Po štn ina pl ača na pr i p ošt i 4 10 2 K ran j Journal of Management, Informatics and Human Resources ISSN 1318-5454 Revija za management, informatiko in kadre Volume 53, Issue 2, May 2020 Organizacija (Journal of Management, Informatics and Human Resources) is an interdisciplinary peer-reviewed journal which is open to contributions of high quality, from any perspective relevant to the organizational phenomena. The journal is designed to encourage interest in all matters relating to organizational sciences and is intended to ap- peal to both the academic and professional community. In particular, journal publishes original articles that advance the empirical, theoretical, and methodological understand- ing of the theories and concepts of management and or- ganization. The journal welcomes contributions from other scientific disciplines that encourage new conceptualiza- tions in organizational theory and management practice. 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Organizacija (Revija za management, informatiko in človeške vire) je interdisciplinarna recenzirana revija, ki objavlja visoko kakovostne prispevke z vseh vidikov, ki so pomembni za organizacijske procese in strukture. Revija je zasnovana tako, da spodbuja zanimanje za različne vidike v zvezi z organizacijskimi vedami in je namenjena tako akademski kot strokovni skupnosti. Revija objavlja izvirne članke, ki spodbujajo empirično, teoretično in metodološko razumevanje teorij in konceptov managementa in organizacije. Pozdravljamo tudi prispevke iz drugih znanstvenih disciplin, ki spodbujajo nove koncepte v organizacijski teoriji in praksi. Objavljamo članke, ki analizirajo organiziranost z različnih vidikov, so usmerjeni na organizacije različnih velikosti in iz različnih sektorjev, na enote, ki sestavljajo organizacije, in na mreže, v katere so organizacije vpete. 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RESEARCH PAPERS 95 112 128 147 165 Eva BOŠTJANČIČ, Fayruza ISMAGILOVA, Alexey MALTCEV Petra LESNIKOVA, Jarmila SCHMIDTOVA Mirjana PEJIĆ BACH, Nikola VLAHOVIĆ, Jasmina PIVAR Nikolaj LIPIČ, Marija OVSENIK Hussein Hurajah AL HASNAWI, Ali Abdulhassan ABBAS The Relationship between Control over a Deal and Cognitive-Based Trust in an International Business Partnership Development of Corporate Sustainability in Enterprises through the Application of Selected Practices and Tools Fraud Prevention in the Leasing Industry Using the Kohonen Self- Organising Maps The Effect of Statistical Literacy on Response to Environmental Change Workplace Ostracism as a Mediating Variable in the Relationship between Paradoxical Leader Behaviours and Organizational Inertia 96 Organizacija, Volume 53 Issue 2, May 2020 EDITOR / UREDNIK Jože Zupančič University of Maribor, Faculty of Organizational Sciencies, Slovenia CO-EDITORS / SOUREDNIKI Petr Doucek Prague University of Economics, Faculty of Informatics and Statistics, Czech Republic Matjaž Maletič University of Maribor, Faculty of Organizational Sciencies, Slovenia Włodzimierz Sroka WSB University, Department of Management, Dąbrowa Górnicza, Poland EDITORIAL BOARD / UREDNIŠKI ODBOR REVIJE Hossein Arsham, University of Baltimore, USA Franc Čuš, University of Maribor, Slovenia Sasha M. Dekleva DePaul University, School of Accountancy and MIS, Chichago, USA Vlado Dimovski, University of Ljubljana, Slovenia Daniel C. Ganster, Colorado State University, USA Jože Gričar, University of Maribor, Slovenia Werner Jammernegg Viena University of Economics and Business Administration, Austria Marius Alexander Janson, University of Missouri-St. Louis, USA Stefan Klein, University of Münster, Germany Aleksandar Marković, University of Belgrade, Serbia Hermann Maurer, Technical University Graz, Austria Matjaž Mulej, University of Maribor, Slovenia Valentinas Navickas, Kaunas University of Technology, Lithuania Ota Novotny, University of Economics, Prague, Czech Republic Milan Pagon, Independent University, Bangladesh (IUB), Dhaka, Bangladesh Björn Paape, RWTH-Technical University Aachen, Germany Matjaž Perc University of Maribor, Slovenia Dušan Petrač, NASA, Jet Propulsion Laboratory, California Institute of Technology, USA Nataša Petrović University of Belgrade, Serbia Tetyana Pimonenko, Sumy State University, Balatsky Academic and Scientific Institute of Finance, Economics and Management, Ukraine Hans Puxbaum, Vienna University of Technology, Austria Vladislav Rajkovič, University of Maribor, Slovenia Gábor Rekettye, University of Pécs, Hungary Henk G. Sol, Faculy of Economics and Business, University of Groningen, Netherlands Eugene Semenkin Reshetnev Siberian State University of Science and Technology, Krasnoyarsk, Russian Federation Velimir Srića, University of Zagreb, Croatia Paula Swatman, University of Tasmania, Australia Brian Timney, The University of Western Ontario, Canada Maurice Yolles, Liverpool John Moores University, UK Douglas R. Vogel, Harbin Institute of Technology-HIT, School of Management, China Gerhard Wilhelm Weber, Middle East Technical University, Turkey Stanisław Wrycza, University of Gdańsk, Poland Yvonne Ziegler, Frankfurt University of Applied Sciences, Germany Hans-Dieter Zimmermann, FSH St. Gallen University of Applied Sciences, Switzerland 97 Organizacija, Volume 53 Issue 2, May 2020Research Papers 1 Received: September 29, 2019; revised: March 13, 2020; accepted: March 18, 2020 The Relationship between Control over a Deal and Cognitive-Based Trust in an International Business Partnership Eva BOŠTJANČIČ1, Fayruza ISMAGILOVA2, Alexey MALTCEV2 1Faculty of Arts, Department Psychology, University of Ljubljana, Aškerčeva cesta 2, SI-1000 Ljubljana, Slovenia, Eva.Bostjancic@ff.uni-lj.si (corresponding author) 2Ural Federal University named after the first President of Russia B.N. Yeltsin, Ural Institute of Humanities, Depart- ment of Psychology, Lenina, 51, 620083 Ekaterinburg, Russian Federation Background and purpose: Trust is embedded into the national culture. It is a tool that helps create strategic part- nerships and facilitates deals that carry certain risks. Cultural differences and norms can affect business relations, but more often focus is on the obvious differences. Although trust in a business partner may be due to non-obvious differences, for example, which part of the deal the partner wants to control himself and which part of the deal he wants to give to the partner to control. If the difference between the real and desired levels of the partner’s control over the deal is large, then is trust possible, especially in intercultural business relations? Objective: One aim of our study is to find out whether trust may be considered as moderator of control in a business deal. In other words, if the level of trust in a business partner is higher, are the partners more open to sharing their control over the deal with each other? The other aim is to identify the links between these indicators (trust and con- trol) in business partnerships of partners from different cultures. Design/Methodology/Approach: The study investigated the answers of 103 Slovenian and 124 Russian business partners. The Organizational Trust Inventory (OTI) and the 5-items questionnaire on control over deal were used to collect data. Descriptive and inferential statistics were used to process the data collected. Results: The probability that the business partner will not fulfil their obligations in the deal negatively relates to the level of trust. The difference between degree of desired control and degree of control negatively relates to the level of trust. Conclusion: As our results showed, trust cannot be considered as a strong moderator of control between partners. In response to greater trust, the respondents only agree to increase their partner’s control, but are not willing to re- duce their own. Moreover, this finding is stronger in the group of Russian partners than in the Slovenian ones. Keywords: Trust, Business Relationships, Business Partner, Control Over Deal, Obligations, Slovenia, Russia DOI: 10.2478/orga-2020-0007 1 Introduction Trust is a tool that helps create strategic partnerships and facilitates deals that carry certain risks. Therefore, it gains a more and more popularity form of collaborative capi- tal (Jost, Dawson, & Shaw, 2005), and the greater is the level of uncertainty, the trust is greater needed. Through the processes of economic globalization, the principle of interaction between independent economic entities: “We will win more together” has emerged (Smolyar, 2017). As a result, the trust between business partners becomes crucial and is particularly acute in relations in small and medium businesses. This study was motivated by a desire to study the fac- tors that influence the degree of control over cross-cultural deals between foreign business partners, when different levels of trust exist between the partners. Examining these factors is crucial, because prior research suggests that con- 98 Organizacija, Volume 53 Issue 2, May 2020Research Papers trol and trust allow businesses to overcome such obstacles as uncertainty and interdependency in business relations (e.g. Mohr & Puck, 2010). Trust was studied across cultures (e.g. Fukuyama, 1995) and the researchers found several associations be- tween trust and cultural differences. Demographic differ- ences, in particular nationality, are the reason for lowering the level of trust in international communications (Glaeser, Laibson, Scheinkman, & Soutter, 2000). Trust is threat- ened by disparate understandings (Berge, 2018) and it op- erates at multiple levels to predict members’ performance regarding the generation of income from business referrals (Becerra, Lunnan, & Huemer, 2008; Gupta, Ho, Pollack, & Lai, 2016). As Svensson (2001) argued, to truly under- stand the trust between two actors (in a marketing channel) beyond the dyadic business relationship, a generic model of the synchronized trust chain concept should be used. Shazi, Gillespie, and Steen (2015) underlined, that trust is implied to have a greater role when organizational borders are greater. Actually, the problem today is that relations between states lead to decisions that affect the economic interaction and development of international business partnership. On the one hand, there is the issue of the crisis of trust between Russian and European business partners in the situation of economic sanctions aimed at Russia. On the other hand, for the past 30 years (known as the perestroika period), Russians have lived in a situation of extreme instability of value orientations, which has led to the confrontation between two business cultures – a culture that inherited the Soviet management practices and a culture built on the Eu- ropean model of management and cooperation (Sinchuk, 2016). That is why the identification of dependencies of the state of trust in international business, as well as the study of the factors of building trust in the international business environment after perestroika is relevant (Bayk- ov, 2018). External constraints affect organizations whose surviv- al largely depends on the environment (Pfeffer & Salancik, 2003). However, if organizations can try to change their environment politically, entrepreneurs can only influ- ence partnerships to control or absorb uncertainty about the transaction. At the same time, partners from different countries find themselves in different conditions. Those who came to the country to develop their business here get more risks and uncertainties than those who live in this country, are well aware and adapted to the environment. Thus, the views of entrepreneurs on a deal with a part- ner from another country are determined by culture, social experience, and whether the deal is in a new or habitual business environment. These factors set the level of un- certainty in the search for a balance between trust in the partner and control over their deal. Our interest was to compare two countries from the same region with similar but different cultural roots – Rus- sians and Slovenians are united by common Slavic roots, there is a common language culture and in many ways be- haviour – that cooperate intensively in the business field; comparing the foreign trade of the two countries, the num- ber of importers and exporters in the Russian Federation and Slovenia has increased in the last ten years, from 441 Slovenian exporters to the Russian Federation in 2008 to 599 in 2016, and from 198 Russian exporters to Slovenia in 2008 to 301 in 2016 (SURS, 2018). Nevertheless, only a few studies concerning Russian-Slovenian partnerships have been published, and most focus on social and cul- tural differences between Slovenians and Russians (e.g., Pajnkihar, Vrbnjak, Kasimovskaya, Watson, & Stiglic, 2019), rather than the features of their collaboration. We believe that with such a comparison group it is possible to single out the most significant regularities, since only the most significant differences can appear on closed samples in different parameters. In the current study we examine trust in business part- nerships as a predictor, and in line with Das and Teng (2002), we consider control over a deal as a regulatory process made the partner’s pursuit of mutually compatible interests more predictable. Following Stroh and Balakshin (2015), we consider a business partnership as a social in- teraction of economically independent subjects, and as ef- forts of business partners to achieve their joint business interests. The main idea of our study is to reveal the rela- tionship between trust and its consequences - an assess- ment of the probability that the partner will not fulfil the obligations of the deal and dimensions of control over the deal. The aim of the study is to identify the links between these indicators in a business partnership with partners from two cultures. 2 Theoretical Framework and Hypotheses 2.1 Cognitive- and affect-based Trust In business relationships trust was studied as a predic- tor, e.g. in a team’s activity (Schaubroeck, Lam, & Peng, 2011), as moderator of the relationship between organiza- tional climate and knowledge donating among alliances sharing tacit knowledge (Becerra et al., 2008). Trust has both cognitive- and affect-based dimensions (Johnson & Grayson, 2005). Вoth processes play essential roles in the development of trust in interpersonal exchanges (Lu, Kong, Ferrin, & Dirks, 2017; Morrow Jr, Hansen, & Pear- son, 2004); in the relationship between network ties (strong and weak ties) and entrepreneurial opportunity discovery and exploitation (Ren et al., 2016). Both types of trust are essential and are independently significant predictors, e.g. of complex knowledge-sharing (Chowdhury, 2005). Nevertheless, it should be recognized that some re- search did not find strong relations between trust and the 99 Organizacija, Volume 53 Issue 2, May 2020Research Papers efficiency of decision-making, e.g., negotiating effec- tiveness was associated with the quantity of information shared but not with trust (e.g. Mohr & Puck, 2010). Such studies therefore created a contradiction in the understand- ing of trust in business relations; Endress (2004), for ex- ample, believes that trust is often considered one-sided, as merely reflexive, and the cognitive component of this concept is exaggerated. Affect-based trust is based on emotional ties between partners and often tends to go beyond the business or pro- fessional relationship or prior knowledge of performance. It has been shown that affect-based trust is important to managers to support relationships with customers and suppliers (Akrout, Diallo, Akrout, & Chandon, 2016), as well as with subordinates in private companies (Maha- rani & Riantoputra, 2018). On the other hand, cognitive trust occurs when a person makes a conscious decision to trust based on the best knowledge they possess. This per- tained to performance and accomplishments through direct dealings with a partner and based on cognitive reasoning (McAllister, 1995). In strategic decision-making teams, cognition-based trust is far more important than affect-based trust as a mod- erator in the relationship between conflict and outcomes (Parayitam & Dooley, 2009; Sohaib & Kang, 2015; So- haib, Kang, & Nurunnabi, 2019). Cognitive-based trust in a business relationship relies on a conscious evaluation of the partner’s ability to carry out their obligations in a deal. Cognitive trust is often based on the repeated interactions of parties (Hite, 2005), the proven reliability of an indi- vidual (Lewis & Weigert, 1985), weighing the evidence embedded in the attributes of the transaction and the char- acteristics of the other parties to the transaction (Morrow et al., 2004), and has connects with task-oriented aspects of work (Yang, Mossholder, & Peng, 2009). At the same time, too much trust is as bad as too little, and in both cases solutions are far from optimal (Jeffries & Reed, 2000). 2.2 Trust in Business Relations as a Probabilistic Choice Trust is especially valuable in a business partnership be- cause partners have to rely on each other and themselves remain vulnerable to the partners’ actions (Gur & Alay- oğlu, 2017). Only recently, have researchers begun to pay attention not only to success factors, but also to the diffi- culties of a business partnership (Berge, 2018; Castaldo, Premazzi, & Zerbini, 2010). For most business deals, it is impossible to monitor every detail, and trust is present in almost every transaction (Davis, Schoorman, Mayer, & Tan, 2000; Minina & Ganskau, 2008). In a competitive en- vironment the business interactions are inevitably accom- panied by a willingness to be vulnerable to a partner (May- er, Davis, & Schoorman, 1995). Under such conditions, the subject’s trust can be seen as a willingness to rely on the actions of the partner and willingness to be vulnerable to contractual and social obligations with the expectation of continued cooperation (Edkins & Smyth, 2006). Among studies focused on the relation between trust and fulfilment of obligation it was found, when trust is high, that appar- ently employees tend to feel that their psychological con- tracts are being fulfilled by their organization regardless of psychological contract type (Kraft & Kwantes, 2013). Trust between business partners assumes that they rely on each other and thus put themselves at risk of being vulner- able in a situation of not keeping commitments. In turn, the risk assessment is always connected to the assessment of the probability of the partner fulfilling the obligations un- der the deal. Thus, in our opinion, trust is associated with an assessment of the likelihood of the partner fulfilling their obligations. This allows us to formulate the following hypothesis. Hypothesis 1: The probability that a partner fulfils its obligations in a deal is positively related to trust 2.3 Connection Between Control and Cognitive-based Trust in Business Partnership Cognitive-based trust may be recognized as a way to re- duce the level of uncertainty of a partner’s cooperative behaviour and increase the predictability of their satisfac- tory performance. The other reason for decision-making is an opportunity to control the deal – specifically not just the subject’s opportunity, but the partner’s opportunity as well. Hence, the relations between trust and control needs clarification, especially in the decision-making context. As Das and Teng argued, trust and control operate in a parallel fashion, supplementing each other as the key sources of partner cooperation; control mechanisms have an impact on trust level and the trust level moderates the effect of control mechanisms in determining the control level (Das & Teng, 2001). Both formal and informal control were ex- plored as ways to generate competence trust and intention- al trust (Hyder, Chowdhury, & Sundström, 2017), and a combination of formal control and trust, which give rise to high project performance, was studied (Ning, 2017). Сontrol is a crucial impact factor in partnerships (Beamish, 2013), and cognition-based trust is linked to the unique and interactive relationships between contractual control, the propensity to trust and affect-based trust (Lu & Yan, 2016). But trust might not be seen as a reason not to use objective control. The trust-control relationship is described as either substitutive or complementary (Alpen- berg & Scarbrough, 2018; Kalkman & Waard, 2017), and one of the principles – trust or control – would come to dominate as a result of the firm’s assessment of the likeli- hood of opportunistic behaviour by the partner (McEvily, 100 Organizacija, Volume 53 Issue 2, May 2020Research Papers Perrone, & Zaheer, 2003). The lack of transparency and openness is not a reason not to trust the company or the team. Therefore, there is no clear understanding of how trust and control relate to each other yet. Moreover, con- trol is mostly considered as subject’s control over a deal, but not as the willingness of subject to share control with a partner (e.g., Franklin & Marshall, 2019). Because re- searchers have paid more attention to the dependence be- tween the level of control and level of trust in a partner rather than to sharing of control between partners (e.g., Graça & Barry, 2019), the topic of this study is relatively new. We agree that the nature of trust and control should be considered as integrated but at the same time parallel concepts. We should pay attention not only to a subject’s control over a deal, but also to the subject’s preferences for their partner’s control. There is a high probability that trust as an attitude to the partner must affect not so much the control from the subject’s point of view, but rather their attitude to the extent to which the subject is ready to allow the partner to control the transaction. The question “How much can I trust my business partner, that they will fulfil their obligations?” appears due to perceived uncertainty and the desire to streamline the process of business coop- eration. It is highly likely that the level of desired control over the deal is reduced due to the trust in the business partner, but increases in conditions of uncertainty and risk. Thus, hypothetically the subject’s trust in their business partner and degree of desired control over the deal should be interrelated. In addition, it is permissible to assume that the subject considers it important to what extent their part- ner controls their part of the deal. The importance of all dimensions of control increases in a business environment with risk and uncertainty. Based on these arguments, we hypothesize that there are some relations between the di- mensions of control and trust. Hypothesis 2. The difference between a degree of de- sired control and degree of real control negatively relates to the level of trust. Hypothesis 3. The partner’s control over the deal re- lates positively to both types of desired control. 2.4 Trust Between Business Partners from Different Countries The culture of trust is based on mutual moral obligations, social norms and standardized expectations of the behav- iour of other people, and cannot be studied in isolation from the environment. Trust, as confidence or social con- text, is not an entity divorced from the nature and condi- tions of interaction. If business relations develop between partners from different countries, then trust is due to dif- ferent points of view on life and the previous experience of each side (Gustaffson, 2008). As Bidault et al. argued, demographic factors are related to the propensity to rely on trust, and that across nationalities, the sensitivity to partner interaction is a factor affecting trust. The culture of trust is based on mutual moral obligations, social norms and standardized expectations of the behaviour of other people, and cannot be studied in isolation from the envi- ronment. The willingness to rely on trust is not entirely determined by the terms of the transaction (Bidault, de la Torre, & Zanakis, 2009). Studies show that cultural differences among project teams can cause conflict, misunderstanding, and reduced project performance (Ajmal, Helo, & Kassem, 2017). Be- sides, high distance between business partners can lead them to have unrealistically high expectations of partner performance (Couper, Reuber, & Prashantham, 2019). When collaborating with Russians, westerners prefer to use their own “familiar ways” of doing business. At the same time, researchers on east-west business partnerships indicate that affect-based trust is much stronger and more durable than cognitive- or institutionally-based trust for Russians (Ayios, 2018), and Russian managers willingness to establish personal relationships is important in this con- text (Weck & Ivanova, 2013). On the other hand, explicit competencies, have significant impacts on the internation- al team members’ trust (Wang & Zhang, 2019). As Ayios mentioned, trust is closely related to the con- text of social norms and obligations, factors that will be under threat at least in the initial stages of a cross-border alliance (Ayios, 2018). Therefore, because cultural issues are rather sensitive, the trust-building process among inter- national project stakeholders and business partners should be investigated more carefully. 2.5 Cultural Traits of Slovenian and Russian Managers and their Business The Russian Federation (Росси́йская Федера́ция, Rossi- yskaya Federatsiya), commonly known as Russia (Rossi- ya), is a transcontinental country extending over much of northern Eurasia (Asia and Europe). The largest country in the world by land area, Russia has the world’s ninth-largest population – 146 million people. As a recent study using the Hofstede model showed, there are differences between interdisciplinary professional groups in Russia. A large difference between Russian entrepreneurs and top manag- ers of large companies was revealed in the Avoidance of Uncertainty index: entrepreneurs are more tolerant of un- certainty than top managers. The power distance is higher among workers and officials and relatively low among spe- cialists. A high level of individualism is identified among sales workers. (Latova, 2017). Another study showed that Russians do not live to work, but work to live, do not sep- arate work from leisure, and highly value interesting work. In the last decade, self-esteem has become more important 101 Organizacija, Volume 53 Issue 2, May 2020Research Papers for Russians than the opinions of others, and they are more focused on business qualities and professionalism than personal qualities (Avios, 2018; Emelyanovich, 2014). Slovenia is one of the smallest countries of the Euro- pean Union (20,273 km2; SURS, 2016) with a population of just over two million (2,063,371) (Statistični urad Re- publike Slovenije [SURS], 2016). It is increasingly open to foreigners, both migrants and tourists, and a consequence of this is growing contact between Slovenians and oth- er cultures. A systematic cross-cultural study (Hofstede, 2001) shows that Slovenians score highly in the power distance dimension. They accept a hierarchical order in which everybody has a place and which needs no further justification. Slovenia could be described as a feminine society, with preferences for cooperation, modesty, caring for the weak and a good quality of life. People living in this country have a high preference for avoiding uncertainty, their daily behaviour is perceived as very well-organized and hard-working, and precision and punctuality are the norms. Security is a crucial element in individual moti- vation. According to Hofstede (2011), uncertainty avoidance is a tendency to react in a certain way to situations that are perceived as uncertain, i.e. situations that cannot be ade- quately structured or categorized due to lack of informa- tion. It can be assumed that a partnership between entre- preneurs from different cultures and the activities between them are seen as uncertain due to lack of information. The behavioural component is manifested here in strength- ening control over the situation and the people involved in it. In Hofstede et al. (2010), the uncertainty avoidance score tends to be a little higher in Russia than in Slovenia. Thus, it can be presumed that the problem of the correla- tion of control and trust is also reinforced by the distinct tendency of Russian and Slovenian entrepreneurs to avoid uncertainty. Russians show a higher long-term orientation score (Hofstede, 2001), which may be connected with a more pragmatic approach; they maintain traditions and norms, and truth depends very much on situation, context and time. Due to the different cultural features of Slovenians (for whom precision and punctuality are the norms) and Rus- sians (they maintain traditions and norms, truth depends very much on situation, context and time.), there will be significant differences between Russian and Slovenian entrepreneurs’ attitudes to control over a deal. Therefore, based on these cultural differences, we propose the final hypothesis. Hypothesis 4: The relation between the level of trust and level of control over a deal will be stronger in the Slo- venian sample than in the Russian one. 3 Method 3.1 Participants and Procedure We invited 143 Slovenians and 161 Russians working for European companies which have an established Sloveni- an-Russian business partnership with locations in Slovenia by e-mail to fill in an online questionnaire. The question- naire was presented in two languages – Slovenians filled in the Slovenian version of the questionnaire, and Russians filled in the Russian version. A total of 103 Slovenians and 124 Russians responded. If respondents did not answer every question of the online questionnaire, they were re- moved from our sample, leaving a total of 103 Slovenians (63 males and 40 females) and 114 Russians (44 males and 70 females). The online self-reported survey battery was sent to all of the employees of the individual organizations, while their participation was anonymous and voluntary. The sur- vey battery was administered in line with Slovenian law (Personal Data Protection Act 2004-01-3836 and subse- quent amendments) and the ethical standards for research approved by the Ethics Committee at the Faculty of Arts, University of Ljubljana (Slovenia). The consent of the par- ticipants was obtained by virtue of survey completion. The participants were told also that they could withdraw from the study at any time and that there would not be paid for participating. 3.2 Measures The survey included questions about demographics (age and gender served as the control variables) and scale items as described below. Independent variables. There were two independent variables in our study: (1) nationality (Slovenian and Rus- sian) and (2) level of trust in the partner in a business rela- tionship. Respondents’ level of trust was assessed using an adapted 12-item scale The Organizational Trust Inventory (OTI, short version; Cummings & Bromiley, 1996) includ- ing six direct questions and six reverse scored questions. OTI has been used in other cultural contexts, where its va- lidity was also confirmed, especially the short form of the scale (Aydan & Kaya, 2018). It can be used to evaluate trust regarding not only employees, but also suppliers and clients (Vidotto, Vicentini, Argentero, & Bromiley, 2008). Each of three trust dimensions (keep commitments, nego- tiate honestly, avoids taking excessive advantage) was as- sessed with four items. For the purpose of our study, some words in the items have been replaced. The scale items are presented in the Appendix section. For instance, we used “I think my Russian (Slovenian) partner tells the truth in negotiations” instead of “We think the people in ____ tell the truth in negotiations”. The respondents indicated on 102 Organizacija, Volume 53 Issue 2, May 2020Research Papers a scale ranging from 1 (strongly disagree) to 7 (strongly agree) how deeply they trust their business partner. Re- liability analysis revealed that the internal consistencies (Cronbach’s alphas) of all dimensions were acceptable (α > .618) to good (α > .845), and the OTI is appropriate for further scientific use and development (α > .840). Dependent variables. There were five dependent var- iables in our study. The first variable is the probability that the partner will not fulfil their obligations in the deal (DV1) assessed with the question “Please indicate the probability that the partner will not fulfil their obligations in the deal”. Participants indicated their agreement with items on a scale ranging from 0 (Most likely the partner will fulfil their obligations) to 1 (Most likely the partner will not fulfil their obligations). Since we were trying to measure the probability, the answers of the subjects could be in the range from 0 to 1 on a continuous scale; for a question sensitivity we divided the scale into 11 divisions: 0; 0.1; 0.2; 0.3; ...; 0.9; 1. When processing the responses divisional units were converted to percentages, as seen in Table 2. The other variables were four measures of control developed by the authors. To identify those variables we interviewed five participants and then analysed the struc- ture of control over the deal from our participant’s point of view (Table 1): • Participant’s level of control over a deal (DV2) was measured by asking participants what percentage of control over the deal’s key factors pertain to them and what percentage pertains to the partner. The question was “Please indicate what degree of control over the deal’s key factors pertains to you”. Participants in- dicated their answers on a scale ranging from 10% (Only 10% of key factors of a deal are under my con- trol) to 100% (All key factors of a deal are under my control). • Participant’s desired control over a deal (DV3) was measured with the question “Please indicate what de- gree of control over the deal’s key factors do you wish to pertain to you.” Participants indicated their answers on a scale ranging from 10% (I wish only 10% of key factors of the deal be under my control) to 100% (I wish all key factors of the deal be under my control). • The partner’s control over a deal (DV4) was meas- ured by asking participants what percentage of con- trol over the deal’s key factors pertains to the partner with the question “Please indicate what degree of con- trol over the deal’s key factors pertains to your part- ner”. Participants indicated their answers on a scale ranging from 10% (Only 10% of key factors of a deal are under partner’s control) to 100% (All key factors of a deal are under partner’s control). • Desired partner’s control over a deal (DV5) means how much control over a deal our participant desires to deliver to the partner. It was measured by asking participants what percentage of control over the deal’s key factors’ they wish to pertain to the partner. The question was “Please indicate what degree of control over the deal’s key factors do you wish to pertain to your partner”. Participants indicated their answers on a scale ranging from 10% (I wish only 10% of key factors of the deal to be under the partner’s control) to 100% (I wish all key factors of the deal to be un- der the partner’s control). Cronbach’s alpha was .72 for both (partner’s and desired partner’s) degrees of control. The questionnaire for control over deals was tested in the study. Due to its specific nature, the definition of its reliability is to be evaluated in the future. Table 1: Dependent variables (dv) of the control over deal WHO CONTROLS THE DEAL CONTROL OVER DEAL REAL DESIRED PARTICIPANT DV2 (as participant desired) DV3 (as participant perceives) HIS/HER PARTNER DV4 (as participant desired) DV5 (as s participant perceives) 103 Organizacija, Volume 53 Issue 2, May 2020Research Papers 4 Results The average age of the Slovenian respondents was 41.9 (SD = 9.6) and of the Russians was 38.8 (SD = 28.1). A total of 93 Slovenian and 112 Russian respondents had a bachelor’s or master’s degree, and only 10 Slovenian and two Russian respondents had received a vocational or professional education. Of the total, 56 Slovenian and 32 Russian respondents worked in managerial positions, 25 Slovenians and 61 Russians were entrepreneurs, and 48 Slovenians and 38 Russians were employees. Although there was some variation in the sample with regard to the positions held, the respondents were mostly educated pro- fessionals. No significant correlations were found between de- mographic variables (gender, age) and trust dimensions (Table 2). Moreover, controlling for these demographic variables in our further analysis did not significantly affect our study results. The probability that the partner will not fulfil their obligations in the deal was negatively related to the general level of trust (r = -.414, p ≤ .01), indicating that participants reported more probability of a partner’s breach of obligations if their trust in the partner is less. Our first findings indicate that Hypothesis 1 is strongly sup- ported (r = .349, p ≤ .01). Desired control over a deal: Cronbach’s alpha was .67 for both (subject’s and subject’s desired) degrees of control. Partner’s desired control over a deal: Cronbach’s alpha was .72 for both (partner’s and partner’s desired) de- grees of control. The difference between the degree of desired control and degree of control was negatively related to the level of trust (r = -.285, p ≤ .01), indicating that participants report- ed more difference between the degree of desired control and degree of actual control if their trust in the partner was lower. Thus, Hypothesis 2 is also strongly supported. Table 6: Main Configuration Management Concepts Found Variables M SD 1 2 3 4 5 6 7 8 9 10 11 1. Gender 1 2. Age 40.9 10.3 -.219** 3. Probability that partner will not fulfil obligations 33.7 26.7 .038 -.063 4. Degree of control 63.3 20.3 .092 -.011 .083 5. Degree of partner’s control 56.9 21.7 .148 * -.017 .052 .080 6. Degree of desired control 63.4 20.9 .043 .094 .070 .506 ** .112 7. Degree of partner’s desired control 54.7 23.0 .108 -.001 .101 .239** .577** .069 8. Difference between degree of desired control and degree of control 10.0 14.6 -.068 .061 .075 -.285** .140 .314** -.167* 9. General level of trust 59.2 11.2 .115 .080 -.414 ** -.026 .114 -.040 .005 -.225** 10. Keeping commitments 20.6 4.2 .114 .078 -.396 ** -.032 .116 .011 -.050 -.188* .912** 11. Negotiating honestly 20.3 4.3 .114 .081 -.349 ** .005 .160* -.020 .052 -.223** .884** .816** 12. Not taking excessive advantage 18.4 4.8 .054 .027 -.343 ** -.003 .030 -.079 .054 -.204* .793** .576** .528** Note: * p < .05 ** p < .01 104 Organizacija, Volume 53 Issue 2, May 2020Research Papers To test the hypotheses, we compared the variables of the Slovenian group to those of the Russians (Table 3). Analysis of the differences between the Slovenian and Russian samples showed that Russian partners estimate the likelihood that the partner will not fulfil promises in the deal to be significantly higher (M = 38.8,) than in the Slo- venian group (M = 33.7; U = 4597; p = 0.008). There were no differences in the groups of Slovenians and Russians concerning how they assessed the level of their control over the deal (M = 63.3, SD = 20.3) and how they wanted (desired) to control the deal (M = 63.4; SD = 20.9). How- ever, the differences were manifested in the level of the partner’s control over the deal. Russians recognize more partner control (M = 61.2, SD = 21.6) than Slovenian par- ticipants do (M = 56.9, SD = 21.7). Differences are also found in the desired control over the deal. For Russians, the desired partner’s control (M = 60.1, SD = 23.5) was significantly higher than what the Slovenians (M = 54.7, SD = 23.0) prefer as the desired partner’s control over the deal. Table 3: Descriptive statistics of comparison of Slovenians and Russians, according to the Mann-Whitney criterion (NSlovenian=103; NRussian=114) Measures Nationality M SD Mann Whitney U p Age Slo 40.9 10.3 5056.2 0.096 Rus 40.0 10.8 Probability that partner will not fulfil obligations Slo 33.7 26.7 4597.5 0.008** Rus 38.8 28.1 Degree of control Slo 63.3 20.3 5245.9 0.210 Rus 65.0 22.5 Degree of partner’s control Slo 56.9 21.7 4312.3 0.001** Rus 61.2 21.6 Degree of desired control Slo 63.4 20.9 5476.0 0.454 Rus 62.8 22.7 Degree of partner’s desired control Slo 54.7 23.0 4032.2 0.000** Rus 60.1 23.5 Difference between degree of desired control and degree of control Slo 10.0 14.6 2422.0 0.574 Rus 8.8 14.0 General level of trust Slo 59.2 11.2 5225.7 0.161 Rus 58.2 11.8 Keeping commitments Slo 21.2 3.8 4887.5 0.033* Rus 20.0 4.5 Negotiating honestly Slo 20.3 4.1 5632.5 0.604 Rus 20.2 4.4 Not taking excessive advantage Slo 18.4 4.8 5417.5 0.325 Rus 18.0 4.6 Note: * p < .05 ** p < .01 105 Organizacija, Volume 53 Issue 2, May 2020Research Papers Figures 1 and 2 illustrate the degree of control for both partners in two contrasting groups with low and high trust in the partner. Two samples (Slovenes and Russians) are presented on Figures 1 and 2, those with below and above average trust, and for each the degree of their own control and that of their partner are shown. Having identified the differences between the groups of Slovenian and Russian participants in terms of how they perceive their and their partners’ control, we assumed that trust-control relations can be manifested as follows: the lower the level of trust in the partner, the higher the control should be over the trans- action and less should be left to the control of the partner. However, this dependence was found only in the group of Russians (Figure 1). In the group of Slovenians, only the control recognized for the partner was associated with trust, while their own control remains constant regardless of the level of trust in the partner (Figure 2). As shown in Figure 1, there is a cross-level interaction between the degree of one’s own control and degree of one’s partner’s control with different levels of trust in the Russian sample. We can thus conclude, that in the Russian sample the will- ingness to give more control to the partner is more strongly tied to the level of trust than their willingness to reduce their own control over the transaction. More specifically, the key point is the difference between the subject’s and their partner’s control: in a group with a low level of trust, the subject’s own control is much higher than the partner control, and in a group with a high level of trust both the subject’s and partner’s levels of control are almost the same. Figure 1: Degree of control and degree of partner’s control with different levels of trust in the Russian sample Figure 1: Degree of control and degree of partner’s control with different levels of trust in the Slovenian sample 106 Organizacija, Volume 53 Issue 2, May 2020Research Papers As can be seen in Figure 2, there is no inter-level inter- action between the degree of the subject’s control and the degree of the partner’s control with different levels of trust in the Slovenian sample. In this, the respondents’ control over the deal and their agreement with the level of control their partners have is related to the level of trust to a greater extent than in Russian sample. Both the subject’s and part- ner’s level of control are equally expressed in groups with high and low levels of trust. The differences are manifested only in relation to groups with different levels of trust – the level of trust increases when the degree of control is lower. To test Hypothesis 3, regression analysis (Table 4) was used to find out which factors have the strongest impact on all variables associated with control (“the level of my control over the deal” and “the desired level of my control over the deal”, “the level of control over the deal by the partner” and “the desired level of control by the partner over the deal”). It was useful to compare the degree of in- fluence on these variables of the factors investigated by us and, in the case of an identified link, to find out whether the moderator of trust is such a link. The variance analysis of these regression models showed the validity of the influence of the set of independ- ent variables (a) nationality and specifics of doing business (in your country, or another), (b) probability that partner will not fulfil their obligations, (c) partner’s control and level of trust on the dependent variable desired partner’s control (F = 22.8; p < .01), while the regression model of dependence of the desired partner’s control on the set of the same independent variables was not reliable. We found that none of the factors we are considering affects control over the deal: neither the likelihood of a breach of the transaction, nor the partner’s control, nor national- ity (Slovenians and Russians) nor the specifics of doing business (in your country, or another). According to these results, trust cannot be considered a moderator. Only the partner’s control significantly affects the level of desired respondent’s control and desired partner’s control (strong influence). Hence, Hypothesis 3 was supported only in its first part. It is therefore not the respondent’s control but the part- ner’s control that impacts the desired respondents’ levels of control over a deal, i.e. control that respondents want to have themselves and control which respondents want to give to their partners. According to the results, the signifi- cant influence of the factors (a) nationality (Slovenians and Russians), (b) the peculiarities of doing business (in one’s own country or another) on the desired partner control should also be discussed. However, we did not distinguish these two factors in this study, so they should be carefully examined in the future. Thus, Hypothesis 4 was supported only partly. Variable Desired level of control Desired level of partner’s control B SD β B SD β Constant 51.394 11.491 13.138 10.406 Nationality -2.896 2.966 -.069 5.441 2.685 .118* Age .210 .140 .103 .001 .127 .000 Probability that partner will not fulfil obligations .065 .058 .084 .078 .052 .090 Degree of partner’s control .134 .068 .139* .573 .062 .540** General level of trust -.034 .137 -.019 -.035 .124 -.017 R2 .039 .353 F 1.7 22.8** Table 4: Regression analysis predicting degrees of control Note: N = 217. * p < .05, ** p < .01 107 Organizacija, Volume 53 Issue 2, May 2020Research Papers 5 Discussion Based on the findings we can conclude that Hypothe- ses 1 and 2 are strongly supported, and thus the results demonstrate that trust in Russian-Slovenian business re- lationships is cognitively and not emotionally based. Be- fore making a decision to trust or not trust an international business partner, a business person will take into account the probability that their partner will or will not fulfil their obligations in a deal. If this probability is lower, then the level of trust is higher. The cognitive basis of trust is also demonstrated by the results concerning the difference be- tween the subject’s desired level of control and their actual degree of control over a deal with a foreign partner. In our study, this difference is negatively related to the level of trust. At the same time, Hypotheses 3 and 4 were only par- tially supported. We suggested that the partner’s control of the deal is positively related to both types of desired control, or, in other words, the subject’s control of the deal determines how much control the subject wants to have and how much they want to give the partner. If the subject’s control is lower, then level of control desired is higher while the level of control desired for the partner is lower. At the same time, this connection is always due to the relationship between people and, in particular, the trust that exists between then. But our results did not show a direct connection between trust and the level of desired control over a deal. We found that trust only affects the subject’s willingness to allow their partner to have more control, rather than making the subject more willing to re- duce their own control over the deal. As mentioned above in our theoretical analysis, the trust-control relationship is described either as substitutive or complementary (Kalkman & Waard, 2017; Alpenberg & Scarbrough, 2018). Our results support the view that trust and control are more complementary to each other than substitutive. A previous study underlined that a combina- tion of formal control and trust gives rise to high project performance (Ning, 2017), and our findings suggest this is also reasonable for international business projects. As Sohaib and Kang (2015) suggested, turning to a comparison between the answers received from the Slo- venian and Russian samples, Russian businessmen focus more attention not on building relationships of trust at the stage of establishing contacts (Avios, 2018), but on the future opportunity to influence the course of the partner- ship. Control over the actions of a partner in future coop- eration for Russian entrepreneurs is more important than the step-by-step establishment of trust at the beginning of cooperation. The Russian managers report a higher degree of partner’s control and also the desire for more partner’s control than Slovenians, which is in line with Hofstede’s findings (2001) – based on the masculinity dimension Slo- venians are more feminine oriented compared to Russians, Slovenians’ dominant value is caring for others and quality of life, but Russians, in relation to the high power distance score, accept dominant behaviour when it comes from an authority, but is not appreciated among peers. Slovenians’ managers express less need for control in their internation- al business. It turns out that the respondents are much more willing to regulate or influence the level of the partner’s control over the deal in accordance with their desires (de- sired partner’s control), but their ideal control for them is not so variable (respondent’s desired control). As a result, we can underline that the rule “trust, but verify” is in force. Hence, the role of trust in a business partnership, especial- ly in the process leading to the deal, is not so important in itself, but is important only in conjunction with other fac- tors, and thus while the findings agree with those of other studies that note trust is important for business, we found that control is more important. 5.1 Practical Implications This study contributes to three important domains of re- search: international business partnership; trust in global business relations; and control over a deal between part- ners, one of whom conducts business in this country, while the other is from a foreign country and runs their business here. As our results showed, there is no strong relation be- tween trust in the partner and control over the deal. There- fore, the degree of control over the deal should be serious- ly acknowledged at all levels of trust in the partner. More specifically, partners should reserve some time to discuss what degree of control they prefer to have and are ready to share with each other. They also should find a balance between their desired and possible degrees of control over a deal. They should not believe that if their partners trust them then this means they are open to reducing their level of control over a deal. This is especially important for in- ternational partnerships, where the partners belong to dif- ferent cultures, or cooperate in situations where one of the partners has just started their business in another country. Our finding that there are no strong differences between most of the variables in the Russian and Slovenian sam- ples is actually good news. This implies that such partners might pay more attention to the control measures of a deal, rather than their partner’s nationality. It seems that the most important thing is to negotiate measures and degrees of control over the deal, and especially to consider both partners’ expectations concerning what exactly they want from each other’s controlling actions. The results of the present study on the psychological mechanisms of trust and control can benefit the interna- tional partnerships developed between entrepreneurs from different countries. In addition, the practical implications of our study’s findings might be extended beyond this uncertain situation to one when business partners already 108 Organizacija, Volume 53 Issue 2, May 2020Research Papers have high levels of trust in each other. This is because we found with regard to the determinants of control over deals that business partners not only strive to build trust, but also to negotiate honestly about having mutually satisfying lev- els control over their cooperation. As Russians often say, “Trust the partner, but verify”. The significance of this statement for Russian and Slo- venian cultures becomes more evident in the context of our study: trust in a partner does not remove control over cooperation, or in other words, “one should not trust a partner absolutely”. Thus, finding a balance between trust and control over deals may be recognized as a challenge to both business partners, especially if they have differ- ent cultural backgrounds. The current study and the results presented here are helpful in analysing and understanding the control preferences of business partners, and can help in identifying why things worked well or went badly in a business relationship. In a broader context, our results may be applied in training programs aimed at developing such managerial competences as business negotiation skills and strategic thinking. 5.2 Limitations and Future Research This study has some limitations that should be discussed. A first limitation concerns the fact that we were not able to include information on participants’ professional field and the duration of business cooperation between Slove- nian and Russian business partners. A second potential limitation relates to the generalizability of our results. The sample of our study mainly consisted of highly educated respondents, which may restrict the generalizability of our findings to less educated people. Future research may in- vestigate whether our results are also found among less educated people. The third limitation of our study is that it relies on single source data, which raises some concerns about common method variance (Podsakoff et al., 2003). Because our study focused on attitudes and behaviour within the person, we were bound to self-report measures. The sample is selective in that participants are engaged in successfully developing Slovenian-Russian business rela- tionships, mostly in Slovenia. However, a more objective investigation would need all participants to interact with each other with different business results. Therefore, we could not use an experimental design with a control group of partners who have unsuccessful experiences of Rus- sian-Slovenian business partnership. As a consequence, our sample is not entirely representative of the general population. Rather, we are interested in examining the mediators by which a business partnership affects when partners are inclined to pursue less or more control over the deal. Although our participants came from a convenient sample, the sample has its strength in its heterogeneity regarding the experience of Slovenian-Russian business partnerships and types of business, which allows for great- er generalizability of our findings. Because the topic of this study is relatively new, we only focused on establishing a link between trust in the partner and probability of the part- ner’s fulfilment of obligations, and trust in the partner and measures of control over a deal. Now that this association has been established in this study, future research should replicate our findings and measure the process by which levels of trust in the partner affect the degrees of control over a deal. We suggested that trust negatively affects the probability that the partner will not fulfil their obligations in the deal. We also assumed that persons may estimate this probability and establish the degree of control over the deal depending on the trust in the partner. Future re- search should test these and possible other explanations when studying relationships between trust and control in other cultures. Finally, future studies could also pay attention to inter- personal relationships between business partners and how these affect the control over the deal. For example, per- ceptions of business partners’ similarity may support the development of coherence and balance in control over the deal. Persons may perceive some of their partners as more trustworthy and capable, and therefore delegate them more control over the deal. These interpersonal factors together with the perception of probability that the partner will not fulfil their obligations could be further explored. Future research is needed, however, in order to inves- tigate whether control over a deal may be operationalized and used to measure not trust in the partner, but mutu- al trust between partners. Additionally, future research should pay more attention to intercultural differences, for example, with respect to different countries’ experiences of a market economy. 6 Conclusion Although additional study is needed, some important con- tributions to research concerning trust-control relations between international (Russian-Slovenian) partners have been made with this work. First, this study has empirically highlighted the importance of distinguishing between the subject’s control over a deal and their preferences concern- ing their partner’s control over the deal, independently of the level of trust the subject has in their partner. Both di- mensions of control over the deal appear to be about equal- ly important for a business partnership. Second, this article contributes to trust theory in general and in trust-control relations research in particular by testing how trust in a business partner acts as moderator for sharing control over a deal between the subject and their business partner. Cul- tural factors which can be understood as a resource in a cross-cultural business interaction framework were tested in order to understand what affects the relation between business partners from different cultures. The results 109 Organizacija, Volume 53 Issue 2, May 2020Research Papers showed only slight differences, which may be an indica- tion that there could be more similarities than differences in the effects of the culture. However, there was an indica- tion that cultural dependence may be more relevant for the effects of the subject’s control over the deal than for those of their partner’s control. Nevertheless, especially when considering more complex relations such as moderating effects, it is important to continue investigating both di- mensions of control over a deal in future research. The similarities and slight differences identified in present study add insight into the distinctions between the two control dimensions and conceptual model of trust as a predictor for assigning the appropriate levels of control in business relationships. The results indicate that the level of trust in a business partner may not necessarily increase the positive effect of the level of control over the deal. In- stead, such forms of dependence could represent ways of coping with an uncertain situation in order to better protect the partnership. 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In 2019 ACM/IEEE 14th International Confer- ence on Global Software Engineering (ICGSE), 152- 161. https://doi.org/10.1109/ICGSE.2019.00036 Weck, M., & Ivanova, M. (2013). The importance of cultural adaptation for the trust development within business relationships. Industrial Marketing Manage- ment, 42(3), 210-220. http://doi.org/10.1108/08858621311302868 Yang, J., Mossholder, K. W., & Peng, T. K. (2009). Super- visory procedural justice effect: The mediating roles of cognitive and affective trust. Leadership Quarterly, 20(2), 143-154. https://doi.org/10.1016/j.leaqua.2009.01.009 112 Organizacija, Volume 53 Issue 2, May 2020Research Papers Eva Boštjančič is an associate professor of the psychology of work and organisation at the Psychology Department of the Faculty of Arts in Ljubljana. Her research work is involved in the area of talent, cultural intelligence and management in an organisational environment, returning to work after burnout or after a long illness and so forth. She also advises, conducts workshops, gives talks to employees in the private and public sectors and manages the website www. psihologijadela.com. Fayruza ISMAGILOVA, is a part-time professor at the Department of Psychology, Ural Institute of Humanities, Ural Federal University named after the first President of Russia B. N. Yeltsin. Scientific activities: scientific monograph, professional publications, more than 60 national and international contributions and presentations. Research interests: behavioural economy, work experience as competitive advantage at the international labour market, managerial decision making, lifelong learning. Alexey MALTCEV, is an assistant professor at the Department of Psychology, Ural Institute of Humanities, Ural Federal University named after the first President of Russia B. N. Yeltsin. Scientific activities: professional publications, more than 40 national and international contributions and presentations. Research interests: psychological diagnostics, professional development, lifelong learning. Povezanost nadzora nad poslom in kognitivnim zaupanjem v mednarodnih poslovnih odnosih Ozadje in namen: Zaupanje je vpeto v kulturo naroda kot orodje, ki pomaga oblikovati strateška partnerstva in skle- pati poslovne odnose. Zaupanje v poslovnega partnerja je lahko posledica očitnih razlik, na primer, kateri del posla želi nadzorovati sam in kateri del posla želi prepustiti partnerju. Če je razlika med resnično in želeno ravnijo par- tnerjevega nadzora nad poslom velika, je potem sploh mogoče vzpostaviti zaupanje, zlasti v medkulturnih poslovnih odnosih? Tako kulturne razlike kot norme vplivajo na poslovne izide, pri čemer razlike med slovenskimi in ruskimi poslovnimi partnerji s tega vidika še niso bile analizirane. Namen: Poslovne odnose oblikuje vrsta vedenj, predvsem pa sodelovanje in tekmovanje, ki temeljita na zaupanju. Namen raziskave je bil ugotoviti, ali igra zaupanje moderatorsko spremenljivko v teh odnosih. Želeli smo raziskati, ali poslovni partnerji ob višji stopnji zaupanja, izvajajo manj nadzora. Cilj študije je bil ugotoviti povezavo med stopnjo nadzora in zaupanjem v poslovnih odnosih udeležencev iz različnih kultur. Zasnova / metodologija / pristop: Sodelovali so 103 slovenski in 124 ruskih poslovnih partnerjev, ki so izpolnili Vprašalnik organizacijskega zaupanja (OTI) ter pet vprašanj o nadzoru nad poslom. Rezultati: Rezultati so pokazali, da le zaznani nadzor nad poslovnim partnerjem vpliva na raven želenega nadzora kot tudi na želeni nadzor, ki ga udeleženci s strani poslovnih partnerjev pričakujejo. Zaključek: Pri oblikovanju nadzore v poslovnih odnosih se zaupanje ni izkazalo kot pomemben moderator. Če si po- slovni partnerji želijo višje stopnje zaupanja, predlagajo povečanje partnerjevega nadzora, a pri tem niso pripravljani na zmanjšanje lastnega nadzora. Ta povezava je bila bolj prisotna pri ruskih kot pri slovenskih poslovnih partnerjih. Ključne besede: zaupanje, poslovni odnosi, poslovni partner, nadzor nad poslom, obveznosti, Slovenija, Rusija. 113 Organizacija, Volume 53 Issue 2, May 2020Research Papers Appendix: The adapted version of The Organizational Trust Inventory (Cummings & Bromiley, 1996) Dimensions Items Keeping commitments In my opinion, my Russian (Slovenian) business partner is reliable. I feel that my Russian (Slovenian) business partner will keep his(her) word. In my opinion, my Russian (Slovenian) business partner does not mislead me. I feel that my Russian (Slovenian) business partner tries to get out of his(her) commitments. Negotiating honestly I think my Russian (Slovenian) business partner tells the truth in negotiations. I feel that my Russian (Slovenian) business partner meets its negotiated obligations to our deal. I feel that my Russian (Slovenian) business partner negotiates with me honestly. I feel that my Russian (Slovenian) business partner negotiates joint expectations fairly. Avoiding taking exces- sive advantage I think that that my Russian (Slovenian) business partner tries to get the upper hand. I think that that my Russian (Slovenian) business partner succeed by stepping on other people. I think that my Russian (Slovenian) business partner takes advantage of our problems. I think that my Russian (Slovenian) business partner takes advantage of people who are vulner- able. 114 Organizacija, Volume 53 Issue 2, May 2020Research Papers Development of Corporate Sustainability in Enterprises through the Application of Selected Practices and Tools Petra LESNIKOVA1 and Jarmila SCHMIDTOVA2 1Technical University in Zvolen, Department of Economics, Management and Business, 960 01 Zvolen, Slovakia, lesnikova@tuzvo.sk 2Technical University in Zvolen, Department of Mathematics and Descriptive Geometry, 960 01 Zvolen, Slovakia, schmidtova@tuzvo.sk Background and Purpose: The research paper identifies practices and tools to support corporate sustainability concept that can lead to increased business competitiveness in a dynamically developing business world. The pur- pose of the paper is to provide insight into the practices and tools of corporate sustainability applied by the Slovak industrial enterprises and which barriers do exist. Moreover, the aim is also to identify factors influencing the appli- cation of tools such as company ownership, importance of sustainability concept, and company vision. Design/Methodology/ Approach: In order to obtain the necessary data an online questionnaire was used. The sample of enterprises was selected on the basis of the enterprise size and the industry focus (n = 336). The following statistical methods were used 1) one-way ANOVA, 2) the Kruskal-Wallis test, and 3) the Wilcoxon rank-sum test. Results: This paper revealed some key insights: 1) foreign-owned enterprises are better at application of sustain- ability practices and tools, 2) still quite a few enterprises attribute the importance to the concept, 3) the existence of barriers, particularly in the form of a lack of financial resources, 4) one of the key drivers of sustainability is enterprise vision. Conclusion: The paper created and analyzed quite a comprehensive list of practices and tools suitable for enter- prises in Slovakia. There was an effort to find out point at the ways how enterprises contribute to sustainable devel- opment. It was also found out that they attach importance to vision as a major trigger for the application of the tools. Keywords: Corporate sustainability, Practices, Tools, Barriers, Company vision DOI: 10.2478/orga-2020-0008 1 Received: October 19, 2019; revised: February 17, 2020; accepted: February 28, 2020 1 Introduction For any enterprise which tries to be sustainable in every way of its activity, everything begins with operating with integrity. This means that business entity will behave in the sense of respecting fundamental responsibilities in the areas of human rights, labor, environment and anticor- ruption. The well-being of workers, communities and the whole planet is linked to the health of the business world. For this reason it is necessary for the enterprise to manage proactively own operations and also value chain (United Nations Global Compact, 2014). The number of factors, e.g. excessive environmental pollution, climate change, corporate behavior towards local communities have led the enterprise to focus on the environmental and social consequences of its activities. This was mainly due to the current situation, marked by environmental burden, high social tension and human behavior. Current models of production and consumption are not sustainable, which is already a well-known fact. Organizations such as the UN, OECD, World Bank, or European Union have paid more attention to this issue. In this regard, enterprises play a sig- nificant role. Enterprises can “green” their own products 115 Organizacija, Volume 53 Issue 2, May 2020Research Papers and also their production. Thereby they can support en- vironmental and social standards in their business chains or implementation of sustainable innovations and solution in the context of sustainable development (Tukker et al., 2008, p.410). The example of sustainable innovation can be the application of the life cycle assessment (Potkány, Gejdoš & Debnár, 2018). Relatively new and innovative approaches to business have been still a challenge, e.g. corporate sustainability, In- dustry 4.0 and many others. Sustainability is gaining quite a strong response in the business sphere, as evidenced by several recent surveys (Bonini & Bové, 2014; GlobeScan & BSR, 2019; The Bureau of National Affairs, 2018). This is in conditions of Slovakia not a thoroughly explored area of corporate management. Corporate sustainability can be perceived as an enterprise strategy that monitors long- term business growth, efficiency, performance and com- petitiveness by integrating economic, environmental and social aspects into corporate management (Kocmanová, Hřebíček & Dočekalová, 2011). Enterprises can use some tools, initiatives or approaches to become a better producer of products with respect to the future generations. Eco‐ef- ficiency, life cycle assessment, and sustainability report- ing are examples of promoting sustainability which have been developed mainly by and for corporations (Lozano, 2019). Another examples are tools which are described in the study of Hlushko (2018), who divided the tools into qualitative and quantitative ones. He included tools as stakeholder analysis, training handouts, environmental monitoring, social audits, etc. There are many initiatives or tools to support corporate sustainability and they will be discussed in more detail in the next chapter. The purpose of the paper is to identify initiatives and tools used by Slovak industrial enterprises to support sus- tainability and evaluate which are the most commonly used. Within the analysis we focused on the existence of potential barriers in their application. Consequently, the aim is also to identify the factors on affecting the use of the tools, e.g. company ownership, importance of sustainabil- ity concept, and company vision. 2 Corporate sustainability in business practices In business practices it is necessary to distinguish, as claimed by Hyršlová (2009), between the “sustainable” enterprise and the enterprise that adopts the concept of sustainable development and seeks to ensure that business activities are in line with the concept. In a business that adopts the concept, changes are required in all business processes, goals, and target values. It means that it is nec- essary to implement a range of actions and practices within enterprise that can reduce negative impacts and enhance positive effects. In this way the enterprise is on the road towards sustainability, while sustainability is the ultimate goal that the enterprise seeks. Sustainability is a business strategy that focuses on profitability over a long-term ho- rizon, also requiring environmental and social issues to be incorporated into the business model. Moreover, sustaina- bility practices can bring an improving competition advan- tage (Clark, Feiner & Viehs, 2015), improving the business performance (Adams, Thornton & Sepehri, 2012), and a long-term success in the long-term perspective (Eccles, Io- annou & Serafeim, 2012). There are other important bene- fits from acting on sustainability in a proactive way in the meaning of strong correlation with higher equity returns (Khan, Serafeim & Yoon, 2016). Sustainability at the enterprise level can be considered a way to take measures such as recycling, conservation of non-renewable materials and energy consumption to reduce the negative impacts of business activities on the environment. These types of activities are increasing- ly becoming part of a deeper strategic perspective in the context of sustainability (Gittel, Magnusson & Merenda, 2012). According to survey of companies from Europe and the United States conducted by The Bureau of National Affairs (2018), these companies see sustainability mainly as reducing company´s environmental impact, investing in long-term growth strategies, and developing more sus- tainable products and services. These statements reflect the need and involvement in the implementation of sustaina- bility initiatives and practices. 2.1 Practices and tools supporting sustainability There are many terms which are used in the terminolo- gy of this issue, e.g. tools, standards, initiative, activities, methods, practices, principles. The reason is that this is- sue is quite wide and plenty of supported attributes can be included here. For promoting the corporate sustainability concept an enterprise can use many initiatives and tools which turn the principles of sustainable development into a competitive advantage (Bocken, Short, Rana, Evans & 2014). These business tools present measures for mak- ing products and services, and the processes that delivers them, more sustainable. Another type of tools is the man- agement systems and standards designed to promote sus- tainable business and certification schemes against which they can be benchmarked (International Institute for Sus- tainable Development, 2013). Global Reporting Initiative (GRI) has a great importance in individual sustainability initiatives and activities. This framework presents a global best practice for reporting publicly on a range of econom- ic, environmental and social impacts and particular activ- ities (GRI, 2015). Some authors divided these practices into environmental area, e.g. reduction of carbon footprint, energy and water conservation, etc. and social area, such 116 Organizacija, Volume 53 Issue 2, May 2020Research Papers as increasing workforce diversity or improving labor con- ditions, etc. (Taylor, Ylm & Vithayathil, 2018). For the purpose of this paper we primary divided the sustainability practices and tools in the sense of Triple bottom line prin- ciple (framework with three parts: economic, environmen- tal, and social). According to Global Reporting Initiative (2015, p. 48) the economic dimension of sustainability concerns the company’s impacts on the economic conditions of its stakeholders and on economic systems at local, national, and global levels. It does not focus on the financial condi- tion of the company. ISO management standards are one of the used sustainable practices from the economic perspec- tive. The ISO 9000 family of standards provides guidance and tools for enterprises, which want to ensure that their products and services consistently meet requirements of their customer and that quality is consistently improved (iso.org). Also the EFQM Excellence Model is committed to helping companies drive improvement and comprehen- sive management framework used by over 50,000 compa- nies around the world (efqm.org). Customers, as well as the enterprise itself, can gain tangible and also intangible benefits from the corporate sustainable management ac- tivities, which can cause the company-customer relation- ships to grow stronger (Shin, Thai, Grewal & Kim, 2017). Management control systems have also been linked with regard to environmental and sustainability issues leaving the question open as to how sustainability management control is embedded in the context of the range of manage- ment methods applied in an enterprise (Maas, Schalteg- ger & Crutzen, 2016). Audit is an important practice to support sustainability activities; however, companies still have reserves in using this tool. Furthermore, auditing and reporting of sustainability information are increasingly structured and standardized (Boiral & Gedron, 2011). The enterprises within the social area of corporate sus- tainability primarily invest socially responsible actions, which improve their position and motivate their members of staff (Miragaia, Ferreira & Pombo, 2017). These prac- tices and tools concern particular areas such as human cap- ital development, labor management, supply chain labor standards and so on (Lyon et al., 2018). A comprehensive example of tool is the ISO 26000 standard, whose aim is to provide guidance on social responsibility and help all types of organizations contribute to sustainable devel- opment (Hahn, 2012). Social area of practices and tools include in particular: training and education, motivation programs, diversity and equal opportunity, human rights which include issues as non-discrimination, gender equal- ity, etc. (GRI, 2015). In the context of motivation, the au- thors (Lorincová et al., 2016, p.360) pay particular atten- tion to the three most satisfying motivation factors which are significant especially for Slovak companies, and those are physical work demands, “interestingness” of work and usefulness of one‘s qualification. A possible tool is a social audit representing an independent evaluation of the per- formance of an enterprise. It relates to the attainment of enterprise social goals and therefore, it is a tool of social accountability of an enterprise (Hlushko, 2018). Another form of social area is characterized by promotion to local community with implemented local community engage- ment, impact assessments, and development programs (GRI, 2015). The environmental area of corporate sustainabili- ty concept represents mainly the ISO 14000 family of standards, which provide practical tools for enterprises and organizations of all types looking for managing their environmental responsibilities. These standards can help their users in achieving the strategic corporate objective by incorporating environmental issues into business man- agement, providing a competitive and financial advantage through improved efficiencies and reduced costs or en- couraging better environmental performance of suppliers by integrating them into the organization’s business sys- tems (iso.org). Another important tool is the cleaner pro- duction which means “...the continuous application of an integrated preventive environmental strategy applied to processes, products, and services to increase overall effi- ciency and reduce risks to humans and the environment” (UNEP, 2002). Cleaner production principles are also practiced as waste minimization, pollution prevention, and eco-efficiency (founded as a 4 R): Reduce, Recycle, Reuse, and Reformulate (UNEP, 2002). An example of re- search in this field is study by authors Vicianová-Hroncová and Hronec (2017) who dealt with the regression analysis between the numbers of environmentally oriented compa- nies and the production of green-house gases, producing sulphur oxide, nitrogen oxide, etc. Further important prac- tices cover also procurement. Green public procurement (GPP; or green purchasing) is a voluntary tool; it has a key role to play in the EU’s efforts to become a more re- source-efficient economy. It can help stimulate a critical mass of demand for more sustainable goods and services which otherwise would be difficult to get into the market. GPP is therefore a strong stimulus for eco-innovation (ec. europa.eu). Another tool used in this area is eco-labeling. It is a sign of the company’s commitment to environmental protection (Witek, 2017). Other examples are reducing en- vironmental impact, raw material sourcing, packaging and waste, opportunities in clean tech, opportunities in renew- able energy or green procurement, etc. (Lyon et al., 2018). However, the view of practices and tools may be slight- ly different. Table 1 presents the tools recommended for the use created by authors Iatridis and Schroeder (2016) in classification by standards, global initiatives and princi- ples. The last two categories include initiatives and guide- lines for sustainability from different organizations, e.g. Global Reporting Initiative, OECD or Global Compact. Each of mentioned organizations has an aim to implement universal sustainability principles through particular tools into business practice. 117 Organizacija, Volume 53 Issue 2, May 2020Research Papers A representative list of tools used by the most sustainable organizations to manage sustainability in division to cer- tified and assured tools, non-certified tools, international guidelines, disclosure, other management programs, and other tools and systems are presented in work of Nawaz and Koç (2019). In relation to environmental area, tools as environmental management systems and labeling sys- tems, environmental product declaration and eco design are mentioned (Tobler-Rohr, 2011). From our point of view the classification by all authors except Tobler-Rohr provide a complex list of possible sustainability activities. Some are more suitable for large and multinational compa- nies or specific industries. Many of practices and tools are mentioned in research of Szanto (2018). These are oriented on availability of sustainability themes and practices on selected business- es websites as part of online communication. Reporting is an integral component of the sustainability practices and tools. On the other hand the sustainable reporting tools have some deficiencies: the lack of standardization which makes comparability difficult, corporations delib- erately manipulating stakeholders’ perception through ‘green-washing’, the lack of attention to uncertainty in the assessment of sustainability performance and etc. (Siew, 2015). The use of practices and tools is not compulsory, but it is on a voluntary base. For this reason, enterprises are not forced to use them in a wide range. Many barriers that enterprises can perceive also contribute to this situation. Barriers of changing the corporate behavior to achieve sus- tainability through applying of some practices and tools are presented by Burnes (2017): the low level of change effectiveness in most organizations; the lack of clarity and consistency of change goals; and the need for appropri- ate and consistent leadership. Other barriers that can be seen are as follows: pressure on short-term economic per- formance rather than the long-term vision of the environ- mental and social sustainability, business’s lack of proper competences and/or abilities, lack or improper use of key sustainability indicators, insufficient support by current organizational structure, sustainability as too low priority, insufficient involvement of stakeholders, lack of stimuli to implement sustainable development activities (Bonini, 2012; Hyršlová, 2009). The research question supports the purpose of the paper, as follows: RQ1: What practices and tools do selected enterprises use to support corporate sustainability and are there any barriers to their application? An important factor in the implementation of all the concepts based on the Triple bottom line is the factor of ownership of the company capital. In the Slovak condi- tions, large foreign owned businesses are mostly those which have better opportunities to implement sustaina- ble and responsible entrepreneurship principles (Markuš, 2005). The results of the survey also showed that in terms of ownership, the concept of sustainability is more applied in foreign-owned enterprises (Vicianová, 2011). Integra- tion of corporate sustainability into business activities is still problematic (Witjes, Vermeulen & Cramer, 2016) not only in Slovakia. On the other hand it is evident, that inter- est of companies in this issue is increasing. The research carried out in 125 companies which are the members of the sustainable business community shows that with more than half of the companies, the sustainability is among the top five priorities for their CEO. Moreover, quarter of companies reported that it is among the top three priorities. This trend points to how sustainability is being prioritized within companies (GlobeScan & BSR, 2019). In regard to the above mentioned facts, we have defined the following hypotheses: H1: Enterprises with foreign capital use more practic- es/tools in their practice than is in the case of enterprises with domestic capital. H2: Enterprises with higher importance dedicated to the corporate sustainability concept use wider range of practices and tools. 2.2 Strategic background of corporate sustainability and its practices In relation to strategic level of enterprise we encounter the term of sustainable strategic management. It enables the businesses to develop and to apply strategic methods and tools to ensure environmental and social well-being. Sus- tainable strategic management creates a link between the social, environmental and corporate aspects of the enter- prise (Stead & Stead, 2009). The following can help enter- prise to be successful in terms of sustainability: reflection of the social and environmental area in corporate mission, Standards ISO 9001, ISO 14001, EMAS, ISO 50001, OHSAS 18001, SA 8000, ISO/IEC 27001, ISO 26000 Global Initiatives GRI, Global Compact, The OECD Guidelines for MNE, UN Guiding Principles on Business and Human Rights, ILO MNE Declaration Principles Business Principles for Countering Bribery, Caux Round Table Principles, CERES Roadmap for Sustainability, ETI Base Code, Business Social Compliance Initiative Table 1: Recommended tools (Iatridis and Schroeder, 2016) 118 Organizacija, Volume 53 Issue 2, May 2020Research Papers vision and values, application of international social and environmental standards in company management system, defining not only objectives but also measurement of eco- nomic, social and environmental areas (Fülöp & Hernádi, 2014). Transformation of sustainable development into enterprise includes changing corporate culture, employee attitudes, defining commitments and responsibilities, cre- ating an appropriate organizational structure, information system, and operational activities (Epstein & Buhovac, 2014). Enterprises are integrating sustainability across many processes. With regard to results of McKinsey´s survey, most respondents claim that their enterprises have in- tegrated sustainability into mission, vision and values (Bonini, 2012) which is considered crucial in this issue. According to Baumgartner and Rauter (2017) there is the need for more concrete guidance that will allow businesses to act strategically and successfully in a sustainable way. It seems that a clear definition of sustainability and a vision is required to support the integration of sustainability into the business (Engert & Baumgartner, 2016). According to a survey conducted among Swedish companies, the com- pany vision must be formulated and promoted among all members of company and that guides the daily work of employees (Chhotray, Sivertsson & Tell, 2018). In prac- tical application of these tools is an important role of in- stitutional pressure for the implementation of these tools (Windolph, Schaltegger, & Herzig, 2014). Based on this, we have defined another research question as well as the last hypothesis: RQ2: What starting point/driver should be done to im- plement these practices and tools by enterprises? H3: Enterprises that attribute a higher importance to a vision and consequently transform it into the business strategy use more practices and tools. It can be conclude as claimed by the authors Eccles, Ioannou, & Serafeim (2014) that the High Sustainability companies are characterized by several features: a greater attention to nonfinancial measures regarding employees; a greater emphasis on external environmental and social standards for selecting, monitoring, and measuring the performance of their suppliers; and a higher level of trans- parency in their disclosure of nonfinancial information, etc. 3 Research methodology 3.1 Data collection and sample To answer the research questions and hypotheses the pri- mary data were obtained through a questionnaire survey using the sample of Slovak industrial enterprises. We have decided to focus on enterprises of all sizes, except micro-enterprises. In our case the business sized categori- zation was based on European Commission Directive no. 2003/361/EC (European Commission, 2003) according to employee number. Micro-enterprises were excluded be- cause many of them struggle with survival, often lacking a strategic approach. The object of the investigation was industrial enterprises. The research was based on the di- vision of enterprises according to SK NACE (Statistical Office of Slovak Republic) and industrial enterprises from below mentioned fields having a significant impact on the environment, from our point of view, were taken into consideration. Following industries were selected: leather, wood-processing (incl. manufacturing of furniture), pulp and paper (incl. printing), chemicals, manufacturing of rubber and plastic products, coke and refined petroleum products, pharmaceuticals, metallurgy, engineering (incl. automotive), electrical, and other non-metallic mineral products. The impact of industry on the environment is perceived from two sides: based on the impact of industri- al production on the environment as well as the impact of consumption, i.e. the use of industrial products. We obtained the database of enterprises from the Statis- tical Office of the Slovak Republic in the number of 2,793. We addressed enterprises (whose e-mail contact was avail- able) with the request to fill out the questionnaire. From the total number of enterprises, 2,125 enterprises were contacted. A total of 501 questionnaires was returned. In order to statistically process individual hypotheses without missing data, 135 questionnaires were excluded. 336 cor- rectly filled out questionnaires were analyzed. The online questionnaire was focused on application of practices and tools of corporate sustainability (CS) which are shown in Table 2. The list was based on GRI meth- odology1. Unlike other authors mentioned in subchapter 2.1, we divided the practices and tools into TBL areas, not according to their forms. We focused on commonly used tools in business practice. Respondents had the opportuni- ty to indicate which tools they use in their practice. Other questions in the questionnaire concerned the existing barriers (whereas we rely on the authors’ knowl- edge from subchapter 2.1) and also the importance that the companies surveyed assign to the concept of sustainability itself. Respondents’ attitudes could be expressed on a scale of 1 to 4, with 1 meaning high importance and 4 mean- ing low importance. Based on the literature background, our interest was to explore the vision of enterprises. We wondered whether enterprises have sustainability elements in their vision. The respondents had the opportunity to re- spond as follows: yes, partially yes, no, I do not know. The collected data were processed by MS Excel. With- in the descriptive statistics, we used absolute and relative frequencies and averages. The following Figure 1 summa- rizes the methodology highlighting research questions and hypotheses. 1 3 https://www2.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf 119 Organizacija, Volume 53 Issue 2, May 2020Research Papers Table 2: Unit Root Test for Panel Data *The difference between motivation program for employees (courses, training, health care) and additional social programs for employees (supplementary pension insurance or life insurance, corporate loans, financial assistance, childcare programs and so on) is that programs offer something extra that is not so common in business practice. 3.2 Statistics methods In our study all investigated variables except one are at ordinal level of measurement. These variables play a role in grouping the values in our analyses. The dependent var- iable of our interest – range of tools - is at the interval level of measurement. When the assumptions of one-way ANOVA – normal distribution of dependent variable and approximately equal variance on the scores across groups are not met we use nonparametric rank-sum tests – the Kruskal-Wallis test and the Wilcoxon rank-sum test for two independent samples. The Wilcoxon rank-sum test seeks to determine wheth- er two populations are identical in measure of central ten- dency or different from one another. The test uses a test statistic, symbolized by W that is derived by pooling the data contained in two independent samples, ranking the data from the smallest value to the largest value, and sum- ming the ranks in each sample. The Kruskal-Wallis test is an extension of the Wilcox- on rank-sum test from two to more than two populations. The purpose of the test remains the same: to determine whether the populations of interest are identical in measure of central tendency or different from one another. A final test statistic H is computed after pooling and ranking the Selected practices / tools to support CS Economic area Social area Environmental area • ISO 9001 • Customer satisfaction survey • Audit • Cost reduction programs • Research and development (R&D) • EFQM model • Management of crises • Benchmarking • Motivation programs for employees* • Additional social programs for em- ployees* • Employees satisfaction survey • Gender equity • Ethic code • System of safe and protection health • Philanthropy • ISO 26000 • SA 8000 • Social audit • Clean production • ISO 14001 • Renewable resources • Green public procurement • Eco-labeling • EMAS • Carbon footprint • Life-cycle assessment • Environmental reporting • Environmental benchmarking • Ecological footprint Figure 1: Methodology of research 120 Organizacija, Volume 53 Issue 2, May 2020Research Papers observations contained in the various samples. A rank sum is computed for each original sample. All our analyses were carried out using the statistical soft- ware STATISTICA 12. We used .05 level of significance. 4 Current state of practices and tool application in Slovak enterprises The object of our interest was pointing out at the most commonly used practices and tools of sustainability. The research was not focused only on tools in individual areas separately, but also on the joint application. Moreover, we identified the average of practices and tools by particular areas and by industry. The center of attention was to iden- tify the existing barriers and the influence of factors on application of practices and tools such as company own- ership, importance of sustainability concept that is linked with company strategy, and company vision. 4.1 Descriptive statistics Enterprises can use a plenty of tools to promote their atti- tude to sustainable development. Many of them understand the meaning of responsible behavior towards themselves but also towards the local community, and environment. This behavior could bring many benefits for not only envi- ronment but also for enterprises (see Chapter 2). This sec- tion provides a brief overview of using corporate sustaina- bility practices and tools in terms of range and average of them in economic, environmental and social area. Figure 2 presents the most often used practices and tools promoting corporate sustainability. The highest num- ber of enterprises uses management system STN ISO 9001 (nearly 70.00%). It may be caused by a relatively strong pressure to implement these standards in the supply chain. Enterprises which try to differentiate themselves from the competition are aware of the fact that the ability to satis- fy customer needs is crucial. The effective and well-im- plemented quality management system can bring an in- creasing customer satisfaction, increasing product quality, strengthened trust and relationships between the enterprise and customers, etc. to the company. It can be concluded that enterprises are mainly focused on practices and tools related to customer satisfaction. From our point of view, relatively fewer enterprises in the sample are engaged in research and development (30%), which is considered to be a serious deficiency in Slovak conditions. This may have an impact not only on the creation of enterprise´s added value, but also on the environment. The least used practices and tools in the economic area (not shown in Fig- ure 2) are benchmarking (22.62%), management of crises (15.48%) and EFQM excellence model (2.08%). The application of social practices and tools is relative- ly balanced. Enterprises focus mainly on employees in the form of motivational programs (almost 60% of enterpris- es). On the other hand, the surveyed enterprises apply less following practices/tools: philanthropy (20%) and work- life balance (13.69%). The least represented practices/ tools are: STN ISO 26000 Guideline for Corporate Social Responsibility (3.27%), social audit carried out by only 10 respondents (2.98%) and the use of the social responsibil- ity standard and the improvement of working conditions SA 8000 (5 respondents; 1.49%). Enterprises are therefore more focused on the internal community - employees than on supporting the external community. Therefore, we can say that enterprises are not comprehensively focused on this area. Practices and tools from environmental area represent the clean production (45.24%). Almost 35% of enter- prises have an implemented ISO 14001 standard. Slovak enterprises have some limits in application of renewable resources, as well as in green public procurement. The following tools are used less frequently (less than 10%): eco-labelling (5.95%), measurement of carbon footprint (4.76%), environmental accounting (3.87%), life cy- cle assessment – LCA and environmental benchmarking (3.52%). Ecological footprint is not represented at all. Figure 3 shows the range of practices and tools used. This range is in the form of averages for each area as well as for all areas together. It can be concluded that the sur- veyed enterprises use 3 tools on average from the econom- ic area, as well as 3 tools from the social area. Almost 2 tools on average are used in the environmental one. The average of tools from each area together is nearly 9 prac- tices/tools. The highest average of their application is in the social area. From the perspective of barriers, the enterprises sur- veyed notice a lack of financial resources for sustainability initiatives (Figure 4). In Slovakia, many enterprises are still struggling with survival, which is reflected in a lack of financial resources, not just for sustainability activities. Making a profit or optimum level of return on capital is a prerequisite for an enterprise to invest in its development or in the development of surrounding communities. Further- more, enterprises register few stimuli to these initiatives. The stimuli could come from government, customers, etc. We can see that shortsightedness still prevails in the form of short-term profits before long-term development. 121 Organizacija, Volume 53 Issue 2, May 2020Research Papers Figure 2: The five most used practices/ tools in individual areas Figure 3: Mean of practices/ tools used by areas Figure 4: Main barriers of sustainability initiatives 122 Organizacija, Volume 53 Issue 2, May 2020Research Papers 4.2 Results of research hypotheses Except of evaluation of descriptive statistics we tested hy- potheses through selected statistical methods (see Chapter 3.2). We analyzed all surveyed practice and tools men- tioned in Table 2. In the first hypothesis, we supposed that enterprises with foreign capital use more practices and tools in their practice than enterprises with domestic capi- tal. The results are presented in the Table 3. We reject (p=.000) the null hypothesis that the average number of used tools is identical among the enterprises with the different capital structure. The enterprises signifi- cantly differ in the scope of used tools. The related statisti- cal characteristics are shown in Figure 5. At the .05 level of significance we reject the null hy- pothesis (p=.000). The capital of enterprise appears to be significantly different in the scope of applied practices and tools. From the results it is evident that enterprises with domestic capital structure are different in application of scope of tools from enterprises with foreign or mixed cap- ital structure. Moreover, enterprises with mixed capital structure are different from enterprises with domestic cap- ital structure. Looking at the tools only from the viewpoint of environmental and social area, we can see the same sit- uation. In the case of mixed-capital enterprises (n= 27) the situation is closer to enterprise with foreign capital. Thus, we can see the impact of foreign investments in the enter- prises and consequently these enterprises are more focused on sustainability issues. The average number of practices and tools in differ- entiation of enterprises with different capital structure is shown in the next table and figure. The smallest difference in application is in the case of environmental instruments that make up the smallest part. In the second hypothesis, we supposed that enterpris- es with higher importance dedicated to the corporate sus- tainability concept use wider range of practices and tools. Importance given to the concept is measured on the scale (1-high importance, 4-low importance). Again, we have applied Kruskal-Wallis Anova. At the .05 level of significance (p=.000) we reject the null hypothesis about equality of average number of prac- tices and tools. The enterprises with different sustainability concept priority differ significantly in the extent of used tools. The conclusion is in accordance with our hypothesis H2. The basic statistical characteristics are illustrated by using of quartile box plot in Figure 7. The results of multi- ple comparison are presented in Table 7. At the .05 level of significance we reject the null hy- pothesis (p=.000). The priority given to the concept ap- pears to be significantly different from the range of used practices and tools, as we expected. Table 3: Statistics: number of used practices/tools and enterprise ownership Grouping Variable Kruskal-Wallis test by Ranks: H (2, N= 336) =45.49 p =.000 Valid N Sum of Ranks Mean Rank Domestic capital structure 210 29622.00 141.06 Foreign capital structure 99 21526.50 217.44 Mixed capital structure 27 5467.50 202.50 Multiple Comparisons (medians and p-values) Domestic capital structure Foreign capital struc- ture Mixed capital structure Domestic capital structure (x = 7) 0.000 0.006 Foreign capital structure (x = 10) 0.000 1.000 Mixed capital structure (x = 11) 0.006 1.000 Table 4: Multiple comparisons 123 Organizacija, Volume 53 Issue 2, May 2020Research Papers Figure 5: Number of practices/ tools by enterprise ownership Table 5: Number of practices/ tools by enterprise ownership Practices/tools Foreign capital Domestic capital Sample size Mean Median Sample size Mean Median economic area 99 4.24 4 210 2.77 3 environmental area 99 2.20 2 210 1.48 1 social area 99 4.51 4 210 3.11 3 Figure 6: Mean number of practices/tools by different type of ownership 124 Organizacija, Volume 53 Issue 2, May 2020Research Papers From the results in Table 7, it is evident that enterprises with attitude of high (slightly high) priority are different in applying range of tools from enterprises with attitude of low (rather low) priority. The last hypothesis is linked to the vision of enterprise. The vision is a prerequisite for further development of the enterprise in any direction the enterprise wants. The reason comes from the future oriented feature of vision, whereas the vision demonstrates the status of enterprise for the next 5-10 years. We assumed that enterprises which have linked corporate sustainability concept to the vision, apply more practices and tools. From the results (Table 8 and 9) it is evident that there is statistical significant dependence between the range of initiatives and tools and linkage of concept with the vision of an enterprise. The enterprises with no linkage of con- Grouping Variable Kruskal-Wallis test by Ranks: H (3, N= 336) =31.46 p =.000 Valid N Sum of Ranks Mean Rank High priority 106 20836.00 196.57 Slightly high priority 151 26393.50 174.79 Rather low priority 66 8178.50 123.92 Low priority 13 1208.00 92.92 Table 6: Number of used practices/tools and priority to the concept Figure 7: Number of practices/ tools and priority to the concept Table 7: Multiple comparisons Multiple Comparisons (medians and p-values) High priority Slightly high priority Rather low prio- rity Low priority High priority (9) 0.461 0.000 0.002 Slightly high priority (8) 0.461 0.002 0.021 Rather low priority (6) 0.000 0.002 1.000 Low priority (5) 0.002 0.021 1.000 125 Organizacija, Volume 53 Issue 2, May 2020Research Papers cept to the vision are different in application. Based on the results we can confirm the hypothesis H3. Enterprises that have set a sustainability aspect in the vision use also more practices and tools. 5 Discussion The research paper brings insight into the application of practices and tools to support corporate sustainability concept in the Slovak industrial enterprises. The research questions focused on the application of individual sustain- ability practices and tools, existing barriers and also what should the starting point of enterprises within these initi- atives be. The most applied tool in the Slovak enterprises was management standard ISO 9000. We consider this tool quite common regarding its application in the Slovak con- ditions. If it is properly implemented, it ensures efficiency gains, increased customer satisfaction that is leading to business development and competitiveness growth. En- terprises applied also motivation programs for employees and clean production. In our opinion, the enterprises need to understand the need for applying these practices and also the importance of sustainability. Their application is beneficial for the enterprise as well as for the whole socie- ty. Overcoming existing barriers, in particular in the form of lack of financial resources or lack of stimuli for these activities, could improve the situation of applying practic- es and tools. The state could also promote the elimination Grouping Variable Kruskal-Wallis ANOVA by Ranks: H (3, N= 336) =28.18 p =.000 Valid N Sum of Ranks Mean Rank Concept is not linked to the vision 17 1637.00 96.29 Concept is partially linked to the vision 167 27073.50 162.12 Concept is linked to the vision 126 24832.50 197.08 Do not know 26 3073.00 118.19 Table 8: Used practice/tools and vision of enterprise Table 9: Multiple comparisons Multiple Comparisons (medians and p-values) CS is not linked CS is partially linked CS is linked Do not know Concept is not linked to the vision (x = 5) 0.047 0.000 1.000 Concept is partially linked to the vision (x = 8) 0.047 0.014 0.192 Concept is linked to the vision (x = 10) 0.000 0.014 0.001 Do not know (x = 5) 1.000 0.192 0.001 of deficiency, e.g. in the form of tax remission or subsidies for sustainable initiatives. Enterprises should emphasize more establishing a vision and its subsequent communi- cation to all employees. The fact that every employee will be informed about where the enterprise is heading, is an essential prerequisite for the successful development of the enterprise. We consider the vision a starting point in this process. Since there are no available statistics of the imple- mentation of sustainability through adequate practices and tools, these research results can summarize reveal reserves related to this issue. From our point of view, we created and analyzed quite a comprehensive list of practices and tools suitable for Slovak enterprises. The benefits can be seen in helping understand how enterprises contribute to the achievement of sustainable development goals. Recog- nition of vision importance and subsequent strategy seems like a major trigger for the application of these practices. The limitations of our research appear in the sense of exploring several factors that may affect the application of practices and tools. Many papers deal with the impact of sustainability on business performance, but few papers deal with the issue of specific tools to help behave in terms of sustainable development. A limiting factor is also the 126 Organizacija, Volume 53 Issue 2, May 2020Research Papers focus of research on industrial enterprises. It is possible to extend the research to service enterprises. Although the focus of this paper may seem narrow, it provides basic overview of tools and barriers and also the opportunities to expand the analysis in further research. Future research will be focused on analyzing the benefits of all these prac- tices and tools aimed at comprehensive fulfillment of sus- tainable development goals. Another interesting possible point covers the extension of research to the V4 countries. 6 Conclusion The development of enterprise depends on the develop- ment of its employees. The source of employee perfor- mance may be sufficient motivation in the form of various benefits, detection and removal of deficiencies through the social audit etc. Environmental investments can also contribute to business development, which can ultimately reduce energy or material intensity, attract customers etc. The purpose of the present research was to provide insight into the practices and tools of corporate sustaina- bility used by the Slovak industrial enterprises and exist- ing barriers. Moreover, the focus was also to identify the factors influencing the application of tools such as compa- ny ownership, importance of sustainability concept, and company vision. The paper relies on research questions in terms of application of particular practices and tools and the position of the vision in this process. We can conclude that enterprises use 8 tools on average, while the least used are in the environmental area. This is surprising, despite the fact that nowadays the pressure on environmental be- havior is increasing. Recognizing that sustainability is a complex and comprehensive issue, we have focused only on a specific area of application of practices and tools, and we highlight the following key insights: • Foreign-owned enterprises are better at using practic- es and tools than domestic-owned enterprises. This can be caused mainly by the impact of foreign invest- ment, which is more focused on sustainability issues. Enterprises are gradually implementing these practic- es into our business conditions. • 31% of enterprises assign a great importance to the sustainability concept. These enterprises apply more practices and tools, which is logical. In this case, it was crucial to find out the amount of such enterprises and whether the perception of the concept has a real impact on application the tools. • In the case of existing barriers we can confirm as Bonini (2012) that they exist in a form of increased pressure of short-term earnings; performance is at odds with longer-term nature of sustainability, and there is also a lack of incentives tied to performance on sustainability initiatives. In the case of Slovak enterprises, there is also a problem with financial re- sources to support this kind of business behavior. • One of the key drivers for sustainability is the vision. This is an important starting point for a business to “move” towards sustainability. In this respect, the strategic management of the enterprise determining the direction of the company, is very useful. It also monitors the external environment. We can state that sustainability in all its aspects is a current trend. 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In Corporate responsibility - part of environmental and corporate culture, March 10, 2011 (pp. 283-292). Banská Bystrica: Faculty of Natural Sciences. Vicianová Hroncová, J., & Hronec, Š. (2017). Environ- mental Impact of Application on the Concept of Cor- porate Social Responsibility in Selected EU Countries. Problemy Ekorozwoju. 12(2), 79-88. Witek, L. (2017). Sustainable consumption: Eco-labelling and its impact on consumer behavior – evidence from a study on Polish consumer. Working Papers 142/2017. Institute of Economic Research. Windolph, S. E., Schaltegger, S., & Herzig, C. (2014). Im- plementing corporate sustainability. Sustainability Ac- counting, Management and Policy Journal. 5(4), 378- 404. http://doi.org/10.1108/SAMPJ-01-2014-0002 Witjes, S., Vermeuleun, W. J. V., & Cramer, J. M. (2016). Exploring corporate sustainability integration into business activities. Experiences from 18 small and me- dium sized enterprises in the Netherlands. Journal of Cleaner Production. 153. 528-538. http://doi.org/10.1016/j.jclepro.2016.02.027 Petra Lesníková, PhD, is an assistant professor at the Department of Economics, Management and Business, Technical University in Zvolen, Slovakia. She finished the doctoral study in the field of Business Economics and Management. She focuses her research effort in the areas as business performance and sustainability. With other researchers she publishes in domestic and foreign journals. Jarmila Schmidtová, PhD, works at the Department of Mathematics and Descriptive Geometry, Technical University in Zvolen. Her job responsibilities are lecturing of academic mathematics to students of forestry, lecturing of statistics to students of enterprise management. She cooperates with researchers on different scientific projects in connection with the application of statistical methods. 129 Organizacija, Volume 53 Issue 2, May 2020Research Papers Razvoj korporativne trajnosti v podjetjih z uporabo izbranih praks in orodij Ozadje in namen: V članku so opredeljene prakse in orodja za podporo konceptu trajnostnosti podjetij, ki lahko pri- vedejo do večje konkurenčnosti poslovanja v dinamično razvijajočem se poslovnem svetu. Namen prispevka je za- gotoviti vpogled v prakse in orodja korporativne trajnosti podjetij, kakršna uporabljajo slovaška industrijska podjetja, in identificirati ovire za njihovo uporabo. Cilj je tudi ugotoviti dejavnike, ki vplivajo na uporabo orodij, kot so lastništvo podjetja, percepcija pomena koncepta trajnosti in vizija podjetja. Zasnova / Metodologija / Pristop: Za pridobitev potrebnih podatkov je bil uporabljen spletni vprašalnik. Vzorec podjetij je bil izbran na podlagi velikosti podjetja in panoge (n = 336). Uporabljene so bile naslednje statistične me- tode: 1) enosmerna ANOVA, 2) Kruskal-Wallisov test in 3) Wilcoxonov testni seštevek. Rezultati: Raziskava je razkrila nekaj ključnih spoznanj: 1) podjetja v tuji lasti več uporabljajo trajnostne prakse in orodja; 2) še vedno precej podjetij ne pripisuje pomena trajnosti; 3) ovire obstajajo zlasti v obliki pomanjkanja finanč- nih sredstev; 4) eden ključnih dejavnikov trajnosti je vizija podjetja. Zaključek: V članku smo analizirali dokaj obsežen seznam praks in orodij, primernih za podjetja na Slovaškem. Prizadevali smo si, da bi ugotovili, kako podjetja prispevajo k trajnostnemu razvoju. Ugotovljeno je bilo tudi, da pripi- sujejo pomembnost viziji podjetja kot glavni pobudi uporabe orodij. Ključne besede: korporativna trajnost, prakse, orodja, ovire, vizija podjetja 130 Organizacija, Volume 53 Issue 2, May 2020Research Papers Fraud Prevention in the Leasing Industry Using the Kohonen Self- Organising Maps1 DOI: 10.2478/orga-2020-0009 Mirjana PEJIĆ BACH, Nikola VLAHOVIĆ, Jasmina PIVAR University of Zagreb, Faculty of Economics & Business, Trg J. F. Kennedy 6, Zagreb, Croatia, mpejic@efzg.hr, nvlahovic@efzg.hr, jpivar@efzg.hr Background and Purpose: Data mining techniques are intensely used in various industries for the purpose of fraud prevention and detection. Research that focuses on the leasing industry is scarce, although frauds in the field of leasing occur rather often. First, we identify clusters of business clients in one leasing company by using the method of self-organising maps based on leasing contract attributes. Second, we compare clusters based on the presence of fraudulent clients, in order to develop fraudsters’ profiles. Methodology: For detecting characteristics of fraudulent clients, we use a client database containing leasing con- tract attributes of one Croatian leasing company. In order to develop profiles of fraudulent clients, we utilise a clus- tering procedure with the Kohonen Self-Organizing Maps supported by Viscovery SOMine software. Results: Five clusters were identified and labelled according to the modal values of attributes describing the leasing object and the industry in which the client operates: (i) New cars / Trade; (ii) Used trucks or tugboats / Other services; (iii) New machinery / Construction; (iv) New motors / Trade; and (v) New machinery and tractors / Agriculture. Conclusion: Self-organising maps have proved to be a useful methodology for developing profiles of fraudulent cli- ents in leasing companies. Companies can use our results and make additional efforts in monitoring clients from the identified industries, buying specific leasing objects. In addition, companies can apply our methodology to their own databases, in order to develop fraudster profiles for their specific purposes, and implement fraud alert mechanisms in their client database. Keywords: fraud, leasing, self-organising maps, Viscovery SOMine, Ward algorithm, Croatia, data mining 1 1A preliminary version of this research (http://doi.org/10.23919/MIPRO.2018.8400218) was presented at 41st International Con- vention on Information and Communication Technology, Electronics and Microelectronics MIPRO 2018, Opatija, May 21-25, 2018. Received: July 11, 2019; revised: March 30, 2020; accepted: April 8, 2020 1 Introduction Knowledge management consists of the processes of cre- ating, storing/retrieving, transferring and applying knowl- edge (Alavi & Leidner, 2001). The process of knowledge discovery is an important subprocess in knowledge man- agement (Wang & Wang, 2008). Some of the tasks solved by data mining are clustering and deviation detection (Folorunso & Ogunde, 2005), which also includes fraud detection. Numerous other applications are also focused to rare events, such as bankruptcy (e.g. Moradi, Salehi, Ghor- gani & Yazdi, 2013). In this paper, the focus is on fraud in the leasing industry. Frauds represent an issue for leasing companies and regulators, which should be able to predict fraudulent be- haviour and take different actions to prevent losses caused by fraud. Defence against frauds includes the implemen- tation of operational and technical solutions for fraud pre- vention and detection. Fraud detection systems are based on data mining techniques and methods that can discover and visualise patterns related to fraudulent behaviour, such 131 Organizacija, Volume 53 Issue 2, May 2020Research Papers as financial frauds (Sadgali, Sael, & Benabbou, 2019), credit card frauds (Carcillo et al., 2019), and frauds in the insurance sector (Leite, Gschwandtner, Miksch, Gstrein, & Kuntner, 2018). Cluster analyses and profiling of clients based on various behavioural, demographic and opera- tional attributes contained in clients databases are essen- tial tools in analysing transactions, and recognising client profiles, which have been used in various industries, such as banking (e.g. Pejić Bach, Juković, Dumičić, & Šarlija, 2014). Clients profiling based on the cluster analysis has also been used in various researches and has been proved as a useful tool in predicting fraudulent behaviour, which can help companies to develop appropriate fraud detection and response systems, e.g. financial statement fraud de- tection system (Chen, Liou, Chen & Wu, 2019). Current research on fraud detection and prevention in the leasing industry is scarce (Singleton & Singleton, 2007), with only a few examples that present the utilization of data mining techniques for that purpose. For example, Horvat, Pejić Bach and Merkač Skok (2014) used a decision tree model- ling in order to discover fraud in leasing agreements. Self organizing maps have been efficiently used to explain fraudulent behaviour in different contexts of the financial industry, including banking (e.g. Merkevicius, Garšva, & Simutis, 2004; Balasupramanian, Ephrem, & Al-Barwani, 2017) and insurance (e.g. Hainaut, 2019). However, to our best knowledge, previous works did not utilise self-organising maps for fraud profiling in leasing, although self-organising maps have been previously effec- tively deployed for fraud prevention and detection (Jian, Ruicheng, & Rongrong, 2016). The research question that emerges is whether self-organising maps are an appropri- ate method for identifying and describing clusters of cli- ents in the context of the leasing industry, with the specific goal of detecting specific attributes that could explain the fraud in the leasing industry. In order to shed some light on this issue, we develop the methodology for developing fraudsters profiles using self-organising maps, based on the leasing contract attributes. We use the database of one leasing company with the rich data on client characteristics and behaviour, for the identification of fradulent behav- iour. First, we use self-organising maps in order to develop clusters of business clients in a leasing company based on leasing contract attributes. Second, we identify the charac- teristics of fraudulent clients among cluster members. The paper is structured as follows. After the intro- duction, the literature review section describes frauds in the leasing industry and gives an overview of previous research related to fraud modelling. The second section explains the methodology of the research, including the self-organising maps, the sample description, and the sta- tistical analysis. The fourth section provides results of the clustering procedure and the fraud analysis according to client and leasing characteristics. It also contains the in- terpretation of the clusters and profiles of fraudsters for each of the clusters based on all the attributes used for the analysis. The last section is the discussion and conclusion section, which provides a response to the research question and describes the contributions of this research. 2 Literature review 2.1 Fraud in the leasing industry Fraud causes material and immaterial losses to an or- ganisation or a person. According to the Basel Committee (Basel Committee on Banking Supervision, 2002), frauds are loss events that are classified into internal and external frauds. Internal frauds are “losses due to acts of a type in- tended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversi- ty and discrimination events, which involves at least one internal party” (Basel Committee on Banking Supervision, 2002, p.3), such as accounting administrators. External frauds are “losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party” (Basel Committee on Banking Supervision, 2002, p.3), such as clients or partners. Fraud is often both inter- nal and external. European Commission (2011, p.3) defines a lease as “an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period”. In order to understand the concept of fraud in leasing, it is necessary to understand ownership rights in the context of the leasing contracts. During different stages of the leasing contract, difficulties in executing ownership rights can occur. Such differences can be the result of the complex leasing law framework (Flath, 1980). However, fraud in leasing, as in other finan- cial industries, is often intentionally conducted by the cli- ent. In that case, leasing companies are usually not able to reach a client or locate a leasing object. For example, fraud happens when a client refuses to return a leasing object after a lease expires. In such a scenario, a leasing company can contact a client and it knows the location of a leasing object but regaining or repurchasing a leasing object is not possible without a complex law procedure. This research focuses on frauds and defaults commit- ted by clients (small and medium companies, and sole proprietorships) in the leasing industry. Defending leasing companies against leasing fraud brings challenging issues both operationally and technically. An efficient fraud de- fence system in the field of leasing has several prereq- uisites. A leasing organisation needs to create anti-fraud measures and introduce them to its employees, as well as to keep employees aware of the fact that frauds are a part of the leasing industry (Boobyer, 2003). Cross-departmen- tal cooperation and communication, especially of sales, human resources, and accounting department, as well as cooperation with external experts are also needed. Addi- 132 Organizacija, Volume 53 Issue 2, May 2020Research Papers tionally, an organisation should establish client verification procedures (Wang, Cheng, & Chen, 2019). In leasing, such procedures are used to verify leasing objects such as verifi- cation of client economic activity, verification of payments and so on. Upgrading information systems with data ana- lytics and warning systems that would support decisions in relation to potentially fraudulent clients are crucial as well (Bănărescu, 2015). 2.2 Fraud modelling Fraud and default modelling are based on various data mining methods. Ngai, Hu, Wong, Chen and Sun (2011) reviewed data mining techniques for the detection of fi- nancial fraud. They concluded that logistics models, neural networks, decision trees, and the Bayesian belief network are the primary data mining techniques for financial fraud detection. Sadgali, Sael and Benabbou (2019) reviewed the performance of various machine-learning techniques such as classification, clustering, and regression for fraud and prevention detection. In addition, visual analysis tech- niques are used for the identification of fraud detection. In identifying and preventing attempts of fraud, detection of suspicious events can be made by using visual analyt- ics techniques (Leite, Gschwandtner, Miksch, Gstrein, & Kunter, 2018), who categorised, described and discussed current visualisation, interaction and analytical methods that can be used in fraud detection systems. Chen, Liou, Chen and Wu (2019) proposed the approach for detecting fraud in the financial statements in business groups by us- ing data mining techniques. However, current research does not conclude which method performs the best in fraud prevention and detection, although several authors identified that neural networks and clustering were the most efficient. Deep convolution neural networks (DCNN) were used to detect fraudsters in customer records of a mobile communication company (Chouiekh & Haj, 2018). The authors stated that DCNN outperforms support vector machines, random for- est and a gradient boosting classifier in terms of accuracy and training duration. Data mining methods have been implemented in various application areas related to fraud. Rousseeuw, Per- orotta, Riani and Hubert (2019) combined the idea of the Fast LTS algorithm (least trimmed squares) for robust re- gression for the detection of unexpected events in time se- ries. These unexpected events are often outliers and shifts that can represent suspicious transactions. An intuitionistic fuzzy set, one of the classification methods, and evidential reasoning were proposed for fraud detection in banking transactions by Eshghi and Kargari (2019), who modelled transactional behaviour by considering the trends of differ- ent variables. The method determines the originality of a newly arrived transaction. Credit card fraud has been researched by several au- thors. Lucas et al. (2020) used a hidden Markov model and a random forest classifier for credit card fraud detec- tion. The hidden Markov model was used to associate a likelihood to a transaction given its sequence of previous transactions. Likelihoods are then used by a random for- est classifier for fraud detection. Ryman-Tubb, Krause and Garn (2018) presented a survey of methods that use AI and machine learning for credit card fraud detection, with the conclusion that in terms of accuracy neural networks were on average better than other techniques. West and Bhat- tacharya (2016) analysed issues of credit card fraud min- ing related to the choice of detection techniques, problem representation, feature and performance analysis. Nami and Shajari (2018) proposed a two-stage method of detect- ing fraudulent payment card transactions. The method is based on k-nearest neighbours, the dynamic random for- est algorithm and the minimum risk model. Patil, Nemade and Soni (2018) used the big data analysis framework and machine learning algorithms for real credit card fraud de- tection. Deployment of a fraud detection system based on machine learning methods in a large e-tail merchant was explored and described by Carneiro, Figueira and Costa (2017). Ensemble learning is a common method used in various practical problems. Zareapoor and Shamsolmoali (2015) evaluated and compared various data mining tech- niques for credit card fraud detection. They presented the decision tree based bagging classifier as the best classifier to construct the fraud detection model. Deep learning neu- ral networks, Generative Adversarial Networks, were used to improve the effectiveness of classifiers for credit card fraud detection by Fiore et al. (2019). Tu, He, Shang, Zgou and Li (2019) proposed convolutional neural networks for the enhancement of anti-fraud systems in the area of e-commerce payments. Several pieces of research have been conducted in the area of insurance. Yan, Li, Liu, and Qi (2020) used an adaptive genetic algorithm with a backpropagation neural network for simulation and prediction of frauds in the au- tomobile insurance claim data. An Artificial Bee Colony algorithm-based Kernel Ridge Regression was proposed for automobile insurance fraud detection by Yan et al. (2019). An Artificial Bee Colony was used for global opti- mization and to optimize the parameter combination of the Kernel Ridge Regression. Wang and Xu (2018) proposed a deep learning model for automobile insurance fraud detec- tion based on text mining. They used the Latent Dirichlet Allocation-based text analytics to extract text features of the descriptions of the accidents in the claims. Deep neural networks are used for detecting fraudulent claims. Neural networks were used to detect fraud in the automobile in- surance industry, with the aim of fraud detection when it comes to personal injury claims (Viaene, Dedene, & Der- rig, 2005). Machado and Santos (2015) used five strategies for auditing vehicle claims and concluded that neural net- works perform the best. Šubelj, Furlan, and Baje (2011) proposed an expert system for the detection of groups of 133 Organizacija, Volume 53 Issue 2, May 2020Research Papers automobile insurance fraudsters by using an Iterative As- sessment Algorithm (IAA). Patel and Singh (2013) used genetic algorithms to detect fraudulent activities in credit card transactions. Fuzzy C-Means clustering and super- vised classifiers comprise the novel hybrid approach that was proposed for detecting fraud in an automobile insur- ance dataset (Subudhi & Panigrahi, 2017). Nian, Zhang, Tayal, Coleman and Li (2016) proposed a spectral ranking method for automobile insurance fraud detection, while Caldeira, Gassenferth, Machado and Santos (2015) used neural networks for the same purpose. Additionally, neural networks were used to detect fraud in the context of bank direct marketing (Zakaryazad & Duman, 2016) and card payments and operations (Dor- ronsoro, Ginel, Sánchez, & Cruz, 1997). Recurrent neural networks were used for the detection of stock price manip- ulation activities by Wang, Xu, Huang, and Yang (2019). The authors concluded that the method could be used to identify unusual trading activities among huge amounts of data. 2.3 Kohonen self-organising maps in fraud research Self-organising maps (SOMs), Kohonen Map or Kohonen Neural Networks are feed-forward neural networks based on unsupervised learning and a clustering algorithm that produces two dimensional and nonlinear mappings of mul- tidimensional data (Urueña López et al., 2019). SOMs are widely used for research in different contexts of the financial industry, including banking, insurance and so on (Van Hulle, 2012). Pejić Bach, Juković, Dumičić and Šarlija (2014) iden- tified three clusters by using self-organising maps for busi- ness clients’ segmentation in the context of the Croatian banking industry, and authors suggested marketing activi- ties for the identified clusters. Holmbom, Eklund and Back (2011) described how self-organising maps could be used for customer portfolio analysis. Merkevicius, Garšva, and Simutis (2004) explored the usage of self-organising maps for forecasting of credit classes. Only several researchers investigated the usage of SOMs in fraud. Urueña López et al. (2019) used self – organising maps for finding hidden relationships in data about fraud on the Internet, computer users’ behaviour, as well as security incidents. Balasupramanian, Ephrem and Al-Barwani (2017) proposed an architectural framework that uses big data analytics and the self-organising maps to handle card fraud effectively. Olszewski (2014) presented how self-organising maps can be used for visualisation of user profiles and comparison of frauds in credit card trans- actions, telecommunications, and networks. Almendra and Enachescu (2013) present an algorithm that combines the self-organising map with the supervised learning para- digm with labelled data in the context of online auction sites. Quah and Sriganesh (2008) described a real-time fraud detection approach aimed at a better understanding of fraudulent spending patterns based on self-organising maps. Zaslavsky and Strizhak (2006) derived the model of a typical cardholder’s behaviour and analysed suspicious transactions by using self-organising maps. Brockett, Xia, and Derrig (1998) classified suspicious automobile bodily injury claims by using self-organising maps. Data mining has been extensively used in fraud de- tection and prevention, with various areas of applications, such as credit card fraud and insurance fraud. Several re- searchers indicated that neural networks outperform other methods for fraud prevention and detection. To our best knowledge, no research presents the application of data mining in fraud prevention and detection in the leasing industry. 3 Methods 3.1 Self-organising maps (SOMs) The goal of using the SOMs is to discover similarities among elements in the set of instances and to organise the neurons in the computational layer into clusters associated with patterns in the set of instances. Therefore, SOMs are visual representations of learned structures that appear as clusters of similar objects. The basic SOMs algorithm can be described as follows (Bação, Lobo, & Painho, 2005). The neighbourhood func- tion is a function that decreases with the distance to the winning node and is responsible for the interactions among nodes. During training, the radius of this function decreas- es, so each node becomes more isolated from the effects of its neighbours. The winning node changes its weight vec- tor to become more similar to the input vector. All neigh- bours of the winning node also change their weights to the direction of the input vector. Thus, the weight vectors of neighbouring nodes become similar because of their con- vergence with the winning node towards the input data vector. The corresponding error function E(w) with an expec- tation value converging to a minimum during the training process (distortion measure) is: E = ∫Σi hci |w − x| g(x) dnx, (1) where hci is the neighbouring function of node i to the corresponding winner c(x), and g(x) the density function of the vectors x in the n-dimensional data space. The Ko- honen net is obtained in a discrete data space by computing the optimal weight vectors for minimizing E(w)) using a gradient descent (Viscovery, 2019). In addition, SOMs can be seen as a form of k-means clustering in which every unit corresponds to a “cluster”, and the number of clusters is defined by the size of the 134 Organizacija, Volume 53 Issue 2, May 2020Research Papers grid (Wehrens & Buydens, 2007). In comparison to the k-means clustering, Kohonens’s self-organizing maps showed more accuracy in classifying most of the objects when the number of clusters is lower than eight (Abbas, 2008). Bação, Lobo, and Painho (2005) also proposed the use of SOMs as a possible substitution for the k-means clustering. They concluded that during the search, space is better explored by SOM, and by the end of the search process, the SOM is the same as k-means, which allows for a minimization of the distances between the nodes and the winning node. The main reason for the usage of SOMs in this research is that the k-means clustering algorithm is mainly used for minimizing the sum of squared distances between the input and the prototype vectors, but it does not perform topological mapping like Kohonen self-organiz- ing maps do (Van Laerhoven, 2001). SOMs are used in state-of-the-art software. Viscovery SOMine software is specialised software, which enables clustering by using two algorithms that are based on the classical hierarchical agglomerative cluster method of Ward (Viscovery, 2019). The first algorithm is based on the Ward method, which uses the variance criterion as a distance measure. The second algorithm is the SOM Ward algorithm based on the modified Ward method. It is de- veloped on the ground of the soft computing paradigm. In this method, the topological neighbourhood influences the cluster merge steps (Viscovery, 2019). The nodes with many corresponding data records have a higher impact in comparison with the nodes with fewer matching records (Viscovery, 2019). As a distance measure, a modified Ward distance is used. This distance observes the topological locations of the clusters. It means that two clusters that are not neigh- bouring in the SOM are never considered to be merged (Viscovery, 2019): (2) Then, the SOM – Ward distance is normalized with an exponential function (Viscovery, 2009): µ(c) = d(c)*cβ, (3) where d(c) indicates the SOM-Ward distance used to merge c clusters into c-1 clusters and β is a linear regres- sion coefficient (3≤c