International Journal of Latest Trends in Finance and Economic Sciences

E-ISSN: 2047-0916
Volume 5 No. 3
September 2015
Editorial Board
Editorial Board
Editor in Chief
Prof. Dr. Jos Antnio Filipe, Instituto Universitrio de Lisboa (ISCTE-IUL),
Lisboa, Portugal
Managing Editor
Prof. Dr. Sofia Lopes Portela, Instituto Universitrio de Lisboa (ISCTE-IUL),
Lisboa, Portugal
Editorial Board Members

1. Prof. Dr. Manuel Alberto M. Ferreira, Instituto Universitrio de Lisboa
(ISCTE-IUL), Lisboa, Portugal
2. Prof. Dr. Rui Menezes, Instituto Universitrio de Lisboa (ISCTE-IUL), Lisboa,
Portugal
3. Prof. Dr. Manuel Coelho, ISEG/UTL, Socius, Lisboa, Portugal
4. Prof. Dr. Isabel Pedro, IST/UTL, Lisboa, Portugal
5. Prof. Dr. A. Selvarasu, Annamalai University, India
6. Prof. Dr. Desislava Ivanova Yordanova, Sofia University St Kliment
Ohridski, Bulgaria
7. Prof. Dr. Antnio Caleiro, University of Evora, Portugal
8. Prof. Dr. Michael Grabinski, Neu-Ulm University, Germany
9. Prof. Dr. Jennifer Foo, Stetson University, USA
10. Prof. Dr. Rui Junqueira Lopes, University of Evora, Portugal
11. Prof. Bholanath Dutta, CMR Inst. of Tech, Blore, India
12. Prof. Dr. Henrik Egbert, Anhalt University of Applied Sciences, Germany
13. Prof. Dr. Javid A. Jafarov, National Academy of Sciences, Azerbaijan
14. Prof. Dr. Margarida Proena, University of Minho, Portugal
15. Prof. Dr. Maria Rosa Borges, ISEG-UTL, Portugal
16. Prof Dr. Marina Andrade, Instituto Universitrio de Lisboa (ISCTE-IUL),
Portugal
17. Prof. Dr. Milan Terek, Ekonomicka Univerzita V Bratislava, Slovakia
18. Prof. Dr. Carlos Besteiro, Universidad de Oviedo, Spain
19. Prof. Dr. Dorota Witkowska, Warsaw Univ. of Life Sciences, Poland
20. Prof. Dr. Lucyna Kornecki, Embry-Riddle Aeronautical University, USA
21. Prof. Dr. Joaquim Ramos Silva, ISEG-UTL, Portugal
Abstracting / Indexing
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Table of Contents
1. Income from Speculative Financial Transactions will always Lead to MacroEconomic Instability................................................................................................................... 922
Tobias Schdler, Michael Grabinski
2.
Breast Cancer in Contemporary Greece: Economic Dimensions and SocioPsychological Effects .................................................................................................................. 933
Savvakis Manos, Tzanakis Manolis, Alexias Giorgos
3. Unemployment Modelled Through M|G| Systems (Revisited) .................................. 941

Manuel Alberto M. Ferreira, Jos Antnio Filipe, Manuel Coelho
4. Enhancing SME Internationalization in a Transition Economy: The role of Internal
Factors............................................................................................................................................... 945
Tsvetan Davidkov, Desislava Yordanova
5. Multicriteria and Multiobjective Models for Risk, Reliability and Maintenance

Decision Analysis - A Book Review ......................................................................................... 957
Manuel Alberto M. Ferreira
922
Int. J Latest Trends Fin. Eco. Sc.
Vol-5 No. 3 September, 2015
Income from Speculative Financial Transactions

will always Lead to Macro-Economic Instability
Tobias Schdler#1, Michael Grabinski#2
#
Department of Business and Economics

Neu-Ulm University
Neu-Ulm, Germany
1tobias.schaedler@uni-neu-ulm.de
2michael.grabinski@uni-neu-ulm.de
Abstract Starting with a macro-economic model

based upon the NAIRU (the nonaccelerating inflation
rate of unemployment), we show that, in a world with
no (speculative) financial transactions, the macroeconomy shows a stable equilibrium state. Including
income from (speculative) financial transactions will
lead to instability if the amount is sufficiently large.
Considering the present amount of financial
transactions, stability is impossible. Therefore, further
financial crashes are not only likely but inevitable.
Keywords system dynamics; instability; speculative
financial transactions; conserved value; chaos.
1.
Introduction
Economic models are in some sense the experiments

of economists. Real experiments, such as in physics,
are impossible in economics, so scrutinizing the
economy is either done through executing fiscal
policy or by playing with economic models. While
access to the first method is limited to very few
people (and may be immoral), the second method is
the way of choice for most economists in science.
Needless to say, there are very many different
economic models. It is virtually impossible to address
even a small part of them.
Our focus is not to add yet another new macroeconomic model to the long list already existing. The
main focus in many economic models is on finding
the equilibrium state when some parameter is
changed. One may, for instance, want to know by
how much inflation would rise if the central bank
lowered the interest rate by a certain percentage.
Furthermore, one might like to know within what
time span this new equilibrium would be reached.
These are important questions and answering them is
essential for fiscal policy makers.
____________________________________________________________________________________
International Journal of Latest Trends in Finance & Economic Sciences
IJLTFES, E-ISSN: 2047-0916
Copyright ExcelingTech, Pub, UK (http://excelingtech.co.uk/)
Besides creating and solving an economic model, one

should always prove its stability. What happens when
all input parameters (e.g., tax rates) stay the same and
the model is put off equilibrium for a short period of
time? Will it come back to equilibrium (stability) or
shift to a new state (instability). In a stable economic
system, conducting fiscal policy makes sense. If an
economic system is unstable, however, fiscal policy
will never steer toward a proper equilibrium. In some
sense capitalism should be declared a failure. Since
real economic systems are extremely complex,
instability will lead to chaotic fluctuations (in a
mathematical sense, cf., e.g., Schuster (1984)).
Neither predictions nor governance are possible then.
Surprisingly little can be found about stability
analysis in economic systems. If done, the focus is
typically on a very particular model, and the goal is
to prove or forecast a particular scenario like a
financial crisis. Chiarella (2012) examined the
financial meltdown in that vein in 2008. Our focus
is slightly different, though. We want to give a more
general answer.
To see the point, we have to take a step back. An
economy is nothing other than an arrangement of
individual human beings and companies. Trying to
forecast a particular persons income for the next year
or a companys cash flow is surprisingly simple, and
the forecasts are highly accurate , see, e.g., SAP, a
manufacturer of ERP systems, in Appel (2011). To
predict its cash flow is quite simple. It can be
represented as a slightly rising line over many years
with hardly any fluctuations. Its stock price should be
proportional to its (future) cash flow. Surprisingly, it
fluctuates by 20 % within months as a typical
result. As explained recently by Appel (2011, 2012),
this is due to the often ignored difference between
price and value. Unfortunately, a rising stock price
may create real cash and therefore value to be
invested in the Realwirtschaft. Based on the work of
923
Grabinski (2004, 2007), Appel (2011, 2012) defined

the term conserved value in contrast to nonconserved value. Both values can be measured in
monetary units, and they may be physically existent.
However, conserved value can only change if
something else changes accordingly. This is like the
conserved quantity energy in physics; it is highly
predictable. In contrast, there is such a thing as the
value of a stock. It is not conserved, and may
change without notice at any time. A non-conserved
quantity is by no means suitable to describe a system.
If the system is sufficiently complex, there will be
chaotic fluctuations which are not predictable.
Within this concept, the momentum effect could be
explained (Appel (2012)). Furthermore, one can
show that a Tobin tax would always be positive and
could even be introduced nationally (Dziergwa
(2013)). As far as stability is concerned, one can also
show that dealing in financial products is in most
cases identical to gambling, Klinkova (2013).
Dziergwa (2015) applied the concept of conserved
value to a new accounting principle: Conserved value
based accounting principles (CVBAP). Our goal is to
apply it to the macro-economic world.
The conjecture that something has gone wrong in
economic modeling is not far-fetched. Consider, for
instance, a situation where a central bank raises or
lowers the interest rate by half a percentage point.
Reactions wont be long in coming. With lower
interest, for example, borrowing is cheaper, and
investment should increase, eventually leading to
higher GDP. The reasoning behind this seems almost
trivial. The magnitude of its impact, however, is
surprising: Lowering interest rates by half a
percentage point will have a measurable effect. It will
not affect the investment decisions of (real-world)
companies, though. Typically one may demand a
gross return on investment of around 20 %, with an
assumed capital borrowing rate of, perhaps, 7 %. Not
a single decision would be changed if the borrowing
rate were 6 % or 8 %. (The latter of the authors of
this paper has advised many companies on
investment decisions in the past. As a rule, an interest
rate varying by 1 percentage point wouldnt even
lead to the calculation being redone) There must be
another reason for this effect, and the only candidate
is trade in financial products. There, non-conserved
value is created by (regularly) borrowing money,
investing it in the stock market, and paying it back
after rapidly selling the stocks (or derivatives).
Depending very strongly on the interest rate, such
deals can be profitable or unprofitable (in the short
run). Hence the turnover and, with it, the profits (and
losses) on the stock market depend heavily on interest
rates.
Therefore, a suitable economic model should
distinguish between investments
from the
Realwirtschaft (in general savings from work) and
the proceeds from financial transactions being
invested. It is hard to imagine that the former will
lead to instability. Based on the work of Klinkova
(2013), it is almost likely that the latter may imply
instability.
Ryshenko (2012) had a conjecture that instability
may occur in his own models, such as Ryshenko
(1999, 2001, 2002). That is the starting point of this
work.
In chapter 2, we will construct a model. It has to be a
model that is very general and assumed to be valid in
all cases. On the other hand, it is not necessary for
this model to lead to accurate economic forecasts. In
other words, it should be a model that will be
accepted by (almost) everybody. Arguably, there are
two things agreed upon within the otherwise much
divided
economic
community:
comparative
advantage and NAIRU (short for non-accelerating
inflation rate of unemployment).
A famous supporter and architect of the NAIRU
concept is Tobin (1980). NAIRU isnt actually an
economic model in its pure form. It links the change
in inflation to the rate of unemployment, so one gets
two variables and one equation, which makes it
insoluble from a mathematical point of view.
Therefore, in chapter 2, we will create two
independent (non-linear) differential equations based
upon NAIRU. There, we will strictly stick to
investments from the Realwirtschaft into the
Realwirtschaft and will avoid income from
(speculative) financial transactions. Our model is
very general and therefore always valid. (Please note
that it is not very suitable for making economic
forecasts, as it contains (unknown) constants. But this
is of no consequence for our purpose here.) The
equations are soluble or at least integrable even in
their non-linear version. Their solutions are always
stable.
In chapter 3, we will introduce speculation to our
model, allowing investment from (speculative)
financial transactions. In other words, we will allow
non-conserved value to be transferred into the
Realwirtschaft. As a result, the differential equations
become more coupled. A rigorous stability analysis
924
shows that the solutions are unstable as soon as the

percentage of investment from speculations increases
too much. Assuming realistic values for the
constants, the solution will always be unstable and
this, in turn, results in the sorry fact that (over a
longer period of time) financial crises are inevitable.
Setting the correct interest rates can at best soften
the effect or prolong the period of time between two
crises. In order to avoid a future financial crisis,
income from financial transactions should be
sufficiently low. A Tobin tax would be a good way of
accomplishing this (Dziergwa (2013)), but, most
likely, it would not suffice. New accounting
principles such as the ones suggested by Dziergwa
(2015) and additional tax legislation are the only
possible way to achieve this, but a discussion of this
is essentially left to further research, as stated in
chapter 5.
In chapter 4, we will discuss our model critically. As
a result, we will see that, despite all possible
shortcomings, our postulate that speculation always
lead to instability will remain valid. In chapter 3, we
will show that financial crises are (almost) inevitable.
Describing the dynamics of a financial crisis itself is
impossible not only within our model but within all
models based upon differential equations.
In Appendix A, we will derive our models from a
very general mathematical point of view. This will
prove that they are correct in the lowest non-trivial
order. While it is impossible to tell whether this
lowest order is sufficiently accurate to describe real
economic dynamics, it has no influence on the
stability analysis. In other words, our results about
instability due to speculation hold true even for the
most general model.
In Appendix B, we will comment on the connection
between our model and neo-classical and Keynesian
approaches.
2.
The Extended NAIRU Model
NAIRU is arguably the most fundamental approach

in macro-economics. It states that there is a certain
equilibrium rate n of unemployment u(t) so that
inflation I(t) stays constant (in equilibrium). If
unemployment u(t) > n, inflation will decrease. This
is logical because many unemployed people are
typically willing to work for less money, which will
result in a deflation in labor costs. While labor is
cheap, employers tend to hire, which brings down
unemployment until equilibrium has been reached.
A similar mechanism works for too low

unemployment u(t) < n. Workers are scarce, so labor
costs will rise, resulting in an inflation in labor costs.
Because of the inflation, more money is needed to
build such things as factories, for example, which
will lead to less jobs being created and, therefore, to
an increase in unemployment until eventually u(t) = n
is reached. Please note that we do not add effects
such as the ones of minimum wages or job security,
as we want to have the pure model and prove its
stability or instability. Doing the same in a more
advanced model would always lead to the question
whether the original model or the add-ons produced
the stability or instability.
Classic textbooks will normally give a formula such
as this
() = (() )
(1)
Here, the derivative with respect to time t is

proportional to the negative deviation of
unemployment u(t) from equilibrium unemployment
n. The constant a must be positive (a > 0), else the
argumentation above would not hold. Eq. (1) contains
two variables (I(t) and u(t)). Therefore, a second
differential equation is necessary to solve it. The
employment rate 1 u is proportional to the number
of jobs and therefore to the capital c(t) invested in
jobs:
1 () = ()
(2)
The constant b is obviously positive because the

capital c(t) is positive, and the unemployment rate
u(t) 1 (u(t) = 1 means nobody is employed. Eq.
(2a) implies
() = ()
(2)
In order to find capital c(t) to be invested in jobs, said

capital must be created first. In our case, people have
to work for it and save or invest what they do not
consume. (The creation of money through financial
transactions will be addressed in the next chapter.)
This means the change in capital is proportional to
the employment rate 1-u (the number of people who
are working) and the incentive they get for saving,
the interest rate z. Of course, interest alone is no
incentive; only the difference between interest and
inflation can be an incentive. This leads to
() =
( ()) (1 ())
(2)
925
The proportional constant /(b a) has been chosen in

this way to keep the final result simpler. Of course,
this proportional constant must be positive and so is
. Eliminating (t) from Eq. (2c) by using Eq. (2b)
yields
() =
(() ) (1 ())
(2)
Eqs. (1,2) are a set of coupled ordinary first order

non-linear differential equations which can be solved.
The interest z from Eq. (2) and normal rate of
unemployment n from Eq. (1) are the equilibrium
rates of I(t) and u(t), respectively. Please note that the
interest rate z is generally not equal to the interest
rate set by a central bank. However it is a
monotonous function of it. (For a more general
approach, please see Appendix A.) The interest rate z
is a rate which makes people save money. A number
of psychological factors may be involved in that. The
same is true for the strength of the investment (or
divestment) . With the following substitution
() = + () () = + ()
(3)
inflation (say, 70 %) will the sinusoidal variation of

inflation turn into a saw-tooth like shape with a lower
frequency. Unemployment hardly changes due to the
non-linear terms. The details of this will be published
elsewhere. As has been stated several times already,
we are not focusing on solving an economic model;
we want to prove or disprove its stability. This is
done by linearizing Eqs. (4,5) to
0
()
(
) = ( (1 )
()
() = ()
() =
(4)
() (1 ())
(5)
Eqs. (4,5) are differential equations for inflation (t)

(= deviation from equilibrium inflation) and
unemployment (t) (= deviation from equilibrium
unemployment). They yield no more information
than Eqs. (1,2), but they are more convenient for our
purpose. Of course, Eqs. (4,5) are easily transformed
into two decoupled second order differential
equations:
= (1 +
1
)
= (1 + )
(6)
(7)
Just by taking the linear parts of Eqs. (6,7), it is easy

to see that they display a harmonic oscillator with a
frequency of
(1 )
Even in their non-linear version Eqs. (6,7) can be
integrated. Their solutions are almost identical to
their linear versions. Only for extremely high
()
0 ) (())
(8)
The eigenvalues i of the matrix of Eq. (8) are

1,2 = (1 )
(9)
With both i being purely imaginary, we have an

undamped harmonic oscillation, just as stated above.
Just for the sake of completeness, we will also give
the corresponding eigenvectors:
1
1,2 =
1
Eqs. (1,2) become
2
(1 )
( (1 ))
1
This gives the formal solution of Eq. (8), which can

also be obtained by using a linear combination of sin
and cos functions as an ansatz:
() = sin( ) + cos( )
(10)
() = sin( ) cos( )
(11)
where = |1 | = |2 | from Eq. (9) and A and B are

arbitrary constants determined by the initial
conditions. Fig shows a typical plot of the Eqs.
(10,11). The parameter essentially determines the
period, here chosen so that the economic cycle is
seven years. Of course, any other length would also
be possible. The parameter a (defined in Eq. (1))
determines the shift between inflation and
unemployment. It also determines the strength of the
non-linearity, cf. Eq. (6). As stated, it does not matter
here.
The solution does not show any instability. Please
note that the solution might never look as smooth as
shown in Fig. This has essentially to do with the fact
that is influenced by the willingness to save, which
may change. The same is true for the perceived
interest z (cf. Eq. (2c)). And, of course, the interest
rate set by the central bank may change too.
926
money by changing it into non-conserved value,

Appel (2011, 2012) and Dziergwa (2015). This
process is commonly referred to as speculation. This
does not change Eqs. (2a, 2b), but it will change the
mechanism of how capital is created. Therefore, Eq.
(2c) will get an extension:
( ()) (1 ())
+
(() )
() =
Figure 1: Plot of off-equilibrium inflation and
unemployment n = 5 %, 0.85/year2 and a
=1.5/year with one percentage raise in interest after
two years
Please note that the interest rate z does not appear in
the general solution of Eqs. (10,11). This is surprising
at first glance only. As long as the difference between
inflation and interest rate remains constant, nothing
will change. But, of course, changing the interest rate
within a certain system will change its behavior. In
order to see how it works, take a look at Fig. After
two years, inflation has grown by over three
percentage points, which is why the central bank
might raise the interest rate by one percentage point,
and this has the same effect on z. As can be seen in
Eq. (2), u (t) will decrease immediately. Such sudden
(2 )
If inflation I(t) is sufficiently high compared to an

effective interest zS , the amount of capital created
through speculative financial transactions will grow.
Please note that the effective interest rate z S will
typically change with the interest rate set by the
central bank without being identical to it. For a more
formal consideration, please see Appendix A. The
constant S is assumed to be positive. However, the
willingness to invest in stocks and especially in the
more advanced financial products, such as derivatives
and the like, can change quite suddenly. As shown by
Appel (2011) and Dziergwa (2013), no capital is
created in the long run. Mathematically speaking, we
have
+
(() ) = 0
(11)
Typically, S will be positive for a long time. For

very short periods of time, it will turn into a large
negative number, though. Any such period of time is
commonly referred to as a financial crisis. Changing
Eq. (2c) into Eq. (2cS) leads to an extended Eq. (2):
unemployment n= 5 %, 0.85/year2 and a =1.5/year
change will certainly have a big effect on the nonlinear terms. A detailed discussion will be published
elsewhere. Here, we will stick to the linear equations.
Of course, these will not give the correct result in
close proximity of t = 2 years, but otherwise the
result should be fine. It is displayed in Figure 1. After
the rise in interest, inflation and unemployment are
growing less rapidly, but, as stated earlier, in this
chapter, we assume a world without speculation,
which is unrealistic anyway. The next chapter will
eliminate this shortcoming.
3.
The NAIRU Model with

speculation
Besides creating money through an increase in

conserved value, the financial industry also provides
(() ) (1 ())
(() )
() =
(2 )
Eqs. (1,2S) are the new set of differential equations to

be solved, and the procedure is identical to the one in
the previous chapter. Note that a discussion of the
non-linear terms can be found elsewhere. Here, we
will stick to the linear version around the equilibrium.
The ansatz like Eq. (3) transforms into
() = + () () = + ()
(12)
Because of the new couplings in Eqs. (1,2 S), the

equilibrium inflation z is some combination of z and
zS:
=
(1 )
+
(13)
(1 )
(1 )
927
Besides the slightly more complicated form of the

equilibrium inflation, it can be positive or negative:
: > (1 )
(1 )
: > (1 ) <
< 0
(1 )
> 0
Case 1 holds for a sufficiently large amount of

speculation. Unfortunately, this is quite likely
because proceeds from speculative financial
transactions are much higher than the ones from the
Realwirtschaft, see, e.g., Dziergwa (2013). Case 2
also leads to a negative equilibrium, but this may not
occur very often in reality. It is only case 3 that leads
to a positive equilibrium value. In summary, a
sufficiently high level of speculation implies a
negative equilibrium inflation, which is, of course,
never attainable. This does not come as a surprise.
Profits from speculative financial transactions are
nothing other than inflation (within a certain area), cf.
Dziergwa (2013). This is identical to printing
money in order to invest in jobs, and will always
lead to too high inflation.
But the problem of no equilibrium inflation is a
minor one compared to the problem of instability. To
see the point, one has to derive an equation analogous
to Eq. (8) from Eqs (1,2 S). A straightforward
calculation yields
0
()
(
) = ( (1 )
()
()
) (()) (14)
with
=
( )
(1 )
(15)
: (1 ) > (1 ) (

2
=
(1 ) + (
)
2
2
2
)
2
> 0
2
)
2
<0
: (1 ) > (1 ) (
,
2
: < (1 ) (
)
2
<
{ } > 0
2
: < (1 ) (
)
2
>
{, } < 0

unemployment n = 5 %, 0.85/year2, a
=1.5/year, z = 2 %, zS = 0.3 %, and S = 0.9
Please note that the inequalities above are implicit
because z is a function of S, cf. Eq. (15), and that it
is not straightforward to make them explicit. Because
it is impossible to stick to one eigenvector in real-life
situations, instability will occur in the above cases 1,
2, and 4. Stability, on the other hand, will only occur
in the above cases 3 or 5. In other words, a
sufficiently large amount of speculation will always
imply instability. This is the major result of this
publication.
In order to make the result more transparent, we also
give the explicit results of Eq. (14):
The matrix in Eq. (14) has the eigenvalues
1,2
2 > 0 > 0
>
< 0
> 0
<
: < (1 ) >
() = 1 + 2
(17)
(16)
() =
Depending on S , one can distinguish between five

cases:
1
2
1 2
(18)
928
A and B are arbitrary real constants. Of course, only

the real parts of Eqs. (17,18) are solutions in the real
world. It is now possible to discuss the five cases
above in detail, which can be found elsewhere. To
illustrate the general line of our argument, we will
stick to case 4 here. Cases 1 and 2 are trivially
instable. Case 3 is an untypical stable solution, and
case 5 is stable because it is the limit toward no
speculation. As a typical result, case 4 gives a plot
such as in Figure 3. We stayed close to the values of
Figure 3: Plot of off-equilibrium inflation and unemployment

n = 5 %, 0.85/year2, a =1.5/year, z = 2 %, zS = 0.3 %, and
S = 0.9 ; z = 2.1 % and zS = 0.5 % after twelve years
Fig and included some small amount of speculation.

Both inflation and unemployment show an oscillation
with an increasing amplitude. The length of the
business has roughly tripled compared to Fig. But
this is not very important here because it is not our
goal to insert the economic data of any one particular
real country.
After twelve years, Figure 3 shows a rise in inflation
of about 4 percentage points. Maybe the central bank
will decide to raise interest rates, which would
typically have a big effect on zS and a smaller one on
z. (This is because the financial world reacts strongly
to changes in interest, while the Realwirtschaft is
usually left fairly unimpressed, as already stated in
the introduction.)
As one can see in Figure 4, an increase in interest
slows down inflation but will also raise
unemployment (in this case, from a very low base).
Please note that the non-linear terms will also have a
big effect on the curves of Figure 4 at t 12 years,
but the general line of argumentation will stay the
same. Within our model (speculation included), nonlinear terms may have an effect for reasons discussed
in Appendix A. Although these may or may not have
an effect on areas of stability or instability, the
general line of argumentation should not change.
4.
Critical evaluation
In the previous chapter, we have shown that

speculative financial transaction will, in almost all
cases, lead to non-stable solutions in the dynamics of
unemployment and inflation. Most of the other
economic variables show some more or less close
relationship to unemployment and inflation so that
their stability is affected in the same way. And it is
the important quantity GDP, in particular, that is
strongly tied to unemployment (and inflation).
Although our model is very general and contains the
perhaps
most
basic
economic
variables,
unemployment and inflation, these variables are not
without flaws. In contradiction to some of the basic
textbooks, one has to say that inflation is defined
precisely yet hard to measure accurately. The
opposite is true for unemployment: It is generally illdefined but very easy to measure within its particular
definition.
Inflation occurs when the same product or service
will cost more at a later point in time than they do
now. No one, of course, can take account of all
products and services. Therefore, a basket of goods is
defined as representative, which results in the
emergence of at least two separate inflation rates:
consumer price inflation and industrial price
inflation. As a matter of fact, there should be
different baskets depending on the specific industry
or the individuals style of living. (This is the same
problem as with the definition of purchasing power
parity) With it, inflation becomes an almost arbitrary
quantity. Furthermore, any basket is normally
dominated by energy and housing. Speculation or a
bursting bubble can cause a huge inflation spike or
our current problem of deflation. Hence the strangely
low inflation or outright deflation in Japan has most
likely to do with the bursting property bubble of the
1990s, cf. The Economist (2015), and is no
counterexample to the theory of inflation and
demography.
It is also hard to decide what is meant by the terms
same product or service. Consider a laptop, for
example. If we take the word same at face value, we
have a huge deflation where laptops are concerned. If
we however assume that the same product only
ever means the premium laptop model, then inflation
is highly overstated.
Unemployment has an exact definition, which differs
from country to country, and it is impossible to give
the one most reasonable definition. Of course, one
929
could take all non-working people in a country and

divide this figure by the total population. But what
does non-working mean? How many hours a week
does a person need to work to be considered
working? Furthermore, dual education, for instance,
counts as work, while a university student is
considered non-working. And when a rich single
parent hires a nanny, a job is created and
unemployment decreases. If, however, he or she
marries the nanny, the job is destroyed and
unemployment rises. Similar arguments apply to the
elderly, the disabled, or people wealthy enough to
stay at home.
everybody is selling his or her stocks). From a purely

mathematical point of view, one can solve the model
as long as non-linear terms are taken into account.
This would be a waste of time and effort, though.
Here, we have individual actions triggering an
avalanche, which makes any statistical approach, the
prerequisite for using differential equations,
impossible. This means we are faced with the sorry
fact that none of the models based upon differential
equations and the like is useful for describing the
dynamics of a financial crisis. In a typical financial
crisis, any economic model will leave the range of
validity.
These remarks on inflation and unemployment apply

to all economic models. Therefore, it is almost
impossible to decide whether an economic model
reflecting, say, 90 % of reality is better than a model
that shows 80 % accuracy.
It is hard to imagine that a proper description, such as

catastrophe theory in physics, will ever be found in
order to simulate the dynamics of a financial crisis
although (unlike in physics) the word catastrophe
theory seems very appropriate here.
In addition, there is another problem with almost all

economic models (and with the ones in management
science). Its formulation goes back to Grabinski
(2004): Any economic outcome is the sum of all
actions of all participating human beings. Humans
have free will, which means that, strictly speaking,
even equations for NAIRU such as Eq. (1) are always
wrong, and can only be understood as a statistical
result. In order to use statistics, one has to consider
many actions, without a single one of them being
dominant. This, by the way, does not have its origin
in mans free will. A gas consists of a large number
of molecules (with no free will whatsoever). A
macroscopic description by differential equations is
only possible if one considers time scales which are
long compared to the time of the individual
interactions between the molecules. The same is true
for the length scale.
At first glance, this does not seem to be an important
limitation. There are, however, particular situations in
physics where the internal length scales become very
long. This is, for instance, the case when water
freezes into ice or ice melts into water. At this very
point, none of the differential equations that
otherwise describe the behavior of water or ice
perfectly at almost all other temperatures can be used.
For some strange reason, physicists sometimes speak
of the catastrophe theory when, for instance,
describing the phase transition of water to ice.
Similar things may occur in economic models.
Consider Eq. (11) of our model, for example.
Typically, it implies a leap from S > 0 to S < 0 at a
certain point in time (e.g., because suddenly almost
5.
Conclusions and next steps
We have shown that speculation will (almost) always

lead to non-stability. Furthermore, the equilibrium
rate of inflation can be negative due to speculative
financial transactions. Therefore, central banks and
financial policy makers can at best mitigate the
severity of financial crises. The only way out would
be to make speculative financial transactions become
extinct, with one way being to prohibit them
altogether. But this approach would be hard to
manage (What exactly is meant by speculative
financial transaction?). Furthermore, prohibiting
them would not fit into our liberal world. Another
way would be to implement a proper tax policy.
There are two ways of achieving this that appear to
be easy and very effective: one would be the
introduction of a Tobin tax, as suggested by
Dziergwa (2013). The effect on reasonable financial
transactions would be minimal because they occur
less frequently than speculative financial transactions
by a factor of one thousand or even one million. The
other possible measure would be to tax derivatives
differently. As stated by Klinkova (2013), their
market is much more instable than the ordinary
stock market, and the potential crashes there are
much more severe. Supporters of derivatives claim
that they are a reasonable way of providing insurance
against such risks as fluctuating oil prices. But if it is
an insurance, it should be treated as such. For one, it
is not allowed, for instance, to insure your neighbors
house against fire (i.e., to receive money in case it
930
burns down without having suffered a financial loss).

Again, it may be difficult to judge whether a person
or company is really exposed to damage due to
changing oil prices or whether that is just speculation.
However, when there is a real risk, people are willing
to pay some sort of tax on this insurance. To see how
it works in reality, consider insurance in Germany,
for example: An insurance tax of 19 % is imposed on
the premium you pay. And unlike the value added
tax, it is not refundable. Individuals and companies
experience substantial losses in case their house or
factory burns down.
Therefore, almost all
homeowners and companies in Germany have fire
insurance, and the 19 % insurance tax does not seem
to hurt anybody. So why not introduce a similar tax
on oil price insurance?
Here, i is the interest set by the central bank; f and

g are arbitrary functions. It is hard to imagine having
a more general approach. As long as f and g are
analytical functions, they have a Taylor expansion.
(If they were non-analytic, there would always be
arbitrarily accurate approximations to them which
would be analytic) The Taylor expansions of f and g
are as follows:
The next steps in our area of research will be to:
Making the following substitutions in Eq. (20,21)
1.
2.
3.
6.
Scrutinize the present model, and especially

the five cases in chapter 3, in more detail. .
Take non-linear terms into account. This
should prove that our general line of
argumentation is not affected by nonlinearities. Furthermore, effects of changes
in interest can be displayed more
realistically. There may be a chance to find
interesting effects, such as mathematical
chaos.
Check other models (unrelated to this one)
for instability.
Appendix A
Eqs. (2c,2cS) give the relation between change in

capital and interest. Although our argumentation
should be very plausible, one could not say that other
terms are forbidden or of less importance. Because
Eq. (2cS) is a generalization of Eq. (2c), it will do to
stick to the first one.
( ) = 0 + 1 ( ) + (( )2 )
(20)
( ) = 0 + 1 ( ) + (( )2 )
(21)
Of course, the an and bn are easily given by

=
0
0
() = ( ()) (1 ())
+( ())
(19)
( )
( )
and inserting them into Eq. (19) will transform Eq.

(19) into Eq. (2cS) if higher order terms are neglected.
So we have a proof that Eq. (2cS) is correct in the
lowest order.
It is an interesting question whether this lowest order
expansion makes sense. If z and zS were the
equilibrium values of the inflation I(t), it would be
absolutely correct within our stability analysis.
However, the z from Eq. (13) is the true equilibrium
value of I(t). Linearization and stability analysis is, of
course, still possible. However, the values of and S
will change with the deviation of z and zS from the
central bank interest rate i. This might change the
regimes of stability.
7.
A change in capital c(t) may come from the
Realwirtschaft. In that case, it must be proportional to
the employment rate 1 u(t). It may also come from
speculative financial transactions. Both parts will also
depend on the effective interest rate. Hence the most
general formulation of Eq. (2cS) will take the
following form:
1 ()
1 ()
|
,
=
|
! = 0 ! = 0
Appendix B
Our models are constructed from a very general

approach, especially when considering Appendix A.
Quite often macro-economic models are classified
into two categories: the neo- classical (or neo-liberal)
models on the one hand and the Keynesian approach
on the other. We did deliberately not follow this
classification. To have two schools and not to know
which one of them is the correct one resembles a
religious approach to macro-economics. Our model
should be scientific rather than creedal.
931
Nevertheless, some readers might ask whether our

model is Keynesian or neo-classical. In short, it is
both (or maybe neither). To see the point, consider
Eq. (2cS) again:
( ()) (1 ())
+
(() )
() =
(2 )
The first part (with ) connects labor and its proceeds

with change in capital. The main point is that one has
to work and save in order to invest in the economy.
This is the typical neo-classical approach. The
Keynesian critique of it would be that, if everybody
(or at least a lot of people) saves money (instead of
spending it), employment will shrink and the
economy will enter a downward spiral. As Keynes
put it, the otherwise reasonable micro-economic
approach is not valid in the macro-economic world.
(We will comment on this conundrum further
below)
The second part of Eq. (2cS) (with S) implies an
increase in capital (for the creation of jobs) as long as
borrowing money is sufficiently cheap. It does not
question the origin of said money. This is exactly the
kind of financial stimulus Keynes would have
suggested. So our model encounters both worlds, the
neo-classical and the Keynesian one. Again, this
confirms that this is the most general of models.
Sadly, although the Keynesian stimulus may create
jobs, it will never lead to stability.
Now we will come back to the conundrum
mentioned above. If micro-economic mechanisms
were not valid in the macro-economic world, all
macro-economic models would be invalid. This is
because integrating (solving) differential equations is
nothing but the summing up of particular (microeconomic) happenings.
To solve this puzzle, consider a heavily indebted
country, for example. All economists will agree that
this country obviously consumed more than it earned
by working, whereas people in countries abroad
earned more than they consumed, or else they
couldnt have lent any money to this country. The
neo-classical remedy would be to save money. In
other words, the indebted country ought to consume
less and work more in order to repay its debts. The
Keynesian critique would be that, if the people in the
indebted country consume less, fewer goods will be
needed. And producing fewer goods will imply less
work and, thus, fewer jobs. However, this outcome is
not the only possible one: The people in the indebted

country could still produce more goods and consume
less. Using the excess, they could repay their debt. In
the real world, Keynesians, in particular, might argue
that the goods these people produce might not be
greatly sought after in foreign countries. This might
even be the reason why their country got into debt in
the first place. But generally, this is not true; people
do not like or dislike certain products. What they do
like or dislike is the product-to-price-ratio. In other
words, you can flood the world market with almost
any product as long as it is sufficiently cheap. So the
neo-classical answer to an indebted people would be
as follows: Work more, without receiving more pay.
Consume only part of these products. Because of
their low production costs, the rest of these goods can
be exported. And since you consume less, you will be
able to repay your debts.
This means that fiscal policy should only soften the
hardship the indebted people most likely experience.
One way of achieving this would be to encourage
investments, either to produce new products or to
improve the efficiency in producing the old ones. But
even if the invested money is borrowed, that does not
mean that debt isnt sometimes a good way of
helping countries to get out of it. It is a common
misunderstanding to assume that borrowing money in
order to invest it means getting into debt. This is only
the case if one only considers cash flow. However, as
any accountant knows, one has to consider both sides
of the balance sheet. Sadly, countries do not do so in
their accounting. So, if there is a reason why one
cannot add up all the micro-economic entries to
describe the macroeconomy, it lies in the
cameralistics of governmental accounting. It may not
be easy to include assets and liabilities in
governmental accounting, but ignoring them and
drawing the wrong conclusions is just plain stupid.
As shown by Agarwala (2012), even a rough estimate
can lead to completely new and interesting results.
8.
Acknowledgements
A fruitful discussion with Ryshenko in summer 2012

has been gratefully acknowledged. We thank Anna
Fischbach for proofreading this manuscript.
Bibliography
932
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933
Breast Cancer in Contemporary Greece:

Economic Dimensions and Socio-Psychological
Effects
Savvakis Manos*1, Tzanakis Manolis**2 and Alexias Giorgos***3
*Assistant Professor, University of the Aegean, School of Social Sciences, Department of Sociology,
Basement, Marine Building, Room 2.12, Xenia, Hill, Lesvos, 81 100, Greece.
1msavvakis@soc.aegean.gr. Corresponding Author.
** Assistant Professor, University of Crete, School of Social Sciences, Department of Sociology, Gallos Campus,
74100, Rethymno, Greece, Tel: (30) 28310-77494.

2tzanakism@uoc.gr
*** Associate Professor, Panteion University, School of Social Sciences and Psychology, Department of Psychology,
New Building, Room C13, 136 Syggrou Avenue, 176 71, Greece.
3galexias@panteion.gr.
Abstract - The main purpose of this article is to

critically complete the economic perspective regarding
breast cancer offering a more spherical understanding
of the disease as well focusing on its socio-psychological
effects. The contribution presents some specific socioeconomic features of this particular illness in
contemporary Greece, emphasizing on some of the core
strategies these diagnosed women apply in respect with
their professional re-orientation. It as well analyses the
inter-subjective experience of breast cancer in as much
as participants record it as a turning point regarding
their economic status, socio-psychological state,
biographies and overall relationships.
The paper is based both on qualitative research,
grounded on fourteen biographical interviews with
Greek women, experiencing breast cancer and
mastectomy and on quantitative data provided by
secondary inquiry. In an integrated view, it is possible
to formulate some preliminary conceptual tools that can
account for the economic dimensions and sociopsychological implications of the disease. Besides, we
present the energetic strategies these women employ to
mitigate personal suffering and transform their
harmed body to an energetic source of professional
re-orientations and biographical re-constitutions.
Keywords - Economic dimensions, Socio-Psychological
effects, Applied sociological research, Mix methods, Breast
cancer.
1.
Introduction
Cancer is a very common disease in the

contemporary world with extremely high direct and
indirect economic costs and socio-psychological
effects. It is estimated that cancer cost the EU
Member States 126 billion in 2009, with healthcare
accounting for 51 billion (40%). Across the EU, the
healthcare costs of cancer were estimated at the
equivalent to 102 per citizen, but varied
substantially from 16 per person in Bulgaria to 184
____________________________________________________________________________________
per person in Luxembourg. Productivity losses due to

early death were estimated to cost 42.6 billion and
lost working days 9.43 billion. Informal care was
estimated to cost 23.2 billion. Lung cancer had the
highest estimated economic cost (18.8 billion, 15%
of overall cancer costs), followed by breast cancer
(15 billion, 12%), colorectal cancer (13.1 billion,
10%), and prostate cancer (8.43 billion, 7%).
Researchers point out that these estimates are
conservative, as some categories of health care costs,
such as screening programmes, were not included
due to the inability to obtain these data for all
countries under study (European Commission, 2014).
The expensive financial cost emerges from the
long hospitalization period, diagnostic tests,
surgeries, however, mainly by the high cost of
medication. Especially in Greece, all the previous
costs are largely paid by the National Health System
and it is roughly estimated that they count for almost
a 6.5% of the total expenditure on health care in the
country. In most countries of the world, as in Greece,
cancer is the second cause of death after
cardiovascular disease (Ministry of Health, 2008).
More specifically, breast cancer is one of the
most serious and life threatening forms of disease
that is the leading type of cancer in women,
especially in the so-called developed world. As a
result, this particular illness is connected to
significant
economic
implications,
socialpsychological re-orientations and biographical
consequences both on a global and on a national
Greek level. It is furthermore responsible for a large
number of death cases or severe health problems
regarding lifetime (IARC, 2008).
Especially for women, breast cancer is the
second type of cancer after that of the lung. Statistics
account that more than 1.6 million women are
diagnosed with the disease each year worldwide.
According to recent research it is estimated that one
woman in eight is affected by the disease, or
934
otherwise 13% of the world female population will

become ill during lifetime. Besides, the disease
affects all age groups from 20-90 years. The chances
of a woman to get infected significantly increase
through ageing, while the risk of developing breast
cancer quadruples after menopause (Tzala, 2004;
Ferlay et al., 2013). Particularly, in Greece, where
breast cancer is the leading cause of cancer death in
women, more than 4.900 women are diagnosed with
breast cancer each year and more than 2.000
eventually die (IARC, 2008).
According to recent epidemiological data
obtained from the Pan-Hellenic Archive of
pathological-tumors laboratories in 2011 the
incidence of breast cancer cases estimated in 6.454
(data from 97%-98% of laboratories). The interesting
element is that 27%-28% of these women are under
50 years of age, while 45% of them - diagnosed with
breast cancer - will proceed to mastectomy. The
scientists emphasize that if breast cancer is early
diagnosed and treated, the prognosis is very good.
Besides, even the metastatic breast cancer - in the
case of HER2 can be treated satisfactorily (Ministry
of Health, 2008).
Thus, a closer scientific examination of this
phenomenon can account for the deeper economic
consequences of breast cancer, especially in the
contemporary Greek context. Is as well allows for a
more promising socio-psychological individual
management and treatment of the disease directed to
an effective regulation and contextualization of its
generating factors. This effort aims to reduce the
potential costs of the disease on economic figures
(macro level), socio-psychological dimensions
(middle level) and biographical disruptions (micro
level).
Breast cancer also results to a unique indirect
economic cost due to reduced productivity of both
the sufferer and the family that is burdened by
homecare and by the loss of working days regarding
at the same time the patient and the caregivers.
Indirect costs are estimated to be at least twice the
direct ones (Ministry of Health, 2008; Tzala, 2004).
Also, the social-psychological cost of breast cancer is
often quite unbearable. Sufferers undergo drastic
consequences in their personal, family, professional
and social-psychological lives.
Women diagnosed with the disease often
encounter compassion or rejection by their friendly or
family environment; an element that creates
additional
unbearable
socio-psychological
encumbrance on patients, who often incriminate and
blame themselves (Sparkes, 2012; Lam and Fielding,
2003). At the same time, the social stigmatization
affects the personality and dignity of these women
and makes the psychological and biographical
experience of breast cancer an extremely painful
process (Landmark and Wahl, 2002). Moreover,
patients are confronted with phenomena and
characteristics of the Greek health care system that
additionally cumber them mentally and strain them

physically (i.e. labyrinthine structures and
bureaucratic obstacles in the health system, high
costs of disease, unsatisfactorily operation of the
National Health System, etc).
The individual socio-economic level is
associated with the possibility of incidence of several
cancers. Cancers of the lung, stomach and esophagus
occur more frequently in the lower economic and
social strata. Breast cancer is detected more often in
the upper social strata, while the cervix into the
lower. Generally, mortality from malignant tumors
appears to be directly and strongly related to lower
socio-economic status, chronic psycho-social burden
and suffering situations such as unemployment and
poor living conditions (Toundas, 2001). It has also
been well documented that most cancers (i.e. lung,
colon and breast) affect people with poor socioeconomic status who have less access to health
services, resulting in insufficient prevention, late
diagnosis and improper treatment (Ministry of
Health, 2008).
Socio-economic factors are crucial regarding
both the appearance and the early diagnosis of breast
cancer thus influencing the effectiveness of treatment
in as much as psychosocial and vocational
rehabilitation. For this reason contemporary health
policies tend to take into account the socialpsychological effects and the economic dimensions
of breast cancer. These policies, at both European
and national level, despite the very serious problems
arising from the current economic crisis, aim to
increase public participation in actions and screening
programs. The recent epidemiological data indicate
that the mammography screening can reduce
mortality of breast cancer in women up to 35%
(IARC, 2008).
However, only 40-50% of women, obliged to go
through clinical testing for the disease, are controlled.
Thus, and due to the high survival rate of the disease,
the applied policies aim at managing the
consequences of breast cancer. Despite the alarming
increase with respect to the frequency of the disease,
the improvement of the diagnostic equipments and
therapeutic practices contribute to the gradual
reduction in the absolute number of deaths.
Specifically, mortality from breast cancer is reduced
at a rate of 2% per year. These epidemiological data
increase the scientific interest regarding the sociopsychological effects and the economic dimensions
of survival these women retain (IARC 2008).
It is indicative that Action 7 of the Greek
national action plan for cancer specifically aims to
improve the institutional framework and to
strengthen the professional and social rehabilitation
mechanisms for cancer patients, both the diagnosed
and the cured ones (Ministry of Health, 2008). The
above action aims to an effective and immediate
biographical recovery. Is as well strives to social and
vocational rehabilitation of cancer patients, because
935
although more than 50% of them are completely

healed less than 10%, fully return to their former
working and social activities (Ministry of Health,
2008).
The previous issues are closely connected to
specific economic features that influence the entire
social, psychological, cultural and historical patterns
in relation to the disease. They are as well combined
to inter-personal experiences and the subjective
interpretation of health problems. For this reason, the
article examines the consequences of breast cancer on
the professional re-orientation of these women. Is as
well explores the economic implications and the
socio-psychological patterns these women follow.
The crucial element is to focus upon every affected
person and on the everyday practices these women
discover in order to transform their socially,
psychologically and culturally disadvantaged body
into a meaningful source of biographical and
professional re-orientation. The management of the
disease ultimately leads to a redefinition of the basic
life values, within the framework of an energetic and
self-reflective social project with an often conflicting
content.
2.
Method
The fundamental findings of this paper was

based on qualitatively empirical research, originally
grounded
on
fourteen
biographical-narrative
interviews with women diagnosed with breast cancer
and mastectomy, aged 45-55 years. It was also based
on secondary research on statistics, reports and health
regulations regarding breast cancer, on a European
and on a national Greek level.
All research participants are enrolled in self-help
programs and voluntarily offer practical and moral
support in various solidarity groups. Women
diagnosed with breast cancer were invited to narrate
their life stories. They were strongly informed that
researchers were largely interested in the ways they
socially experienced and psychologically managed
this particular disease (Alexias et al., 2015). The
purpose was to examine how the experience of both
illness and therapy are connected to biographical
disruption (Savvakis and Tzanakis, 2004).
Accordingly, we explore the ways this biographical
discontinuity is connected to a plethora of economic
issues (i.e. work, vocational opportunities, etc) and is
related to specific professional re-orientations (Bury,
1982, 1997; Williams, 2001).
Research design roughly followed the general
lines of grounded theory and the interviews were
conducted in three phases (Strauss and Corbin, 1996).
The first phase of research design involved contacts
with psychologists at cancer hospitals and at
womens breast cancer associations in Athens. At this
initial stage, what was recorded, through semistructured interviews, basically concerned their
overall and more specific estimations and evaluations
with respect to the key parameters of the disease. The
aim was an interactive relation to the research field,

which would allow us a more sensitive and open
conceptualization and question-posing process.
At the same time, this would take into
consideration that participants themselves and
professionals as well attribute meaning when
engaging in a sociological research (Savvakis and
Tzanakis, 2004). During this initial stage, we
highlighted specific social parameters as the social
and marital status, the educational level and the
economic budget. We additionally focused on the
patients economic, social and psychological needs
during treatment. At this phase, we finally conducted
participant observation at the aforementioned
institutions in order to preliminarily understand a
variety of characteristic aspects of the relationship
between women with breast cancer and health
professionals.
The second phase of the project included the
completion of six biographical narrative interviews
and their systematic analysis, extracting the important
themes that participants deemed as meaningful and
crucial, in order to create a more comprehensive
model of grasping all cases. Finally, the third phase
involved the completion of eight additional
biographical narrative interviews, following a similar
as above research approach.
The research was conducted mainly in Athens
and in the broader geographical region of Attica. The
overall project lasted from 2004-2009; consequently
it was completed a few months before the emergence
of the, still lasting, severe economic and social crisis.
The purpose was to understand the way in which the
occurrence of breast cancer and mastectomy affects
the womens lives. More particularly, we focused on
some economic dimensions of the disease and on the
ways it affected their socio-psychological state, their
biographical trajectories and their professional
orientations.
The sample selection criteria included the
existence of mastectomy, as part of a therapy
concerning breast cancer, the expiration of a certain
period of time after the completion of interventional
therapies (mastectomy, chemotherapy and possibly
radiotherapy) without the appearance of metastases,
the voluntary participation in solidarity and self-help
groups, the family status (i.e. marriage and
parenthood), the average productivity age (i.e. a
decade before or after fifty) and the overall social
stratification (i.e. belonging to middle social strata).
Breast cancer forces to a radical rethinking of
the body as a whole; its economic capacities, its
productive abilities, its socio-psychological state and
the constitutive values of life itself. However, the
interesting feature is that womens participation in
voluntary self-help groups - first as patients and
consequently as active members who offer caring,
nursing and assistance to new patients - as well
highlights the economic dimensions and the socio-
936
psychological effects of coping with this type of

cancer. Moreover, it gives to the research community
access to some particular forms of assistance that
have been developed in Greece, especially regarding
the decline of the traditional middle-class, both on
an economic and on a cultural level (Alexias et al,
2015).
Participants were preliminarily informed that
interviews would be recorded exclusively for
research purposes and declared their agreement.
During the overall research period, all the required
and appropriate ethical standard, as decided by the
Senate of the University of Crete (Senate 229/22-32012,
http://www.en.uoc.gr/research-at
uni/eth/ethi.html
and
http://ec.europa.eu/euraxess/index.cfm/rights/index)
were applied. All the narrators are protected through
the use of pseudonyms. Besides, in this study,
triangulation, an attempt to increase reliability and
validity of qualitative results, was pursued (Savvakis,
2014).
3.
From the Initial Shock

Professional Re-orientation
to
Regarding the early stage of the disease, namely

the shock situation we can highlight - based on the
overall empirical material that the majority of
patients strive hard to rationalize and attribute a sense
of meaning to the occurrence of breast cancer. The
participants, in their effort to accept and rationalize
the diagnosis of this particular disease, reconstruct
the past and consider it as a basic reason for the
emergence of breast cancer in the present. This is an
effort to assign a sense of continuity to the events of
the past, as directly related to the disease.
Thus, the participants report that, before the
onset of the illness, they systematically experienced
severely traumatic events and endured painful
situations. As mentioned above, cancer patients often
claim that the most important factor in carcinogenesis
is a chronic suppression of emotions and desires.
Indeed, a common feature is that narrators are heavily
worried about various issues. They furthermore
develop anxiety and stress regarding situations that
are subsequently assessed as unimportant (Ovayolu et
al., 2013).
Participants regard the appearance of breast
cancer as a particular and uneasy moment of a
biographical pattern that is valued from a present
standpoint as incorrect and pathological. This
particular pathology is grounded on a personal
inability to retain a happy and self-determined life.
The participants demand honesty and sincerity from
the medical staff, since they claim that can plausibly
deal with and potentially overcome this predicament.
We may suggest that the actual knowledge of the
medical condition is absolutely necessary and
significant. The participants in general propose that
only a brave and conscious attitude towards breast
cancer suit women. They support that women

energetically demand to have control over their
situation. It seems like they stand against an enemy
whom is vital to know and meet in order to increase
their chances to beat it.
These biographical difficulties lead to a
conscious shift: the patients decide that they
ultimately want to stay alive. This powerful desire to
stay alive gradually opens up the space for a
transition from a shock situation to a struggling one
that these women fight to cope with the gap of
physical loss (mastectomy). At this second stage
(mastectomy phase), the important issue, as derived
from the data, is the awareness and the acceptance of
the modified body after surgery. During this second
phase, women have fortunately escaped the danger of
immediate death. Thus, they deal with the
management of chemotherapy and its side effects.
They as well strive to become reconciled with
the new sense of the bodily self. Participants recall
these situations and preserve a heroic, merely stoic,
attitude regarding side effects. Mastectomy is a direct
assault to their identity and self-confidence; however,
it did not eliminate passion for living and their ability
to plan for the future. In our research, it is
particularly the existence of the family and the
significant others that empower this concrete decision
to keep on living. Through the interviews, it is also
evident that these particular women seriously review
their views on life, revise their goals and set new
priorities, including professional re-orientation.
It is often remarked that women with
mastectomy abandon their work because of physical
weakness, particularly if this task requires manual
work. This happens because of the dysfunction
merely caused by the surgery to remove lymph
nodes. In our research is evident that this choice is
directly linked to the way in which the appearance of
the disease is justified. Moreover, changes over the
body are interpreted as part of an overall reorientation of life projects and plans. Consequently,
some typical alternatives emerge, which incorporate
an altering professional perspective in a new
biographical re-constitution. In what follows the
analysis shall focus on three typical energetic types
of professional re-orientation, as these were recorded
in our research.
3.1
Retirement form Work
Withdrawal from work can be total or partial

including even household and everyday shopping.
This alternative can be passive and be characterized
by a sense of powerlessness because of objective
physical difficulties. These options, however, can be
associated with an interpretative scope through which
the appearance of the disease is explained, namely as
a consequence of the lack of self-caring over the
body. Thus, withdrawal from work may not
exclusively be passively and connected to a weak
body. It might as well be - especially in these cases
937
where work is replaced by alternative caring

activities of the self and the others (yoga,
participation in self-help groups, gymnastics, artistic
activities, etc.) quite energetic, voluntarily and
enthusiastic.
The following extract from Mary is indicative:
After cancer I stopped working and

it was something that was my
choice. Why was my choice? I
thought it is better to sit home to
look after my children and do
things without stress, because when
you work and have a family you are
constantly in a state of doubt
whether to find time for household.
And I was just a little bit strict in
the way I did things. So I wanted to
chill, to stay home, and do what I
wanted to do. And what I wanted
was to take care of my family. I
liked very much to take care of my
children, my husband.
In this case, housework acquires a moral
dimension that did not previously retained, associated
with a reorientation of values and a serious
revaluation of what is meant as essential to life.
3.2
Reassessment of Job Opportunities
However, the job prospects are often coupled

with the assessment that the harmed body is
affected and an adaptation should occur according to
new conditions. In this case, as well, the adjustment
may be rational aiming to actively prove that the
infected body remains quite able to meet current
and demanding conditions.
Joan is a characteristic example who manages
the household simultaneously taking good care of her
image towards her beloved ones:
I did not demonstrate that I was

unable or depressed, that I could
not do my work like I did it in the
past. I was trying not to show it in
order not to influence them, my
family. I did not want them to think:
look how our mom and husband
ended up, in all the social roles to
say so. I did not show it and I
continued my life as before, as I
could. Of course, there were some
minor differences because as I said,
I could not lift weight, was
medically prohibited, I could not
shake the clothes or the carpets
outside. Of course I got used to it
(laughs) and gradually I did what I

could do; however, I continued my
life as before with some minor
changes.
It is, in other cases, also often that household in
combination with the previous profession take the
form of the last line of defence in maintaining a
positive and healthy image of the self.
Gogo accounts on this:
What helped me was the fact that I was

alone and on my own in the house, I had
no mom, I had no aunts, and I had no
brothers or sisters. It was just my husband
and I. During the chemotherapy an aunt of
my husband was visiting me [...] with some
friends and came and helped for two days.
During the other days I was on my own.
This did good to me because I had no time
to play the sick-role, vomiting and so on. It
was just impossible to think of
chemotherapy and side effects since I had
to feed my children.
3.3
Professional Re-orientation
In some cases of heavy surgery, patients are

entitled to a low disability pension but as a
consequence it is forbidden to work. However, it is
normal, as this was reflected in our research, to
supplement their income by additional part-time
professional occupations, which are black, non
typical, due to legal restrictions. In other words,
profession is both a means of income support and of
empowering a damaged self-image.
As Vivi reports:
I now get a disability pension that

binds me, for I cannot work. I just
do odd and part-time jobs whenever
I can, without IKA (Institution
social security), without anything
because it is forbidden due to this
disability pension.
A professional re-orientation is very common
feature in our research. The example of Miriam is
indicative of a typical choice. This professional
strategy is adopted either de facto due to infirmity or
it forms an explicit objective of policies aiming to
vocational rehabilitation. Miriam had problems in her
work because it was linked to operating hospital
machines. However, she changed her professional
direction and started writing of poetry and reports, a
shift heavily assisted and supported by her
colleagues.
938
Her account is as follows:
I was extremely helped from my

colleagues
thus
I
changed
professional direction because I
could not operate machines which
were difficult to handle. These
machines demand some pressure,
some rhythm, which I cannot have
anymore due to the surgery on my
right hand. However, I eventually
managed to succeed and to leave
the scullery and move towards
research. I compensated - and I
really do not want to say that I won
with my illness - but I account on
my everyday life in a better way.
Over these years that I have
undergone this surgery I have
written one or two collections of
poems I think, apart from three
hundred to five hundred research
papers (laughs). I really think that I
have taken a great pleasure to from
this.
According to this logic, which is part of a typical
professional and biographical re-orientation, the
modification of working conditions is interpreted as a
positive change. This transformation is in line with
the new state of the body and is as well desirable to
the extent that is assessed as compatible with the new
relationship to the self. The interesting element is that
this new relationship with the self is directly
associated with a modified approach to the others that
is far more energetic than the healthy past. This
acquires sociological significance when this
professional re-orientation is transformed into
voluntary action and support to groups of peers.
The narrators state that after surgery and proper
treatments, they felt an intense need for emotional
support. Through participation, they felt stronger and
undertook action to provide support to other
sufferers. Under this perception, the disease is
conceptualized as a new starting point for
professional and biographic action. The source of this
shift can be detected in the overall experience of the
damaged body and the abused breast.
Participants feel obliged to help other women and
transform cancer from a source of biographical
discontinuity and professional retirement to an
inspiration for life.
4.
Discussion
The experience of illness potentially acts as a

mechanism for individualisation, connecting personal
experience with general economic transformations
and social developments (Bauman, 1997; Beck,
1999). Increasing complexity in western societies,

Greece included, have contradictory effects on how
people understand the past, live in the present and
plan for the future. The opportunities for individual
action seem to be multiplied; however, this takes
place on a ground that is constantly characterized by
economic uncertainty, social instability and
psychological tensions (Giddens, 1991).
Every modern person and this was evident in
our research is assigned with increasing
responsibilities in relation to the organization of
his/her life. He/she is as well, almost individually,
accountable for the sufficient management of critical
issues that affect economic prosperity, social
organization and psychological happiness. This
contradictory and struggling life project is everyday
performed without reference to generally accepted,
namely universally, criteria of life evaluation and
without a material basis of a steady professional
career, at least for a vast majority of people (Burke
et. al., 2012).
This has certain results on personal biographies
and on collective desicions forcing life to acquire,
sometimes mandatory, experimental elements and
improvisation. Therefore, every individual is carrying
an unprecedented moral weight, since everybody,
under a certain age, assumes responsibilities which
enter the realm of the constitution of subjectivity and
management of personal identity. Consequently,
she/he is forced to employ new practices of the self,
as defined by the late Foucaults work (Foucault,
2008, 2009). Similar transformations are detected in
our research and have already been described in other
previous empirical sociological papers, regarding
Greek society (Alexias et al., 2012; Serdedakis and
Tsiolis, 2000).
More specifically, in our research, participants
intend to restore a stable relationship between
continuity of the healthy (past) and ill (present) self
and body, on economic, social and psychological
terms (Henriksen and Hansen, 2009; Katapodis et al.,
2005; Facione and Facione, 2006). Breast cancer
leads to a dialectical and biographical construction of
the past. This meaningful, retrospective, reconstitution project is attempting to heal the personal
ruptures and it is, as well, related to the practical
purposes of managing the high risks of the disease,
on economic, social and psychological level (Bairati
et al., 2006).
It is precisely these radical individual changes
that participants in our research are forced to go
through, due to the experience of biographical
discontinuity caused by breast cancer. Women of our
sample thematise as objective the state of their
disease. At the same time, they inexorably link it with
individual challenges in all areas (economy, work,
family social relationships, psychological stability,
political action, etc). This eventually leads to a
rational reflection of the capabilities, opportunities
and constraints of the damaged body within a
939
particular economic and socio-psychological

environment. Experiencing the loss of previous
certainties leads to a severe and painful renegotiation
of - taken for granted in time and space general
concepts and everyday practices. This process
touches fundamental dimensions of existence and
influences constitutive aspects of individual identity.
Nevertheless, and this is vital, women, their relatives
and families do not remain passive within the new
situation.
For example, profession, a fundamentall
economic dimension of modern living, plays a key
role in this radical social re-orientation process but
does not shape an obvious choice. On the contrary it
is dependant, every time, upon a particular social,
cultural and economic milieu, which is activated
within a framework of existential dilemma. This
process is neither one-dimensional nor univocal and
it is not absolutely based on voluntarily action or
good will. On the contrary, it is a lifetime project
grounded on calculations, cancellations and reorientations. It is an ambivalent process that is
materialized through the personal confrontation with
social conditions and through interaction with
significant others. It is a multifaceted process with
different, partial, individual objectives (Serdedakis et
al., 2003).
Thus, breast cancer, through this biographical
restructuring process and the subsequent reorientation of economic priorities based on
professional re-settlement, produces some positive
social results. Actually, it redefines social identity
and highlights contribution and engagement as
dominant categories of existence. In other words,
subjectivity does not acquire the form of an isolated
individualisation or a turn to the inner self. On the
contrary, it is a project of energetic contribution,
deeply rooted in self-help groups, which does not
promote a one-dimensional individualisation. It
rather constitutes a complex social mechanism, which
might lead to new forms of economic exchanges,
altered political paths and more psychological
features.
The intervention of medicine is often
accompanied by a process of self-empowerment that
participants retain regarding both the previous
situation and the future (Tzanakis, 2014). Thus, the
suffering female body becomes at the same time the
object of medical institutions and of personal care.
Voluntary action is precisely a concrete result of this
contradictory experience. Medical interventions tend
to produce subjectivities that are involved in risk
situations that promote new forms of co-existence.
The objectification of the body, through medical
intervention, is accompanied by a parallel process of
individualization and subjectification.
These two elements constitute a practice of the
self (Foucault, 2008, 2009) resulting to the
development of professional re-orientation, voluntary
action and self-help. Through this action, a state of
non-normality (i.e. breast cancer that threatens

profession, family, social and psychological stability
and life itself) is converted to a mechanism of social
integration and economic re-capitulation. This assists,
especially after a successful treatment, to the
restoration of a positive view that leads to a deep
understanding of life and to a paradigm shift.
This transformation is closely connected to a
demand for a personalized treatment for each patient.
The ultimate goal and philosophy of modern breast
cancer treatment, is, as demonstrated, to have a
specific treatment for each patient identity and not in
general for the diseases. This goal, advocated by
applied sociological research, ultimately forms a
solid basis for moderate economic costs and for more
balanced social and psychological effects.
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941
Unemployment Modelled Through M|G|

Systems (Revisited)
Manuel Alberto M. Ferreira*1, Jos Antnio Filipe*2, Manuel Coelho#
*
Lisbon University Institute ISCTE-IUL, BRU-IUL, ISTAR-IUL, ISTAR-IUL

Portugal
1manuel.ferreira@iscte.pt
2jose.filipe@iscte.pt
#SOCIUS,
ISEG-University of Lisbon, Portugal

coelho@iseg.utl.pt
Abstract - Here it is resumed the work presented in

Ferreira, Filipe and Coelho (2014) where, using the
results on the M|G| queue busy period, it is presented
an application of this queue system in the
unemployment periods parameters and distribution
function study. Now it is completed with an evaluation
of the assistance costs.
Keywords -
1.
M | G | , busy period, unemployment.
an exponential length with mean .

1
In the M|G| queue system

The customers arrive according to a
Poisson process at rate
Receive a service which time length is a

positive
random
variable
with
distribution function
In a queue system a busy period is a period that

begins when a costumer arrives at the system finding
it empty, ends when a costumer abandons the system
letting it empty and in it there is always at least one
customer present. So in a queuing system there is a
sequence of idle and busy periods.
In the M | G | queue system the idle periods have
The Model
worker firing and the moment he/she

finds a new job.
But the busy periods distribution is much more

complicated. In spite of it, it is possible to present
some results as it will be seen.
For what interests in this work
G . and mean
When they arrive, each one finds

immediately an available server
Each customer service is independent
from the other customers services and
from the arrivals process
The traffic intensity is .
can be applied to the unemployment study. Then
is the rate at which occur the firings,

supposed to occur according to a
Poisson process
A busy period
unemployment
An idle period is a period of full

employment.
is
period
of
The results that will be presented are on

unemployment periods length and their number in a
certain time interval.
2.
It is easy to understand how the M | G | queue
Unemployment Periods Length
Call D the random variable unemployment period

length. According to the results known for the
M | G | queue busy period length distribution

-
E D
e 1
(2.1)
The service time is the time between the
____________________________________________________________________________________
whichever is a worker unemployment time length

distribution (see Takcs, 1962)
942
Var D depends on the whole
As for
unemployment time length distribution

probabilistic structure. But Sathe (see Sathe,
1985) demonstrated that
G t 0, t 0 for great enough. The

exponential distribution is one example.
2 max e2 e 2 s2 2 e 1;0 Var D 2

2e 2 1 e 1 e 12
s
As for the meaning of
and
great
enough,
computations
presented
in
Ramalhoto and Ferreira (1994) show that for
(2.2),
1 , after 10 it is reasonable to
admit (2.7) for many distributions.
where
As for this last result, begin noting that many

probability distributions fulfill the condition
the unemployment time length
coefficient of variation
-
If a worker unemployment time length

distribution function is
G t
e
, t 0, (2.3)
1 e et e
Calling
the mean number of unemployed people
in the unemployment period, if G . is exponential

.
For any other G . probability distribution
the D distribution function is
D t 1 1 e e e
2.4 ,
,t 0
(see Ferreira, 1991)

-
If the unemployment time length of a worker

is such that
G t 1
1 e
,t 0
1 e
(2.5)
(see Ferreira and Filipe 2010). Of course, multiplying

(2.8) or (2.9), as appropriate, by the mean cost of
each unemployment subsidy it is possible to estimate
the assistance costs caused by the unemployment
period.
Be
the D distribution function is
D t 1 e
e 1
working at time t, being the time origin the

unemployment
period
beginning.
2.6 ,
,t 0
Being
For
and
great enough (very intense
unemployment conditions) since

such
that
for
G t 0, t 0 ,
D t 1 e e t , t 0
where
is the probability
density function associated to G . , the service time
see (Ferreira, 1995)

-
the probability that everybody is
hazard rate function1,
G . is
great
enough
2.7 ,
see Proposition 3.1 in Ferreira and Andrade (2009).

And calling
(see Ramalhoto and Ferreira, 1994).
the mean number of seek people
at time t, being the time origin the pandemic period

beginning
Note:
1
That is: the rate at which unemployed people finds a job.
943
1, t
(3.5)
R t
1 e t , t
,
D) If the unemployment
exponentially distributed
time
length
is
see Proposition 5.1 in Ferreira and Andrade (2009).
e
3.
Mean Number of Unemployment

Periods in a Time Interval
After the renewal processes theory, see (inlar,

1975),
calling
R (t )
the
mean
number
0,t ,
unemployment periods that begin in
of
being
t 0 the beginning instant of an unemployment

period, it is possible to obtain, see (Ferreira, 1995),
t
R t e
1 G v dv
0
1G v dv
du
(3.1)
and , consequently,
(3.2),
e t R t e
1 e
t (3.6)
Concluding Remarks
So that this model can be applied it is necessary that

the firings occur according to a Poisson process at
constant rate. It is an hypothesis that must be tested.
Among the results presented, (2.1), (2.2), (2.7) and
(3.2) are remarkable for its simplicity and also for
requiring only the knowledge of the firings rate ,
the mean unemployment time , and the
unemployment time variance.
The other results are more complex and demand
the goodness of fit test for the distributions indicated
to the unemployment times.
[1] Takcs, L. (1962). An introduction to queueing

theory. Oxford University Press.
see Ferreira (2004).
[2] Ferreira, M. A. M. (1991). Um sistema M|G|

com perodo de ocupao exponencial. Actas
das XV Jornadas Luso-Espanholas de
Matemtica, Vol. IV, D63-D66, Universidade
de vora, vora. Accession Number: WOS:
A1991BV70Y00123 .
Also,
e
A) G t
,t 0
1 e et e
R t 1 e t
[3] Ferreira, M. A. M. (1995). Comportamento

transeunte e perodo de ocupao de sistemas de
filas de espera sem espera. PhD thesis. ISCTE.
(3.3)
G t 1
1 e e
1 e
0, t
G t
1, t
[4] Ferreira, M. A. M. (2004). M | G | queue
,t 0
R t e 1 e e t e 1 e e
C)
4.
References
e 1 t R t 1 t
B)
1 e
1e
3.4
busy cycle renewal function for some particular

service time distributions. Proceedings of the
International Conference Quantitaive Methods
in Economics (Multiple Criteria Decision
Making XII), 42-47, Virt, Slovakia. Accession
Number: WOS:000288041600006 .
[5] Ferreira, M. A. M., Andrade, M. (2009). The
Ties between the M | G | Queue System
Transient Behaviour and the Busy Period.
International Journal of Academic Research,
1(1), 84-92.
944
[6] Ferreira, M. A. M., Filipe, J. A. (2010).
M | G | Queue
[8] Ramalhoto, M. F., Ferreira, M. A. M. (1994).

Some further properties of the busy period of an
Systems Busy Period to solve Logistics

Problems in an Organization. China-USA
Business Review, 9(9), 59-63.
for Operations Research and Economics, 4(4),

251-278.
Economic
Crisis:
Using
[7] Ferreira, M. A. M., Filipe, J. A., Coelho, M.

(2014). Unemployment Modelled Through
M|G| Systems. International Journal of Latest
Trends in Finance and Economic Sciences, 4(1),
677-679, 2014.
M | G | queue. Central European Journal
[9] Sathe Y. S. (1985) . Improved bounds for the

variance of the busy period of the M | G |
queue. Advances in Applied Probability, 17(4),
913-914. http://dx.doi.org/10.2307/1427096
945
Enhancing SME Internationalization in a

Transition Economy: The role of Internal
Factors
Tsvetan Davidkov #1, Desislava Yordanova #2
Department of Business Administration, Sofia University St. Kliment Ohridski
Sofia, 125 Tzarigradsko Shosse Blvd., bl. 3
1tzvetandavidkov@feb.uni-sofia.bg
2d_yordanova@abv.bg
Abstract - This study explores the internal factors that

may enhance SME internationalization. It contributes
to the field of international business by providing
hypotheses about organizational and owner-managers
characteristics which affect SME internationalization.
Combining the Resource-Based View and the Upper
Echelons Theory the study creates a more complete
picture of the effect of organizational and ownermanagers characteristics on the likelihood of SME
internationalization. The proposed hypotheses are
tested in a sample of Bulgarian SMEs offering empirical
evidence about SME internationalization in a transition
context and addressing the call for more research in this
context.
Keywords Internationalization,
Organizational factors.
1.
SMEs,
Bulgaria,
Introduction
The development of information and

communication
technologies,
increasing
globalization, and increasingly important role of
small and medium-sized enterprises (SMEs) in the
economy stimulate SMEs to go to foreign markets
(Storey, 2008). The internationalization of SMEs is
an important policy issue because it was suggested
that internationalized SMEs make a disproportionate
direct contribution to wealth creation (Storey,
2008:xiv). In transition economies with small
domestic market, such as Bulgaria, the ability of
SMEs to acquire competitive advantage in foreign
markets may be essential for their survival and
growth (Glas et al., 1999; Zhu et al., 2006). However,
SMEs may face size-related characteristics that may
diminish their ability to take advantage of new
opportunities and respond to threats from
internationalization, mainly greater uncertainty in
external environment, limited resource base, and
distinctive behavioural characteristics stemming from
the combination of ownership and management
____________________________________________________________________________________
(Smallbone et al., 1998).

The internationalization of SMEs has been
researched extensively in developed economies. In
transition economies the phenomenon has received
relatively little attention. The available literature on
SMEs internationalization aims to explain and
predict how SMEs will internationalize investigating
various aspects including process, resources, firms
operations, relationships, networks, and international
environment (Ruzzier et al., 2006). This research has
important practical implications for practitioners and
public decision-makers as it generates knowledge
about effective and successful approaches and
favourable conditions for internationalization. The
research findings about SMEs internationalization in
developed countries can not be directly applied to
transition countries due to economic, institution, and
cultural differences. The internationalization of new
and small firms has been researched extensively in
developed economies (Chiao et al., 2006; Coviello
and Jones, 2004), while in transition economies this
phenomenon has received relatively little attention
and there is a need for more research on
internationalization of SMEs in Central and Eastern
Europe (CEE) (Meyer and Peng, 2005; Smallbone et
al., 1998). It was acknowledged that transition
economies in CEE provided a unique environment
for testing and developing theories in international
business (Meyer and Peng, 2005).
The existing research on internalization of SMEs
operating in CEE is limited in several aspects. Most
studies are descriptive and deal with the nature,
environment
and
barriers
to
SMEs
internationalization. They are either qualitative or
rely on limited samples. There is a lack of
understanding why some SMEs tend to
internationalize, what factors determine the nature of
SMEs internationalization, and what is the effect of
946
internationalization decisions on SME performance

in transition economies. Therefore some authors call
for future research on internationalization in CEE
(Meyer and Peng, 2005; Smallbone et al., 1998).
Therefore, the purpose of the present study is to
identify internal factors that enhance the likelihood of
SME internationalization. The paper is organized as
follows. In the next section the specific context of the
research is described. The third section contains
literature review and hypotheses of the study. The
research methodology is described in the following
section. The fifth section contains the empirical
results of the study. The final section presents
conclusions, implications and recommendations for
future research.
2.
The Context of the Study
In this section, the context of the present research on

internal factors enhancing SME internationalization
is described. The geographic/political location is an
important cotextual factor for understanding the
internationalization of young and small firms (Ratten
et al., 2007; Dana et al., 2008). This study
investigates the internationalization of SMEs in
Bulgaria, a transition country situated in Eastern
Europe. Although the transition economies in Central
and Eastern Europe differ significantly in various
cultural, political, and economic aspects, they share a
specific context before and during the transition to
market economy (Dana and Ramadani, 2015).
marketisation and prompted the emergence of a

functioning market economy in these countries
(Sokol, 2001). Bulgaria started the transition process
in 1989 and was one of the first transition countries to
adopt a new constitution, but the privatization and
other necessary reforms were delayed especially in
the early years of transition (Ramadani and Dana,
2013). The preparation of the accession of Bulgaria
to the European Union exercised a positive influence
on the environment for enterprise development. In
2007, after fulfilling economic and political criteria,
Bulgaria joined the European Union, but the
transition is not completed yet, which may be
attributed to the fact that peoples mindset adapts
slower than regulatory reforms (Dana and Ramadani,
2015). Despite the steady economic growth in the
recent past, Bulgaria remains one of the least
developed countries in the European Union. It is
easier to do business in most EU member states than
in Bulgaria (World Bank, 2014). In terms of Global
Competitiveness Index, Bulgaria also lags behind the
majority of the EU member states. Problematic
factors for doing business include corruption, access
to financing, inefficient government bureaucracy,
policy instability, etc. (World Economic Forum,
2014).
During the period of planned economy, large

state-owned industrial enterprises using mass
production methods and relatively inflexible
production
processes
and
producing
for
geographically restricted markets, dominated the
economies in CEE (McMillan and Woodruff, 2002;
Tkachev and Kolvereid, 1999). In most countries in
CEE including Bulgaria, entrepreneurship was not
always a legal activity (Tkachev and Kolvereid,
1999). Private businesses were practically eliminated
in most countries (Manolova et al., 2007) and existed
only as part of the grey economy (Smallbone and
Welter, 2001).
The transition created many opportunities for

entrepreneurship in transition countries and
entrepreneurship became an important factor for the
transition from centrally-planned to market economy
(McMillan and Woodruff, 2002). The stage of
development of transition economies affects
significantly both domestic entrepreneurship and
SME internationalization (Dana et al., 2008). The
major obstacles to entrepreneurship development in
transition countries were the heritage from the
planned era and the lack of appropriate institutions
(Dana and Ramadani, 2015). Specific obstacles to
entrepreneurship development in Bulgaria include
political uncertainty, energy issues, lack of
management
skills,
problematic
financing,
infrastructure deficiencies, stigma associated with
entrepreneurship, etc. (Ramadani and Dana, 2013).
Transition to market economy was a complex

process involving both radical economic and political
transformations in all Eastern European countries
(Dana and Ramadani, 2015). The political transition
included political liberalization, free elections and
democratization and resulted in the establishment of
liberal democracy and civic society in transition
countries (Sokol, 2001). The economic transition
entailed economic liberalization, privatisation and
SME sector makes a significant contribution to

the Bulgarian economy. SMEs account for more than
99% of all non-financial enterprises in the Bulgarian
economy (Simeonova-Ganeva et. al, 2012, 2013).
Within the SMEs population, the share of micro
enterprises is more than 92% (Simeonova-Ganeva et.
al, 2012, 2013). SMEs provide more than half of the
total employment in the non-financial enterprises and
contribute to a greater extent to gross value added
947
and turnover than large private non-financial

companies (Simeonova-Ganeva et. al, 2012).
Bulgarian SMEs are characterized with low share of
exporters, low innovativeness, low use of intellectual
property, low competitiveness, and low access to
finance, and low integration into European and world
business networks (Simeonova-Ganeva et. al, 2012;
Simeonova-Ganeva et. al 2013). Most SMEs have not
implemented good management practices and have
insufficient access to finance (Simeonova-Ganeva et.
al, 2012; Simeonova-Ganeva et. al 2013). The
adaptation of the Bulgarian SMEs to the European
requirements and global economy is a slow and
painful process. The average labour productivity in
the Bulgarian SMEs is significantly lower than the
average in the European Union. These enterprises are
involved predominantly in activities with low value
added. The main factors that foster the modernization
of Bulgarian SMEs are:
the external influence from the EU through
regulations;
the internal influence exerted by the
subsidiaries of multinational companies operating in
Bulgaria.
In summary, during the last decade the
Bulgarian economy has achieved macroeconomic
stability and growth. Various measures were
implemented in order to improve the environment for
doing business especially for SMEs. However, the
Bulgarian economy is characterized by very low
competitiveness in comparison with the other
European Union member states. The reasons for the
low competitiveness of the Bulgarian economy can
be found at both macro-economic and microeconomic levels.
3.
Background and Hypotheses of the

Study
2.2
The role of organizational factors for

SME internationalization
SMEss ability to enter foreign markets is directly

related to their accumulated stocks of resources both
in developed and transition economies (Ratten et al.,
2007; Dana et al., 2008; Westhead et al., 2001;
Bloodgood et al., 1996). The Resource-Based View
of the firm (RBV) (Barney, 1991) is a powerful and
influential theoretical framework for rigorous
research in the field of international business as well
as in the context of emerging and transition
economies (Meyer and Peng, 2005). The RBV
assumes that strategic formulation and competitive
advantage are dependent on the resources and

capabilities of the firm (Barney, 1991). Only rare,
valuable, inimitable, and non-substitutable resources
may be sources of sustained competitive advantage
(Barney, 1991). Firms with unique resources may
have a greater propensity to internationalize their
business (Bloodgood et al., 1996). Resources and
capabilities are important not only for SME capacity
for internationalization, but also for its continuing
success (Ratten et al., 2007). Empirical research
confirms that various organizational resources and
capabilities encourage SME internationalization
(Westhead et al., 2001). In this study, the RBV is
used to explain the role of organizational
characteristics
for
understanding
SME
internationalization.
Entrepreneurial orientation may be seen as an
important organizational resource for international
involvement.
It
was
acknowledged
that
internationalization is an entrepreneurial act because
it consists of identifying and exploiting
entrepreneurial opportunities in foreign markets
(Jantunen et al., 2005; Ripolls-Meli et al., 2007).
Entrepreneurial orientation and its dimensions have a
significant positive impact on the likelihood of
internationalization (Ripolls-Meli et al., 2007),
degree of internationalization (Javalgi and Todd,
2011), scope of internationalization (Ripolls-Meli
et al., 2007), and international performance (Jantunen
et al., 2005). Therefore, we suggest that:
H1: Entrepreneurial orientation increases the
likelihood of SME internationalization.
Internationalization is considered as a process of
organizational learning and knowledge development
(Basly, 2007). Internationalization knowledge
influences positively the internationalization degree
of the firm (Basly, 2007). Learning is an
organizational capability, which is critical for
increasing the stock of knowledge and knowledge
intensity in the internationalizing firm (Prashantham,
2005:38). Firms international learning effort is
positively associated with internationalization intent
(De Clercq et al., 2005), while the chance to acquire
new knowledge is important for the decision to
continue exporting (Burpitt and Rondinelli, 2000).
Learning orientation increases export propensity of
SMEs (Burpitt and Rondinelli, 1998) and affects
positively international performance (Jantunen et al.,
2008). Therefore, we suggest that:
H2: Learning orientation increases the likelihood
of SME internationalization.
948
The lack of resources for internationalization

may impede exploiting abroad the competitive
advantages gained in domestic markets (Fernandez
and Nieto, 2005). Financial resources are necessary
to fund international activities and to introduce the
changes
within
the
firm
required
for
internationalization including development of firms
production, managerial, and marketing capabilities
(Graves and Thomas, 2008). The access to finance
enhances export intensity (Du and Girma, 2007) and
determines internationalization pathway undertaken
(Graves and Thomas, 2008). Therefore, we suggest
that:
H3: Access to financial resources increases the
The presence of foreign investors in companies
operating in Central and Eastern Europe is associated
with numerous positive effects including high
learning, high efficiency governance, and high
corporate restructuring effectiveness (Filatotchev et
al., 2003). Foreign investors may provide SMEs in
transition economies with resources, knowledge and
capabilities in internationalization (Dana et al., 2008;
Filatotchev et al., 2008). Empirical research confirms
the importance of foreign ownership for export
propensity (Rojec et al., 2004), export intensity
(Filatotchev et al., 2008), international sales (Calabr
et al., 2013). Drawing upon these considerations, we
formulate the following hypothesis:
H4: The presence of foreign investors increases
the likelihood of SME internationalization.
Most empirical research demonstrates that
family businesses and especially family SMEs are
less likely to get involved in international activities
than non-family businesses (Jorissen et al., 2005;
Fernandez and Nieto, 2005; Cerrato and Piva, 2012).
Family SMEs that want to go to international markets
may face the challenge to change their objectives,
culture, structure, and strategy (Gallo and Sveen,
1991). Although family firms may posses unique
resources and capabilities stemming from the the
systematic interaction between the business, the
family and its members, family businesses may also
face some disadvantages such as the ability to make
appropriate shedding decisions about resources,
which may influence negatively their performance
(Sirmon and Hitt, 2003). The lower export propensity
and intensity of family SMEs compared with nonfamily SMEs is explained with the difficulties for
acquiring essential resources and capabilities for
building competitive advantage in international
markets (Fernndez and Nieto, 2005). Therefore, we

suggest that:
H5: Family SMEs are less likely to have
internationalized their business than non-family
SMEs.
3.2
The
role
of
owner-managers
characteristics
for
SME
internationalization
In the present study, the Upper Echelons Theory is

used to explain the role of owner-managers
characteristics for SME internationalization. The
Upper Echelons Theory (Hambrick and Mason,
1984) is one of the key theoretical approaches for
understanding managerial decision-making in
international business (Aharoni et al., 2011). Top
executives in organizations have bounded rationality
and their decision-making is based on biases and
dispositions, which are crucial for understanding the
functioning and performance of organizations
(Hambrick, 2007). Strategic choices of executives
including international strategic choices are a
function of executives cognitive processes
(Hambrick and Mason, 1984; Aharoni et al., 2011).
Observable characteristics of executives can be used
as valid indicators of their cognitive base, values and
behaviours (Hambrick and Mason, 1984; Hambrick,
2007; Aharoni et al., 2011). Such observable
characteristics include age, tenure in the organization,
education, functional background, tenure, career
experiences, socioeconomic background, stock
ownership of top executives, etc. (Hambrick and
Mason, 1984). The upper echelons theory has been
substantially supported in empirical research
(Hambrick, 2007; Aharoni et al., 2011).
According to the Upper Echelons Theory education is
an indicator of the knowledge and skill base of
managers (Hambrick and Mason, 1984). Managers
with high educational attainment may exhibit higher
cognitive abilities and skills (Wiersema and Bantel,
1992). Executives with higher educational level may
engage in a more in-dept decision-making analysis,
which
is
important
for
managing
the
internationalizing
business
because
internationalization requires learning about unique
national settings with specific cultural and
institutional features (Hsu et al., 2013). Empirical
evidence suggests that top management teams level
of education is positively associated with strategic
change (Wiersema and Bantel, 1992), level of
internationalization (Casillas and Acedo, 2005), and
scale of internationalization (Hsu et al., 2013).
949
H6: The owner-managers level of education

increases the likelihood of SME internationalization.
There are distinct patterns of executive behaviour
within an executives tenure in a position (Hambrick
and Fukutomi, 1991). Long tenure is associated with
increasing commitment to the executives paradigm
for running the firm, decreasing interest in the job,
relying on narrower and more finely filtered
information, and slowing increase in task knowledge
(Hambrick and Fukutomi, 1991). CEOs tend to
exhibit more conservative attitude toward change as
their tenure increases (Musteen et al., 2006). CEOs
tenure influence negatively entrepreneurial risktaking, especially a firms emphasis on innovation
and venturing in domestic and international markets
(Zahra, 2005). Organizational tenure of top
management team was found to be negatively
associated with strategic change (Wiersema and
Bantel, 1992). CEO position tenure is associated with
the choice of foreign market entry mode (Herrmann
and Datta, 2002) and the degree of firms
internationalization (Jaw and Lin, 2009).
H7: The owner-managers tenure decreases the
4.
Research Methodology
This study uses a sample of 190 SMEs (83 family

businesses and 107 non-family businesses) operating
in Bulgaria. The sample was extracted from a
database about corporate entrepreneurship in
Bulgarian
enterprises
(Yordanova,
2013).
Respondents are the owner-managers of the
companies. The survey uses a structured
questionnaire containing questions about the
characteristics of the organization, the ownermanager, and the environment. More than 64% of the
sample companies operate predominantly in the
service sector. Microenterprises represent 32.1% of
the sample firms, while small enterprises account for
41.6%. Approximately 44% of the sample firms
operate for less than 10 years.
Following Ruzzier et al., (2006:477), in this
research
is
defined
as
geographical expansion of economic activities over
a national countrys border. As there is no
commonly accepted measure of internationalization
(Sullivan, 1996), researchers use various approaches
to operationalize internationalization. Some authors
explore one or more specific modes of entry to
foreign markets such as exporting and/or foreign
direct investment (Westhead et al., 2001; Chiao et al.,
2006). Empirical studies on internationalization using
data from Bulgaria or other Eastern European

countries are also focused either on exporting (LloydReason et al., 2005; Smallbone et al., 1998) or on
foreign direct investment (Svetlii et al., 2007). The
modes of internationalization most frequently cited
by SMEs are direct exporting without an overseas
base and establishing an overseas base through some
form of foreign direct investment (Wright et al.,
2007). Therefore the present investigation, which is
based on a sample of SMEs, examines the
involvement of the sample companies in exporting
and/or foreign direct investment. The variable
INTERNATIONALIZATION is a binary variable. It
takes value 1 if the company exports products or
services and/or has made foreign direct investments
and value 0 if not.
The
variable
EO
reveals
the
level
entrepreneurial orientation of the sample firms. EO is
measured with 9-item, 7-point Likert scale proposed
by Covin and Slevin (1989). Its validity and
reliability was poven in previous research (Wiklund,
1998). In this study the EO scale reports acceptable
reliability (Cronbach alphas value is 0.858).
The variable LO indicates the level of learning
orientation of the studies companies. LO is measured
through a scale developed by Sinkula et al. (1997).
The scale is retested by Baker and Sinkula (1999)
who provide further evidence for its validity and
reliability. The Cronbachs alpha of the learning
orientation scale adopted in this study is 0.833.
Following Wiklund and Shepherd (2005), this
study uses a subjective measure of the ownermanagers access to financial capital. The dummy
variable RESOURCES is coded 1 if the respondents
answer to this question is somewhat satisfactory,
mostly satisfactory or fully satisfactory for the firms
development and 0 if the respondent has given
another answer.
The dummy variable FOREIGN indicates the
presence of foreign owners (value 1) or otherwise
(value 0).
The most common definition of family business
applied in literature on internationalization of family
businesses is based on a combination of ownership
and management criteria (Kontinen and Ojala, 2010).
Therefore, in this study family SMEs are SMEs
where one family controls the company and is
represented in its management team (Naldi et al.,
2007). This approach to defining family business will
increase the comparability of our results with
previous empirical findings about internationalization
950
of family businesses, which was recommended by

Kontinen and Ojala (2010). The dummy variable
FAMILY indicates whether the company is a family
business (value 1) or not (value 0).
The dummy variable CEO_EDU indicates the
level of education acquired by the owner-manager of
the company (1 = university degree, 0 = other). The
variable TENURE indicates the owner-managers
tenure in this position in number of years.
Three control variables are used in the study.
The variable FIRM_AGE measures firm age in
number of years. The variable MANUFACTURING
indicates if the company operates predominantly in
the manufacturing sector (value 1) or not (value 0).
The variable SERVICES takes value 1 if the
company operates predominantly in the service sector
and value 0 if not.
A binary logistic regression was employed to
deal explicitly with the dependent variable
INTERNATIONALIZATION, which is a binary
variable (Greene, 1997). The logistic regression is a
robust method since according to Greene (1997):
the dependent variable needs not to be
normally distributed;
logistic regression does not assume a linear
relationship between the dependent and the
independent variables;
the dependent variable needs not to be
homoscedastic for each level of the independent
variable(s);
normally distributed error terms are not
assumed;
independent variables can be categorical;
it does not require independent variables to

be interval or unbounded.
The application of non-parametric techniques is
adequate when the independent variables are
predominantly categorical. The use of the maximum
likelihood approach is recommended when sample
selection bias is possible (Nawata, 1994).
Binary logistic regression provides a framework
that indicates if and how well independent variables
can adequately predict SME internationalization. The
estimated binary logistic models take the following
form:
Prob (SME internationalization)
= 1 / (1 + e-Z)
(1)
where Z = f (Xi, C), i.e. a linear combination of

independent variables (Xi) and a constant (C).
The research hypotheses will be supported if
regression analysis provides an acceptable accuracy
of classification of cases and of goodness of fit
measures. In addition, the impact of explanatory
variables should be statistically significant at least at
the 10 percent level (two-tailed test) with the
predicted sign. Wald statistics will be used to
estimate the significance of the independent
variables. Data analyses are performed with the
statistical package SPSS version 15.0.
5.
Empirical Results
In this section we present the empirical results of

hypotheses test in our sample of 190 Bulgarian
SMEs. A logistic regression model has been
estimated to identify which independent variables
predict SME internationalization (Table 1). The
model is significant at 99% confidence level
according to Chi-square statistics. The Variance
Inflation Factor (VIF) is calculated in order to check
for the presence of multicollinearity problems. The
values of the Variance Inflation Factor (VIF) for all
regressors included in Table 1 do not exceed 2, which
excludes multicollinearity. The overall predictive
ability of the regression model in Table 1 to classify
correctly companies by the presence of growth plans
is more than 76%, which is much higher than the
random chance (50%).
Four organizational characteristics seem to
impact significantly the probability of SME
internationalization. The coefficients of the variables
EO, MANUFACTURING, RESOURCES, and
FOREIGN are statistically significant and positive.
SME with higher entrepreneurial orientation are more
likely to have internationalized their business. The
presence of foreign owner(s) increases the probability
of SME internationalization. SMEs with good access
to financial resources are also more likely to have
internationalized their business. The choice of
manufacturing sector is related to higher probability
of internationalization. Hypotheses H1, H3, and H4
cannot be rejected.
Contrary to what was suggested, learning
orientation and family business status have no
statistically significant influence on the probability of
SME internationalization. The coefficients of the
variables LO and FAMILY are not statistically
significant. There are no significant differences in the
likelihood of going to foreign markets between
family and non-family SMEs in the sample. The level
951
of learning orientation is not associated with

differences in the likelihood of internationalization of
the studied SMEs. Hypotheses H2 and H5 can be
rejected. The control variables SERVICES and
FIRM_AGE
have
no
impact
on
SME
internationalization. Firm age and the choice of
service sector are not associated with the odds of
internationalization.
Table
1
demonstrates
that
individual
characteristics of the owner-manager included in the
present study have no significant impact on the
dependent variable INTERNATIONALIZATION.
Contrary to our expectations, education level and
tenure of the CEO are not related to the probability of
going to foreign markets. Hypotheses H6 and H7 can
be rejected.
Table 1 The effect of internal factors on SME
Variables
Coefficients
Std.
Error
Wald
EO
0.041**
0.020
4.070
LO
-0.020
0.021
0.904
RESOURCES
0.694*
0.378
3.372
FOREIGN
2.154***
0.497
18.765
FAMILY
0.316
0.397
0.636
EDU
0.643
0.672
0.917
TENURE
-0.061
0.040
2.369
FIRM_AGE
0.026
0.018
2.156
1.910***
0.618
9.561
0.431
0.508
0.721
Constant
-2.912**
1.306
4.969
Chi-square
62.990***
MANUFACTURIN
G
SERVICES
-2 Log likelihood
195.649
Overall % correct
predictions
76.8
190
* p<0.1 ** p<0.05 ***p<0.01
6.
Discussion and Conclusions
The shift from centrally planned to market economy

in the countries in Central and Eastern Europe has led
to the emergence of a large number of privately
owned SMEs, which play important role for
countries economic development. In order these
enterprises to remain competitive in both local and
international markets it is of the utmost importance to
gain understanding what factors encourage their
internationalization. Due to increasing globalization
and volatility of markets, internationalization
constitutes an important strategic option to SMEs to
increase their competitive advantage in national and
international markets (Calabr et al., 2013). This
study explores the internal factors that may enhance
SME internationalization. It contributes to to the field
of international business by providing hypotheses
about
organizational
and
owner-managers
characteristics which affect SME internationalization.
Combining the Resource-Based View and the Upper
Echelons Theory the study creates a more complete
picture of the effect of internal factors on the
likelihood of SME internationalization and a deeper
understanding of the relationship between the internal
factors
and
various
owner-managers
and
organizational
characteristics.
The
proposed
hypotheses are tested in a sample of Bulgarian SMEs
offering
empirical
evidence
about
SME
internationalization in a transition context and
addressing the call for more research in this context
(Meyer and Peng, 2005; Smallbone et al., 1998).
This study reveals that several organizational
factors play important role for stimulating SME
internationalization. Manufacturing SMEs are
significantly more likely to go to foreign markets
than othet SMEs, which is not a surprising finding
about a country with small domestic market such as
Bulgaria. The presence of foreign owners has a
strong positive effect on the odds of
internationalization. Similarly to previous research
(Rojec et al., 2004; Filatotchev et al., 2008; Calabr
et al., 2013) our findings demonstrate that foreign
investors play an important strategic role for SME
internationalization. This is consistent with the RBV
which suggests that foreign owners may provide
SMEs in transition economies with resources and
capabilities needed for their internationalization such
as new products and marketing skills, knowledge,
technology, management skills, know-how, etc.
(Dana et al., 2008; Filatotchev et al., 2008).
952
Entrepreneurial orientation has a significant

positive effect on the likelihood of SME
internationalization. SMEs with pro-active, risk
seeking and innovative behaviour are more likely to
identify and exploit entrepreneurial opportunities in
foreign markets. This finding is consistent with
resource-based perspective that entrepreneurial
orientation may be seen as an important resource
driving international involvement. From a research
standpoint, these results enhance existing body of
knowledge about the strategic importance of
entrepreneurial orientation to internationalization
(Ripolls-Meli et al., 2007; Javalgi and Todd, 2011;
Jantunen et al., 2005).
The finding that the access to financial resources
enhances the odds of internationalization is in line
with previous research (Du and Girma, 2007). It
seems that the lack of access to financial resources
impedes the studied SMEs to exploit abroad the
competitive advantages gained in domestic markets
(Fernandez and Nieto, 2005). SMEs with insufficient
access to financial resources may not be able to fund
international activities and to introduce the changes
within the firm required for internationalization
including development of firms production,
managerial, and marketing capabilities (Graves and
Thomas, 2008).
The proposed hypotheses about the effects of
learning orientation and family business status were
rejected. Learning orientation is not associated with
SME internationalization, which is in contradiction
with previous empirical evidence about the
importance
of
learning
orientation
for
internationalization (Burpitt and Rondinelli, 1998;
Jantunen et al., 2008). Empirical findings of the
present study demonstrate that family and non-family
SMEs do not differ significantly in the likelihood of
internationalization. Contrary to previous research in
other countries and contexts (Jorissen et al., 2005;
Fernandez and Nieto, 2005; Cerrato and Piva, 2012),
family SMEs are not less likely to internationalize
their operations than non-family SMEs in the studied
sample from a transition economy.
The present study did not find support for the
role of owner-managers characteristics for
explaining SME internationalization. Although
previous research finds that top executives tenure
(Jaw and Lin, 2009; Herrmann and Datta, 2002) and
education (Casillas and Acedo, 2005; Hsu et al.,
2013; Arregle et al., 2012) are associated with firms
internationalization, our analysis reveals that the
effects of owner-managers tenure and education
level on SME internationalization are not statistically

significant in the studied sample.
Before discussing the implications of the
findings, some limitations of the study should be
noted. First, this exploratory study uses a relatively
small sample of SMEs and therefore the findings
should be interpreted with caution. Second, data was
collected through a self-reported survey and thus may
be subjected to cognitive biases and errors. Third, the
findings may be influenced by specific features of the
Bulgarian cultural and institutional environment and
therefore may not be applicable to other developed or
developing economies. Finally, due to the crosssectional design of the research causal relationships
cannot be deduced.
In order to enhance the understanding of
internationalization in family and non-family SMEs
operating in different contexts, future research needs
to examine the following aspects. The presented
hypotheses should be tested in a large representative
sample of Bulgarian SMEs. Future research should
examine the importance of other individual and
organizational
characteristics
for
SME
internationalization. Future research should also
examine to what extent the findings of this study can
be generalized to SMEs operating in other transition
countries or in other contexts. A longitudinal analysis
of SME internationalization should complement the
findings of this research in order to confirm causal
relationships. The multiple measurements of
independent and outcome variables in the study over
time will allow examining the bidirectional
relationships between the variables studied.
The findings reported here have several
important implications for practitioners. It is clear
from the results of our study that owners and
managers in SMEs must foster entrepreneurial culture
throughout the organization in order to stimulate the
internationalization of their business opperations.
Attracting foreign investors appears as a critical
factor for SME internationalization. SMEs should be
aware that foreign investors may provide valuable
resources such as know-how, finance and other
resources, knowledge, information about foreign
clents and markets, etc., which may enhance their
chances to enter successfully foreign markets and to
achieve competitive advantage in these markets.
Therefore, SMEs should try to attract foreign
investors in order to be able to benefit from the
presence of foreign investors and to dispose with
valuable resources that these investors may provide
for their internationalization. Policy makers should
953
implement specific policies, instruments and

mechanisms for improving the SMEs access to
financial capital in order to enhance their
internationalization. Loan institutions, risk capitalists,
business partners and business angles trying to
identify SMEs with propensity to internationalize
their operations should pay more attention on
organizational factors including its entrepreneurial
orientation, the presence of foreign investors, secotr
and access to resources.
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Multicriteria and Multiobjective Models for

Risk, Reliability and Maintenance Decision
Analysis - A Book Review
Manuel Alberto M. Ferreira
Lisbon University Institute ISCTE-IUL, BRU-IUL, ISTAR-IUL
Portugal
manuel.ferreira@iscte.pt
Abstract - The objective of this work is the book
Multicriteria and Multiobjective Models for Risk,
Reliability and Maintenance Decision Analysis, 978-3319-17968-1, from Springer Series International Series
in Operations Research & Management Science
review.
The authors are:
- de Almeida,
A.T.
- Cavalcante,
C.A.V.
- Alencar, M.H.
-Ferreira, R.J.P.
- de AlmeidaFilho, A.T.
- Garcez, T.V.
It is composed of twelve chapters

Chapter I
Multiobjective and Multicriteria Problems and
Decision Models
Almeida, Adiel Teixeira (et al.)
Chapter II
Multiobjective and Multicriteria Decision Processes
and Methods
Chapter III
Basic Concepts on Risk Analysis, Reliability and
Maintenance
Chapter IV
Multidimensional Risk Analysis
Chapter V
Preventive Maintenance Decisions
Chapter VI
Decision Making in Condition-Based Maintenance
Chapter VII
Decision on Maintenance Outsourcing

Chapter VIII
Spare Parts Planning Decisions
Chapter IX
Decision on Redundancy Allocation
Chapter X
Design Selection Decisions
Chapter XI
Decisions on Priority Assignment for Maintenance
Planning
Chapter XII
Other Risk, Reliability and Maintenance Decision
Problems
Almeida, Adiel Teixeira (et al.).
According to the authors Multicriteria and

Multiobjective Models for Risk, Reliability and
Maintenance Decision Analysis is implicitly
structured in three parts. The first part deals with
MCDM/A
(Multi-Criteria
Decision
Making/Analysis) concepts methods and decision
processes. The second part presents the main
concepts and foundations of RRM (Risk, Reliability
and Maintenance). Finally the third part deals with
specific decision problems in the RRM context
approached with MCDM/A.
1. The Review
Since a long time Operations Research is
connected with Management. In this sense it is a
fundamental tool in the management of
organizations, in particular the ones producers of
services and goods: the companies. There some of the
most important professionals are engineers and
____________________________________________________________________________________
958
managers.
The Multicriteria and Multiobjective Models
for Risk, Reliability and Maintenance Decision
Analysis authors represent a group of active
members of scientific societies in Operations
Research and RRM areas and are Professors in
Management Engineering. In this book they
efficaciously show how to use the multiple criteria
concepts and methods within the RRM context.
Applied Probability (Decision Analysis, Reliability
Theory,), Decision Making ( MCDM, MCDA,)
and Mathematical Programming (Multiobjective
Optimization,) are the main tools used in the text.
The book is very well structured and written in
very good English. The whole cases studied are
consistently scientifically approached and their
practical application adequately exemplified.
It is divided, implicitly, not effectively, in three
parts. The first two are mainly conceptual and
methodological. The third is more operative. In the
first part are considered MCDM/A concepts methods
and decision processes. In the second part the main
concepts and foundations of RRM are presented.
Finally the third part, supported on the former ones,
deals with specific decision problems in the RRM
context approached with MCDM/A.
Since Reliability and Maintenance become of
major importance, due to
the demands that the services are

permanently available (generating each
interruption
losses
and
customer
abandonment) and the products are of
consistently high quality (the lack of quality
causing complaints and opting for an

alternative product),
the companies fight to reduce the costs and
simultaneously improve their performances
in order to reach their strategic objectives,
failures may cause dramatic consequences in
terms of safety and environmental losses,
this
book
becomes
important,
even
indispensable, either for academic or for
professionals in the fields of service and industry.
Also as the whole subjects are explained very clearly,
in a very pedagogical way, it may conquer larger
number of readers.
2. Overall review
Analysis is an outstanding text on the multiple
criteria concepts and methods use within the Risk,
Reliability and Maintenance context. It is an
indispensable book, either for academic or for
professionals in the fields of services and industry,
beginners or seniors, and for anyone curious on this
subject.
3. References
[1]
de Almeida, A. T., Cavalcante, C. A.

V., Alencar, M. H., Ferreira, R. J. P., de
Almeida-Filho, A. T., Garcez, T. V..
Analysis. International Series in Operations
Research & Management Science 231, ISBN: ",
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E-ISSN: 2047-0916

Editorial Board Members

3. Unemployment Modelled Through M|G| Systems (Revisited) .................................. 941

5. Multicriteria and Multiobjective Models for Risk, Reliability and Maintenance

Vol-5 No. 3 September, 2015

Income from Speculative Financial Transactions

Department of Business and Economics

Abstract Starting with a macro-economic model

Economic models are in some sense the experiments

Besides creating and solving an economic model, one

Grabinski (2004, 2007), Appel (2011, 2012) defined

Vol-5 No. 3 September, 2015

shows that the solutions are unstable as soon as the

The Extended NAIRU Model

NAIRU is arguably the most fundamental approach

Vol-5 No. 3 September, 2015

A similar mechanism works for too low

Here, the derivative with respect to time t is

The constant b is obviously positive because the

In order to find capital c(t) to be invested in jobs, said

Vol-5 No. 3 September, 2015

The proportional constant /(b a) has been chosen in

Eqs. (1,2) are a set of coupled ordinary first order

inflation (say, 70 %) will the sinusoidal variation of

Eqs. (4,5) are differential equations for inflation (t)

Just by taking the linear parts of Eqs. (6,7), it is easy

The eigenvalues i of the matrix of Eq. (8) are

With both i being purely imaginary, we have an

Eqs. (1,2) become

This gives the formal solution of Eq. (8), which can

where = |1 | = |2 | from Eq. (9) and A and B are

Vol-5 No. 3 September, 2015

money by changing it into non-conserved value,

If inflation I(t) is sufficiently high compared to an

Typically, S will be positive for a long time. For

The NAIRU Model with

Besides creating money through an increase in

Eqs. (1,2S) are the new set of differential equations to

Because of the new couplings in Eqs. (1,2 S), the

Vol-5 No. 3 September, 2015

Besides the slightly more complicated form of the

Case 1 holds for a sufficiently large amount of

Figure 2: Plot of off-equilibrium inflation and

The matrix in Eq. (14) has the eigenvalues

Depending on S , one can distinguish between five

A and B are arbitrary real constants. Of course, only

Figure 3: Plot of off-equilibrium inflation and unemployment

Fig and included some small amount of speculation.

Vol-5 No. 3 September, 2015

In the previous chapter, we have shown that

Vol-5 No. 3 September, 2015

could take all non-working people in a country and

everybody is selling his or her stocks). From a purely

These remarks on inflation and unemployment apply

It is hard to imagine that a proper description, such as

In addition, there is another problem with almost all

Conclusions and next steps

We have shown that speculation will (almost) always

Vol-5 No. 3 September, 2015

burns down without having suffered a financial loss).

Here, i is the interest set by the central bank; f and

The next steps in our area of research will be to:

Making the following substitutions in Eq. (20,21)

Scrutinize the present model, and especially