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MANAGEMENT AND TRUST DURING THE GLOBAL ECONOMIC CRISIS:
THE CASE OF SERBIA
Professor Sinisa ZARIC, PhDUniversity of Belgrade, Faculty of Economics
Kamenicka 6, 11000 Belgrade
Professor Vojislav BABIC, PhDUniversity of Belgrade, Faculty of Economics
Kamenicka 6, 11000 Belgrade
ISR Belgrade
Abstract:
The paper analyzes the trust influence on management and business indicators of
Belgrade entrepreneurs during the global economic crisis. The first chapter points out that
entrepreneurs are exposed to significant non-market risks in countries with underdeveloped
institutional infrastructure. Due to that fact, creation of business strategies is more difficult.Under the conditions of economic crisis, large number of decisions are made by the
institutions that influence on the behavior of entrepreneurs, in order to seek answers for the
crisis disturbances. In such conditions, solid stocks of social capital are of great importance
for the stability of the economy and individual agents.In chapter 2 it was defined the term,
structure and functions of social capital. Besides, it was considered the influence of social
capital on the micro-economic sector. In chapter 3, it was measured institutional, financial
and stakeholders’ trust of entrepreneurs and its impact on the investment trend, the volume
of business and real salaries of micro and small enterprises. Based on empirical data, it was
shown that low trust stocks have the negative influence on business indicators and
development of firms.
Keywords: Economic crisis, Serbian entrepreneurs, social capital, trust, business
parameters;
JEL Classification: G01, O43, L26, D22, A13
Economic agents are performing within the business environment. David Baron
(Baron, 2010) makes a distinction between the market and the non-market environment.
Operating within the non-market environment, the entrepreneurs are facing the problem of
formulating so-called non-market strategies. It is of significant interest to get knowing how
favorable the non-market environment is for business. In the same time, having in mind the
character and the structure of the non-market environment, the economic agents have to be
prepared for answering to the impulses coming from the government non-market
environment. Many of the elements of the non-market environment (the network of
institutions) are, in the same time, the factors of creating social capital. The social capital,definitely recognized as one of the kinds of capital - besides physical and the human one is
not only having a positive impact on entrepreneurial activities, but is a capital in which one
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could invest. The role of entrepreneurship in creating inclusive forms of social capital ,
considering it as a production factor (Svensend, G.L.H. and Svensend, G.T., 2005).
An entrepreneur is in a situation in which the stocks of social character and the
character of relations within this specific “glue” of society (The World Bank 1998)
influence his/her economic behaviour. An entrepreneur can participate in the government
arena by building coalitions, lobbying and trying to limit the dangers that come from those
institutions which significantly influence his/her non-market behaviour. In the time of
global economic crisis, an entrepreneur faces dramatic or less dramatic changes in the fieldof market environment. Experiences of countries such as the peripheral European countries
(Serbia), demonstrates that entrepreneurs have difficulties in anticipating the changes
coming from the range of non-market environment. Generally speaking, in countries with
insufficiently developed institutional infrastructure entrepreneurs are exposed to great non-
market risks, in other words, they have difficulties in successfully creating their non-market
strategies. Good networking (Kim,P., and Aldrich,H., 2005), solid stocks of social capital,
as well as trust in other agents and institutions, will prove to be the factors of highest
significance for the stability of economy and individual agents. The crisis incites making a
greater number of decisions by institutions which influence on the entrepreneurs’
behaviour, with the objective to seek answers to crisis disturbances. In a situation with low
trust in this segment of non-market environment actors, the low level of social capital
disables adequate adjustment of actions in the entrepreneurial structure to the newly
developed circumstances.
2. Social Capital Theory Approach
A starting framework of this study relies on a social capital theory. The social
capital represents an investment into social relations with an expected refund on a market.
Wealthy social environment, which allows frequent acquaintances and business contracts,
presents a suitable ground for exchange of social norms, trust and reciprocity. The social
capital includes information which are available to alters (members of entrepreneur
networks), ideas, instructions, business possibilities, easier approach to financial capital,
emotional and moral support, trust, cooperation, power and influence (Zaric and Babic
2010). The information collected through entrepreneurs networks, are more qualitative
because they are: 1. cheaper, 2. more detailed and accurate, 3. the alters, with which they
keep up constant contacts, have economic motivation to be reliable and 4. permanent
economic relations become coated by social content added to trust expectation andopportunism absence. Increasing the number of business contacts based on trust, it makes
an influence on decreasing transactional costs as well as the increase of physical capital
decreases production costs. The way human, physical and financial capital are productive,
the same goes for the social capital, too. Therefore, the social capital can be considered as
the input in a production process. By its use, business can be done, profit can be realized on
market, and new values can be created. Also, mission can be fulfilled, goals achieved and
the contribution can be given to the world. According to The World Bank ”The social
capital of a society includes the institutions, the relationships, the attitudes and values that
govern interactions among people and contribute to economic and social development.
Social capital, however, is not simply the sum of the institutions which underpin society, it
is also the glue that holds them together” (The World Bank 1998:1). After The World
Bank initiative an upswing of quotations was registered in economic literature, including
terms social capital and social network (Isham et al. 2002). According to Putnam, the socialcapital refers to relations among an individual, a social network, reciprocity norms and trust
resulted from them (Putnam 2000). Under the term of social capital, Schiff implicates a
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sum of social structural elements which affect interhuman relationships and represent an
input for production or functional utility (Schiff 2002). Portes sees the social capital as the
actors` ability to insure benefits through members in social networks (Portes 1998). To
Pennar’s definition, the social capital consists of networks of social relationships that
influence individual behavior and thus cause economic growth (Pennar 1998). The name
”social” in the term social capital, points to the fact that resources are neither personal
property nor they are possessed by any single person. They can be only used within
interrelation network. Entrepreneurs’ network is a personal and business network that anentrepreneur builds in order to realize his entrepreneurial ventures. Within business
management, networks are treated as a variable of a social capital that enterprises exploit to
overcome limitations related to their size and possible institutional barriers, providing
access to other resources that can improve business (Curran et al. 1995). In addition to
business networks, trust presents a significant input variable of the social capital. Numerous
authors give it the importance of weighted variables and quite a number of them identify it
with the social capital. A trust idea refers to correct expectations about the actions of other
people that have a bearing on one’s own choice of action when that action must be chosen
before one can monitor the actions of those others (Dasqupta 1998). The trust can be also
explained as a firm belief in the reliability of an individual, company or institutions, i.e. the
reliability and the veracity of their claims and statements without being checked before.
Trust can have an effect on developing entrepreneurship course, on forming different sorts
of enterprises as well as on entrepreneurs’ behavior. In connection with it, low stocks of trust increase transactional costs, limit market entry as well as firm growth and
competition.
It is possible to speak about the positive impact of social capital at the micro-
economic, macro-economic and financial sector. Due to the nature of work, the emphasis
will be on analyzing the impact of social capital at the micro-economic sector. The
influence of social capital at the micro-economic development can be seen at the level of
families, companies and communities. At the family level, social capital is used especially
among the poor, to ensure the disease environment, harsh climate and government
restrictions. In such cases social capital encourages the pooling of resources such as food,
loans, etc.. In addition, good informal relationships enable the poor to start small business
and increase revenue. The influence of social capital on firm level is manifested through
the dense business networks that encourage economic cooperation and build trust between
economic agents. Social capital positively affects the productivity of firms to exchangevaluable information about products and markets and reduces the cost of contracting,
regulation and enforced collection. Repeating business transactions and business reputation
promote sides of acting in order to achieve mutual benefits. Social capital, created among
firms, significantly reduces business risks. It allows the exchange of valuable information
about products and markets and reduces the cost of contracting, regulation and enforced
collection. As we know from Coase theory of the firm, one of transaction costs incurred in
terms of market mechanism are the costs of incomplete contracts (Coase 1937). Signing a
contract entails a dose of uncertainties, regarding the future state in which the laws and
clauses will be applied. For example, the contract may specify the delivery of certain
quantities of inputs at a specified price at some future date, and that no party knows with
certainty if the market prices of inputs and outputs will be produced on that day. A possible
solution would be to include in the contract each possible pair of market prices of outputs
and inputs. This kind of contract is called a complete understanding or agreement.However, in practice contracts are rarely complete for several reasons. The first reason is
the high cost and time used for compiling a list of all possible pairs of unpredictable cases.
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Another reason may pose some unforeseen events that took place, and could not be verified
by a third-hand court. In these situations, developed commercial network, with significant
stocks of social capital, eliminate or significantly reduce the risk factors. Social capital also
facilitates the implementation of collective projects, because it reduces the risk of free
riding and stronger interpersonal trust. According to Martin Raiser, firms belonging to
networks increasingly avoid free riding , in order not to lose a reputation of reliability
(Raiser 1999). Social capital encourages and facilitates the pooling of resources and access
to alternative credit activities to those residents who were denied access to formal financialinstitutions. Several projects, based on increasing the stock of social capital, were
conducted in Tanzania, Rwanda, Cambodia, Bolivia and Nicaragua under the auspices of
the World Bank (The Initiative for Social Capital 2000). Consequently, in the field of
Management, social capital leads to greater efficiency compared to traditional
organizational models. Thus, in firms with Taylorian organizational form (Taylor 1929.),
information is delayed or distorted while being transferred through a strict hierarchical
chain of command. Taylorian form is increasingly replaced by a flexible management
structure in which responsibility is transferred to each of the sectors in the company. In that
way, workers are forced to make decisions independently, because they are not constantly
obliged to consult their superiors in the hierarchical chain. Such organization of the
company increases efficiency but on the other hand, it depends on the stock of social
capital workforce. In such situations, lack of trust between social workers and managers
can lead to opportunism and paralyze production. The Norwegian-Italian study from 2006.examined the influence of human and social capital on productivity (Greeve et al 2006) .
The survey was conducted in three organizations involved in research and development
(R&D) and provided consulting services. Analysis included the Italian company "GESTO",
which provide business consulting services and two Norwegian companies "ALPHA" and
"BETA" for applied research and consulting in the fields of economics and social sciences.
ALPHA is more concerned with applied research and consulting than BETA, where more
emphasis is made on applied research work. GESTO and ALPHA are profitable
organizations while BETA is non-profit. The BETA rewarding of employees is in relation
to academic satisfaction and participation in projects. Within the database for the
companies ALPHA and BETA were analyzed: employee participation in projects, salaries,
working hours on projects and the number of permanent employees. The database for
BETA contained even information about published works. The dependent variable for
measuring productivity in the firm GESTO was measured by average number of daysrequired to complete the project (which was 19 days per project) and the average number of
completed projects within one year (14). The average employee in the ALPHA completed
20 projects for one year. In the ALPHA is measured the productivity of each individual
through the payment per hour for participating in the project expressed in NOK.15
Since
BETA is a nonprofit organization, the variable of productivity is measured by the weighted
”publishing index” which has the following composition: articles published in international
academic journals (4), articles in the Norwegian and Nordic academic journals (3), the
number of international chapters in academic books (3), research reports (2) and BETA
working papers (1) (Greve et al 2006). In the study, the independent variables were selected
this way: 1. human capital, 2. tenure to measure effects of experience and 3. social capital.
In the firm GESTO, data on the social capital were obtained via an online questionnaire
which was tested over 52 employees. The questionnaire covered the following topics:
general staff contacts at the time of starting the project, getting advice while working on the
15 Norwegian Krone
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project, providing advice during the work on the project, contacted with alters in the past
two months, contacted alters at the time of commencement of the project, general advisory
relationship and social relationship. In the case of companies ALPHA and BETA
employees were asked two questions: ”From whom did you get advice at the time of
starting the project?” and ”Who advised you during the project work and research
questions?”. The study examined several hypotheses, but the most important for our
analysis is the next one: H*: ”The Social capital has a direct impact on productivity. People
with more social capital will be more productive than those having less of it.” (Greve et al.2006). After the regression analysis, it is demonstrated the positive impact of social capital
on productivity. in all three cases. Common to all three organizations is that social capital
has a major contribution to productivity in comparison with other observed variables.
Additional reasons should be looked for in nature of work these three organizations go in
for. All three organizations run most of the projects, unless they are ordered from other
companies and institutions. Working teams in these organizations are small and the
imperative is the ability to get advice from others in order to create greater productivity.
Social capital, in the form of opportunities to establish direct business contacts, affects
more access to information, discovers new opportunities, learning from the mistakes that
other people have previously made and enables more efficient troubleshooting and
fulfilling tasks.
3. Measuring Belgrade Entrepreneurs’ Trust and Its Influence On BusinessDuring The Global Economic Crisis
In this chapter it is presented part of the survey we carried out in 2011. about
institutional, financial and stakeholders’ trust of Belgrade micro and small entrepreneurs
before and during the Global economic crisis. Beside, we also examined the influence of
previous variables on business parameters such as: investment trend, business extent and
entrepreneur real earnings. As a methodological instrument it is used a questionaire16
. In
the survey it is started from the following hypotheses:
H1 : Institutional trust of Belgrade entrepreneurs is on a low level
H2: Index of financial trust and investment trend for next 6 months are in a positive
correlation
H3: Index of financial trust and business extent of enterprises are in a positive correlation
H4: Index of financial trust and real salary of entrepreneurs are in a positive correlation
As for institutional trust, it is measured in 19 institutions conected in a direct or indirect way with functioning of economic and financial spheres. For measuring it is used
4-level Likert scale which is defined the following way: 1. do not trust at all, 2. do not
have enough trust, 3. have trust and 4. trust completely. The hypothesis H1 will be rejected
if a majority of respondents have trust in more than 50% of institutions offered. Trust
existence in each of the institutions implies that share of the answers which express
institutional trust (sum of responses: ”have trust” and ”trust completely”expressed in
percents) exceeds the share of answers which express institutional mistrust (sum of
responses:”do not trust at all” and ”do not have enough trust” expressed in percents).
To the question: ”Will you please quote how high is your trust degree in each of the
following institutions”, to the least degree respondents believe in political parties(3,1%),
Agency for privatization (6,1%), Republic parliament (7,7%) and Serbian government
(10,8%):
16The sample included owners and managers of 65 small and micro private enterprises
(from 1 to 100 employees) in the seven municipalities of Belgrade
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Do not trust
at all %
Do not have
enough trust%
Have
trust %
Trust
completely %
Commercial Banks 23,1 41,5 33,8 1,5
Large Companies 38,5 43,1 18,5 0
Central Bank (NBS) 23,1 36,9 40 0Municipal
Administration 29,2 40 30,8 0
Public Utility Companies 23,1 43,1 33,8 0
Serbian Government 49,2 40 10,8 0
Republic Parliament 52,3 40 7,7 0
Belgrade Stock Exchange 26,2 56,9 16,9 0
Ministry of Treasury 41,5 41,5 16,9 0
Ministry of Economy 46,9 36,9 16,9 0
Privatization Agency 56,9 36,9 4,6 1,5
Statistical Office of
Serbia 33,8 32,3 33,8 0
Political Parties 75,4 21,5 3,1 0
Serbian Chamber of
Economy 36,9 44,6 18,5 0
Belgrade Chamber of
Economy 35,4 44,6 20 0
Agency for Business
Registers 21,5 26,2 49,2 3,1
Agency for MSE 35,4 47,7 16,9 0
Investment Funds 36,9 49,2 13,8 0
Voluntary Pension
Funds 32,3 40 27,7 0
Table 1. Institutional trust of Belgrade entrepreneurs during the global economiccrisis
Practically 75.4% of respondents do not trust political parties at all, 56.9% do not
trust Agency for privatization and 52.3% of them mistrust the Republic Parliament.
Speaking about institutions directly connected with economic and financial spheres, some
better results are achieved in the case of the Agency for business registers, Central bank
and commercial banks (due to the reforms in Serbian banking sector, and because of
measures for increasing work efficency in the Agency for business registers in the period
2008-2010). Finally it could be concluded that majority of respondents do not trust 18 out
of 19 institutions. So it can be stated that hyphotesis H 1 is confirmed. In order to test
differences within trust level in the same institutions the period before the recession in
Serbia, we put the following question: ”Related to the period before the recession in Serbia
(4th quarter of 2008.) – is your present trust with these institutions much lower, lower,without change, greater or much greater”, they answered following way (Table 2)
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Much
lower %
Lower % Without
change %
Greater
%
Much
Greater %
Commercial
Banks 20 27,7 50,8 1,5 0
Large
Companies 27,7 24,6 46,2 1,5 0
Central Bank
(NBS) 20 26,2 52,3 1,5 0
Municipal
Administration 18,5 23,1 56,9 1,5 0
Public Utility
Companies 16,9 30,8 52,3 0 0
Serbian
Government 26,2 24,6 49,2 0 0
Republic
Parliament 26,2 26,2 47,7 0 0
Belgrade Stock
Exchange 18,5 24,6 55,4 1,5 0
Ministry of
Treasury
24,6 27,7 47,7 0 0
Ministry of
Economy 21,5 27,7 50,8 0 0
Privatization
Agency 26,2 26,2 47,7 0 0
Statistical
Office of
Serbia
13,8 23,1 63,1 0 0
Political
Parties 30,8 21,5 47,7 0 0
Serbian
Chamber of
Economy
15,4 26,2 58,5 0 0
BelgradeChamber of
Economy
15,4 24,6 58,5 1,5 0
Agency for
Business
Registers
12,3 21,5 63,1 1,5 1,5
Agency for
MSE 16,9 29,2 53,8 0 0
Investment
Funds 20 30,8 49,2 0 0
Voluntary
Pension Funds 21,5 21,5 56,9 0 0
Table 2. Institutional trust of Belgrade entrepreneurs now vs. before the recession
According to the analogy with replies from table 1, a great percent of answers in
the column ”without change” testifies low institutional trust in the period before the
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recession, too. On the other hand, a trend of further trust decreasing is evident in
institutions such as: Republic Parliament and Agency for privatization (with 52% of
respondents), Ministry of Finance, large companies and political parties (with 52.3% of
respondents), investment funds (with 50,8% of respondents) and Ministry of Economy
(with 49.2% of respondents), etc. The next part of survey was related to enterprise business
parameters. To the question: ”Are you planning to reduce, leave unchanged or increase
your investments in business in the next 6 months”, the respondents answered the following
way (Table 3.)
Investment trend for next
6 months
Frequency Valid Percent
Reduce 12 18.5
Status quo 47 72.3
Increase 6 9.2
Total 65 100.0
Table 3. Investment trends for next 6 months
The majority of them (72.3%) will keep an investment status quo, 18.5% of
respondents will reduce investments while 9.2% will increase theit investment in the 6
months. To the question: ” Related to the period before the recession in Serbia is business
extent of your firm significantly less, slightly less, without change, slightly increased or
significantly increased”, most of respondents faces the recession consequences (Table 4.)
Extent of Business Percent
Significantly decreased 52,3
Slightly decreased 38,5
Without change 7,7
Slightly increased 1,5
Table 4. Business extent of enterprises related to period before recession
In order to examine etrepreneurs` real earnings we put the following question:
”Related to the period before the recession in Serbia (4
th
quarter of 2008.) is your real salary now significantly decreased, slightly decreased, without change, slightly increased
or significantly increased”, 61.5% of respondents state that earning was significantly
decreased, 30.8% state that it was slightly decreased, 4.6% of them state that salary was
without change, while 3.1% state the earning was increased (Table 5.)
Real salary now vs. Before
the crisis
Frequency Percent
Significantly decreased 40 61.5
Slightly decreased 20 30.8
Without change 3 4.6
Slightly increased 2 3.1
Table 5. Real salary of entrepreneurs now vs. Before crisis
To examine a relation between business variables and financial trust of entrepreneurs, we
have created an index of financial trust (I ft). It is synthetical index whose components
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unclude trust measures in four financial institutions having the greatest significance for
running business: trust in banks, trust in Central bank, trust in Ministry of Finance and trust
in investment funds. The final model was set up as follows:
Ift = Pb + Pcb + Pmf + Pi (equation 1)
Pb - Trust in banks; Pcb - Trust in Central bank; Pmf - Trust in Ministry of Finance;
Pi - Trust in Investment Funds
The trust in institutions were weighted with: 5 : 3 : 2 : 1 respectively. To test hyphohesis H 2
a correlation analysis was done between the Index of financial trust and entrepreneurs’investment trend (Table 6)
Correlations
Index of
Financial
Trust
Investment trend
for the next 6
months
Index of Financial Trust Pearson Correlation 1 .298*
Sig. (2-tailed) .016
N 65 65
Investment trend for the next
6 months
Pearson Correlation .298 1
Sig. (2-tailed) .016
N 65 65
*. Correlation is significant at the 0.05 level (2-tailed).
Table 6. Correlation between the Index of financial trust and Entrepreneurs`
investment trend
As it is seen on the table 6, a significant linear correlation was found, showing a direct
linear relation between the index and entrepreneurs’ investment trend. To test hypothesis
H3, a correlation analysis was done between the Index of financial trust and business extent.
As a result, it was achieved a more significant Pearson coefficient value (Table 7.)
Correlations
Index of
Financial
Trust
Business extent
of
enterprise
Index of Financial Trust Pearson Correlation 1 .393**
Sig. (2-tailed) .001
N 65 65
Business extent of
enterprise
Pearson Correlation .393**
1
Sig. (2-tailed) .001
N 65 65
**. Correlation is significant at the 0.01 level (2-tailed).Table 7. Correlation between the Index of Financial Trust and business extent of
enterprise
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To test hypothesis H4 it was done a correlation analysis between the Index of
financial trust and the variable: ”real salaries now vs. before the crisis” (Table 8.)
Index of
financial
trust
Real salaries now
vs. before the
crisis
Index of financial trust Pearson Correlation 1 .298
Sig. (2-tailed) .016
N 65 65
Real salaries now vs. before
the crisis
Pearson Correlation .298 1
Sig. (2-tailed) .016
N 65 65
*. Correlation is significant at the 0.05 level (2-tailed).
Table 8. Correlation between the Index of financial trust and changes in real salaries
Also, it was received a significant Pearson coefficient value (.298*) which
indicates the existence of a direct linear relationship between these two variables.
In the survey was also examined entrepreneurs’ trust in the followingstakeholders: suppliers, competitive firms, foreign investors, consumers and employees of
the firms. Generally, the majority of respondents (81.6%) has trust in suppliers, customers
(70.7%) and employees in their firms (79.4%):
Trust Level Suppliers Competitive
Firms
Foreign
Investors
Consumers
No Trust at all % 1,5 18,5 32,3 3,1
Not enough Trust % 16,9 50,8 49,2 26,2
Have Trust % 55,4 29,2 18,5 56,9
Have Complete Trust % 26,2 1,5 / 13,8
Table 9a. Trust in suppliers, competitive firms, foreign investors and consumers
during the global economic crisis
Table 9b. Trust in employees in respondents’ firms
Trust Level in
employees
Percent of
entrepreneurs
No Trust at all
%
1.7
Not enough
Trust
%
19.0
Have Trust
%
46.6
Have
Complete
Trust %
32.8
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To the question: ”Related to the period before the recession in Serbia (4th
quarter
of 2008.) – is your present trust in the same people much less, less, without change, greater
or much greater”, most of the respondents have the same trust in stakeholders. However,
concerning the period before the crisis a decreasing trend was registered with suppliers
(16.9% of respondents), with competitive firms (24.7%), with foreign investors (27.7%),
with consumers (21.5%) and the employed (10.3%). In the period of economic crisis, a
good recipe for keeping business stability of small companies presents winning an
preserving loyality of suppliers, employed people as well as consumers. For the analysisrequests, an index of stakeholders’loyality has been created. Its components consists of 3
components such as: trust in consumers, trust in suppliers and trust in employees with
weights 5 : 4 : 4 respectively
Isl = Pc + Ps + Pe (equation 2)
We have started from the following hyphothesis H5: The Index of
Stakeholders’Loyality makes an influence on a change of a dependante variable ”the
change of real salaries with the reference to the period before the recession”. Model of
linear regression has been put the following way:
yi = β0 + β1xi + εi (equation 3)
yi = dependant variable (real salary)
β0 = y intercept
β1 = slopexi = predictor (index of stakeholders` loyalty)
εi = error in the observed value for the i cases
After the regression, the next results are received (Table10)
Model Summaryb
Model R
Coefficient
of
determination
R 2
Adjusted R 2
Standard Error of
the Estimate
1 .222a .049 .032 .695
a. Predictors: (Constant), Index of Loyalty
b. Dependent Variable: Real salary now vs. before the crisisTable 10. Excerpt from the regression analysis
As it can be seen, low values are received for the coefficient (R = 0.22) together
with the coefficient (R 2
= 0.049), so we can conclude that the hypothesis H5 was not
confirmed. It means that entrepreneurs associate crisis cause with financial trust more than
trust with stakeholders.
4. Conclusion
The text puts emphasis on the measurement of trust and its impact on business
operations of firms in Belgrade during the global economic crisis. Based on survey results,
most entrepreneurs have no confidence in 18 out of 19 institutions that are directly or
indirectly related to economic and financial sphere. This negatively affects the creation of
business environment and business operations of firms. In relation to the period before the
recession in Serbia, the trust of entrepreneurs mostly fell in the Parliament, thePrivatization Agency, Ministry of Finance and the large companies. With the great majority
of entrepreneurs there was a decrease in the volume of business and real wages related to
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pre-recession period, whereas 18.5% of respondents intended to reduce their investment in
their own business. The study measured the correlation between the Index of financial trust
and the three business variables in firms. In all three cases, a significant positive correlation
was achieved. In the survey it is found that most respondents have trust in suppliers,
customers and employees, and that there is no trust in the competitive companies and
foreign investors. In relation to the period prior to 4th
quarter of 2008. there has been a
slight decline of trust in all of these stakeholders. In addition to it, the survey found that
more respondents associated the cause of crisis with institutional trust declining rather thanwith a lack of trust in stakeholders. Bearing in mind economic disparities in the state, it is
rational to expect that in other parts of Serbia stock of measured trust would be lower, and
the business environment and the firms’ parameters less qualitative.
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