voluntary ba-
sis. Consumers also have the option of ordering a
weekly small or large basket of seasonal vegetables
payable by monthly subscription. SEGs communi-
cate through Google Groups where product orders
and arrangements regarding the group’s actions
are being made. Thus, Solidarity Ecological Mar-
kets have been established, which take place once a
week in the cities where SEGs operate (Pula, Rovinj,
Novigrad and Osijek). Products are sold exclusively
by certified organic producers and include fresh
fruit and vegetables, olive oil, cereals, honey, dairy
products, lavender products and others. Siljan and
Cerjak (2017) examined the satisfaction of produc-
ers and consumers with the organic farmer’s mar-
ket (SET) in Pula. They found that the main motive
for visiting an eco-market was to purchase organic
products directly from the producers, and that the
consumers were very satisfied with the service pro-
vided and the quality of organic products.
231
Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia

4. Results
Socio-demographic characteristics of the
respondents
The socio-demographic characteristics of the re-
spondents are presented in Table 1. Women ac-
counted for a larger share of the sample (81.9%) than
men (18.1%). Most of the respondents were aged 25
to 34 (42.7%), followed by respondents aged 35 to 44
(28%), making a total of 70.7% in the age group 25 -
44. In terms of their education, most of the respond-
ents had a university degree (54.8%). The majority
(70.5%) had an average monthly household income
of €669 to €2,004. The average number of household
members was 3 (N=228, mode=3, median=3). Ac-
cording to the 2011 Census in Croatia, the average
household had 2.8 members, and according to the
Croatian Bureau of Statistics5, the average monthly
salary in 2016 was €760 (5,685 HRK).

Table 1 Socio-demographic characteristics of the respondents

Variables N Share (%)

Gender (n = 232)

Female 190 81.9

Male 42 18.1

Age group (n = 232)

18 - 24 11 4.7
25 - 34 99 42.7
35 - 44 65 28.0
45 - 54 30 12.9
55 - 64 21 9.1
> 65 6 2.6

Level of education(n = 232)

Primary school 1 0.4

Secondary school 64 27.6
College degree 20 8.6
University degree 127 54.8
Master’s degree or PhD 20 8.6

Average monthly household income* (n = 227)

≤ €668 (≤ 5,000 HRK) 29 12.8

€669 - €1,336 (5,001 – 10,000 HRK) 96 42.3
€1,337 - €2,004 (10,001 - 15,000 HRK) 64 28.2
€2,005 - €2,672 (15,001 - 20,000 HRK) 26 11.5
€2,673 - €3,340 (20,001 - 25,000 HRK) 9 3.9
> €3,341 (> 25,000 HRK) 3 1.3
*InforEuro , exchange rate 1 EUR = 7.48 HRK for July 2016 (rounded values), available at: http://ec.europa.eu/budget/
6

contracts_grants/info_contracts/inforeuro/index_en.cfm (Accessed on: 10 May 2018)

Source: Authors’ research

232 God. XXXIII, BR. 1/2020. str. 227-241

 Review article

The results in Table 2 show the respondents’ organic
food purchase behaviour. Most of the respondents
purchase organic products once a week (40.1%) fol-
lowed by those who buy them three times a week
(21.1%) and once a month (16.8%). These results are
not surprising as most respondents are SEG mem-
bers and purchase organic products often. To an-
swer the question which organic food products they
purchase most frequently, the respondents could
choose more than one answer. The results show
that consumers mostly purchase fresh fruit and
vegetables (85.3%), honey (50%), cereals and cereal
products (47%), milk and dairy products (37.5%)
and olive oil (35.8%). Another question to which
the respondents could select more than one answer
inquired about the place of purchase. The majority
(50.9%) reported purchasing organic products di-
rectly from producers, followed by those who pur-
chase them at the markets (44%) and in specialised
stores (42.7%). It is important to emphasise that for
this question an option ‘through Solidarity Ecologi-
cal Groups’ was added in the online questionnaire
because it targeted SEG members. Of a total of 149
online survey respondents 100 (67.1%) chose this
answer. It is of note that not all SEG members fol-
low SEG policy and opt for the default when order-
ing organic fruit and vegetables online. Some buy
them directly from the producer or at the markets.

Table 2 Organic food purchase behaviour

Variables N Share (%)
Purchase frequency (n=232)
Every day 21 9.1
Up to three times a week 49 21.1
Once a week 93 40.1
Up to three times a month 17 7.3
Once a month 39 16.8
Twice a year 9 3.9
Once a year 4 1.7
Most frequently purchased organic food products * (n=232)
Fresh fruit and vegetables 198 85.3
Processed fruit and vegetable products 63 27.2
Milk and dairy products 87 37.5
Medicinal and aromatic herbs 44 19.0
Honey 116 50.0
Olive oil 83 35.8
Cereals and cereal products 109 47.0
Meat and meat products 22 9.5
Other (chicken eggs, nuts and seeds) 5 2.2
Places where the consumers most frequently purchase organic food products* (n=232)
In specialised stores 99 42.7
At the market 102 44.0
Directly from the organic producers 118 50.9
In supermarkets 28 12.1
At organic fairs 85 36.6
Online 21 9.1
Through Solidarity Ecological Groups** 100 67.1
* the possibility to choose several answers
** data collected from 149 members of SEG via an online questionnaire
Source: Authors’ research

God. XXXIII, BR. 1/2020. str. 227-241 233

Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia

83.1% of the respondents consider that it is justi-
fied for organic products to be more expensive
than conventional products (n=231), and as many
as 95.7% of them are willing to pay more for such
products (n=232). When asked how much more
they would be willing to pay for organic products,
211 respondents answered they are would be will-
ing to pay 24% more.
Using an independent t-test it was found there is
no significant difference between male and female
respondents in terms of the frequency of purchase
(t (230) = - 0.320, p = 0.749) and willingness to pay
more for organic products (t (230) = - 0.997, p =
0.320). These results were anticipated given that
the respondents were surveyed at the organic food
fair, and most of them were also active members of
SEGs. One-way ANOVA showed no significant dif-
ferences among the respondents in terms of their
answers to questions as to the frequency of pur-
chasing organic products, whether it is justifiable
Table 3 Consumers’ perceptions of organic food products
Statements (n=229)
Organic products are too expensive.
Generally, the supply of organic products is poor.
I do not have confidence in the organic farming control system.
I do not trust eco-labels.
I do not trust organic producers.
Source: Authors’ research
for organic products to be more expensive, willing-
ness to pay more for organic than for conventional
products and other socio-demographic characteris-
tics (age, education and income).
To learn more about their perceptions of organic
products, the respondents were asked to indicate
their level of agreement with several statements
on a scale of 1-5, 1 being strongly disagree and 5
being strongly agree. The results show (Table 3)
that the respondents neither agree nor disagree
with the statements “Organic products are too
expensive” and “Generally, the supply of organic
products is poor”. They tend to disagree with the
statements “I do not trust organic producers”, “I
do not trust eco-labels” and “I do not have con-
fidence in the organic farming control system”.
Given that the majority of respondents were SEG
members, it is not surprising that they reported
trusting organic producers, eco-labels and the or-
ganic farming control system.
Average SD
3.04 1.24
2.57 1.27
2.46 1.22
2.14 1.13
2.12 1.11

Table 4 shows consumers’ perceptions of the im-
portance of specific attributes of organic food
products. The respondents were asked to rate the
importance of several statements on a 5-point
Likert-type scale (1 - not important, 5 - very im-
portant) in their purchase decision. The respond-
ents find that high quality of products is impor-
tant no matter what their price is (average=4.02).
Furthermore, they are of the opinion that organic
products must have an eco-label (average=3.89)
and should be locally produced and sourced (aver-
age=3.86). It is not particularly important to them
for the product to have attractive packaging (aver-
age=1.95).

Table 4 Consumers’ perceptions of the importance of specific attributes of organic food products
Statements (n=228) Average SD
It is important that organic products are of high quality no matter what their price is. 4.02 0.98
Organic products must have an eco-label. 3.89 1.19
It is important that organic products are locally produced and sourced. 3.86 1.10
Organic products must have attractive packaging. 1.95 1.15
Source: Authors’ research

To determine their perceptions of quality attrib- with several statements on a 5-point Likert scale
utes of organic food products, the respondents (1 - strongly disagree, 5 - strongly agree). The re-
were asked to indicate their level of agreement sults in Table 5 show that the respondents consider

234 God. XXXIII, BR. 1/2020. str. 227-241

 Review article

organic products to be of higher quality compared (average=4.67) and of higher quality (average=4.63).
to conventional products. Specifically, respondents They also believe that they have greater nutritional
strongly agree that organic products are healthier value (average=4.58) than conventional products.

Table 5 Consumers’ perceptions of quality attributes of organic food products

Statements (n=230) average SD
Organic products are healthier than conventional ones. 4.67 0.66
Organic products are of higher quality than conventional ones. 4.63 0.73
Organic products have greater nutritional value than conventional ones. 4.58 0.87
Organic products taste better than conventional ones. 4.42 0.88
Organic products are fresher than conventional ones. 4.07 1.11
Source: Authors’ research

To gain a deeper insight into the consumers’ percep-
tions of organic food products, a Principal Compo-
nent Analysis was conducted on a set of 14 variables.
The following variables were not used in the PCA:
“Organic products are too expensive”; “Generally,
the supply of organic products is poor”; “It is im-
portant that organic products are locally sourced”;
and “It is important that organic products are of
high quality no matter what their price is”. Thus, ten
variables were included in the analysis and three
principal components were obtained. However, the
Cronbach alpha for the second component was too
low (0.469) which led to the conclusion that the vari-
ables do not explain this component very well and
the statements “Organic products must have an eco-
label” and “Organic products must have attractive
packaging” were removed from the final analysis.
Thus, eight variables were analysed in the final anal-
ysis and two principal components were obtained.
Two components had eigenvalues greater than 1, ex-
plaining 67.68% of the total variance (KMO = 0.773,
Bartlett’s Test χ2 sig. 0.000). The PCA was conduct-
ed to identify the main factors that influence con-
sumer perceptions of organic food products. The
data obtained may be used in future research as the
basis for developing a predictive model.

Table 6 Principal Component Analysis (PCA) results, Consumers’ perceptions of organic food products
Pattern Matrix Component
Statement
1 2
I do not trust organic producers. .863
I do not trust eco-labels. .903
I do not have confidence in the organic farming control system. .890
Organic products are healthier than conventional ones. .840
Organic products taste better than conventional ones. .780
Organic products are of better quality than conventional ones. .804
Organic products have greater nutritional value than conventional ones. .799
Organic products are fresher than conventional ones. .664
Factor statistics
Eigenvalue 3.204 2.210
Variance, % 40.053 27.628
Cumulative variance, % 40.053 67.681
Cronbach alpha 0.819 0.863
Mean 4.47 2.24
Extraction Method: Principal Component Analysis.
Rotation Method: Promax with Kaiser Normalisation.a
a. Rotation converged in 3 iterations.
Source: Authors’ research

God. XXXIII, BR. 1/2020. str. 227-241 235

Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia
Two principal components were identified. The
first is the “quality” of organic products compared
to conventional products, which is associated with
the following statements: “Organic products are
healthier than conventional ones”; “Organic prod-
ucts taste better than conventional ones”; “Organic
products are of better quality than conventional
ones”; “Organic products have greater nutritional
value than conventional ones” and “Organic prod-
ucts are fresher than conventional products”. The
respondents rated the quality of organic products
the highest. The second principal component can
be described as “confidence” in organic products.
As can be seen in Table 6, this component includes
the following statements: “I do not trust organic
producers”, “I do not trust eco-labels” and “I do not
have confidence in the organic farming control sys-
tem”.
5. Discussion
The paper examines consumers’ perceptions of or-
ganic food products in Croatia. The results of the
survey indicate that the typical organic food buy-
ers are university-educated women aged 25 to 44.
In terms of gender, several studies have shown that
women show preference for organic food (Char-
atsari, Tzimitra-Kalagianni, 2007; Mostafa, 2007;
Sivathanu, 2015; Ureña et al., 2008). The results of
this study are consistent with the results of several
other studies (Xie et al., 2015; Roitner-Schobesberg-
er et al., 2008; Brčić-Stipčević, Petljak, 2011; Lockie
et al., 2002; Sivathanu, 2015) which showed that
consumers with a higher level of education pur-
chase organic products more often. Respondents
reported buying fresh fruit and vegetables, honey,
cereal and cereal products, milk and dairy products,
and olive oil once a week directly from producers
(50.9%) or at the market (44%). In comparison, only
15.5% of the respondents in the survey among Aus-
tralian consumers buy organic food directly from
farmers (Lockie et al., 2002). The results of this
study may be used to determine why consumers in
Croatia tend to buy organic food products directly
from producers, and to explore the availability of
organic food products in supermarkets in Croatia.
Future research is suggested to explore the gap be-
tween demand and supply of organic food products
and identify which products are in short supply. The
results could be used by organic producers in plan-
ning, i.e. expanding their production. The results of
the study show that the respondents trust organic
236
producers and have confidence in the certification
of organic production and eco-labels. These results
are not surprising because the surveyed respond-
ents were mostly members of SEGs, which operate
on the principle of trust between consumers and
producers. Moreover, organic farmers must justify
and maintain consumer confidence by maintain-
ing product quality. The study also found that the
respondents believe that organic food products are
healthier, of higher quality and have greater nu-
tritional value than conventional products. These
findings are consistent with those of Brčić-Stipčević
and Petljak (2011), who found that most consumers
in Croatia believe that organic food is healthier than
conventional food. According to Bozga (2015), Ro-
manian consumers also consider organic products
to be healthier, better tasting and safer than conven-
tional products. The present study found that most
of the respondents consider that it is justified for
organic products to be more expensive than con-
ventional products, and most of them are willing to
pay, on average, 24% more for such products. These
findings are also consistent with those of other stud-
ies (Annunziata, Vecchio, 2016; Aryal et al., 2009;
Ureña et al., 2008; Rödiger et al., 2016; Štefanić et
al., 2001; Radman, 2005) that suggest that consum-
ers are willing to pay a higher price for organically
produced food.
6. Conclusion
The main finding of the research is that consumers
value confidence and quality of organic food prod-
ucts the most. To facilitate the placement of organic
products on the market, it is recommended to con-
tinue developing Solidarity Ecological Markets and
Solidarity Ecological Groups. The development of
new SEGs should be encouraged by local authori-
ties as an example of good and sustainable practice
in Croatia. Also, it is necessary to improve the sup-
ply and availability of organic products in Croatia as
well as market control. The results of the research
could be a useful aid for producers of organic food
in developing marketing strategies.
The results of this research may serve as a base for
future empirical studies that would focus on SEG
members and organic consumers, in general. It is
suggested that future research looks at a larger sam-
ple of SEG members across Croatia to monitor the
development of SEGs and justify their existence. It
would be interesting to identify the main motives
God. XXXIII, BR. 1/2020. str. 227-241

for being a member of SEG and the benefits pro-
vided by an organisation like SEG to consumers.
Furthermore, it may be useful to determine the dif-
ferences between organic consumers who are SEG
members and those who are not. Further research
might explore the young consumers’ attitudes to-
wards organic food. Gil et al. (2000) concluded
that young people are an attractive target group
for organic food products because they are seek-
ing to improve their eating habits. It might also be
interesting to investigate whether local origin influ-
ences the perceived quality of organic products, i.e.
whether consumers consider that locally produced
and sourced products are of higher quality.
7. Research limitations
The limitation of the study is sampling bias. The
data were collected from SEG members and visi-
tors to the organic food fair, i.e. people who have al-
ready shown interest in organic products. Thus, the
God. XXXIII, BR. 1/2020. str. 227-241
Review article
results of the study may not be generalised to the
entire population of Croatia. The questionnaires
were sent via e-mail to members of three SEGs, in
Pula, Rovinj and Osijek. Hence, the sample is not
representative either of Istria County or of Croa-
tia. Moreover, the results should be validated by a
larger sample size to include consumers of organic
food who are not SEG members and who purchase
organic food through other distribution channels
(via the Internet, in supermarkets, in special organ-
ic food stores, etc.).
8. Acknowledgements
We want to thank all the participants of the survey
and members of SEGs for providing us with valu-
able information about SEGs.
We would also like to thank the reviewers for their
valuable suggestions and efforts towards improving
this manuscript.
237
Tina Šugar, Kristina Brščić: Consumers’ perceptions of organic food products in Croatia

R

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E

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ro/index_en.cfm (Accessed on: May 22, 2018)

Tina Šugar
Kristina Brščić

P   

   H

S
Razvoj ekološke poljoprivrede tema je o kojoj se sve više raspravlja. Posljednjih godina ljudi sve više obra-
ćaju pozornost na hranu koju konzumiraju. Potrošači percipiraju ekološke proizvode kao prihvatljive za
zdrav način života. Cilj rada je istražiti percepciju potrošača o ekološkim prehrambenim proizvodima u
Hrvatskoj. Za istraživačke svrhe provedeno je istraživanje i prikupljena su 232 ispunjena upitnika, i to na
sajmu ekološke hrane u Puli i putem internetskih mreža solidarnih ekoloških grupa (SEG) u Hrvatskoj
(Pula, Rovinj i Osijek). Prikupljeni podatci analizirani su pomoću SPSS (22) softvera, a za prikaz rezultata
korištena je deskriptivna statistika, t-test, One-way ANOVA i Principal Component Analysis (PCA). Prema
dobivenim rezultatima, tipični kupci ekološke hrane su žene u dobi od 25 do 44 godine s visokom stručnom
spremom. Ispitanici najčešće kupuju svježe voće i povrće, med, žitarice i proizvode od žitarica, mlijeko i
mliječne proizvode te maslinovo ulje. Potrošači imaju povjerenja u certificiranje ekološke proizvodnje i eko-
loške oznake, a prema PCA analizi najvažnije teme vezane uz potrošače ekoloških prehrambenih proizvoda
mogu se svrstati u skupine: povjerenje i kvaliteta. Rezultati istraživanja mogu biti korišteni za bolje razu-
mijevanje preferencija potrošača prema ekološkim prehrambenim proizvodima pri kreiranju marketinške
strategije za ekološke proizvode.
Ključne riječi: percepcija potrošača, ekološki prehrambeni proizvodi, Hrvatska, Solidarne Ekološke Grupe
(SEG)

God. XXXIII, BR. 1/2020. str. 227-241 241

 CC BY-NC-SA

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nekomercijalne svrhe
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Josip Juraj Strossmayer Josip Juraj Strossmayer Review article
University of Osijek University of Osijek
Faculty of Law Osijek Faculty of Law Osijek Received: November 4, 2019
Stjepana Radića 13, Stjepana Radića 13, Pogledajte
Accepted for publishing: December 16, 2019 sažetak lic
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Imenovanje-Nekome
CC BY-NC-ND

POVERTY: Ovo je najrestriktivnija

A CHALLENGE TO
THE PROTECTION OF HUMAN 5 od 6

RIGHTS OF OLDER PERSONS

IN THE REPUBLIC OF CROATIA
A
Poverty is traditionally studied from an economic point of view. However, along with the development of
international human rights law poverty is increasingly becoming the focus of legal science; it is studied
from the aspect of the protection of human rights and viewed as a result of structural and institutionalised
inequalities and discrimination. Poverty is one of the leading problems older persons encounter worldwide,
including in the Republic of Croatia. Therefore, the aim of this paper is to point to the problem of poverty
of older persons as a form of human rights violation, but also to the lack of research on this issue, as well
as to make recommendations for future research. Thus, the paper gives an overview of global and national
demographic trends, analyses exposure of older persons in the Republic of Croatia to poverty and outlines
the existing legal framework for the protection of the rights of the elderly at both national and global levels.
The paper also draws attention to ageism and negative stereotypes and prejudices towards older persons
that persist in society and affect the position of the elderly and highlights the need for a paradigm shift in
relation to their role in society.
Keywords: Poverty, older persons, human rights, discrimination, international law

the elderly, old age poverty, protection against vio-

1. Introduction
The demographic trend of population aging brings
many challenges. The United Nations warns that
countries with a pronounced trend of population
aging are likely to face fiscal and political pressures
regarding public systems of health care, pension and
social protection for a growing older population.1
Countries also face problems of ensuring political
participation of older persons, social inclusion of
lence and discrimination, or generally speaking, the
protection of the rights of older persons. However,
one of the biggest challenges is changing the way
we look at the elderly population and finding effec-
tive ways to tap into their potential. One of the in-
dicators of older persons’ position in society is their
exposure to increased risk of poverty both globally
and in the Republic of Croatia. Although poverty
is traditionally studied from an economic aspect,

God. XXXIII, BR. 1/2020. str. 243-254 243

Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia
along with the development of international human
rights law poverty is increasingly becoming the fo-
cus of legal science; it is studied from the aspect of
the protection of human rights and viewed as a re-
sult of structural and institutionalised inequalities
and discrimination. Indeed, rapid population ag-
ing significantly changes social, political, legal and
economic relations in society. This change is even
more complicated in our country due to some spe-
cific factors. Namely, damage caused during the war
in the 1990s impoverished the country significantly,
and the transition to democracy and the abandon-
ment of self-managed socialism caused further deg-
radation of social, economic and political relations.
A combination of these factors and the deep-rooted
negative stereotypes and prejudice about the older
population place the elderly in an unenviable posi-
tion where their fundamental human rights are be-
ing undermined, neglected and denied.
Hence, the aim of this paper is to point to the prob-
lem of poverty of older persons as a form of human
rights violation and to a lack of research on this is-
sue, as well as to make recommendations for future
research. The paper gives an overview of global and
national demographic trends, analyses exposure of
older persons in Croatia to poverty and outlines an
overview of the existing legal framework for the
protection of the rights of the elderly at both nation-
al and global levels. Finally, it proposes guidelines
for further development of policies and promotion
of older person’s rights. How to reduce the costs of
caring for the elderly and increase their inclusion,
health, and contribution to society?
2. The dynamics and the phenomenon of an
increase in the number of older persons in
the 21st century
Although aging is a biological process and con-
cept, old age is a socially constructed phenomenon,
whose definition depends on numerous factors.
When defining the notion of an older person, based
on the World Health Organisation (WHO) data,
it can be seen that different standards are used to
define old age.2 Bearing in mind the difficulty of
setting objective criteria when defining this notion
by using functional and social determinants of old
age or by using a multi-dimensional definition that
would include all of these elements, a chronological
definition of an older person is the most commonly
used one.3
244
There is no consensus on the age after which a
person becomes an “older person”. In its statisti-
cal reports, the United Nations (UN) defines older
persons as those aged 60 years or over.4 In most de-
veloped countries, the age limit of 65 years is laid
down as a determinant defining old age, which is
closely related to the statutory retirement age, a
situation applicable to the Republic of Croatia as
well (cf. the Social Welfare Act). In the absence of
a universally accepted definition (or at least the age
limit) of old age, the study of the position of older
persons is hampered by the fact that older persons
are an extremely heterogeneous group that differs
by gender, ethnicity, economic status, health status,
accepted social values, level of education, residence
in countries at different levels of development and
even the age itself. The paradox of aging consists in
the fact that the world’s population is getting older
and maintains vitality in psychological and biologi-
cal terms and remains mentally and physically fit
for longer compared to previous generations (Hel-
ebrant, 2005: 5). Chronological age is only loosely
associated with levels of functioning. The WHO
states that, unlike the youth population, the elderly
population is characterised by the sheer diversity of
health of its members, in terms of both physical and
mental capacities.5
However, population aging has unquestionably
been one of the leading demographic trends over
the past decades. According to the most recent
data, older persons are increasing in number and
today account for a growing share of the popula-
tion in virtually every country. This has had im-
plications for nearly all sectors of society, includ-
ing labour and financial markets, the demand for
goods and services such as housing, transportation
and social protection, as well as family structures
and intergenerational ties.6 There is no doubt that
the share of the elderly in the total population will
continue to grow. According to the UN data, there
were 901 million people aged 60 years or over in
2015 worldwide, an increase of 48% compared to
607 million in 2000. In 2017, there were an esti-
mated 962 million people aged 60 or over in the
world, comprising 13% of the global population.7
The population aged 60 or above is growing at a
rate of about 3% per year. By 2050, the number of
older persons in the world is projected to double
compared to 2015, amounting to about 2.1 billion.8
According to Eurostat estimates, about 511 million
God. XXXIII, BR. 1/2020. str. 243-254

people lived in Europe in 2017, over 19% of whom
were aged 60 or over.9
The population aging process has two features char-
acteristic of old age poverty, i.e. aging and femini-
sation of the elderly population. According to the
UN data, women live longer than men and make up
most of the elderly population, especially in the old-
est age group. In 2015, women accounted for 54%
of the world’s population aged 60 and over and 61%
of those aged 80 and over.10 The number of persons
aged 80 and over is projected to triple by 2050, and
by 2100 to increase to nearly seven times its value
in 2017.11 Globally, the number of persons aged 80
and over is projected to increase from 137 million
in 2017 to 425 million in 2050, and further to 909
million in 2100.12
The Croatian population is also old. The causes of
an aging population occurring in other developed
countries are also present in Croatia, i.e., lower
birth rates and increased life expectancy. As the
core of the migration contingent consists of persons
between the ages of 20 and 40, population aging in
Croatia was also influenced by specific factors such
as several major migration waves in the 20th century,
as well as casualties and emigration that occurred
during and after the Croatian War of Independence
(Živić, 2003: 309). It is estimated that 1,233,000 (i.e.
31%) and 1,309,000 (i.e. 36.8%) persons aged 60 and
over will live in the Republic of Croatia in 2030 and
in 2050, respectively.13
According to the estimates of the Central Bureau
of Statistics of the Republic of Croatia (CBS), there
were about 825,400 persons aged 65 and over in
2017, compared to 758,633 persons belonging to
the same group in the 2011 Census.14 According
to the 2011 Census, the share of persons aged 65
or over in the total population was 17.7%15, while
that share for 2017 is estimated at 20.1%16. Consist-
ent with global demographic trends, the number
of very old persons is increasing in Croatia. Thus,
according to estimates for 2017, in the total num-
ber of persons aged 65 or over, there were 256,900
persons between the ages of 65 and 69, 183,700
persons between the ages of 70 and 74, and 384,800
persons older than 75.17 These estimates also show
the feminisation of aging. According to this source,
out of the total number of persons aged 65 and old-
er, 492,400 (i.e., 59.66%) are women, while 333,000
(i.e., 40.34%) are men. CBS projections show that by
2051 the share of persons aged 65 or older in the
total population will increase to 27.6%.18
God. XXXIII, BR. 1/2020. str. 243-254
Review article
3. On the number of older persons living in
poverty in the Republic of Croatia: society
growing older and poorer
There has been no comprehensive empirical re-
search on poverty in the Republic of Croatia; hence,
there has been no systematic research on old age
poverty. Instead, papers that highlight this issue or
analyse available statistical data19 are sporadically
published (see: Šućur, 2008: 435-454). Most data in
Croatia are obtained from the Croatian Bureau of
Statistics (CBS). According to the CBS Indicators of
poverty and social exclusion for 2017, the at-risk-
of-poverty rate in Croatia was 20%.20 This indicator
was the highest in 2017 for persons aged 65 years
and over (28.6%). The difference by gender was the
highest in this age group and it amounted to 31.7%
for women and 24.1% for men.
As the elderly reach retirement, their income de-
creases. There is a rather small number of older
people who are financially self-sufficient and oth-
erwise independent. In 2017, the at-risk-of-poverty
rate of retirees was 24.5% (i.e., 26.7% for women
and 21.9% for men).21 According to the Croatian
Pension Insurance Institute, in April 2019, 457,365
retirees received a pension of less than HRK 2,000.
The average pension income in April 2019 was HRK
2,435.20.22 Rarely do retirees partially return to
the labour market, so their financial situation can
hardly change for the better. According to the Croa-
tian Pension Insurance Institute data for April 2019,
9,425 old-age and early retirement pension benefi-
ciaries work up to half of what typically constitutes
the standard for full-time employment, while 10,863
persons over the age of 65 are employed full time.23
Older persons living alone in a household are par-
ticularly exposed to the risk of poverty. According
to available data, 24.23% of the population aged
65 and over living in Croatia live in single-person
households, 77.5% of whom are women.24 By age
group, the oldest-old (aged 85 years and over) ac-
count for the largest share of single-person house-
holds (i.e., 30.9%), and this group is followed by the
middle old age group (75-84 years, 28.57%) and the
young old age group (65-74 years, 20.28%).25 The
at-risk-of-poverty rate for 2017 shows that single-
person households are most vulnerable, especially
those with persons aged 65 or over (47.8%).26 It is
also reported that female single-person households
are the most vulnerable (47.6% compared to 39.5%
245
Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia
referring to men at risk of poverty).27 The authors of
the Report on Social Development of the Republic
of Croatia state that a typical member of the elderly
population is 74 years old, has a monthly income of
up to HRK 2,000 and lives alone or with a spouse
(Bayley, Gorančić-Lazetić, 2006: 100). According to
the statistics of the Ministry of Demography, Family,
Youth and Social Policy of the Republic of Croatia,
as at 31 December 2015, 9,287 persons aged 65 and
over received a guaranteed minimum income (the
so-called social benefit), which accounts for 9.07%
of all beneficiaries of the minimum guaranteed in-
come or 1.16% of all persons aged 65 and over.28
Declining health associated with increased (health)
care needs puts older people in a position of pow-
erlessness and dependency. There are also many
persons with disabilities in the elderly population.
According to the statistics of the Ministry of De-
mography, Family, Youth and Social Policy of the
Republic of Croatia, as of 31 December 2015, 3,226
persons aged 65 and over received personal disabili-
ty allowance, which makes up 13.58% of all personal
disability allowance beneficiaries, while 33,859 per-
sons aged 65 and over received assistance and care
allowance, which makes up 50.68% of all assistance
and care allowance beneficiaries.29 A large number of
older persons, especially those living in rural areas,
live far away from health care institutions, which are
mostly located in larger cities. The elderly are also
affected by changes in the healthcare system, espe-
cially by rising costs of medications and treatments.
Older people experiencing financial hardship and
poor psychological and physical health are often
placed in nursing homes. In terms of institutional
elderly care in Croatia, 2.86% of the population aged
65 and over are placed in institutional households,
whereas 2.38% are placed in institutions for the el-
derly, of whom are 75.55% of women.30 Most worri-
some is the fact that a number of older persons are
forced to seek refuge in homeless shelters because
they frequently live in accommodation with no ac-
cess to basic sanitation services and other facilities.
According to survey data on homelessness in Croa-
tia, 5.7% of the total number of homeless people are
aged 65-69, and 3.4% are over the age of 70.31 Life
in such extreme circumstances, the abnormal and
unnatural state of poverty, might lead to mental ill-
nesses or disorders and deterioration in their health
condition in general. Out of 635 people who com-
246
mitted suicide in 2017, 300 persons were aged 60+
(i.e. 130 persons aged 60 to 69, 78 persons aged 70
to 79, and 92 persons aged 80+).32 Of the total num-
ber of people over 60 who committed suicide, 74.3%
were men (i.e. 223 persons).33
Research has shown that due to transition, high
unemployment rates, low pensions, gender and
age discrimination, reforms of health care, pension
and social welfare systems, older persons in Croa-
tia are poor and socially vulnerable, which implies
increased risk of both domestic violence and vio-
lence against older people in institutional settings
(Ajduković et al., 2008: 5-6). Since the perpetrators
are often family members and since such offences
take place at home or in institutions, they are rarely
recognised and penalised. An additional problem
is that elderly people are most often dependent on
perpetrators of criminal offences and do not report
their abusive behaviour out of either fear or igno-
rance. A huge problem today is economic (financial
or material) abuse, or abuse of an older person’s
money, property or assets (e.g. taking an older per-
son’s pension, abuse of power of attorney, change to
the last will, etc.) (Dessin, 2002: 269). Older persons
are easy targets for financial abuse, which can be
committed by unknown persons, but is very often
perpetrated by a person who is well known to them
or a person they depend on (Moore, Schaefer, 2004:
508).
Poverty is traditionally studied through objective
one-dimensional indicators such as income, con-
sumption and assets (Wang et al., 2011: 716). How-
ever, over the past decades, the idea of poverty has
been recognised as a multidimensional and com-
plex phenomenon. Theories of poverty, marginali-
sation and underclass are being developed in Amer-
ica and the Anglo-Saxon world, while the concept
of social exclusion is being developed in Europe,
which, in addition to the lack of material resources,
also implies deprivation in social, cultural, politi-
cal and other dimensions of life (Stark, 2009: 381-
430). As Lipman states, poverty is hunger, harmful
to the mind, body and soul; poverty is situational,
generational, urban and rural, expensive, persistent,
pervasive and criminalised (Lipman, 2017: 394-
396). Although the very notion of social exclusion
is rather new, Sen feels that there is a connection
between that concept and old ideas of poverty, as
lack of opportunity characterises both (Sen, 2000:
3-4). The Multidimensional Poverty Index (MPI)
God. XXXIII, BR. 1/2020. str. 243-254

that was conceptualised in 2010 for the purpose
of measuring multidimensional poverty is based
on Sen’s notion of poverty as a lack of opportunity.
The World Bank set the criterion for estimating the
number of people living in extreme poverty at $1.90
a day or less (Pogge, 2017: 516; Lipman, 2017: 398;
Novak, 1995: 59). When measuring the incidence of
poverty, the Multidimensional Poverty Index (MPI)
looks beyond income to understand how people
experience poverty in multiple and simultaneous
ways and includes three dimensions: health, educa-
tion and standard of living, which are assessed and
evaluated by means of ten indicators.34 People who
experience deprivation in at least one third of these
indicators fall into the category of multidimension-
ally poor.35
Methodological problems related to the measure-
ment of old-age poverty lead to problems with
assessing the total number of the elderly living in
poverty or extreme poverty. While the literature
on poverty is extensive, the specific focus on old-
age poverty is limited (Kwan, Walsh, 2018: 1-21).
Research dealing with poverty from a multidimen-
sional aspect or other aspects of deprivation other
than income is even scarcer. Relying solely on eco-
nomic indicators relating to expenditure on the el-
derly without taking into account the contributions
of older people both at an old age and throughout
their lifetime gives a wrong picture of the elderly
and their role in society. The research conducted by
Cook in the United Kingdom shows that the contri-
butions of older persons through taxation, consum-
er spending and other economically valuable activi-
ties such as social care provision and volunteering
were estimated to be worth nearly GBP 40 billion
in 2010, which is more than expenditure on them
through pensions, welfare and health care com-
bined, and this number is set to rise to GBP 77 bil-
lion by 2030 (Cook, 2011: 141-146). Furthermore,
as part of the economy, the silver economy recog-
nises aging population as a new source of economic
and business opportunities (Barković Bojanić et al.,
2018: 915). Despite these developments, and given
the current demographic revolution, the position
that is prevalent today is that without an adequate
strategy and policy response, economic growth will
be seriously hampered (Barković Bojanić, 2019:
1781).
God. XXXIII, BR. 1/2020. str. 243-254
Review article
4. Legal protection and the status of older
persons
4.1 Poverty in the context of violation of the
older persons’ rights
Poverty is one of the biggest problems older persons
encounter. Not all elderly people are poor; however,
they are at higher risk of poverty than any other age
group. In many societies, older persons comprise a
disproportionate number of the poor, the persistent
poor and the poorest among the poor.36 Poverty can
exacerbate the denial of basic human rights as well
as limit choices and opportunities for a tolerable life
for older persons.37 As early as 1975, Butler stated
that the tragedy of old age is not the fact that each
of us must grow old and die but that the process of
doing so has been made unnecessarily and at times
excruciatingly painful, humiliating, debilitating and
isolating through insensitivity, ignorance and pov-
erty (Butler, 1975, as cited in van den Heuvel, van
Santvoort, 2011: 297). Why is that the case and
what is the relationship between poverty and the
rights of older persons?
Human rights, inter alia, rely on the recognition
of the inherent dignity and equality of all human
beings and on the non-discrimination principle
(Lister, 2013: 109; 113). A human rights approach
to poverty thus raises fundamental ethical ques-
tions about how people in poverty are regarded and
treated and about the responsibilities of others to-
wards them (ibidem). However, mainstream society
pushes to the margins of society all those who are
in some way different. Poverty thus becomes one of
the indicators of social exclusion (Šućur, 2004: 49-
51). The process of excluding poor people from so-
ciety is aggravated when poverty interacts with so-
cial divisions such as gender, ethnicity and disability
(Lister, 2013: 112). This category certainly includes
old age. Bejaković states that inequality causes dis-
ruption (albeit small) to social capital and lower
participation of citizens in political life and society,
which reduces the possibilities of influencing the
decision-making process of the poor (Bejaković,
2004: 84). We must also take into account “shame
as a non-material and social dimension of pover-
ty”, which has devastating impacts on the poor (Jo,
2013: 514; Lister, 2013: 112).
Negative stereotypes and prejudices against older
persons are deeply rooted in society. Not much has
changed since the term ageism was coined in the
late 1960s by Butler who described it as “prejudice
247
Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia
by one age group toward other age groups” (as cited
in Mikolajczyk, 2015: 86). Although it is an old term
and a recognised type of discrimination, “ageism”
has not survived in international documents as a
term, despite the ban on age discrimination that
has become “more and more popular in the inter-
national fora” (ibidem: 106). Ageism is still socially
acceptable and often unrecognisable even when it
occurs at the level of design and implementation of
policies and measures directly affecting older per-
sons. In extreme situations, discrimination in old
age can reach such a level that we speak of struc-
tural violence at the level of society and it refers to
discriminatory social, health and other policies and
practices towards the elderly population, and to
inadequate and disturbing treatment of public ser-
vices (Rusac, 2006: 332-334). Whitton also believes
that ageism is still developing and that gerontopho-
bia has emerged recently as the fear of growing old
or aging, the fear of sharing scarce intergenerational
resources and a tendency to perceive older people
as a social problem (Whitton, 1997: 469).
Unfortunately, older persons are a group that does
not have enough information and knowledge about
their (human) rights and how to exercise them, and
as such, they easily become victims. Thus, it is ex-
tremely important for every modern state to com-
bat discrimination against older persons as success-
fully as possible, and to develop successful national
poverty reduction strategies. In this respect, it is
important to take into account not only economic
growth and development, but also social sensibility
of the state towards the elderly poor. By combat-
ing poverty in old age, ensuring access to adequate
health care, enabling older persons to participate
in the labour market and in social, cultural and
political life in general, older persons are given the
opportunity to enjoy a healthy life of good quality
for many years, their contribution to society is ac-
knowledged and they have the possibility of reach-
ing their full potential.
4.2 Legal protection and the status of older
persons at international level and in the
Republic of Croatia
Unlike the rights of recognisably vulnerable groups
such as children, women, minorities, people with
disabilities, members of the LGBT community, mi-
grant workers, racial groups, victims of torture, etc.,
older persons have no special protection under in-
ternational law but rather within the generic frame-
248
work for the protection of human rights. However,
there are very few provisions in international law
that directly address elderly rights and they are
the only vulnerable population that does not have
a comprehensive and/or binding international in-
strument addressing their rights specifically (Rodri-
guez-Pinzon, 2003: 1008). In 2008, Tang published
an important paper inviting the international com-
munity to adopt as soon as possible an international
convention that would establish a system aimed at
monitoring the protection of the rights of older
persons (Tang, 2008: 99, see also Sanchez Rivera,
2010: 281-282). To that end, Resolution 65/182 of
21 December 2010 was adopted by the United Na-
tions General Assembly, establishing an open-end-
ed working group that will work on a convention on
the rights of older persons. A future convention on
the rights of older persons could be modelled after
the Convention on the Rights of the Child, which
focuses on another particularly vulnerable group
that is defined on the basis of age (Rodriguez-Pin-
zon, 2003: 1008).
Due to the lack of such legal instrument, older peo-
ple have to seek protection of their rights within
the generic human rights framework. The relevant
international agreements in this context are as fol-
lows: the 1945 Charter of the United Nations, the
1951 Convention Relating to the Status of Refugees,
the 1966 International Covenant on Economic, So-
cial and Cultural Rights, the 1952 ILO C102 – So-
cial Security (Minimum Standards) Convention
(Part V), the 1958 C111 – Discrimination (Employ-
ment and Occupation) Convention, the 1967 ILO
C128 – Invalidity, Old-Age and Survivors’ Benefits
Convention and the 1988 ILO C168 Employment
Promotion and Protection against Unemployment
Convention. Age-based discrimination is explic-
itly mentioned in Article 7 of the UN International
Convention on the Protection of the Rights of All
Migrant Workers and Members of Their Families.
Another international treaty that explicitly refers
to older persons is the Convention on the Rights of
Persons with Disabilities and its Optional Protocol
(2006) (Articles 25(b) and 28(b)). The latter is ex-
tremely important because it represents a “dramat-
ic paradigm shift” from the medical-social welfare
model of disability to the human rights model that
focuses on capability and inclusion (Kanter, 2009:
572).
At European level, fundamental rights and free-
doms are governed by two key Council of Europe
God. XXXIII, BR. 1/2020. str. 243-254

conventions: the European Convention for the Pro-
tection of Human Rights and Fundamental Free-
doms (1950) and the European Social Charter with
protocols (1961). Article 4 of the Additional Proto-
col to the European Social Charter of 1988 provides
for the right of older people to social protection.
The rights of older people are clearly stated and reg-
ulated in Article 25 of the Charter of Fundamental
Rights of the European Union (Title III, Equality),
which is binding on all EU Member States.
Neither international nor EU law provide a compre-
hensive and systematic framework for the protec-
tion of older people’s human rights, and Croatia’s
legal system is no exception in this regard. Rather,
the protection of the elderly is fragmented and scat-
tered across a wide range of laws, by-laws and stra-
tegic documents. First of all, the Constitution of the
Republic of Croatia calls for the protection against
discrimination and social exclusion as a fundamen-
tal human right, whereas older persons are explic-
itly mentioned in Article 64, paragraph 3, in the
context of family and children’s obligation to look
after their elderly and helpless parents. The Consti-
tution also guarantees health and medical care (Ar-
ticle 59), as well as respect for and legal protection
of personal and family life, dignity, reputation and
honour (Article 35). Pursuant to Article 58 of the
Constitution, there is also the obligation of the state
to assist the weak and the helpless to meet their ba-
sic needs. The provision of Article 65, paragraph 1,
of the Constitution states that everyone shall have
the duty to protect children and helpless persons.
In addition to the Constitution of the Republic of
Croatia, the provisions of the Family Act, the Pro-
tection against Family Violence Act, the Anti-Dis-
crimination Act and the Free Legal Aid Act are of
special importance for the protection of the rights
of older persons. The Social Welfare Act, which
regulates the rights in the social welfare system, of
which financial assistance (guaranteed minimum
income and care allowance) and social services (ac-
commodation and in-home support services) are
particularly important, the Pension Insurance Act
and the Compulsory Health Insurance Act are sig-
nificant in the field of social rights and the protec-
tion of older persons against poverty.
5. Concluding remarks: How to stay peaceful,
happy and healthy as you age?
The WHO notes that social changes that will occur
by 2050 are largely predictable, so we can safely say
God. XXXIII, BR. 1/2020. str. 243-254
Review article
that the demographic transition to older popula-
tions will occur and that is exactly why we need to
make a plan and implement policies that will enable
the protection of older people and improve their
status.38 In this modern age, the biggest challenge
associated with the phenomenon of population ag-
ing in our society will be the ability to remain com-
mitted to the idea of dignity at any age, the idea
that every human being, regardless of their age,
possesses inherent and equal fundamental dignity
and basic rights (McLachlin, 2015: 112). As has al-
ready been said, old age poverty is closely related to
a grave violation of the rights of older persons, the
misunderstanding of the issue of aging in general
and its impact on society, as well as negative stereo-
types and prejudice leading to ageism.
National governments are faced with serious dilem-
mas as to which economic policies, changes to laws
and regulations, as well as social welfare and other
system reforms to implement to improve the sta-
tus of older persons. An equally serious problem is
an increase in the number of older persons and a
decline in the working-age population; hence gov-
ernments face problems with pension payments, as
well as maintenance of expensive health care and
other services for the elderly (Nash, 2004: 246).
The fact that this population group is constantly
and rapidly growing only exacerbates the prob-
lem. Therefore, we believe that at the level of the
Republic of Croatia we should focus on systematic
and comprehensive regulation of the rights and sta-
tus of this extremely vulnerable and growing group
of people, which is now dispersed across different
legal instruments. The Republic of Croatia must
take a more proactive approach to adopting special
social policies and legislation that would specifi-
cally regulate the status and rights of older persons,
which is consistent with contemporary tendencies
in the international community. It is necessary to
develop policies and measures to strengthen and
stabilise the health care and pension systems, to
improve social welfare services for the elderly as
well as measures to assist older people and their
families facing the challenges of aging (e.g. regu-
lating the status of a carer for an elderly person,
etc.). Further desirable actions would be to intro-
duce a state pension or other instruments to pre-
vent old age poverty, to sensitise the public to and
increase the “visibility” of older people in society,
as well as to address negative stereotypes of aging
and the elderly. It is particularly important to iden-
tify, prosecute and punish criminal offences against
249
Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia
older persons. However, it is also necessary to find
ways in which the elderly can feel useful by lever-
aging their potentials for the benefit of society as a
whole (through their employment or volunteering,
participation in social and cultural life, by making
use of their experience in the education of younger
generations, etc.).
However, it is difficult to achieve these goals without
sufficient data and analysis of the overall problem of
old age poverty and the position of the elderly in our
society in general. Statistical data and analysis are
key in this context. There is inadequate practical re-
search into the problems and status of older persons
in the Republic of Croatia, and new appropriate pol-
icies and legal solutions can be initiated only on the
basis of accurate research combined with existing
statistical data. Therefore, a systematic quantitative
survey on older people’s exposure to poverty, so-
cial exclusion and age discrimination (especially by
means of questionnaires and interviews) should be
carried out in the coming period by a multidiscipli-
nary team of scientists. Particular attention should
be paid to research into the specific problems of the
250
elderly in rural areas, together with the analysis of
the needs and problems of the elderly in urban ar-
eas. In these studies, attention should be paid not
only to risk factors but also to protective factors that
influence the risk of poverty in old age. Quantitative
research should be accompanied by qualitative re-
search into the quality of life and well-being of older
people in our society, and aim to find ways to help
strengthen their quality of life. On the other hand,
we also need to study the contribution of older
people to the Croatian economy through taxation,
consumer spending and other economically rel-
evant activities. Scientists and experts in various
branches of humanities and social sciences, but also
in biomedicine and health care (e.g. lawyers, econo-
mists, sociologists, social workers, psychologists,
culturologists, demographers and others) should be
fully involved in dealing with this problem. All of
them should participate in the design of the reforms
needed to ensure both sustainable development of
our country and respect for human rights, dignity
and the quality of life of all persons, including the
elderly.
God. XXXIII, BR. 1/2020. str. 243-254
 Review article

R

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E

1 United Nations (2018), “Global Issues – Ageing, available at: https://www.un.org/en/sections/issues-depth/ageing/ (Accessed on:
August 9, 2019)”
2 World Health Organization (2002), “Proposed Working Definition of an older person in Africa for the MDS Project“, available at:
http://www.who.int/healthinfo/survey/ageingdefnolder/en/ (Accessed on: August 9, 2019)
3 Zelenev, S. (Ed.) (2008), “Guide to the National Implementation of the Madrid International Plan of Action on Ageing”, United
Nations Department of Economic and Social Affairs, New York, p. 11
4 United Nations Department of Economic and Social Affairs (2013), “World Population Ageing 2013”, New York, p. 17
5 United Nations Department of Economic and Social Affairs (2015), “World Population Ageing 2015”, New York, p. 7
6 United Nations Department of Economic and Social Affairs (2017a), “World population ageing 2017 – highlights”, New York, p. 2
7 United Nations Department of Economic and Social Affairs (2017b), “World population prospects – The 2017 Revision”, New York, p.
11
8 United Nations Department of Economic and Social Affairs (2015), “World Population Ageing 2015”, New York, p. 9
9 Eurostat (2019), “Population structure and ageing”, available at: https://ec.europa.eu/eurostat/statistics-explained/index.
php?title=Population_structure_and_ageing#The_share_of_elderly_people%20_continues_to_increase (Accessed on August
9,2019)
10 United Nations Department of Economic and Social Affairs (2015), “World Population Ageing 2015”, New York, p. 18
11 United Nations Department of Economic and Social Affairs (2017b), “World population prospects – The 2017 Revision”, New York, p.
13
12 United Nations Department of Economic and Social Affairs (2017b), “World population prospects – The 2017 Revision”, New York, p.
13
13 United Nations Department of Economic and Social Affairs (2015), “World Population Ageing 2015”, New York, p. 125
14 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 115
15 Ostroški, Lj. (ed.) (2013), “Popis stanovništva, kućanstava i stanova 2011, Stanovništvo prema spolu i starosti“, Croatian Bureau of
Statistics, Zagreb, p. 10
16 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 115

252 God. XXXIII, BR. 1/2020. str. 243-254

 Review article

17 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 115
18 Mihel, S., Rodin, U. (2010), “Pobol i uzroci smrtnosti osoba starije životne dobi u Hrvatskoj u 2009. godini”, Croatian National
Institute of Public Health, Zagreb, p. 5
19 Nestić, D., Radić, A., Škreblin Kirbiš, I., Švaljek, S., Tomić, I. (2010), “Starenje stanovništva i održavanje primjerenog životnog stan-
darda u trećoj životnoj dobi“, Institute of Economics, Zagreb
20 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/
publication/2018/14-01-01_01_2018.htm (Accessed on: August 9, 2019)
21 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/
publication/2018/14-01-01_01_2018.htm (Accessed on: August 9, 2019)
22 Krstičević, G. (Ed.) (2019), “Statističke informacije Hrvatskog zavoda za mirovinsko osiguranje”, Year XVII, No. 4/2019, Zagreb, p.
38
23 Krstičević, G. (Ed.) (2019), “Statističke informacije Hrvatskog zavoda za mirovinsko osiguranje”, Year XVII, No. 4/2019, Zagreb, p.
19 and 7
24 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in
the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-
ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)
25 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in
the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-
ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)
26 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/
publication/2018/14-01-01_01_2018.htm (Accessed on: June 9, 2019)
27 Croatian Bureau of Statistics (2018), “Indicators of poverty and social exclusion, 2017” available at: https://www.dzs.hr/Hrv_Eng/
publication/2018/14-01-01_01_2018.htm (Accessed on: August 9, 2019)
28 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in
the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-
ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)
29 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in
the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-
ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)
30 Ministry of Demography, Family, Youth and Social Policy of the Republic of Croatia (2017), “Social Care Strategy for Older People in
the Republic of Croatia 2017-2020” available at: https://mdomsp.gov.hr/vijesti-8/strategija-socijalne-skrbi-za-starije-osobe-u-republi-
ci-hrvatskoj-za-razdoblje-od-2017-2020/6702 (Accessed on: August 9, 2019)
31 Družić Ljubotina, O. Kletečki Radović, M., Ogresta, J. (2016), “Slika podrške beskućnicima u Hrvatskoj”, Gradski ured za socijalnu
zaštitu i osobe s invaliditetom, Zagreb, p. 32
32 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 120
33 Croatian Bureau of Statistics (2018), “Statistical Yearbook of the Republic of Croatia”, Zagreb, p. 120
34 “United Nations Development Programme (2018), “The 2018 Global Multidimensional Poverty Index (MPI)”, available at: http://hdr.
undp.org/en/2018-MPI (Accessed on: August 9, 2019)
35 United Nations Development Programme (2018), “The 2018 Global Multidimensional Poverty Index (MPI)”, available at: http://hdr.
undp.org/en/2018-MPI (Accessed on: August 9, 2019)
36 United Nations (2018), “Report of the Independent Expert on the enjoyment of all human rights by older persons, A/HRC/38/50”,
available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G18/210/00/PDF/G1821000.pdf?OpenElement (Accessed on:
August 9, 2019), p. 6
37 United Nations (2018), “Report of the Independent Expert on the enjoyment of all human rights by older persons, A/HRC/38/50”,
available at: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G18/210/00/PDF/G1821000.pdf?OpenElement (Accessed on:
August 9, 2019), p. 6
38 World Health Organization (2015), “World Report on Ageing and Health”, Luxembourg, p. 3

God. XXXIII, BR. 1/2020. str. 243-254 253

Mira Lulić, Ivana Rešetar Čulo: Poverty: A challenge to the protection of human rights of older persons in the Republic of Croatia

Mira Lulić
Ivana Rešetar Čulo

S:    

    R H
S
Siromaštvo se tradicionalno proučava s ekonomskog gledišta. Međutim, razvojem međunarodnog prava
o ljudskim pravima siromaštvo sve više dolazi u fokus pravnih znanosti i proučava se s gledišta zaštite
ljudskih prava i na njega se gleda kao na posljedicu strukturalnih i institucionaliziranih nejednakosti i dis-
kriminacije. Upravo je siromaštvo jedan od vodećih problema s kojima se starije osobe susreću kako u
svijetu, tako i u Republici Hrvatskoj. Stoga je cilj ovoga rada ukazati na problem siromaštva starijih osoba
kao oblika kršenja ljudskih prava starijih i na nedostatak istraživanja o ovoj problematici te dati preporuke
za buduća istraživanja. Stoga će se u radu dati pregled demografskih tendencija, kako u svijetu tako i u
Hrvatskoj, analizirat će se izloženost siromaštvu starijih osoba u RH i dati pregled postojeće pravne mreže
zaštite prava starijih osoba na međunarodnom i nacionalnom nivou. Također će se upozoriti na ageism i
negativne stereotipe i predrasude prema starijim osobama koji perzistiraju u društvu i utječu na položaj
starije populacije te potrebu promjene paradigme u odnosu na ulogu starijih osoba u društvu.
Ključne riječi: siromaštvo, starije osobe, ljudska prava, ageism, diskriminacija, međunarodno pravo

254 God. XXXIII, BR. 1/2020. str. 243-254

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Josip Juraj Strossmayer University of Osijek Review article
Faculty of Law Osijek
Stjepana Radića 13, Received: January 27, 2020
31000 Osijek, Croatia Pogledajte
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LAGGING REGIONS: Ovo je najrestriktivnija

THE CASE OF EASTERN CROATIA

5 od 6

A
Uneven level of regional development is something that has characterized Croatia for a long time, with
Eastern Croatia lagging behind significantly. There are many indicators that substantiate such a condition as
well as the expected trends (e.g. GDP per capita in counties that belong to Eastern Croatia, huge population
drain in the region, development index calculated by the Ministry of regional development and many oth-
ers). As the development level of counties in Eastern Croatia is far from comparable to the most developed
ones (especially the City of Zagreb), it is necessary to identify areas for possible improvements in those
lagging regions. In the context of the European Union, the development level of counties in Eastern Croatia
is particularly low. Other EU members have also failed to achieve convergence towards total homogeneity,
but this paper focuses on chosen examples of countries and their regional policies that aimed to decrease
existing regional differences. Decentralization level is one of the important prerequisites to decrease exist-
ing regional differences and adequately apply regional policies.
This paper will theoretically examine the research on experiences of selected EU lagging regions and note
the importance of the relationship between regional and national economy. As all five counties in Eastern
Croatia can be characterized as lagging counties, one of the goals of this paper is, in accordance with theo-
retical insights into European experiences, to compare the situation and trends in the lagging regions and
counties in Eastern Croatia, going beyond economic considerations to include a much broader context.
Keywords: Regional development, lagging regions, Republic of Croatia, regional development inequalities,
counties

1. Introduction Regional economic policy, according to Vanhove

In the mid-20th century, regional development be-
came a central theme of academic and political life,
so those times mark the beginning of the regional
perspective. Regional equality in national economic
development has therefore become an important
part of the political agenda of many countries (Hig-
gins, Savoie, 2018). At the same time, each mem-
ber state of the European Economic Community
turned to different incentive programs in order to
stimulate development in less developed regions
(Higgins, Savoie, 2018).
(2018: 57), includes all forms of public intervention
aimed at improving the geographical distribution
of economic activities. Furthermore, in reality, re-
gional policy is aimed at correcting certain spatial
consequences of a free market economy, in order
to achieve two interconnected goals, economic
growth and improvement of social distribution.
Vanhove (2018: 57) lists five stages that need to be
distinguished: a) definition of regional problems
and their origins; b) definition of objectives, if possi-
ble in a quantitative way; c) definition of the strategy

God. XXXIII, BR. 1/2020. str. 255-270 255

Katarina Marošević: Lagging regions: The case of Eastern Croatia
to be followed; d) indication of the instruments to be
used; and e) evaluation of the policy.
Hansen et al. (1990: 2) emphasize that a policy-
oriented regional economy recognizes the impor-
tance of efficient markets, but also seeks to diagnose
sources of significant spatial inequalities and to use
regional analysis as a tool to identify the failures that
may occur in the economy as a whole. Regional poli-
cy represents all conscious and deliberate actions by
the authorities to change the spatial distribution of
economic and social phenomena, including popu-
lation, income, state income, production of various
goods and services, transport facilities, other social
infrastructure and even political power. Capello &
Nijkamp (2019) emphasize that the conceptualiza-
tion and coherent explanations of regional growth,
as well as the differences that arise, are a mystery to
the research community in many countries. There is
no single panacea to increase or accelerate the de-
velopment of a region in the national economy or in
supra-national context. Therefore, regional policy is
still in many cases “a black box”, and the outcomes
of intensified regional growth strategies are often
extremely unpredictable.
Structurally, the paper has four chapters. Following
the introductory remarks, the second chapter fo-
cuses on the theoretical background of the lagging
regions, their experiences and the factors of poten-
tial progress, with the distinction of two different
types of lagging regions. Furthermore, the same
chapter examines the opportunities to stimulate
development in lagging regions, with a focus on se-
lected European experiences. In the same chapter,
the emphasis is placed on theoretically pervasive
research on the state of regional development in
Eastern Croatia, i.e. five counties of Eastern Croa-
tia. The focus of the third chapter is on the position
of the Republic of Croatia and its lagging regions in
the context of the NUTS 2 classification1. In addi-
tion, this chapter elaborates on the macro image of
the national economy through the prism of NUTS
2 regions, but also an overview of the county per-
spective, which provides an insight into the situa-
tion within the national economy of the Republic
of Croatia. Chapter 4 summarizes the lagging re-
gions theory, as well as the situation and trends in
the form of concluding remarks for the Republic of
Croatia.
256
2. Theoretical framework of regions lagging
behind: European experience
There is an indisputable relationship between the
national economy and the regions of national econ-
omy, with the national economy as the sum of its
regional components (Römisch et al., 2017). How-
ever, these authors state that macroeconomic con-
ditions and policies that influence them do not have
the same level of impact in all regions, and therefore
macroeconomic development that positively affects
one region may even be detrimental to another re-
gion. It is therefore necessary to emphasize that the
problems faced by lagging regions are sometimes
related to national issues, but directly manifest in
the regions themselves.
Furthermore, certain regions are lagging not only in
comparison with the EU average, but also in com-
parison with national measures and other regions
of the same national economy. In lagging regions
there are usually structural problems and issues.
It is important to emphasize that those regions of
the European Union whose level of development is
significantly lower than the EU average are called
“catching up regions” (European Commission,
2015)2. There are two types of “catching up” regions:
i) low-growth regions are regions that experience a
persistent lack of growth and are less developed or
transition regions (regions with GDP/capita up to
90% of the EU average), which did not converge with
the EU average between 2000 and 2013; and ii) low-
income regions, those that remain well below the
EU average GDP per capita and apply to all regions
with GDP per capita below 50% of the EU average in
2013. According to the report “Competitiveness in
low-income and low-growth regions“ (2017: 1)3, both
types of regions perform well below the EU aver-
age in terms of employment, research and develop-
ment rates as a GDP share, quality and accessibility
of government. Farole et al. (2018)4 point out that
the diversity of regions also requires different ap-
proaches, and in this case, the use of different cohe-
sion policies. Furthermore, they state that it is the
recognition of the basic differences between the two
types of regions, the low-income and low-growth
regions, which is the decisive factor in creating a
cohesion policy. Low-income regions are poor, but
converge rapidly and many, though not all, are well
positioned. On the other hand, low-growth regions
are really lagging behind and are facing fundamen-
tal structural barriers to achieve convergence.
God. XXXIII, BR. 1/2020. str. 255-270
 Review article

Considering regional development in the context
of the European Union, Bachtler & Begg (2018)
emphasize the importance of innovation, human
capital and efficient institutions as key areas of fu-
ture policies. Human capital and institutions are
also mentioned by Farole et al. in the Report of the
World Bank about the European Union as the most
important determinants of economic performance
(2018: 48): “...some of the most significant determi-
nants of economic performance are social endow-
ments – human capital and institutions.“
Although human capital is very often cited as a
key component of future development, most EU
member states are in fact recording negative de-
mographic trends, and thus a problematic issue of
future human capital potential. For example, Farole
et al. (2018) state that demographics and technol-
ogy will be highlighted as drivers of divergence
(e.g. concentration of educated and skilled work-
ers around metropolitan areas and declining young
population, evident in most southern and eastern
European regions, which are losing more than 1%
of the population a year as a result of low fertility
and migration rates). In general, therefore, it can be
said that lagging regions report below average fertil-
ity and net migration5. For example, only two out of
the 45 lagging regions have fertility rates above the
EU average. Hence, there is increasing divergence in
relation to leading regions.
As the need for a specific regional policy in line with
the requirements of a particular region, or at least
several types of tailored regional policies, has already
been emphasized, the specific approaches to policy
in lagging regions are highlighted in Figure 1 below.

Figure 1 Templates of policy approaches in lagging regions

Source: Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on
the potential of Europe’s regions”, International Bank for Reconstruction and Development/The World Bank, Washington,
DC, available at: http://pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed
on: October 9, 2019)

The four quadrants shown (Figure 1) can be inter-
preted as follows (Farole et al., 2018): i) Densely
populated, centrally located region (upper right
quadrant): These regions are generally not those
belonging to lagging regions, with the stage of the
integration process as a possible reason. However,
if it does belong to lagging regions, usually it is a
serious failure of the government and/or major
institutional weaknesses or conflicts; ii) Densely
populated, peripherally located region (lower right
quadrant): these regions, which are as lagging re-
gions numerous in the European Union, especially
among “low-growth” lagging regions, represent the
types of regions where typical place-based sectoral

God. XXXIII, BR. 1/2020. str. 255-270 257

Katarina Marošević: Lagging regions: The case of Eastern Croatia
or spatial investments - for example, the implemen-
tation of Smart Specialization Strategies — were ef-
fective in overcoming coordination errors to unlock
agglomeration; iii) Sparsely populated, peripherally
located regions (bottom left quadrant): These re-
gions generally lack the key ingredients required for
sustainable transformation to develop high-added-
value activities as they lack agglomeration potential
and face severe market access constraints. A focus
is needed on creating equality of opportunity for
individuals in the region - to develop institutions to
support the quality of social services with a focus
on human capital accumulation. In rare peripheral
regions where advanced quality institutions ex-
ist and human capital has already reached a high
level, a targeted opportunity for regional economic
development should emerge through existing insti-
tutions; iv) Sparsely populated, centrally located re-
gions (upper left quadrant): These regions are often
located near larger agglomerations, so the priority is
to improve connectivity to the agglomeration. Tar-
geted sectoral investments may also be relevant in
this type of region. The challenge is the limited po-
tential of agglomerations, meaning that specializa-
tion is extremely important, which raises the typical
risk of regional industrial policy that aims to “pick
winners“.
If we discuss specific examples of regional policy
implementation, we can consider the research of
Brown et al. (2017)6, who studied eight selected lag-
ging regions in EU countries (Spain, Italy, Portugal,
Romania, Greece, Bulgaria, Hungary, Poland) and
reported remarkable heterogeneity in the approach
to those lagging regions. Among the eight studied,
Spanish regions have a bridge federal structure with
regions enjoying a high degree of autonomy while
adapting their policies to investment needs, even
despite the imposed central budget constraints. It
should be noted that the competences of the Span-
ish regions, the so-called autonomous communities
include, but are not limited to, territorial develop-
ment, the economy and economic development,
agriculture, social policy, the environment, health,
education and others, either shared with the state or
kept within autonomous communities.
The degree of autonomy of regions and national
policies regarding regional development are strong-
ly related, as pointed out by Brown et al. (2017).
Among the eight countries studied, Italy tradition-
ally has the most developed national strategy for
regional development, with a strong focus on its
258
lagging southern regions. This is reflected in the
Italian organizational approach, and thus the na-
tional regional policy is highly institutionalized, in
terms of both the amount of funding and their own
resources, in order to boost growth in developing
regions. Spain is right behind Italy (relative to the
countries studied), with a national regional policy
in place. Contrary to Italy, in Spain’s regional policy,
given the high degree of autonomy of its regions,
national policies do not interfere with regions in
the form of setting investment priorities. Instead,
Spanish policy is implemented through the redis-
tribution of funds from more to less developed
regions, thus helping economically weaker regions
in a financial sense. Among other countries in the
analysis, Greece with its own national regional
policy, mainly operates through the centrally estab-
lished “Public Investment Program”. Compared to
Italy and Spain, the size of Greece’s national policy
in financial terms is small, which makes Greece sig-
nificantly more dependent on EU cohesion policy
than the other two countries. For the remaining five
countries, including Portugal and four Eastern Eu-
ropean countries whose regions are lagging behind,
it is necessary to emphasize that there are no major
national regional policies.
Farago & Mezei (2018) state that the international
academic literature pays insufficient attention to the
fact that unified European regional/cohesion policy
and regulations, as well as changes that occur with-
in it, produce different effects in developed (center)
and transition countries (periphery). The countries
of Central and Eastern Europe are lagging behind in
terms of progress and future in the European Un-
ion. In addition, academic debates about European
regional policy and planning are also dominated by
Western and Northern European leaders. There-
fore, authors emphasize that in a “unified Europe”
periphery should also be entitled to its share in the
reconstruction of Europe.
The following chapter is a comprehensive theoreti-
cal account of previous research into regional devel-
opment of Eastern Croatia.
2.1 Review of previous regional development
research of Eastern Croatia
There are five counties in Eastern Croatia and all of
them have an extremely low level of development,
most of them lagging behind. There are many rea-
sons for this, but we can single out consequences of
God. XXXIII, BR. 1/2020. str. 255-270

the war as the main one. Accordingly, it should be
noted that the academic literature contains analy-
sis that indicates the possibility of exploiting war-
affected areas for economic gain, for example for
tourism purposes. For example, Šulihoj (2017) ex-
plored the mentioned topic for the territory of the
Republic of Croatia, pointing out that war-damaged
areas can become tourist destinations. Neverthe-
less, as stated by Klarin (2018), it is necessary to
introduce the concept of sustainable development,
which would reduce the negative impact of tour-
ism. The implementation itself depends on a num-
ber of factors. Highlights are, for example, creating
a stimulating institutional environment, proactive
local governments, engaging the local population
and educating the stakeholders about governance
and sustainable development principles. Search-
ing for the means of sustainable development, Bar-
toluci et al. (2015) analyze the state of rural tourism
in Croatia and emphasize the need to use ecologi-
cally preserved space according to the principle of
sustainable development. Denona Bogović et al.
(2016), analyze the developmental characteristics
of Eastern Croatia and the increase in developmen-
tal divergence, i.e. regional inequality, with respect
to comparative advantages. They propose the im-
plementation of the “green economy“, which reit-
erates the importance of sustainable development
principles. So, the prerequisites for implementa-
tion and transformation of the current economic
structure of this region should be oriented towards
a strategic commitment and implementation of de-
velopment policy according to the principles of a
green economy.
If we take into account the demographic factor,
recorded trends are very discouraging.7 In terms
of unfavorable trends, Matišić & Pejnović (2015:
101) claim that “Eastern Croatia is the largest
problem area of Croatia in recent times.” Lončar &
Marinković (2015) also analyze the socio-demo-
graphic processes in Eastern Croatia. At the heart
of their research, which relies on several selected
demographic and economic indicators, is the struc-
ture of certain economic activities as well as the
population, which they emphasize should be the
basis of regional development.
Continuing on the earlier point of the impact of hu-
man capital on changes in regional development,
Borozan (2015) highlights significant regional
economic disparities, explores internal migration
flows, tests for economic convergence and assesses
God. XXXIII, BR. 1/2020. str. 255-270
Review article
the effects of internal migration (net and gross) on
convergence and growth. The results point to the
following: i) contrary to expectations based on neo-
classical theory, Croatian counties face complete
and conditional economic divergence; ii) in- and
out-migration works symmetrically; iii) net migra-
tion mainly appears to be a force that accelerates
divergence, just opposite to gross in- and out-migra-
tion; iv) although estimated parameters of net and
gross migration have expected signs, their effect size
lies in the range of statistically significant but mi-
nor to insignificant; v) migrant characteristics and
behavior matters when the effect size is considered.
In addition to its focus on migration flows, the aca-
demic literature on regional development also ex-
amines other important economic issues. Talking
about public sector employment and the share of
self-employment, Botrić (2012) shows that at the
regional level, public sector employment is nega-
tively correlated with the share of self-employment
and that the educational level of the self-employed
is an important category for clarifying differences
in Croatian counties.
Current research also includes an analysis of the
sectoral structure of the economy for the five coun-
ties of Eastern Croatia, covering the period from
2009 to 2017. The results of the analysis show that
some counties have relatively smaller local com-
petitiveness than the national average, while some
have a positive value of the local component, which
indicates an increase in local competitiveness
(Trinajstić et al., 2019). Regions’ strength tests are
also conducted at the regional level and through
some empirical analyses. Čučković et al. (2013), for
example, examine the regional competitiveness of
Croatian regions, grouping them based on major
competitive strengths and weaknesses. The analysis
confirms that Central and Eastern Croatia, on aver-
age, are the least competitive regions and require
long-term efforts to catch up with the rest of the
country. Furthermore, decision makers should cer-
tainly take into account that significant investments
are needed to support entrepreneurial and inno-
vation activity along with investments in business
infrastructure. It is important to emphasize that
the potential on which the competitiveness of the
region will be built in the future is positively cor-
related with the level of education of its inhabitants.
Elaborating on the suggestions about the necessity
of education as a part of human capital that can be
improved, the author of this paper had an insight
259
Katarina Marošević: Lagging regions: The case of Eastern Croatia

into the Statistical Reports of the Central Bureau
of Statistics8 on higher education in 2013-2016 by
place of residence. These reports show that the
share of students who have graduated from uni-
versity or professional studies by county and city/
municipality of residence, decreased in all coun-
ties of Eastern Croatia, and in the City of Zagreb in
2016 compared to the initial observation in 2013,
suggesting the already well-known demographic
problems and “loss” of population. It is clear that
long-term education processes should be taken into
account, and the alarming results of the reduced
enrollment quota may not be visible for three, four
or more years, but should not be neglected.
The economic development of individual counties
is presented in a European context by the analysis
of the Croatian Chamber of Economy (2019). It is
evident that in 2015 Croatian counties were in a
more unfavorable situation than in 2008 compared
to each other, but also to the context of the Euro-
pean Union NUTS 3 regions (Table 1).
It should be emphasized that such a change may lie
in the fact that other NUTS 3 regions of the Euro-
pean Union have advanced significantly compared
to the 2008 data, but also potentially in the poorer
performance of the areas for which such indica-
tors were recorded. Furthermore, the same table
also shows the development index in 2018, again
showing all five counties of Eastern Croatia lagging
behind significantly, with slightly better recorded
results of Osijek-Baranja County compared to the
remaining counties of Eastern Croatia.

Table 1 Comparison of the rankings of the counties of Eastern Croatia and the City of Zagreb by GDP
per capita by PPS, 2015 (EU28 = 100) and for 2008, including the development index
Ranking Ranking Development index
County Index 2015 Index 2008
2015 2008 20189
City of Zagreb 362. 336. 107 109 117.758
Osijek-Baranja 1236. 1174. 46 53 96.009
Vukovar-Srijem 1309. 1257. 34 40 91.992
Požega-Slavonia 1313. 1256. 33 40 93.947
Virovitica-Podravina 1317. 1242. 32 42 90.666
Brod-Posavina 1318. 1279. 32 37 93.449
Source: Author’s editing, according to sources from Croatian Chamber of Economy (2019), “Razvijenost statističkih regija
NUTS3 razine u Europskoj uniji”, available at: https://www.hgk.hr/documents/gospodarska-razvijenost-nuts-3-regi-
ja5c49bd13e22f8.pdf (Accessed on: October 13, 2019); Development index 2018 values were taken from calculations
done by the Ministry of Regional Development and EU Funds, available at: https://razvoj.gov.hr/o-ministarstvu/djelo-
krug-1939/regionalni-razvoj/indeks-razvijenosti/vrijednosti-indeksa-razvijenosti-i-pokazatelja-za-izracun-indeksa-ra-
zvijenosti-2018/3740 (Accessed on: November 17, 2019)

The positive impact of entrepreneurial activity on
economic growth is significant, as confirmed by
the research conducted by Korent et al. (2015), em-
phasizing the importance of entrepreneurship for
regional development at the level of Croatian coun-
ties. Advisable recommendations for the underde-
veloped regions of Croatia can be found in good
practices of foreign countries. For example, Bojar
et al. (2016) cite a positive example of clustering in
Polish agriculture and food production industry. In
addition, there are indications of increased impor-
tance of such trends for regional development and
growth, making local and regional business estab-
lishments and farms more competitive and profit-
able. Many EU member states have also implement-
ed cluster-based strategies, and Anić et al. (2019)
emphasize different aspects of clustering, with
some members interested in lobbying activities,
while others are focused on networking and inno-
vation for the most important clustering goals. The
Ministry of Economy, Entrepreneurship and Trade
(2019)10 source points out that the Smart Speciali-
zation Strategy of the Republic of Croatia for the
period 2016-2020 is focused on the need to connect
and involve all participants in the innovation sys-
tem, i.e. business and scientific communities with
local and regional government and state adminis-
tration. Obadić & Tijanić (2014) emphasize the im-
portant role of clusters in accelerating regional and
national economic development. Based on mul-

260 God. XXXIII, BR. 1/2020. str. 255-270


tivariate analysis results these authors found that
those who felt clusters were unnecessary were also
members of a cluster with a small number of em-
ployees who were dissatisfied with various jointly
organized marketing activities, lobbying, research,
development and education. Therefore, results also
indicate that more effort should be put into trying
to use clustering capabilities and opportunities, as
well as defining the purpose, objectives and benefits
of clustering in a simpler way.
Therefore, in the continuation of this paper, an at-
tempt is made to investigate at what level it is possi-
ble to stimulate the development of lagging regions,
taking into account various barriers that may be en-
countered when creating certain solutions.
2.2 Encouraging the development of lagging
regions: cohesion policy
Given that regional economic development, as
well as the needs of different regions, is a process
related to the category of dynamism, adjustments
are needed in the ways of implementing regional
policy as well as in setting its goals. According to
the UNESCO website (2017)11, EU regional policy,
i.e. cohesion policy, aims at improving the econom-
ic well-being of regions in the European Union and
avoiding regional differences, with regional policy
directed at all regions and cities in the European
Union to ensure job creation, business competitive-
ness, economic growth, sustainable development,
but also to improve the quality of life of the region’s
inhabitants. Furthermore, as stated by Tulumello
(2016), European cohesion policy was established
in response to the risk of market integration that
could possibly exacerbate national and regional
socio-economic imbalances.
Vanthillo & Verhetsel (2012: 1) point out: “Due to
the changing role of the “region” in economic devel-
opment, it appears that policies targeting regions
underwent significant changes in goals, geographi-
cal scope, governance and policy instruments.”
Bachtler, Mendez & Polverari (2016) provide a
comprehensive overview of proposals for possible
changes to the expected cohesion policy for the
coming period taking into account, among other
things, a potential way of improving the existing
administrative capacity of the regions. Gänzle et
al. (2018) cite that the European Union is imple-
menting macro-regional strategies as a new EU
governance tool, combining territorial community
God. XXXIII, BR. 1/2020. str. 255-270
Review article
cooperation and a repertoire of cohesion policies
with intergovernmental regional cooperation in-
cluding EU Member States and partner countries
(e.g. Baltic Sea, Danube, Adriatic-Ionian i Alpine
macroregion strategies). In order to better monitor
and harmonize inter-regional and intra-regional
needs, certain analysis are also carried out, e.g.
Chmieliński (2017)12, on the topic of policy recom-
mendations on how to integrate cohesion policy
with urban and rural policies.
Regarding regional policy and regional develop-
ment, Rodriguez-Pose & Ketterer (2019) state some
interesting facts on econometric research for the
period 1999-2013: i) the quality of government is of
utmost importance in regional growth; ii) relative
improvements in government quality are a strong
driver of development; iii) one-size-fits-all policies
in the case of lagging regions are not the solution;
iv) improving the quality of government is crucial
for low-growth regions; v) in low-income regions,
the ability to reduce contributions is still a major
barrier to development. Thus, the low-growth re-
gions of Southern Europe benefit the most from the
improvements provided by the government, while
the low-income regions of Central and Eastern
Europe consider investing in traditional drivers of
growth to be the main tool for successful economic
development.
Given the evident complexity of creating adequate
regional policies to minimize disparities and achieve
convergence of economic outcomes, as stated by
Farole et al. (2018: 62), remains an unrealistic ex-
pectation. Therefore, it is crucial to form so-called
fundamental theories of place-based policy, thereby
removing market barriers to production factors as a
mechanism to stimulate hidden economic resourc-
es rather than redistribution or equal convergence.
For the post-2020 period, it is recommended to
implement a region-centered cohesion policy that
focuses solely on maximizing regional potential.
Two goals are set: i) to maximize regional poten-
tials, measured not only by output per capita but
also by the capacity to create quality (productive)
jobs (EPI - Economic Potential Index); ii) to ensure
equality, that is, an opportunity for individuals to
reach their potential. So, when creating place-based
goals, there is a clear focus on potentials. Further-
more, while the goal of convergence remains, it is
not defined in terms of spatial economy outcomes
but in terms of social outcomes and individual op-
portunities.
261
Katarina Marošević: Lagging regions: The case of Eastern Croatia
According to the New Cohesion Policy (2018)13 for
the period 2021–2027, as the European Union’s
main investment policy and one of its most concrete
expressions of solidarity, the European Commission
has proposed a modernized version of Cohesion Pol-
icy, which for example in the context of regional de-
velopment includes: i) regional development invest-
ments targeted by Objectives 1 and 2; 65 to 85% of
ERDF and Cohesion Fund resources will be directed
towards these priorities, depending on the relative
economic strength of the member state; ii) cohesion
policy continues investment in all regions, respect-
ing the categories of less developed, transitional and
more developed; iii) new types of interregional and
cross-border programs (“Interreg”) will help mem-
ber states to overcome cross-border obstacles and
develop common services, and the Commission
also proposes a new instrument for border regions
and member states seeking to harmonize their le-
gal frameworks, called The European Cross-Border
Mechanism; iv) a development template based on a
successful pilot programs 2014-2020, with the Com-
mission proposing the creation of an Interregional
Innovative Investments system, where regions with
similar areas of smart specialization will be sup-
ported in creating Pan-European clusters in priority
sectors such as big data, circular economy, advanced
manufacturing or cyber security.
Farole et al. (2018: 48) present interesting data on
future radical restructuring of the economic hierar-
chy in European regions in the coming two cycles of
cohesion policy, in case the current trends in low-in-
come and low-growth regions continue. As early as
the next cohesion policy cycle, in 2021, low-income
regions will on average reach 50% threshold of the
European Union average by its definition of low-in-
come regions. Consequently, by the end of the next
cycle of the cohesion policy program, low-income
and low-growth regions will switch positions, with
the average of low-growth regions falling to the 50%
threshold and the average of low-income region ris-
ing significantly above it. By 2035, low-income re-
gions will have achieved a transition stage. The same
authors (2018: 52) point out that the report suggests
increasing attention to existing low-growth regions
as a critical challenge of cohesion policy in the fu-
ture programming period in order to ensure that
current low-income regions do not become future
low-growth regions. Furthermore, significant het-
erogeneity in low-income regions is indeed present,
suggesting that there is a high possibility that certain
regions will be able to converge while others may be
262
lagging behind (delaying progress). These authors
(2018: 53) also cite the important fact that social
outcomes do not always follow economic outcomes.
It is obvious, therefore, that relatively high levels of
income are a necessary but insufficient condition
for securing high social outcomes (2018: 54): “…
you can have a rich region and still have great social
outcomes, but you cannot be a poor region and have
good social outcomes.“ Cohesion orientation on the
interpersonal level, not just on the territorial level,
a more sophisticated focus on human capital and,
more broadly, social outcomes, even in high-income
regions will be very important. Therefore, the local
and regional levels of government play an important
role. For example, the same authors state that eco-
nomic progress at the regional level can be evident
in economic and social outcomes for the household
and the individual. If regional policy focuses on gen-
erating sustainable and quality job opportunities for
all its working age residents, especially women and
young people, it has multiple effects on the regional
labor market. Furthermore, labor market outcomes
are important not only because work and earnings
are channels through which economic progress at
the regional level is translated into household and
individual economic and social outcomes, but also
because work has significant positive economic and
social externalities as future workers become more
effective in the presence of others workers, and tend
to invest more in building next-generation human
capital.
After an extensive insight into European practice
and the situation in selected countries regarding
the possibilities of progress of individual regions
and their development, followed by a theoretical
background and the empirical study of the area of
Eastern Croatia, the analysis of the economic situ-
ation and trends regarding regional development
in Eastern Croatia as a lagging region is presented
below.
3. Discussion of regions lagging behind in the
context of Eastern Croatia
The regions14 of the Republic of Croatia, compared
to most regions of other EU member states, have a
much lower level of development expressed in GDP
per capita with respect to purchasing power parity
(Figure 2). It is evident from Figure 2 that the level
of realized GDP per capita (PPS) in the Republic of
Croatia for both regions is at a lower level in relation
to other regions of EU member states.
God. XXXIII, BR. 1/2020. str. 255-270
 Review article

Figure 2 Distribution of GDP per capita (PPS) across regions within EU countries, 2015

Source: Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on
the potential of Europe’s regions”, International Bank for Reconstruction and Development/The World Bank, Washington,
DC, available at: http://pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed
on: October 9, 2019)

The observation of Eastern Croatia in the context
of other counties of the Republic of Croatia points
to the existence of exceptional differences and in-
equalities within the country. Economic indicators
confirm the stated differences, as well as their in-
crease15. Dragičević & Letunić (2008) state that re-
gional differences that create even bigger gaps are
inherited from the earlier system; they have been
obvious since Croatia became independent, but
have only increased as a result of the war and the
lack of government strategies and policies to ad-
dress this problem. Regional development, sim-
ply expressed, was not a central policy issue. Fur-
thermore, certain authors, for example, Bićanić &
Pribičević (2013), consider regional inequalities for
an extremely long period, taking into account the
forty-year period between 1968 and 2008.
The regional development of the Republic of Croatia
is determined by the Law on Regional Development
(NN 147/14, 123/17, 118/18; hereinafter referred to
as “the Law”)16, and the current version has been
in force since January 1, 2019. The very purpose of
implementing regional development policy, as an
instrument for change at the regional level of the
Republic of Croatia, is defined as the need to cre-
ate the appropriate conditions, as stated in Article
2 of the Law: “The aim of the regional development
policy is to contribute to social and economic de-
velopment of the Republic of Croatia, in accord-
ance with principles of sustainable development, by
creating conditions that will enable all parts of the
country to strengthen their competitiveness and re-
alize their own development potential.“17 The body
responsible for the implementation of policies ad-
dressing the inequalities within the country and
aimed at the balanced regional development is the
Ministry of Regional Development and EU Funds.
The Ministry measures the degree of development
of each area by the development index. The analysis
of this index as an indicator of the Croatian regional
policy is given by Perišić & Wagner (2015). In the
current NUTS 2 classification, which is particularly
important because of its statistical recording capa-
bility, the Republic of Croatia is divided into two18
NUTS 2 regions. However, this classification has
been met with numerous negative comments and
consequences. The introduction of a new classifica-
tion is already presented and a study has been made
for this purpose by the Institute for Development
and International Relations (hereinafter referred to
as “the Study”) (Puljiz, Biondić, 2018)19. The Study
notes that changes in the number of NUTS 2 re-
gions have already been addressed in certain coun-
tries. Generally, the common denominator refers to
the extrication of an area that deviates significantly,
in positive or negative terms, from GDP per capita
from other areas, and most commonly by separat-
ing the capital city from the rest of the NUTS 2 re-
gion. Puljiz & Biondić (2018:16) cite some impor-
tant changes suggested in the study: “The possibility
of isolating the City of Zagreb for the first time as
a separate NUTS 2 region is an important novelty,

God. XXXIII, BR. 1/2020. str. 255-270 263

Katarina Marošević: Lagging regions: The case of Eastern Croatia
which can finally determine the division at NUTS 2
level which will provide the greatest degree of advan-
tage in using EU funds as well as in securing regional
subsidies“. In addition, there are three objectives of
the new division of NUTS 2 regionalization that are
to be achieved (Puljiz, Biondić, 2018: 27): „i) to pro-
vide the greatest possible degree of advantage for as
many residents of the Republic of Croatia as possible
with regard to the rules for granting regional aid;
ii) to ensure the best possible conditions for the use
of Cohesion Policy funds for the largest area of the
Republic of Croatia; iii) to form as homogeneous re-
gions as possible in terms of development and other
important features“. Puljiz et al. (2019) elaborate on
the results achieved in the implementation of cohe-
sion policy in the Republic of Croatia so far, as well
as clarify how it will be approached in further devel-
opment of the cohesion policy.
The Croatian Chamber of Economy (2019)20 in
its Sector for Financial Institutions and Economic
Analysis, Department for Macroeconomic Analysis,
produced a ranking of Croatia’s NUTS 2 and NUTS
3 regions relative to the rest of the European Union.
In 2008, most of the counties in Croatia, which be-
long to the NUTS 3 level, were ranked lower than
one thousand. It is extremely important to empha-
size that the three worst ranking counties were those
in the region of Slavonia (Table 2). At the same time,
large differences in the development of Croatian re-
gions are noticeable, with the City of Zagreb taking
the place of the most developed Croatian county
with 2.9 times higher GDP per capita, expressed in
PPS, while the worst ranked for the stated period
was the Brod-Posavina County. The data for 2015
shows that Croatian counties are in a less favorable
position than in 2008 in the context of the European
Union NUTS 3 level. The data for 2015, from the
same source, indicate widening differences between
Croatian counties, as the differences between the
most developed and underdeveloped counties in-
creased by 3.3 times. The City of Zagreb maintained
the leading position in terms of development, while
the least developed counties were Brod-Posavina
and Virovitica-Podravina counties. Furthermore, in
2015, as many as four Slavonian counties were also
the worst positioned in the context of the Republic
of Croatia (Table 2).
Puljiz & Biondić (2018) point out that, according
to the range of differences at NUTS 3 level, Croa-
tia does not deviate significantly from most other
member states in Central and Eastern Europe, but
264
when we consider the differences between NUTS 2
regions, differences are significantly larger in Con-
tinental Croatia than in Adriatic Croatia. The same
authors further state that in Continental Croatia the
ratio between NUTS 3 regions, i.e. between Croa-
tian counties, with the highest and lowest GDP per
capita is 3.17, while in Adriatic Croatia it is 1.62,
i.e. Continental Croatia is a more heterogeneous
region when considering the level of development
of the associated NUTS 3 regions compared to
other NUTS 2 regions in the 11 Eastern European
countries. It is necessary to emphasize that the cur-
rent classification of counties into the appropriate
NUTS 2 regional level has led to a paradoxical ra-
tio of regional aid, where currently counties with
a lower level of development can achieve a lesser
degree of regional aid than counties with a higher
level of development. It is worth mentioning that in
terms of the highest amount of aid awarded, out of a
total of five as many as three relate to the Slavonian
counties, namely Osijek-Baranja, Vukovar-Srijem
and Brod-Posavina. Thus, although the least devel-
oped counties have attracted the funds needed for
investment, given the dynamics of GDP per capita
and certain demographics, it is evident that the
grants awarded were not sufficient to significantly
improve socio-economic opportunities in eastern
Continental Croatia. At the request of the Ministry
of Regional Development and EU Funds21, and ac-
cording to research by Apsolon22, several Croatian
towns were selected to receive physical, economic
and social support, including Beli Manastir, Benko-
vac, Petrinja and Vukovar. The main challenge for
the central governance mechanism is to create an
investment model that would propel the economy
and reduce emigration from those most deprived
areas.
Gazilj et al. (2016) emphasized the importance of
the legal basis needed to implement the institutional
framework at the regional level and its effectiveness.
The basic problem of Eastern Croatia is related to
reduced economic and social development. One of
the main reasons for the developmental decline of
the region of Eastern Croatia is the lack of self-gov-
ernment status, since Eastern Croatia is made up of
the already mentioned five counties. Therefore, with
the necessary implementation of regionalization
within the Croatian territory, as well as possible so-
lutions due to development problems, the authors
propose the efficient use of EU funds and greater
accountability and efficiency of state institutions.
God. XXXIII, BR. 1/2020. str. 255-270
 Review article

The Croatian Chamber of Economy (2019) further
states that drawing on EU funds is positive in its im-
pact on regional development; the amount of funds
drawn is inversely proportional to the development
level and thus underdeveloped regions should and
must use the full range of options at their disposal.
Furthermore, since the City of Zagreb is currently
in the Continental Croatia classification and thus
does not give a realistic picture of the development
level, and the Central Bureau of Statistics estimates
that in 2017 the City of Zagreb exceeded the popu-
lation needed to become a NUTS 2 unit, the newly
created region of Continental Croatia could benefit
significantly from EU funds. Therefore, the Min-
istry of Regional Development and EU Funds has
already initiated the modification of the existing
NUTS 2 regions.
The economic indicators of the selected counties
are given below (Table 2).

Table 2 Basic economic indicators of selected counties for 2015 and 2016
GDP per Gross Gross
GDP per capita in PPS added value GDP per Indexes added value
County capita (EUR) (EU-28=100) (base prices) capita (EUR) (HR=100) (base prices)
2016 2015
Brod-Posavina 6 292 34.3 2.0 5 962 56.3 2.0
Osijek-Baranja 8 834 48.2 5.5 8 413 79.5 5.6
Požega-Slavonia 6 346 34.6 1.0 6 061 57.3 1.0
Virovitica-Podravina 6 190 33.8 1.0 5 852 55.3 1.1
Vukovar-Srijem 6 563 35.8 2.3 6 235 58.9 2.4
City of Zagreb 19 546 106.6 33.6 18 579 175.5 33.4
Source: Croatian Bureau of Statistics, First Release Number 12.1.3., Zagreb, February 12, 2019, from Table 2. GDP for
Republic of Croatia at NUTS 2013 – 2nd level and by counties, 2016; Table 4. Share in gross value added of the Republic
of Croatia, at NUTS 2013 – 2nd level and by counties, 2016; First Release Number 12.1.3., Zagreb, February 15, 2018,
GDP of the Republic of Croatia at NUTS 2013 – 2nd level and by counties, 2015, available at: https://www.dzs.hr (Acce-
ssed on: November 2, 2019)

The necessity of self-government status, as stated 4. Conclusion

by Gazilj et al. (2016), with the need for decentrali-
zation, is interpreted by Jurlina Alibegovic (2013),
who analyzes reforms within decentralization
framework and their effects on regional and local
development process in Croatia. In doing so, the
author points out that there is a link between the
degree of decentralization and the degree of region-
al development. Reforms are therefore necessary to
redefine the role of the public sector and improve
performance, because a high degree of decentrali-
zation of administrative power and responsibility
is expected to result in increased efficiency of the
public sector, improvement of local and regional
government, and promotion of local and regional
economic development. Đulabić & Koprić (2017)
emphasize the importance of decentralization re-
form in the Republic of Croatia for the period 2001
to 2015, focusing on the impacts, effects and out-
comes of decentralization for specific areas, includ-
ing education, health, social care and firefighting.
Regional development is probably one of the few
economic topics that has, in less than a century of
intense research, become almost a key part of the
development of national economies. In order to
correct the differences that have arisen due to the
pursuit of a free market economy, it is necessary,
given the dynamics of national economies and their
regions, to constantly update the tools and instru-
ments of regional or cohesion policy. A single re-
gional policy is also not a solution, since every
region and its economic reality is unique within a
national economy.
Furthermore, the national economy can be viewed
as the sum of regional units, but the macroeconom-
ic effects are not manifested equally in all regions.
Thus, it can be concluded that in specific situations,
national issues and problems are more pronounced
in certain regions that are lagging behind. If a re-
gion’s level of development is significantly lower

God. XXXIII, BR. 1/2020. str. 255-270 265

Katarina Marošević: Lagging regions: The case of Eastern Croatia
than the EU average, it is categorized as a “catch-
ing up region”. Such regions are divided into two
different types. The first are low-growth regions
experiencing a permanent lack of growth, i.e. less
developed or transition regions that did not con-
verge with the EU average between 2000 and 2013.
The second are low-income regions, which include
those that remain well below the EU average by
GDP per capita, i.e., all regions below 50% of the EU
average in 2013. Low-growth regions, such as those
in Southern Europe benefit most from improve-
ments by the government, while low-income re-
gions, such as those in Central and Eastern Europe,
benefit most from the economic developments they
make from investing in traditional growth drivers.
It is necessary to introduce different approaches
adapted to the conditions of the region to which
the policies apply. Key areas of investment, as cited
by several authors, should include human capital
and institutions. One of the templates for policy
approach in lagging regions outlines four possible
options (Figure 1). Based on that classification, the
conclusion could be that all five counties of East-
ern Croatia can be viewed in the context of sparsely
populated areas. Four of them are peripherally lo-
cated regions, and one can be viewed as a sparsely
populated, centrally located region. The former
lack agglomeration potential, so it is necessary to
strengthen the creation of opportunities for indi-
viduals in the region and to develop institutions to
support the quality of social services with a strong
interest and focus on human capital accumula-
tion. Vukovar-Srijem, Požega-Slavonia, Virovitica-
Podravina and Brod-Posavina could be included in
this category of counties. Osijek-Baranja County
could fall into the category of sparsely populated,
centrally located regions. Being close to major ag-
glomerations, such regions should be linked to
them, and investments should be targeted by sector,
aiming to compensate for the limited potential of
agglomerations through specialization. It is crucial
to continually stimulate development at both indi-
vidual and institutional levels.
Given the recorded situation and expected trends, a
key question is how to devise adequate policies that
target not only human capital development but also
create an incentive for people to stay in these parts
of the Republic of Croatia, which are experiencing
big population outflows.
The new EU’s programming period also brings
about certain changes in the ways in which regional
266
policy is implemented, recommending the imple-
mentation of region-centered cohesion policy in
order to maximize regional potential. It is impor-
tant to note that while the goal of convergence re-
mains, it is defined in terms of social outcomes and
individual opportunities.
In addition to the inadequacy of the same policy for
different regions, several authors also cite the im-
portance of government quality, especially in low-
growth regions, while in low-income regions re-
ducing fiscal contributions is still a major barrier to
development. The current non-administrative divi-
sion in the Republic of Croatia encompasses two
NUTS 2 regions, although the government has al-
ready, by a proposal pending a final decision, raised
the important issue of change to the four NUTS 2
regions, thus ensuring a more balanced future de-
velopment. However, the question remains how to
construct a specific and targeted regional policy
that will drive change in Eastern Croatia, harness
its potential, and not necessarily focus solely on
harmonizing regional achievements.
Future research should certainly include positive
examples of tackling similar problems within na-
tional economies with the extreme underdevelop-
ment of certain regions, as well as recommendations
on how to improve the functioning of institutions,
which are ultimately one of the main obstacles to
(regional) development. In general, the countries of
the European Union faced with the issue of lagging
regions rarely have adequately designed national
regional policies.
The observed situation in Eastern Croatia and the
five counties belonging to that area is characterized
by low levels of development in both economic and
social terms.
The paper is theoretically well supported with de-
tails on previous European and Eastern Croatian
experiences in the field of regional development
and in line with the aim to become a basis for in-
terpreting the potential of Eastern Croatia and its
associated counties. Nevertheless, the limitation
is the lack of empirical analysis focused on explor-
ing the current institutional framework in order to
come up with new recommendations and possible
solutions. Besides, future research should include
analysis of ways and means of achieving a greater
degree of decentralization.
God. XXXIII, BR. 1/2020. str. 255-270
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R

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E

1 European Commission Glossary, available at: https://ec.europa.eu/regional_policy/hr/policy/what/glossary/n/nuts (Accessed on:

November 14, 2019)
2 European Commission (2015), “Catching up regions”, https://ec.europa.eu/regional_policy/en/policy/how/improving-investment/
lagging_regions (Accessed on: October 7, 2019)
3 European Commission (2017), “Competitiveness in low-income and low-growth regions: The lagging regions report”, Brussels,
available at: https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/lagging_regions%20report_en.pdf (Accessed on:
November 17, 2019)
4 Farole, T., Goga, S., Ionescu-Heroiu, M., (2018), “Rethinking Lagging Regions: Using Cohesion Policy to deliver on the potential of
Europe’s regions”, International Bank for Reconstruction and Development/The World Bank, Washington, DC, available at: http://
pubdocs.worldbank.org/en/739811525697535701/RLR-FULL-online-2018-05-01.pdf (Accessed on: October 9, 2019)
5 Net migration rate presents in-migration less out-migration as a share of the population.
6 Brown, A. et al. (2017), “Final Report, Economic Challenges of Lagging Regions”, European Commission, Publications Office of
the European Union, Luxembourg, available at: https://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/challenges_
lagging/econ_challenges_lagging_en.pdf (Accessed on: November 2, 2019)
7 See more: Živić, D. (2016). “Suvremena migracija kao odrednica depopulacije Istočne Hrvatske (2001.-2014.)”, In: Šundalić, A.,
Zmaić, K., Sudarić, T., Pavić, Ž. (eds). Sociokulturno nasljeđe i gospodarski razvoj, Zbornik radova sa znanstvenog skupa Globaliza-
cija i regionalni identitet, Sveučilište Josipa Jurja Strossmayera u Osijeku, Osijek, pp. 52-76. Available at: https://bib.irb.hr/datote-
ka/857963.Zbornik_Globalizacija_i_regionalni_identitetGospodarske_koristi_od_kulturnih_aktivnosti.pdf#page=52, (2.10.2019.);
Živić, D. (2017). “Demografsko pražnjenje Istočne Hrvatske”, Političke analize Vol. 8, No. 31., pp. 24-32. Available at: https://hrcak.
srce.hr/index.php?show=clanak&id_clanak_jezik=283893, 2.10.2019.; Akrap, A. (2019), “Stanovništvo u Hrvatskoj: čimbenici silaznih
trendova”, Obnovljeni život, Vol. 74, No. 3, pp. 335-350.
8 Croatian Bureau of Statistics, Statistical Reports, Higher Education in 2013, 2014, 2015, 2016, available at: www.dzs.hr (Accessed on:
November 17, 2019)
9 In this case, the Development Index of the Ministry of Regional Development and EU Funds in Table 1 shows the values of the deve-
lopment index and Indicators for the calculation of the development index in 2018, which implies the value of the development index
and the indicators for the calculation of the development index according to the new county level calculation model which includes
the timeframe 2014 – 2016.
10 Ministry of Economy, Entrepreneurship and Crafts (2016), “Vlada usvojila Strategiju pametne specijalizacije RH za razdoblje 2016.
– 2020.”, available at: https://www.mingo.hr/page/vlada-usvojila-strategiju-pametne-specijalizacije-rh-za-razdoblje-2016-2020
(Accessed on: November 1, 2019)
11 UNESCO (2017), “EU cohesion policy (regional policy)“, available at: https://en.unesco.org/creativity/policy-monitoring-platform/
eu-cohesion-policy-regional, (Accessed on: November 9, 2019)
12 Chmieliński, P. (2017), “Report on the policy recommendations on how to integrate cohesion policy with urban and rural policies”,
Institute of Agricultural and Food Economics – National Research Institute IAFE-NRI, Poland, available at: https://www.perceivepro-
ject.eu/wp-content/uploads/2017/09/PERCEIVE-Project-Deliverable-4.4_Report-on-the-policy-recommendations-on-how-to-integra-
te-cohesion-policy-with-urban-and-rural-policies.pdf (Accessed on: November 9, 2019)
13 European Commission (2018), “New Cohesion Policy”, https://ec.europa.eu/regional_policy/en/2021_2027 (Accessed on: Novem-
ber 9, 2019)
14 Referring to the regions of the Republic of Croatia, the official statistical breakdown of the European Statistical Office (Eurostat) is ta-
ken into account according to the European Commission glossary (https://ec.europa.eu/regional_policy/en/policy/what/glossary/n/
nuts) in order to apply a common statistical standard across the European Union. However, it should be emphasized that in the
Republic of Croatia, as well as in many other EU member states, such a division has been used mainly for statistical purposes. No-
menclature of territorial units for statistics (NUTS) was created by the European Bureau of Statistics (Eurostat) to apply a common
statistical standard across the European Union.
15 See more in: Croatian Chamber of Economy (2019). Razvijenost statističkih regija NUTS3 razine u Europskoj uniji, Zagreb. Available
on: https://www.hgk.hr/documents/gospodarska-razvijenost-nuts-3-regija5c49bd13e22f8.pdf, 13/10/2019.
16 Official Gazette of the Republic of Croatia (2018), “Regional Development Act” (NN 147/14, 123/17, 118/18).
17 Art. 2. of the Regional Development Act (NN 147/14, 123/17, 118/18)
18 According to the Ministry of Regional Development and EU Funds, the announcements of 01/23/2019 (https://vlada.gov.hr/
vijesti/nove-c four-statisticke-regije-omogucit-ce-vise-potpore-gospodarstvu-i- more evenly-development-their- parts-croatia/25170,
17/11/2019). At the proposal of the Ministry of Regional Development and EU Funds, the government has decided on four non-
administrative units - Pannonian Croatia, Northern Croatia, Adriatic Croatia and the City of Zagreb, as a division of Level 2 statistical
regions, while spatial units for Statistics 1 and 3 levels will not change. This will make better use of Cohesion Policy funds for as large
an area as possible and form a more homogeneous region in terms of development level but also other important features. The
decision shall take effect on January 1, 2023.
19 Puljiz, J., Biondić, I. (2018), “Izrada prijedloga nove NUTS 2 klasifikacije u Republici Hrvatskoj“, Institute for Development and Inter-
national Relations, Zagreb, available at: https://razvoj.gov.hr/UserDocsImages/Vijesti%20-%20dokumenti/Izrada%20prijedloga%20
nove%20NUTS%20klasifikacije%20u%20RH%20012019.pdf (Accessed on: October 28, 2019)

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Katarina Marošević: Lagging regions: The case of Eastern Croatia

20 Croatian Chamber of Economy (2019), “Razvijenost statističkih regija NUTS3 razine u Europskoj uniji”, available at: https://www.
hgk.hr/documents/gospodarska-razvijenost-nuts-3-regija5c49bd13e22f8.pdf (Accessed on: October 13, 2019)
21 Ministry of Regional Development and EU Funds (2019), “Regionalni razvoj”, available at: https://razvoj.gov.hr/o-ministarstvu/djelo-
krug-1939/regionalni-razvoj/110 (Accessed on: October 2, 2019)
22 Apsolon (2019), “How we contributed to Croatia’s regional development”, available at: https://apsolon.com/en/success-stories/
how-we-contribute-to-croatia-regional-development/ (Accessed on: October 14, 2019)

Katarina Marošević

R    :

  H
S
Nejednak stupanj regionalnog razvoj karakterizira Republiku Hrvatsku već dugi niz godina, uz iznimno
zaostajanje područja istočne Hrvatske. Brojni su pokazatelji kojima se takvo stanje, a i očekivani trendovi
mogu i potkrijepiti (npr. ostvareni BDP po stanovniku županija koje pripadaju području istočne Hrvatske,
veliki odljev stanovnika pstočne Hrvatske, indeks razvijenosti Ministarstva regionalnog razvoja i fondova
Europske unije i brojni drugi). Kako je stupanj ostvarenog razvoja županija istočne Hrvatske na zaista ne-
usporedivoj razini u odnosu na nekoliko vodećih županija, a posebice Grad Zagreb, nužno je razmotriti
prostor za moguća poboljšanja navedenog područja koja zaostaju u razvoju. U kontekstu Europske unije,
razina razvijenosti pojedinih županija istočne Hrvatske na poražavajućoj je razini.
Ni druge zemlje članice Europske unije nisu ostvarile konvergenciju k potpunoj homogenosti, no u radu se
izdvajaju primjeri kreiranih regionalnih politika kojima se pokušava smanjiti stupanj divergencije. Stupanj
decentraliziranosti jedan je od važnih preduvjeta smanjenja postojećih regionalnih razlika kao i odgovara-
juće primjene regionalnih politika.
Stoga je cilj ovoga rada teorijski obraditi dosadašnja istraživanja izabranih europskih iskustava regija koje
zaostaju u razvoju, a koje su sve dijelom Europske unije, te evidentirati važnost međusobnog odnosa re-
gija - nacionalno gospodarstvo. Kako se svih pet županija koje su u sastavu istočne Hrvatske zaista mogu
okarakterizirati kao područja koja zapostaju u razvoju, cilj je shodno teorijskim saznanjima europskih isku-
stava usporediti situaciju i trendove regija i županija istočne Hrvatske, uzimajući pri tomu u obzir, ne samo
ekonomski, nego i znatno širi koncept županija koje zaostaju u razvoju.
Ključne riječi: regionalni razvoj, regije koje zaostaju, Republika Hrvatska, nejednakosti u regionalnom
razvoju, županije

270 God. XXXIII, BR. 1/2020. str. 255-270

 CC BY-NC-SA

Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for
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5 od 6

RECENT TRENDS IN SUSTAINABILITY

REPORTING: LITERATURE
REVIEW AND IMPLICATIONS
FOR FUTURE RESEARCH
A
Sustainability reporting has become a topical issue in recent years as it is no longer enough to make claims
about the sustainability level of companies, but it is also necessary to demonstrate their sustainability ef-
forts. For this purpose, sustainability reporting has grown from a voluntary basis into a legal obligation for
some organizations, which speaks in favor of the importance of sustainable business globally. This paper
aims to provide a wider perspective and theoretical support for research on sustainability reporting. A
literature review of 52 papers from the Web of Science database indicates the following eight aspects as a
trend in the literature reviews of sustainability reporting: Assurance, Boards, Communication, Framework,
Impact, Indicators, Materiality and Practices. The paper highlights problems and provides challenges re-
lated to sustainability reporting and research opportunities for exploring sustainability reporting in future
studies.
Keywords: Sustainability reporting, sustainable development, corporate social responsibility

1. Introduction sequences, it is important to pursue a development

Modern technology as well as globalization have
brought significant changes in numerous areas of
human life. On the other hand, there are increas-
ing global problems in the form of more frequent
natural disasters, degradation of natural resources,
climate change, energy crises, and other problems
that have led not only to risks to the planet, but also
to a threat to development. To prevent further con-
policy aimed at achieving continuous economic
and social progress, as well as protecting nature and
the environment. This is accomplished by focusing
on sustainability and sustainable development.
In 2015, as part of the 2030 Agenda for Sustain-
able Development1, the United Nations adopted 17
main Sustainable Development Goals (SDG) and
169 target goals that they plan to achieve by 2030.

God. XXXIII, BR. 1/2020. str. 271-283 271

Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for
future research
Although the goals are not legally binding, the UN
Member States are expected to integrate the SDGs
into their national policies and establish a system
for monitoring the implementation through the
agreed indicators. SDGs balance the economic, so-
cial and environmental dimensions of sustainable
development. Each participant should contribute to
the achievement of these dimensions, with particu-
lar emphasis on the role of the business sector.
According to Pojasek (2007), business sustainability
must take into account the needs of the company as
well as its stakeholders but at the same time it must
protect, sustain, and enhance the environmental,
social, and economic resources that are crucial
for the future. Sustainable business creates added
value for the company, which reflects on the value
of the company through its economic viability and
financial utility. The results of activities related to
sustainable business are presented to the public in
the form of sustainability reports, which are needed
“to substantiate information about the actual status
of and progress towards corporate sustainability;
otherwise the information tends to be considered
rather superficial” (Schaltegger et al., 2006: 15).
There are several internationally recognized sus-
tainability frameworks and standards that are avail-
able for organizations when preparing their sustain-
ability reports: the Global Reporting Initiative (GRI)
Sustainability Reporting Guidelines G4, ISO 26000
Guidance on  Social Responsibility, the UN Guid-
ing Principles Reporting Framework, the IIRC In-
ternational Framework, and the OECD Guidelines
for Multinational Enterprises. In the European Un-
ion, sustainability reporting is regulated by Direc-
tive  2014/95/EU of the European Parliament and
of the Council2. It is also called the Non-Financial
Reporting Directive (NFRD) and is legally binding
on large public-interest companies with more than
500 employees, listed companies, banks, insurance
companies, and other companies designated by na-
tional authorities as public-interest entities.
However, there is still no universal regulation for
sustainability reporting at a global level, but it is im-
posed by each country depending on its laws and
accounting regulations; hence sustainability report-
ing varies across countries. Thereby, the purpose of
this paper is to summarize and critically assess liter-
ature on sustainability reporting and explore trends
related thereto in the period 2017-2020. This is im-
portant because as of 2017 sustainability reporting
became a legal obligation for many organizations,
272
which should consequently lead to an increase and
changes in sustainability reporting. In addition, the
aim is to identify opportunities for future research
in the field of sustainability reporting.
This research paper is organized as follows. The
introductory part and the literature review of sus-
tainability reporting is succeeded by a section with
methodology explained. The next section brings
results on recent trends in sustainability reporting,
while the last section is devoted to discussion and
the main conclusions of the paper.
2. Literature review of sustainability reporting
Since sustainability reporting is an ever-evolving
concept, there is still no single definition. Siew
(2015) notes that sustainability reporting is known
under various synonyms - corporate social respon-
sibility (CSR) reporting, sustainable development
(SD) reporting, triple bottom line (TBL) reporting,
non-financial reporting, and environmental, social
and governance (ESG) reporting. Calabrese et al.
(2017a: 439) define sustainability reporting as “the
practice of measuring, disclosing, and being ac-
countable to internal and external stakeholders for
the company’s ability to achieve sustainable devel-
opment goals and manage impacts on society”. Dis-
sanayake et al. (2016) state that the most structured
definition of sustainability reporting is obtained
from the sole concept of sustainable development,
i.e. from the economic, social and environmental
pillars.
The absence of a standardized form of sustainability
reporting makes it harder to compare reports. The
implementation may be similar in associations of
countries such as the EU, but the harmonization of
reporting in the EU is still in the process that is hard
to achieve (Jose, 2017; Kinderman, 2019). Compa-
nies choose independently how to compose their
sustainability reports, as well as the manner of their
presentation. Free will in terms of the layout of sus-
tainability reports by companies allows researchers
to do numerous research studies in this area.
Hahn and Kühnen (2013) provided a review of 178
articles from business, management, and account-
ing journals in the period 1999-2011 and gave an
overview of the results on the determinants of sus-
tainability reporting (internal and external). Mo-
rioka and de Carvalho (2016) conducted a literature
review of 261 papers and integrated the literature on
sustainability performance in a conceptual frame-
God. XXXIII, BR. 1/2020. str. 271-283
 Review article

work. Gulenko (2018) provided an overview of po-
tential consequences of CSR reporting regulation,
derived potential future developments in Germany
based on the EU Directive and contributed to the
literature by suggesting that mandatory CSR report-
ing leads to a shift in the reporting behavior of com-
panies. Dienes et al. (2016) reviewed existing stud-
ies, analyzed the drivers of sustainability reporting
by using a qualitative approach, and contributed to
the literature by defining the most important driv-
ers of the sustainability reports disclosure. While
the reviewed papers refer to a specific segment of
sustainability reporting, Dumay et al. (2016) studied
integrated reporting to discover how research has
developed and contributed to the literature by of-
fering an intuitive critique of accounting practice.
3. Methodology
To examine current trends in the literature related
to sustainability reporting and to find the potential
for future research, a literature review by analyz-
ing the extant literature was used. The guidelines
proposed by Vázquez-Carrasco and López-Pérez
(2013) were used for a review of the literature with
modifications adapted to the purpose of this re-
search:
1. Define the research question(s) to be ad-
dressed;
2. Search for (i) a set of bibliographic da-
tabases, and/or (ii) in a well-defined and
 
justified journal sample using one or more
predefined keywords;
Figure 1 Number of papers related to sustainability reporting (1 January 2017 – 20 March
Figure 1 Number of papers related to sustainability reporting (1 January 2017 – 20 March 2020)
2020)
30
26
25 22
3. Include the keywords in the search fields
(title);
4. Analyze each article to identify the theoreti-
cal framework, a methodological approach
and interesting potential lines of research.
The sample consists of papers related to sustain-
ability reporting. The authors selected the Web
of Science as a bibliographic database. It includes
scientific papers from a wide range of scientific
disciplines, i.e. over 20,000 peer-reviewed schol-
arly journals published worldwide across 252 disci-
plines3. According to Orsagie et al. (2016: 236), such
a “broad range of scientific disciplines ensures that
the search is sufficiently comprehensive”. Within
the database, the Web of Science Core Collection
database and basic search were used. The literature
search was based on the following criteria:
• Timespan: 2017 (1 January) to 2020 (until 23
March),
• All Citation Indexes,
• Document Types: Article,
• Key words: “sustainability reporting”, “sus-
tainability report”, “sustainability reports”
found in the title,
• Open access.
The search engine generated a total of 63 papers
(i.e. 34, 5 and 24 papers containing “sustainability
reporting”, “sustainability report” and “sustainability
reports”, respectively) (Figure 1).

20

15 13

10

5 2

0
2017 2018 2019 2020

Source: Research results Source: Research results.

God. XXXIII, BR. 1/2020. str. 271-283 273

Out of the total number of papers, 2 papers (1 with “sustainability reporting” and 1 with
“sustainability reports”) could not be downloaded despite the open access criterion, while 9
papers (i.e. 1 with “sustainability reporting”, 3 with “sustainability reports”, and 5 with
Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for
future research
Out of the total number of papers, 2 papers (1 with
“sustainability reporting” and 1 with “sustainability
reports”) could not be downloaded despite the open
access criterion, while 9 papers (i.e. 1 with “sustain-
ability reporting”, 3 with “sustainability reports”, and
5 with “sustainability report”) are not entirely in
English and in order to avoid any misunderstanding,
they were excluded from further analysis. Hence a
total of 52 papers (i.e. 32 papers with “sustainability
reporting”, 2 with “sustainability report”, and 18 with
“sustainability reports”) out of 63 generated papers
were analyzed.
Figure 2 Aspects of sustainability reporting
Source: Research results
A trend has been observed in the literature in
terms of researching the impact of sustainability
reporting. Impact is the most prevalent aspect of
sustainability reporting (25%). The framework and
practices are equally explored (19%). This is be-
cause these two areas are closely linked since the
framework acts on the application of sustainability
reporting in practice. Other aspects (communica-
tion (7%), boards (6%), materiality (8%), assurance
(8%) and indicators (8%)) are less investigated and
they represent a basis for exploring future trends in
sustainability reporting.
274
All papers were thoroughly reviewed by the authors
who examined the key determinants in this litera-
ture, identified the main gaps, and pointed to areas
where future work in this area could usefully be un-
dertaken.
4. Recent trends in sustainability reporting
Based on the review and according to the content and
results of the papers, the authors found the following
eight aspects of sustainability reporting: Assurance,
Boards, Communication, Framework, Impact, Indi-
cators, Materiality and Practices (Figure 2).
4.1 Assurance
Boiral et al. (2020: 1) conducted a qualitative con-
tent analysis of 337 assured sustainability reports in
the mining and energy sectors and found that “as-
surance statements do not demonstrate a material,
substantial, and credible verification process”. By
using a sample of Spanish accounting and consult-
ing firms, Vaz Ogando et al. (2018) analyzed if the
use of international standards and the profile of the
provider performing the service influences the as-
surance process and quality. Results showed that
God. XXXIII, BR. 1/2020. str. 271-283

the profile of the provider performing the service
does not have any effect on the assurance process
and assurance quality. Al-Shaer and Zaman (2019)
used a sample of UK FTSE 350 companies for the
period 2011–2015. They found a significant positive
connection between board-level sustainability com-
mittees and sustainability reporting assurance, and
inclusion of sustainability terms in compensation
contracts. Braam and Peeters (2017) investigated
the relationship between corporate sustainability
performance and choices related to sustainability
assurance by using a panel data set of 4,686 listed
companies (from 21 European and North American
countries) in the period 2009–2014. They revealed
that companies with superior corporate sustain-
ability performance are more likely to employ third
parties to assure their sustainability reports than
companies with inferior sustainability performance.
4.2 Boards
Anazonwu et al. (2018) used a sample of quoted
manufacturing firms in Nigeria to investigate the
influence of corporate board diversity on sustain-
ability reporting, while Onyali and Okafor (2019)
explored the influence of foreign directors on inte-
grated sustainability reporting of 21 listed consum-
er goods firms in Nigeria in the period 2011–2017.
These two studies recommend a heterogeneous
board structure. Furlotti et al. (2019) used the data
of 182 companies listed on the Milan Stock Ex-
change and examined whether there is an associa-
tion between the presence of women with different
responsibilities and gender policies disclosed in
CSR or sustainability reports. The results showed
that it is important for firms that care about gender
equality to have women as board members.
4.3 Communication
Calitz and Zietsman (2018) analyzed the existing
sustainability reporting frameworks for higher edu-
cation institutions and identified a lack of the use
of mobile technologies in the reporting process. In
their study, Rahim and Omar (2017) investigated
the attitudes of managers of various backgrounds
from Malaysian public listed companies on using
online communication to report sustainability ef-
forts. The results showed that from the perspec-
tive of a manager sustainability reporting through
online communication was considered positive.
Hsueh (2017) examined the success of corporate
God. XXXIII, BR. 1/2020. str. 271-283
Review article
communication in voluntary sustainability report-
ing on a sample of family businesses. The author
revealed that although companies have a possibil-
ity and are motivated for communicating, external
stakeholders might be skeptical about voluntary
sustainability reports of companies. Hossain et al.
(2019) used a sample of top 24 companies of the
Fortune 500 Global to explore the nature of rhetoric
and rhetorical strategies that are implicit in stan-
dalone sustainability reporting. They concluded
that companies from the sample communicate fan-
tasy type and rhetorical vision in their corporate
sustainability reporting.
4.4 Framework
The authors pinpointed the shortcomings and
problems of sustainability reporting frameworks.
Cardoni et al. (2017) evaluated the intra-industry
comparability of sustainability reports, with an em-
phasis on GRI. Andreassen (2017) explored how
sustainability reporting guidelines represent oil
operation safety issues and concluded that frame-
works do not indicate how well the product safety
issues are presented. Diouf and Boiral (2017) ana-
lyzed the perceptions of stakeholders of the quality
of sustainability reports using the GRI framework
and observed that socially responsible investment
stakeholders are aware of the limitations of sustain-
ability reports.
Other authors described new frameworks to help
solve sustainability challenges. Garcia-Torres et al.
(2017) proposed an action-oriented disclosure tool
in order to help solve sustainability challenges of
complex fast-fashion supply chains. Hamalainen
and Inkinen (2017) utilized Big Data and exam-
ined how to develop cost and sustainable report-
ing. Onkila et al. (2018) developed frameworks for
understanding the role of sustainability reporting in
organizational identity change by analyzing 52 in-
terviews conducted with employees in two Finnish
companies. Niemann and Hoppe (2018) used an ex-
ploratory evaluation in Amsterdam, Basel, Dublin,
Freiburg, Nuremberg and Zurich, and presented a
framework suitable for assessing real-life practices
and outcomes. They suggested that sustainability
reporting can positively influence organizational
change, management and communication, but
could also lead to “fatigue” and discontinuation.
Maj (2018) involved companies indexed on the
Warsaw Stock Exchange and investigated diversity
275
Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for
future research
reporting, diversity data and the determinants of
diversity reporting. The author asserted the pos-
sibility of embedding diversity into sustainability
reporting by including it in auditing guidelines and
standards. Romero et al. (2019) made an effort to
improve the existing framework of the integrated
report and provided a new reporting tool in order
to achieve the objectives of the International Inte-
grated Reporting Council.
4.5 Impact
Most studies investigated the relationship between
sustainability reporting and some of firm charac-
teristics. Wang (2017) examined the relationship
between firm characteristics and the disclosure of
sustainability reporting for 50 Index-listed compa-
nies from Taiwan. The results showed that seven
corporate governance and business characteristics,
namely the size of the board of directors, the ratio
of independent directors, the audit committee, the
ratio of export income, the percentage of foreign
shareholders’ holdings, fixed asset staleness, and
firm growth, are positively related to the sustain-
ability reporting disclosure. On the other hand, the
percentage of director holdings and the stock price
per share are negatively related to the sustainabil-
ity reporting disclosure. Gavana et al. (2017) used a
sample of 230 non-financial Italian listed firms for
the period 2004–2013 to analyze the differences in
sustainability reporting within family businesses
and highlighted “that the way family ownership af-
fects sustainability reporting depends on how the
family exerts its influence on the business”. Loh et
al. (2017) investigated the relationship between sus-
tainability reporting and firm value based on listed
companies in Singapore and found that there is a
positive relationship between sustainability report-
ing and market value. By using an example of Ko-
rea, Lee et al. (2019) investigated whether chaebol
firms are more likely to issue CSR reports than non-
chaebol firms, and they proved that they are. Re-
sults also indicated that there is a smaller increase
in firm value when a firm discloses its sustainability
report voluntarily because investors doubt a firm’s
intentions in relation to sustainability disclosure
and therefore discount its value. Carp et al. (2019)
used a sample of Bucharest Stock Exchange listed
companies from 2012 to 2017 to analyze the impact
of sustainability reporting on firm growth and no-
ticed low influence.
276
Cunha and Moneva (2018) identified the main in-
fluencing drivers on the elaboration and publication
of sustainability reports of chemical and oil compa-
nies in Brazil and Spain. They found transparency
and legitimacy as the main reasons affecting the
publication of sustainability reports of companies.
Smeuninx et al. (2020) applied readability formu-
lae and Natural Language Processing to a manu-
ally assembled 2.75-million-word corpus in order
to analyze the language of corporate sustainability
reporting along region, industry, genre and content
lines. The result indicated that there is no industry
impact on readability, but the region proves to be an
important variable. Sutopo et al. (2018) examined if
the information on the winners of the Sustainabil-
ity Reporting Award contributes to the usefulness
of the information in the financial statements and
found a positive impact on finance.
Other studies investigated the quality of sustain-
ability reporting and various variables. Ching et al.
(2017) concluded that although quality disclosure
is improving throughout the years under study, the
scores are still low. Mion and Adaui (2019) noted
that the implementation of the Non-Financial Re-
porting Directive (NFRD) increased the quality of
sustainability reporting. On the other hand, the
quality of sustainability reporting has a positive im-
pact on risk (Truant et al., 2017) and on access to
finance (Garcia-Sanchez et al., 2019).
4.6 Indicators
Few authors examined sustainability disclosure in-
formation in a particular country at selected com-
panies. Gnanaweera and Kunori (2018) evaluated
the determinants of corporate sustainability disclo-
sure practices on a sample of 85 Japanese companies
listed on Tokyo Stock Exchange (TSE) from 2008
to 2014 and found that social values, ensuring the
guidelines and the accuracy of the disclosure infor-
mation, are important for corporate sustainability
reporting. Arthur et al. (2017) examined GRI per-
formance indicators disclosed in sustainability re-
ports of 10 large mining companies in Ghana in the
period 2008–2012. The result showed an increasing
trend in the disclosure of performance indicators in
sustainability reports for companies by GRI guide-
lines. Tarquinio et al. (2018) explored performance
indicators disclosed in GRI-based sustainability re-
ports produced by the companies in Italy, Spain and
Greece. They revealed that social indicators related
God. XXXIII, BR. 1/2020. str. 271-283

to labor are more frequently reported in sustain-
ability reports of the three countries under study.
Calabrese et al. (2017b) used sustainability reports
of a sample of 50 Italian companies and analyzed
the possible presence of greenwashing practices.
Their results showed that reporting a higher num-
ber of environmental indicators pursues a green-
washing strategy aimed at obfuscating their scarce
commitment in sustainability and managing stake-
holders’ perceptions of their benefit.
4.7 Materiality
Calabrese et al. (2019) provided suggestions for the
development of a new and more effective method
of materiality analyses for making materiality work
in practice. Guix et al. (2017) investigated sustain-
ability reporting by focusing on stakeholder-related
practices disclosed by the 50 largest hotel groups
worldwide. The authors pointed out that dialogue
mechanisms that are used to empower stakehold-
ers, as their participatory role in decision-making
and the reporting process, shape the materiality
and responsiveness disclosure. The same authors
(2018) explored the understanding and use of mate-
riality on a sample of eight sustainability managers
of the world’s 50 largest hotel groups. The results
showed that sustainability managers are disempow-
ered, have limited resources, time, knowledge, and
skills to apply to materiality assessment.
4.8 Practices
Szekely and Brocke (2017) applied topic modeling
to 9,514 sustainability reports published in the pe-
riod 1999-2015 to identify the most common prac-
tices described in these reports. They found that the
most frequently mentioned topics in sustainability
reports of organizations related to the environmen-
tal dimension are emissions and consumption, the
ones related to the social dimension are employ-
ees and the one related to economic sustainability
is financial data. Kim and Kim (2017) based their
research on news articles and sustainability reports
to explore sustainable supply chain management
(SSCM) trends, and a firm’s strategic position-
ing and execution concerning sustainability in the
textile and apparel industry. The results indicated
that listed firms show relatively low realism and
high commonality. Landrum and Ohsowski (2017)
studied worldviews of corporate sustainability, or
the corporate message conveyed as to what sustain-
God. XXXIII, BR. 1/2020. str. 271-283
Review article
ability or CSR is and how to enact it on a sample
of dominant North American firms. The results
showed that the most dominant worldview is fo-
cused on the business case for sustainability with
a weak representation of sustainability in corporate
sustainability reports. Stewart and Niero (2018)
performed a review of 46 corporate sustainability
reports in the fast-moving consumer goods sector
with an aim to explore how companies from the
sample incorporate the circular economy into their
sustainability efforts. The results showed that a cir-
cular economy has started to be integrated into the
corporate sustainability agenda. Cho et al. (2017)
used a sample of seven large U.S. oil and gas firms
to illustrate how Goffman’s frontstage and back-
stage analogy can be useful for providing insights
into sustainability disclosure. An et al. (2017) exam-
ined the sustainability reporting by a New Zealand
public university from a longitudinal perspective
and found that the university does not follow any
reporting guidelines. Rashidfarokhi et al. (2018)
investigated the content of sustainability report-
ing issued by the real estate sector and found that
fulfilling the legislative requirement and avoiding
financial or legal risks are the main reasons why
companies report on sustainability. Giacomini et al.
(2018) used Italian local government organizations
(LGOs) to investigate if LGOs use reporting tools
to promote sustainable development. They revealed
that major obstacles to sustainability reporting in
most Italian municipalities are cost reduction,
voluntariness and low efficiency of sustainability
reporting. Kurniawan (2018) described the imple-
mentation model of sustainability reporting in the
village-owned enterprise and small and medium
enterprises (SMEs), especially in Indonesia and
found that SMEs and village-owned enterprises can
contribute more to the sustainability context than
other related businesses.
5. Discussion and conclusion
Successful companies engage assurance providers
to assure their sustainability reports. Since sus-
tainability reporting assurance is a relatively new
process, “factors that affect the reliability and cred-
ibility of assurance statements need to be studied
further” (Boiral, Heras-Saizarbitoria, 2020: 13).
Further research on assurance providers, as well as
sustainability reporting users is necessary. Explor-
ing stakeholder expectations and their engagement
in the process of assurance is worth studying. Board
277
Ana Zrnić, Dubravka Pekanov Starčević, Boris Crnković: Recent trends in sustainability reporting: Literature review and implications for
future research
member or CEO characteristics influence corpo-
rate board diversity and sustainability reporting, so
future research can analyze the impact of charac-
teristics of the board, such as the education level,
personality, age, etc. What can also be analyzed is
the board members’ focus on particular aspects of
sustainability reporting. In addition, there is a per-
ception gap between the reporting company and
its stakeholders that can influence the success of
corporate communication regarding sustainabil-
ity behavior of a company. Based on the presented
framework problems, Cardoni et al. (2019) point
out that researchers should be more concentrated
on the quality characteristics of sustainability dis-
closure rather than on performance, as long as the
level of data comparability in sustainability report-
ing is low. It is also necessary to discuss whether
sustainability reporting frameworks are useful for
providing information on companies according to
various industries.
Sustainability reporting practices indicate that or-
ganizations are faced with different issues and bar-
riers in sustainability reporting. The main reason
for sustainability reporting is to fulfill the legislative
requirement. On the other hand, the legal require-
ment has a role to play in how the size of firms will
affect sustainability reporting, without neglecting
SMEs that can contribute to sustainability. All of
the above indicates that there are weak represen-
tations of sustainability in corporate reports. That
is because sustainability is a process that has yet to
find its way into sustainability reports. Although the
quality of sustainability reporting is still relatively
low, the legislation is affecting its increase. All seg-
ments of future impact research are welcome as the
impact is a measure that is inexhaustible in the area
of sustainability reporting due to a large number of
variables that can be observed.
278
In sustainability reports, managers prepare materi-
ality criteria using their judgment because material-
ity in the context of sustainability reporting implies
those issues that are most relevant to stakeholders
and companies. Therefore, it is important to de-
velop an effective method for making materiality
work. Stakeholders play a significant role in shaping
the disclosure of materiality. Further research may
study the judgment process of materiality deter-
mination from the perspective of stakeholders and
managers.
This research makes three major contributions in
the field of sustainability reporting. First, it con-
tributes to the research gap by providing eight as-
pects that represent a trend in literature reviews of
sustainability reporting. Second, the review offers
insights into the topic and outlines problems and
some of the challenges related thereto. Finally, it
provides research opportunities for exploring sus-
tainability reporting in future studies. Despite the
contribution of this study to the literature, several
limitations are worth mentioning. The analysis was
conducted on a single database with three keywords,
considering all papers that were conceptually solely
related to sustainability reporting. One drawback
of the Web of Science database in this research is
that despite the set criteria, it was not possible to
download all the selected papers from the database.
These limitations imply recommendations for fu-
ture research of this type. Future research should
focus on a specific aspect of sustainability reporting
and conduct an analysis of papers from other data-
bases with multiple keywords included, i.e. all the
synonyms. The search may include the years since
sustainability reporting is required or multiple years
may be included to gain an insight into the develop-
ment of sustainability reporting.
God. XXXIII, BR. 1/2020. str. 271-283
 Review article

R

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E

1 UN General Assembly (2015), “Transforming Our World: The 2030 Agenda for Sustainable Development”, available at: https://
sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for%20Sustainable%20Development%20web.pdf
(Accessed on: March 5, 2020)
2 European Parliament (2014), Directive 2014/95/EU of the European Parliament and of the Council, available at: https://eur-lex.
europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32014L0095&from=EN (Accessed on: March 9, 2020)
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form/coverage (Accessed on: March 19, 2019)

282 God. XXXIII, BR. 1/2020. str. 271-283

 Review article

Ana Zrnić
Dubravka Pekanov Starčević
Boris Crnković

N   

 :    
  
S
Izvještavanje o održivosti u posljednjim je godinama postalo aktualno pitanje obzirom da više nije dovoljno
iznositi tvrdnje o održivosti kompanija, nego demonstrirati njihove napore vezane uz održivost. Stoga je
izvještavanje o održivosti preraslo s dobrovoljne osnove na zakonsku obvezu za neke organizacije, što go-
vori u prilog važnosti održivog poslovanja na globalnoj razini. Ovaj rad ima za cilj pružiti širu perspektivu i
teorijsku podršku za istraživanje izvještavanja o održivosti. Pregled literature koji uključuje 52 rada iz baze
podataka Web of Science ukazuje na sljedećih osam aspekata koji su postavljeni kao trend u pregledima li-
terature vezanim uz izvještavanje o održivosti: osiguranje, odbori, komunikacija, okvir, utjecaj, pokazatelji,
materijalnost i prakse. U radu se ističu problemi i postavljaju izazovi povezani s izvještavanjem o održivosti
i mogućnostima za istraživanje izvještavanja o održivosti u budućim radovima.

Keywords: izvještavanje o održivosti, održivi razvoj, društvena odgovornost

God. XXXIII, BR. 1/2020. str. 271-283 283

 P 
S 

Marijana Ćurak, Dujam Kovač:

Upravljanje rizicima društava za neživotno osiguranje
i reosiguranje primjenom tehnike sekuritizacije
 CC BY-NC-SA

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Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
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Marijana Ćurak Dujam Kovač licenciraju svoja djela
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Ekonomski fakultet Ekonomski fakultet
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Prihvaćeno za objavu: 18. prosinca 2019.
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Imenovanje-Nekome
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UPRAVLJANJE RIZICIMA Ovo je najrestriktivnija

DRUŠTAVA ZA NEŽIVOTNO
OSIGURANJE I REOSIGURANJE
5 od 6

PRIMJENOM TEHNIKE
SEKURITIZACIJE
S
U radu se analiziraju karakteristike instrumenata sekuritizacije i njihovo značenje u upravljaju aktuarskim
rizicima društava za neživotna osiguranja i reosiguranja. Iako se sekuritizacijom na tržište kapitala mogu
transferirati različiti rizici, najznačajniji među sekuritiziranim rizicima jesu rizici povezani s katastrofalnim
događajima za koje osiguratelji/reosiguratelji ne mogu ostvariti diversifikaciju unutar vlastitog portfelja
osiguranja/reosiguranja. Mogućnost proširenja kapaciteta za transfer rizika, smanjivanje izloženosti kredit-
nom riziku, fiksiranje uvjeta prijenosa rizika na duže razdoblje, kojim se ostvaruje zaštita od fluktuiranja
cijene transfera rizika, unaprjeđenje upravljanja kapitalom i unaprjeđenje performansi, glavne su koristi
koje osiguratelji/reosiguratelji mogu ostvariti ovom metodom upravljanja rizicima. Ovim prednostima, u
odlučivanju o primjeni ove tehnike u upravljanju rizicima, suprotstavljaju se nedostatci, koji u ovisnosti od
primijenjenog uvjeta transakcije, obuhvaćaju rizik baze i likvidnosti te obvezu objavljivanja informacija o
portfelju osiguranja, a što u konačnici određuje cijenu transfera. U odnosu na reosiguranje i retrocesiju,
sekuritizacija ima malo značenje u upravljanju rizicima. Ipak, uvažavajući sve veće razmjere katastrofalnih
šteta, te mogućnosti primjene ove tehnike na ostale rizike, mogao bi se očekivati porast značenja ove me-
tode u upravljanju rizicima društava za osiguranje/reosiguranje, ali u svojstvu komplementa reosiguranju,
odnosno retrocesiji, ne njihove alternative.
Ključne riječi: sekuritizacija, obveznice, katastrofalni rizici, upravljanje rizicima društava za neživotno osi-
guranje/reosiguranje

1. Uvod
Iako su društva za osiguranje izložena raznovrsnim
rizicima, koji se prema suvremenom konceptu
upravljanja rizicima, integriranom upravljanju ri-
zicima (eng. Enterprise risk management, ERM),
kategoriziraju u aktuarske rizike, financijske rizike,
operativne i strateške rizike, s obzirom na glavnu
djelatnost osiguratelja/reosiguratelja, aktuarski ri-
zici predstavljaju najznačajnije rizike društava za
osiguranje/reosiguranje. U svom osnovnom obliku

God. XXXIII, BR. 1/2020. str. 287-303 287

Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
aktuarski rizici jesu odstupanja stvarnih od očeki-
vanih šteta. Najznačajnija metoda upravljanja ovim
rizicima je reosiguranje/retrocesija kojim osigu-
ratelj/reosiguratelj transferira rizike na društvo za
reosiguranje/retrocesionara uz plaćanje premije.
Međutim, uz reosiguranje i retrocesiju, koncept
integriranog upravljanja rizicima društava za osigu-
ranje/reosiguranje, između ostalog, uključuje i pri-
mjenu alata, tradicionalno korištenih u upravljanju
financijskim rizicima, u smanjivanju rizika iz poslo-
va osiguranja, a koji pripadaju kategoriji tzv. alter-
nativnog transfera rizika. Riječ je o širokom skupu
metoda upravljanja rizicima koji se prema Banks
(2004: 49) definira kao „proizvod, kanal ili rješenje
kojim se transferira izloženost riziku između trži-
šta osiguranja i tržišta kapitala kako bi se ostvari-
li postavljeni ciljevi upravljanja rizicima.“ Prema
Cummins i Weiss (2009: 506) metode alternativnog
transfera rizika mogu se kategorizirati u tri skupine:
udruženja (poolovi) za rizik i osiguratelji (netradici-
onalni), hibridni proizvodi i financijski instrumenti.
Prvoj skupini pripadaju plan samoosiguranja, vlasti-
ta društva za osiguranje i grupe za pridržaj rizika.
Hibridni proizvodi obuhvaćaju ograničeno ili finan-
cijsko (re)osiguranje, proizvode za višegodišnju za-
štitu, proizvode za višestruke opasnosti, proizvode
s višestrukim triggerom, warranties šteta industrije
i sidecars. Financijski instrumenti su uvjetno finan-
ciranje, opcije, poslovi zamjene i obveznice vezane
za katastrofalne rizike. Dok su se neke od navede-
nih metoda počele značajnije koristiti od 1960-ih
i 1970-ih godina (plan samoosiguranja i vlastita
društva za osiguranje), metode koje su povezane s
tržištem kapitala na važnosti dobivaju od 1990-ih
godina (Banks, 2004: 51). Među njima, najznačajnija
je tehnika sekuritizacije u osiguranju/reosiguranju
koja integrira tržište kapitala u upravljanje aktuar-
skim rizicima. Tehnikom sekuritizacije, rizici koji-
ma je izložen osiguratelj/reosiguratelj, transferiraju
se na investitore na tržište kapitala. Ova tehnika
uključuje kreiranje „Special purpose vehicle“ (SPV)
i emisiju vrijednosnica čiji kuponi i povrat glavnice
ovise o ostvarenju osiguranog događaja, razini in-
deksa šteta ili iznosu određenog fizičkog parametra
vezanog za štetni događaj.
Uz volatilnost na godišnjoj razini, broj katastro-
falnih šteta od druge polovice 1980-ih godina ima
uzlazni trend, uz određeno smanjenje u zadnjim go-
dinama (Swiss Re Institute, 2019)1. Uzrok kojim se
najčešće objašnjava ovakvo kretanje broja katastro-
falnih događaja jesu klimatske promjene koje iza-
288
zivaju ekstremne vremenske uvjete. Dodatno, kao
posljedica koncentracije stanovništva u područjima
koja su izloženija nastupu katastrofalnih događaja,
posebno u obalnim područjima, štete koje proizla-
ze iz katastrofalnih događaja velikih su razmjera.
Ukupne ekonomske štete kao posljedice prirodnih
katastrofa (posebno uragana i oluja) i onih koji su
pod izravnim utjecajem čovjeka (kao što su požari,
teroristički napadi, pomorske i zrakoplovne nesre-
će) u 2017. godini iznosile su 350 milijardi USD, što
je značajno više od desetogodišnjeg prosjeka koji
iznosi 220 milijardi USD (Swiss Re, 2019: 3)2. S po-
rastom katastrofalnih šteta, a s obzirom na rast vri-
jednosti osigurane imovine, veličina šteta za društva
za osiguranje, također je rasla (Swiss Re Institute,
2019)1. U 2017. godini ukupna vrijednost osiguranih
šteta iznosila je 150 milijarde USD (Swiss Re, 2019:
4)2, što je najveći iznos šteta u pojedinačnoj godini
ikada zabilježen (Swiss Re, 2018: 4)3. Broj katastro-
falnih događaja u 2018. godini bio za dva manji u
odnosu na 2017. godini (304, prema metodologiji
Swiss Re, 2019: 2; 27; Swiss Re Institute, 2019)2,1 i
veličina ekonomskih i osiguranih šteta bile su ma-
nje u odnosu na prethodnu godinu (165 milijarde
USD odnosno 85 milijardi USD). Međutim, ove vri-
jednosti su četvrte najveće od 1970. godine (Swiss
Re, 2019: 4)2. Konačno, ove činjenice više odraža-
vaju volatilnost na godišnjoj razini. Naime, prema
izvješću o globalnim rizicima (Marsh, 2019: 6; 8)4,
rizici povezani s ekstremnim vremenskim uvjetima,
klimatskim promjenama i prirodnim katastrofama,
prema frekvenciji čine tri od pet najvećih rizika, dok
isti rizici, uz rizik krize s vodom, predstavljaju če-
tiri od pet najvećih rizika prema intenzitetu šteta.
Prirodne katastrofe su treći po važnosti rizik koji-
ma su izložene poslovne tvrtke u 2019. godini pre-
ma Allianz Risk Barometer (2019)5. Također, prema
AXA (2017)6 među pet najznačajnijih rizika kojima
će svijet biti izložen do 2025. godine, vodeće mjesto
zauzimaju klimatske promjene, a za očekivati je da
će s njima rasti i broj katastrofalnih događaja i nji-
hove posljedice.
Dok je nedostatak kapaciteta bio važnim inicijal-
nim čimbenikom emisija obveznica baziranih na
katastrofalnim rizicima7, kasnije sudjelovanje osig-
uratelja i reosiguratelja u ovim transakcijama trans-
feriralo se iz pasivne u aktivnu ulogu, odnosno bez
obzira na raspoloživost kapaciteta na tržištu reosig-
uranja/retrocesije, prenose rizike na tržište kapitala
(Spry, 2009: 16) optimizirajući na taj način, upravl-
janje rizicima. S druge strane, veliki kapacitet tržišta
God. XXXIII, BR. 1/2020. str. 287-303

kapitala, njegov intenzivan rast i inovacije činili su
važnu pretpostavku na strani potražnje za vrijed-
nosnicama temeljenim na rizicima iz osiguranja.
Uz rast katastrofalnih šteta i cikličnost tržišta reo-
siguranja, važnost za razvoj sekuritizacije imala su
i unaprjeđenja u računalnoj i telekomunikacijskoj
tehnologiji koja su omogućila prikupljanje i obradu
podataka o katastrofalnim događajima i mode-
liranje šteta, te dala doprinos razvoju koncepta in-
tegriranog upravljanja rizicima (Cummins i Weiss,
2009: 494).
Cilj je rada analizirati primjenu sekuritizacije u up-
ravljanju rizicima društva za neživotna osiguranja
i reosiguranja, kao nastavak istraživanja Ćurak
(2009) u smislu proširenja analize sekuritiziranih
instrumenata i novijih razvoja u korištenju sekuriti-
zacije u upravljanju rizicima povezanih s katastro-
falnim događajima. U prvom dijelu rada opisat će
se tehnika sekuritizacije i dati pregled različitih
instrumenata koji su produkt sekuritizacije vezane
za katastrofalne rizike. U sljedećem dijelovima rada
analizirat će se koristi, rizici i troškovi te stupanj
korištenja ove metode upravljanja rizicima društava
za osiguranje i reosiguranje, kao i perspektive
sekuritizacije. Zadnji dio rada obuhvaća zaključna
razmatranja.
2. Tehnika sekuritizacije i vrste sekuritizaranih
instrumenata
Prema Gorvett (1999: 137)8 sekuritizacija u osi-
guranju obuhvaća transformaciju novčanih tokova
vezanih za preuzimanje rizika u osiguranje u vri-
jednosnice (oblik „financijskog inženjeringa“) i
transfer aktuarskog rizika na tržište kapitala kroz
prodaju vrijednosnih papira investitorima. Naime,
osigurateljima, odnosno reosigurateljima nije
omogućen izravan pristup tržištu kapitala za trans-
fer aktuarskih rizika. Također, investitori na tržištu
kapitala nisu ovlašteni za preuzimanje rizika te je
njihova osnovna uloga vezana za investiranje u fi-
nancijske instrumente. Način na koji su investitori
u mogućnosti preuzimati aktuarski rizik jest kroz
sudjelovanje u vlasništvu društva za osiguranje.
Međutim, s takvom investicijom moraju biti sprem-
ni na preuzimanje i ostalih rizika kojima su izložena
društava za osiguranje (Lale, 2013: 3)9. Drugi način
je kroz sudjelovanje u transakciji sekuritizacije.
Naime, sekuritizacijom se omogućava povezivanje
ovih subjekata, odnosno ostvarenje zaštite od rizika
za osiguratelje i ulaganje investitora u vrijednosnice
God. XXXIII, BR. 1/2020. str. 287-303
Review article
čiji prinosi nisu korelirani s prinosima od ulaganja
u druge financijske instrumente, nego štetama po
osnovi osiguranih događaja. Ovo se povezivanje os-
tvaruje posredovanjem posebnog pravnog entiteta
– Special purpose vehicle (u nastavku: SPV) (IAIS,
2003: 14)10.
Među rizicima društava za osiguranje/reosiguranje
koji su predmetom sekuritizacije, najznačajniji su
katastrofalni rizici (posebno oni vezani za prirodne
katastrofe, kakvi su potresi, oluje, uragani i sl.),
transferom kojih na tržište kapitala nastaju tzv. vri-
jednosnice temeljene na katastrofalnom riziku (eng.
cat bonds). Stoga se u nastavku opisuje postupak
sekuritizacije ovih rizika, čija je struktura grafički
prikazana na Slici 1.
Osiguratelj, odnosno reosiguratelj transferira rizike
na tržište kapitala sklapanjem ugovora sa SPV-om.
Ako se zaključuje, uz tzv. odštetni kriterij, ugovor
predstavlja ugovor o reosiguranju. Ukoliko je pak
kriterij za sekuritizaciju indeks šteta industrije ili
parametarski kriterij, ugovor će biti financijskog
karaktera (IAIS, 2003: 15). Temeljem ugovora, uz
obvezu plaćanja premije, osiguratelj/reosiguratelj
stječe pravo na odštetu u slučaju nastupa štetnog
događaja. Kao i u slučaju tradicionalnog reosiguran-
ja, osiguratelj ostaje obvezan prema ugovarateljima
osiguranja, a kroz sekuritizaciju osigurava izvor fi-
nanciranja ovih obveza. Premija koju sponzor plaća
SPV-u za pokriće rizika (kvartalno, polugodišnje)
koristi se za plaćanje kupona investitorima koji su
uložili sredstava u obveznice.
SPV je posrednik između sponzora i investitora.
Riječ je o nezavisnom društvu koje na temelju ugo-
vora sa sponzorom, posreduje u pokriću rizika,
emitira vrijednosnice i upravlja sredstvima koja se
ostvaruju u okviru transakcije sekuritizacije (usm-
jerava sredstva na povjerenički račun za daljnje
investicije i ugovara swap transakciju). Uobičajeno
se osniva u područjima koja su karakteristična po
povoljnijem regulatornom okviru, posebno u smis-
lu nižih kapitalnih zahtjeva i povoljnijeg poreznog
tretmana (npr. Kajmanski otoci, Bermuda). Najčešće
se u ulozi SPV-a pojavljuje offshore reosiguratelj.
Za SPV koji sudjeluje u transakciji sekuritizacije s
odštetnim kriterijem, potrebno je ostvariti licencu
za pružanje poslova reosiguranja, dok to nije nužno
u slučaju transakcija sekuritizacije s drugim kriteri-
jima (IAIS, 2003: 15). Sponzor ne može izravno sud-
jelovati u vlasništvu SPV-a. Stoga je SPV uobičajeno
sponzoriran od strane određene dobrotvorne zak-
lade (Banks, 2004: 120).
289
obveznice. SPV ima obvezu isplatiti sredstva sponzoru u slučaju nastupa osiguranog događaja,
odnosno glavnicu i kamate investitorima ako se događaj ne ostvari.
Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije

Uobičajeno
Aktivnostitransakcija sekuritizacije
vezane za emisiju vrijednos-ugovor
i plasmanuključuje o zamjeni
za plaćanje (eng.
kupona swap). Ugovor
investitorima se odnosi
u obveznice. SPV
nica obavljaju
na zamjenu investicijske
fiksnih prinosa banke. Iznos emisije
od ulaganja ima obvezu
u financijske isplatiti sredstva
instrumente sponzoru u slučaju
za fluktuirajuće na-
kamate
odgovara maksimalnom iznosu obveze koje SPV stupa osiguranog događaja, odnosno glavnicu i ka-
(uobičajeno
preuzima LIBOR uvećan (limit
prema sponzoru za određenu premiju
reosiguranja). zainvestitorima
mate rizik). Ovimako sesedogađaj
ugovorom ostvaruje
ne ostvari.
Sredstva koja ostvari od investitora, SPV plasira na Uobičajeno transakcija sekuritizacije uključuje
dodatna zaštita investicija.
kolateralizirani povjereničkiMeđutim, zaštita
račun. U cilju od rizika
sman- nije potpuna. Naime, ugovor o zamjeni
ugovor o zamjeni (eng. swap). Ugovor se odnosi na
jivanja kreditnog rizika postavljaju se ograničenja zamjenu fiksnih prinosa od ulaganja u financijske
uključuje rizik suprotne
na investicije, strane. povlačenja sred-
kao i mogućnosti instrumente za fluktuirajuće kamate (uobičajeno
stava. Investicije se strukturiraju od nisko-rizičnih LIBOR uvećan za određenu premiju za rizik). Ovim
vrijednosnica (najčešće vrijednosnica novčanog se ugovorom ostvaruje dodatna zaštita investicija.
tržišta). Upravo se prinosi od ovih ulaganja, zajedno Međutim, zaštita od rizika nije potpuna. Naime,
s premijom koju SPV ostvaruje od sponzora, koriste ugovor o zamjeni uključuje rizik suprotne strane.
Slika 1. Struktura sekuritizacije
Slika 1. Struktura sekuritizacije

Suprotna strana
ugovora o
zamjeni (swap)

Fiksni investicijski LIBOR +/- swap spread

prinos

Premija Sredstva za obveznice

Sponzor
(osiguratelj ili SPV Investitori
Isplate kupona
reosiguratelj)
Naknada štete Preostala glavnica

Investicijski prinos Glavnica i premija

Povjerenički
račun

Izvor: Prilagođeno prema Ćurak (2009: 47).

Izvor: Prilagođeno prema: Ćurak (2009: 47).
Primjer gubitka povezanog s ovim rizikom je osiguranja/reosiguranja. Upravo su to potvrdili re-
propast investicijske banke Lehman Brothers koja zultati istraživanja Carayannopoulos i Perez (2015).
je bila suprotna strana u ugovoru o zamjeni za tran- Naime, za vrijeme financijske krize, zbog propasti
sakcije sekuritizacije za vrijeme financijske
Primjer gubitka povezanog s ovim rizikom je propast krize Lehman Brothers, banke
investicijske prinosi Lehman
na obveznice temeljene
Brothers koja
2007./2008. Zbog ovoga događaja, ukupno su četiri na katastrofalnim rizicima bili su korelirani s prino-
je bila suprotnasekturitizacije
transakcije strana u ugovoru o zamjeni
rezultirale za transakcije
u gubitku sekuritizacije
sima na ostalu za uvrijeme
imovinu. Ipak, financijske
dugom roku postoji
(Edesess, 2014: 9). Ovo je pokazalo da se u kratkom potencijal za ostvarenje diversifikacijskog učinka za
krizeroku može dogoditi
2007./2008. Zbogpovezanost
ovoga događaja, ukupno su
između kretanja četiri transakcije
investitore (Spry, 2009: sekturitizacije
18). rezultirale
prinosa na ostale instrumente na tržištu kapitala Investitori, kojiroku
su indirektni pružateljipovezanost
zaštite za
u gubitku
i prinosa(Edesess, 2014: 9).
na vrijednosnice Ovo je na
temeljene pokazalo
riziku izda se u kratkom može dogoditi
rizike društava za osiguranje odnosno reosigu-

290 God. XXXIII, BR. 1/2020. str. 287-303

6

ranje, kupuju vrijednosnice čiji će povrat ovisiti o
nastupu događaja koji je predmetom sekuritizacije.
Vrijednosnice koje nastaju postupkom sekuriti-
zacije mogu se ponuditi širokoj javnosti ili se nji-
hova prodaja realizira preko privatnog plasmana.
Investitori obuhvaćaju mirovinske fondove, inves-
ticijske fondove, hedge fondove, banke te društva za
osiguranje i reosiguranje. Motiv njihova ulaganja u
vrijednosnice temeljene na katastrofalnim rizicima
je diversifikacijski učinak (s obzirom da vrijednost
instrumenta ovisi o katastrofalnom događaju, ne o
prinosima na ostale financijske instrumente) i/ili
veći prinos u odnosu na ulaganja u korporacijske
obveznice. Iako je diversifikacijski učinak važan
motiv uključenja obveznica temeljenih na katastro-
falnim rizicima u investicijski portfelj, ovaj učinak
može i izostati budući da katastrofalni događaji
mogu proizvesti negativne posljedice i na tržište
kapitala.
Iz prinosa od ulaganja sredstava koja su ostvarena
prodajom vrijednosnica i premije koju je platio
sponzor, plaćaju se varijabilni kuponi investitorima.
Uobičajeno je da se kamatna stopa veže za LIBOR
i uvećava za određenu premiju za rizik. Kamate
će se razlikovati s obzirom na rejting obveznica
kojeg utvrđuju agencije za rejting (npr. Standard
& Poors, Moody’s) na temelju frekvencije i inten-
ziteta katastrofalnog događaja koji je predmetom
transakcije sekuritizacije, uvjeta sekuritizacije i
rizika. Utvrđivanje frekvencije i intenziteta te-
melji se na modeliranju katastrofalnog događaja
od strane poduzeća za modeliranje šteta. U skladu
s utvrđenom razinom rizika, vrijednosnice mogu
imati investicijski ili ispod-investicijski rejting.
Najčešće imaju rejting u rasponu od B do BBB pre-
ma Standard & Poors (OECD, 2009: 36)11.
Sve dok se ne ostvari definirani uvjet (eng. trigger)
na kojem su temeljene obveznice, investitori će pri-
mati kupone te glavnicu na dan dospijeća vrijednos-
nice (uobičajeno dospijeće je od tri do pet godina).
Ukoliko se pak određeni događaj realizira, pravo na
sredstva ostvaruje sponzor, a investitori gube dio ili
cjelokupnu glavnicu. Naime, kod dijela obveznica
glavnica je zaštićena u cijelosti ili djelomično, dok
je kod drugih glavnica u potpunosti pod rizikom.
Pored kreditnog rizika, investitori se izlažu i riziku
likvidnosti. Naime, iako se vrijednosnicama koje
nastaju u postupku sekuritizacije trguje na sekund-
arnom tržištu kapitala, likvidnost ovoga tržišta je
ograničena.
God. XXXIII, BR. 1/2020. str. 287-303
Review article
Nekoliko je kriterija za podjelu obveznica vezanih
za katastrofalne rizike (prema Araya, 2004: 3, Slika
2.). S obzirom na broj rizika koji su pod pokrićem ra-
zlikuju se obveznice koje pokrivaju jedan događaj
(eng. single-peril) i one koje obuhvaćaju više
događaja (eng. multi-peril), npr. zemljotres i ura-
gan. Obveznice koje su temeljene na više događaja
omogućavaju sponzoru uštedu u smislu izbjegavan-
ja troškova transfera svakog pojedinačnog rizika.
Prema razdoblju pokrića rizika, postoje obveznice
koje pružaju pokriće za jednu godinu (eng. single-
year) i obveznice s višegodišnjim pokrićem (eng.
multi-year). S obzirom na vrstu štete, obveznice se
dijele na one za određeni događaj (eng. per event)
i obveznice koje pokrivaju agregirane štete (eng.
aggregate).
Uvažavajući kriterij, odnosno uvjet prema kojima
se određuje pravo osiguratelja/reosiguratelja na
naknadu i posljedično pravo investitora na povrat
uloženih sredstava i ostvarenje kamata, razlikuju
se obveznice temeljene na odštetnom kriteriju
(eng. indemnity trigger), indeksu šteta industrije
(eng. loss index), ponderiranom indeksu šteta
(eng. weighted loss index), čistom parametarskom
kriteriju (eng. pure parametric), parametarskom
indeksu (eng. parametric index) te kriteriju mod-
eliranih šteta (eng. modeled-losses trigger).
Odštetni kriterij je stvarna šteta društva za osi-
guranje, odnosno reosiguranje. Kao i u slučaju ne-
proporcionalnog reosiguranja/retrocesije, kada pri
ostvarenju osiguranog događaja svota štete prijeđe
unaprijed definirani iznos, sponzor ostvaruje pravo
na naknadu štete. S obzirom da je naknada vezana
za iznos štete osiguratelja/reosiguratelja, sponzor
nije izložen riziku baze (odstupanje osigurateljevih/
reosigurateljevih šteta u odnosu na štete/parametar
koji predstavljaju kriterij za ostvarenje naknade
štete na kojima su obveznice bazirane), zbog čega je
ugovaranje sekuritizacije uz odštetni uvjet za spon-
zora prihvatljivije u odnosu na ugovaranje tran-
sakcije uz druge kriterije. Međutim, ovu prednost
osiguratelji/reosiguratelji plaćaju višim premijama
za rizik koju investitori zahtijevaju na vrijednosnice
s odštetnim kriterijem s obzirom na viši stupanj
izloženosti riziku, a koji proizlazi iz višeg stupnja
informacijske asimetrije koja za posljedicu može
imati nepovoljnu selekciju i moralni hazard. U pr-
vom slučaju osiguratelj/reosiguratelj nekvalitetno
izvršava proces preuzimanja rizika i transferira
„loše“ rizike na tržište kapitala, dok u drugom ne
291
Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
potiče na aktivnosti za smanjivanje šteta i/ili s
nemarom izvršava aktivnosti vezane za likvidaciju
šteta. Investitori bi trebali razumjeti poslovni pro-
ces klijenta, politiku preuzimanja rizika i prakse
likvidacije štete (Hagedorn i sur., 2009: 40), što
nije jednostavno za investitore u obveznice koji ne
pripadaju industriji osiguranja/reosiguranja. U cilju
smanjenja nepovoljnih učinaka informacijske asi-
metrije, odnosno usklađivanja interesa sponzora i
investitora, investitori mogu zahtijevati sudjelovan-
je osiguratelja/reosiguratelja u naknadi dijela štete
(IAIS, 2003: 21). Također, sponzor je obvezan udo-
voljiti zahtjevu za pružanjem informacija o svom
portfelju. Nedostatak primjene odštetnog kriterija je
i u trajanju procesa u kojem osiguratelj/reosiguratelj
ostvaruje novčane tokove za pokriće šteta. Ono je
duže u odnosu na razdoblja koja se vežu uz ostale
kriterije iz razloga što štete trebaju biti potvrđene
(Hagedorn i sur., 2009: 46), što osiguratelja izlaže
riziku likvidnosti. Dodatno, neke se štete mogu pri-
javiti i znatno nakon njihova nastanka, zbog čega je
pri ugovaranju sekuritizacije s odštetnim kriterijem,
sponzor izložen i riziku zaostalih šteta.
Smanjenje informacijske asimetrije ostvaruje se
transakcijom sekuritizacije uz ugovaranje kriterija
indeksa šteta industrije. Prema ovom uvjetu, osi-
guratelj/reosiguratelj ostvaruje pravo na naknadu
štete ako indeks šteta dosegne razinu iznad one
koja je unaprijed definirana. Ovaj se kriterij koristi
u situacijama kada portfelj osiguranja/reosiguranja
ne sadrži dovoljno podataka, ali njegova izloženost
slična je izloženosti ukupne industrije osiguranja/
reosiguranja (Araya, 2004: 4). Indekse, na temelju
kretanja šteta industrije neživotnog osiguranja u po-
jedinim geografskim područjima (dijelovima država
ili državama), određuju nezavisne agencije (koje
nisu izravno uključene u transakciju sekuritizacije)
(npr. PCS (Property Claims Service) za Sjedinjene
Američke Države, PERILS (Pan-European Risk In-
surance Linked Services) za Europu). Primjenom
ovoga kriterija osiguratelj/reosiguratelj zaštićuje in-
formacije odnosno ostvaruje privatnost svog port-
felja (Banks, 2004: 123; OECD, 2009: 26; Swiss Re,
2011: 12)11,12, smanjuje se problem informacijske
asimetrije za investitore (indeks je razumljiviji za
investitore u odnosu na karakteristike portfelja osi-
guranja/reosiguranja), doprinosi se standardizaciji
ugovora i višem stupnju likvidnosti tržišta obvezni-
ca (IAIS, 2003: 21). Međutim, sponzor je izložen
riziku baze u smislu odstupanja njegovih šteta od
indeksa šteta. Korelacija u kretanju šteta osigu-
292
ratelja/reosiguratelja i šteta industrije zavisit će od
tržišnog udjela osiguratelja/reosiguratelja (Hage-
dorn i sur., 2009: 44). Prema tome, sekuritizacijom
temeljenom na ovom kriteriju, zaštita sponzora od
rizika može biti nepotpuna. Također, za ostvari-
vanje odštete potrebno je ostvariti informacije o
štetama industrije nakon što se ostvari katastrofalni
događaj, što može potrajati, zbog čega i ovaj kriterij
s gledišta likvidnosti osiguratelja/reosiguratelja ima
nedostatak. U slučajevima događaja koji izazivaju
velike štete razdoblje od nastanka događaja i ob-
jave podataka o procjeni šteta na razini industrije
može se produžiti i do dvije godine (Brookes, 2009:
87). Dodatno, za osiguratelja je prisutan i rizik za-
ostalih šteta. Iz perspektive investitora, zbog veće
transparentnosti te zbog nepostojanja potrebe za
procjenom portfelja osiguranja sponzora, ovaj kri-
terij je poželjniji.
Način na koji se može smanjiti rizik baze za spon-
zora jest uvođenje kriterija ponderiranog indeksa
šteta, kojim se uvažava geografska distribucija
portfelja osiguranja/reosiguranja sponzora. Naime,
uvođenjem pondera, koji uvažavaju geografsku
izloženost riziku sponzora, ostvaruje se viši stupanj
koreliranosti u kretanju šteta osiguratelja/reosigu-
ratelja i kretanja indeksa šteta.
Čisti parametarski ili fizički kriterij u transakciji
sekuritizacije određuje pravo sponzora na naknadu
štete na osnovi fizičkih mjera, kao što su magnitu-
da potresa, brzina vjetra, veličina padalina i druge
fizičke karakteristike događaja koji uzrokuje štetu,
u određenom geografskom području. Sponzor
utvrđuje veličinu kriterija i geografsko područje koje
je obuhvaćeno zaštitom. Odštetu ostvaruje ukoliko
definirani događaj, npr. vjetar dosegne određenu
minimalnu razinu u određenom području. Osi-
guratelj/reosiguratelj ne mora otkrivati podatke o
svom portfelju osiguranja/reosiguranja. Budući da
se parametri o katastrofalnom događaju mogu os-
tvariti u relativno kratkom roku, vrijeme u kojem
sponzor ostvaruje naknadu je kraće u odnosu na vri-
jeme povezano s prethodnim kriterijima. Međutim,
zbog mogućeg nepodudaranja šteta iz događaja na
čijim se veličinama bazira parametarski kriterij i
šteta osiguratelja/reosiguratelja te zbog moguće
različite geografske distribucije osigurateljnog/
reosigurateljenog portfelja (Swiss Re, 2011: 13)12,
sponzor je izložen riziku baze. Rizik baze je veći u
odnosu na onaj koji se može pojaviti pri primjeni
indeksa šteta jer kriterij nije iznos šteta industrije
kojoj pripada osiguratelj/reosiguratelj, nego veličina
God. XXXIII, BR. 1/2020. str. 287-303
 Review article

parametra vezana za određeni događaj. S druge
strane, manja je informacijska asimetrija za inves-
titore jer parametri koji se odnose na katastrofalni
događaj i određuju pravo na odštetu, nisu pod utje-
cajem osiguratelja/reosiguratelja i razumljiviji su u
odnosu na one koji se vežu uz odštetni kriterij. Sto-
ga su vrijednosnice temeljene na parametarskom
kriteriju pogodne i za investitore koji ne pripadaju
industriji osiguranja. Zbog manje informacijske
asimetrije, investitori zahtijevaju manje premije za
rizik, što rezultira u nižem trošku za društvo za osi-
guranje/reosiguranje.
Uz čisti parametarski kriterij, koristi se i param-
etarski indeks. Pri izračunu ovoga indeksa uvažava
Slika 2. Podjela obveznica temeljenih na katastrofalnim rizicima
se više lokacija za koje se primjenjuju različiti pon-
deri koji odražavaju izloženost sponzora katastro-
falnim događajima u određenom području (Swiss
Re, 2011: 13)12. Primjer pondera su svote osigu-
ranja ili maksimalna moguća šteta u određenom
području (Hagedorn i sur., 2009: 42). U slučaju na-
stupa određenog događaja, množe se fizički para-
metar koji se odnosi na događaj i ponderi. Ukoliko
zbroj ovih umnožaka dosegne unaprijed određenu
razinu, sponzor ostvaruje pravo na odštetu (Hage-
dorn i sur., 2009: 41). Na ovaj se način smanjuje
izloženost osiguratelja riziku baze u odnosu na
onu koja se javlja kod primjene čistog parametar-
skog kriterija.

Slika 2. Podjela obveznica temeljenih na katastrofalnim rizicima

Obveznice vezane za katastrofalne rizike

Obveznice s obzirom na broj Obveznice prema razdoblju Obveznice prema uvjetu kojim
Obveznice prema vrsti štete Obveznice prema broju uvjeta Obveznice prema tranšama
rizika pod pokrićem pokrića rizika se određuje pravo na naknadu

Godišnje Određeni Odštetni Jedan

Jedan rizik Jedan uvjet
pokriće događaj kriterij instrument

Višegodišnje Agregirane Indeks šteta Hibridne

Više rizika Različite tranše
pokriće štete industrije obveznice

Ponderirani
indeks šteta

Čisti
parametarski

Parametarski
indeks

Modelirane
štete

Izvor: Izrada autora prema Araya (2004)

Izvor: Izrada autora prema Araya (2004).

Kriterij modeliranih šteta uzima u obzir sintetički
portfelj, koji se u cilju smanjenja rizika baze,
usklađuje s portfeljem osiguratelja/reosiguratelja,
te odgovarajuće modeliranje (Hagedorn i sur., 2009:
45). Naknada se ne utvrđuje na temelju stvarnih
šteta, nego šteta koje proizlaze iz modela. Naime,
nakon nastupa određenog događaja koji je pred-
metom sekuritizacije, uvažavaju se fizički parametri
događaja (magnituda potresa, brzina vjetra i dr.)
koji se unose u unaprijed određeni model temeljem
kojeg se određuje šteta. Ukoliko modelirane štete
dosegnu razinu iznad unaprijed definiranog praga,
osiguratelj ostvaruje pravo na naknadu (Hagedorn
i sur., 2009: 45). Transakciju temeljenu na kriteri-
ju modeliranih šteta karakterizira srednji stupanj
rizika baze za osiguratelje, odnosno reosiguratelje,
kao i srednji stupanj informacijske asimetrije za 12
investitore. Sponzor zaštićuje informacije o svom
portfelju osiguranja/reosiguranja. U smislu likvid-
nosti sponzora, kao i slučaju parametarskog krit-
erija, vrijeme u kojem se ostvaruje odšteta je kraće
u odnosu na vrijeme u slučaju odštetnog kriterija i
kriterija indeksa šteta industrije. S kriterijem mod-
eliranih šteta javlja se izloženost riziku modela u
smislu da se štete iz određenog događaja mogu pod-
cijeniti ili precijeniti. Međutim, s unaprjeđenjem
modela od strane agencija za modeliranje šteta, ovaj
se rizik smanjuje (Cummins, 2008: 28).

God. XXXIII, BR. 1/2020. str. 287-303 293

(Cummins, 2008: 28).
Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
Slika 3. Odnos rizika baze za osiguratelje i transparentnosti za investitore za različite kriterije
na kojimaSlika 3. Odnos
su bazirane rizika baze za osiguratelje i transparentnosti za investitore za različite kriterije na
obveznice
kojima su bazirane obveznice
Zahtjev za pružanjem informacija
Odštetni uvjet
Uvjet
modeliranih šteta
Parametarski
Rizik baze za sponzora
Izvor: Swiss Re (2011: 10).12
Izvor: Swiss Re (2011: 10).12
Uz primjenu pojedinačnih kriterija, transakcija
sekuritizacije se može strukturirati i kombiniran-
jem dvaju ili više kriterija. Na ovaj način nastaju tzv.
hibridne strukture sekuritizacije. Uvjetovanjem
isplata ispunjavanjem više kriterija, moguće je is-
todobno udovoljiti interesima i sponzora i investi-
tora. Međutim, hibridne strukture su kompleksnije
za razumijevanje i s njima su povezani viši troškovi
u odnosu na jednostavne strukture sekuritizacije.
Svaki od kriterija se razlikuje s obzirom na stupanj
rizika baze, zahtjeva za pružanjem informacija o
portfelju osiguranja s gledišta osiguratelja, odnosno
informacijskoj asimetriji iz perspektive investitora,
što u konačnici određuje i premiju za rizik koju
zahtijevaju investitori. Odnos između stupnja rizika
baze i razine transparentnosti prikazan je na Slici 3.
Pored gore navedenih podjela vrijednosnica pov-
ezanih s katastrofalnim rizicima, obveznice se mogu
razlikovati i prema tranšama. Postoje obveznice koje
imaju samo jedan oblik instrumenta, te one koje se
emitiraju u različitim tranšama koje karakterizira-
ju različiti odnosi rizika i prinosa, odnosno razine
kamatnih stopa i/ili povrata glavnice, odgađanja is-
plate glavnice ili glavnice u potpunosti pod rizikom i
kreditni rejting (Spry, 2009: 13). Odgađanje vraćanja
glavnice nakon isteka planiranog dospijeća ob-
veznice događa se kod dužeg vremena razvoja šteta.
Osiguratelji preferiraju duže razdoblje razvoja šteta,
dok investitori imaju interes za kraćim vremenom
294
Ponderirani
indeks šteta Indeks šteta
industrije industrije
Čisti
parametarski
indeks uvjet
razvoja šteta (Banks, 2004: 124). Dodatno, tranše se
mogu razlikovati i prema opasnostima na kojima su
temeljene kao i teritoriju (Spry,
13 2009: 13).
3. Koristi, rizici i troškovi sekuritizacije za
osiguratelje/reosiguratelje
U razmatranju sekuritizacije društvo za osiguranje/
reosiguranje analizira potencijalne koristi i rizike,
odnosno troškove povezane s ovom metodom up-
ravljanja rizicima. Oni će se razlikovati između
različitih instrumenata koji rezultiraju iz tehnike
sekuritizacije u ovisnosti od primijenjenog uvjeta
kojim se definira pravo osiguratelja na naknadu
šteta odnosno investitora na kupone i glavnicu
te od ciklusa tržišta osiguranja/reosiguranja. Us-
poredba sekuritizacije temeljene na odštetnom i
neodštetnim kriterijima prikazana je u Tablici 1.
Primjenom sekuritizacije u upravljanju rizicima
osiguratelj/reosiguratelj može ostvariti dodatni ka-
pacitet za preuzimanje rizika. Upravo je težnja za
dodatnim kapacitetom za preuzimanje rizika bila
glavni pokretač razvoja ove metode upravljanja ri-
zicima društava za osiguranje/reosiguranje (Ćurak,
2009). U kontekstu kapaciteta, posebna je važnost
sekuritizacije za društva za osiguranja/reosiguranja
u upravljanju rizicima za koje se ne može ostvariti
diversifikacija u okviru njihova vlastitog portfelja,
kakvi su katastrofalni rizici. Zbog velikog intenzite-
ta, nastup katastrofalnih događaja smanjuje kapac-
God. XXXIII, BR. 1/2020. str. 287-303

itet na tržištu reosiguranja/retrocesije i povećava
cijenu transfera rizika ili može dovesti tržište do
situacije u kojoj uopće nije u mogućnosti preuzeti
određene rizike. S obzirom na veličinu tržišta kapi-
tala te brojne i raznovrsne investitore, ovaj segment
financijskog tržišta ima veću apsorpcijsku sposob-
nost u odnosu na tržište reosiguranja/retrocesije, te
društva za osiguranje/reosiguranje postaju manje
ovisna o reosiguranju/retrocesiji u upravljanju ak-
tuarskim rizikom, posebno u situaciji kada je zbog
velikih šteta kao posljedice katastrofalnih događaja,
tradicionalni transfer rizika vrlo skup.
Osim što se sekuritizacijom može nadoknaditi ne-
dostatak kapaciteta tržišta reosiguranja, sekuriti-
zacija može pozitivno djelovati na učinkovitost
tržišta reosiguranja. Naime, alternativan transfer
rizika može potaknuti reosiguratelje na konkurent-
nije djelovanje i u smislu cijene i pokrića rizika
(Somers, 2017: 189)13.
Višegodišnje ugovaranje pokrića rizika omogućava
sponzoru zaštitu od porasta cijene transfera rizika
u usporedbi s tradicionalnim reosiguranjem,
odnosno retrocesijom, koje se u pravilu obnavlja
na godišnjoj razini. Ova prednost sekuritizacije je
posebno izražena u situaciji tzv. „tvrdog“ tržišta re-
osiguranja/retrocesije, kada zbog rasta šteta reosig-
uratelji/retrocesionari povećavaju premiju reosigu-
ranja/retrocesije. Ugovaranje zaštite na razdoblje
od nekoliko godina također smanjuje administra-
tivne troškove u odnosu na ugovaranje reosiguranja
na godišnjoj osnovi. Smanjivanje troškova odražava
se u unaprijeđenim performansama društava za
osiguranje/reosiguranje.
Tablica 1. Usporedba karakteristika obveznica temeljenih na katastrofalnim rizicima i reosiguranja/
retrocesije s gledišta osiguratelja/reosiguratelja
Oblik transfera Rizik likvidnosti za zaostalih informacija Višegodišnje Obuhvat
Kreditni rizik
baze
Minimalan (ovisi
Obveznice o investicijskim
s odštetnim Ne
ograničenjima, suprotnoj
uvjetom strani u swap transakciji)
Minimalan (ovisi
Obveznice s o investicijskim
neodštetnim Da
ograničenjima, suprotnoj
uvjetom strani u swap transakciji)
Reosiguranje/ Ne Da
retrocesija
Izvor: Prilagođeno prema Cummins i Weiss (2009: 531).
God. XXXIII, BR. 1/2020. str. 287-303
Review article
Sekuritizacijom se stabiliziraju rezultati iz poslova
preuzimanja rizika u osiguranje/reosiguranje spon-
zora, što pozitivno utječe na vrijednost bogatstva
dioničara osiguratelja, odnosno reosiguratelja (Nje-
gomir, Maksimović, 2009: 72). Uz istu razinu kapi-
tala, osiguratelju/reosiguratelju je omogućeno preu-
zimanje više rizika. Oslobađanje kapitala i njegova
uposlenost u druge svrhe, može pozitivno djelovati
na performanse osiguratelja/reosiguratelja.
Sekuritizacijom osiguratelji ostvaruju zaštitu od
rizika koja je, za razliku od tradicionalnog reosigu-
ranja, kolateralizirana. Drugim riječima, sredstava
za pokriće šteta ostvarena su unaprijed i plasirana u
instrumente s kojima, za razliku od transfera rizika
na društvo za reosiguranje/retrocesionara, osi-
guratelji/reosiguratelji nisu u tolikoj mjeri izloženi
kreditnom riziku. Zapravo, kreditni rizik će ovisiti
o kvaliteti imovine koju formira SPV (IAIS, 2009:
10)10 i o suprotnoj strani u ugovoru o zamjeni. Pri-
nosi na ovu imovinu nisu ovisni o katastrofalnim
štetama. S druge strane, u slučaju tradicionalnog
transfera rizika, štete mogu značajno djelovati na
financijski položaj reosiguratelja/retrocesionara
i time na njegovu sposobnost da nadoknadi štete
osiguratelju/reosiguratelju. Također, zbog jasno
definiranih uvjeta plaćanja, posebno kod transakci-
ja temeljenih na neodštetnim kriterijima, naknada
štete se ostvaruje brže u odnosu na naknadu po os-
novi reosiguranja, kod kojega su češća osporavanja
osigurateljeva prava na naknadu i iznos naknade
(Swiss Re, 2011: 19)12. Stoga, iako se sekuritizacijom
društava za osiguranje/reosiguranje mogu izložiti
riziku likvidnosti, u usporedbi s reosiguranjem/ret-
rocesijom, ovaj rizik je manji.
Pružanje
Rizik Rizik
o portfelju pokriće više rizika
sponzora šteta osiguranja
Varira
među
Umjeren Da Da Da
instru-
mentima
Varira
među
Umjeren Da Ne Da
instru-
mentima
Da Da Da Rijetko Rijetko
295
Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
Rizici s kojima se suočavaju sponzori obuhvaćaju
rizik baze, rizik zaostalih šteta i rizik modela.
Rizik baze pojavljuje se u slučajevima transakcija
baziranih na ne-odštetnim uvjetima i predstav-
lja odstupanja stvarnih šteta osiguratelja od šteta
na kojima je temeljen kriterij za utvrđivanje prava
osiguratelja na odštetu. Rezultira iz slabe korelacije
između šteta osiguratelja/reosiguratelja i šteta in-
dustrije. Rizik zaostalih šteta odnosi se na pojavu
naknadnog zahtjeva za odštetom, nakon razdoblja
razvoja šteta, te u iznosu većem od onoga kojeg je
sponzor ostvario od SPV-a. Investitori uobičajeno
ograničavaju razdoblje razvoja šteta do 18 mjeseci
(IAIS, 2003: 19). Rizik modela obuhvaća rizik vezan
za utjecaj pretpostavki složenih modela katastro-
falnih šteta, varijabli, osjetljivosti varijabli na
određene čimbenike, korelacije između varijabli, na
usklađivanje modeliranih šteta s razvojem katastro-
falnih šteta za sponzora (IAIS, 2003: 20). Količina
i kvaliteta podataka razlikuje se među različitim
događajima (Spry, 2009: 10). Međutim, općenito
vrijedi da su događaji koji su predmetom sekuriti-
zacije uglavnom oni, koji unatoč njihovoj rastućoj
učestalosti u zadnjim desetljećima, u odnosu na os-
tale rizike, ipak imaju manju frekvenciju, ali kada
se materijaliziraju imaju veliki intenzitet, te su po-
datci za parametre potrebni za modeliranje šteta
ograničeno dostupni (Smith, 2017: 2)14.
Uz rizike kojima osiguratelj može biti izložen u
različitim stupnjevima u ovisnosti od primijenje-
nog uvjeta, visoki troškovi realizacije transakcije
sekuritizacije predstavljaju važno ograničenje za
primjenu ove metode upravljanja rizicima osi-
guratelja, odnosno reosiguratelja. Međutim, ovo
ograničenje ovisi o uvjetima na tržištu reosiguran-
ja/retrocesije. Naime, nakon većih šteta, posebno
nakon prirodnih katastrofa, kada se smanji kapac-
itet tržišta reosiguranja/retrocesije za preuzimanje
rizika, raste cijena transfera rizika. U takvoj sit-
uaciji, osiguratelji i reosiguratelji traže alternativne
načine upravljanja rizicima. Stoga, u uvjetima „tvr-
dog“ tržišta reosiguranja/retrocesije, sekuritizacija
ima prednost u odnosu na reosiguranje, odnosno
retrocesiju i obrnuto u situaciji „mekog“ tržišta
(Swiss Re, 2011: 16)12.
Troškovi kamata na obveznice u početku, kada su
uključivali i premiju za „novitet“, bili su iznimno
visoki. Naime, ova je premija na obveznice koje su
emitirane u početnim godinama razvoja sekuriti-
zacije bila za oko 50 do 100 postotnih bodova iznad
premije na korporacijske obveznice sličnog rejtinga
(Banks, 2004: 119). Međutim, s gubljenjem karakter-
istike „nove vrijednosnice“ ova se premija smanjuje.
Dodatno, smanjivanju kamata doprinijela je i ponuda
296
sredstava na tržištu za koja su investitori tražili alter-
nativna ulaganja u situaciji niskih kamatnih stopa na
financijskim tržištima (Munich Re, 2014; Ammar i
sur., 2015: 21)15. Ostali troškovi obuhvaćaju troškove
osnivanja SPV-a, troškove agencija za rejting,
troškove aktivnosti vezanih za utvrđivanje cijene vri-
jednosnica i troškove drugih aktivnosti investicijskih
banaka u okviru emisije i plasmana vrijednosnica,
pravne troškove vezane za emisiju vrijednosnica.
Dok je fiksiranje uvjeta na dulje razdoblje, prednost
sekuritizacije u odnosu na reosiguranje u smislu
zaštite od porasta premije reosiguranja/retrocesi-
je, osiguratelji/reosiguratelji nisu u mogućnosti
iskoristiti povoljnije uvjete do kojih može doći na
tržištu reosiguranja/retrocesije. Naime, kraća raz-
doblja na koja se ugovora reosiguranje/retrocesija
omogućavaju fleksibilnost, odnosno ostvarenje jef-
tinijeg transfera rizika u situaciji „mekog“ tržišta.
Prema Subramanian i Dicke (2018: 55) troškovi nepo-
voljne selekcije su manji kod reosiguranja u odnosu
na sekuritizaciju jer reosiguratelji raspolažu značajno
većim resursima za preuzimanje rizika u odnosu na
investitore na tržištu kapitala. Na ovaj način u većoj su
sposobnosti procijeniti karakteristike rizika i smanjiti
vjerojatnost pojave nepovoljne selekcije.
Odluka osiguratelja/reosiguratelja o korištenju
obveznica vezanih za katastrofalne rizike, prema
tome, bit će temeljena na analizi troškova i koristi
i njihovim usporedbama s ostalim metodama up-
ravljanja rizicima. Pri tome, uz uvažavanje izravnih
koristi i troškova, važno je u obzir uzeti i one neiz-
ravne, kakvi su veličina ukupnog rizika koji se želi
zadržati i transferirati, kreditni rizik i dr. (Banks,
2004: 118). Stoga bi se, uz uvažavanje karakteristika
reosiguranja/retrocesije i sekuritizacije, prednosti
ovih metoda transfera rizika trebale iskoristi u nji-
hovoj optimalnoj kombinaciji (Ćurak, 2009: 47).
4. Značenje sekuritizacije u upravljanju
rizicima osiguratelja/reosiguratelja
Vrijednost novih emisija i ukupna vrijednost ob-
veznica temeljena na katastrofalnim rizicima i os-
talih vrijednosnica povezanih s osiguranjem u raz-
doblju od 1997. do 2018. godine, prikazana je na
Grafikonu 1. U razdoblju od 1997. do 2007. godine
ukupan volumen vrijednosnica (novoemitiranih
i nedospjelih) je rastao, dok je 2008. godine sman-
jen, posebno je smanjen volumen novih emisija. Uz
smanjivanje prinosa, kao posljedica krize, na pad
emisija obveznica temeljenih na katastrofalnim ri-
zicima, utjecala je i neizvjesnost vezana za ugovore
o zamjeni (zbog propasti investicijske banke Lehman
God. XXXIII, BR. 1/2020. str. 287-303
 Review article

Brothers) te povoljniji uvjeti na tržištu reosiguranja prikazani podatci o kretanju tradicionalnog i alter-
(OECD, 2009: 25)11. Od 2012. godine, uz određene nativnog kapitala društava za reosiguranje, a kojem
godišnje oscilacije, vrijednost vrijednosnica te- pripadaju i obveznice vezane za katastrofalne rizike.
meljenih na rizicima iz osiguranja ima rastući trend. Iako je značenje alternativnog kapitala u ukupnom
Rast značenja obveznica temeljenih na katastrofal- kapitalu reosiguratelja značajno manje u odnosu na
Grafikon
nim 1. očituje
rizicima Vrijednost novih emisija
se i iz Grafikona i ukupna
2. na kojem su tradicionalno, prisutan je
vrijednost obveznica trend rasta.
temeljenih na
katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz osiguranja u razdoblju od
Grafikon 1. Vrijednost novih emisija i ukupna vrijednost obveznica temeljenih na katastrofalnim
rizicima
1997. do i2018.
ostalih vrijednosnica vezanih za rizik iz osiguranja u razdoblju od 1997. do 2018. godine
godine

60

50
Milijarda USD

40

30

20

10

Vrijednost novih emisija Ukupna vrijednost vrijednosnica

Izvor: Artemis (2019)1616.

Izvor: Artemis (2019)
Međutim, unatoč trendu rasta novih emisija i ukupne katastrofalne rizike i ostalih vrijednosnica povezanih s
vrijednosti obveznica temeljenih na katastrofalnim osiguranjem činile su 7,9% ukupno naplaćenih prem-
rizicima i ostalih vrijednosnica povezanih s osigu- ija neživotnog reosiguranja u 2018. godini. Odnos
Međutim, unatoč trendu rasta novih emisija i ukupne vrijednosti obveznica temeljenih na
ranjem, u usporedi s reosiguranjem ovi instrumenti ukupne vrijednosti postojećih obveznica temeljenih
imaju relativnomrizicima
katastrofalnim i ostalih
malo značenje vrijednosnica
u upravljanju rizici-povezanih s osiguranjem,
na katastrofalnim u usporedi
rizicima i ostalih svrijednosnica
ma društava za osiguranje. Naime, prema podatcima povezanih s osiguranjem i premija neživotnog reo-
reosiguranjem ovi instrumenti imaju relativnom malo značenje u upravljanju rizicima društava
iz Grafikona 3., nove emisije obveznica vezanih za siguranja iznosio je 21,14% u 2018. godini.
za osiguranje. Naime, prema podatcima iz Grafikona 3., nove emisije obveznica vezanih za
katastrofalne
Grafikon
Grafikon 2. 2. riziketradicionalnog
Vrijednost
Vrijednost i ostalih vrijednosnica
tradicionalnog povezanih
i alternativnog
i alternativnog kapitala s kapitala
osiguranjem
društava činile za
društava
za reosiguranje su reosiguranje
7,9% ukupno
naplaćenih premija neživotnog reosiguranja u 2018. godini. Odnos ukupne vrijednosti
700
postojećih
600
obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica povezanih s
osiguranjem
500 i premija neživotnog reosiguranja iznosio je 21,14% u 2018. godini.
Milijarda USD

400
514 516
300 511 493
490
461
447 428
200 388 378
368 321
100
50 64 72 81 89
17 22 19 22 24 28 44
0
2006. 2007. 2008. 2009. 2010. 2011. 2012. 2013. 2014. 2015. 2016. 2017.
Alternativni kapital Tradicionalni kapital

Izvor: Aon
Izvor: AonBenfield
Benfield(2018) p. 5.17 5).17
(2018:

God. XXXIII, BR. 1/2020. str. 287-303 297

Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija
obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz
osiguranja u 2018. godini 19
 Alternativni kapital Tradicionalni kapital

Izvor: Aon Benfield (2018) p. 5.17

Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija
obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz
Grafikon 3. Premije neživotnog reosiguranja, ukupna vrijednost i vrijednost novih emisija obveznica
osiguranja u 2018.
temeljenih godini
na katastrofalnim rizicima i ostalih vrijednosnica vezanih za rizik iz osiguranja u 2018. godini

200
180
160
140
Milijarda USD

120
100
176
80
60
40
20 38
14
U početku
- razvoja sekuritizacije, vrijednosnice su primarno bile temeljene na odštetnom
Vrijednost naplaćene bruto Ukupna vrijednost CAT Vrijednost novih emisija
kriteriju. Jedan od razloga
premije je bio taj
za tržište neživotnog što su glavni investitori
obveznica u vrijednosnice bili društva za
reosiguranja
osiguranje i reosiguranje koja nisu značajnije bila izložena problemu informacijske asimetrije i
bila su
Izvor:
Izvor: spremna
Prikaz
Prikaz autora naprihvatiti
autora temelju odštetni
podataka
na temelju kriterij.
Reinsurance
podataka Međutim,
News (2019)18kada
Reinsurance su sponzori počeli tragati za
, https://www.reinsurancene.ws/top-50-
News (2019) 18
, https://www.reinsurancene.ws/top-50-reinsuran-
reinsurance-groups/ Pristupljeno [29. 08. 2019.] & Artemis (2019)16
ce-groups/ Pristupljeno
investitorima [29. 08.
koji bi pružili 2019.]kapacitet
dodatni & Artemisza (2019) .
preuzimanje
16
rizika, odnosno onima koji ne
pripadaju industriji osiguranja, zbog visoke premije za rizik koju su zahtijevali ovi investitori
U početku razvoja sekuritizacije, vrijednosnice rizika, odnosno onima koji ne pripadaju industri-
za primarno
su odštetne uvjete
bile(zbog asimetrijenainformiranja),
temeljene odštetnommoralikri- su prihvaćati neodštetne
ji osiguranja, zbogkriterije.
visoke premije za rizik koju su
teriju.
Kasnije,Jedan od razloga
s dodatnim razvojemje sekuritizacije,
bio taj što su glavni
kada zahtijevali
su investitori postali ovi
višeinvestitori
upoznati s za odštetne uvjete (zbog
investitori u vrijednosnice rizicima,
osigurateljnim/reosigurateljnim bili društva
odštetnizakriteriji
osi- ponovno
asimetrije informiranja),
dobivaju na važnosti
20 morali su prihvaćati
guranje i reosiguranje koja nisu značajnije bila neodštetne kriterije. Kasnije, s dodatnim raz-
(Hagedorn et al., 2009: 38).
izložena problemu informacijske asimetrije i bila vojem sekuritizacije, kada su investitori postali
su spremna prihvatiti odštetni kriterij. Međutim, više upoznati s osigurateljnim/reosigurateljnim
kada su sponzori počeli tragati za investitorima rizicima, odštetni kriteriji ponovno dobivaju na
koji bi pružili dodatni kapacitet za preuzimanje važnosti
Grafikon 4. Struktura obveznica baziranih na katastrofalnim rizicima (Hagedorn
i ostalih et al., 2009: 38).
vrijednosnica
povezanih 4.
Grafikon s osiguranjem prema uvjetima
Struktura obveznica u razdoblju
baziranih od 1997. do prva dva
na katastrofalnim kvartalai ostalih
rizicima 2018. vrijednosnica poveza-
nih s osiguranjem prema uvjetima u razdoblju od 1997. do prva dva kvartala 2018. godine
godine

100%
Udio s obzirom na uvjete utvrđivanja obveza u

90%
80%
70%
60%
50%
%

40%
30%
20%
10%
0%

Odštetni uvjet Indeks šeta industrije Parametarski uvjet

Uvjet modeliranih šteta Kombinirani uvjet Nepoznato

Izvor: Artemis (2018)19.

Izvor: Artemis (2018)19

Kao što je prikazano na Grafikonu 4., vrijednosnice s odštetnim kriterijem u 2018. godini imale
su298
udio od 68% u ukupnom volumenu izdanih vrijednosnica, štoBR.
God. XXXIII, je na razinistr.udjela
1/2020. u početne
287-303
dvije godine analiziranog razdoblja, dok su primjerice, 2006. godine imale udio od samo 6%.
Slijede vrijednosnice temeljene na parametarskom uvjetu (14% u 2018. godini) i indeksu šteta
Review article
industrije (12% u 2018. godini), dok su sredinom analiziranog razdoblja imale udio od 36%,
odnosno 35%. Vrijednosnice temeljene na kombiniranom uvjetu i uvjetu modeliranih šteta u
Kao što je prikazano na Grafikonu 4., vrijednosnice 2018. godini) i indeksu šteta industrije (12% u 2018.
zadnjim godinama nemaju
s odštetnim značenjeu u2018.
kriterijem ukupnoj vrijednosti
godini imale suvrijednosnica
udio povezanih
godini), dok ssurizikom iz
sredinom analiziranog razdoblja
od
osiguranja. 68% u ukupnom volumenu izdanih vrijednos- imale udio od 36%, odnosno 35%. Vrijednosnice
nica, što je na razini udjela u početne dvije godine temeljene na kombiniranom uvjetu i uvjetu mod-
analiziranog razdoblja, dok su primjerice, 2006. eliranih šteta u zadnjim godinama nemaju značenje
godine imale udio od samo 6%. Slijede vrijednos- u ukupnoj vrijednosti vrijednosnica povezanih s
Grafikon 5. Struktura
nice obveznica
temeljene temeljenih na katastrofalnim
na parametarskom uvjetu (14% u rizicima i ostalih
rizikom vrijednosnica
iz osiguranja.
povezanih s osiguranjem prema vrstama opasnosti u razdoblju od 1997. do prva dva kvartala
Grafikon 5. Struktura obveznica temeljenih na katastrofalnim rizicima i ostalih vrijednosnica pove-
2018. godine
zanih s osiguranjem prema vrstama opasnosti u razdoblju od 1997. do prva dva kvartala 2018. godine
1% 1%

2%
17%

7% Potres

Uragan

Oluja
12%
Vjetar

Tajfun
41%
Poplava
19%

Izvor: Artemis (2018)19.

Izvor: Artemis (2018)19

S obzirom na vrstu opasnosti koju pokrivaju ob- potrebu za dodatnim kapacitetom izvan okvira
veznice vezane za katastrofalne rizike i ostale vri- tradicionalnih preuzimatelja rizika. Naime, već ra-
S obziromjednosnice povezane
na vrstu opasnosti kojus pokrivaju
osiguranjem (Grafikon
obveznice 5.),za katastrofalne
vezane nije spomenute
rizikeprojekcije
i ostale najznačajnijih rizika ko-
najznačajnije su vrijednosnice za pokriće rizika jima će svijet biti izložen do 2025. godine svrstavaju
vrijednosnice povezane s osiguranjem (Grafikon 5.), najznačajnije su vrijednosnice za pokriće
potresa, čije su emisije u razdoblju od 1997. go- klimatske promjene među pet glavnih rizika (AXA,
rizika potresa,
dine čije su emisije
do prva u razdoblju
dva kvartala odgodine
2018. 1997. godine do prva dva
sudjelovale kvartala
2017) 6
. Za očekivati je da će u takvim uvjetima rasti
2018. godine
sudjelovale u ukupnoj vrijednosti instrumenata s 41%. Slijede ih vrijednosnice za pokriće rizikakatastrofalnih događaja, što
u ukupnoj vrijednosti instrumenata s 41%. Slijede vjerojatnost i intenzitet
ih vrijednosnice za pokriće rizika uragana (19%), za posljedicu može imati ograničenja u upravljanju
uragana (19%), kombiniranih
kombiniranih rizikarizika
(17%)(17%) i oluja
i oluja (12%).(12%). rizicima društava za osiguranje/reosiguranje tradi-
cionalnim metodama i rast značenja sekuritizacije i
drugih alternativnih tehnika upravljanja aktuarskim
5. Perspektive sekuritizacije u upravljanju
rizicima.
rizicima osiguratelja i reosiguratelja
Težnja osiguratelja/reosiguratelja prema optimi-
Prema podatcima prikazanim u prethodnom dijelu zaciji upravljanja rizicima u smislu troškova i koris-
rada, značenje sekuritizacije u upravljanju rizicima ti koji su povezani s metodama upravljanja i daljnji
društava za osiguranje u usporedbi s reosiguranjem razvoj koncepta integriranog upravljanja rizicima,
je relativno malo. Međutim, prisutan je trend rasta također može pozitivno
primjene ove metode alternativnog transfera rizika. 22 djelovati na potražnju za
sekuritizacijom. Daljnja unaprjeđenja računalne
Uvažavajući čimbenike koji su doveli do razvoja tehnologije dodatno će doprinijeti mogućnostima
sekuritizacije katastrofalnih rizika, čije se značenje, obrade podataka i modeliranja šteta, važnim za
posebno kada su u pitanju klimatske promjene i s sekuritizaciju. U ovom smislu posebnu važnost
njima povezani katastrofalni događaji, povećava, imaju indeksi šteta. Prema Swiss Re (2011: 33)12,
za očekivati je da će osiguratelji/reosiguratelji imati

God. XXXIII, BR. 1/2020. str. 287-303 299

Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije
upravo je razvoj kriterija šteta industrije PERILS
doprinio širenju tržišta vrijednosnica baziranih na
osiguranju s obuhvatom katastrofalnih rizika i iz-
van SAD-a.
Pored sekuritizacije katastrofalnih rizika i drugi
rizici koje preuzimaju društva za neživotno osigu-
ranje, mogu biti predmetom alternativnog transfera
rizika. Oni posebice obuhvaćaju rizike iz područja
osiguranja motornih vozila, osiguranja kućanstava,
rizik ozljede na radu, političke rizike, rizike odgo-
vornosti članova uprave i direktora (IAIS, 2003: 11)
te kibernetičke rizike (Amar i sur., 2015: 16). Prema
Spry (2009: 12) dok je sekuritizacija terorističkih
rizika bila ograničena modelima, s njihovim razvo-
jem, sekuritizacija ovih rizika također ima perspek-
tivu.
Rezultati istraživanja Ammar i sur. (2015: 13) poka-
zuju da su glavne prepreke u razvoju alternativnog
transfera rizika s vrijednosnicama temeljenim na
osiguranju, visoki troškovi za realizaciju transakci-
ja, nedovoljno poznavanje i nedovoljno iskustvo
s ovim instrumentima te neizvjesnost vezana za
regulaciju.
Uvažajući koristi koje proizlaze iz sekuritizacije za
sponzore i investitore, za očekivati je da bi se trend
rasta značenja sekuritizacije u upravljanju rizicima
društava za osiguranje/reosiguranje mogao nastav-
iti. Smanjivanje prethodno navedenih ograničenja,
odnosno usklađivanje interesa sponzora i inves-
titora, posebno u smislu smanjivanja rizika baze
i povećanja informiranosti, povećalo bi broj sudi-
onika na tržištu i vrijednost transakcija. Širenjem
tržišta smanjila bi se cijena transfera za sponzore
i unaprijedila likvidnost za investitore (Swiss Re,
2011: 33)12. Međutim, s obzirom na specifičnosti
poslovanja osiguratelja/reosiguratelja u smislu
rizika koje pokrivaju i transferiraju, očekuje se da
će se reosiguranje/retrocesija zadržati primarnom
metodom upravljanja aktuarskim rizicima. Stoga,
perspektiva sekuritizacije je u njezinoj komplemen-
tarnosti reosiguranju/retrocesiji.
6. Zaključak
Obveznice vezane za katastrofalne rizike zaštićuju
osiguratelje i reosiguratelje od velikih šteta koje
proizlaze nastupom katastrofalnih događaja. S
obzirom na ograničeni kapacitet tržišta reosigu-
ranja/retrocesije za preuzimanje rizika, volatilnost
cijena reosiguranja/retrocesije i kreditni rizik pov-
ezan s reosigurateljima/retrocesionarima, te s dru-
300
ge strane, sposobnost tržišta kapitala da apsorbira
velike rizike i pruži kolateralizirane instrumente
za višegodišnje pokriće rizika, stabilizirajući time
kreditni rizik i cijenu transfera rizika, sekuritizacija
predstavlja komplement reosiguranju.
Ključna odluka u kontekstu upravljanja rizicima
društava za osiguranje/reosiguranje primjenom
tehnike sekuritizacije je izbor odgovarajućeg uvje-
ta, budući da se na temelju njega utvrđuje pravo
sponzora na odštetu i cijena transfera rizika. Dok
s odštetnim kriterijem osiguratelj/reosiguratelj iz-
bjegava izloženost riziku baze, suočava se s višom
cijenom transfera rizika u odnosu na onu koja je
povezana uz primjenu drugih kriterija i obrnuto za
neodštetne kriterije.
Iako se volumen sekuritiziranih instrumenata
povećava, značenje tehnike sekuritizacije u uprav-
ljanju rizicima društava za neživotno osiguranje
je malo u usporedbi s reosiguranjem. Za razvoj
sekuritizacije važno je smanjivanje troškova i njezi-
no dodatno razumijevanje od strane sudionika i
tržišta osiguranja i tržišta kapitala. Uz smanjivanje
ovih prepreka, perspektive sekuritizacije ovisit će
o usklađivanju interesa osiguratelja i investitora
odnosno o mogućnostima smanjivanja rizika baze
za sponzore i informacijske asimetrije za investitore
te o uvjetima na tržištu reosiguranja/retrocesije.
Očekuje se da će ova metoda upravljanja rizicima
osiguratelja/reosiguratelja ostati na razini dopune,
a ne alternative reosiguranju/retrocesiji.
Zahvala
Izradi rada doprinio je gospodin Steve Evans, vlas-
nik publikacija Artemis.bm & Reinsurancene.ws.,
kojemu se ovom prilikom autori posebno zahvalju-
ju. Ukazano povjerenje i omogućen pristup bazi
podataka koja nije javno dostupna, doprinijeli su
obogaćivanju sadržaja rada u dijelu podataka koji
su uporište prezentiranim tvrdnjama.
God. XXXIII, BR. 1/2020. str. 287-303
 Review article

L

1. Ammar, S. A., Braun, A., Eling, M. (2015). Alternative Risk Transfer and Insurance-Linked Securi-
ties: Trends, Challenges and New Market Opportunities. St. Gallen: Institute of Insurance Economics
IVW-HSG.
2. Araya, R. (2004), „Catastrophic Risk Securitization: Moody’s Perspective, Background note”, Paper
presented at the conference Catastrophic Risks and Insurance, OECD, Paris.
3. Banks, E. (2004). Alternative Risk Transfer – Integrated Risk Management through Insurance, Rein-
surance and the Capital Market. Chichester: John Wiley & Sons Ltd.
4. Carayannopoulos, P., Perez, M. F. (2015), „Diversification through Catastrophe Bonds: Lessons from
the Subprime Financial Crisis”, The Geneva Papers on Risk and InsuranceIssues and Practice, Vol. 40,
No. 1, pp. 1-28.
5. Cummins, J. D. (2008), „Cat Bonds and Other Risk-Linked Securities: State of the Market and Recent
Developments”, Risk Management and Insurance Review, Vol. 11, No. 1, pp. 23-47.
6. Cummins, J. D., Weiss, M. A. (2009), „Convergence of Insurance and Financial Markets: Hybrid and
Securitized Risk Transfer Solutions”, The Journal of Risk and Insurance, Vol. 76, No. 3, pp. 493-545.
7. Ćurak, M. (2009), „Sekuritizacija katastrofalnih rizika u industriji osiguranja i reosiguranja”, Osigu-
ranje - hrvatski časopis za teoriju i praksu osiguranja, No. 12/1, pp. 42-52.
8. Edesess, M. (2014), „Catastrophe Bonds: An Important New Financial Instrument”, Working Paper,
EDHEC-Risk Institute, EDHEC Business School, London, July 2014.
9. Hagedorn, D., Heigl, C., Müller, A., Seidler, G. (2009), „Choice of Triggers”, in Barrieu, P., Albertini, L.
(Eds.), The Handbook of Insurance-Linked Securities, John Wiley and Sons Ltd., Chichester, pp. 37-49.
10. IAIS (2003), „Issue Paper on Non-life Insurance Securitization”, Issues Paper, International Associa-
tion of Insurance Supervisors, Basel, October 2013.
11. Njegomir, V., Maksimović, R. (2009), „Risk Transfer Solutions for the Insurance Industry”, Economic
Annals, Vol. 54, No. 180, pp. 57-90.
12. Spry, J. (2009), „Non-life Insurance Securitization: Market Overview, Background and Evolution”, in
Barrieu, P., Albertini, L. (Eds.), The Handbook of Insurance-Linked Securities, John Wiley and Sons,
Ltd., Chichester, pp. 9-18.
13. Subramanian, A., Dicke, J. F. (2018), „Reinsurance versus securitization of catastrophe risk”, Insurance:
Mathematics and Economics, Vol. 82, pp. 55-72.

E

1 Swiss Re Institute (2019), „Sigma Data“, dostupno na: http://institute.swissre.com/research/overview/sigma_data/ (pristupljeno

29. kolovoza 2019.)
2 Swiss Re (2019), „Natural catastrophes and man-made disasters in 2018: ‘secondary’ perils on the frontline”, Sigma, No. 2/2019,
Swiss Reinsurance Company Ltd, Zurich.
3 Swiss Re (2018), „Natural catastrophes and man-made disasters in 2017: a year of record-breaking losses”, Sigma, No. 1/2018.
4 Marsh (2019), „The Global Risks Report 2019”, dostupno na: http://www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf,
(pristupljeno 29. kolovoza 2019.)
5 Allianz (2019), „Allianz Risk Barometer, Top Business Risk 2019”, dostupno na: https://www.agcs.allianz.com/assets/PDFs/Reports/
Allianz_Risk_Barometer_2019.pdf, (pristupljeno 29. kolovoza 2019.)
6 AXA (2017), „Emerging Risks: what are the main risks for 2025? AXA Emerging Risk Survey 2017”, dostupno na: https://www.axa.
com/en/about-us/emerging-risks-survey, (pristupljeno 28. kolovoza 2019.)
7 Za čimbenike koje su potaknuli razvoj sekuritizacije vidjeti: Ćurak (2009).
8 Gorvett, R. W. (1999), „Insurance Securitization: The Development a New Asset Class, Casualty Actuarial Society: Securitization of
Risk”, dostupno na: https://www.casact.org/pubs/dpp/dpp99/99dpp133.pdf (pristupljeno 28. kolovoza, 2019.)
9 Lale, O. (2013), „Alternative risk transfer: Advantages and risks of transferring insurance risks to the capital markets”, dostupno na:

God. XXXIII, BR. 1/2020. str. 287-303 301

Marijana Ćurak, Dujam Kovač: Upravljanje rizicima društava za neživotno osiguranje i reosiguranje primjenom tehnike sekuritizacije

https://www.bafin.de/dok/7874384 (pristupljeno 11. lipnja 2019.)

10 IAIS (2009), „Developments in (Re)Insurance Securitisation”, Global Reinsurance Market Report, Midyear Edition, August 2009,
International Association of Insurance Supervisors, Basel.
11 OECD (2009), „Catastrophe-linked securities and capital markets”, 2nd Conference organized under the auspices of the OECD
International Network on Financial Management on Large-Scale Catastrophes, Bangkok, Thailand, Organisation for Economic Co-
operation and Development, Paris, 24-25 September 2009.
12 Swiss Re (2011), „The fundamentals of insurance-linked securities – Transforming insurance risk into transparent and tradable capi-
tal market products”, Swiss Reinsurance Company Ltd, Zurich.
13 Somers, J. W. (2017), „The Capital Markets: An Alternative to Traditional Reinsurance for Terrorism Risk”, dostupno na: https://
dri.org/docs/default-source/committee/0130tria/the-capital-markets-an-alternative-to-traditional-reinsurance-for-terrorism-risk.
pdf?sfvrsn=2 (pristupljeno 28. kolovoza 2019.)
14 Smith, C. (2017), „Insurance-linked Securities, Financial Market Authority Liechtenstein”, dostupno na: https://www.fma-li.li/files/
fma/fma-factsheet-ils-en.pdf, (pristupljeno 29. kolovoza 2019.)
15 Munich Re (2014), „InsuranceLinked Securities (ILS) Market Review 2013 and Outlook 2014”, dostupno na: http://www.ilsbermuda.
com/wp-content/uploads/2014/06/ILS-Annual-Review-2013-Outlook-2014.pdf (pristupljeno 28. kolovoza 2019.)
16 Artemis (2019), „The Alternative Risk Transfer, Catastrophe Bond, Insurance-Linked Securities and Weather Risk Management Por-
tal”, dostupno na: http://www.artemis.bm/, (pristupljeno 29. kolovoza 2019.)
17 Aon Benfield (2018), „Insurance-Linked Securities, Q1 2018 Update“, dostupno na: http://www.ilsbermuda.com/wp-content/
uploads/2018/05/Aon-Benfield-Insurance-Linked-Securities-Q1-2018-Update.pdf (pristupljeno 30. kolovoza 2019.)
18 Reinsurance News (2019), dostupno na: https://www.reinsurancene.ws/top-50-reinsurance-groups/ (pristupljeno 29. kolovoza
2019.)
19 Artemis (2018), “All cat bond data Oct 2018 - baza podataka”, dostupno na upit: http://www.artemis.bm/ (pristupljeno 29. listopada
2018.)

Marijana Ćurak
Dujam Kovač

R   -  

   

A
This paper analyses characteristics of securitization instruments and their importance in managing the
actuarial risks of non-life insurance and reinsurance companies. Although various risks could be tran-
sferred to the capital market by securitization, the most significant among the securitized risks are ri-
sks associated with catastrophic events for which insurers/reinsurers cannot diversify within their own
insurance/reinsurance portfolio. The possibility of expanding risk transfer capacity, reducing credit risk
exposure, hedge against the fluctuation of the risk transfer price, improving capital management and im-
proving performance, are the main benefits that insurers/reinsurers can achieve with this risk management
technique. However, when making decision on the application of this technique in risk management, these
advantages should be compared to the disadvantages. Depending on the applied trigger of the transacti-
on, disadvantages include base risk, liquidity risk and obligation to disclose information about insurance
portfolio, which ultimately determines the price of the transfer. Compared to reinsurance and retrocession,
securitization is of little importance for risk management. However, considering the increasing extent of
catastrophic damage, and the possibility of applying this technique to other risks, increase in importance of
this technique in the risk management of insurance/reinsurance companies could be expected, but only as
a complement to reinsurance and retrocession, not as their alternatives.
Keywords: Securitization, bonds, catastrophic risks, risk management of non-life insurance/reinsurance

302 God. XXXIII, BR. 1/2020. str. 287-303

 B 
P 

Tihana Škrinjarić:
Financial Econometrics, Mathematics and Statistics: Theory, Method and Application

Predrag Bejaković:
Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?
 Tihana Škrinjarić: Prikaz knjige “Financial Econometrics, Mathematics and Statistics: Theory, Method and Application”
Tihana Škrinjarić
Sveučilište u Zagrebu
Ekonomski fakultet – Zagreb
Trg J. F. Kennedyja 6,
10000 Zagreb, Hrvatska
tskrinjar@net.efzg.hr
PRIKAZ KNJIGE
FINANCIAL ECONOMETRICS,
MATHEMATICS AND STATISTICS:
THEORY, METHOD AND
APPLICATION
Autori: Lee, Cheng-Few, Chen, Hong-Yi, Lee, John
Izdavač: Springer Science+Business Media
Godina izdavanja: 2019
Broj stranica: 655
Kvantitativne financije danas predstavljaju neizos-
tavan dio cjelokupnoga menadžmenta portfelja.
Pritom je potrebno imati znanja iz područja finan-
cija, matematike, ekonometrije i statistike. Knjiga
Financial Econometrics, Mathematics and Statistics
predstavlja kombinaciju godina predavačkog iskust-
va, kao i onoga u istraživanjima troje autora. Odmah
na početku knjige autori upozoravaju da je za lakše
praćenje knjige potrebno položiti dva semestra
kolegija ekonometrija, dva semestra matematičke
statistike, kao i jedan semestar multivarijatne statis-
tike. Dodatno, autori dijele knjigu na četiri osnovne
cjeline: Regresija i financijska ekonometrija, Analiza
vremenskih serija i primjene, Statističke distribucije,
modeli vrednovanja opcija i menadžment rizika te
Statistika, Itôv račun i modeli vrednovanja opcija. S
obzirom na teme koje se obrađuju u knjizi, potreb-
no je, osim navedenih kvantitativnih znanja, imati i
God. XXXIII, BR. 1/2020. str. 305-307
određena teorijska znanja iz financija. Kroz knjigu
se provlači mnoštvo primjera, čiji su ispisi dani iz
MINITAB-a, Excela, MySQL-a, SAS-a itd., uz bro-
jne interpretacije rezultata. Ono što se uočava da
su svi primjeri utemeljeni na financijskoj teoriji i
već prethodno objavljenim empirijskim radovima
koji testiraju tu teoriju. Stoga čitatelji mogu odmah
dobiti jasnu ideju gdje i kako primijeniti određene
koncepte koji se obrađuju u pojedinom poglavlju.
Kako bi se matematički zapisi mogli lakše pratiti,
potrebna je srednja razina znanja iz matematike.
Dodatno su prikazani izvodi pojedinih važnijih
nalaza u svakome poglavlju u odgovarajućim do-
dacima. Na kraju svakog poglavlja dan je (vrlo često
opsežan) popis literature koja je obrađivana unutar
tog poglavlja.
Prvo poglavlje nije ubrojeno u prvu cjelinu jer se
ovdje radi o navođenju najvažnijih pojmova koji će
se obrađivati kroz knjigu, zajedno s referencama na
koje se zainteresirani čitatelji mogu uputiti za de-
talje te novije doprinose u pojedinome području.
Primjetno je da knjiga nije namijenjena početnicima
koji se tek susreću sa spomenutim kvantitativnim
pristupima jer se već u prvome odjeljku navodi,
primjerice, GMM metoda (engl. generalized method
305
Tihana Škrinjarić: Prikaz knjige Financial Econometrics, Mathematics and Statistics: Theory, Method and Application
of moments). Tako u drugome poglavlju započinje
obrada materije koja pripada prvoj cjelini knjige.
Odmah se uočava kako se veoma brzo prolaze os-
novne stvari vezane uz regresijske modele, kvalitetu
modela (engl. goodnes of fit), osnovni testovi (t-test
i slično), te se već ovdje nalaze brojni empirijski
primjeri. Autori kombiniraju nekoliko primjera iz
objavljenih radova, kao i vlastitih. Treće poglav-
lje se nadovezuje na drugo, s obzirom da se ovdje
obrađuju testiranja pretpostavki regresijskog mod-
ela, obrađuju se binarne varijable, kao i logistička
regresija. Iako se radi o osnovnim pojmovima s koji-
ma se ciljano čitateljstvo trebalo već susresti, autori
obrađuju i dodatne pojmove koji se ne mogu uvijek
pronaći u standardnoj vezanoj literaturi. Primjerice,
često se kod analize autokorelacije reziduala modela
obrađuje Durbin Watsonov test, no kako se u mod-
ele uključuje i zavisna varijabla s pomakom, tada
taj test više nije primjenjiv. Stoga autori obrađuju
Durbin H test koji je primjenjiv u tome slučaju.
Četvrto poglavlje je kratko jer obrađuje modele
simultanih jednadžbi, dok se primjene obrađuju u
sljedećem poglavlju. Ideja petog poglavlja je prika-
zati kako se istovremeno moraju obrađivati i pra-
titi financijska analiza, planiranje i prognoziranje,
te općenito donošenje odluka. Stoga se detaljno
obrađuju tipične primjene, ne samo strukturne, već
i SUR (engl. seemingly unrelated regression) modele.
Kroz cijelu knjigu se uočava kako autori posjeduju
velika znanja iz područja financija jer se određene
primjene kvantitativnih modela i metoda prikazuju
detaljno u okviru pojedinog financijskog modela za
koji su najbolje „krojeni“. Kako se i u području fi-
nancija koriste panel podatci, poglavlje 6 obrađuje
odabrane teme vezane uz panel modele. Tako se
uspoređuju i rezultati temeljem nekoliko mogućih
specifikacija istoga modela da bi čitatelj lakše razu-
mio razliku između, primjerice, nekoliko različitih
metoda procjene, kao i različitih učinaka u modelu.
Ono što je prisutno ovdje, ali i u drugim poglavljima,
jest kako se u dodatku posebno još obrađuje neka
tema iz financija koja je usko vezana uz metodologi-
ju koja se obrađivala prethodno. U šestom poglavlju
se analizira optimalan omjer isplate dividendi uz
prisustvo neizvjesnosti (engl. optimal payout ratio
under uncertainty) uz empirijsku primjenu. Dakle,
u tim dodatcima radi se o kratkom prikazu na koji
način istraživači pristupaju pisanju empirijskih ra-
dova. Autori prikažu kratko teoriju koja se razma-
tra, razvijaju hipoteze koje se testiraju i temeljem
stvarnih podataka primjenjuju metodologiju koja je
306
prethodno u poglavlju obrađivana. Ovakav pristup
daje dodatnu vrijednost ovoj knjizi.
Sedmo poglavlje analizira alternativne metode
procjene modela s obzirom na probleme u mjeren-
jima varijabli (engl. errors-in-variables problems):
ograničena klasična metoda (constrained classi-
cal method), IV metoda (instrumental variables),
LISREL i MIMIC metode (linear structural rela-
tions; multiple indicators multiple causes). Odmah
se na početku poglavlja pokazuje motivacija kroz
nalaze i zaključke radova ekonomista u području
financija vezane uz konkretne primjene i prob-
leme na koje su nailazili. Ovakav pristup izuzetno
je koristan za čitatelje kako bi vidjeli motivaciju za
nastanak alternativnih modela i pristupa za analizu
određenih ekonomskih i financijskih fenomena.
Na ovo poglavlje nastavlja se osmo, koje obrađuje
tri pristupa procjene i testiranja modela procjen-
jivanja kapitalne imovine (CAPM, Capital As-
set Pricing Model): metodu grupiranja (grouping
method), IV te ML (maximum likelihood) metodu.
Radi se o opširnom empirijskom poglavlju koje de-
taljno analizira posljedice svih obrađivanih metoda
i ekonomske implikacije. Poglavlje je puno tabličnih
ispisa rezultata i detaljne analize posljedica prim-
jene pogrješne ili ispravne metode s obzirom na
narav problema. Autori prikazuju i zaključke ra-
dova tijekom desetljeća s preporukama što učiniti
u pojedinom slučaju. Tako se primjećuje da se osim
tipičnih popularnih radova koji se učestalo citiraju
i u radovima i udžbenicima, nalaze i najnoviji ra-
dovi (citiraju se nalazi radova iz iste godine u kojoj
je izišla knjiga!). Takav pristup je veoma pohvalan
da zainteresirani čitatelji mogu dobiti uvide i u
najnovije nalaze vezane uz određene, njima zanim-
ljive, teme. Posljednje poglavlje u prvoj cjelini knjige
odnosi se na pojam lažne regresije (engl. spurious
regression) u uvjetnim modelima procjenjivanja
kapitalne imovine. Ovo poglavlje sadrži mnoštvo
tablica u kojima su rezultati simulacija uvjetnih
modela procjenjivanja kapitalne imovine, s obzirom
na veličinu uzorka, broj instrumenata u modelima,
kako bi se mogle određene pravilnosti uočiti lakše i
zaključivati. Sličan pristup simuliranja može se naći
u još nekoliko poglavlja. To je još jedna posebnost
ove knjige koja doprinosi njenoj jedinstvenosti.
Druga cjelina knjige (Analiza vremenskih serija
i primjene) sastoji se od dva veća poglavlja. De-
seto poglavlje obrađuje univarijatne modele koji
se najčešće primjenjuju u području financija (ARI-
MA, autoregressive integrated moving average;
God. XXXIII, BR. 1/2020. str. 305-307
 Tihana Škrinjarić: Prikaz knjige Financial Econometrics, Mathematics and Statistics: Theory, Method and Application
GARCH, generalized autoregressive conditional
heteroskedasticity). Poglavlje započinje motivaci-
jom o sezonalnosti u vremenskim serijama, te se
prikazuju načini njihova izglađivanja. Jedanaesto
poglavlje moglo bi biti osobito zanimljivo onima
koji si usmjereni na omjere zaštite (engl. hedge
ratio), pri čemu se obrađuju i statički i dinamički
pristupi procjenjivanja tog omjera, zajedno s pred-
nostima i nedostatcima svakoga. Obrađuje se više
od deset različitih pristupa se s popisom literature
za one koje zanimaju detalji i pretpostavke po-
jedinoga pristupa, a na kraju poglavlja empirijski
primjer uključuje nekoliko popularnijih pristupa,
zajedno s usporedbama, kao i detaljan prikaz rado-
va (na sedam stranica!) koji su analizirali pojedine
pristupe, s opisom njihove metodologije, financi-
jske imovine za koju se provodila analiza, te glavni
zaključci rada.
Treća cjelina knjige posvećena je distribucijama i
vrednovanju opcija. Čini ju ukupno pet poglavlja.
Dvanaesto poglavlje obrađuje binomnu i multi-
nomijalne distribucije s obzirom da se one koriste
u izvođenju modela vrednovanja opcija; dok se
trinaesto bavi alternativnim modelima vredno-
vanja opcija i uspoređuju se prednosti u odnosu
na modele iz prethodnog poglavlja. Za potpuno
razumijevanje ovih dvaju poglavlja potrebno je
imati dobru matematičku podlogu (diferencijalnog
računa, limesa, itd.), kao i statističku (vjerojatnos-
ti). Dodatno, za one čitatelje koji žele dobro bara-
tati pojmovima vezanima uz Black-Scholes model
vrednovanja opcija, savjetuje se da se posvete up-
ravo ovim poglavljima. Iduće poglavlje obrađuje
normalnu i log-normalnu distribuciju, s obzirom
na njihove primjene za europske i američke opcije.
Detaljno se obrađuju njihova svojstva, a dodatno se
na kraju poglavlja nalazi cijeli popis naredbi u ok-
viru Excela i VBA (visual basic) programiranja za
izračun potrebnih vrijednosti u okviru specifičnih
modela vrednovanja. Dodatno se u trećoj cjelini
obrađuju dva poglavlja koja se odnose na mod-
eliranje kreditnog rizika i analizu financijskog re-
God. XXXIII, BR. 1/2020. str. 305-307
jtinga, kopule (engl. copulas) i multivarijatnu ana-
lizu. Ono što se uočava i u ovim poglavljima, jest da
autori u uvodu objašnjavaju motivaciju s financijske
perspektive, što daje dodatan značaj knjizi. To znači
da knjiga nije isključivo kvantitativna, gdje se iska-
zuju isključivo modeli, metode, formule, teoremi,
izvodi i dokazi, već svi oni služe u svrhu opisivanja
financijskih fenomena. No, svejedno se uočava da je
potrebno imati dobru kvantitativnu osnovu za pot-
puno razumijevanje svih tema.
Četvrta cjelina je posvećena modelima vrednovanja
opcija, ali pomoću stohastičkih modela. Tako se
obrađuju Itôva lema, proces i vezani pojmovi i teo-
remi, implicirana volatilnost, Edgeworthov binomi-
alni model i slično. U ovoj se cjelini uočava najviše
primjena matematičkih zapisa, te je vjerojatno
ujedno i najteža cjelina, s obzirom i na potrebno
prethodno znanje iz financija i kvantitativnih dis-
ciplina, ali i (vjerojatno) novih pojmova nekim
čitateljima. Pokrivene su brojne varijacije opcija,
odnosno njihova vrednovanja. Primjeri su kao i u
ostatku knjige mnogobrojni i doprinose boljem ra-
zumijevanju teorije. U nekim poglavljima, pa tako
u posljednjem, autori daju doprinos razvoja novih
modela ili metoda u ovisnosti o pojmu koji se ana-
lizira. Tako u posljednjem poglavlju autori razvijaju
novi pristup neparametrijskog procjenjivanja donje
granice za cijene opcija.
Jedan nedostatak koji se može uočiti, a odnosi se
najviše na osobnu preferenciju načina predočavanja
teksta jest što je cijela knjiga pisana na način da je
tekst oblikovan u dva stupca. Knjiga se preporuča
studentima viših godina ekonomskih fakulteta, kao
i matematičkih fakulteta koji su usmjereni na finan-
cijskoj matematici. Na taj način će prva skupina
studenata moći lakše povezati financijsku teoriju s
primjenama nad stvarnim podatcima, dok će druga
skupina steći ideje na koji način stečena kvantita-
tivna znanja mogu primijeniti u području financija.
Nadalje, knjiga se preporuča onima koji se bave
kvantitativnim financijama, analizama financijskih
tržišta te menadžmentom portfelja.
307
 Predrag Bejaković: Book review “Innovation Culture in Crony Capitalism: Does Hofstede’s Model Matter?”
Predrag Bejaković
Institute of Public Finance
Smičiklasova 21,
10000 Zagreb, Croatia
predrag.bejakovic@iif.hr
Phone: +38514886455
BOOK REVIEW
INNOVATION CULTURE
IN CRONY CAPITALISM:
DOES HOFSTEDE’S MODEL MATTER?
Authors: Jadranka Švarc, Jasminka Lažnjak
Publisher: Institute of Social Sciences Ivo Pilar,
Zagreb
Year: 2017
Number of pages: 236
Optimal innovation culture enables a strong entre-
preneurial economy with a high innovative poten-
tial and improved competitiveness on international
markets. What is it that determines innovation cul-
ture? It is almost impossible to give an unambiguous
answer because there are many factors that influ-
ence its development. However, without these fac-
tors, the conditions necessary for creating a culture
that fosters innovation and enables technological
progress would not be optimal and could hamper
economic development. While creating an optimal
innovation culture is quite difficult as it takes a lot
of time and effort to align and balance all its ele-
ments, it is relatively easy to put at risk all that has
been achieved. A recent publication by two Croa-
tian authors contributes to the scholarly discourse
on the role and development of innovation culture,
particularly having in mind the impact of crony cap-
italism. It is a book entitled Innovation Culture in
Crony Capitalism – Does Hofstede’s Model Matter?
by Jadranka Švarc and Jasminka Lažnjak, published
by the Institute of Social Sciences Ivo Pilar, Zagreb.
God. XXXIII, BR. 1/2020. str. 309-313
In addition to a short Foreword and Introduction,
the book comprises three sections, which are di-
vided into eight chapters. In the Introduction, the
authors explain that their interest in the subject was
sparked by Croatia’s long-term economic recession
and divergence in GDP growth compared to other
“new” EU members. Such conditions impede not
only the economic development but also the welfare
and wellbeing of Croatian society. Furthermore,
significant disparity between Croatia’s regions in
terms of economic development is another reason
why they decided to explore regional differences in
innovation culture using the well-known Hofstede’s
cultural model. This model is probably the most
popular model for analysing cultural impacts on
economic and social development. The main goal of
the book is to enhance the understanding of the role
and importance of cultural factors that determine
regional innovation capacities and development.
By applying Hofstede’s cultural model, the authors
wanted to discern whether an inclination to indi-
vidualism or collectivism, masculinity or femininity,
authoritarianism or liberalism, orientation to future
or immediate satisfaction of desires, etc. is related
to innovativeness and the development of Croatia’s
regions and the country as a whole.
In the first part titled Theoretical background, based
on their review of numerous research studies, the
authors explain the importance of innovation and
how it is linked with the innovation culture. In the
309
Predrag Bejaković: Book review Innovation culture In crony capitalism does hofstede’s model matter?
1990s, innovation experienced a remarkable boom
thanks to the emergence of the knowledge econo-
my, and became a buzzword, a grand concept which
drives technical and technological development as
well as economic growth, and helps countries to
overcome major socio-economic problems. There
are numerous interrelationships between innova-
tion and creativity, and although in the cultural
economy every product can be deemed an innova-
tion, this relationship is an assurance for the success
in the market or with the audience. Creativity in-
cludes new knowledge, whereas innovation may not
be creative and can be gradual. The main charac-
teristic of innovation is the application of new ideas
or creativity to achieve commercial results. Creativ-
ity is not sufficient but it is a necessary condition
for innovation. In modern society, innovation is no
longer rooted in scientific and technological knowl-
edge but aligned with creative activities. They are
encouraged by the growth of the creative economy,
which brings together creativity, knowledge, and in-
novation.
The widespread distribution of innovation, the
emergence and ubiquitous use of ICT and the
growth of innovative undertakings enable the crea-
tion of the entrepreneurial economy. While in the
previously dominant concept of innovation system,
innovation preceded entrepreneurial activity, in
the entrepreneurial economy the order is reversed:
innovation comes after entrepreneurial activity
because it cannot be generated and commercial-
ised without them. Over the last twenty years or
so, public and academic interest has moved from
the innovation culture to entrepreneurial culture.
Consequently, there is an increasing trend towards
applying the concepts of national culture to the
analysis of national entrepreneurial culture, using
the internationally recognised Hofstede’s perfor-
mance evaluation and scoring. Although national
innovation culture is a frequently applied concept,
a universal definition has not been developed yet.
Švarc and Lažnjak believe that this can be explained
by two factors: first, national innovation culture is
usually replaced by the concept of organisational or
corporate culture, and second, national innovation
culture is deemed as a derivative of national culture.
In such circumstances, some selected elements of
national culture suggest a higher national propen-
sity to innovate while others are innovation adverse
(page 61).
310
There are numerous definitions of innovation cul-
ture, but they essentially include norms, values and
attitudes towards innovation, technology, entrepre-
neurial activities, business uncertainty and other
factors that affect innovation behaviour. The inter-
pretation of pro-innovation cultural dimensions is
quite demanding because in the relevant literature
there is no consensus on what the dimensions of
pro-innovative cultures are. Although in different
cultures the same dimensions can enhance or con-
strain innovations, there is a number of social val-
ues and behaviours that innovation cultures should
have. These characteristics are individualism, social
equality, tolerance to risk and failure, high level of
social trust, zero tolerance for corruption, diversity
of views, and others. It is obvious that national in-
novation culture depends on the socio-economic
and political environment and the traits of the na-
tional culture in general. Several authors have de-
fined various dimensions of national culture, but
the most popular and widely known is Hofstede’s
model. Thus, the authors in this study analyse in-
novation culture only in relation to the dimensions
of the national culture, according to the Hofstede’s
systematisation. The literature on organisational
innovation culture is more abundant than the lit-
erature on national innovation culture, both on the
theoretical and empirical levels. This is probably
due to the more direct relationship between organi-
sational culture and company’s innovation and eco-
nomic results than between national cultural char-
acteristics and national innovative capacity.
Various required innovation behaviours and strata
of culture assessed through dimensions of organisa-
tional culture have been discussed in the literature,
such as success, openness and flexibility, internal
communication, competence and professionalism,
inter-functional cooperation, employee responsibil-
ity, appreciation of employees, and willingness to
take risks. The values supporting innovation alone
are not sufficient to increase innovation output so
the norms for innovation, artefacts of innovation,
and innovative behaviours should be added. Other
characteristics that stimulate creativity and ini-
tiative are types of flexible management style, bal-
ance between technology and market orientation,
performance appraisal, constructive competition,
informal communication, democratic workplace
environment, high level of freedom, low level of
bureaucracy, and supportive collectivism. Further-
more, there is a strong influence of national culture
God. XXXIII, BR. 1/2020. str. 309-313
 Predrag Bejaković: Book review Innovation culture In crony capitalism does hofstede’s model matter?
on organisational culture and management styles.
Thus, the way management boards run companies
is without doubt influenced by the prevailing na-
tional culture.
Geert Hofstede, a psychologist and professor of or-
ganisational anthropology and international man-
agement, well-known for his cultural dimensions
theory developed on the basis of survey data on
national values and comparative quantified differ-
ences between national cultures using constructed
cultural dimensions. This theory proved to be a
defining moment in comparative intercultural re-
search. His book Culture’s Consequences published
in 1980 represented a new paradigm in social sci-
ence research with six dimensions of innovation
culture. They include power distance, which is re-
lated to the degree of inequality in a society and its
acceptance; uncertainty avoidance, which is linked
to the level of stress tolerated in a society faced with
an unknown future; individualism versus collectiv-
ism, which is connected to the integration of people
into primary groups; masculinity versus femininity,
which is related to the division of emotional roles
between women and men; long-term versus short-
term orientation refers to the attention that society
members give to the future or the present events;
and finally, indulgence versus restraint, which is
linked to the gratification versus control of basic
human desires related to enjoying life.
There are numerous critiques of the Hofstede’s mod-
el (inappropriate instrumentalisation of culture; the
model has a simplistic concept of national culture
and fails to capture the flexibility and changes of
culture over time; it ignores within-country cul-
tural heterogeneity; questionable relevance of the
data in a contemporary environment, etc.). Howev-
er, there are also many advocates of this approach,
who have implemented it in various surveys and on
different levels. Although there are significant dif-
ferences in various survey results, they all suggest
a strong correlation between lower power distance
(social hierarchy) and higher individualism with
the national innovativeness measured by the in-
vention patents granted. Furthermore, researchers
have found a strong positive impact of uncertainty
acceptance and individualism on the achievement
of high rates of innovation. Firms located in high
power distance countries show a higher innovation
index than firms based in low power distance coun-
tries. Similarly, firms based in collectivistic coun-
tries invest significantly more in innovation inputs,
God. XXXIII, BR. 1/2020. str. 309-313
achieve better results in innovation processes and
display a higher innovation index than those from
individualist countries, although in some circum-
stances collectivism could prevent an innovation
breakthrough. This part of the book ends with the
note on the regions and regional cultural differ-
ences in Croatia.
The second part of the book titled Empirical re-
search explains the details, purpose and aim of the
research on the innovative culture in Croatia. Al-
though Croatian government has made an effort
to develop the Croatian innovation system and in-
novation policy, it was not really a priority on the
government policy agendas. Often, the focus was
mainly on other political and social issues, which
is why innovation policy has had little impact on
innovation and economic growth. The aim of the
research was threefold: to analyse the differences
among the Croatian regions in terms of Hofstede’s
cultural dimensions (HCD); to describe the pro-
innovation and innovation-adverse cultural dimen-
sions of the regions; and to assess the relationship
between HCD and innovation and entrepreneurial
capacities of the regions. The authors remind us
that the explanation of Hofstede’s cultural dimen-
sions depends on prevailing circumstances and
that results are often contradictory, meaning that
there is no consistent relationship between cultural
dimensions and economic prosperity or innovation/
entrepreneurial intensity (page 144). Furthermore,
some dimensions can be deemed more important
in terms of facilitating innovations in comparison
to others. While many studies found contradictory
influence of cultural dimensions on innovation, en-
trepreneurship and self-employment, most of them
concluded that the social values and norms that
encourage risk-taking, creativity, collaboration and
openness are critical for innovation success.
The authors performed a survey on the influ-
ence of cultural dimensions on innovation in six
Croatian regions: North Croatia, Zagreb and its
surroundings, Dalmatia, Slavonia and Baranya,
Istria and Lika, and Banovina. When it comes to
regions, the findings of the study by Švarc and
Lažnjak are in some cases quite surprising. For
example, Slavonia, which is considered a tra-
ditional agrarian society that maintains strong
ties with extended family, has a high degree of
individualism, second only to the Zagreb region.
According to the common interpretation of high
uncertainty avoidance, people in such circum-
311
Predrag Bejaković: Book review Innovation culture In crony capitalism does hofstede’s model matter?
stances feel a continuous threat that must be
fought, higher level of stress, expression of emo-
tions, and neuroticism. They also score lower on
subjective health and well-being. Surprisingly,
uncertainty avoidance is significantly higher in
Istria than in other regions of Croatia, which
means that people living there are more scared of
the future and try to control it by numerous rules
and regulations. Indulgent societies are “happier”
societies where human desires related to enjoying
life and having fun are more likely to be gratified.
According to the obtained results, the regions of
Zagreb, Slavonia and Dalmatia are happier than
the rest of Croatia, inferring that people living
there are more optimistic and inclined to leisure,
and are in control of their life. While these results
are understandable for relatively developed and
rich Zagreb and Dalmatia, the result for Slavo-
nia is rather unexpected. Zagreb and Istria, as the
two most developed regions, are the most short-
term oriented societies. North Croatia gener-
ally does not have the cultural traits that would
stimulate innovation. The prevailing short-term
orientation in the Zagreb region reveals respect
for tradition, the need to protect one’s image and
inclination for personal steadiness and stability.
Istria, the most developed region in Croatia after
the City of Zagreb, is the least propulsive of all
Croatian regions and has only two pro-innova-
tion cultural dimensions (low power distance and
high individualism), while the remaining four di-
mensions usually do not support innovation. The
results confirm a well-known proposition that
unfortunately the statistics presented in research
studies often do not tell the entire story and need
to be followed by multifaceted interpretation of
survey results.
312
Considering the ambiguities in the results, the au-
thors in the last shorter part of the book titled An
alternative approach to studying innovation cul-
ture move beyond Hofstede’s model and present
the ideas proposed by Croatian researchers on the
links between culture and innovation. The plenti-
ful research into the reasons for Croatia’s economic
performance lagging behind and weak innovation
and entrepreneurship development in comparison
to other new EU members could be grouped into
two main types: the path dependence processes or
social values inherited from socialism, while the
other approach focuses on the characteristics of
clientelist capitalism heavily burdened with cor-
ruption. According to the first group, the deficits
in innovation culture and technological progress in
the communist societies are the result of a totalitar-
ian bureaucratic dictatorship, which had eradicated
competition. The other explanation is related to
the widespread corruption and crony capitalism in
which entrepreneurial activities are more prone to
political connections and rent seeking than to en-
trepreneurial efforts and risk taking.
The authors of the book, Jadranka Švarc and Jas-
minka Lažnjak, give an interesting and notable ac-
count of the influence of cultural determinants on
innovation development. Building on the key find-
ings from the study, future research should propose
a set of recommendations for the improvement of
the situation in Croatia. Undoubtedly, this book
provides sufficient information and analysis to
stimulate more academic and practitioner research
as well as public policy activities with regard to the
important topic of innovation development. One
ought to congratulate the authors for their extraor-
dinary achievement in analysing the innovation
culture in the circumstances of crony capitalism.
God. XXXIII, BR. 1/2020. str. 309-313

Opis časopisa
Ekonomski vjesnik / Econviews - Review of
Contemporary Business, Entrepreneurship and
Economic Issues usmjeren je znanstvenicima i
praktičarima. Objavljuje radove koji doprinose te-
orijskim, metodološkim i empirijskim spoznajama
u kompleksnom području ekonomije. Radovi se
mogu temeljiti na kvantitativnim i na kvalitativnim
analizama, mogu predstavljati sinteze dosadašnjih
istraživanja i ukazivati na otvorena pitanja u poseb-
nim područjima društveno-ekonomske prakse.
Prihvaćaju se radovi usmjereni na različite razine
istraživanja (od pojedinačnih slučajeva do manjih
ili velikih uzoraka) i različite kontekstualne okvire
(mala, srednja i velika poduzeća, industrijski sek-
tori, lokalna, regionalna i nacionalna gospodarst-
va, međunarodna ekonomija, gospodarske grane,
zdravstvo i obrazovanje, rad i demografija, prirodni
potencijali i drugi društveno-ekonomski okviri).
Časopis je usmjeren na znanstvena područja
ekonomije, poslovne ekonomije i poduzetništva, a
zbog njihove neodvojive povezanosti s drugim dis-
ciplinama - informacijskim i tehničkim znanostima,
pravom, sociologijom, psihologijom i drugima, ob-
javljuju se i radovi s multidisciplinarnim sadržajima.
God. XXXIII, BR. 1/2020. str. 313-314
U 
Vrste radova
Časopis objavljuje recenzirane radove (znanstvene
članke), izvješća o istraživanju, znanstvene rasprave
i prikaze. Povremeno se izdaju i tematski brojevi.
Radovi podliježu postupku dvostruke slijepe recen-
zije (eng. double blind review) koju provode domaći
i međunarodni recenzenti. U okviru postupka
stručnog recenziranja, radovi objavljeni u časopisu
svrstavaju se u jednu od sljedećih kategorija: izvorni
znanstveni radovi, prethodna priopćenja, pregledni
radovi i stručni radovi. Radovi moraju biti na en-
gleskom jeziku. Stručni radovi, prikazi i slični prilo-
zi mogu se objavljivati na hrvatskom jeziku.
Podnošenje radova
Podneseni radovi ne bi smjeli biti ranije objavljeni
niti predani na razmatranje za objavljivanje negdje
drugdje. Radovi se dostavljaju u elektroničkom ob-
liku na elektroničku adresu: ekonomski.vjesnik@
efos.hr. Detaljne upute za autore mogu se pronaći
na http://www.efos.unios.hr/ekonomski-vjesnik/
upute-autorima/. Uz rad u odvojenoj datoteci
potrebno je dostaviti naslovnu stranicu i kratku bio-
grafiju (ne više od 100 riječi) za svakog (su)autora.
Autorska prava (Copyright)
Autori čiji se rad objavljuje u časopisu Ekonomski
vjesnik / Econviews - Review of Contemporary
Business, Entrepreneurship and Economic Issues
automatski prenose svoja autorska prava na časopis,
koji pridržava ta prava za sve radove koji su u njemu
objavljeni. Rukopisi se ne vraćaju.
313
Upute autorima
Etička načela
Etička načela za časopis Ekonomski Vjesnik / Econ-
views - Review of Contemporary Business, Entre-
preneurship and Economic Issues temelje se na sm-
jernicama za najbolju praksu za urednike časopisa
Udruge za etiku objavljivanja (COPE - Committee
on Publication Ethics).
Opće smjernice za autore
Ne postoje strogi uvjeti, ali svi radovi moraju
sadržavati bitne elemente kao što su: sažetak,
ključne riječi, uvod, pregled dosadašnjih istraživanja
(teorijski okvir), metodologija, rezultati, rasprava,
zaključak. Takva se struktura preporučuje za znan-
stvene članke u kategoriji izvornih članaka, preth-
odnih priopćenja i preglednih radova.
314 God. XXXIII, BR. 1/2020. str. 313-314
Radove je potrebno formatirati za ispis na papiru
veličine 210 x 297 mm. Treba koristiti fontove
Times New Roman ili Arial veličine 12 (osim ako
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Rad bi trebao imati između 4500 i 6500 riječi.
Detaljne Upute za autore mogu se pronaći na
http://www.efos.unios.hr/ekonomski-vjesnik/
upute-autorima/. Radovi koji nisu napisani u skladu
s uputama neće se uzeti u obzir za objavljivanje.
Uredništvo
 G  
Description of the journal
Ekonomski Vjesnik / Econviews – Review of Con-
temporary Entrepreneurship, Business, and Eco-
nomic Issues is intended for researchers and prac-
titioners, and devoted to the publication of papers
that contribute to the theoretical, methodological
and empirical insights in the complex field of eco-
nomics. Articles can be based on quantitative as
well as qualitative analyses; they can be a synthe-
sis of previous research and discuss open issues in
specific areas of social and economic practice. The
journal welcomes papers focused on different levels
of analysis (from individual cases to small or large
samples) and contexts (SMEs and large compa-
nies, industrial sectors, local, regional and national
economies, international economics, branches of
economy, healthcare and education, labour and
demographics, natural resources and other socio-
economic frameworks).
The journal is focused on research in economics,
business economics and entrepreneurship, how-
ever, as these are closely intertwined with other dis-
ciplines – information and technical sciences, law,
sociology, psychology and other fields – multidisci-
plinary submissions are also welcome.
God. XXXIII, BR. 1/2020. str. 315-316
Types of papers
The journal publishes reviewed papers (scholarly
articles), research reports, scholarly debates and re-
views. Individual issues can be dedicated to more
specific topics. Submissions will undergo a double
blind review. Within the peer review process, pa-
pers published in the journal are categorized in one
of the following categories: original scientific pa-
pers, preliminary communications, review papers
and professional papers. Papers must be in English.
Professional papers, presentations and other contri-
butions can be published in Croatian.
Submission
Submissions should not be published earlier or be
under consideration for publication elsewhere. The
papers should be submitted electronically to the e-
mail address: ekonomski.vjesnik@efos.hr.
In addition to the main manuscript, a separate file
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biographical note for each author (details below).
Copyright
Contributing authors automatically waive their
copyright in favour of the journal. The journal re-
serves copyright of all papers published in it.
Ethical policy
The ethics statements for Ekonomski Vjesnik /
Econviews - Review of Contemporary Entrepre-
neurship, Business and Economic Issues are based
on the Committee on Publication Ethics (COPE)
Best Practice Guidelines for Journal Editors.
315
Guidelines for authors
General guidelines for authors
There are no strict requirements but all manu-
scripts must contain the essential elements, for ex-
ample: Title; Abstract; Keywords; Main part of the
paper: Introduction, Review of previous research
(Theoretical framework), Methodology, Results,
Discussion, Conclusion, References. Such article
structure is recommended for scholarly articles in
the category of original scientific papers, prelimi-
nary communications and review papers.
Papers must be formatted so as to allow printing
on paper size 210 X 297 mm. Times New Roman or
Arial font, size 12 (unless otherwise stated herein)
should be used, and line spacing should be 1.5.
316 God. XXXIII, BR. 1/2020. str. 315-316
The margins (left, right, top and bottom) should be
25mm wide. The text should be aligned with both
the right and left margins (justified). The paper
should have between 4500 and 6500 words.
Detailed guidelines for authors can be found at
http://www.efos.unios.hr/ekonomski-vjesnik/en/
guidelines-for-authors/. Papers that do not adhere
to these guidelines will not be considered for pub-
lication.
Editorial Board