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Paperless custom clearance and business supply chains

Bassa, Louis,Kwateng, Kwame Owusu,Kamewor, Francis Tetteh

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Bassa, Louis; Kwateng, Kwame Owusu; Kamewor, Francis Tetteh Article Paperless custom clearance and business supply chains Marine Economics and Management (MAEM) Provided in Cooperation with: Ocean University of China, Qingdao Suggested Citation: Bassa, Louis; Kwateng, Kwame Owusu; Kamewor, Francis Tetteh (2021) : Paperless custom clearance and business supply chains, Marine Economics and Management (MAEM), ISSN 2516-158X, Emerald, Leeds, Vol. 4, Iss. 1, pp. 42-58, https://doi.org/10.1108/MAEM-03-2020-0002 This Version is available at: https://hdl.handle.net/10419/320053 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Paperless custom clearance and business supply chains Louis Bassa, Kwame Owusu Kwateng and Francis Tetteh Kamewor Department of Supply Chain and Information Systems, KNUST School of Business, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana Abstract Purpose –Seaports play an immeasurable role in the advancement of international trade. They have been the common avenue for the transportation of goods and services from one continent to another, and it has also been the linking transport of one mode of transport to another. The study sought to assess the effect of paperless information technology (IT)-based custom clearance at Ghana Seaports on businesses and industrial supply chains in Ghana. Design/methodology/approach –The study conducted a survey with a sample size of 200 trading firms in Ghana. Findings –The study discovered that IT-based port clearance has positive impact on customer order fulfillment, transaction cost reduction and supply chain relationships. Practical implications –With the aim of making Ghana the transportation hub of businesses in the sub region, the paperless custom clearance has the potential to reduce delays at the port and improve their supply chain. Originality/value –This paper provides researchers with a contemporary perspective toward understanding the effect of paperless custom clearance on the supply chain of businesses in the West African sub region. Keywords Industrial supply chain, Businesses, Paperless, Custom clearance, Seaport Paper type Research paper Introduction The increase in the level of globalization gives rise to increase in the volume of international trade. International trade has increased in volume significantly such that a judgment from the surface could lead one to believe that every nation is expanding its international trade borders (Arvis et al., 2013). This is not the case in reality. The volume of trade has increased due to the fact that some countries have significantly improved their international trade and as long as there are exports and imports, the countries at the other end of the trade benefit from these improvements (Hausman et al., 2005;Ashley, 2020). Seck (2017) has shown that a set of trade facilitation measures determine the growth of international trade. The author mentioned that border efficiency, the nature of the physical infrastructure, the laws and regulations, the level of information and communication technology, and logistics performance are some indicators of the growth of international trade. It is clear that Seck (2017) has clarified the reason why the volume and value of international trade were not rising uniformly by pinpointing the specific measures that facilitate the growth of international trade. The rate at which these factors are favorable in the country, the more it will promote the volume of international trade in the country. De Jong and Baas (2013) indicated that countries that are war prone are likely not to experience growth in international trade due to the adverse prevalence of the factors that determine the growth of international trade. MAEM 4,1 42 © Louis Bassa, Kwame Owusu Kwateng and Francis Tetteh Kamewor. Published in Marine Economics and Management. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http:// creativecommons.org/licences/by/4.0/legalcode The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/2516-158X.htm Received 22 March 2020 Revised 28 October 2020 17 December 2020 23 February 2021 Accepted 15 March 2021 Marine Economics and Management Vol. 4 No. 1, 2021 pp. 42-58 Emerald Publishing Limited 2516-158X DOI 10.1108/MAEM-03-2020-0002 According to UNDP (2013), the general volume of trade in the sub-Saharan Africa region expanded greatly in the beginning of the 21st century. In the early decades of the 21st century, the volume of trade in sub-Sahara Africa increased by 5.9%, which was incredibly above the global growth trend of 3.8% (Seck, 2017). Consequently, the volume of international trade in Ghana consistently increased in the early part of the 21st century, and this can be explained from the political turmoil in the neighboring countries (De Jong and Baas, 2013). Nsiah (2014) has indicated that ports play an immeasurable role in the growth of international trade. Ports have been the common avenue for the transportation of goods and services from one continent to another, and it has also been the linking transport of one mode of transport to another (Carbone and Martino, 2003;Behdani et al., 2020;Ashley, 2020). The study by this author indicated that ports are the point of loading and offloading goods. Considering the measures that determine the growth of international trade and the key role played by the sea ports in international trade, it is necessary for attention to be shifted to the improvement of port operations. According to Sourdin and Korinek (2011), what facilitates trade is the trade logistics. Sourdin and Korinek (2011) found out that improved trade logistical services enhance the competiveness of exports by lowering the cost involved in transiting the goods. The study by these authors showed that changes in the efficiency of trade logistics impact changes in the value and volume of international trade. Wilmsmeier et al. (2006) in their study also mentioned that transport costs constitute a great part of trade costs, and for this reason, there has been a growing interest of researchers on the factors that drive the increase in the transaction costs. This seemed all simple until Hornok and Koren (2014) came along to state that some trade costs have no relationship with the increase in the value and volume of international trade. The study by these authors showed that there are some transactional activities in the shipment process that increase costs, yet add no value, and an attempt to reduce such costs result in trade efficiency. For instance, the charge of a container is fixed whether it is full or not. In that case, an exporter would incur more cost to ship fewer items than when he or she sends a container full. In that case, the exporter would prefer to wait and load a full container for transport. The exporter has to make a tradeoff either by incurring higher cost to ship the product on time, or delay shipment of the product at a lower cost. The authors cited a number of transport costs that actually do not proportionate with the volume and value of trade. Some include inventory holding costs between shipment arrivals. Another operation in international trade that has the propensity to increase cost yet not add value to the trade is port clearance (Hornok and Koren, 2014). Traditional port clearance is characterized by manual operations, arbitrary decisions, corruption and unnecessary delays (Kesino, 2012;Agbozo, 2017;Osei-Owusu and Mahmood, 2020;Addo, 2020). The manual operations make it difficult for the clearance procedures to be executed on time and accurately, especially, in this era where there is rise in volume of transaction because of globalization. The arbitrary decisions allow custom officials to frustrate and delay the businesses in clearing their goods from the port. Corruption increases the cost of transportation for businesses due to extra cost borne due to corruption. The delays in the port clearance increase the inventory holding cost as they are kept in the bonded warehouses (Kahyarara, 2018). In a nutshell, the traditional port clearance increase transaction cost yet adds little or no value. Hoa and Haasis (2017) argued that port clearance is a logistical activity, and a logistical activity is to add value by ensuring that the right products are delivered to the “right customer”in their rightful quantity and condition at the right time to the right place for the right price. Comparing the function of a logistical activity stated by Hoa and Haasis (2017) and the function performed by the traditional port clearance in international trade, there is a gross mismatch. This mismatch has aroused the interests of researchers and policy makers to seek for ways and means of making the port clearance efficient enough so as to deliver effectively as a logistical driver in international business. The efforts made by countries in enhancing port Paperless custom clearance 43 clearance has been the adoption of information technology (Aliet, 2008). According to Tijan et al. (2012), information technology is an effective tool for achieving competitiveness and efficiency in sea port clearance. The justification for this argument is that information is a key resource in international trade. Therefore, to effectively carry out international trade, the information flow must be seamless. The adoption of information communication technology allows the port to handle the immense volume of demand and other information traffic. In a “Port Efficiency Conference,”organized by Ghana Institute of Freight Forwarders (GIFF) in 2017, the Vice President of the Republic of Ghana expressed the inefficiencies in the Ghanaian port clearance processes. In an effort to battle the inefficiencies, the government ordered the port operators to adopt total paperless operations in the clearance procedures. This is a great initiative but the problem associated with this reform is the limited research in the field. However, it cannot be said from face value that once the aim of the paperless port clearance adoption is to reduce clearing time, eliminate human intervention and streamline business process, firms and their supply chains are going to soar and will automatically be impacted positively (de Reuver et al., 2018;Klein et al., 2020). Nevertheless, there has been very limited literature in the context of Ghana that examines the impact of paperless IT clearance on businesses and their supply chains. For this reason, this study assesses the impact of paperless information technology-based custom clearance at Ghana port on businesses and industrial supply chains in Ghana. It is necessary for the government and policymakers in Ghana to understand the potential of the paperless port clearance system (Shepherd, 2014), from an objective point of view and to also guard against all the risks that may impede the flow of the benefits. This study provides an in-depth understanding into the paperless clearance process and related prospects of its adoption. This research work is a basis for the government to know which areas are risk prone to the paperless clearance adoption and how exactly the paperless clearance adoption impact businesses in Ghana. The paperless system and the challenges it pose to Ghana’s port clearance procedure is presented under the overview. This is followed by the theoretical foundation of the study. The data and methodology then follow. The next section is the presentation of the results and is followed by the discussion section. The last section contains the conclusion of the study. Theoretical foundation Transaction cost economics theory (TCE) The transaction cost economics is a theory that defines the various structures of organizations such as the market structures and government structures (Chen et al., 2017). The author stated that in a more detailed explanation, the transaction economics theory refers to the determination of the level of transaction cost that is sufficient enough for firms to successfully manage and organize themselves in the competitive market. Williamson (1996) did a great job on explaining the theory some few decades after it was developed. The author explained that there are three dimensions to the transaction cost theory. These dimensions are asset specificity, frequency of transaction and supply uncertainty. The asset specificity dimension of this theory refers to the level at which the firm’s assets used to carry out an activity can be re-used for alternative activities by other users without sacrificing its productive value (Chen et al., 2017). The frequency of transaction also refers to the repetition of transaction activity carried out with customers in the market. Supply uncertainty also refers to the non-disclosure, disguising and distortion of information by the players in the market to take advantage of opportunities (Williamson, 1996). These three dimensions are interplays that determine the costs of a firm as it operates in a market. Willamsom (1996) explained that all these three dimensions have costs element and these costs emanate from production and coordination. The production costs arise from the flow of materials in the course of carrying out the transaction, whereas the coordination costs arise from the transfer MAEM 4,1 44 of information in the course of carrying out the transaction. Information technology comes to play to help improve the coordination costs incurred by firms. The transaction cost economics theory is employed to examine the impact of investment in information technology on firm coordination costs. Since this research is focused on the influence of paperless port clearance on businesses and industrial supply chains, the transaction economics theory better explains the relationship between the constructs. According to Chen et al. (2017), IT-coordination costs are significant in external coordination. This makes the usage of the transaction cost economics theory plausible in the explanation of the impact that paperless port clearance has on businesses. As mentioned by Carbone and Martino (2003) ports are part of the supply chain and they are very instrumental in the coordination of the parties in the supply chains. Nsiah (2014) also disclosed that the ports play key role in the flow of materials across the supply chain. The author explained that the ports link all the other modes of transport employed by firms as long as international trade is concerned. This is very reasonable because international freights are transited on sea, due to the relatively lower cost of marine transport (Shepherd, 2014), before the freight are transported through other modes of transport such as road, rail and pipeline. Paperless IT-based port clearance Ports have been the recognized site for the regular transshipment of consignments in order to transfer freights from one mode of transport to another mode of transport (Carbone, 2013). According to Rau and Aikaterini (2013), Customs Clearance, also known as Port Clearance is the act of passing freights through the customs unit of a country so that they can legally enter or leave the country. When the customs unit is satisfied with the certification, customs duty is paid by the importer or exporter, then a clearance document is issued to authorize the shipment of the goods. In the clearance procedure, the exporter is required to submit some documentation such as sales invoice, purchase order from the buyer, shipping bill, Bill of Lading or air waybill, Certificate of Origin for inspection (Rau and Aikaterini, 2013). The importer is also required to submit copies of the same documentation for inspection. Over time, information technology has been integrated into port clearance to enhance its efficiency. This has given rise to the concept of paperless trade or paperless port clearance. Paperless port clearance is a cross-border trade that takes place on the basis of absolute electronic communications, involving the transfer of trade-related data and documents purely through an electronic means (Shepherd, 2014). According to Duval and Mengjing (2017), paperless trade generally refers to the conduct of international business transactions through an electronic means, rather than using paper-based documents and data. Ports play significant roles in the management and coordination of the materials and information flow in supply chains (Carbone and Martino, 2013). Thus, UNIPASS will help to reduce the turnaround time of importers and exporters at the port (Mante–Kodjo, 2020). Customer order fulfilment Christopher (2011) defines order fulfillment as the processes undertaken by a firm to receive an order from a customer to the delivery of the product to the customer. It is commonly used to designate the process of shipping or distribution (logistics). It refers to the diverse ways through which firms respond to customer orders and the processes the firms follow to ensure that the product or service gets to the consumer. One of the crucial aspects of managing a business and being in business is to satisfy the customer successfully. It requires businesses to pay particular attention to client needs, order processing, time management and quality assurance efforts. The author further explains that unless businesses keenly take part in the Paperless custom clearance 45 fulfillment process, they are possibly not going to be fully aware of the requirement of a successful Supply Chain delivery. Order fulfillment process of industries operate distinct from each other (Cannas et al., 2020). However, the major common factor among the industries is the speed at which an order can be delivered, tells how excited a customer is going to be (Hishamuddin et al., 2014). Hence, the benefits of order processing are many, irrespective of the means adopted by a supply chain in satisfying customer orders. The proliferation of the Internet and computers have greatly influenced the evolution of order fulfillment process. The new technology has created new processes of managing client information and orders. Now firms are able to rely on new order fulfillment tools to provide better organization of information and efficiency. Thanks to globalization and technology firms have access to unlimited opportunities and wide network of potential customers. In the new system, the supply chain is set in motion by the customers’order. Conceptual framework and hypothesis Some earlier studies have examined the impact of IT-based port clearance on several constructs. Yang and Wei (2013) examined the impact of IT based port clearance on security performance. Garstone (1995) looked at the effect of electronic data interchange on port operations. Strandenes and Marlow (2000) also examined the effect of IT-based port clearance on port pricing and competitiveness. Clark et al. (2004) examined the relationship between port efficiency, transport cost and international trade. Alavi (2004) also studied how ICT can be used in Port operations to facilitate trade. Schilima and Gikonyo (2017) examined the role of Kenya’s electronic single window on global value chain. Tijan et al. (2012) also studied the essence of port community system implementation. All these are great works conducted on the impacts ICT-driven port clearance have on the various aspects of the global economy. A conceptual framework has been designed based on the review made on the literature above and some other literature. The study involves four main constructs: Paperless IT-based port clearance, transaction cost reduction, customer order fulfillment, and supply chain relationships. Below is a schematic diagram of the conceptual framework for the study (see Figure 1). Paperless IT Based Port Clearance Transacon Cost Reducon Customer Order Fulfillment Supply Chain Relaonships H1(+) H2(+) H3(+) Figure 1. Conceptual framework MAEM 4,1 46 Hypothesis According to Sichilima and Gikonyo (2017), the implementation of the Kenyan National Electronic Single Window System led to great efficiency, transparency and effectiveness in the port operations that resulted in enhanced revenue collection for the government and reduced cost of doing business for both the public and private sector. Ghanaian ports can reduce costs in their chains through transportation cost savings, time savings and reduction in errors (Sichilima and Gikonyo, 2017). Costs incurred by exporting and importing firms in Ghana are caused by both internal factors and external factors within their port chain (Kholkin, 2017). Nord as and Piermartin (2004) explained that production in Ghanaian firms could be halted because a particular part needed for production was locked up at the Ghanaian Ports. This results in production interruptions which subsequently increases production costs within Ghanaian Port Chain. Therefore, costs of consignment at the Ghanaian Ports are escalated by the time goods are cleared. Sanchez et al. (2003) also stated that the cost of tariffs and duties paid on exports and imports passing through the Ghanaian Ports increased the cost of inventory and production costs. Moreover, travelling expenses and expenses related to documentations for the clearance of goods are added up to the administrative costs incurred by export and import firms in Ghana. United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, 2013) explained that paperless port clearance makes business more efficient in their cost management. Based on this, it is hypothesized that: H1. There exists a positive relationship between Paperless Port Clearance and Transaction Cost Reduction among firms in Ghana. In a study by Sarathi (2006) on container security, the author mentioned that the greatest concern of supply chain executives is security of the in-transit inventory. It was discovered that the ports have greater stake in ensuring the safe delivery of transported goods. A nonsmooth transport of the goods results in delays, increased holding costs, and production disruption. All these are factors that have the potency of affecting customer order fulfillment (Tengfei and Duval, 2013). Therefore, this study hypothesizes that H2. Paperless IT-based port clearance positively influence customer order fulfillment in Ghana. Ports are not external parties to supply chains. They are not third-party service providers, rather, they are part of the supply chain of every exporter or importer the port operates with. Not only are they part of the supply chain, but they are powerful actors in the supply chains (Carbone and Martino, 2003). Thus, a paperless port clearance is likely to increase supply chain visibility, shorten lead time, promote trust and collaborations, and this will eventually strengthen the relationships in the supply chains (Shepherd, 2014). Therefore, this study hypothesizes that H3. Paperless IT-based port clearance positively relates to supply chain relationship development. Data and methodology In accordance with other studies (such as Latif et al., 2021;Park and Baek, 2018;Meier and Sch€ afer, 2018) this study employed the survey method to evaluate the relationship between paperless custom clearance and business supply chains. The survey method is a quantitative technique used to examine the relationship between constructs (Latif et al.,2021;Newsted et al.,1998). Thus, a paper-based questionnaire was used to collected primary data from the respondents. The items used in the study were adapted from United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, 2013). The items on the Paperless custom clearance 47 questionnaire were measured with a five-point Likert scale (1 –Strongly Agree to 5 – Strongly Disagree). The respondents were purposively selected from import and export firms. They were deemed appropriate to provide the right kind of data needed to answer the research questions because they are very much involved in port operations. The respondents were briefed on the purpose of the survey and the researcher assured them that their identity will never be exposed. Also, the respondents were assured that participation in the survey is not compulsory. In other words, they have the right to opt-out at any time if they so wish. The main concepts in the survey were explained to the respondents before administering the questionnaire. This gave the researchers the opportunity to clarify all ambiguous issues. With regards to eligibility, only top managers of the selected firms were recruited to participate in the survey. 145 out of 200 questionnaires distributed were retrieved. However, 139 was used for analysis. Results and discussion Firms’background The respondents were asked to disclose some background information about their respective firms and the responses are presented on Table 1: Two respondents representing 1.4% disclosed that their firm is less than a year old. 12 (8.6%) respondents indicated that their firms are between 1 and 3 years old. 21 (15.1%) respondents also responded that their firms have been in existence for a period of 4–6 years. 33 (23.7%) respondents also answered that their firms have been in existence for a period of 7–9 years now. 71 (51.1%) of the respondents also indicated that their firms have been in existence for 10 years and over. The researchers further probed to investigate the length of time for which these firms have been involved in international trade. 4 respondents (2.9%) answered that their firms started using the port clearance a year or less ago. 14 (10.1%) respondents also answered that their firms have been involved in the clearing process for a period of 1–3 years now. 29 (20.9%) respondents also responded that their firms have been involved in the port clearance process Measures Categories Frequency Percentage Firms age (in years) Less than 1 2 1.4 1 to 3 12 8.6 4 to 6 21 15.1 7 to 9 33 23.7 10 or more 71 51.1 Years in port clearing Less than 1 4 2.9 1 to 3 14 10.1 4 to 6 29 20.9 7 to 9 35 25.2 10 and more 57 41 Firms’clearing status Exporting 16 11.5 Importing 99 71.2 Both 24 17.3 Industry Agriculture 12 8.6 Automobile 7 5 Building, mining and engineering 25 18 Chemical and agrochemical 12 8.6 Energy, electrical and electronic 22 15.8 Food and beverage 37 26.6 Pharmaceuticals 17 12.2 Others 6 4.2 Table 1. Background information of firms MAEM 4,1 48 for a period of 4–6 years now. 35 (25.2%) respondents also indicated that their firms have been involved in the port clearance procedures for a period of 7–9 years now. 57 (41%) respondents also indicated that their firms have been involved in the port clearance procedures for 10 years and more. From the above information on the age of the firms and the length of time for which the firms engaged in international trading, it is evident enough that majority of the firms have been in existence for more than 10 years and they have been involved in the port operations for that long as well. 16 (11.5%) respondents indicated that their firms solely export goods, 99 (71.2%) respondents showed that their firm solely import goods, and 24 (17.3%) respondents indicated that their firms are into both exporting and importing of goods. It is very evident from the statistics above that majority of the firms in Ghana are involved in importing. This confirms the assertions that Ghana imports more goods than it exports. The respondents also provided the industry within which their firms fall. 8.6% of the firms fall within the agriculture industry, 5.7% fall within the automobile industry, 18% fall within the Building, Mining, and Construction Industry, 8.6% fall within the chemical and agrochemical industry. 15.6% fall within the Energy, Electrical and Electronics Energy, 27.3% fall within the food and beverage industry, 12.2% fall within the pharmaceutical industries and 2.8% fall within the other industries including forestry and industrial supplies. Reliability test result In order to ensure that the items used in measuring the constructs are reliable, a reliability test is conducted (Table 2). The Cronbach’s alpha value is used to determine how reliable the items used to measure the variables in the study are. According to Hair et al. (2006), Cronbach’s alpha values range from 0 to 1; however, 0.7 is the universally accepted lower limit. Nevertheless, in exploratory studies, this might decrease to 0.6 (Hair et al., 2006). PPC measured the extent to which paperless port clearance practices are adopted: 6 items were used in measuring PPC and the test for reliability revealed a Cronbach’s alpha value of 0.918, thus affirming that the items used to measure PPC are reliable and valid. 7 items were used to measure Customer Order Fulfillment, COF. The reliability test revealed a Cronbach’s alpha value of 0.924, confirming that the 7 items used are effective and reliable. TCR representing Transaction Cost Reduction was also measured with 5 items. The reliability test indicates an alpha value of 0.873, again revealing that these 5 items are reliable indicators to measure TCR. 5 items were also used to measure Supply Chain Relationship (SCR) and the test for reliability showed a Cronbach’s alpha value of 0.915. 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(2014), “Professional learning communities enhancing teacher experiences in international schools”,International Journal of Pedagogies and Learning, Vol. 9 No. 1, pp. 76-86. Agbesi, K. (2013), “The impact of ICT on the clearing of goods at Ghana ports: a study of Tema and Takoradi ports”,Academic Research International, Vol. 4 No. 3, p. 87. Banomyong, R. (2005), “The impact of port and trade security initiatives on maritime supply-chain management”,Maritime Policy and Management, Vol. 32 No. 1, pp. 3-13. De Vaus, D. (2001), Research Design in Social Research, 1st ed., Sage Publications. Ghana Port and Harbours Authority (2018), “About us”, available at: https://www.ghanaports.gov.gh/ page/34/About-Us (accessed 30 September 2018). Hausmann, R., Pritchett, L. and Rodrik, D. (2005), “Growth accelerations”,Journal of Economic Growth, Vol. 10 No. 4, pp. 303-329. Paperless custom clearance 57 Lu, D. (2011), Fundamentals of Supply Chain Management, Ventus Publishing ApS, Frederiksberg. Lund, T. (2012), “Combining qualitative and quantitative approaches: some arguments for mixed methods research, Scandinavian”,Journal of Educational Research, Vol. 56 No. 2, pp. 155-165, doi: 10.1080/00313831.2011.568674. Corresponding author Kwame Owusu Kwateng can be contacted at: [email protected] For instructions on how to order reprints of this article, please visit our website: www.emeraldgrouppublishing.com/licensing/reprints.htm Or contact us for further details: [email protected] MAEM 4,1 58