Business Performance and Financial Institutions in Europe

The paper proposes a new method for analysing the structure and dynamics of economic activity undertaken by locally owned and foreign-owned companies within the European Union. We employ an unsupervised learning algorithm that generates a neural network depicted on Kohonen maps and offering a clustering of companies with a different ownership (local and foreign) from various industries and countries of the European Union during 2009–2016. The research methodology, based on a self-organizing map (SOM) algorithm, belongs to a class of neural networks trained to organize data so that unknown patterns may be discovered, thus leading to results that cannot be attained by more traditional clustering methods. Each type of company (locally owned and foreign-owned) from a specific industry and country is characterized by a series of performance indicators that are included in the SOM algorithm, i.e. indicators at the average enterprise and employee level (turnover, value added at factor cost, gross operating surplus, personnel costs, gross investments) and comprehensive indicators, such as labour productivity and profitability (the latter through the gross operating rate). We detect various clusters of companies based on Euclidian distances that provide similarities and differentiation between companies’ common production activities by taking into account their ownership (foreign versus local), industry and country of location, and related performance results, as well as their interrelationships. The resulting classification can be used to understand the linkages between European Union companies and the different branches of economic activities across EU countries, as well as to investigate the performance gap between locally owned and foreign-owned companies.

Identifying the driving forces of enterprise R&D spending, which is important for achieving long-term economic growth, has become an important research topic for economists. Accordingly, our study aims to determine the driving forces of business R&D expenditures in the Eastern European region. In this context, panel data regression models have been used to determine the impacts of human capital, high technology density and public R&D expenditures on the business R&D intensity of the Eastern European countries. The empirical results show that all three factors have a significant and positive effect on the business R&D intensity of the Eastern European area. More specifically, high-tech industrial structure is seen as the most impressive factor for business R&D expenditures, while human capital is second and public R&D expenditures play a third role. Therefore, within the framework of innovation policies aiming to increase business R&D expenditures, priority should be given to increase the share of manufacturing sector that makes production based on the advanced technology in the economy. Besides, to invest more in human capital and public R&D activities may be other significant options for effective innovation policies that will be implemented in Eastern European countries.

Greek pharmaceutical industry has been emerged as one of the major drivers for the Greek manufacturing sector mostly from 2000 until 2011. The value-added of the industry in the overall economy is indicated through its impact on the gross value-added production, employment, exports, innovation and global competiveness. Greek pharmaceuticals firms have one of the highest shares of investment in innovation and R&D activities in the total Greek economy. The purpose of this study is to investigate the potential causal relationship between industry-level competitiveness, profitability and R/D intensity. Specific financial ratios have been selected for the regression analysis using a sample of Greek pharmaceutical firms with in-house Research and Development department. The period of the analysis has been defined between 2004 and 2015. According to the existing literature, it is expected that R/D intensity plays a significant role on the profitability for pharmaceutical firms.

Pegasus Airlines has been an unique airline, as it changed its business model from a charter airline business model to a low-cost airline business model and is currently positioned itself with low-cost network carrier business model. The aim of this study is to examine the change of business model of Pegasus Airlines, which has been operating in airline industry in Turkey since 1990. For this purpose, a single case study approach was designed to allow in-depth analysis of the airline business model. Semi-structured interviews were conducted in 2019, supported by data gathered from multiple sources. The results confirm that the change of regulations and perspectives, geographical advantages of the airports and the state support could serve as catalysts to the ability to change the airline business model. This study makes a contribution to airline business model literature by revealing the factors influencing the evolution of a business model of Pegasus Airlines.

The significance and role of the banking sector for the development of national economy define the need for continuous monitoring of the performance of banks. The banking sector in the Republic of Serbia has undergone considerable changes in recent decades. The contemporaneous trend of liberalization enabled the entry of foreign capital which led to an increase in competition, and the issue of the financial performance of banks got significant attention. Adequate evaluation of banks’ financial performance may provide useful guidelines to bank managers during decision-making. The problem of banks’ financial performance assessment can be defined as a multi-criteria decision-making (MCDM) problem since the bank needs to check and oversee an extensive set of performance indicators. Therefore, MCDM techniques can be a useful tool for the evaluation of the financial performance of banks. In this paper, the financial performance of all banks that operated in the Republic of Serbia during the period from 2012 until 2017 was assessed using an integrated model combining the CRITIC method and the TOPSIS method. The analysis consists of two steps: in the first step, criteria weights are obtained by the CRITIC method while in the second step the ranking is performed using the TOPSIS method.

The digitalization of banking sector is a direct consequence of the overall digitalization of the economy. Today’s demand is anytime anywhere banking. This requires innovative, robust, secure, optimized and ready to meet the expectations of empowered and tech-savvy customers. As a result of these changes, it is important to capture the new reality in relation to the banking environment, through the views of customers. This study aims to explore customers’ attitudes towards the use of digital services and applications in banking sector. In particular, it aims to identify the factors that affect customers’ attitudes towards those applications, to classify them into groups according to their similar behaviour patterns and to profile each group of customers according to their demographic characteristics and other factors. Principal component analysis (PCA) was conducted to identify the main factors that affect citizens’ attitudes towards the use of digital services and applications in banking sector. Cluster analysis was performed to classify citizens into groups with similar behaviour whilst discriminant analysis conducted to check cluster predictability. Non-parametric tests performed to profile each group of customers according to their demographic characteristics and other factors. PCA identified three main factors that customers’ attitudes towards those applications: (a) better service, (b) cautiousness and (c) timelines/directness. Cluster analysis classified customers into three groups according to their purchasing behaviour towards the use of those digital services/applications (i) those that are in favour of, (ii) opportunists and (iii) sceptical. Chi-square analysis indicated that demographic characteristics such as gender, age, education, marital status, income have an impact on customers’ particular behaviour. Furthermore, Friedman non-parametric test identified that some other opinion of customers regarding the use of digital applications in comparison with those of traditional banking services are also related with their behaviour towards those digital banking applications.

The purpose of this paper is to test the effect of non-parametric methodology of ANNs on enhancing decision-making procedures compared to classic multivariate Regression models. We implement the two methods on decision-making for loan allowances and on a valuation of collaterals using data from a Small Medium Greek Bank. Using sensitivity analysis, we also find the key points where decision-making results change. We provide all the estimations and a comparable matrix is produced in order to point out the similarities and differences between the two methodologies. Also, the key points in decision-making approach are presented. The practical implication is that crucial for decision-making approach in the banking industry and affects bank’s risk management. From the presentation of comparison between the two methodologies, we also provide the relationship between independent variables along with decision-making options. The debate in academic society for theoretical and non-theoretical approaches in decision-making procedure is crucial the last decades. Our paper contributes also to this academic debate, by presenting advantages and disadvantages per methodology. This study demonstrates a practical tool for decision roles and units who are trying to define the best practice for decision-making procedures.

Rapid changes in technology, integration and specialization of individual economies reinforce trade motives and the consequences of integration into the world trade system. The Visegrad countries (Czech Republic, Hungary, Poland and Slovakia) have undergone fundamental structural changes in recent years, characterized at the turn of the century mainly by the opening of the economy and the influx of foreign direct investment into the industry. They are currently classified as high-income countries. Developments in the trade in services in these countries indicate changes in the business environment, firms and the challenge of improving their position on the international market. Visegrad countries belong to highly open economies, because of its heavy dependence on foreign trade and considerable sensitivity to the global economic environment. Each of these countries represents a small internal market, which is unable to cover the raw material requirements and is substantially dependent on the export of domestic production to foreign markets. The discussion of the assessment of the development of foreign trade in business services of Visegrad countries and identification of the presence of their comparative advantages is the object of the contribution. International trade in services in the V4 countries increased by 7% on the export side in 2013–2016, on the import side it decreased by 0.85%, of which trade in business and management consulting and public relations services increased by 76% on the side export and 53% in import. Trade in services, in spite of the V4 membership of the EU28 and the single market, is under constant pressure from a variety of factors, including pressures of associations, interest associations or groups. Three of the V4 countries are not members of the Euro area, and the use of national currencies and their own monetary policy also affects international trade in the trade in services.

The climate change is a global externality that requires international efforts. The European Union has subscribed international agreements and internally has launched the European Union 2020 Strategy, with specific environmental targets. In this context, it is important to measure the environmental damage and economic growth relationship in the European Union. The paper aims to evaluate the decoupling of the gross domestic product and greenhouse gas emissions and to analyse the effects of population growth and gross domestic product on increase of greenhouse gas emissions and energy inefficiency in the members of the European Union. To do that, we use Data Envelopment Analysis models, which were applied to analyse the inefficiency levels and the population growth and gross domestic product decoupling of the 28 member countries of the European Union using data from the years 1995, 2000, 2005, 2010 and 2014. It was found that Luxembourg, Austria, Denmark, Malta, UK and Italy are the economies that turn out to be the most decoupled, and there is a reduction of inefficiency rates from 2010 to 2014 that could be affected by the great recession of 2009.

China’s programme for inter-regional economic connectivity, the Belt and Road Initiative (BRI), will develop new trade routes and production chains linking predominantly developing world economies with the Chinese market, making a unique contribution to global economic development but disrupting power relativities. At the same time, problems with debt servicing, corruption and a range of other political risks such as the role of Chinese state-owned enterprises have emerged in some BRI partner countries and with some projects. These have encouraged an increasingly negative commentary, particularly following the shift of the US rhetoric since 2017, characterising China as a strategic competitor. Conventional geopolitical, realist and liberal internationalist analysis appears to have reached foregone conclusions that the BRI will generate zero sum benefits to China and costs to others, yet there is a significant research gap in empirical case studies of what is actually taking place on the BRI. To date, firms engaged in BRI projects have been overwhelmingly Chinese, but it is likely that there will be future internationalisation of BRI projects and firms (and governments) will need to assess the full range of political risks of participation. Political risks are non-market risks that may affect business outcomes. While most political risk analysis has usually taken place at the national (country) level or at the firm (project) level, this paper utilises a political risk framework to identify political risks generated by the BRI at the geopolitical and trans-national level, as well as at the country and project levels. Under each of these categories, this paper discusses how risks are constructed, assesses available evidence, agency of stakeholders and identifies where further empirical investigation and theoretical development are required.