HKUST Business School [SBM] Newsletter, November 1998 (Issue 4)

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luncheon talk by Professor Merton Miller, 1990 Nobel Laureate in Economics, was so fully-booked that about 50% of interested companies and

ISSUE 4

NOVEMBER 1998

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NOBEL LAUREATE TALK OVERSUBSCRIBED

Clear Water Bay, Kowloon, Hong Kong

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olutions to practical problems faced by firms, corporations, and government agencies can soon be tested out in laboratories before implementation.

A new center, “The Center for Experimental Business Research (cEBR)”, established by the School in September, is expected to help promote the use of experimental methods in business research, expand experimental methodology through research and teaching, and apply this methodology to solve real life problems.

Dr. Rami Zwick, Director of the Center, said, “we expect to make experimental methods an integral part of mainstream business research and teaching in Hong Kong, and render the use of experimental testbeds a standard component of the introduction of new products by firms and new policies by governmental agencies.”

World-renowned experimental economist Professor Vernon Smith, the guest speaker at the inaugural lecture to mark the Center’s opening, highlighted the importance of the new center to business education. He said, elsewhere in the world, experimental business research was assuming an increasingly significant role in education.

Dr. Zwick said experimental economics is an area that has developed rapidly over the past 10 years in the US and Europe where most universities now have economic laboratories, or at least researchers working in the field. However, similar

development has not been seen in Asia. “As far as we know none exists in Asia. cEBR will fill this gap,” said Dr. Zwick.

The center will focus on three areas: research, education, and networking and outreach programs. It will also initiate joint projects and public activities with its peer centers across the world. It has recently collaborated with the C a l i f o r n i a I n s t i t u t e o f Technology in a technology transfer project that will be used for both teaching and research in the area of electronic markets (“smart markets”).

SCHOOL OPENS ASIA’S FIRST

EXPERIMENTAL BUSINESS

RESEARCH CENTER

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eteran businessman Larry Yung was conferred Doctor of Business Administration honoris causa at the University’s 1998 congregation.

Born in Shanghai and a graduate of the University of Tianjin, Mr. Yung came to Hong Kong in 1978 to develop his own business. He is currently the chairman of CITIC Pacific Limited, among other directorships he holds in local and overseas companies.

HKUST has conferred five honorary doctorates in business administration since its establishment in 1991.

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usiness sense and practical ideas are what contributed t o t h e s u c c e s s o f s i x u n d e r g r a d u a t e M a r k e t i n g s t u d e n t s i n a l o c a l c a s e competition.

At an award presentation ceremony held in November, the winning team members, Bonny Cheng, Willie Heung, William Mok, Evelyn Ngai, Kathy Wong and Catherine Yu, all final-year Marketing students, were praised for their thorough preparation and bright ideas in the proposal they entered for the Joint U n i v e r s i t y M a r k e t Planning (JUMP) Contest. The JUMP Contest was organized by the b u s i n e s s s t u d e n t associations of HKUST, the Chinese University and the University of Hong Kong. Participating teams were invited from a l l p u b l i c l y - f u n d e d universities in Hong Kong. Participants were given one month to devise a business development p r o p o s a l a n d a n exposition plan for the t e l e c o m m u n i c a t i o n s company SUNDAY, who sponsored the contest.

LARRY YUNG AWARDED

HONORARY DOCTORATE

The contest included a series o f p r o g r a m s t h r o u g h o u t September to November. Two teams from the HKUST Business School made their way to the final list of five. The works of the five finalist teams are being displayed in an exposition roadshow touring the three organizing universities from November 1998 to January 1999.

Undergraduate Programs Director Dr. Patrick Chau, one of the adjudicators of the contest, was delighted that students had

an opportunity to deal with real business issues. “I was impressed b y t h e p e r f o r m a n c e o f t h e participants. They were so well prepared and brilliant that we had a hard time selecting the winners. The great thing about the contest, though, was that participants were given the chance to formulate and implement their strategic plans for a real business entity. No matter what the final result was, they all should have gained invaluable experience from the process,” said Dr. Chau.

Prof. Vernon Smith speaks at the inaugural lecture of the cEBR.

Prof. Merton Miller (right) and Prof. Nai-fu Chen.

individuals had to be denied participation.

Co-organized by the School’s Center for Economic Development and the University of Chicago Club of Hong Kong, the talk in November focused on the “on-going financial crisis”. It attracted over 300 participants including regulators, financial practitioners, corporate executives, politicians and the media.

Professor Miller touched upon elements essential to the recovery of economies in Asia. Such elements include keeping finanical markets free of government interference and continuing free capital flows. The winning team ... (from left) Willie Heung, William Mok, Bonny Cheng, Kathy Wong, Catherine Yu, and Evelyn Ngai.

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The Hong Kong University of Science & Technology

BUSINESS FORUM

ALTERNATIVE APPROACHES TO THE EMPLOYEE-ORGANIZATION

RELATIONSHIP: DOES INVESTMENT IN EMPLOYEES PAY OFF?

By Professor Anne Tsui, Head of Management of Organizations; Jone Pearce and Lyman Porter of University of California, Irvine; and Angela Tripoli of University College Dublin

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h e s t u d y s e e k s t o f i n d t h e impact of different employee-organization relationships (EOR) on the n a t u r e a n d q u a l i t y o f e m p l o y e e performance and the attitudes employees hold toward the organizations. It also looks at whether firms will be able to realize desired flexibility by reducing investment in their employees.

Data were collected from some 1,000 employees in 10 companies operating in competitive industries in the US. They were analyzed at the job and individual levels rather than at the firm level, assuming that employers may adopt different employment approaches for different jobs within a firm. The classification of relationships is based on the employer’s investment in employees in terms of training and employment security.

TYPES OF RELATIONSHIPS

Four types of employee-organization relationships were identified in the study, namely, quasi spot contract, mutual investment, under-investment and over-investment. The first two types involve relatively balanced exchanges between employee and employer while the latter two reflect unbalanced relationships.

Quasi Spot Contract resembles a

pure economic exchange where the employer offers short-term economic benefits in exchange for well-specified contributions by the employee. There is no long-term commitment by either the employer or the employee toward the other.

mailed survey. The study also included 205 supervisors who were asked to describe the various EOR approaches they adopted and rate the performance of the employees in those jobs.

FINDINGS

The study measures seven elements reflecting the performance and attitude of e m p l o y e e s u n d e r d i f f e r e n t E O R approaches. Those elements, described as employee outcomes, are listed as the followings:

Basic task performance (refers to the quantity and quality of work, and the employee’s efficiency, overall ability, judgment, accuracy, job knowledge and creativity)

Citizenship behavior (refers to the employee’s willingness and initiatives in making suggestions to improve an organization)

Loyalty to the company (refers to the employee’s intention to stay in the organization)

Attendance (refers to the frequency of absences)

Psychological commitment (refers to the employee’s sense of belonging, sharing of values with the organization, and c o n c e r n o f t h e w e l l - b e i n g o f t h e organization)

Perceived fairness (refers to the employee’s perception of fairness in issues such as pay, promotion, evaluation decisions, as well as the procedural and distributive aspects of fairness) Trust in co-workers (refers to the extent to which the employee perceives their co-workers can be relied upon and have integrity)

Inquiries can be directed to Anne Tsui at [email protected]

M u t u a l I nv e s t m e n t i n v o l v e s a

combination of economic and social exchange which entails unspecified, broad, open-ended obligations and long-term commitment on the part of both the employer and the employee.

Under-Investment refers to the kind

of relationships where an employee is expected to undertake broad and open-ended obligations, while the employer reciprocates with short-term rewards, with no commitment to a long-term relationship.

Over-Investment is in direct contrast

to under-investment. In this type of relationship, the employee performs a well-specified set of activities, but the employer offers open-ended and broad-ranging rewards, including long-term commitment to the employee.

SAMPLES

The sample was taken from 10 companies in competitive industries. Concentration ratios and ownership changes over a five-year period were used to identify 10 industries that were defined as facing high levels of competitive pressure. For each industry, a set of firms that each had at least 1,000 employees was identified. The final sample included two companies each in computer manufacturing, electronics and semiconductors, and telecommunication; three companies in food and groceries; and one in apparel. A total of 976 employees who occupied 85 different jobs at different l e v e l s a c r o s s t h e 1 0 c o m p a n i e s participated in the study by completing a

The primary findings are summarized in Table 1.

Overall, employees under the mutual i n v e s t m e n t e m p l o y e e - o r g a n i z a t i o n relationship generally performed better. They also were more committed to the company than employees managed under a n y o f t h e o t h e r t h r e e e m p l o y e e -organization-relationship approaches. On the contrary, the under-investment employee-organization relationship produced the worst results on both employee performance and attitudes. Employees performed least well on core tasks, refrained from citizenship behavior, and were absent more often than others.

CONCLUSION

A major management implication derived from the results of this study is that investment in employees will be beneficial to the firm, as the employees are likely to reciprocate by investing in the firm with b e t t e r p e r f o r m a n c e a n d s t r o n g e r commitment.

The employment flexibility of the quasi spot contract and the under-investment approaches may involve a trade-off– reduced performance and commitment from employees.

Although firms may need to rely upon under-investment as a temporary means of weathering severe economic downturns, the results of the study suggest that the mutual investment is the best approach in the long term.

Job security has become a major concern in Asia as the economic downturn lingers. In Hong Kong, for example, the unemployment rate has soared from 2.3% for the period August – October 1997, when the regional financial turmoil first hit the territory, to 5.3% in the same period this year. Those who can keep their jobs may still have to face possible salary cuts and reduction in benefits.

While more companies resort to letting people go or reducing perquisites available to staff in order to survive in difficult times, a recent study shows that such approaches may lead to reduced performance from employees, which in turn may have a negative effect on the companies in the long term.

The study, summarized below, was the winner of the Academy of Management Journal Award for the Best Paper Published in 1997.

Table 1: Employee Performance and Attitudes under Four Employer-Defined Employee-Organization-Relationship Approaches

Employee-Organization-Relationship Approach Employee Quasi Spot Under- Over- Mutual Outcome Contract Investment Investment Investment Basic task performance 4 3 2 1 Citizenship behavior 3 4 2 1 Loyalty to the company 3 4 2 1

Attendance 3 4 2 1

Psychological commitment 4 3 1 2 Perceived fairness 4 3 2 1 Trust in co-workers 3 4 2 1

Numerals in the body of the table indicate the relative level of favorable outcome, with 1 designating the most favorable and 4 the least favorable.

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HKUST BUSINESS SCHOOL – Newsletter

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he School’s cooperation with the Kellogg Graduate School of Management has been taken to a new level when the two jointly pitched for and succeeded in securing a major executive training contract from the Mass Transist Railway Corporation (MTRC).

This is the second time the two schools have formed an alliance following the successful launch of the Kellogg-HKUST Executive MBA program in January 1998. “It was a strategic decision we took,” explained Associate Dean Steve DeKrey. “The list of contenders Dean Yuk-Shee Chan

Suggestions and comments on this newsletter are welcome. Please contact us by email at: [email protected] (May Hung) or echu@uxmail.

ust.hk (Elaine Chu) or by fax (852) 2358 1467.

FROM THE DEAN

EXECUTIVE DEVELOPMENT

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he team of students who successfully completed the MSc in Investment Management program had good reasons to celebrate.

Apart from the pride of being the first graduates since the program was introduced two years ago, students felt their 24-month t r a i n i n g h a d i m p r o v e d t h e i r analytical skills and their ability to link latest financial theories with practice.

D a v i d W o n g , M a n a g i n g Director of ABN-Amro Bank, was one of the 20 graduates. He said

MSC PROGRAM PROVIDES IN-DEPTH

TRAINING FOR FINANCE PROFESSIONALS

he took the course to keep abreast of the changes taking place in financial markets. “The course covered subjects like futures o p t i o n s , r i s k m a n a g e m e n t , financial mathematical models, and the operation of financial institutions. The professors used various methods such as case studies and special computer programs to help us link theories with practice. It was very helpful,” said Mr. Wong.

Another student, Ricky Siao, A s s i s t a n t Vi c e P r e s i d e n t a t Citibank said, “the program is

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orty hospital administrators and head of pharmacies within hospitals from 17 different provinces of the Chinese Mainland were provided training to enhance their management skills and knowledge during a one-week program in November at the HKUST campus.

Organized by the Hang Lung Center for Organizational Research and co-sponsored by the Hospital Authority and the Xian-Janssen Pharmaceutical

Company in China, the program included lectures, discussions and visits to local hospitals. General administration skills, service marketing, financial management, and human resource management concepts were introduced during the program.

Head of the delegation Tang Ren said the program enhanced their management skills and knowledge and provided a good opportunity for them to exchange ideas with their counterparts in Hong Kong.

HANG LUNG CENTER ORGANIZES TRAINING

FOR PRC HEALTH CARE ADMINISTRATORS

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n t h e s u n n y

Thursday after-noon of 12 November, 824 business students had their degrees conferred in the U n i v e r s i t y ’ s s i x t h congregation.

The St. Bonaventure College & High School band p r o v i d e d a s o l e m n a m b i e n c e a m o n g t h e

audience as the procession entered the University Atrium where the ceremony was held. Sitting on the stage with our fellow faculty members, I saw a lot of familiar faces in the packed venue glowing with pleasure and a sense of achievement. So they should. This was an important occasion where their hard work through the programs was recognized in front of their parents, teachers, and supporters from the community.

Among the 683 undergraduate students, Ng Sui Ling and Wong Kin Cheong received the Academic Achievement Awards and another 49 students graduated with first-class honors. The MSc in Investment Management program saw its first intake of 20 students graduating since its establishement two years ago.

The students were sent off with their degrees and the most sincere blessings. While I am sure the time they spent here will remain a memorable treasure with them always, their knowledge and training will set their feet on solid ground so that they can reach out to “the skies that have no limit,” as remarked by President Chia-Wei Woo.

As the congregation concludes an important stage for some of the School’s members, a number of activities take on impetus in their development.

Our Graduate Diploma in Management program has completed the enrollment of the 1998/99 class. The number of students has increased to 43, more than doubling in size since last year. Our second intake for the Kellogg-HKUST EMBA program, class of 1999, is expected to match the outstanding profile of its chartered members, both in terms of qualification and experience as well as in number. These are significant developments of our on-going executive education offerings. Along with this growth is an increasing demand for our customized executive programs which we have conducted for executives of Daimler Benz, and will soon do so for the MTRC.

We have also expanded our network of international exchange partners. By mid-November, we now have 29 undergraduate and 24 MBA exchange partners. The latest additions since September this year were Chulalongkorn University in Thailand, Michigan State University in the US, and York University in Canada.

Other exciting events of the School since last summer include the establishment of our Center for Experimental Business Research, the first of its kind in the Asia-Pacific region, and the School’s outreach day. These are reported in more detail elsewhere in this newsletter.

JOINT TEAM LANDS MTRC JOB

for the MTRC training includes top-level international business schools from Asia, Europe and the US. By combining our strengths with Kellogg’s, we were able to offer MTRC the best they could get from a single source and we naturally stood out from the crowd.”

Dr. DeKrey in particular thanked Kitty Chan, Director, Executive Programs & External Development and Kellogg Associate Dean Ken Bardach for their invaluable contributions to this project.

Training classes will start on the HKUST campus from January 1999.

excellent for those who would like t o a c q u i r e c o m p r e h e n s i v e knowledge in derivatives pricing a n d s t r u c t u r e a n d i n t h e fundamentals and theories behind p o r t f o l i o a n d i n v e s t m e n t management. For me, it helped me develop my analytical skills.”

T h e M S c i n I n v e s t m e n t M a n a g e m e n t p r o g r a m w a s l a u n c h e d i n 1 9 9 6 b y t h e Department of Finance to offer up-to-date and specialized training for industry professionals in view of the increasingly complicated investment environment in Hong Kong’s financial sector.

“It is a relatively new field in Hong Kong. However, from the number of applications we got in the past two years, we see there is great demand for relevant train-ing in the market. Our program is designed to meet this need,” said Professor K. C. Chan, Head of the Department of Finance.

Graduates celebrated the completion of their studies at the Aberdeen Marina Club in June.

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The Hong Kong University of Science & Technology HKUST Business SCHOOL – Newsletter

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BA students are able to learn from the experience of renowned businessmen, bankers, financiers, human resources professionals, and regulators, thanks to a series of talks organized by the MBA program.

The talks, organized for this Fall semester, were arranged in the form of Saturday luncheons and as a new elective course.

Speakers at the luncheons include Laura Cha, Deputy Chairman & Executive Director of Securities & Futures Commission; David Chiang, Chairman and Managing Partner of Lombard/APIC (HK); Mervyn Davies, Executive Director of Standard Chartered Bank and Chairman of the Association of Banks; Jean-Benoît Kaeppelin, Regional Human Resources Director of the LVMH Group (Asia Pacific); and Roger Marshall, Executive Director of Crosby Asset Management. Topical issues such as the Asian currency crisis and the developments in private equity in Asia are discussed.

The new elective course, entitled “Organization Leadership and Strategy”, is led by Paul Cheng, Chairman of N M Rothschild & Sons (HK) Ltd. Guest speakers include Augustine Chow, Chief Executive Officer of Harmony Asset; William Fung, Managing Director of Li & Fung (Trading); Roger Moss, Senior Advisor of Goldman Sachs (Asia) and Former Finance Director of MTRC; and Alan Zeman, Chairman of California International Investments.

The course was structured into four case workshops, each featuring the s h a r i n g o f a c t u a l

e x p e r i e n c e o f t h e speakers and discussion of issues faced by their companies.

MBA STUDENTS BENEFIT

FROM EXPERTS’

EXPERIENCES

RECRUITMENT ACTIVITIES GATHER

MOMENTUM

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nternal communication and staff relationships are expected to improve with the newly introduced “Friday Get Together” gatherings. The new initiative aims to provide an opportunity for faculty members and staff to meet and chat

outside their offices. It has received excellent support since it was first held in May. As one of the staff members put it, “I get to see more colleagues here than on any other occasion.”

The gathering takes place once every month.

FRIDAY GET TOGETHER

DEPARTMENTAL INITIATIVE

The Department of Accounting recently piloted a student-driven exercise to enhance communication and visibility with the secondary school community.

On the first Saturday in November, the Accounting Students’ Society invited selected students and teachers from 20 top secondary schools in Hong Kong to a one-day recruitment event entitled the Accounting Olympics. Some 170 students and teachers attended talks given by professional accountants and the Accounting Department faculty members, toured the campus, and took part in accounting-related competitions. As feedback from the participants was very positive, the Department plans to host it as an annual event in future.

Miss Laura Cha (right) and Prof. K.C. Chan.

Snap-shots taken at

one of the gatherings. Dr. David Chiang

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hou Ka Ping, 1997 Accounting graduate, was listed as one of three students who scored the highest marks in the Tax Planning (HK) paper in the June 1998 session of Hong Kong Society of Accountants (HKSA) professional examinations.

Mr Chou is now an assistant assessor of Inland Revenue Department.

ACCOUNTING GRADUATE

TOPS HKSA EXAM LIST

ANNUAL OUTREACH DAY

HKUST Business School participated in a university-wide student recruitment event that drew 15,000 participants in September. Organized annually, the University’s outreach day targets mainly secondary school students who will in due course consider options for their tertiary education.

The School arranged eight seminars, a video show and exhibition displays for the participants. As demand was great, some secondary students had to queue up an hour before the seminars started. Participants were also provided with opportunities to tour the campus.