Journal No 57

Amfiteatru Economic Journal
The Bucharest University of Economic Studies

Faculty of Business and Tourism
Volume XXIII ● May 2021 ● No. 57
Quarterly publication
Amfiteatru Economic Journal

is recognized and classified category A by
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Topics of the following two issues
• Issue no. 58/2021 – Teleworking: economic and social impact and perspectives
• Issue no. 59/2022 – Digital transformation in the context of European Union’s
Green Deal
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EDITORIAL BOARD
Editor-in-Chief
Vasile Dinu, The Bucharest University of Economic Studies, Romania; Academy of Romanian Scientists
Managing Editor
Laurenţiu Tăchiciu, The Bucharest University of Economic Studies, Romania
Associate Editors
Armenia Androniceanu, The Bucharest University of Economic Studies, Romania
Constantin Brătianu, The Bucharest University of Economic Studies, Romania; Academy of Romanian Scientists
Cristina Circa, West University of Timișoara, Romania
Dan-Cristian Dabija, ”Babeş-Bolyai” University, Cluj-Napoca, Romania
Cristian-Mihai Dragoş, ”Babeş-Bolyai” University, Cluj-Napoca, Romania
Irina Drăgulănescu, University of Studies of Messina, Messina, Italy
Octavian-Dragomir Jora, The Bucharest University of Economic Studies, Romania
Judit Oláh, University of Debrecen, Hungary
Madălina Dumitru, The Bucharest University of Economic Studies, Romania
Valentin Dumitru, The Bucharest University of Economic Studies, Romania
Raluca-Gina Gușe, The Bucharest University of Economic Studies, Romania
Valentin Hapenciuc, ”Ştefan cel Mare” University, Suceava, Romania
Nicolae Lupu, The Bucharest University of Economic Studies, Romania
Čudanov Mladen, University of Belgrade, Belgrade, Serbia
Alexandru Nedelea, ”Ştefan cel Mare” University, Suceava, Romania
Marieta Olaru, The Bucharest University of Economic Studies, Romania
Cătălina Soriana Sitnikov, University of Craiova, Romania
Włodzimierz Sroka, WSB University, Polonia
Nicoleta Tipi, The University of Huddersfield, Huddersfield, United Kingdom
George-Sorin Toma, University Bucharest, Romania
Aharon Tziner, The Academic College of Netanya, Netanya, Israel
Cristinel Vasiliu, The Bucharest University of Economic Studies, Romania
Călin Vâlsan, Bishop’s University, Sherbrooke, Québec, Canada
Milena-Rodica Zaharia, The Bucharest University of Economic Studies, Romania
Editorial Advisory Board
Dan-Laurenţiu Anghel, The Bucharest University of Economic Studies, Romania
Andrej Bertoncelj, University of Primorska, Koper, Slovenia
Yuriy Bilan, University of Szczecin, Szczecin, Poland
Slobodan Čerović, University Singidunum, Belgrade, Serbia
Ung-il Chung, The University of Tokyo, Tokyo, Japan
Lóránt Dénes Dávid, Szent István University, Gödöllő, Hungary; ordinary member of the European
Academy of Sciences and Arts
Emilian Dobrescu, Romanian Academy, Bucharest, Romania
Veselin Draskovic, University of Montenegro, Kotor, Montenegro
Delgado Francisco Jose, University of Oviedo, Spain
Valeriu Ioan-Franc, Romanian Academy, Bucharest, Romania
Romualdas Ginevicius, Vilnius Gediminas Technical University, Vilnius, Lithuania
David B. Grant, Hanken School of Economics, Finlanda
Nicolae Istudor, The Bucharest University of Economic Studies, Romania
Dumitru Miron, The Bucharest University of Economic Studies, Romania
Puiu Nistoreanu, The Bucharest University of Economic Studies, Romania
Bogdan Onete, The Bucharest University of Economic Studies, Romania
Rodica Pamfilie, The Bucharest University of Economic Studies, Romania
József Popp, University of Debrecen, Hungary
Idowu Samuel, London Metropolitan University, London, United Kingdom
Ion Stancu, The Bucharest University of Economic Studies, Romania
Daniel Stavarek, Silesian University, Karvina, Czech Republic
Dalia Streimikiene, Vilnius University, Vilnius, Lithuania
Bernhard Swoboda, Universitatea Trier, Germania
Gheorghe Zaman, Romanian Academy, Bucharest, Romania
Founders
Vasile Dinu, The Bucharest University of Economic Studies, Romania
Sandu Costache, The Bucharest University of Economic Studies, Romania
Editorial Office
Irina Albăstroiu, The Bucharest University of Economic Studies, Romania
Mihaela Bucur, The Bucharest University of Economic Studies, Romania
Simona Margareta Bușoi, ASE Publishing House, The Bucharest University of Economic Studies, Romania
Răzvan Dina, The Bucharest University of Economic Studies, Romania
Raluca Mariana Grosu (Assistant Editor), The Bucharest University of Economic Studies, Romania
Silvia Răcaru, ASE Publishing House, The Bucharest University of Economic Studies, Romania
Violeta Rogojan, ASE Publishing House, The Bucharest University of Economic Studies, Romania
Daniel-Ion Zgură, The Bucharest University of Economic Studies, Romania
Contents
Challenges of IoT Technologies for Businesses and Consumers .................................. 321

Irina Albăstroiu
Challenges of IoT Technologies for Businesses and Consumers

Adopting IoT-Based Solutions for Smart Homes. The Perspective
of the Romanian Users ..................................................................................................... 325
Irina Albăstroiu, Calcedonia Enache, Andrei Cepoi, Adrian Istrate
and Teodora Liliana Andrei
The IoT Technologies Acceptance in Education by the Students

From the Economic Studies in Romania ........................................................................ 342
Liliana Ionescu-Feleaga, Bogdan-Ștefan Ionescu and Mariana Bunea
Factors That Influence the Adoption of the Internet of Things

in Tourism by Romanian Consumers ............................................................................. 360
Vasile Dinu, Sorin Paul Lazăr and Iustin Atanasiu Pop
Wearable Technology Adoption Among Romanian Students:

A Structural Model Based on TAM ................................................................................ 376
Mihai Felea, Mihaela Bucur, Cristian Negruțiu, Maria Nițu and Dragoș Andrei Stoica
Business Model Innovation for IoT Solutions: An Exploratory Study

of Strategic Factors and Expected Outcomes ................................................................ 392
Florin Sabin Foltean and Bogdana Glovațchi
Usage of Neural-Based Predictive Modeling and IIoT

in Wind Energy Applications .......................................................................................... 412
Adrian-Nicolae Buturache and Stelian Stancu
Intrusiveness and Data Protection in Iot Solutions

for Smart Homes. Amfiteatru ......................................................................................... 429
Irina Maiorescu, Larisa Gabudeanu, Alexandru - Lucian Vîlcea, Gabriel - Cristian Sabou
and Marian Dârdală
Internet of Things (IoT), Challenges and Perspectives in Romania:

A Qualitative Research .................................................................................................... 448
Silviu-Gabriel Szentesi, Lavinia Denisia Cuc, Ramona Lile and Paul Nichita Cuc
Vol. 23 • No. 57 • May 2021 319

Economic Interferences
The Effect of Corporate Income Tax of Agricultural Companies on
National Budget ‒ the Case of the Slovak Republic ...................................................... 466
Juraj Chebeň, Renáta Krajčírová, Alexandra Ferenczi Vaňová and Michal Munk
Assessment of the Role of a Leader in Shaping Sustainable

Organizational Culture .................................................................................................... 483
Dalia Streimikiene, Asta Mikalauskiene, Lina Digriene and Grigorios Kyriakopoulos
Quantitative Assessment of the Dynamics of Socioeconomic Processes ...................... 504

Romualdas Ginevičius, Martin Schieg, Magdalena Kot-Radojewska and Marta Jarocka
Inflation Forecasting in the Western Balkans and EU:

A Comparison of Holt-Winters, ARIMA and NNAR Models ...................................... 517
Vesna Karadzic and Bojan Pejovic
Amfiteatru Economic recommends

Synergy of Neoliberalism, Alternative Institutions and Transitional Crisis ............... 534
Veselin Draskovic, Sergey A. Kravchenko and Milica Delibasic
An Assessment of the Social Work Program in Turkey in Terms

of Labour Market Experience and Professional Skill Attainment .............................. 548
Bulent Arpat, Mete Kaan Namal, Mustafa Kocanci and Aynur Yumurtaci
Book Review: 10 (ten) projects Internet of Things. Author: Radu Pietraru .............. 570
Daniel-Marian Merezeanu
320 Amfiteatru Economic

CHALLENGES OF IoT TECHNOLOGIES FOR BUSINESSES
AND CONSUMERS
Please cite this article as:

Albăstroiu, I., 2021. Challenges of IoT Technologies for Businesses and Consumers.
Amfiteatru Economic, 23(57), pp.321-323.
DOI: 10.24818/EA/2021/57/321
IoT (Internet of Things) is a concept and a paradigm that involves the ubiquity of large and
diverse number of smart devices and active objects that can interact and cooperate with
other devices and objects through wired and wireless connections and unique addressing
schemes to create services and applications adapted to users’ needs. The ability of smart
devices to connect, communicate and transfer data has enabled the innovation and
development of various solutions for industry, business organizations, and final consumers.
Currently, popular IoT solutions in the consumer segment (Consumer IoT) are those in the
“smart home” category (which refers to applications for control and automation of lighting
systems, ventilation, air conditioning, robotic vacuum cleaners, air purifier, air
conditioners, ovens or refrigerators) and wearable devices (“wearables”), such as fitness
bracelets or trackers and smart watches, allowing users to monitor and control their health.
Companies have embraced this tendecy very quickly, because the benefits are important:
higher connectivity, easy access to data, interconnected ecosystems. All this translates into
lower costs and efficiency in resource optimization. Commercial IoT projects are varied ‒
from collecting and analyzing information from customers through interconnected objects,
to implementation of intelligent solutions for the office area (resources ‒ such as water, gas,
electricity or heat ‒ become controllable by automation and monitoring in office buildings,
industrial halls, warehouses, hotels, and can be distributed more efficiently, according to
real needs).
Also, the applicability of IoT technology proves to be useful in optimizing production
flows, intelligent power grids, connected industrial equipment and digital supply chain
management. Industrial IoT (IIoT) refers to application of IoT technology in industrial
settings, especially in terms of control the devices involving cloud technologies and
allowing organizations to collect and analyze data from a variety of sensors (on production
equipment, delivery trucks, pipelines, weather stations, smart meters etc.)
IoT applications have proven their technical feasibility, but there are still questions about
their economic viability, especially from a business perspective. In this regard, concerns are
raised about the high costs and length of time required to implement these solutions, the
scarcity of suitably qualified staff and uncertainties about actual cost-effectiveness of such
projects. In addition, there are concerns about the impact on environment and human
health, data security and confidentiality, and many other unresolved ethical and legal issues.
In this context, this issue of Amfiteatru Economic journal is dedicated to identify the main
benefits and challenges in all areas of IoT applicability, associated with use at the level of
individual consumer, business organization or industry. Moreover, the issue dedicated to
Vol. 23 • No. 57 • May 2021 321

this topic has offered the opportunity for academics and business professionals to present
the results of their research, indicating the degree of understanding of the concept and its
implications, as well as the current state and development trends in different sectors.
The concept of smart home has been drawing attention recently due to IoT. A home with
IoT solutions is the one wherein electrical, electronic, and household appliances are
connected to a central monitoring and control system, so that can be automatically turned
on and off at certain times or if certain events occur. These smart home IoT solutions are
the subject of the article “Adopting IoT-based Solutions for Smart Homes. The perspective
of the Romanian Users”, that presents areas of application, characteristics of the solutions
dedicated to smart homes and the results of an exploratory research, that allowed
identification of the level of understanding, degree of the adoption and, also, the associated
benefits and challenges of these solutions, from the perspective of the Romanian users.
Nowadays, IoT technologies are successfully used in the field of education. The article
“The IoT Technologies Acceptance in Education by the Students from the Economic Studies
in Romania” investigates the factors that affect the IoT technologies adoption using a
conceptual framework inspired by the Technology Acceptance Model ‒ TAM, which
explains the use of new technologies by adopting a causal relationship between beliefs,
perceptions, attitudes, intentions and behavior. The results of the study show the existence
of a positive correlation between the research variables and indicate that Romanian students
from the economic studies are ready to accept the new technological advances in IoT and to
implement them in their future jobs.
The adoption of IoT technologies in tourism is the issue addressed in the article “Factors
that Influence the Adoption of the Internet of Things in Tourism by Romanian Consumers”.
The study is highlighting the specific determinants of IoT adoption in tourism, in general,
and in reservation systems, especially, by presenting the causal relationship between the
level of IoT adoption in tourism services and trust in these systems, on the one hand, and
individual internal consumer behaviours, on the other hand. Influencing factors are grouped
into six categories: awareness, confidentiality and safety, cost, convenience, social
influence, and habits. The main results of the research conducted among Romanian tourists
show the significant influence of behavioural variables related to awareness, convenience,
habits, and cost. Among the socio-demographic factors, the role of age and education was
highlighted, the younger and more educated people having higher probabilities of frequent
use of the tourist services proposed by IoT systems.
A new theoretical model based on Technology Acceptance Model (TAM) was also
developed and tested in the article “Wearable Technology Adoption among Romanian
Students: a Structural Model Based on TAM” in order to identify the relations between
factors influencing the attitude towards use and the intention to use of wearable devices. A
survey carried out on Romanian students provided the necessary data to test the model. The
results of Structural Equation Modelling (SEM), based on the Partial Least Squares (PLS)
method, indicate that the three exogenous variables of the model (perceived usefulness,
perceived enjoyment, and visual attractiveness of wearable devices) have a significant
positive influence on endogenous variables (intention to use and attitude towards the use of
wearable devices).
Successful innovation of the business model for IoT solutions requires companies to adopt
strategic orientations towards market, technology, and entrepreneurship, creating the
conditions for increasing long-term performance. Despite this, in the field of strategic

management and marketing, limited efforts have been dedicated to studying the strategic
factors of business model innovation for IoT solutions. To fill this knowledge gap, the
paper “Business Model Innovation for IoT Solutions: an Exploratory Study of Strategic
Factors and Expected Outcomes” contributes by deepening the understanding of the
business model innovation phenomenon and guiding managers in this process. Through a
qualitative research, consisting in semi-structured interviews with top managers at IT
companies operating in Romania, that have successfully developed IoT solutions, the
authors of this article have identified proactive market orientation, technology orientation,
entrepreneurial orientation, and adaptive marketing capabilities as strategic factors of
business model innovation for IoT solutions.
The article “Usage of Neural-Based Predictive Modeling and IIoT in Wind Energy
Applications” aims to provide an overview on the use of predictive analytics based on
neural networks and IIoT in the wind energy industry. The focus is on analytics, by
identifying the theoretical and practical aspects of using network-based algorithms for
rapid, short-term univariate predictions of wind energy production, using Romanian-based
wind turbines data for the case study. The article demonstrates that Industrial Internet of
Things is enabling the effective transition to wind energy through automation by removing
many of the disadvantages in a way that has recently become accessible, creating a synergy
of physical devices through advanced sensing capabilities, software, storage and analytics
capabilities.
The use of IoT by individuals in their homes involves the reinterpretation of existing
requirements regarding data protection, especially in terms of the ethics of using data and
the security of personal data. The paper “Intrusiveness and Data Protection in IoT
Solutions for Smart Homes” analyses the intrusiveness generated by aggregations of
personal data, the responsibility for data protection and user's perception of these issues. It
also presents the results of a quantitative research, showing that accessing certain types of
data is perceived as being more intrusive than others, and that respondents rely on other
users' reviews to learn how data protection is provided through the IoT device.
The paper “Internet of Things, Challenges and Perspectives in Romania: A Qualitative
Research” makes a contextual analysis of the development and the future of Industrial IoT
in Romania. Data collected from Romanian companies, by semi-structured interview, are
presented in the paper and allow to identify the level of integration of IoT in the activity of
companies, a first capture of potential risks perceived by users in industry, car
transportation and support services, and the barriers in the implementation and use of IoT.
The devices used in everyday life are becoming more and more intelligent and
interconnected. Thus, IoT is an emerging field. These technologies, that could allow
literally billions of everyday objects to communicate with each other, have enormous
potential to change our lives, to boost productivity, keep us healthier (or at least more
careful and concerned with this aspect), make transportation more efficient, reduce energy
consumption or make our homes more comfortable.
Associate Editor,
Irina Albăstroiu
Vol. 23 • No. 57 • May 2021 323

Contents
Challenges of IoT Technologies for Businesses and Consumers

Adopting IoT-Based Solutions for Smart Homes. The Perspective
of the Romanian Users ..................................................................................................... 325
Irina Albăstroiu, Calcedonia Enache, Andrei Cepoi, Adrian Istrate
and Teodora Liliana Andrei
The IoT Technologies Acceptance in Education by the Students

From the Economic Studies in Romania ........................................................................ 342
Liliana Ionescu-Feleaga, Bogdan-Ștefan Ionescu and Mariana Bunea
Factors That Influence the Adoption of the Internet of Things

in Tourism by Romanian Consumers ............................................................................. 360
Vasile Dinu, Sorin Paul Lazăr and Iustin Atanasiu Pop
Wearable Technology Adoption Among Romanian Students:

A Structural Model Based on TAM ................................................................................ 276
Mihai Felea, Mihaela Bucur, Cristian Negruțiu, Maria Nițu and Dragoș Andrei Stoica
Business Model Innovation for IoT Solutions: An Exploratory Study

of Strategic Factors and Expected Outcomes ................................................................ 292
Florin Sabin Foltean and Bogdana Glovațchi
Usage of Neural-Based Predictive Modeling and IIoT

in Wind Energy Applications .......................................................................................... 312
Adrian-Nicolae Buturache and Stelian Stancu
Intrusiveness and Data Protection in Iot Solutions

for Smart Homes. Amfiteatru ......................................................................................... 329
Irina Maiorescu, Larisa Gabudeanu, Alexandru - Lucian Vîlcea, Gabriel - Cristian Sabou
and Marian Dârdală
Internet of Things (IoT), Challenges and Perspectives in Romania:

A Qualitative Research .................................................................................................... 348
Silviu-Gabriel Szentesi, Lavinia Denisia Cuc, Ramona Lile and Paul Nichita Cuc

Challenges of IoT Technologies for Businesses and Consumers AE
ADOPTING IoT-BASED SOLUTIONS FOR SMART HOMES.

THE PERSPECTIVE OF THE ROMANIAN USERS
Irina Albăstroiu1∗, Calcedonia Enache2, Andrei Cepoi3, Adrian Istrate4
and Teodora Liliana Andrei5
1)2)3)4)5)
Bucharest University of Economic Studies, Romania
Please cite this article as: Article History

Albastroiu, I., Enache, C., Cepoi, A., Istrate, A. and Received: 30 December 2020
Andrei, T.L., 2021. Adopting IoT-Based Solutions for Revised: 29 January 2021
Smart Homes. The Perspective of the Romanian Users. Accepted: 6 March 2021
DOI: 10.24818/EA/2021/57/325
Abstract
IoT (Internet of Things) is a concept that defines a world in which all objects are connected
to each other via the Internet. The ability of smart devices to connect, communicate and
transfer data has enabled the innovation and development of various solutions for industry,
business organizations and final consumers. In this article, we have chosen to discuss the
solutions related to smart homes.
Thus, our paper presents, in the first part, the conceptual delimitations regarding IoT, areas
of application, and characteristics of the solutions dedicated to smart homes, showing that
adoption of IoT-based smart home solutions has been too little addressed in the literature.
Most of the work in the field insists on the technical aspects and only subsidiarily deals with
the issues regarding the level of understanding of the IoT smart home concept by potential or
actual users and the degree of adoption and use of these solutions. In order to cover these
gaps identified in the literature, we presented, in the second part of the paper, the
methodology and results of an exploratory research, conducted on a sample of 471 persons,
which allowed us to identify the socio-demographic characteristics of the respondents (users
of IoT solutions), level of understanding the IoT concept, degree of the adoption and, also,
the associated benefits and challenges, from the perspective of the Romanian users. We also
developed a binary logistic regression model, for in-depth analysis of the results and for
correlating the findings of our research with those of other studies.
Keywords: Internet of Things, smart home, smart device, automation, monitoring and
remote control.
JEL Classification: L86, O33
∗ Corresponding author, Irina Albăstroiu ‒ e-mail: irina.albastroiu@com.ase.ro

Authors’ ORCID:
Irina Albăstroiu: https://orcid.org/0000-0003-4159-0572
Calcedonia Enache: https://orcid.org/0000-0001-7069-6662
Andrei Cepoi: https://orcid.org/0000-0002-0413-5389
Adrian Istrate: https://orcid.org/0000-0001-9724-456X
Teodora Liliana Andrei: https://orcid.org/0000-0003-3487-6310
Vol. 23 • No. 57 • May 2021 325

AE Adopting IoT-Based Solutions for Smart Homes.
The Perspective of the Romanian Users
Introduction
Kevin Ashton, technology pioneer, cofounder and executive director of the Auto-ID Center
at MIT (Massachusetts Institute of Technology), used for the first time syntagma Internet of
Things ‒ IoT in a presentation he made in 1999 in order to describe the network connecting
objects in the physical world to the Internet. Referring later to this concept, Ashton (2009)
affirmed that IoT has the potential to change the world, as has happened before with the
Internet.
Although the concept appeared two decades ago, technologies that condition and support
IoT are constantly evolving; being related with an amalgam of existing and developing
technologies applied in a new context, even finding an appropriate definition of the term is
not an easy task. Many authors have tried to expose the important attributes, to define and
capture the essence of IoT (Gigli and Koo, 2011; Lee and Lee, 2015; Madakam et al., 2015;
Whitmore, Agarwal and Li, 2015; Ben-Daya et al., 2017), approaching Internet of Things
especially from the perspective of a global network infrastructure that connects physical
and virtual objects by exploiting data capture and communication capabilities, based on
object identification, sensors and connections in order to development independent
cooperation services and applications. Over time, the term has evolved, describing, into a
more generic meaning, a network of entities connected by any form of sensor, allowing
these entities to be located, identified and even controlled and remotely operated (Onete,
Pleșea and Albăstroiu, 2017).
An IoT solution involves hardware components (processors, sensors, gateways, controllers,
and switches), software (standalone and integrated platforms), and services (device
lifecycle management, remote monitoring, and deployment services). Adopting these
solutions is a way to boost productivity, keep us healthier (or at least more careful and
concerned with this aspect), make transportation more efficient, reduce energy consumption
or make our homes more comfortable. This last-mentioned aspect, namely the implications
of IoT technologies on our homes, is subject of the present article.
Although home automation has been in question since the '80s (Horrigan, 1987), the
concept of smart home has been drawing attention recently due to IoT. A smart home is an
advanced form of traditional home automation, but IoT technologies are taking a step
further by introducing centralized control. A home with IoT solutions is the one wherein
electrical, electronic, and household appliances are connected to a central monitoring and
control system, so that can be automatically turned on and off at certain times or if certain
events occur. The devices are connected via the Internet, and the customer can remotely
adjust access in the house, temperature, lighting, etc., but also functions of the smart TV,
refrigerator, oven etc.
The adoption of IoT smart home solutions has been too little addressed in the literature. Most
papers in the field are based on the technical aspects, presenting the architecture, structure
and functionalities of such systems and associated security issues (Strengers, 2013; Lia et al.,
2018; Sowah et al., 2020) and only subsidiarily deal with issues regarding the level of
understanding the IoT smart home concept by potential or actual users and the degree of
adoption and use of these solutions Although there are regional analyzes and market reports
(Fortune Business Insights, 2020; Mordor Intelligence, 2020; Research Reports World,
2020), still, in the scientific literature are presented mainly empirical analyzes on specific
groups (young people in the digital generation, elderly with disabilities, various categories of

patients etc. (Le, Nguyen and Barnett, 2012; Lee and Park, 2020)), but the popularization of
such services requires more general discussions for various classes of users. Also, we did not
identify any scientific articles dealing with the situation from Romania or the perspective of
the Romanian users of smart home IoT solutions.
In this context, our paper aims to present and analyze the adoption of IoT smart home
solutions in Romania and the benefits and challenges from the perspective of the Romanian
users. To achieve this goal, the article is structured as follows: this introductory part
(describing the general scientific framework) is followed by a review of the literature, which
focuses on conceptual delimitations regarding IoT, areas of application and features of smart
home solutions. Forwards is the methodology section, presenting the purpose, objectives,
applied method and research tools. Results of this research, performed to identify the level of
adoption of smart home solutions in Romania, are analyzed related to other similar studies in
third section of the paper. The article ends with conclusions part, where is also mentioned the
limits of the research and possible directions for future analyzes.
1. Literature review
1.1. Internet of Things – conceptual insights
In recent years, Internet of Things (IoT) has attracted significant attention from different
researchers. Nevertheless, there is no universal definition of IoT, as stated by Whitmore,
Agarwal and Li (2015). However, analyzing definitions in the literature, Lynn et al. (2020)
notice there are two main conceptualizations: technical perspective (IoT is considered an
ecosystem of technical artifacts (Weyrich and Ebert (2016)) and socio-technical perspective
(IoT recognizes actors and associated processes, being recognized especially the role of
connected objects (Shin, 2014)).
However, IoT paradigm has evolved, from the approach concerning what can be connected
to the network, to the approach based on what can be done with objects connected to the
network (Ibarra-Esquer et al., 2017).
Regarding the thing or object that can be connected to the network, from the IoT
perspective, it can be any machine, device, application, computer, virtual or physical object
involved in a communication that could connect to the Internet and capable to create,
request, consume, redirect, or access digital information (Elkhodr, Shahrestani and Cheung,
2013). There are related concepts mentioned in the literature, such as smart
pieces/articles/products, "smart" being a term used to describe things or processes that have
the ability to calculate, connect and communicate to differentiate themselves from
machines and equipment working in isolation.
Concerning what can be done with these (inter)connected things or objects, it can be said
that act as providers and/or consumers of data related to physical world. Recent definitions
(Whitmore, Agarwal and Li, 2015; Ibarra Esquer et al., 2017) focus on some capabilities of
these objects/things, such as:
• networking – set of communication functionalities that allow them to connect and
make their identification, sensor measurements, and other attributes available to external
entities such as other smart objects or systems;
Vol. 23 • No. 57 • May 2021 327

• identification – have an unique identifier and can be recognized either by an

electronic tag or a label that can be read by another object or device;
• localization and tracing – built-in sensors to obtain data on their precise physical
location and actual condition;
• actuation – can be remotely controlled to trigger actions that have an effect on
physical reality;
• processing – can process information obtained by themselves or received via the
Internet and possess basic computing capabilities which can be used to make decisions
about themselves and their interactions with external entities.
Taking into account existing studies in the literature, we note the following aspects: most of
the previous studies have presented IoT application from the perspective of business
organizations (Schlick, Ferber and Hupp, 2013; Osterrieder, Budde and Friedli, 2020) or
communities/cities (Wirtz, Weyerer and Schichtel, 2019; Janik, Ryszko and Szafraniec,
2020), a multitude of papers focus on technical issues, presenting IoT architecture, design
and implementation (Gubbi et al., 2013; Bing, 2014; Weyrich and Ebert, 2016) and only a
few studies have investigated the impact of IoT on the final consumer (Gao and Bai, 2014;
Shin and Park, 2017). This is one more reason to consider particularly important the
consumer perspective concerning IoT, as we will proceed in this article.
An important aspect approached in the literature refers to data protection and security.
Sicari et al. (2015) and Dian, Vahidnia and Rahmati (2020) indicate as important security
challenges those regarding access control, authentication confidentiality, privacy,
compliance, middleware security, data security etc.
1.2. IoT application areas
The development of IoT technologies is currently far-reaching, despite the pandemic,
which has slowed the pace of development of many such high-potential sectors. The
purpose of using this technology varies, its value is increasing, as well as the budgets
allocated for its development and application (Nižetić et al., 2019). Given the forecasts for
their spread over the next 10 years, it is estimated that over 125 billion IoT devices will
connect to the global network (Anstee, 2019). Also, the expected investments in IoT
technologies are remarkably high, and is estimated will reach over 120 billion USD in
2021, with an annual growth rate of 7.3%, (Columbus, 2018).
IoT application areas have expanded and changed over the years. A research by Atzori, Iera
and Morabito (2010) indicated as major areas: transport, logistics and health. Five years
later, a study by I. Lee and K. Lee (2015) identified key areas for the IoT footprint,
including production, finance and insurance, retail, and intelligence services. Recently,
Nizetic et al. (2019) show among the areas of IoT applicability the following: transport,
agriculture, health, energy, smart home, smart wearables, and smart city.
The capability of smart devices to connect, communicate and transfer data using advanced
sensors, data networks and computing systems has enabled innovation and development
of IoT devices and applications for the industrial sector (Industrial IoT), business
organization (Commercial or Enterprise/Business IoT) and individual user or final
consumer (Consumer IoT).

• Regarding Industrial IoT, applicability of IoT technologies would allow an increased

efficiency regarding the production process by giving a smooth communication over the
network of operators and machines. Industrial processes have expanded through M2M
(Machine-to-Machine) communication, sometimes referred to as the Internet of Industrial
Objects, but also include links to human interfaces. An efficient and enhanced industrial
process is defined by the way sensors are connected, how they process data collected and
the output of these sensors. (Chen et al., 2020). A key point in the industry will be the
design development, production, and integration of various sensors in industrial
applications (Li et al., 2020).
• Regarding the business sector (Commercial/Business or Enterprise IoT), IoT projects
addressed to companies are varied ‒ from optimizations of production flows (which are
also related to the industrial sector ‒ Industrial IoT, presented above) to the implementation
of intelligent solutions for the office area (associated, up to a point, with those related to the
concept of smart home, corresponding to the category Consumer IoT).
Transportation and logistics are sectors where IoT applications are in high demand (Porru
et al., 2020). Already in the transportation industry we have the concept of Internet of
vehicles (Shen, Fantacci and Chen, 2020), which have both impact and potential to develop.
Some of the IoT application in the case of vehicles are related to creating a fully
autonomous vehicle, location, direction, planned journey of the autonomous vehicle,
monitoring of safety systems, prevention and avoidance of crash and accidents, improving
the safety and service life of vehicles (Saki, Abolhasan and Lipman, 2020).
Efficient demand side management with accurate and flexible smart metering technologies
are key factors to enable smart power management in smart grids. The most important role
of IoT technologies in smart grids is to save electricity (Rishav et al., 2019), driving to a
rational and fair distribution of energy.
Waste management, as an incumbent part of a circular economy, is another problematic
area, including for business organizations. Various solutions are being developed to
enhance the smart waste management (Das et al., 2019). There are solutions dedicated
towards the smart monitoring of waste bins (Dhana Shree et al., 2019), to detect the level of
bin filling, waste temperature, if any fire threat, trash bin vibration and garbage discharge,
location of the trash bin and sanitation service operator etc.
• With respect to Consumer IoT, relatively recent studies (Porter and Heppelmann, 2014;
Ostrom et al., 2015) suggest that every connected product has potential to offer value-added
business, creating a new market after the product is already sold to its final customer.
Portable and health monitoring devices fall into this category, being devices that can be
worn (wearables) by the user ‒ smart watches, bracelets, trackers even clothes, shoes etc.
The sensors together with the increased computation capacity of the smart watches, can
help to make complex actions, such as payment management (Hsu and Lin, 2016). Also,
smart wearables technology focus on sensor that can also collect health data such as heart
rate, blood pressure, oxygen level in blood, skin temperature, vitamin levels, glycemic
index, ketosis, effort and stress levels, and other general information which can help
improve wellness observation levels (Zhang et al., 2020). IoT may be used to diagnose and
administrate a proper treatment to patients (Muthu et al., 2020), assistance to elderly people
by monitoring general health condition and nutrition status (Nivetha et al., 2020),
rehabilitation monitoring at home after a disease (Bisio et al., 2019).
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Smart home devices refer to various interconnected devices that can communicate to
improve the habitat of the user's home. Most of the tasks associated with a house
management can be self performed or remotely managed thus saving time and effort for the
individual. Some of these smart devices and technologies are lighting solutions,
entertainment devices, home appliances, surveillance cameras, door lock systems, home
sensors, voice recognition or activation home products, remote controls and many more
(Le, Nguyen and Barnett, 2012; Lia et al., 2018; Yang, W. Lee and H. Lee, 2018). These
are associated with the concept of smart home, which will be the subject of the next section
and the central point of the research related to present paper.
1.3. IoT-based solutions for smart home
Although home automation has been in question since the '80s (Horrigan, 1987), as home
security systems, lighting systems with motion sensors, automation of garage doors and
gates, etc., the concept of smart home has been drawing attention recently due to IoT.
Nowadays, most modern homes already have some degree of "intelligence" because many
appliances already have built-in sensors or electronic controllers; however, these fall into
the category of automation systems, but are not exactly what we mean today by smart
home. IoT smart home takes things a step further by introducing centralized control.
Devices communicate between themselves, as well as with the user, to create an
environment that matches the user’s lifestyle. Therefore, the IoT smart home is a concept
that adds to the traditional features of automation and remote control two essential
attributes, namely interconnection and contextual adaptation. (Yang, W. Lee and H. Lee,
2018). Also, the smart home system requires a smartphone application or a web portal as a
user interface to interact with an automated system.
Smart housing technologies and applications were initially used to manage environmental
systems, such as lighting and heating (Ricquebourg et al., 2006). Currently, due to
technological development, smart home application monitors users' activities and the
internal environment, but also offers services that meet specific requirements and needs.
Recently, smart home applications are evolving as they integrate artificial intelligence (AI)
(Yang, W. Lee, and H. Lee, 2018). For instance, products such as Amazon Echo and
Google Home have become a central hub for smart home gadgets and their voice-activated
assistants, providing comfort in homes. Examples can also be the intelligent remote-control
module developed by Chinese manufacturer Xiaomi (which can be inserted into all home
appliances, such as refrigerators, air purifiers, air conditioners, washing machines, etc.) and
Apple HomeKit (which provides voice support as a hub to communicate, configure and
control smart devices in the Apple kit). In brief, this evolution is presented in table no. 1.
Table no. 1. Evolution of smart home
Year Phase Technical background Main function
1990s Home automation Broadband Internet Household automation
2000s Home network Smart phone and app Remote monitoring and control
2010s Smart home Internet of Things (IoT) and Context awareness and adaptation
Artificial Intelligence (AI)
Source: Yang, W. Lee and H. Lee, 2018, p.2
Despite its long history and growing interest, applications and technologies in this category
have not been widely accepted, mainly due to lack of infrastructure, expensive devices and,
implicitly, limited consumer demand. However, IoT solutions for housing have become

more popular in recent years as they have become more accessible and simpler through the
development of information technology. Thus, the global smart home solutions market is
expected to reach $ 246.42 billion by 2025, at an annual growth rate (CAGR) of 25% over
the 2020-2025 forecast period (Mordor Intelligence, 2020b).
IoT-enabled house equipment and devices allow for a home to be more “intelligent”, remote
controllable, and interconnected (Yang, W. Lee, and H. Lee, 2018). There are various
associated benefits mentioned in literature (Perera et al., 2017; Johannesen, Kolhe and
Goodwin, 2019), such as improving comfort and lower costs resulting from better resources
management, especially energy. IoT devices are constantly being developed to allow low
consumption of household appliances and to forecast electricity consumption in homes.
Regarding the challenges associated with these devices, Risteska Stojkoska and Trivodaliev
(2017) comment on the problematic aspect of data transmission, both in terms of volume
and speed, given that action should normally be done instantly. Associated with data
transfer is the aspect of network protocols and the need for interoperability between smart
devices that do not belong to the same brand. Also, a problem of all IoT devices is
maintaining confidentiality, securing data, and ensuring privacy.
2. Research methodology
As we indicated throughout the entire article, aspects regarding the architecture of smart
home IoT solutions (Strengers, 2013; Lia et al., 2018; Sowah et al., 2020) and those
regarding the advantages (Perera et al., 2017; Johannesen, Kolhe and Goodwin, 2019),
challenges and security issues (Risteska Stojkoska and Trivodaliev, 2017) have been
frequently addressed in the literature. The same statement is not valid when it comes to level
of understanding the concept and degree of adoption of these solutions, as most studies have
either applied the Technology Acceptance Model (TAM) or the Unified Technology
Acceptance and Use Theory (UTAUT) or targeted only specific groups, especially the
elderly and/or those with various health problems and young people. In order to cover these
gaps identified in the scientific literature, we intended to present in this article the results of a
more extensive research that we conducted to identify the degree of smart home IoT
solutions usage by Romanians from various socio-demographic categories. We mention that
our research focused on several aspects regarding the adoption of IoT solutions in Romania,
but in this article we will focus only on those solutions for smart homes.
Thus, the aim of the research was to determine the degree of smart home IoT solutions
usage in Romania. Subsequent to this goal, the main objectives of our research were to:
• O1: know the socio-demographic characteristics of the respondents – namely,
Romanian users of IoT solutions for smart homes;
• O2: establish the level of understanding of the Internet of Things (IoT) concept;
• O3: identify the main IoT solutions used for smart home;
• O4: highlight the benefits and challenges related to these solutions, from the
perspective of Romanian users;
• O5: determine the extent to which certain socio-demographic variables influence the
adoption of IoT smart home solutions.
Vol. 23 • No. 57 • May 2021 331

This research was based on a standard methodology, which is applied in opinion survey.
The method of data collection was the use of a self-administered questionnaire. The
questionnaire was posted on the website www.isondaje.ro and was distributed as a link by
e-mail to personal contacts of the authors and through social networks LinkedIn and
Facebook. The beginning section of the questionnaire provides a brief explanation of its
purpose to provide a common frame of reference for all potential respondents.
The sample used in the research was 471 persons. Given the limited sample size, this online
questionnaire-based study is an exploratory research.
Data collection took place between April and June 2020.
IBM SPSS Statistics Version 26 software was used for descriptive statistics, but also for the
binary logistic regression model.
3. Results and discussions

The socio-demographic characteristics of the respondents are presented in table no. 2. We
mention that in the questionnaire were answer options regarding age over 65 years and the
level of primary or secondary education, but none of the respondents were included here.
Thus, our sample consisted of people aged between 18 and 65 years, most are men (56.4%,
although the difference is relatively small because 43.6% of respondents are women),
young people (40.1% of those surveyed are included in the category 18-25 years), with
bachelor's and even master’s or Ph.D degree, most of the respondents (43.6%) having
incomes between 2000-4000 lei and living in urban area (89.5%).
Table no. 2. Characteristics of the respondents
Characteristics %
Gender Male 56.4%
Female 43.6%
Age 18-25 years 40.1%
26-35 years 26.2%
36-45 years 20.3%
46-56 years 9.3%
55-65 years 4.1%
Income (RON) Under 1000 8.7%
1001-2000 13.4%
2001-3000 21.5%
3001-4000 22.1%
4001-5000 14%
Over 5000 20.3%
Education level High school and secondary education 16.3%
Undergraduate and postgraduate studies 83.7%
Residence Urban area 89.5%
Rural area 10.5%
Source: Research data processed by authors with statistical program SPSS
Most of the respondents (82%) stated they use IoT devices and applications for their home,
which allow remote control and automation. Corroborating with the characteristics of the
sample, we can accomplish our first research objective (O1), outlining the socio-

demographic characteristics of Romanian users of IoT smart home solutions who answered
our questionnaire, these being mainly young people, male, with average income (between
3000 and 4000 lei, given the average net salary in Romania in that period, namely 3200 lei,
according to INS (2020)), educated, with completed university or postgraduate studies and
living in urban areas. From the perspective of age and education level, these results
correlate with those of the ANCOM (2019) study on Romanian users of IoT solutions,
although that study does not strictly refer to smart home solutions, but generally to IoT
technologies. That research also shows that most household incomes of the respondents are
higher than 6000 lei, but in the case of our research the users' incomes were targeted. Also,
other research in the field (Zanocco et al., 2020) found that inclination towards the idea of
smart home appears mainly among young people, and the largest rate of interest was
registered in the case of males.
It is important to note that only those who answered affirmative to the filter question
(related to the knowledge and understanding of the IoT concept) accepted the invitation to
complete the questionnaire. To accomplish the second objective of our research (O2), an
analysis of the answers was necessary and showed that most of those who accessed the
questionnaire knew the meaning of the term (471 from 534 persons). Subsequently, they
were asked to choose from a list one or more terms or collocations associated with IoT, and
the main chosen were smart device (25.5% of responses), portable and/or wearable device
(14.6%), interconnected objects (13%), remote monitoring (12.3%) and remote control
(12.1%). We mention that the fewest answers were for automation (7.1%), which indicates
that respondents can also differentiate between home automation and smart home.
It is found that respondents monitor, control and remotely operate via IoT solutions mainly
smart TVs, ventilation and air conditioning systems, access and security systems (including
flood and smoke sensors, motion sensors, surveillance cameras etc.), as well as heating
systems (figure no. 1). Thus, indicating the solutions categories, we achieved the third
objective of our research (O3). It is also important to mention that most research indicates
smart TVs among the main devices for which IoT solutions are applied. Also, other audio-
video systems and entertainment devices are mentioned in other studies, which does not
result from our study, highlighting that utility prevails for Romanian consumers.
The fourth objective of our research (O4) was accomplished through questions of the
questionnaire related to main advantages, but also problems associated with the use of IoT
solutions for smart home. Thus, the main benefits were related to saving time and energy
(44.2% of responses), making live easier (39.8%) and improving the home comfort
(23.4%), and problems, understood also as barriers, were linked to dependence on
technology (32%), high cost of devices (30%), fear and distrust related to confidentiality
and security (28.5%). These results correlate with those of the ANCOM (2019) study on
Romanian users of IoT solutions (although that study does not strictly refer to smart home
solutions, but to IoT technologies, in general), because participants in that study mentioned
benefits such as comfort, security and optimization, and the biggest fears are those
regarding personal data (theft/loss, confidentiality, complexity of the information
collected), respectively, cost of the smart devices.
For a deeper interpretation of the results and to accomplish the ultimate research objective
(O5), we will use the binary logistic regression model, similar to the one presented by
Peng, Lee and Ingersoll (2002). The binary model, in which the dependent variable is a
dichotomous one (has two values, usually symbolized by 0 and 1), is used to show whether
Vol. 23 • No. 57 • May 2021 333

an event occurred or whether a statistical unit has a particular property or not. We further
purpose to quantify econometrically the relationship between the determinants and the
option of the respondents to use smart home IoT solutions.
Figure no. 1. Respondents' weight hierarchy regarding the use of devices, appliances
and systems monitored, controlled and operated by IoT solutions
The variables included in the analysis are:
• PSH ‒ use of IoT solutions for smart home (independent, dichotomous,
categorical/nominal variable, with values 0 ‒ if the person does not use such IoT solutions ‒
and 1 ‒ if the person uses such IoT solutions);
• SP ‒ gender (dependent, dichotomous, categorical/nominal variable, with values
0 ‒ for female person ‒ and 1 ‒ for male person);
• VP ‒ age (dependent, dichotomous, categorical/nominal variable, with values 1 ‒ if the
person is aged between 18-35 years ‒ and 2 ‒ if the person is aged between 36-65 years);
• VEP ‒ income (dependent, multinomial, categorical/nominal variable, related to the 6
income groups, having values 1 ‒ if the person has an average monthly income below 1000
lei, 2 ‒ average monthly income between 1001-2000 lei, 3 ‒ average monthly income
between 2001-3000 lei, 4 ‒ average monthly income between 3001-4000 lei, 5 ‒ average
monthly income between 4001-5000 lei, 6 ‒ average monthly income over 5000 lei).
To estimate the model parameters, the records at the level of the sample of 471 people were
used. The results obtained are shown in table no. 3.

Table no. 3. Results of binary logistic regression model
B S.E. Wald df Sig. Exp(B)
SP .010 .255 .002 1 .969 1.010
VP .971 .331 8.602 1 .003 2.640
VEP .406 .100 16.577 1 .000 1.501
Constant -.868 .444 3.816 1 .051 .420
The column B shows the direction of the link between the dependent variable (PSH) and
independent variables (SP, VP, VEP). All of them show a positive number and thus a
positive connection. Column Exp(B) shows the intensity of the link between the dependent
variable and independent variables.
The coefficients of the variable VP and VEP are statistically significant, for a p-value
significance threshold <0.05.
There is a direct, positive connection between VP and PSH. Thus, people aged 18-35 are
interested in using IoT applications and devices 2.6 times more than people belonging to
the age group 36-65 years. As indicated by general studies on the adoption of IoT in
Romania (ANCOM, 2019), but also by specific studies on the adoption of smart home
solutions (Zanocco et al., 2020), age is a determining factor. Young people with digital
skills, a high degree of knowledge and information, being up to date with technological
discoveries and progress in this field, choose to use such devices, rather than other age
groups, such as the baby boomers generation (born between 1946-1964) and generation
X (born between 1965-1979). The main factor that prevents these categories for using smart
home technologies is the concern for personal data protection, a sensitive topic when it
comes to new technologies (Jungwoo, Yuri and Daeho, 2018).
There is a direct, positive connection between VEP and PSH. People are more interested in
using IoT applications and devices as their revenue grows. Although, in general, people
associate IoT with savings and the rational use of electricity, people with lower incomes
prefer to save at the expense of joining new technologies, regardless of the benefits they
could bring, as other studies indicate (Zanocco et.al, 2020).
In contrast, the coefficient of the variable SP is not statistically significant, because the
significance threshold p-value = 0.969 is very high (96.9%), so a very low probability of
guaranteeing the significance of the parameter, respectively 3.1%. The explanation lies in
the fact that the sample is relatively balanced from this point of view, and the sex of the
users does not determine the choice to use smart home devices. As other research in the
field shows, there are differences between genders that are not related to the choice of
using, but to the reasons for choosing or the criteria applied to choose certain brands or
certain functionalities of the devices. For example, research by Jungwoo, Yuri, and Daeho
(2018) indicates that males tip the scales in choosing IoT devices based on their usefulness,
and females pay more attention to device compatibility.
The model passed the set of diagnostic tests relatively comfortably, as presented in table
no. 4. The model is significant, according to the Omnibus test (table no. 4) of the model
coefficients. The model also explains between 7.9% ‒ Cox & Snell R Square (Cox and Snell,
1989) and 13% ‒ Nagelkerke R Square (Nagelkerke, 1991) variation in the use of devices and
applications that allow remote control and monitoring (table no. 4), 82.2% of cases being
correctly classified. The value of the Hosmer and Lemeshow test (Hosmer and Lemeshow,
2000) supports the model, with a good fit suggested by a value p> 0.05 (p = 0.26).
Vol. 23 • No. 57 • May 2021 335

Table no. 4. Diagnostic tests of the binary logistic regression model

Omnibus Tests of Model Coefficients
Chi-square df Sig.
Step 38,910 3 ,000
Block 38,910 3 ,000
Model 38,910 3 ,000
Model Summary
-2 Log likelihood Cox & Snell R Square Nagelkerke R Square
402,769a ,079 ,130
a. Estimation terminated at iteration number 5 because parameter estimates changed by less than ,001.
Conclusions
IoT-based smart home solutions focus on increasing the home comfort, improving the
quality of life and enhancing personal experience. In recent years, these solutions have
become more popular, more accessible and easier to use through the development of
information technology.
As we indicated in the article, issues regarding the architecture of IoT solutions related to the
smart home category and those regarding the advantages, benefits, but also challenges and
security issues of IoT solutions for smart homes have been frequently addressed in the
literature, but issues regarding the degree of understanding the concept and the extent to which
these applications are adopted and used have been less approached. Also, the local literature
does not deal with issues related to the adoption of these solutions in our country. To cover
these gaps identified in the literature, we presented in this article the results of a research that
allowed us to discover the level of understanding the IoT concept and the adoption of IoT
solutions for smart home by Romanians from different socio-demographic categories.
The key to successfully adopting these technologies is to understand the reasons why
people might use them, the features they need, the problems they have identified and the
barriers to accepting them, and we have identified all of these in this research.
Although, the Internet of Things is still at the beginning in terms of its applicability in
Romania, most of the respondents to our questionnaire (82% of the 471 respondents) stated
they use IoT devices and applications that allow remote control and monitoring.
Respondents in our study use such solutions for smart TVs, ventilation and air conditioning
systems, access, safety and surveillance systems and heating systems. The main benefits of
adopting these solutions have been related to the fact that they save time and energy, make
their lives easier and improve the comfort of their homes, and identified problems include
technology dependence, high cost of devices, privacy, and information security issues.
Also, we note there are still many obstacles that need to be overcome, and our respondents
have also identified problems especially related to the data used throughout the process. At
the same time, new technologies and synergies have the potential to address them, such as
5G technology, which brings the benefit of an increased Internet speed, as well as the use of
artificial intelligence (AI), which helps both predictability and making the best decisions.
To identify the relationship between certain determinants (sex, age, income) and the option
to use IoT smart home solutions, we used the binary logistic regression model, showing that

people in the age group 18-35 are more interested in using IoT applications and devices,
compared to people belonging to age group 36-65 years. They are also more interested in
using IoT applications and devices as their revenues grow; that is naturally, given that most
Romanians cannot afford these IoT solutions.
Taking into account the data was obtained by using a web-based survey among the personal
contacts of authors and the main limitation of our research is the non-representativeness of
the sample, we consider that future research developed among large survey sample could
provide a better understanding of the IoT users’ attitude and perception.
Also, in future analyzes, the binary logistic regression model could include as dependent
variables the environment (urban or rural) in which the house is located, the number of family
members living in it and their level of education, as well as the average monthly income of the
household, not only those of the respondents. We specify that we did not include in this model
the area (rural or urban) within the house is located, most of the respondents (89.5%) residing
in urban areas. We also did not include the level of education, given that most respondents
have undergraduate and postgraduate studies. Other research (van der Zeeuw, van Deursen and
Jansen, 2020) shows that the level of education does not influence the attitude towards the use
of smart devices for housing, but rather the degree of adaptation and operational skills of the
individual has an impact on perceiving IoT technology. For people with advanced operating
skills, using IoT devices is perceived as a hobby. They explore all the features offered by IoT
and create their ecosystems in their own homes by combining several smart devices. On the
other hand, in the case of people with not very developed operating skills, the use of IoT smart
home solutions is limited to basic functions. The latter choose to purchase IoT technologies
under the influence of external factors, such as recommendations from friends or family, and
need help with installation and programming.
Given that our research was initiated at the beginning of the coronavirus pandemic, we did
not know the consequences at that time and did not take this into account. Future research
should take into account the fact that, against the background of long quarantine periods,
people began to discover the new lifestyle, based on working from home, online school and
a longer time spent at home, and this lifestyle can have the effect of changing perception
regarding the acquisition and adoption of smart technologies in homes.
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Vol. 23 • No. 57 • May 2021 341

AE The IoT Technologies Acceptance in Education by the Students
From the Economic Studies in Romania
THE IoT TECHNOLOGIES ACCEPTANCE IN EDUCATION

BY THE STUDENTS FROM THE ECONOMIC STUDIES IN ROMANIA
Liliana Ionescu-Feleaga1, Bogdan-Ștefan Ionescu2 and Mariana Bunea3∗
1)2)3)

Ionescu-Feleaga, L., Ionescu, B.-Ș. and Bunea, M., Received: 23 December 2020
2021. The IoT Technologies Acceptance in Education Revised: 6 February 2021
by the Students From the Economic Studies in Accepted: 25 March 2021
Romania. Amfiteatru Economic, 23(57), pp.342-359.
DOI: 10.24818/EA/2021/57/342
Abstract
The main objective of this research is to test the IoT model of acceptance technologies (the
Internet of Things) among the economics students from Romania. The Internet of Things
refers to the interconnection between different devices via the Internet. Through this
interconnection, the communication is no longer limited to the usual “human to human”
form but is complemented by a new “object-to-object” form, which has a direct impact on
the company’s functions. In this context, the IoT technologies acceptance by the future
economists and managers is extremely important. The study included 1,179 students from
four university centers from Romania and the included factors from the acceptance of IoT
technologies model (Internet of Things) were analyzed using the quantitative statistical
methods in SPSS, applying a series of tests processed to highlight the research results,
respectively the reliability test, the validity test, the chi-square test and the Person's
correlation coefficient.
The results of the study show the existence of a positive correlation between the research
variables and indicate that the students from the economic studies, are ready to accept the
new technological advances in IoT and to implement them in their future jobs.
Keywords: Internet of Things (IoT), education, technology acceptance model, perceived

utility, ease of use, intent to use, Romania
JEL Classification: I23, I21, L86, M20
∗
Corresponding author, Mariana Bunea – e-mail: mariana.bunea@cig.ase.ro
Authors’ ORCID:
Liliana Ionescu-Feleaga: orcid.org/0000-0002-2087-2186
Bogdan-Ștefan Ionescu: orcid.org/0000-0003-0021-2938
Mariana Bunea: orcid.org/0000-0003-2879-2065

Introduction
In the recent years, the information and the communication technology (TIC) have become
a omnipresent tool in the entities lives from different economy sectors, by stimulating the
innovation in the services, by increasing the efficiency of production and by reducing the
costs. In addition, the technology has influenced the organization and the business
management (Attuquayefio and Addo, 2014). Such benefits have long-term effects and will
continue to grow, despite the difficulties and challenges of the companies nowadays.
Among the emerging TIC applications that can have a significant economic and social
impact, but also a key role in the convergence of the various technologies, the Internet of
Things (IoT ‒ the internet of things) is becoming more and more popular. The IoT is
described as a network of objects that can be connected to the Internet without human
interaction (Park et al., 2017) and “has the potential to change the world, just as the Internet
has done, perhaps even more” (Ashton, 2009), because it mediates the communication
within an organization as well as between the organization and outside it, contributing to
the improvement and the efficiency of the services provided at the economy level. In
addition, allowing the connection of any person at any time and from any place, this
technology creates the conditions for the emergence of new services (Lu et al., 2018). In
other words, the IoT allows the transition to the next level of the wireless world and offers
significant improvements in critical areas such as connectivity, speed and accessibility
(Uckelmann et al., 2011).
Currently, the IoT technologies are successfully used in areas such the medical services, the
smart retail, the customer services, the smart homes, the smart cities, the agriculture, the
environmental monitoring and the industrial internet. The education sector did not remain
inert to the IT technology development. Many schools and universities have introduced the
IoT technologies in the educational activities for the benefit of pupils, students, teachers
and the entire educational system.
Thus, in some countries, the IoT technologies are the essential learning tools (Lyapina et
al., 2019). The teachers apply them in their pedagogical processes and to monitor the
students' attendance and the classroom activities (Alotaibi, 2015; Jiang, 2016). The students
use them to exchange data from various resources, such as portable devices, sensors and
actuators (Abed et al., 2020). In addition, many universities have incorporated the IoT
technology in order to optimize campus, to save the resources, to increase the student safety
and security (Nie, 2013; Asseo, 2016).
Although the IoT development generates impressive benefits, there are a series of the
procedural and ethical dilemmas that may affect the confidence completely, referring to
new identity, privacy, protection, safety and security. Therefore, the wide use of IoT
requires acceptance from users. In the information systems field, there are different theories
and models of acceptance and adoption. They were developed to understand the consumer
behavioral intent by regarding adoption and using technology (Chipeva et al., 2018) and to
facilitate the identification of factors that influence the technology acceptance (Davis, 1989;
Venkatesh and Davis, 2000).
We are about to contribute to this debate and to analyze from all angles the situation that is
currently affecting the world economy on a large scale. Our study investigates the factors
that affect the IoT technologies adoption by the Romanian students from the economic
studies. Given that the integration of these technologies forever changes the enterprises
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functions and affects the customer satisfaction and their loyalty, it is important to underline
whether the economics students are ready to accept the new IoT technological advances and
to implement them in their future jobs.
To achieve the objective it has used a conceptual framework inspired by the model of
technology acceptance (Technology Acceptance Model: TAM) proposed by Davis (1989),
which explains the use of new technologies by adopting a causal relationship between
beliefs, perceptions, attitudes, intentions and behavior. The use of conceptual framework
took into account other suggestions found in the literature for improving TAM.
The content of the research is structured as follows: the first part is a review the relevant
literature on the IoT technologies use and their influence on the education system. The next
section presents the methodology research, followed by the analysis of the research results
and the final section presents the conclusions of the work, the implications and future
directions of research.
1. Review of the scientific literature

The IoT concept has its origins in the 1980s and was based on RFID (RadioFrequency
Identification) technology and the sensor technology that, in the connection with the
Internet, allows the identification and intelligent management of data.
It was first used by Kevin Ashton in 1999 at a conference, referring to “uniquely
identifiable objects or things and their virtual representations in an internet-like structure”
(Han, 2011; Uzelac, Gligoric and Krco, 2015). This deadline was formalized in 2005 when
the International Telecommunication Union (ITU) introduced it in the ITU Internet report
and in 2012 when Rand Europe analyzed it in a report for the European Commission.
Although there is no single definition for the IoT, it is accepted that this concept refers to a
global system of computer networks interconnected to the Internet to serve billions of users
worldwide. In other words, the IoT is seen as a network of connections that includes
millions of private, public, academic, business and government networks that are connected
to a wide range of electronic, wireless and optical network technologies. Through
computers, the IoT offers the ability to collect the information in real time, which can be
connected at any time and from anywhere (Falkenreck and Wagner, 2017).
Specifically, the IoT provides a number of autonomous communication functions between
the objects, through the use of sensors and related connectivity components (Park et al.,
2017). Each device that connects to an object could be uniquely identified and must have
the ability to acquire and sometimes process data in real time without human intervention
(Das and Jain, 2017). Consequently, this open and comprehensive network of intelligent
objects that have the ability to self-organize, share information, data and resources, reacting
and acting in front of situations and changes in the environment, facilitates the
communication and transmission of information (Sula et al., 2013).
In the last decade, the IoT has become a popular topic in research, creating all the
prerequisites for researchers to make a significant contribution to the knowledge
development in this field. Thus, some studies have explained the IoT architecture
(Uckelmann et al., 2011; Li and Wang, 2013), focused on the design and use of these
technologies from the perspective of the organization or industry (Schlick et al., 2013) or
explained best practices for their use (Guinard et al., 2011).

Other studies have examined the technical aspects of the IoT implementation (Shang et al.,
2012), highlighting that the major challenges for these technologies accepting are the
security and the privacy issues (Medaglia and Serbanati, 2010), the slow technology
adoption, the interoperability issues, the implementation cost and the user perception
(Evens, 2015).
The recent studies have focused on the IoT technologies acceptance from the perspective of
the individual consumers, trying to identify the factors that affect IoT acceptance and to
propose models for accepting this technology (Kowatsch and Maass, 2012; Li and Wang,
2013; Abu et al., 2014; Al-Momani et al., 2016).
Although the IoT development generates impressive benefits, a number of completely new
procedural dilemmas arise that may affect the trust, the identity, the confidentiality, the
protection, the security and the safety. Also, the ethical issues, such as the immoral policies,
quite common in the business areas, can cause immense damages to the individuals, the
communities and the environment (Dinu, 2008, p. 7). Therefore, widespread use the of IoT
requires user acceptance. In the information systems field, there are different theories and
models of acceptance and adoption. They have been developed to understand the consumer
behavioral intent on adoption and using technology (Chipeva et al., 2018) and to facilitate
the factors identification that influence the technology acceptance (Davis, 1989; Venkatesh
and Davis, 2000).
In education, it is important for the students to be able to communicate with the right person
at the right time and place. For this reason, many universities have rethought the teaching
and the learning process (Selinger et al., 2013), gradually moving from an exclusive model
of physical knowledge transfer, in the classroom teaching system, to a model of active
collaboration, transfer and communication of information via technology. According to
Abed et al. (2020), the universities are supported by the internet and the adoption of the IoT
allows to the students to exchange data from different resources. The students around the
world have already used their portable devices and smart objects in the learning process,
because these students have grown up with digital technologies such as computers,
smartphones, iPods, gradually losing their relationship with the books and the newspapers
(Hjenaabadi, 2017). But the influence of technology on education is not limited to the
involvement of students in the learning process but also to the support provided to teachers
in creating personalized content and improving student outcomes (Wellings and Levine,
2009). In addition, the IoT is present in many universities in the form of security cameras,
temperature control or energy consumption tools, and access tools inside the buildings
(Asseo et al., 2016).
However, there is a number of disadvantages to using IoT in the education field. Among
them, there is the limitation of the extracurricular opportunities organized by the
educational institution, the ordinary students with a vibrant social life on campus are feeling
the lack of socialization with other colleagues in the university and beyond. For the
programs that require complex practical training, the online education is not an effective
option (Uygarer et al, 2017). Also, another disadvantage may be the high cost of moving to
the virtual, digital campus, which can generate a series of risks related to the cyber security,
the loss of information or data stored as a result of the cyber attacks (Gul et al., 2017).
In their research, O’Brien (2016) and Asseo et al. (2016) analyzed the impact of the IoT
and its prospects on higher education, as well as issues regarding the generated or solved
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problems /difficulties by IoT, while highlighting the importance of the security, the
confidentiality and the data ownership. However, Asseo et al. (2016) appreciate that one of
the biggest advantages of IoT in the educational process is the personalized interaction that
the teachers can have with the students, who have the opportunity to receive the
recommendations and the individual homework.
However, the use of IoT in the education sector should not be viewed only from a
quantitative, physical perspective. It actually shows the universities ability to adapt to the
changing needs of the future employees, of the future labor market and of the future
economy.
In the present study, the research was conducted both from a descriptive perspective, thus
ensuring an accurate understanding of the IoT system by questionnaire respondents,
undergraduate, master and doctoral students, and from an explanatory perspective, being
established the relationships between the analyzed variables (Saunders et al., 2016).
This research aims to significantly identify the factors (and their interdependence
relationships) that determine the behavior of respondents in the sense of accepting or
rejection of the IoT technology. Thus, in order to achieve the research objectives, the
authors conducted and transmitted between October 27 and November 2, 2020, an online
survey among the enrolled students at the universities from the economics and business
administration area at Babeș Bolyai University in Cluj-Napoca (UBB), Alexandru Ioan
Cuza University from Iași (UAIC), the West University from Timișoara (UVT) and the
Academy of Economic Studies (ASE) from Bucharest.
The selection of the 4 university centers is largely ensuring our national representation
meaning that it covers the following geographical areas: UVT ‒ West region, ASE ‒
Bucharest Ilfov Region, UBB ‒ North West Region, Iasi ‒ North East region. At the same
time, inside these universities, is concentrated the largest number students from the
economic studies in Romania. Knowing that the total number of students enrolled in
bachelor's, master's and doctoral programs in the Social Sciences fundamental field (which
includes economics students) in the academic year 2019-2020 was 68305 (ANS, 2020) the
sample of 1179 is considered , in the literature (Rotariu, 1999) as a very large one and, as a
result, ensures a significant representativeness.
To ensure the completeness of the answers, we have formulated a series of questions, which
must be checked before sending the answers. As a consequence, all our answers were
complete in terms of the questions asked, with no non-answers. The applied questionnaire
had two parts. The first part included four demographic and profile questions. Table no. 1
describes the researched sample.
The demographic results of the study indicate that three out of four respondents are female,
which is in line with the high share of female representatives among students enrolled in
Romania in the field of university economic studies. However, the situation in Romania is
atypical given that in many countries, women are underrepresented among graduates of
economic studies (Goldin, 2013; Crawford et al., 2018). Most respondents are under
26 years old and are mainly enrolled in undergraduate programs (78.97%). The situation of
the average ages of the respondents on each level of study is presented in table no. 2.

Table no. 1. Demographic and profile data of respondents
Variables / Number
Alternative Structure %
Characteristics of respondents
women 902 76.51
Gender
men 277 23.49
18-20 years, 660 55.98
21-25 years, 460 39.02
Age
26-35 years 35 2.97
>35 years 24 2.04
Bachelor 931 78.97
Level of studies at
Master 224 19.00
which they are enrolled
PhD 24 2.04
ASE Bucharest 755 64.04
UBB Cluj-Napoca 130 11.03
University
UAIC Iași 105 8.91
UVT Timișoara 189 16.03
Total 1,179 100.00
Table no. 2. Distribution of respondents by level of education

Level of studies Number of respondents Average
Bachelor 931 20.394
Master 224 23.326
PhD 24 28.381
Grand Total 1,179 21.101
Also, more than half of the respondents are affiliated to the Academy of Economic Studies
in Bucharest. This large share is justified by the fact that the Bucharest Academy of
Economic Studies (ASE) has the largest number of economics students in the country. The
number of respondents affiliated to the other universities varies between 189 (West
University of Timișoara) and 105 (Alexandru Ioan Cuza University of Iași). These data
allow us to perform a cross-sectional analysis on university centers.
The second part of the questionnaire contains five sets of questions related to IoT
technologies, each statement in these questions being assigned values from 1 to 5 (1 – total
disagreement, 5 – total agreement). To formulate the questions, we relied on the existing
literature on the technology acceptance model (Davis, 1989; King and He, 2006; Gao and
Bai, 2014; Almetere et al., 2020). Trained to use IoT technologies, they tend to believe that
these products are useful and easy to use, increasing the intention to use them, and that the
chances of people using these technologies are considered to increase considerably if there
are facilitating conditions for their use. The inclusion factors of the IoT technology
acceptance model (TAM) are presented in the table no. 3.
Table no. 3. The included factors in the IoT technologies acceptance model
Factors / domains Description of factors / domains
The usefulness of IoT technologies in The measure to which a person believes that their performance
the learning process (TU) – 5 items will improve using a particular system (Davis, 1989).
Perception of ease in using IoT The measure to which a particular system is considered to be
technologies in the learning process devoid of physical and mental effort when a person uses it
(EOU) – 4 items (Davis, 1989).
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Factors / domains Description of factors / domains

Intention to use IoT technologies in An individual perception of leading to a specified behavior
the learning process (IU) – 3 items in the future (Fishbein and Ajzen, 1975).
Facilitating conditions for the use of The degree to which a person appreciates that the organization
IoT technologies in the learning already has the necessary structures (technical and
process (FC) – 3 items organizational) to support the process (Venkatesh et al., 2003).
Training for the use of IoT Training on the use of IoT and related information and
technologies in the learning process communication technology supports users in understanding,
(UT) – 3 items appreciating and minimizing the difficulties arising from
technological complexity. (Mudaly et al., 2013).
The model includes the determinants, moderation factors and the relationships between
them. The factors with the elements associated with each variable are presented into the
table no. 4.
Table no. 4. The situation of the factors with the associated elements
Encoding
Factors / domains Statement
items
TU1 The use of IoT technologies increases the effectiveness of learning
TU2 IoT technologies are useful in the learning process
The usefulness of IoT Using IoT technologies allows me to accomplish my
technologies in the TU3
professional tasks faster
learning process TU4 The use of IoT technologies increases the quality of learning
TU5 IoT technologies make learning easier
EOU1 IoT technologies should be easy to use in the learning process
The interaction with IoT in the learning process should be clear
Ease of use IoT EOU2
and intelligible
technologies in the
Using IoT in the learning process should not require a high
learning process EOU3
mental effort
EOU4 Interaction with IoT in the learning process should be flexible
IU1 I intend to use IoT technologies in the learning process
Intention to use IoT I believe that in the next period I will use more and more IoT
technologies in the IU2
technologies in the learning process
learning process I would recommend other students to use IoT technologies in the
IU3
learning process
The support of IoT teachers encourages me to use these
FC1
technologies in the learning process
Facilitating Having a user guide can enhance the knowledge and skills of
FC2
conditions for the use using IoT technologies in the learning process
of IoT technologies The existence of a technical support team for cases where I
FC3 encounter difficulties in using IoT technologies encourages me
to use these technologies
Organizing training courses for the use of IoT technologies
UT1 would encourage me to use these technologies more in the
learning process
Training in the use of
Organizing training courses on computer systems would encourage
IoT technologies UT2
me to use IoT technologies more in the learning process
The existence of materials on IoT technologies improves my
UT3
skills in using these technologies

Once we have defined the factors / domains and their associated elements, it is important to
investigate how these factors relate to our research model on testing the acceptance model
of IoT (Internet of Things) technologies among economics students in Romania. For this
purpose, we used the hypothesis testing methodology to clarify the relationships /
interdependence between factors, the connection between two factors being illustrated with
the terms positive / negative. Table no. 5 summarizes the research hypotheses we used in
our study.
Table no. 5. Research hypotheses
Research hypotheses Relationship
H1 There is a positive correlation between perceived utility and intention TU and IU
to use IoT technologies
H2 There is a positive correlation between ease of use and perceived EOU and TU
usefulness of IoT
H3 There is a positive correlation between ease of use and intention to EOU and IU
use IoT technologies
H4 There is a positive correlation between training and perceived utility UT and TU
H5 There is a positive correlation between training and ease of use UT and EOU
H6 There is a positive correlation between the facilitative conditions and FC and IU
the intended use
The data collected using the questionnaire were processed using the SPSS program, and the
following tests were performed: Reliability test, Validity test, Chi-squared and Pearson’s
correlation correlation test.
3. Results
Reliability test
Through the reliability test the consistency of the data is calculated and determined and is
achieved by applying the test method of the Cronbach’s alpha coefficient (Saunders et al.,
2016). Thus, this method tests the reliability of the questionnaire data. In the present
research, the values of the factors of the IoT technologies acceptance model were calculated
as the average of all the elements that contribute to the evaluation of this model. For
example, the IoT Technologies Utility (TU) is the overall average of the elements TU1 –
TU5 for all cases, using the data analysis and processing functions using SPSS software.
The table no. 6 presents the results of the reliability test from the IBM SPSS tool.
According to Cortina (1993), the reliability test is performed for a value of the Cronbach's
alpha coefficient greater than 0.7.
Table no. 6. The situation of the reliability tests results
for the factors of the IoT technologies acceptance model
Factors / domains Element/ Item Result Coefficient Cronbach’s alpha
The usefulness of IoT technologies TU1, TU2, TU3, TU4, 0.916 (> 0.7)
in the learning process TU5
Ease of use IoT technologies in EOU1, EOU2, EOU3, 0.812 (> 0.7)
the learning process EOU4
Intention to use IoT technologies IU1 IU2, IU3 0.907 (> 0.7)
in the learning process
Vol. 23 • No. 57 • May 2021 349

Factors / domains Element/ Item Result Coefficient Cronbach’s alpha

Facilitating conditions for the use FC1, FC2, FC3 0.752 (> 0.7)
of IoT technologies
Training in the use of IoT UT1, UT2, UT3 0.922 (> 0.7)
technologies
In our study, the results of the Cronbach’s alpha coefficient indicate values higher than 0.7,
demonstrating that the data collected were consistent and therefore very reliable.
For ease and accuracy of interpretation of the reliability test results, the values of the alpha
coefficient of internal consistency are as follows: less than 0.5 – not accepted; between
0.5-0.6 ‒ weak; between 0.6-0.7 moderate; between 0.7-0.8 – good; between 0.8-0.9 – very
good and above 0.9 ‒ excellent (Hair et al., 2003).
Validity test
The validity test assesses “the extent to which a variable measures what it should measure”
(Samouel et al., 2015). The objective of using this research tool is to test the correlation
between the identified factors and the intensity attributed to this correlation. In this study,
the validity test was performed for each element of the IoT technology acceptance model,
using the analyse_dimension reduction_factor function within SPSS. Table no. 7 presents
the situation of the results of the analysis of validity tests.
Table no. 7. Validity test results
Initial Eigenvalue
Validity No. of % of variance Std
Element item significant by extracted Mean Result
Dev
loading extracted factors factor
TU1 .895 1 74.884 3.69 1.097 Item questions
are valid
TU2 .834 4.03 .996
TU3 .802 4.08 .989
TU4 .895 3.51 1.166
TU5 .896 3.56 1.158
EOU1 .818 1 65.816 4.44 .843 Item questions
are valid
EOU2 .861 4.56 .794
EOU3 .700 4.05 1.053
EOU4 .856 4.43 .839
IU1 .927 1 84.437 3.98 .974 Item questions
are valid
IU2 .914 4.08 .999
IU3 .916 3.84 1.084
FC1 .728 1 68.162 3.66 1.123 Item questions
are valid
FC2 .884 4.21 .940
FC3 .856 4.29 .934
UT1 .939 1 86.575 4.02 1.026 Item questions
are valid
UT2 .945 4.04 1.008
UT3 .907 4.20 .959

Thus, the validity test results demonstrated the validity of the questions regarding the way
in which IoT technologies are perceived and accepted by the students from the economic
studies within the bachelor, master and PhD programs in the university centers from
Bucharest, Timișoara, Iași and Clu- Napoca.
Chi-square test
The Chi-square test is used to determine the probability that the two variables are
independent. In other words, Chi-square tests whether two variables are associated and
whether this association is significant (Saunders et al., 2016). A significance threshold of
0.05 is considered to indicate that there is a five percent chance that the data collected will
appear only by chance.
The mean values, the totals, the standard deviations, the minimum and maximum values of
each element were calculated for each case, being presented in table no. 7.
The newly calculated values were then tested according to the designed hypotheses. In IBM
SPSS, the analytical descriptive statistics crosstabs function was used. Into the table no. 8
are presented the results of the Chi-square test, demonstrating that the factors selected from
the IoT technology acceptance model are associated and this association is significant at
Asimp. Sig. <0.01.
Table no. 8. The situation of chi-square test results
Asymptotic
Association test Chi square value Result
significance
TU*IU 1.511 0.000 <0.01 The association is significant
EOU*TU 1.096 0.000 <0.01 The association is significant
EOU*IU 1.135 0.000 <0.01 The association is significant
UT*TU 932 0.000 <0.01 The association is significant
UT*EOU 1.362 0.000 <0.01 The association is significant
FC*IU 1.251 0.000 <0.01 The association is significant
Thus, the results of the analysis by the chi-square test method demonstrate the existence of
a significant probability of correlation between the variables of the model of acceptance of
IoT technologies.
The demographic and profile variables of the respondents allow us to deepen the study and
to perform a cross-sectional analysis according to the characteristics: gender, age, level of
education and university. In this sense, in order to show the difference of the respondents'
perception according to the listed characteristics, in this article it was analyzed successively
for each factor the testing of the hypothesis regarding the difference of two averages
H 0 : μ 1 = μ 2 H 1 : μ 1 ≠ μ 2 (z-test: Two Sample for Means) thus:
• on testing the difference in perception of female and male responses to the factors:
The usefulness of IoT technologies in learning (TU), the perception of the ease of use of IoT
technologies in learning (EOU), the intention to use IoT technologies in learning (IU) and
the Facilitating Conditions for the use of IoT technologies in learning (FC) resulted in a
p-value <0.05 respectively, the calculated statistical value z = 1.966 is higher than critical z
in both types of tests. Consequently, we cannot reject Ho, as a result, the difference
Vol. 23 • No. 57 • May 2021 351

between the opinions of the respondents of the two genders is insignificant at a significance
threshold of 95%. While, in the case of the factor “Training for the use of IoT technologies
in the learning process (UT)”, the alternative hypothesis is confirmed regarding the fact
that the female gender considers the training in the learning process to be much more
necessary than the male gender. The results of the statistical processing are presented into
the table no. 9 and table no. 10.
Table no. 9. The averages of the analyzed factors according
to the gender characteristic
Gender No. resp. Average of TU Average of EOU
Women 902 3.7541 4.3800
Men 277 3.8440 4.3439
Grand Total 1179 3.7752 4.3715
Table no. 10. z-test: Two sample for means Training for the use of IoT technologies
in the learning process (UT)
women men
Mean 4.114190 3.98315
Known Variance 0.8242 0.9763
Observations 902 277
Hypothesized Mean Difference 0
z 1.966929
P(Z<=z) one-tail 0.024596
z Critical one-tail 1.644854
P(Z<=z) two-tail 0.049191
z Critical two-tail 1.959964
• from the comparative analysis of the respondents’ perception by age groups, the
averages of the 5 factors analyzed by age groups (under 25 years and over 25 years) do not
show significant variations, respectively the assessments are uniform. The results of the
statistical processing are presented in the table no. 11.
Table no. 11. Averages of the analyzed factors by the age groups
No. Average Average Average Average Average
Age groups
resp. of TU of EOU of IU of FC of UT
Under 20 years 657 3.6755 4.3543 3.8600 3.9741 4.0015

21-25 years 462 3.8732 4.3864 4.0801 4.1335 4.1674
26-30 years 20 4.2500 4.4625 4.4333 4.1500 4.1167
31-35 years 16 4.3750 4.6094 4.6667 4.7083 4.8125
36-40 years 11 3.7091 4.3182 3.7879 4.0000 4.1515
over 41 years 13 3.9231 4.3269 4.1282 4.5128 4.2308
Grand Total 1179 3.7752 4.3715 3.9692 4.0557 4.0834
• from the comparative analysis of the respondents perception on study levels, in

which p-value <0.05 respectively, the value of zcalc <–zα statistics in the left unilateral test,
significant differences between respondents averages are found in the factors: “The
usefulness of IoT technologies in the process Learning (TU), Intention to Use IoT
Technologies in Learning (IU), Facilitating Conditions for the Use of IoT Technologies in
Learning (CF), and Training for the Use of IoT Technologies in Learning (UT) in which

students' opinion enrolled in the bachelor degree, differs significantly from those in the
master and phD studies. The only factor in which the null hypothesis is not rejected,
respectively where there are no significant differences between age groups is related to
"Perception of the ease of use of IoT technologies in the learning process (EOU)". The
results of the statistical processing are presented in the table no. 12.
Table no. 12. The averages of the analyzed factors according to the level of studies
Level of No. of Average Average Average Average Average
studies resp. of TU of EOU of IU of FC of UT
Bachelor 931 4.3048 4.3502 3.9026 4.0054 4.0340
Master 227 3.7012 4.4515 4.2115 4.2291 4.2658
PhD 21 4.0300 4.4524 4.3016 4.4127 4.3016
Grand Total 1179 3.7752 4.3715 3.9692 4.0557 4.0834
The undergraduate students appreciate the listed factors with less intensity than master and
PhD students. The results of the statistical processing are presented into the tables no. 13
and 14.
Table no. 13. z-test: Two sample for means
The usefulness of IoT technologies Intention to use IoT technologies
in the learning process (TU) in the learning process (IU)
Bachelor Master and PhD Bachelor Master and PhD
Mean 3.46938776 3.9233871 3.76047261 4.14112903
Known Variance 1.3783 1.04268 1.203855 0.95571
Observations 931 248 931 248
Hypothesized
Mean Difference 0 0
z -6.0213989 -5.3059941
P(Z<=z) one-tail 8.6458 5.603
z Critical one-tail 1.64485363 1.64485363
P(Z<=z) two-tail 1.7292 1.1206
z Critical two-tail 1.95996398 1.95996398
Table no. 14. z-test: Two sample for means

Facilitating conditions for the use Training for the use of IoT
of IoT technologies in the technologies in the learning
learning process (FC) process (UT)
Bachelor Master and PhD Bachelor Master and PhD
Mean 4.24919441 4.43548387 4.1471536 4.375
Known Variance 0.9098 0.70837 0.936387 0.81831
Observations 931 248 931 248
Hypothesized Mean Difference 0 0
z -3.0087574 -3.4724359
P(Z<=z) one-tail 0.00131159 0.00025788
z Critical one-tail 1.64485363 1.64485363
P(Z<=z) two-tail 0.00262318 0.00051576
z Critical two-tail 1.95996398 1.95996398
Vol. 23 • No. 57 • May 2021 353

• from the comparative analysis and testing the hypothesis of the difference in the
perception of respondents by university centers resulted in all cases p-value> 0.05 at a
significance threshold of 95%, therefore, the H0 hypothesis cannot be rejected, there are no
significant differences in students' perception in different university centers. The results of
the statistical processing are presented into the table no. 15.
Table no. 15. The averages of the analyzed factors by university centers
No Average Average Average Average Average
University
of resp. of TU of EOU of IU of FC of UT
ASE ‒ Bucharest 753 3.7578 4.3825 3.9602 4.0416 4.1040
UBB ‒ Cluj-Napoca 125 3.9856 4.3500 4.1120 4.0907 4.1173
UAIC ‒ Iași 110 3.6418 4.3568 3.8848 4.0364 4.0758
UVT ‒ Timișoara 191 3.7832 4.3508 3.9599 4.0995 3.9843
Total 1179 3.7752 4.3715 3.9692 4.0557 4.0834
It turns out that regardless of the age and the university center where the students are
trained, the perception of respondents accepting IoT (Internet of Things) technologies
among economics students in Romania was similar.
Pearson correlation test

A very strong relationship refers to the high probability of a strong correlation between
variables (Samouel et al., 2015). This relationship, as noticed so far, can only be positive or
negative. A positive relationship offers the high probability that, in the situation where one
variable registers a change in the direction of increase or decrease and the other variable
will change accordingly, not necessarily in a linear sense (Saunders et al., 2016). Thus, the
Pearson correlation test determines the extent to which the increase or decrease in the
factors used in the model results in a change (increase or decrease) in another factor with
which it is correlated.
Using SPSS software, factors presented in table no. 3 were processed, using the function
analize_correlate_bivariate correlations, determining the values of the Pearson’s
correlations coefficient for each variable. Along with the values of the correlation
coefficients, the values of the significance threshold (Sig) are also presented,
correspondingly. The results of the Pearson’s correlation test are presented in table no. 16.
Table no. 16. The situation of Pearson’s correlation coefficient
TU EOU IU FC UT
TU 1
EOU 0.4182 1
IU 0.7290 0.4842 1
FC 0.5728 0.5121 0.6125 1
UT 0.4496 0.4708 0.4971 0.6182 1
The Pearson correlation coefficient shows the meaning of the relationship between the
variables, being able to take values between -1 and +1. If it has a value of zero or close to
zero, then there is no connection between the variables. The plus sign shows a direct link
(as the values of variable X increase, so do the values of variable Y), and the minus sign

shows an inverse link (as the values of variable X increase, the values of variable Y
decrease). The interpretation of this coefficient on 5 intervals is as follows:
• r є [0; 0.2] → very weak correlation;
• r є [0.2; 0.4] → weak correlation;
• r є [0.4; 0.6] → reasonable correlation;
• r є [0.6; 0.8] → high correlation;
• r є [0.8; 1] → very high correlation → very close relationship between variables.
Thus, according to the results of the Pearson correlation test, it can be seen the existence of
a reasonable correlation between the variables TU and EOU, FC and UT ‒ the Pearson
correlation coefficient recording values between 0.4 and 0.6, and a high correlation between
the variables TU and IU, IU and FC, respectively FC and UT, cases in which the Pearson
correlation coefficient registers a value between 0.6 and 0.8
The research hypotheses tested were the following:
H1: Is there a positive correlation between perceived utility and intention to use IoT
technologies?
H2: Is there a positive correlation between ease of use and perceived usefulness of IoT?
H3: Is there a positive correlation between ease of use and intention to use IoT
technologies?
H4: Is there a positive correlation between training and perceived utility?
H5: Is there a positive correlation between training and ease of use?
H6: There is a positive correlation between the facilitative conditions and the intended use
All these hypotheses were tested and accepted, the results of these tests being summarized
into the table no. 17.
Table no. 17. The situation of the test results of the formulated hypotheses
Hypotheses Pearson’s P-value SPSS results
correlation
H1: TU IU 0.729 p < 0.01 Hypothesis accepted
H2: EOU TU 0.4182 p < 0.01 Hypothesis accepted
H3: EOU IU 0.4842 p < 0.01 Hypothesis accepted
H4: UT TU 0.4496 p < 0.01 Hypothesis accepted
H5: UT EOU 0.771 p < 0.01 Hypothesis accepted
H6: FC IU 0.612 p < 0.01 Hypothesis accepted
Conclusions
The main purpose of this research is to test the model of acceptance of IoT (Internet of
Things) technologies among students from the economic studies in Romania. To do so, we
have conducted an online survey among students enrolled in universities with a profile in
economics and business administration from four universities representing the economic
Vol. 23 • No. 57 • May 2021 355

field in Romania, considered regional leaders. The results of the study demonstrate the
existence of a positive correlation between research variables and indicate that economics
students are ready to accept new technological advances in IoT and implement them in their
future jobs.
Thus, by testing the factors included in the acceptance model of the IoT technologies used,
through the SPSS software (Reliability test, Validity test, Chi-squared and Pearson's
correlation test) the research objectives were met by demonstrating that when people are
trained to use IoT technologies, they tend to believe that these products are useful and easy
to use, increasing the intention to use them. In addition, the chances of people using these
technologies are considered to increase considerably if there are facilitating conditions for
their use, factors that have become increasingly important in the workforce, in the context
of digitalisation and online activities amid the current pandemic of disease. with SARSCo
V-2 virus.
However, the research has limitations determined primarily by the age distribution of
survey respondents, most of whom (95%) are between 18 and 25 years old, students in
economic higher education, bachelor or master degree, they are much more open in the use
of IoT technologies. Despite these limitations, we appreciate that this work is a challenge
for future research in the use of IoT technologies, the challenges posed by their increasing
use in the economic field, by expanding research on the degree of acceptance of IoT
technologies by professionals within this segment of activity, respectively economists,
experts, auditors, managers, research that can be an important source of information and
reflection for practitioners and not only.
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Vol. 23 • No. 57 • May 2021 359

AE Factors That Influence the Adoption of the Internet
of Things in Tourism by Romanian Consumers
FACTORS THAT INFLUENCE THE ADOPTION OF THE INTERNET

OF THINGS IN TOURISM BY ROMANIAN CONSUMERS
Vasile Dinu1, Sorin Paul Lazăr2∗ and Iustin Atanasiu Pop3
1)
Bucharest University of Economic Studies; Academy of Romanian Scientists
2)3)
Babeș-Bolyai University of Cluj-Napoca, Romania

Dinu, V., Lazăr, S.P. and Pop, I.A., 2021. Factors That Received: 17 December 2020
Influence the Adoption of the Internet of Things in Revised: 13 February 2021
Tourism by Romanian Consumers. Amfiteatru Accepted: 31 March 2021
Economic, 23(57), pp.360-375.
DOI: 10.24818/EA/2021/57/360
Abstract
The study examines the causal relationship between the level of IoT adoption in tourism
services and trust in these systems, on the one hand, and individual internal consumer
behaviours, on the other. Influencing factors are grouped into six categories: awareness,
confidentiality and safety, cost, convenience, social influence, and habits. Each category is
described by several items, and the correctness of their aggregation is tested with the
Cronbach's alpha coefficient. The dependent variable is defined on an ordinal scale, to be
able to progressively evaluate the degree of IoT adoption. The research methodology uses
the ordered multinomial logit model, applied to a database of 431 tourists from Romania.
The main results show the significant influence of behavioural variables related to
awareness, convenience, habits, and cost. Among the socio-demographic factors, the role of
age and education was highlighted. The conclusions of the study make policy
recommendations necessary for the development of IoT systems in tourism industry.
Keywords: IoT, tourism, ordered logit model, TAM model
JEL Classification: G22, C21
∗
Corresponding author, Sorin Paul Lazăr – e-mail: paul.lazar@ubbcluj.ro
Authors’ ORCID:
Vasile Dinu: orcid.org/0000-0003-3606-2548
Sorin Paul Lazăr: orcid.org/0000-0003-0775-9231
Iustin Atanasiu Pop: orcid.org/0000-0002-6687-3109

Introduction
In a broad sense, IoT (Internet of Things) is a system of intelligent technologies, connected
to each other, which can communicate and transfer data over a network, based on defined
algorithms, without the need for the intervention of a human entity.
Examples of such systems exist in various fields. In the medical sector there are people
equipped with smart chips or a heart activity monitor that communicates directly with a
cardiology clinic. Medical centres also use interconnected intelligent systems to better
organize the management of medicines and medical equipment. In the automotive industry
there are cars equipped with sensors that can communicate information to the driver or
directly to a car service. Some insurance companies equip the insured cars with telemetry
devices that calculate and communicate the route travelled, speed, violations of road
regulations. Based on these data, the insurance premiums can be established more correctly
and efficiently, avoiding the problems related to self-selectivity and adverse selection. Even
in agriculture, some animals are equipped with chips that transmit data on position, health
or other useful information to computers run by the owner, veterinarian, or public
authorities. In plant culture, IoT-based management systems are used to regulate plant
growth and development conditions, using air or soil sensors that transmit useful data for
automatic irrigation systems. IoT systems are also used in public safety, through automatic
traffic control systems or the identification of optimal routes in terms of time, cost or
distance. In the field of housing (Bodea, Purnuș, 2018), there are smart homes, and the
equipment varies from simple ones such as the thermostat for the central heating to more
sophisticated devices that manage lighting and heating remotely through smart phones. The
use of IoT systems is constantly evolving in various economic sectors so that companies
can operate more efficiently, to know customers better and adapt to their needs, to make
more accurate decisions and consequently to make more profitable business.
IoT is a system of devices equipped with artificial intelligence, connected in its own or
public network (Nekit, Kolodin, Fedorov, 2020). The devices used are very diverse: chips,
sensors, computers, processors, communication equipment, etc. They take over, process,
synthesize, share, and transmit data from the environments in which they act. The
processing of some data takes place locally, where it was collected, and the processing of
other data takes place in a common space (cloud). Most processes take place directly
between devices, without human intervention. Data collection, communication and analysis
are automatic, but previously established by some protocols and algorithms.
The use of IoT systems can bring multiple benefits to companies, some being specific to a
sector of activity, others being universal. Interconnected intelligent systems can monitor
production processes, transportation, customer relationships and work relationships
between employees. Business models established by corporate management can be more
easily implemented and adapted. Instead, there may be disadvantages of IoT systems. As
the amount of information accumulated in a system increases, the probability of a hacker
being tempted by confidential information increases. Also, the amount of data becomes
available raises major challenges regarding storage and processing, requiring a more
professional management in terms of data analysis methods and programming of
components equipped with artificial intelligence.
The tourism industry has recently benefited more and more from IoT systems. The
applications are very varied. In some developed countries there are intelligent trains
Vol. 23 • No. 57 • May 2021 361

equipped with artificial intelligence systems that perform several functions: passenger
information, train control through autonomous systems or WiFi networks, predictive
maintenance, traffic signalling and monitoring, consumption efficiency (Verma and Shukla,
2019). In the hotel industry, IoT facilities are used for custom rooms, repair and predictive
maintenance of hotel room facilities or electronic cards sent to the smartphone to avoid
wasting time at the hotel reception (Martijn, 2018). The client's health can be monitored
through sensors and can be communicated if necessary, to a clinic (Diachuk, 2018). Soon,
the rooms of Marriot hotels will be equipped with mirrors with smart screen functions,
lights and temperature will be adjusted by ordering from the smartphone, the shower will
adjust the water temperature according to guests' requirements, and any malfunctions will
be reported to staff. Smart parking and remote control for the pool will be used (McMullen,
2017). Tourist attractions also benefit from the recent implementation of IoT systems that
can allow monitoring of attractions inside museums and visitor reactions by analysing data
and sensors. Travel booking websites also have intelligent algorithms that allow
customization of customer preferences. Using the user's IP address and other equipment
associated with it, personalized offers are sent. The data processing algorithms follow the
profile of the potential client by monitoring the internet searches related to tourism and
considering the profile of previous reservations. According to Angelova (2017), the use of
IoT in tourism has advantages and disadvantages. The main advantages are communication
control, automation, enhanced experience, higher revenue, and cost saving. The
disadvantages are the dangers related to data risk (security, protection, quality, accurate
analysis, and compatibility) and confidentiality issues (lack of standards, protocols,
interoperability, and legal issues).
Numerous academic studies explore various aspects of IoT systems. They focus mainly on
system design issues, protocols and security, confidentiality, data risk, data analysis
methods and economic effects. The literature on the effects of IoT systems on consumer
behaviour is still very poor. The main objective of our study is to fill part of this gap,
investigating the behavioural and socio-demographic influencing factors of consumer
adoption of IoT usage results in accommodation reservation systems. The article is
organized as follows. In the Review of the scientific Literature section, academic studies on
IoT are reviewed, starting from general aspects, and converging to specific aspects related
to the approval and use by consumers of such systems. The Methodology of Research
section describes the consumer database, the variables and items used and how to use the
multinomial logit model in the regressions that model the causal relationships. The Results
and Discussions focus on the main trends emerging from the regression analysis and on the
comparison with similar results obtained in other fields. The Conclusions summarize the
study and focus on the recommendations that can be made because of the study results.

IoT systems are becoming more widespread in various aspects of human activities. The
trend has been taken over by the academic literature, which is increasingly concerned with
this topic. However, most articles refer to technical aspects of these systems: programming
algorithms, technical reliability, communication protocols, design, development,
implementation, and maintenance of high quality IoT systems. Very precise technical
issues are being researched, such as: the impact of 5G technology on interconnected
artificial intelligence (Li, Da Xu and Zhao, 2018), security and cybercrime (Conti et al.,

2018), middleware models (da Cruz et al., 2018), machine learning adaptive algorithms for
data processing (Mahdavinejad et al., 2018) or specific processing methodologies for big
data (Ahmed et al., 2017).
However, studies that explore the effects on human society, both on those who manipulate
these systems and on consumers, are beginning to appear very recently. Following a survey
among experts working in this field, Reggio et al. (2020) show that the most relevant
quality attributes for IoT systems are reliability, availability, performance, scalability, and
security. Researchers are also analysing the advantages and disadvantages of radical change
in modern society because of IoT development. According to economists, the main
disadvantage is the loss of many jobs. A comparative study by empirical evidence of the
advantages and disadvantages of Japanese, German, and Australian societies is conducted
by Shenkoya (2020). The results show that IoT improves research funding and the
efficiency of business processes, while increasing job creation. The impact on human
society is also analysed by Nižetić et al (2020). Four main current areas are discussed:
energy and sustainable environment, smart hats, E-health ‒ environmentally assisted living
systems and technologies in transport and low-carbon products. The environmental
implications of the increased application of IoT products are discussed. Research on the
implementation of interconnected smart systems in the field of business is also of
increasing interest. A global perspective of IoT deployment in a business is presented by
Lee (2019) which presents an IoT ecosystem, an IoT architecture and a business model of
IoT services, essential for the selection and implementation of IoT services in different
enterprise settings. It also exemplifies how IoT services can be developed to innovate hotel
rooms. Nitti et al. (2017) define an architectural structure for a sustainable tourism
application in a smart city. The idea of developing smart tourist destinations through IoT is
addressed by Wise and Heidari (2019). They show that smart technology that exploits IoT
data offers new opportunities for the tourism industry, allowing easy access and interaction
with a wide variety of information for transportation, attractions, tours, shopping, and
hotels. Smart tourism is approached by Kaur and Kaur (2016) which offers a perspective on
this concept and how it can be achieved through modern IoT technology. It requires the
collaboration of participants in the tourism industry through a common technology platform
and provides an algorithm for cooperative operation through the exchange, processing, and
analysis of information.
As we can see, the academic literature covers various aspects related to IoT systems:
technical aspects related to design, protocols, security, data processing algorithms, but also
some effects on society, economy, and business. However, the literature on investigating the
influencing factors of consumer adoption of IoT systems is much poorer. Theories that come
from consumer behaviour stipulate that there are two essential conditions for accepting a
technology: its usefulness and ease of use, as stated (Davis, 1989; de Boer, van Deursen and
van Rompay, 2019) on the Technology Acceptance Model (TAM ). The TAM model was
later used in various applications, such as factors affecting the intention to use an online
learning community (Liu et al., 2010), clinical information systems among hospital medical
staff (Melas et al., 2011) or mobile banking applications (Munoz-Leiva, Climent-Climent
and Liébana-Cabanillas, 2017; Almugari et al., 2019). Other factors influencing IoT
adoption are convenience, social influence, habits, privacy, safety, awareness, and costs
(Almugari et al., 2019). Convenience as a factor of influence is found especially in
marketing, generally with the sense of saving time and buying time (Cho and Sagynov,
2015). Previous studies have subsequently confirmed that ease of use significantly
Vol. 23 • No. 57 • May 2021 363

determines the intention of behavior towards the adoption of new technologies (Del Giudice
et al., 2016). An equally important factor in accepting new intelligent systems is social
influence (Aldossari and Sidorova, 2018). The influence of family, friends, colleagues, and
the media can influence the intention of consumers to adopt IoT products and services of
banks (Almugari et al., 2019). Habits have also been identified as a significant factor in the
adoption of digital technologies (Alalwan et al., 2015). Abushakra and Nikbin (2019) also
found an important strong relationship between habits and IoT adoption. The stated
determinants are found in many consumer-oriented marketing studies. They appear in
various forms in market research and as questions in questionnaires on purchase intentions
for all types of products. Instead, there are specific factors related to the adoption of
technologies in general and the IoT in particular: safety and privacy. The peculiarity lies in
the fact that artificial intelligence systems operate with data that consumers do not want to
make public. These determinants have been shown to be significant in empirical studies
(Axelrod, 2015; Atlam and Wills, 2020). Consumers may be concerned that digital service
providers may use personal information for the benefit of the company or collect personal
data without customer permission. Consequently, there may be negative effects on IoT
service demand. Another component of the TAM model is the awareness and understanding
of how to use the new technology. The Internet of Things is a new phenomenon for a large
part of consumers of tourism products, because of which service providers are interested in
making them aware of new technologies. Awareness as a factor in technology adoption has
been explored for IoT systems in general (Guo et al., 2013; Gite and Agrawal, 2016), but
there are also some studies that address specific sectors, such as banking (Almugari et al.,
2019). Cost is a factor with more general coverage, not necessarily specific to the TAM
model. It is found as a determinant in most empirical studies on demand for a particular
product or service. Sometimes it is viewed in a narrow sense, referring to the price of
providing the product or service (Tehranipoor et al., 2018; McPherson and Irvine, 2020).
Sometimes it is considered in a broader sense, including collateral costs (lost time ‒
Almugari et al., 2019). In addition to the components of the TAM model, interesting
correlations can be identified with some socio-demographic variables such as age, sex,
income, level of education or marital status. However, there are few studies (eg.: Gunasekara
and Fernando, 2017) that link the adoption of IoT to such indicators.
To evaluate the importance of the determinants of the adoption of the tourist services
provided with the help of IoT systems, we use an econometric model with discrete
regressions. The level of consumer adoption of the services provided is measured in our study
by the ordinal variable ADOPTION (see the paragraph on regression variables and table 1 for
the complete definition of the variable). Ordinal scaling allows the identification of variables
that increase the probability of situating at higher levels the adoption of IoT technology. For
statistical estimates we use Ordered Logit Model with the following structure:
Prob( yi = j | x, b, c) = F (c j +1 − xi b) − F (c j − xi b) (1)
exp(c j +1 − xi b) exp(c j − xi b)
Prob( yi = j | x, b, c) = - (2)
1 + exp(c j +1 − xi b) 1 + exp(c j − xi b)

i = 1, N index the consumers in the sample
j = 1,3 indexes the three alternatives of the endogenous variable (ADOPTION)
xi is the vector of explanatory variables (CONV, SOC_INLF, HABITS, PRIV_SAFE,

AWAR, COST, GENDER, MARRIED, AGE, EDUC, RESID)
b is the vector of regression coefficients
c j , j = 0,1,2,3 are cutoffs of the distribution (technical coefficients of the model)
c0 = −∞ , c3 = ∞
c1 and c2 are estimated by the maximum likelihood method.
The model is also controlled for heteroskedasticity by Davidson and MacKinnon’s (1984)
test, based on the Lagrange multiplier (LM) principle. The coefficients reported in the
regression are robust, corrected for heteroskedasticity. The robustness of the prediction is
verified by the Receiver Operating Characteristics curve developed for multinomial models
(Dragos, 2010).
Following the study of the literature, using the data and methodology described above, we
formulate the following research hypothesis: the level of adoption by Romanian consumers
of IoT technologies in tourism is influenced by TAM model components: convenience,
social influence, habits, confidentiality and safety, awareness, and costs.
Data
The data are collected by sampling between August and September 2020 using the CATI
(Computer-Assisted Telephonic Interview) method. To avoid as much as possible, the
biases of the values of the variables, the personal numerical code was used as an
identification element, which allows a stratified and proportional survey in relation to the
geographical area, gender, and age. The survey is balanced at national level, there are
between 8 and 15 respondents from each county, proportional to the number of inhabitants.
The survey is conducted nationwide, finally comprising 431 respondents who provided
complete data on the questions in the sample. A part of the Romanian population,
especially elderly people from the rural area do not go on vacation and as a result they
could not answer the questions, so they were excluded from the sample. This elimination
caused some biases of the average values of the socio-demographic factors in relation to the
national values (see Table no. 1).
Variables
The endogenous variable ADOPTION (Y in the theoretical model) is a proxy that measures
on an ordinal scale from 1 to 3 the level of use of services provided by IoT systems in
tourism. Special offers offered by online accommodation booking websites are especially
considered. They collect information about the potential consumer following the specifics
Vol. 23 • No. 57 • May 2021 365

of his internet searches regarding the type of destination (sea, mountain, city, spa), the
profile of the accommodation units pursued (hotel, pension, holiday home), etc. As a result
of running artificial intelligence algorithms, tourist destinations or accommodation units are
proposed through alert systems on the smartphone, tablet, or computer. The variable
ADOPTION follows on an ordinal scale how often tourists use the destinations and
accommodations proposed by IoT systems. The variable takes the value 1 if the individual
never uses services provided by IoT in tourism; value 2 if he rarely uses such services and
value 3 if he uses it regularly. The explanations regarding such mechanisms for proposing
offers through IoT systems in tourism are explained to the people in the sample during the
interview. The results regarding the answers are summarized in table no. 1.
Table no. 1. Variables used in analysis and descriptive statistics: mean,
standard deviation, minimum and maximum value
Variable Explanations Mean St. Dev. Min Max
ADOPTION Adoption of services provided through IoT 0.93 0.74 1 3
systems in tourism. Measured ordinarily, on a
scale from 1 to 3 in ascending order of degree of
adoption.
CONV Convenience. Measured quantitatively, as an 3.55 0.92 1 5
average of 3 ordinal items: SAVING_TIME,
AVOID_MOV and ELAST_TIME (complete
description of the items in the Appendix no. 1).
SOC_INFL Social influence. Measured quantitatively, as an 2.80 0.82 1 4.67
average of 3 ordinal items: FRQ_ENTOUR,
REC_ENTOUR and PUB_AUTH (complete
HABITS Habits regarding the use of IoT and other digital 3.05 0.99 1 5
systems. Measured quantitatively, as an average
of 3 ordinal items: FRQ_PROF, FREE_TIME
and DIGITAL (complete description of the
items in the Appendix no. 3).
PRIV_SAFE Privacy and safety. Measured quantitatively, as 2.74 0.85 1 4.67
an average of 3 ordinal items:
RISK_PRODUCT, PRIV_DATA and
RISK_UNSUCC (complete description of the
items in the Appendix no. 4).
AWAR Awareness. Measured quantitatively, as an 2.87 1.08 1 5
average of 3 ordinal items: ADV_IOT,
DISADV_IOT and OTHER_EXP (complete
COST Costs ‒ the importance of the best price and the 3.52 0.95 1 5
confidence that it is identified by IoT systems.
Measured quantitatively, as an average of 2
ordinal items: IMP_PRICE and
IDENT_PRICE (full description of the items in
the Appendix no. 6).
GENDER Gender (1 if male, 0 if female). 0.51 0.50 0 1
MARRIED Marital status (1 if the consumer is married or in 0.74 0.44 0 1
a long-term relationship, 0 if he is unmarried,
alone).
AGE Age of the consumer (years). 45.3 12.0 18 66

Variable Explanations Mean St. Dev. Min Max
EDUC The level of the highest education institution 2.27 0.71 1 3
graduated (1 if he has graduated only primary or
secondary school, 2 if he graduated high school
or vocational school, 3 if he has university or
postgraduate studies).
RESID Residential area (1 if urban, 0 if rural) 0.64 0.48 0 1
Note: St. Dev. = standard deviation
To better measure as many aspects of the determinants that come from the TAM model,
each explanatory variable is defined based on several component items. The items are not
included in the regressions, because within each category (convenience, social influence,
etc.) they are very correlated with each other and would have posed problems of
multicollinearity. In addition, considering each of them as an explanatory variable would
have made the econometric model less representative by considerably reducing the ratio
between the number of observations and the number of explanatory variables. However, the
information contained in the items is found in the regressions by aggregating them to form
variables, one for each component of the TAM model (CONV, SOC_INLF, HABITS,
PRIV_SAFE, AWAR, COST).
Table no. 2 only briefly presents the items that make up the variables, to be easily identified
in the presentation of the study results. Their more complete description, as they come from
the questions of the questionnaire is given in Annexes no. 1, 2, 3, 4, 5 and 6.
Table no. 2. Brief information on the items that make up the explanatory variables
The meaning of the item. All items St.
Variable Item coding Median
are scaled up from 1 to 5 Dev.
CONV SAVING_TIME Saving time 3.69 2.32
AVOID_MOV Avoiding movement 3.43 2.32
ELAST_TIME Elasticity of time 3.93 2.38
SOCIAL FRQ_ENTOUR Entourage frequency 3.04 2.51
REC_ENTOUR Entourage recommendations 3.33 2.40
PUB_AUTH Public authorities 2.71 2.48
HABITS FRQ_PROF Professional IoT frequency 2.94 2.35
FREE_TIME IoT in your free time 3.23 2.32
DIGITAL Use of digital technologies 3.53 2.29
PRIV_SAFE RISK_PRODUCT Product risk 3.28 2.43
PRIV_DATA Privacy of data 2.62 2.49
RISK_UNSUCC Risk of unsuccessful vacation 2.96 2.38
AWARENESS ADV_IOT Awareness of IoT benefits 3.09 2.31
DISADV_IOT Awareness of IoT disadvantages 2.76 2.38
OTHER_EXP Knowing the experiences of others 3.42 2.29
COST IMP_PRICE The importance of the best price 4.27 2.56
IDENT_PRICE Optimal price identification via IoT 3.39 2.32
Note: St. Dev. = standard deviation

In many cases where the data come from the questions of a questionnaire, the problem of
variability of the values of some items can be raised. If a pre-test of the questionnaire was
not used, for some questions there can be mostly only negative or positive answers.
Vol. 23 • No. 57 • May 2021 367

For example, on a Likert scale from 1 to 5 we can have exaggeratedly large proportions of
answers 1 or 5. The effects on regression can be very serious in these cases, practically
trying to identify correlations between an endogenous variable and a constant. In such a
situation, even if the phenomenon exists, it being poorly measured, the results are degraded.
In our study, because of pretesting the sample, some questions were recalibrated.
Consequently, there is a good variability of the answers for all the items used, even if some
distributions are asymmetric (Figure no. 1).
SAVING_TIME AVOID_MOV ELAST_TIME FRQ_ENTOUR REC_ENTOUR
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Figure no. 1. Distribution of answers for items

To measure the reliability of variable aggregation and to verify the extent to which all items
that make up a variable measure the same concept, we calculate Cronbach's alpha coefficient
(Cronbach, 1951). The alpha coefficients calculated for the items in our database are between
0.776 and 0.871 (Table no. 3), which indicates a robust result (McNeish, 2018).
Table no. 3. Reliability of item aggregation ‒ Cronbach’s alpha
Variable CONV SOC_INFL HABITS PRIV_SAFE AWAR COST

Average interitem
covariance 0.754 0.644 0.890 0.658 0.723 0.692
Reliability
coefficient (α) 0.850 0.847 0.861 0.833 0.871 0.776

The results of the ordinal logistic regression (Table no. 4) are obtained after the correction
for heteroskedasticity (Davidson and MacKinnon, 1984), so with a robust estimator for the
standard error and consequently for the probability of rejecting the significance of the
regression coefficients.
Table no. 4. The effects of influencing factors on IoT adoption in tourism; robust
estimates of the ordered logit model; endogenous variable ADOPTION
Regression Standard error,

p ‒ value Significance
coefficient robust estimation
CONV 0.291 0.106 0.006 ***
SOCIAL 0.192 0.125 0.123
HABITS 0.199 0.098 0.043 **
PRIV_SAFE -0.054 0.111 0.627
AWARENESS 0.179 0.093 0.055 *
COST 0.374 0.098 0.000 ***
GENDER 0.171 0.193 0.376
MARRIED -0.248 0.213 0.246
AGE -0.018 0.008 0.027 **
EDUC 0.282 0.136 0.037 **
RESID 0.035 0.197 0.859
Note: ***,**, * : significant at 1% ,5% and 10% level
We observe first that the CONV variable has a statistically significant positive influence
(p = 0.006) on the adoption of the services provided through IoT. The convenience offered
by the lack of the need to move to a travel agency to find suitable offers seems to be
conclusive. Also, the elasticity of time is part of this variable, the possibility to consult the
offers in 24/7 regime is very attractive. Social influence is instead insignificant (p = 0.123).
The result can be explained by the fact that the influence of the entourage risks being less
decisive than in other activities. In tourism in general and in the choice of destinations in
particular, the preferences are very heterogeneous and the fact that people around us
recommend something to us might prove inappropriate for our preferences. In addition, the
public authorities do not encourage much in Romania the use of digital systems in relation
to the state authorities, as a result there is not a sufficiently important social stimulus for the
use of IoT systems. Habits (HABITS variable) are statistically significant (p = 0.043).
People who use IoT more frequently in their professional lives, but also in leisure activities
(eg looking for a parking space available through online systems) are more likely to adopt
more frequent tourist services offered by interconnected artificial intelligence. The habit of
using digital technology of any kind (eg various applications for smartphones) probably
also has a beneficial role in habits. The elements of confidentiality and security (variable
PRIV_SAFE) do not appear to be significant (p = 0.627). The result is in contradiction with
the study of Munoz-Leiva, Climent-Climent and Liébana-Cabanillas (2017) on the adoption
of IoT banking by Indian consumers. It seems that tourism customers do not have major
concerns about the security of personal data and the confidentiality of information
transmitted through such systems. Indeed, compared to the banking sector, where the data
contain salaries and payments, the possible theft of information on internet searches
regarding certain destinations is generally not worrying. Nor does the risk of failing a
vacation, or another service that meets expectations, seem to have a major impact. Indeed,
Vol. 23 • No. 57 • May 2021 369

with the development of IoT systems there is an essential element of controlling these risks
through the large number of online reviews and recommendations from other consumers.
A positive influence with lower significance (p = 0.055) has awareness (variable
AWARENESS). This is partly explained by the knowledge to a lesser extent by the
population of the advantages and especially of the disadvantages of using IoT in tourism
(the average value of the DISADV_IOT item is equal to 2.76). Instead, consumers are
better acquainted with other people's experiences (the average value of the OTHER_EXP
item is 3.42), which is encouraging, proving that the population is trying to inform itself
and offers a favourable perspective for the development of IoT systems in the future.
Romanian consumers of tourist services seem to be the most sensitive (p <0.001) to costs
(variable COST). This result is also in contradiction with studies on the banking services
market (Almugari et al., 2019), where the cost is insignificant, the most decisive for the
adoption of services being convenience and awareness. In fact, of all the items from the
questionnaire, the importance of the price (IMP_PRICE item) had the highest average
value, of 4.27. Among the socio-demographic variables are significant age (AGE variable,
p = 0.027) and education (EDUC variable, p = 0.037). The signs of the coefficients are the
expected ones, the younger and more educated people having a higher probability of
frequent use of IoT systems in tourism. Gender and marital status do not have a significant
impact. The RESID variable is not significant at all (p = 0.089), its effect being probably
taken over by education, in rural areas there is a much lower percentage of people with
higher education than in urban areas.
Conclusion
The issue of IoT systems is relatively recent in the literature but is currently an important
topic. Most studies refer to technical aspects: programming algorithms, technical reliability,
communication protocols, design, development, implementation, and maintenance of high
quality IoT systems. Concerns about the effects on human society have gradually
developed, discussing the advantages and disadvantages of radical change in modern
society because of the development of interconnected artificial intelligence systems. The
fields of study are diverse: energy and sustainable environment, smart hats, E-health ‒
environmentally assisted living systems, transport technologies, low carbon products, etc.
However, the effects on consumers have been much less explored. Specialists turned rather
to the effect of applications in the banking system. Our study aims to fill a gap in the
literature, highlighting specific determinants of IoT adoption in tourism in general and in
reservation systems. Econometric estimates indicate the significant influence of behavioural
variables related to awareness, convenience, habits, and cost. There are notable differences
from the banking system, where social influence, confidentiality and security of
transactions are decisive. Among the socio-demographic factors, the role of age and
education was highlighted, the younger and more educated people having higher
probabilities of frequent use of the tourist services proposed by IoT systems.
The mechanisms highlighted by this study can be used to better match demand with supply.
By observing the frequency of use and the type of service chosen or not by consumers, IoT
system programmers can adapt algorithms to select relevant information on consumer
behavior in relation to the type of tourist offers. Thus, the offers that are rarely purchased
by tourists, come from defective algorithms, which must be corrected. Public authorities

may find that a major impediment to increasing the frequency of IoT use is the poor
development of these systems in relations between state institutions and citizens. Because
there is no correlation between the frequency of IoT use and privacy and data security
issues, it means that consumers are not seriously concerned about these issues in tourism.
Consequently, such data necessary for the optimal configuration of the offers can be
collected, of course in compliance with the legislative framework.
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Annexes
Annex no. 1. Items of the CONV variable and the distribution of answers
Item Explanations regarding the item. All items are Percentage of response options
scaled up from 1 to 5 1 2 3 4 5
SAVING_TIME Saving time. The importance of saving time
by using IoT (not at all important to very 2.3 18.8 26.2 32.0 20.6
important).
AVOID_MOV Avoiding movement. The importance of
avoiding the inconveniences of movement to
a travel agency: congestion, waiting times, the 5.6 20.9 31.3 28.5 13.7
possibility of meeting less pleasant people
(not at all important to very important).
ELAST_TIME Elasticity of time. The importance of
elasticity given by the possibility of accessing
2.1 10.4 25.5 34.6 27.4
IoT services 24 hours a day and 7 days a week
(from not important to very important).
Annex no. 2. Items of the SOC_INFL variable and the distribution of answers
FRQ_ENTOUR Entourage frequency. How high is the use of
IoT by people around you (friends,
7.4 28.3 40.1 20.9 3.2
colleagues, relatives)? (from very low
frequency to very high frequency).
REC_ENTOUR Entourage recommendations. How big is the
effect of your entourage's recommendations to
5.3 22.3 34.3 29.5 8.6
use IoT in tourism? (from very low to very
high).
PUB_AUTH Public authorities. How encouraged do you
think you are in using IoT by public
authorities (community service, relationship 18.8 29.5 36.4 13.0 2.3
with public institutions, etc.)? (not at all
encouraged to total encouragement)
Annex no. 3. Items of the HABITS variable and the distribution of answers
FRQ_PROF Professional IoT frequency. How often do
you consider using IoT in your professional
17.4 23.2 32.7 21.1 5.6
activities (service tasks)? (from very low
frequency to very high frequency).
FREE_TIME IoT in your free time. How often do you
consider using IoT in other areas of your
activities, in your free time (financial-banking 10.0 23.0 30.6 26.2 10.2
activities, online shopping, etc.)? (from very
low frequency to very high frequency).
DIGITAL Use of digital technologies. How common are
you to use digital technologies in your general
activities, compared to the national average? 6.5 19.0 27.4 28.8 18.3
(from very low frequency to very high
frequency).

Annex no. 4. Items of the PRIV_SAFE variable and the distribution of answers
Item Explanations regarding the item. All items Percentage of response options
are scaled up from 1 to 5 1 2 3 4 5
RISK_PRODUCT Product risk. How high do you consider the
risk of not benefiting from a product or
5.3 23.2 36.0 28.8 6.7
service as described? (from very low to
very high).
PRIV_DATA Privacy of data. How high do you consider
the risk that your personal data and those
regarding the chosen product will exceed 20.6 31.6 34.3 11.8 1.6
the scope of confidentiality? (from very low
to very high).
RISK_UNSUCC Risk of unsuccessful vacation. How worried
are you about the possibility of missing a
vacation due to the choice of a poor quality
13.2 27.8 33.2 20.6 5.1
tourist product due to the use of IoT
systems? (from not at all worried to very
worried).
Annex no. 5. Items of the AWARENESS variable and the distribution of answers
ADV_IOT Awareness of IoT benefits. How well are you
aware of the comparative advantages offered
by IoT systems in relation to the classic
13.2 25.5 29.9 21.6 9.7
methods of choosing the tourist product or
service? (from very low knowledge to very
high knowledge).
DISADV_IOT Awareness of IoT disadvantages. How well
are you aware of the comparative
disadvantages offered by IoT systems in
19.5 30.9 28.3 16.7 4.6
relation to the classic methods of choosing the
tourist product or service? (from very low
knowledge to very high knowledge).
OTHER_EXP Knowing the experiences of others. How well
do you know the pleasant or unpleasant
experiences of other tourists in their 6.7 22.3 30.2 23.7 17.2
relationship with IoT systems? (from very low
knowledge to very high knowledge).
Annex no. 6. Items of the COST variable and the distribution of answers
IMP_PRICE The importance of the best price. How
important is it for you to identify the best
0.7 5.3 22.0 28.5 43.4
price for the tourist product or service? (not at
all important to very important).
IDENT_PRICE Optimal price identification via IoT. How
convinced are you that IoT systems allow you
7.2 20.9 29.0 30.6 12.3
to identify the best price for the tourist
product or service you are looking for?
Vol. 23 • No. 57 • May 2021 375

AE Wearable Technology Adoption Among Romanian Students:
A Structural Model Based on TAM
WEARABLE TECHNOLOGY ADOPTION AMONG ROMANIAN STUDENTS:

A STRUCTURAL MODEL BASED ON TAM
Mihai Felea1*, Mihaela Bucur2, Cristian Negruțiu3, Maria Nițu4
and Dragoș Andrei Stoica5
1)2)3)4)5)

Felea, M., Bucur, M., Negruțiu, C., Nițu, M. and Stoica, Received: 23 December 2020
D.A., 2021. Wearable Technology Adoption Among Revised: 10 February 2021
Romanian Students: A Structural Model Based on Accepted: 20 March 2021
TAM. Amfiteatru Economic, 23(57), pp.376-391.
DOI: 10.24818/EA/2021/57/376
Abstract
The Internet of Things (IoT) has gained particular attention, both from academia and from
companies and industries, as a result of its characteristics and the opportunities that this
technology generates for end-users and for the business environment. Thus, the creation of
this network that connects the objects around us allowed optimization and improvement of
activities in various fields.
The adaptation and deployment of IoT in wearable smart devices has created an important
market, due to the popularity, the functionality and the use of these devices in various
professional and everyday activities. The purpose of this paper was to examine the adoption
of wearable technology in the broader context of the development of innovations and
technologies in the field of IoT. A new theoretical model based on Technology Acceptance
Model (TAM) was developed and tested to identifying the relations between factors
influencing the attitude towards use and the intention to use of wearable devices. A survey
carried out on Romanian students provided the necessary data to test the model. The results
of Structural Equation Modelling (SEM), based on the Partial Least Squares (PLS) method,
led to the acceptance of eight out of the nine issued hypotheses, indicating that the three
exogenous variables (perceived usefulness, perceived enjoyment and visual attractiveness of
wearable devices) have a significant positive influence (with one exception) on endogenous
variables (intention to use and attitude towards the use of wearable devices).
Keywords: Wearable Devices, Internet of Things (IoT), Technology Adoption, Technology
Acceptance Model (TAM), Structural Equation Modelling (SEM), Partial Least Squares (PLS)
JEL Classification: L86, O33, C12
*
Corresponding author, Mihai Felea – e-mail: mihai.felea@com.ase.ro
Authors’ ORCID:
Mihai Felea: orcid.org/0000-0001-9375-6912
Mihaela Bucur: orcid.org/0000-0003-0867-2971
Cristian Negruțiu: orcid.org/0000-0003-1857-8567
Maria Nițu: orcid.org/0000-0001-6314-9601
Dragoș Andrei Stoica: orcid.org/0000-0002-7846-189X

Introduction
The Internet of Things (IoT) is a new concept that designates a connected network of people,
processes, data and things that together are able to achieve more relevant and valuable results.
In this context, IoT can make significant improvements in all economic and social areas, but
also on a personal level (consumers, households) and a professional level (companies and
other organisations). Wearable devices present a concrete application in the personal area of
IoT technology, presenting a strong development in recent times.
IoT offers opportunities and challenges related to the consumer (Onete, Pleşea, and
Albăstroiu, 2017) and must be placed in the broader context of innovation and progress in
the area of the Internet and communications in particular. The term was first presented by
Kevin Ashton in 1999 as a way to describe objects connected to the Internet. Subsequent
definitions followed, including the proposal of the International Telecommunication Union
(ITU), the UN specialised body in the field of information and communication technology.
According to the ITU (2012, p.1), IoT is “a global infrastructure for the information society
that must enable advanced services through the interconnection of things (physical and
virtual) based on existing interoperable and evolving information and communication
technologies”.
The development of theoretical models relating to the acceptance of technology allows the
efficient implementation of an information system, i.e. a technology by understanding the
consumer behaviour of users. Thus, the TAM model developed in 1989 by Fred D. Davis,
which examines consumers' intention to use systems/technology and actual use, represents a
first step in this direction, followed by an extension of the model – TAM 2.
The aim of this paper is to analyse the adoption of wearable devices technology among
Romanian students. Therefore, this article is divided into four sections. The first part includes
the review of the scientific literature on IoT, wearable technology and the theories regarding
accepting technology. The second section presents the proposed model and the research
hypotheses, while the third part describes the research methodology. The research’s results
are presented in the fourth section, alongside discussions referring to the structural model.
1.1. Internet of Things
Following the explosive development of practical IoT applications in recent times, there has
been and continues to be increased interest from researchers for this field. Therefore, the
scientific literature in the field of IoT is extensive and encompasses various research
perspectives.
Concerning the historical evolution of the IoT concept, Ibarra-Esquel et al (2017) distinguish
three major phases of evolution. Phase I includes the birth and first clarifications of the
concept on the basis of the definitions cited above. At this stage, the concept was generally
referring to connecting computers in various fields. In Phase II we are witnessing a
consolidation of the concept, as well as the integration of objects, different from computers.
The IoT paradigm is defined at the intersection of three visions, the semantic one, the one
related to objects, and the Internet (Figure no. 1). Finally, in Phase III, we notice a clear trend
Vol. 23 • No. 57 • May 2021 377

towards the growth of the data and services area by developing diverse applications, both in
the professional and domestic area.
At this stage of clarification, it is also important to define what the term of objects in the IoT
concept refers to. According to Ibarra-Esquer et al (2017), these objects have the following
properties: identification, localization and tracking, detection, actuation and processing. The
last feature is specific to more technically advanced objects, but the first four properties are
essential for defining an object in the notion of IoT. In the same note, Klein, Pacheco and
Righi (2017) identify several additional elements, related to cooperation and the user
interface. This last aspect is particularly relevant in the consumer application area.
Internet-oriented
visions
Things-oriented Semantic-oriented
visions visions
Internet
of Things
Figure no. 1. Internet of Things paradigm

Source: Ibarra-Esquer et al, 2017, p. 9
Russo et al (2015) sees the concept of IoT integrated into a broader view, comprising three
main areas: the Energy Internet (IoE), the Communications Internet (IoC) and the Logistics
Internet (IoL). These three areas created the global platform that now enables large-scale
distribution and success of the IoT concept. In the same note, Murray et al (2016) describes
the IoT concept as a specific application of the broader concept of innovation. Furthermore,
the authors argue that the introduction of IoT into a company's processes brings, in addition
to tangible (financial) benefits, an increase in intangible assets and intellectual capital. This
last aspect is also reached by Uden and Wu (2017) in a study dedicated to the impact of IoT
on knowledge management. The authors argue that due to the virtual and extensive nature of
the interactions between processes and systems allowed by IoT technology, knowledge
management in an organization can experience a huge leap. The authors illustrate their thesis
through a case study of a smart parking system where the IoT technology has also brought a
significant increase in customer satisfaction.
Internet of Things are among the new drivers of the actual economy and together with other
Internet based technologies have a critical impact on organizational performance (Tohanean,
Toma and Dumitru, 2018). The economic value of IoT systems is analysed in detail by
Westerlund, Leminen and Rajahonka (2014). Lately, the concept of IoT has evolved from a
technological platform to a business ecosystem. In this context, the researchers ask a pertinent
question ‒ can IoT-based business systems generate enough profit, are they economically
viable? According to the authors, there are three important barriers to be considered: diversity
of embedded objects; lack of maturity of innovation in the field and high degree of non-
structuring of business models. To overcome these difficulties, the authors propose an

integrated approach and several essential elements in the design of an IoT-based business
model. The potential to create value is also found in Jin and Ji (2018) as the term most
commonly associated with research related to IoT-based business models. In a
comprehensive review of literature, the authors also identify other key terms associated with
IoT: the challenge (challenging) of current business models, the concept of "open source”, as
well as association with entrepreneurship and small companies. IoT-based business models
are also approached by Klein, Pacheco and Righi (2017) using the Canvas tool, which is a
holistic approach to a business, especially at the beginning of the road. The authors argue
that the biggest challenges in the design of such a model are: the IoT; product/service
development; value sentence; the company's internal capabilities ; technological
infrastructure and revenue generation mode.
In a follow-up study, Nicolescu et al (2018) extends IoT's value concept through the
economic, social and technical perspectives, adding that an integrated approach is essential
for understanding the concept and assessing the benefits of IoT. From a social point of view,
the authors highlight several key features related to working with human agents, ensuring the
necessary digital skills, integrating multiple different social values (especially those related
to the security and protection of personal data), as well as the legal framework, still
underdeveloped. From an economic point of view, the authors note the lack of economic and
cost-calculation models associated with IoT, as well as the associated risks and opportunities.
In the field of social factors, the authors note the need for a multidisciplinary expertise in the
design of IoT systems, also associated with a higher requirement of standardization and
interoperability. The authors also propose a functional model of IoT systems, which takes
into account the factors presented above and is very useful for differentiating between the
professional area and the household area.
1.2. Wearable devices
Wearable devices are an important application of IoT technology, which has developed
extensively over the last period. By wearable device (or wearable technology) we mean any
computer device that communicates with other devices. The examples are numerous:
smartwatches, smart strips, smart glasses, or even smart jewellery. Wearable devices are
systems worn by individuals or attached to the clothing they wear to perform different specific
functions or tasks (Khakurel, Pöysä și Porras, 2017). A large part of the gadgets/devices
integrated different types of sensors that collect information and data in order to develop and
improve these devices and consumer experiences. Thus, these technologies are concerned with
providing direct responses to consumers, such as minimum energy consumption, seamless
monitoring, but also to secure communications and data protection. Tarabasz and Poddar (2019)
proposed the following classification of smart devices (Table no. 1).
Borowski-Beszta and Polasik (2020) consider that these devices have several common
characteristics, such as:
• Hands-free use, which allows users to do different tasks at the time;
• Controllable character (the user can control it at any time);
• Relationship with the external environment (the devices are provided with multiple
sensors and working modes);
• Provide additional information (providing alerts, reminders, or messages that retain the
user's attention);
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• Communicate with each other (they are able to exchange information over an IoT
wireless network)
• Works in the background (the user can operate independently; the device does not need
his attention)
Table No. 1. Classification of smart devices
Sector Type Body area
Consumers • Smartwatch • Head
• Health • Fitness tape • Ear
• Sport and fitness • Virtual glasses • Eye
• Information • Smart Clothes • Shoulders
• Games and free time • Medical devices • Elbow
Professional • Games • Wrists
• Commercial • Feet
• Industrial
• Military
• Others
Source: adapted from Tarabasz and Poddar, 2019, p. 127
The adoption of smart devices has increased in recent times, driven by both consumer
demand and the growing supply proposed by flagship companies such as Apple, Microsoft
or Google. However, the adoption of this technology is subject to the same types of factors
influencing consumer decisions in general. Following quantitative research conducted in
Dubai, Tarabasz and Poddar (2019) identify the following important factors in the adoption
of smart devices: safety, product attributes, behavioral motivations, perceived utility and
perceived easy use. In the same note and in a similar procedure, based on TAM, Yu-Sheng,
Nawata and Huang (2019) examine the adoption of one of the most widespread devices, the
fitness band. The authors mention the following factors as the most important: perceived
use, expected performance, perceived utility, external network connection, degree of
innovation, degree of knowledge of technology, adoption intent, and usage behavior.
1.3. Theories about Technology Acceptance: TAM and TAM 2
In order to effectively implement an information system or technology, it is essential to
understand the user's consumer behavior and preferences. In recent decades, the focus has
been on developing theoretical models that can explain and predict user’s acceptance of new
technologies. One of the most representative models of acceptance of technology is TAM,
which has been extended to TAM 2.
TAM (Figure no. 2), is a component part of the Theory of Reasoned Action (TRA), theory
that analyses human behavior. Thus, according to the two dimensions: perceived usefulness
and perceived ease of use it can predict the intention of consumer behavior and acceptance
of technology (Venkatesh and Davis, 2000). The first dimension refers to the possible level
of effortless use of technology, and the perceived ease of use demonstrates the extent to which
consumers believe that their use would not require a major effort (Gao and Bai, 2014, Davis,
1989). The Technology Acceptance Model has been used in various studies such as: adopting
online shopping (McCloskey, 2003); e-learning and mobile financial services (Lee et al.,
2012); internet banking (Al-Ajam and Nor, 2013).

Figure no. 2. Technology acceptance model (TAM)

Source: Davis and Venkatesh, 1996, p. 20
This model was created to predict the use of the IT system in the workplace (Gao and Bai,
2014), but variables can be used to predict consumer behavior to accept IoT technology.
Numerous researches have analysed the fact that TAM can predict 40% of what the behavior
and intent of users might be (Venkatesh and Davis, 2000).
Subsequently, the authors Venkatesh and Davis (2000) expanded the original model TAM,
based on empirical and theoretical developments by adding additional elements on the
process of social influence and cognitive instruments. Thus, TAM 2 (Figure no. 3) includes
in the first category the following: image, voluntariness and subjective norm and, in the
second category: result demonstrability, output quality, job relevance and perceived ease of
use (Venkatesh and Davis, 2000) in order to understand the consumers’ ability to accept new
technologies.
Figure no. 3. TAM Proposal 2

Source: Venkatesh and Davis, 2000, p.188
Vol. 23 • No. 57 • May 2021 381

Improving the TAM model by introducing those three interconnected social forces (image,
voluntariness and the subjective norm) will predict how an individual will react when faced with
the situation of rejecting or accepting a new system/technology (Venkatesh and Davis, 2000):
• The image reflects the level by which a consumer uses technology to improve and
present their status within a social group (Moore and Benbasat, 1991);
• Voluntariness presents the optional decision of the users on the purchase process;
• The subjective norm investigates the use of technology according to an individual's
perception of the opinion of those close to him.
The process of cognitive instruments in the TAM 2 model reflects (Venkatesh and Davis,
2000, p.190):
• Job relevance describes the user's perception of the applicability of the technology
within the service;
• Output quality demonstrates the consumer's opinion on the results of the use of
innovative technology in its service;
• The perceived ease of use remained the same from the original TAM model, being a
direct factor of perceived utility (F. D. Davis, 1989);
• Result demonstrability suggests the concrete result of the use of technology/innovation.
2. Research model and hypotheses

This study proposes a new model to examine the underlying factors affecting the attitude
towards the use and the intention to use wearable devices. The proposed model is based on
the TAM framework, which has been successfully applied in related wearable technology
studies (Lunney, Cunningham and Eastin, 2016; Nascimento, Oliveira and Tam, 2018; Jung,
Kim and Chiu, 2019). This research model is shown in Figure no. 4.
Perceived
Usefulness
Attitude
towards Intention
Perceived Use to Use
Enjoyment
Visual
Attractiveness
Figure no. 4. The proposed conceptual model

Davis (1989, p. 320) defines perceived usefulness as “the degree to which a person believes
that using a particular system would enhance his or her job performance”. Users of wearable
devices can improve their life and productivity by monitoring health and different activities,
receiving notification about their mail and meetings, accessing information, and
communicating with others via Internet. In the context of smart wearable devices, perceived
usefulness is employed as a direct determinant of both users’ attitude towards the use and
intention to use (Choi and Kim, 2016; Park, 2020). This study therefore proposes the
following hypothesis:
H1. There will be a positive relationship between the perceived usefulness of wearable
devices and the attitude towards using wearable devices.
H2. There will be a positive relationship between the perceived usefulness of wearable
devices and the intention to use wearable devices.
According to Ko et al. (2009, p. 264), perceived enjoyment, is defined as “the level to which
using a specific technology or service is seen as enjoyable”. Perceived enjoyment is an
important factor for wearable technology. Previous studies have identified that perceived
enjoyment has a significant impact on the attitude toward using the smartwatch (Wu, Wu and
Chang, 2016). Other studies have examined the relationship between perceived enjoyment
and intention to use smart wearable devices (Kim and Shin, 2015). Thus, we hypothesize
that:
H3. There will be a positive relationship between the perceived enjoyment of wearable
devices and the perceived usefulness of wearable devices.
Wearable technology is complex because it merges the characteristics of electronic devices
with those of fashion and clothing. In this regard, Yang et al (2016, p.260 ) defines visual
attractiveness as ‘‘an aesthetic product design expressed through shapes, colours, and
materials and user interfaces such as device menus and the mobile applications of wearable
devices”. Jeong et al (2017) found that the perceived aesthetics of wearable devices has a
positive effect on the intention of purchasing wearable devices. In addition, visual
attractiveness can be a significant factor that influences perceived enjoyment as well as the
attitude towards using wearables devices. Therefore, we hypothesize that:
H6. There will be a positive relationship between the visual attractiveness of wearable
devices and the perceived enjoyment of wearable devices.
According to Chuah et al (2016, p. 277), the attitude toward using technology is defined as
“a person's overall judgment of using a technology and the technology itself”. The main
endogenous variable, the intention to use a technology reflects a person's desire to start using
Vol. 23 • No. 57 • May 2021 383

a technology (Davis, 1989). Regarding wearable devices, previous studies that applied TAM
found a positive relationship between the attitude toward use and the intention to adopt these
technologies. (Jung, Kim and Choi, 2016). Thus, we also hypothesizes that:
H9. There will be a positive relationship between the attitude toward the use of wearable
devices and the intention to use of wearable devices.
A quantitative research design was adopted for this exploratory study. An online survey was
administered to business students at The Bucharest University of Economic Studies, a higher
education institution from Romania. The survey began with a brief description and examples of
wearable technologies. Students were also informed that participation in the study was entirely
voluntary and guarantees anonymity. The first part of the questionnaire included demographic
items relating to the participants' age, gender, years of studies and employment status. The
second part of the survey consisted of multi-item measures on a seven-point Likert scales (from
1 totally disagree to 7 totally agree) that were adapted in the context of wearable technologies.
An overview of the constructs, items and references are presented in Table no. 2.
Table no. 2. Survey items used in this study
Construct Item Contents References
Perceived PU1 I think that smart wearable devices are useful Davis,
Usefulness for my life 1989; Park,
(PU) PU2 Using smart wearable devices increases my 2020
productivity
PU3 Using smart wearable devices helps me
conveniently perform many tasks
PU4 Wearable devices provide very useful service
and information to me
Perceived PE1 Using wearable devices is truly fun Yang et al,
Enjoyment PE2 I enjoy using smart wearable devices 2016;
(PE) PE3 Using smart wearable devices gives me a lot of Park, 2020
enjoyment
PE4 The use of wearable devices makes me feel
good
Visual VA1 The design of wearable devices is attractive to Jeong et al,
Attractiveness me 2017;
(VA) VA2 The user interface of wearable devices (i.e., Yang et al,
colours, boxes, menus, etc.) is attractive 2016;
VA3 The design of wearable devices is cool to me
VA4 The overall look and feel of wearable devices
is visually appealing
Attitude ATU1 I feel positive regarding the utilization of Davis et al,
Towards Use wearable devices 1989
(ATU) ATU2 In general, I admire the utilization of wearable
devices
ATU3 I think it is a trend to use wearable devices
ATU4 Overall, I like using the wearable devices

Construct Item Contents References

Intention to IU1 I intend to use wearable devices in the next Li et al.
Use months (1989)
(IU) IU2 I will make use of wearable devices regularly in
the forthcoming time
IU3 I will give out my recommendation to others to
use wearable devices
IU4 I will use more wearable devices in the future.
The questionnaire was hosted on a free platform and the invitation to participate at the survey
was sent to the students who are enrolled in bachelor and master programs of Faculty of
Business and Tourism during the first semester of the school year 2020-2021. Data was
collected over a two weeks period in November 2020 and was imported into the SmartPLS
3.3.2 software package for further analysis.
4. Results and discussion.

This section presents the results of this study. The first part presents the descriptive statistics
regarding the characteristics of respondents. The second part evaluates the reliability and
validity of the proposed model. The third part analyse the relationship between exogenous
and endogenous variables within the model and tests the hypothesis.
4.1. Descriptive statistics
The total number of respondents of the survey was one hundred ninety-two. The participants
ranged in age from 19 to 36 years old (Mean=21.9, Std. Deviation=2.022). The rest of the
information about the participants is presented in Table no 3.
Table no 3. Characteristics of the respondents.
Characteristics Respondents (n = 192) Percent
Gender
Male 52 27.0
Female 140 73.0
Scholar status
Bachelor student 98 51.0
Master student 94 49.0
Employment status
Working full time 71 37.0
Working part time 28 14.6
Unemployed 93 48.4
4.2. Reliability and validity
We used Partial Least Squares (PLS) analysis to measure the reliability and validity of the
proposed model. Cronbach's alpha and Composite reliability was used to test construct
internal consistency. Cronbach’s Alpha and the Composite Reliability values between 0.60
and 0.70 are considered acceptable in exploratory research and values between 0.70 and 0.90
range from satisfactory to good (Hair et al., 2019). Convergent validity of the constructs was
measured by Average Variance Extracted (AVE). The acceptable threshold for Average
Vol. 23 • No. 57 • May 2021 385

Variance Extracted is 0.50 (Hair et al. 2014). Table no 4 shows that Cronbach's alpha,
Composite reliability and Average Variance
Table no 4. Constructs Reliability and Validity
Cronbach's Composite Average Variance
Alpha >0.7 Reliability >0.7 Extracted (AVE) >0.5
Attitude Towards Use 0.829 0.885 0.662
Intention to Use 0.917 0.942 0.802
Perceived Enjoyment 0.885 0.921 0.745
Perceived Usefulness 0.841 0.894 0.678
Visual Attractiveness 0.912 0.938 0.792
Extracted values for each of the five constructs of the proposed model exceeds the minimum
thresholds indicating high convergent reliability and validity.
To evaluate the discriminant validity, the square root of the Average Variance Extracted of
each construct have to be compared with its inter-construct correlation. The square root of
each construct’s AVE should be higher than the correlation between the constructs in order
to satisfy discriminant validity requirement (Fornell and Larcker, 1981). Table no. 5 shows
that all square roots of the AVEs on the diagonal are higher than the correlations between
constructs and indicates adequate discriminant validity of the measurements.
Table no. 5. Discriminant Validity Results
Attitude Intention Perceived Perceived Visual
Towards Use to Use Enjoyment Usefulness Attractiveness
Attitude
Towards Use 0.814
Intention to
Use 0.683 0.896
Perceived
Enjoyment 0.704 0.642 0.863
Perceived
Usefulness 0.632 0.702 0.649 0.823
Visual
Attractiveness 0.527 0.342 0.447 0.383 0.89
In addition, an inspection of the overall model reveals a satisfactory model fit, as shown by
the Standardized Root Mean Square Residual (SRMR=0.072). The SRMR is the square root
of the sum of the squared differences between the model-implied and the empirical
correlation matrix (Henseler, Hubona, and Pauline, 2016). A value of 0.08 as proposed by
Hu and Bentler (1999) indicates an acceptable fit for PLS path models.
4.3. Structural model
Structural equation modelling (SEM) has become widely applied in many social science
researches to analyse the cause–effect relations between latent variables. Among variance-
based SEM methods, Partial Least Squares (PLS) path modelling approach is considered as
a “silver bullet” and can be applied to a wider range of situations (Hair, Ringle and Sarstedt,
2011).

The structural proposed model was analysed with SmartPLS, a software with graphical user
interface for conducting PLS-SEM analyses. A complete bootstrap procedure has been
performed with 5000 bootstrap subsamples to measure the significance of the hypothesized
relationships among the variables. The path coefficients of the structural model and R-square
values for endogenous latent variables are presented in Figure no. 5.
The paths coefficients are considered statistically significant if the t-statistics give a value
above 1.96 at the 0.05 significance level. According to Cohen (2013), values above 0.35,
0.15, and 0.02 can be regarded as strong, moderate, and weak.
The results showed first that perceived usefulness was positively related to both attitude
towards use (β=0.264, t=4.134, p<.001) and intention to use (β=0.399, t=6.4333, p<.001),
thus H1 and H2 were supported. Second, perceived enjoyment was a significant predictor of
attitude towards use (β=0.428, t=6.84, p<.001), intention to use (β=0.168, t=2.277, p<.0023)
and perceived usefulness (β=0.649, t=15.149, p<.001). Therefore, hypothesis H3, H4 and H5
were supported.
Figure no. 5. Relationship Model with Path Coefficients and R-square

Third, visual attractiveness positively influenced attitude towards use (β=0.235, t=3.613,
p<.001) and perceived enjoyment (β=0.447, t=6.076, p<.001), thus providing support for H6
and H8. However, visual attractiveness appeared to have no significant influence on intention
to use, thus H7 was not supported. Finally, attitude towards use had a positive relationship
with intention to use (β=0.349, t=4.932, p<.001), thus H9 was supported. The results of the
hypothesis testing are summarized in Table no. 6.
Vol. 23 • No. 57 • May 2021 387

Table no. 6. Summary of hypothesis.

Hypothesis Coefficients β t Values p Values Result
H1 PU → ATU 0.264 4.134 0.000 Supported
H2 PU → IU 0.399 6.433 0.000 Supported
H3 PE → ATU 0.428 6.84 0.000 Supported
H4 PE → IU 0.168 2.277 0.023 Supported
H5 PE → PU 0.649 15.149 0.000 Supported
H6 VA → ATU 0.235 3.613 0.000 Supported
H7 VA → IU -0.07 1.414 0.158 Not Supported
H8 VA → PE 0.447 6.076 0.000 Supported
H9 ATU → IU 0.349 4.932 0.000 Supported
*significant at p < 0.05, *** significant at p < 0.001.
R-square, also called the coefficient of determination, measures the variance in the
endogenous variable that is explained by the observed exogenous variables. R-square is the
overall effect size measure for the structural model and indicate that 59.2% of the variance
in the variable Attitude towards Use and 60.3% in the variable Intention to Use is explained
by the model. According to Chin (1998), the values of R-square are 0.67 for substantial, 0.33
for moderate and 0.19 for weak path models. The R-square values of this model can be
considered as moderate strength or effect.
Conclusions
The study is part of the wider context of the explosion of IoT technology in all fields, both in
the professional and the personal sphere and is comprised of// comprises an exploratory study
focused on understanding the elements that impact Romanian students’ attitude towards use
and intention to use wearable devices. The research is part of the wider context of the
explosion of IoT technology in all fields, both in the professional and the personal sphere. To
accomplish this, the paper proposes a structural model based on the Technology Acceptance
Model (TAM) to which were added other two variables: Perceived Enjoyment and Visual
Attractiveness. Wearable devices that are perceived as useful, enjoyable and attractive are
the most likely to be adopted by young people and are more likely to gain a larger market
share. To test the proposed conceptual model, first a quantitative research was conducted and
online survey responses from Romanian students were collected. Second, Partial Least
Squares (PLS) analysis was used to measure the reliability and validity of the proposed
model. Subsequently, PLS-SEM was used to analyse the relationship between variables and
test the hypothesis. The results of the study showed that perceived usefulness, perceived
enjoyment and visual attractiveness positively influenced the attitude towards use and
intention to use wearable devices with one exception. Visual attractiveness had no significant
influence on the intention to use although it positively influenced attitude towards using
wearable devices. These results extend the literature regarding the adoption of wearable
devices technology among young users and provide useful information to the industry.
The limits of this study are primarily the size and structure of the sample. Young people,
especially those with higher education, have a natural predisposition to the use of new
technologies, being very receptive and curious. On the other hand, they are also the main

recipients of these technologies, with the major producers in the field having active
campaigns to promote young people.
Possible future research directions include testing the adoption of these devices in the
professional or commercial environment. We believe that there is also significant
development potential here, by integrating these devices into complex IoT systems (e.g.,
production management, monitoring in the logistics and distribution area etc.). In this
context, the economic impact will need to be studied in detail in order to highlight the
contributions to the area of profitability growth brought by wearable devices.
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Vol. 23 • No. 57 • May 2021 391

AE Business Model Innovation for IoT Solutions: An Exploratory Study
of Strategic Factors and Expected Outcomes
BUSINESS MODEL INNOVATION FOR IoT SOLUTIONS: AN EXPLORATORY

STUDY OF STRATEGIC FACTORS AND EXPECTED OUTCOMES
Florin Sabin Foltean1∗ and Bogdana Glovațchi2
1)2)
West University of Timisoara, Romania

Foltean, F.S. and Glovațchi, B., 2021. Business Model Received: 27 December 2020
Innovation for IoT Solutions: An Exploratory Study of Revised: 30 January 2021
Strategic Factors and Expected Outcomes. Amfiteatru Accepted: 10 March 2021
Economic, 23(57), pp.392-411.
DOI: 10.24818/EA/2021/57/392
Abstract
Business model innovation is a key success factor for IT companies competing in
technologically uncertain environments. Despite the need of IoT solution developers to
renew their business models to effectively create value for customers and capture value for
the company, the strategic factors of business model innovation for IoT solutions have
remained under-researched so far. The paper addresses this knowledge gap by exploring the
strategic factors of business model innovation and its results from the perspective of RBV
(Resource-Based View) theory. The theoretical foundation of this research is based on the
literature of the business model innovation and the strategic marketing literature. In the
empirical exploration of the strategic factors of the business model innovation, we adopted
a qualitative research strategy having as methodological basis Grounded theory. More
precisely, we conducted 12 semi-structured interviews with top managers at IT companies
operating in Romania that have successfully developed IoT solutions. Proactive market
orientation, technology orientation, entrepreneurial orientation, and adaptive marketing
capabilities have been identified as strategic factors of business model innovation for IoT
solutions, while competitive advantage and customer satisfaction as the main expected
outcomes.
Keywords: Proactive market orientation; technology orientation; entrepreneurial

orientation; adaptive marketing capabilities; business model innovation; Internet of Things
(IoT)
JEL Classification: M15, M31, O33
∗ Corresponding author, Florin Sabin Foltean ‒ e-mail: florin.foltean@e-uvt.ro

Authors’ ORCID:
Florin Sabin Foltean: orcid.org/0000-0002-0480-8221
Bogdana Glovațchi: orcid.org/0000-0002-0923-0799

Introduction
IoT technologies have a disruptive potential in many industries and markets. The
proliferation of smart products and services, the blurring of industry boundaries, increasing
the number of consumers with experience in using products that incorporate new
technologies and adopt new behaviours, the implementation of new business models and
competitive practices and the emergence of new business regulations are just some of the
current trends in the business environment. Incumbents are threatened by the rapid pace of
digital transformation, the entry of new competitors with unconventional business models,
and by the changing needs and behaviours of digitally savvy customers (Verhoef et al.,
2019). To cope with the disruption challenges, incumbents need to adopt next generation
technologies that allow the development of new value propositions and business models
and the development of new organizational capabilities to survive and thrive in an uncertain
and fast changing environment. Despite the fact that strategists and entrepreneurs need
guidance in business model innovation for digital-enhanced products and services, this
phenomenon remains under-explored (Foss and Saebi, 2018). Moreover, the role of the
company's strategic orientations and adaptive marketing capabilities in business model
innovation for IoT solutions remains insufficiently understood. Consequently, this research
contributes to filling this knowledge gap by exploring the strategic factors of business
model innovation for IoT solutions and the outcomes expected by managers. We studied
this phenomenon from the perspective of RBV (Resource-Based View) theory, aiming to
identify the company's strategic orientations and marketing capabilities that lead to business
model innovation for IoT solutions, as well as the outcomes expected by managers. We
used previous research on business model innovation (Clauss, 2017; Foss and Saebi 2018),
strategic orientations (Miller, 1983; Gatignon and Xuereb, 1987; Narver, Slater and
MacLachlan, 2004) and marketing capabilities (Day, 2011; Guo et al., 2018) to inform our
theoretical approach. Given the emerging nature of the business model innovation
phenomenon for IoT solutions, we adopted the Grounded theory perspective as the
methodological foundation of our exploratory empirical study. The qualitative research
conducted on a sample of 12 top managers at high-tech companies that develop and deliver
IoT solutions provides empirical support for strategic factors and expected outcomes of
business model innovation for IoT solutions.
The paper brings certain contributions to the literature on business model innovation and
strategic marketing that are relevant from both a theoretical and managerial perspective.
First, the paper expands the scope of RBV theory in researching business model innovation
in the context of next-generation digital technologies, such as IoT. Second, we found that
proactive market orientation, technology orientation, entrepreneurial orientation, and
adaptive marketing capabilities are important strategic factors of business model innovation
for IoT solutions. Third, the competitive advantage and customer satisfaction were revealed
as the main outcomes expected by managers following business model innovation for IoT
solutions.
The remainder of this paper is structured as follows. First, we review the literature related
to the business model innovation, strategic orientations, and marketing capabilities. The
next section presents the methodology of qualitative research, the sample, the topics of
semi-structured interviews and the coding process. Then, we will present the findings from
the analysis of qualitative data. Finally, in the conclusion section, we will draw theoretical
contributions, managerial implications, limitations and directions for further research.
Vol. 23 • No. 57 • May 2021 393


IoT represents “a system of uniquely identifiable and connected constituents (termed as
Internet-connected constituents) capable of virtual representation and virtual accessibility
leading to an Internet-like structure for remote locating, sensing, and/or operating the
constituents with real-time data/information flows between them, thus resulting in the
system as a whole being able to be augmented to achieve a greater variety of outcomes in a
dynamic and agile manner” (Ng and Wakenshaw, 2017, p. 6). IoT-related technologies
(e.g., RFID tags, sensors, actuators, microchips, software, cloud computing, wireless
communications, and the Internet) are changing the nature of products, making them
smarter and better connected (Porter and Heppelmann, 2014). Smart and connected
products generate real-time usage data and allow the company to continuously connect with
the customer through the product (Siggelkow and Terwiesch, 2019). These transformations
are taking place in a growing number of traditional industries for consumer and industrial
products and services, such as smart watches, cars, light bulbs, thermostats, industrial
equipment, heavy machinery, energy equipment and wearable items.
The new capabilities of smart products, the new services they can offer, and their greater
reliability have the potential to increase the value delivered to customers and the value
captured by companies. From the company's perspective, IoT-enhanced products and
services disrupt value chains, industry boundaries and structures, create new markets and
unlock competitive value (Porter and Heppelmann, 2014). From a customer perspective,
IoT significantly changes the customer experience (Hoffman and Novak, 2018) and
customer relationships with smart and connected products (Verhoef et al., 2017; Novak and
Hoffman, 2019). To meet these challenges, companies need to renew their strategic vision,
positioning and partnerships (Porter and Heppelmann, 2014), develop new business models
(Djkman et al., 2015), reconfigure operational processes and build new capabilities (Brous,
Janssen and Herder, 2020). The market success of new enhanced IoT products and services
developed by companies is more likely if managers, along with technological innovation,
also facilitate the development of organizational resources that drive business model
innovation in line with customer expectations.
The development of new digital technologies and digital businesses over the past three
decades led to a more strategic understanding of the business model concept as a tool in
managerial decision making (Wirtz et al., 2016) and as a unit of analysis in strategic
management of the processes of value creation and capture by the company (Zott, Amit and
Massa, 2011). The business model, as a distinct concept from strategy (Casadesus-Masanell
and Ricart, 2010), was conceptualized as “an architecture for how a firm creates and
delivers value to customers and the mechanisms employed to capture a share of that value”
(Teece, 2018, p.40). Osterwalder, Pigneur and Tucci (2005) identified nine building blocks
which they centred on four main pillars: product (value proposition); customer interface
(target customers; distribution channel; customer relationships); infrastructure management
(value configuration; core competency; partner network); and financial aspects (cost
structure; revenue model). The defining feature of the business model is represented by the
complementarities of the activities underlying the creation, delivery and capture of value
(Foss and Saebi, 2018). The level of differentiation, effectiveness and efficiency of these
components of the business model has a significant impact on creating the company's
competitive advantage (Teece, 2010). Moreover, managerial decisions regarding the design
of new business models have become critical in the context in which next-generation digital

technologies have a disruptive potential in different industries (Porter and Heppelmann,
2014). More precisely, IoT technologies have a significant contribution in the innovation of
the business model of manufacturing companies in the direction of servitization (Paiola and
Gebauer, 2020). Consequently, the concept of business model innovation has become
increasingly relevant for both managers and researchers (Taran, Boer and Lindgren, 2015).
Technological changes and the intensification of competition over the last two decades
require a dynamic perspective on the business model. New technologies with disruptive
potential allow the development of innovative ways to meet customer needs more
effectively and require new business models appropriate for creating and capturing value
(Teece, 2010). Previous literature (Mezger, 2014; Taran, Boer and Lindgren, 2015; Wirtz,
2016) provides three main conceptualizations of business model innovation. First, business
model innovation is widely understood as “the design process for giving birth to a fairly
new business model on the market, which is accompanied by an adjustment of the value
proposition and/or the value constellation and aims at generating or securing a sustainable
competitive advantage” (Wirtz, 2016, p. 189). Clauss (2017) developed a three-dimensional
conceptualization of this construct: a) value creation innovation (new competencies, new
technology/equipment, new partnerships, and new processes); b) value proposition
innovation (new offerings, new customers and markets, new channels, and new customer
relationships); and c) value capture innovation (new revenue models and new cost
structures). Second, Mezger (2014) proposed a definition of business model innovation as a
dynamic capability that consists of three dimensions: a) the ability to sense opportunities
for new business models; b) the ability to seize these opportunities by developing new
business models; and c) the ability to reconfigure the company's capabilities and assets to
enable the implementation of a new business model. Third, Taran, Boer and Lindgren
(2015) argued that business model innovation can be understood not only as a process, but
also as a result of this process. Some research has empirically investigated the role of
strategic orientations and organizational capabilities in business model innovation. For
example, Ciampi et al. (2021) empirically validated the positive influence of
entrepreneurial orientation on business model innovation, and Mütterlein and Kunz (2017)
found that entrepreneurial orientation has a positive influence on the innovation of two
components of the business model, respectively on the development of an innovative value
proposition and on the innovation of the value creation process. Guo et al. (2020) identified
a beneficial impact of the technology and customer orientations adopted in the business
model design process on the performance of start-up companies. Tarkiainen, Ritala, and
Sainio (2015) found the antecedent role of market sensing capability in the business model
innovation process. However, the role of market orientation and marketing capabilities in
the business model innovation process in IT&C companies has not been the subject of
empirical studies to date.
The field of strategic management is dominated is dominated by theoretical studies that
provide the conceptual basis for describing the business model innovation process in the
practice of organizations. However, advancing the understanding of the business model
innovation phenomenon requires empirical studies to identify and test its relationships with
antecedents and performance outcomes (Foss and Saebi, 2018). Consequently, we
investigated the phenomenon of business model innovation from the perspective of RBV
theory according to which differences in company performance are explained by the
availability and development of valuable, rare, inimitable and non-substitutable resources
by the company (Barney, 1991). Moreover, Barney (2014) argued that a “constellation of
Vol. 23 • No. 57 • May 2021 395

resources and capabilities” (p. 25) has an essential contribution to the strategy that ensures
the competitiveness and performance of the organization. RBV theory has been the
theoretical foundation of many previous researches in strategic management and marketing
(Kozlenkova, Samaha and Palmatier, 2014).
Market orientation positively influences the level of innovation which, in turn, leads to
superior firm performance (Han, Kim and Srivastava, 1998). From the perspective of
innovation type, Zhou, Yim and Tse (2005) found that market orientation positively
influences technology-based innovations, and Najafi-Tavani, Sharifi and Najafi-Tavani
(2016) identified a positive influence of market orientation on the performance of a new
product. From the perspective of market uncertainty, Gatignon and Xuereb (1997) found that
customer orientation positively influences the market performance of innovation in
environments with high uncertainty. However, some critics have questioned the value of
market orientation in the context of innovation (Berthon, Hulbert and Pitt, 1999).
Consequently, Narver, Slater and MacLachlan (2004) argued that the market orientation of
the company lies in two types of behaviour: responsive market orientation that meets the
needs expressed by the customer, and proactive market orientation that uncover latent needs
and anticipates future ones and take the initiative in developing new solutions. Empirical
findings have shown that proactive market orientation is positively related to the market
success of a new product (Narver, Slater and MacLachlan, 2004; Lamore, Berkowitz and
Farrington, 2013), supporting the company's long-term profitability and position on the
market (Jaeger, Zacharias and Brettel, 2016). More specifically, Blocker et al. (2011) found
that proactive customer orientation is the most important factor in creating customer value
that leads to a higher level of customer satisfaction and loyalty. The value of proactive market
orientation has proven to be higher in times of greater technological uncertainty, creating
opportunities for more radical innovation (Tsai, Chou and Kuo, 2008). However, in markets
with a culture of avoiding uncertainty, increasing the level of proactive market orientation,
beyond a certain threshold, can negatively affect market performance due to customer
resistance in learning new behaviours (Ozdemir, Kandemir and Eng, 2017). Recently, three
proactive market strategies have been proposed as useful in the process of creating value for
customers and creating new markets: market shaping, customer involvement and innovative
leadership (Brege and Kindstrom, 2020). Consequently, we will focus on exploring the role of
proactive market orientation in business model innovation in the context of the technological
uncertainty generated by disruptive digital technologies.
Company’s survival in technologically uncertain environments requires a high level of
innovation in adopting new technologies and developing new solutions to meet the needs of
new customers (Gatignon and Xuereb, 1997). Innovative and proactive companies have
adopted a strategic technology orientation defined as “the ability and will to acquire a
substantial technological background and use it in the development of new products”
(Gatignon and Xuereb, 1997, p. 78). These companies are focused on monitoring future
technological developments to identify and evaluate the business potential of new
technologies and their impact on the evolution of the company and its market. Previous
literature provides empirical evidence to support the contribution of customer orientation and
technology orientation to the success of innovation in specific contexts, such as high-tech
industries (Zhou, Yim and Tse, 2005) and markets with high uncertainty (Gatignon and
Xuereb, 1997). Hortinha, Lages and Lages (2011) found that customer orientation and
technology orientation play equally important roles in enhancing exploratory innovation
capabilities. Moreover, Zhou and Li (2010) identified stronger effects on adaptive capability

of technology orientation compared to customer orientation in markets with a high level of
demand uncertainty. More recently, Adams, Bodas Freitas and Fontana (2019) have
discovered a higher level of performance of companies with a combined customer and
technology orientation compared to those oriented only to the customer or only to technology.
Technology orientation is the most important strategic orientation when companies want to
ensure the competitive superiority of their innovations (Gatignon and Xuereb, 1997).
Entrepreneurial orientation has been conceptualized in terms of decision-making norms
(Morris and Paul, 1987), management style (Covin and Slevin, 1998), managerial capacity
(Avlonitis and Salavou, 2007), and processes and practices (Lumpkin and Dess, 1996) and
is generally characterized by innovation, proactivity and calculated risk-taking. In other
words, entrepreneurial firms develop radical innovations, adopt proactive strategies, and
take calculated risks in new product projects whose results are uncertain (Zahra and
Neubaum, 1998) and to search for new market opportunities (Hult and Ketchen, 2001). For
example, in the service sector, Karimi and Walter (2016) discovered that proactivity and
risk-taking directly influence the disruptive innovation of the business model.
Entrepreneurial organizations are more likely to learn through exploration and
experimentation, challenging current thinking and creating generative learning (Slater and
Narver, 1995). Previous empirical research supports the notion that entrepreneurial
orientation enhances organizational capabilities. For example, Zhao et al. (2011) found that
entrepreneurial orientation positively influences the capability of experiential learning,
while Chen, Li and Evans (2012) provide empirical support for the idea that entrepreneurial
orientation enhances a company’s exploitation and exploration capabilities. Furthermore,
Zhou, Yim and Li (2005) found a positive influence of entrepreneurial orientation on
technology and market-based innovations. Regarding the relationship between
entrepreneurial orientation and performance, Saeed, Yousafzai and Engelen (2014) found a
higher impact of this orientation in developing countries than in developed ones, without
any differences in the intensity of this relationship determined by market size. More
recently, Martin and Javalgi (2016) validated the positive influence of entrepreneurial
orientation on performance in an international context, both in highly competitive
environments and in those with a low level of competitive intensity.
In the strategic management literature, adaptability has been defined as “the firm's ability to
identify and capitalize on emerging market opportunities” (Wang and Ahmed, 2007, p. 37). In
the case of small firms, the results of empirical research have shown that adaptability leads to
high financial performance and performance in the case of new products (Chryssochoidis,
Dousios and Tzokas, 2016). In the field of strategic marketing, previous research has
conceptualized adaptability as a multidimensional construct which consists of the ability to
scan the market, the ability to adapt the product-market and the ability to respond quickly to
market changes (Oktemgil and Greenley, 1997). Adaptive marketing capabilities allow an
early detection of new market trends and a faster response to them (Day, 2011; Jayachandran,
Hewett and Kaufman, 2004). Day (2011) proposed three adaptive marketing capabilities that
lead to a sustainable competitive advantage in dynamic and uncertain environments: a) vigilant
market learning capability; b) market experimentation capability; and c) open marketing
capability. Previous marketing research provides empirical evidence to support the notion that
dynamic marketing capabilities have a positive impact on firm performance (Fang and Zou,
2009; Guo et al., 2018). Adaptive marketing capabilities become essential in enabling a better
market performance in uncertain environments (Guo et al., 2018) where next-generation digital
technologies with disruptive potential proliferate.
Vol. 23 • No. 57 • May 2021 397

This research focused on exploring strategic factors and expected outcomes of business
model innovation in organizations that have successfully developed IoT solutions.
Therefore, we looked for answers to three research questions: a) what strategic orientations
of the company lead to the innovation of the business model? b) What marketing
capabilities are involved in this process? c) What are the expected outcomes of business
model innovation for IoT solutions?
Due to the shortage of previous theoretical and empirical studies aimed at explaining strategic
factors of business model innovation in general, in the context of IoT solutions in particular,
we have chosen an exploratory research approach. More specifically, we decided to adopt the
model of Grounded theory in our qualitative research design. This decision is justified by the
fact that the grounding of a theory in qualitative data is recommended for research topics not
consistently informed by any previous theories (Amit and Zott, 2001). To this end, we
collected qualitative data through semi-structured interviews with 12 top managers at
companies with operations in Romania that, through pioneering, have successfully developed
and launched new IoT solutions for operations management, logistics, retailing, public
utilities and services, and environmental sustainability (Table no. 1).
Table no. 1: Sample profile
Participants Role The company's IoT solution projects
Participant 1 General manager Operations management
Participant 2 General manager Public utilities and services
Participant 3 General manager Environmental sustainability
Participant 4 General manager Logistics
Participant 5 General manager Operations management
Participant 6 General manager Retailing
Participant 7 R& D director Operations management
Participant 8 R& D director Public utilities and services
Participant 9 R& D director Operations management
Participant 10 R& D director Logistics
Participant 11 Sales manager Operations management
Participant 12 Sales manager Public utilities and services
The sample was constructed using the convenience sampling method. Participants were
included in the sample based on their knowledge and experience in managing projects for
the successful development and launch of IoT solutions by their companies. These
managers were qualified to share their companies experience in IoT projects, which is
useful in revealing a realistic perspective on the phenomenon studied. In addition, their
views and critical assessments have helped us develop a deeper understanding of business
model innovation for IoT solutions. The sample size of 12 managers is comparable to that
of samples used in other qualitative research based on semi-structured interviews that
explored aspects of business model innovation in the context of adopting next-generation
digital technologies (Alberti-Alhtaybat, Al-Htaybat and Hutaibat, 2019; Barbour and Luiz,
2019). Moreover, Guest, Bunce and Johnson (2006) found through an experiment that the
number of 12 interviews represents a threshold for data saturation in the case of in-depth
interviews. Also, this sample size is justified in the case of exploring an emerging

phenomenon such as the development of IoT solutions in which companies in the IT&C
sector around the world and in Romania have started to get involved relatively recently.
The semi-structured interviews were conducted by the first author, being assisted and
technically supported by the second author, and took place between February and
December 2019. The interviews were recorded with the permission of the participants and
the both authors took notes during the interviews. In order to stimulate the free expression
of their own ideas and opinions, participants were reassured that their personal data and
their company’s data would be treated confidentially and anonymously. The interviews
were conducted based on an interview guide containing two broad topics related to
managers’ perceptions of the potential of IoT technologies and the process of developing
and launching new IoT solutions. The interview began with an introduction by the
interviewer who explained the purpose of the research and a broad question that addresses
the participants’ perspective on the phenomenon of IoT adoption by organizations. The
interviewer gave all participants the freedom to structure their ideas on their own. To
ensure the generation of useful information to answer the research questions of this study,
the interviewer asked further questions to go in depth into some of the ideas presented by
the participants. The interviewer did not suggest any ideas or formulate any opinions to
avoid influencing the participants’ line of reasoning.
The qualitative data obtained were manually coded, analyzed and interpreted. Following
the recommendation of Saldaña (2013), throughout the entire process of conducting
interviews, reading field notes and transcripts, as well as coding, we noted the reflections
and ideas we generated in the form of analytical memos. We analyzed these qualitative data
following the coding model presented by Saldaña (2013), in a first round of coding using
codes invoked directly from the interviewees' vocabulary. In doing so, a first round of
coding was conducted using invoked and process codes for interview transcripts. A second
cycle followed using theoretical coding method to arrive at categories that were considered
to be first-order constructs, and themes as second ‒ and third-order constructs.
In the first coding cycle we used invoked codes and process codes to summarize the topics
of the interview excerpts. Invoked codes were extracted from the terminology used by the
interview participants. As examples of such codes we mention the following: technology;
business model; proactive; first mover; vision; advantage; satisfaction; (corporate) image;
customer needs; market; alliance. At the same time, we used process codes to capture the
actions taken in business model innovation. Examples of such process codes are: decision;
innovation; experiment; understand; project management, market development. In the
second coding cycle we used theoretical coding to identify the categories and themes that
lead us to the first-, second ‒ and third-order constructs. In doing so, we relied on the
literature of business model innovation and strategic marketing to identify the theoretical
constructs relevant to the phenomenon we investigated.
The aggregation of codes into categories (first-order constructs) and themes (second ‒ and
third-order constructs) was achieved by the theoretical coding method recommended in
Grounded theory, which allowed, in addition to focused coding and axial coding,
integration and synthesis of categories in order to develop a theory (Saldaña, 2013). This
coding method has been used previously in qualitative research (Kohtamäki et al., 2020).
We used as reference points in the analytical reflection the measurement scales of the
following constructs that were previously developed and validated in the literature: a)
innovation of the business model, respectively innovation of the value creation process,
Vol. 23 • No. 57 • May 2021 399

innovation of the value proposition and innovation of the value capture process (Clauss,
2017); b) proactive market orientation (Narver and Slater, 2004); c) technology orientation
(Gatignon and Xuereb, 1987); d) entrepreneurial orientation (Miller, 1983); e) adaptive
marketing capabilities, namely vigilant market learning, market experimentation and open
marketing (Day, 2011; Guo et al., 2018); f) facilitative leadership (Slater and Narver,
1995); and g) organizational culture (Moorman, 1995). The way of aggregating the
constructs is presented in the table in the next section. To increase confidence in the results
of the coding process, two general managers and two business consultants separately
assessed the congruence of codes, categories and themes.
3. Results
In the following sections we will present the main constructs that emerged from the coding
process as supported by interview excerpts.
3.1. Business model innovation for IoT solutions
To identify the elements of the business model for IoT solutions on which innovation
efforts revolve, we adopted Clauss's (2017) conceptualization of business model innovation
as a third-order construct consisting of three second-order constructs: a) value creation
innovation, with four dimensions (i.e. new competencies, new technology and/or
equipment, new partnerships and new processes); b) value proposition innovation, with
four dimensions (new offers, new customers and markets, new channels and new customer
relationships); and c) value capture innovation with two dimensions (new revenue models
and new cost structures) (Table no. 2).
A. Value creation innovation. The company's commitment to developing IoT solutions
triggers a learning process in order to develop complementary skills for innovation, i.e.
technical, business and marketing skills. Managers try to capitalize on the company core
competencies for developing IoT solutions, so that employees can more easily develop new
complementary technical skills. From a marketing perspective, the seller is assigned an
integrative role, developing a comprehensive view of the customer and the market and
becoming a reliable customer consultant. As an R&D director mentions, “The customer
becomes the responsibility of the seller who supports him in the decision-making process.
(...) The seller becomes a reliable customer consultant”. Furthermore, the technical product
owner must acquire commercial and marketing skills for understanding the business, the
expected benefits and future needs of the customer, and for initiating proactive actions to
offer solutions that the customer hasn't thought of.
Innovation for value creation requires the use of new technologies and equipment to
develop new technical capabilities to create solutions to customer problems. Relevant in
this regard is the description of the sales manager of an IT company in the sample that has
become an IoT network operator, also providing data services: “Our company has
developed new technological capabilities to become an IoT network operator, acquired and
installed new HW equipment with software applications, sensors deployed, and network
applications installed to provide data to customers or the community”.

Table no. 2. Business model innovation for IoT solutions

Third-
Second-order First-order
order Codes
constructs* constructs*
construct
New New technical knowledge and skills
competencies New marketing knowledge and skills
New technology New technological capabilities
and/or equipment New equipment and software
Value creation IT partnerships
innovation New partnerships New specialized partners offering
complementary services
Business model innovation
New IoT solution development

New processes process
New market creation process
Analytic services
New offerings
New services through a sharing model
New customers New approach to the market
Value and markets Demand from new customers
proposition New channels Designing new direct channels
innovation Customization
New customer Continuous interaction and
relationships collaboration
Co-development
Product-as-a-Service model
Value capture New revenue and
Low-cost solutions
innovation cost model
Solution scalability
Note: *According to Clauss’s (2017) conceptualization
New partnerships play a very important role in value creation innovation. Managers are
trying to expand existing partnerships to reap the benefits of rapid access to information,
increasing their ability to adapt to new trends by developing and promoting IoT solutions.
The general manager of one company highlighted the efforts to “bring traditional IT
partnerships to the IoT area”, and an R&D director argued that “specialized partners
offering complementary services are needed to develop an IoT solution together. But it is
necessary to have confidence that the partners carry out their tasks on time, respecting the
agreed parameters”.
Our qualitative data revealed two new processes representing innovations in value creation,
namely the process of developing an IoT solution and the process of creating a new market.
The IoT development process adopts a solution-centred approach to meet the needs and
problems of customers, rather than a product-centred logic, the emphasis being on the
ability of the IoT solution to generate value for the customer’s business. The new market
creation process for IoT solutions relies on identifying one first customer with a problem
that could be addressed, deepening the customer knowledge and co-developing the solution
together with the customer, developing a market positioning concept and promoting the
solution to other customers in the same category. As a R&D director explained, “The new
IoT solution development process was designed in the logic of project management.”
Vol. 23 • No. 57 • May 2021 401

B. Value proposition innovation. In developing new IoT solutions, the focus is on services,
not devices. The managers interviewed revealed that their companies develop IoT solutions
that provide non-invasive data capture services and real-time data that help managers to
make better decisions which in turn create higher customer value. IoT developers are
looking for standardization, modular architecture and scalability of the solutions they
develop, allowing customers to integrate and customize these modules according to their
needs and activities. Successful IoT solutions have proven to be simple, customized, easy to
implement and low cost for customers. The provision of new solutions for the development
of the customer’s core business is particularly important. In this regard, summarizing his
company's future plans, an R&D director said that “In the future, we will provide analytics
services using algorithms that identify patterns in the data collected, thus creating new
value for the customer. Instead of applications, customers request new services through a
sharing model”.
IoT developers focus on customer problems that can be solved by the real time data
collected, displayed, and analyzed by the IoT solution. For example, an R&D director
highlights that his company “began providing air quality data collected by sensors in its
IoT network. Requests were made by non-traditional customers like not-for-profit
organizations”.
The companies that develop IoT solutions create direct marketing channels. The process of
customer communication and negotiation starts at the level of top management and
operations managers (the latter as direct users of the proposed solution), in contrast to
conventional IT products and services for which this process begins and takes place
through the IT department. New collaborative relationships with customers were found to
emerge. The sample companies develop the IoT solutions together with the customers, the
process of co-creating value being a key success factor in the development and
commercialization of new IoT solutions. The need for continuous interaction,
communication and collaboration with the customer throughout the value creation process
(i.e. discovering customer needs, designing the IoT solution, implementing, providing
maintenance and updating the IoT solution) was highlighted. As the general manager of a
company explained, “In the case of a solution for monitoring the manufacturing process,
the idea arose during discussions with a customer about the possibility of monitoring the
electricity consumption of the equipment. Then the idea of monitoring the operation of
equipment based on monitoring electricity consumption crystallized, the IoT solution being
developed together. Moreover, when the customer receives the first benefits that strengthen
his trust, he requests the gradual expansion of the solution by adding new features.”
C. Value capture innovation. Companies are put in a position to renew their revenue and
cost models to capture value from the IoT solutions they develop. For example, Product-as-
a-Service was revealed as a new way of value capture, the customer paying for the service
provided by IoT solution. Customers are a driving force behind the adoption of new
revenue-generating model by requiring access to IoT solution as a service according to a
sharing model rather than buying it as a unique product. From a cost perspective, the
sample companies focus on developing simple, scalable, and easy to implement solutions to
keep costs low to increase access and to intensify their use. The R&D director of a
company explained these aspects as follows: “There are many customers who discuss an
IoT solution with us, then request it as a service, which leads to a different approach to the

market. Thus, instead of applications, customers request services according to a sharing
business model”.
3.2. Strategic factors of business model innovation for IoT solutions
The company’s strategic orientations (i.e. proactive market orientation, technology
orientation, and entrepreneurial orientation), adaptive marketing capabilities, organizational
culture and leadership play an important role in business model innovation for IoT
solutions (Table no. 3).
Table no. 3. Strategic factors of business model innovation for IoT solutions
Second-order First-order
Codes
constructs constructs
Proactive market Recognizing customers’ latent need
orientation Setting market trend
Recognizing the business potential of the
Strategic Technology
new technologies
orientations orientation
Development of IoT solutions
Entrepreneurial Decision to act proactively
orientation To be among the first movers
Listening to customers
Vigilant market
Identifying emerging trends and needs
learning
New understandings of customer needs
Adaptive Testing solutions in the real context of
marketing Market customer use
capabilities* experimentation Testing solutions on the market
Learning through experimentation
Joining non-trade alliances
Open marketing
Promotion through virtual communities
Organizational Innovation culture Focus on innovation
culture Openness to new technologies
Organizational Facilitative leadership Vision and imagination
leadership Foreseeing business opportunities
Note: * According to Day’s (2011) conceptualization
Proactive market orientation was revealed as one of the important factors in business model
innovation for IoT solutions. Proactive market orientation is about creating and developing
a new market by offering IoT solutions that address customer problems and their
unexpressed needs. In this regard, one general manager points out that “the role of the
provider is to discover unexpressed customer needs and to convince customers to invest
based on an opportunity cost of not adopting an IoT solution.” Because customer
awareness and readiness to adopt IoT solutions are low, adopting a proactive market
orientation appears to play an important role in creating a new market.
At the same time, companies in the sample have a high level of technology orientation by
recognizing ahead of their competitors the business potential of IoT technologies. Once the
business opportunities opened by technology and market trends have been identified by top
managers, the development of IoT solutions has become the focus of the company’s
strategy. An R&D director explained this orientation towards technology: “The business
Vol. 23 • No. 57 • May 2021 403

potential of IoT and the complementarities with the specific core activities of the company
have been identified. Initially, the innovation division focused on research, identifying new
ideas and developing projects (...) that could lead to the discovery of new market niches
and the development of proprietary solutions. Then, among market trends, the future
business potential of the IoT was identified and became the focus. ”
The third strategic orientation adopted by companies in the sample is the entrepreneurial
orientation. The companies in the sample are innovative and proactive in their strategic
actions, taking the initiative and calculated risks to develop IoT solutions, and are among
the first movers in the market. As one general manager explained, “Once top management
understood the IoT phenomenon, we made the decision to be proactive, to be among the
first to develop IoT solutions and to create a new IoT business”.
The theoretical coding of our qualitative data led us to discover that adaptive marketing
capabilities also play an important role in business model innovation for IoT solutions. The
capability of vigilant market learning allows the generation of valuable insights about the
latent and future needs of the customers. For example, an R&D director pointed out that
“they have identified the need for new solutions to ensure resource planning and product
traceability, simultaneously solving the problem of capturing data from existing
equipment”. Thus, speaking and listening to customers are essential activities to discover
unarticulated needs and to help identify potentially disruptive trends that require business
model changes. In addition, IoT developers are expanding their understanding of how IoT
technology can improve the customer's operations processes and how it can add value to the
customer's business.
Adaptive market experimentation capability has been identified as an important factor in
driving business model innovation. Some managers adopt a trial and error approach to
conducting internal and market experiments to enhance learning and good practice
development. The general manager of a company explained this approach as follows:
“Initially, we test the IoT solution at home and only after that we offer it to the market.
Testing products and services in the real context of customer use is essential. The feedback
provided by the customer gives us the opportunity to learn how to continuously improve the
quality of the products and services we offer to the market. Different types of solutions have
been tested on the market and some of them have proven their viability.”
Open marketing capability seems to play a significant role in driving business model
innovation for IoT solutions. The IoT developers in the sample strive to integrate into
alliances, business ecosystems, networks and communities for organizational learning and
marketing communication. In this regard, an R&D director pointed out that “The first thing
was to join an alliance that aims to standardize a communication protocol to promote
market development. The company benefits from access to information about this protocol,
its standards and the accessibility of IoT technology solutions”. Furthermore, these
managers also leverage the resources of any external partners, such as virtual communities
of interest, to build customer awareness and trust in IoT solutions.
An innovation-centred company culture has been revealed as a factor that encourages
innovative behaviours such as experimenting with new technologies and business models.
In this line, a general manager from the sample emphasized that “company culture
stimulates openness to new technological trends”. Encouraging the exploration of the
unknown is an another interesting feature of this culture, as revealed by an R&D director:

“A company that is open to innovation facilitates the development of the IoT business by
focusing on what employees do not yet know how to do.”
Facilitative leadership plays an important role in innovation of the business model for IoT
solutions. As one general manager pointed out, “the visionaries are the ones who foresee
IoT business opportunity and imagine a new business model which they build in order to be
successful in the market”. Moreover, a common vision shared within the organization is
essential in this process. The general manager of another company in the sample concluded
that “The most important thing is to share the same vision, so that when the business model
changes, everyone gets involved in implementing the vision and taking the risk”.
3.3. Performance outcomes of business model innovation for IoT solutions
We discovered two main outcomes of business model innovation for IoT solutions, namely
strengthening the competitive advantage of the company and increasing customer
satisfaction (Table no. 4).
Table no. 4. Outcomes of business model innovation for IoT solutions
First-order constructs Codes
Competitive advantage Differentiation as competitive advantage
First mover
Customer satisfaction Customer satisfaction
Customer delight
IoT developers expect to benefit from being among the first movers to gain a competitive
advantage through IoT-enabled differentiation. In this regard, a sales manager revealed that
“the company's aim in developing IoT solutions is to create a differential advantage over its
competitors market through a unique value proposition”. Customer satisfaction and delight
seem to be a high priority for the managers of the companies in this sample, the right
attitude towards the customer being an important factor of success in developing IoT
solutions. In addition, we identified a concern about the risk of negatively affecting the
corporate image through customer dissatisfaction resulting from unclear and/or excessive
customer’s expectations. A general manager highlighted that: “Ensuring customer
satisfaction and delight is a priority for the company. The right attitude towards the
customer is essential in developing a successful IoT solution”.
To synthesize, this study provides empirical evidence that, in contexts characterized by
uncertainty of the business environment as in the case of IoT solutions, strategic
orientations of the company, adaptive marketing capabilities, facilitative leadership, and
innovation-centred organizational culture have the potential to pave the way for successful
business model innovation.
4. Discussions
Companies need to innovate continuously their business model in response to the
uncertainty generated by technology and market changes in order to sustain their long-term
competitive advantage (Foss and Saebi, 2018). Successful innovation of the business model
for IoT solutions requires companies to adopt strategic orientations towards market,
technology and entrepreneurship (Chesbrough and Rosenbloom, 2002). These strategic
orientations generate a value system (Zhou, Yim and Li, 2005) and an external perspective
Vol. 23 • No. 57 • May 2021 405

in aligning the company's strategies with the environmental dynamics (Zhou and Li, 2010),
creating the conditions for increasing long-term performance. Despite this, in the field of
strategic management and marketing, limited efforts have been dedicated to studying the
strategic factors of business model innovation for IoT solutions. To fill this knowledge gap,
this paper contributes to deepening the understanding of the business model innovation
phenomenon and guiding managers in this process.
First, this study identified links between proactive market orientation, technology
orientation, and entrepreneurial orientation with business model innovation for IoT
solutions. This is consistent with previous research in strategic marketing that demonstrates
the positive influence of these strategic orientations on innovation and performance
(Gatignon and Xuereb, 1997; Atuahene-Gima, 2001; Zhou, Yim and Tse, 2005). Second,
the potential of adaptive marketing capabilities to facilitate business model innovation for
IoT solutions was highlighted. This finding confirms the idea that capitalizing on the
company's strategic orientations requires complementary resources such as marketing
capabilities (Zhou, Yim and Li, 2005; Zhou and Li, 2010). Third, a facilitative leadership
and an innovative organizational culture have been found to play an important role in
stimulating business model innovation for IoT solutions. This finding is in line with
previous empirical research that revealed the role of top management support in
implementing market orientation (Narver and Slater, 1990) and the role of top managers in
developing new capabilities for capitalizing on new technologies (Srinivasan, Lilien and
Rangaswamy, 2002). Fourth, managers have formulated their expectation that competitive
advantage and customer satisfaction will be the main results of business model innovation
for IoT solutions. This is consistent with the results of previous research that supports the
contribution of business model innovation to competitive advantage (Casadesus-Masanell
and Zhu, 2013; Bashir and Verma, 2019) and to company performance (Karimi and Walter,
2016; Visnjic, Wiengarte and Neely, 2016).
Conclusions
This research makes some theoretical contributions to explaining the strategic factors of
business model innovation for IoT solutions from the perspective of RBV theory. Thus,
links were identified between proactive market orientation, technology orientation and
entrepreneurial orientation with business model innovation for IoT solutions. Moreover,
adaptive marketing capabilities have the potential to facilitate business model innovation
for IoT solutions, while a facilitative leadership and an innovative organizational culture
play an important role in supporting business model innovation for IoT solutions.
Consequently, the competitive advantage and customer satisfaction are the main results of
the innovation of the business model for the IoT solutions expected at the managerial level.
From a methodological point of view, this paper expands the scope of Grounded theory in
researching the phenomenon of business model innovation for IoT solutions in the context
of an emerging economy.
The results of this research are relevant for business practice, providing managers with
guidance in business model innovation for IoT solutions. Understanding the strategic
factors of business model innovation for IoT solutions will help managers make decisions
about developing the complementary assets and capabilities needed to facilitate business
model innovation for IoT solutions and to take advantage of technological innovations.
Capitalizing on technological innovations requires innovation both in terms of components

and in the architecture of the business model. Consequently, managers need to allocate
adequate resources to the development of new value propositions, new value creation
processes and new value capture models. To achieve the expected outcomes from business
model innovation, managers should ensure the development of adaptive marketing
capabilities that provide valuable customer insights and relational assets. To enhance the
company's adaptive marketing capabilities, managers should instil at the organizational and
individual level the values and behaviours appropriate to the strategic orientations that lead
to successfully innovation of the business models. More specifically, they should encourage
and support employees to adopt in their actions the values and norms of proactive market
orientation, technology orientation and entrepreneurial orientation.
No research can exhaustively explain the investigated phenomenon. Likewise, this research
has its own limits that open new avenues for future research. First, from the perspective of
building and validating a theory, the relationships between the company's strategic
orientations, marketing capabilities and the outcomes of business model innovation have
not been tested quantitatively due to the small number of companies that have started to
develop such solutions. Consequently, further research could develop and test hypothesis
regarding the relationships between these theoretical constructs using validated scales from
the previous marketing and strategic management literature. Second, further research could
investigate the role of other strategic orientations in driving successful business model
innovation for IoT solutions. For example, it could be investigated the role of responsive
market orientation in driving business model innovation and how it relates to proactive
market orientation. Third, the role of innovation and technological capabilities in driving
business model innovation for IoT solutions could be further investigated. Finally, how a
company’s proficiency in implementing new business model for IoT solutions influences
the impact of business model innovation on firm performance requires further research. In
this regard, the moderating role of dynamic and static marketing capabilities in the
relationship between business model innovation and performance outcomes could be
specifically addressed. Research on the impact of strategic orientations and organizational
capabilities on business model innovation can be done through survey research using
certain measurement scales developed and validated in previous research. For example,
proactive market orientation can be measured using Narver, Slater and MacLachlan’s
(2004) scale, and dynamic marketing capabilities using the scale developed by Guo et al.
(2018). The construct of business model innovation can be measured using the Clauss’s
(2017) scale, while in measuring expected performance the scales developed by Moorman
and Rust (1999) and Vorhies and Morgan (2005) are useful.
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AE Usage of Neural-Based Predictive Modeling
and IIoT in Wind Energy Applications
USAGE OF NEURAL-BASED PREDICTIVE MODELING AND IIoT

IN WIND ENERGY APPLICATIONS
Adrian-Nicolae Buturache1* and Stelian Stancu2
1)2)

Buturache, A.N. and Stancu, S., 2021. Usage of Received: 29 December 2020
Neural-Based Predictive Modeling and IIoT in Wind Revised: 14 February 2021
Energy Applications. Amfiteatru Economic, 23(57), Accepted: 4 March 2021
pp.412-428.
DOI: 10.24818/EA/2021/57/412
Abstract
The adoption of wind energy has grown significantly in recent years. New, cost-effective
technologies have been developed, led by customer awareness of green technologies and a
legal framework proposed at the European Union level. The stochastic nature of wind speed
is transferred to wind turbine output, making wind energy difficult to predict. The main scope
of predicting wind energy production is to be proactive in balancing and reserving energy to
meet demand. When the prediction identifies a potential gap between supply and demand,
additional energy from other sources must be generated and supplied. Creating a synergy of
physical devices through advanced sensing capabilities, software, storage and analytics
capabilities, the Industrial Internet of Things is enabling the effective transition to wind
energy through automation by removing many of the disadvantages in a way that has recently
become accessible. This research focuses on the data analytics, proposing a fast univariate
network-based approach for wind energy prediction, using Feed Forward Neural Networks,
Recurrent Neural Networks, Long-Short Term Memory, Gated Recurrent Unit, and
Convolutional Neural Networks. Moreover, by introducing the theoretical fundamentals, the
implementation method and the hyperparameters of the final models, this article becomes
unique in the context of wind energy. At the time of this study, no prior research studies have
presented a direct comparison between feedforward, recurrent, and convolutional neural
networks ‒ these being the most important in the field of supervised learning.
Keywords: machine learning, artificial neural networks, wind energy, internet of things,
industrial internet of things
JEL Classification: O13, O14, O31, Q47, C45
*
Corresponding author, Adrian-Nicolae Buturache ‒ e-mail: ad.buturache@yahoo.ro
Authors’ ORCID:
Adrian-Nicolae Buturache: orcid.org/0000-0002-6146-2992
Stelian Stancu: orcid.org/0000-0002-4727-993X

Introduction
The renewable energy sector has experienced considerable global growth in the last few years.
This growth comes with huge challenges, in terms of asset management. Wind turbine site
selection can lead to geographically dispersed layouts, which makes the management of these
installations a challenging task. By adopting an Internet of Things (IoT) approach,
geographical dispersion-related problems can be overcome by enabling remote descriptive,
diagnostic, and predictive analytics to minimize operational costs by maximizing production
and preventing unplanned, costly downtimes. Predictions of wind energy is one of the core
data needed in real-time control of power systems: to be close to the real-time ideal means
delivering fast predictions, in sync with entire system dynamics. The higher the prediction
accuracy, the higher the efficiency of the system, resulting is savings for all investors. IoT
can enable companies across the entire energy supply chain to achieve their targets. The
continuously increasing adoption of these renewable technologies has led to a situation that
was not previously possible: small installations built by businesses or homeowners. These
installations were initially built to cover daily basic energy consumption, but they can also
send energy into the power grid. This reinforces the dispersed character of current power
systems and creates a new challenge, in terms of optimal grid management. However, data
from smart energy meters has the advantage of driving improvements for consumers, for
example, by identifying waste, such as power-hungry devices or automated heating,
ventilation, and air conditioning systems. The growth of wind power systems is driven by
European Commission and Government legislations. For the next 10 years, through the
European Green Deal, there are precise targets for the minimum percentage of renewable
energy to be used and the reduction of greenhouse gas emissions (European Commission,
2020). Even though most renewable energy resources were identified decades ago, they have
not been able to replace fossil fuel-based sources because of their intermittent and variable
availability. The solution for this has been to gradually add them to existing power grids,
which has been possible due to the development of smart grids that include features, such as
power consumption and output power prediction. In this way, a feedback loop between
customer and supplier is created. Then, the gap between demand and supply can be covered
using fossil fuel-based sources, overcoming the negative impact of availability. The
successful integration of wind-based technologies in the existing electricity grid depends on
the accuracy of wind prediction. Short-term forecasting plays an important role, for both
operational and energy trading activities. The IoT, by definition, covers every piece of
technology with the capability to communicate with other devices, systems and networks
(Ashton, 2009). Industrial professional and academics split the IoT in two branches:
Industrial Internet of Things (IIoT) and Customer Internet of Things (CIoT) (Al-Ali, 2016).
IIoT is represented by smart grids, factories, cars, and machines, while CIoT is oriented to
the customer and their devices, such as smart home devices, connected cars and wearables.
IIoT and CIoT are connected, enabling information transfer between them. This research
aims to provide an overview on the use of predictive analytics based on neural networks and
IIoT in the wind energy industry. The focus is on analytics, by identifying the theoretical and
practical aspects of using network-based algorithms for rapid, short-term univariate
predictions of wind energy production, using Romanian-based wind turbines data for the case
study. Finally, the results of the best performing models belonging to each of the five selected
typologies are compared, both in terms of generalization capacity and training time.
Vol. 23 • No. 57 • May 2021 413

Methods for wind energy prediction can be grouped depending on the timescale (short-term,
medium-term, long-term), model type (physical, statistical, machine learning, hybrid) and
the variety of parameters (univariate, multivariate). Physical models are built on the
exogenous variables that influence energy production. However, being deterministic, they
are dependent on the location and physical properties of the environment in which the wind
turbines are located, making them less versatile than other models. In these models, another
important aspect is that for all methods of prediction, either the output energy is predicted
directly, either firstly wind speed is predicted and then based on power curves, the energy is
determined analytically. Most literature uses the indirect method, as described below. An
error correction model, based on a bidirectional gated recurrent unit neural network, is
proposed to correct the error of the numerical weather prediction of wind speed (Ding, et al.,
2019). The results outperformed the selected benchmark models for short-term power
prediction and the same approach could also be used for medium and long-term predictions.
Using the same univariate machine learning model, Long-Short Term Memory (LSTM) and
One-dimensional Convolutional Neural Networks (1D-CNN) can be implemented (Fukuoka,
et al., 2018). In this study both LSTM and 1D-CNN provide better performances than the
Feed Forward Neural Networks (FFNN). Another way to extract meaningful information
from a time series is represented by Empirical Wavelet Transform (Wang and Hu, 2015),
then the GPR (Gaussian Process Regression) model combines, in a nonlinear way, the
predictions generated by other models like ARIMA (Autoregressive Integrated Moving
Average), ELM (Extreme Learning Machine) and SVM (Support Vector Machine). This
method is more accurate than the standalone models for predicting short-term wind speed at
two sites. An example of ARIMA implementation on real operational data illustrates the
improvement in reducing energy buffers, resulting in a cost reduction by accurately
predicting wind speed (Eldali, et al., 2016). A similar outcome can be achieved by direct
predicting of the wind power (Pant and Garg, 2016). The model performance can also be
improved by dividing the year into months and building separate models for each of them
(Chen and Lai, 2011). The comparison of ARIMA and FFNN reveals that for each month,
and for one hour, two hours, three hours, and four hours ahead, FFNN outperforms ARIMA.
Under the direct wind energy prediction, a hybrid approach has been tried that consists of
using a non-linear model for the non-linear component of the time series, and a statistical
model for the linear factor. An example of this is using ARIMA for the linear and RBFNN
(Radial Basis Function Neural Network) for the non-linear component. For large data
similarity and a high-density time series, a preprocessing step for extracting the change trend
information can be used (Liu, Ding and Jia, 2020). A K-means clustering method is proposed
for obtaining a new time series that compresses the data, facilitates storage and utilization,
and eliminates noise. The resulting time series is then used as input for ARIMA, SVM, GPR,
ESN (Echo State Network), GRU (Gated Recurrent Unit), A-RNN (Attention Recurrent
Neural Network), Input-Attn-RNN (Input Attention Recurrent Neural Network) and DA-
RNN (Dual-stage Attention based Recurrent Neural Network). Except SVM, the results from
all of the selected models were similar, proving the versatility of the network-based models.
Machine learning-based approaches enable researchers to study wind energy production
without having much industry experience. These flexible and highly scalable models
outperform existing models in fast univariate prediction tasks. Currently, there is a gap in
direct univariate wind energy prediction. Furthermore, a comprehensive analysis of the most
important network-based models is necessary, specifically to align with the challenges faced

by the wind energy industry. The enabler for implementing these machine learning-based
solutions is facilitated by IIoT technologies firstly by the fact that operational data is readily
available for consumption, and secondly by the fact that the results of predictive analyzes can
be propagated backwards for real-time optimization of energy production.
2. Theoretical fundamentals
2.1. Feed Forward Neural Networks
The artificial neural network (ANN) concept was first introduced by McCulloch and Pitts
(1943). Inspired by the human brain, ANN aims to replicate the way information flows
between neurons. However, only after backpropagation was introduced (Rumelhart, Hinton
and Williams, 1986) did ANN start to demonstrate its capabilities. By implementing
backpropagation, the synaptic weights between neurons are updated according to the expected
result. The value of the synaptic weight provides information about how important the inputs
are to achieve the maximum possible accuracy. FFNN represents an instance of the ANN in
which the information is processed while passing forward through the network, traveling from
the input layer through hidden layers and, finally, the output layer (figure no. 1). Each layer
consists of neurons, representing the computational units of the network.
Figure no. 1. Feed Forward Neural Network high level architecture

The neurons only communicate with the outside world if they are in the input or output layer.
The neurons of the hidden layers are receiving inputs from the neurons upstream and are
sending the information downstream, either to another hidden layer or to the output layer. All
neuron inputs have a synaptic weight (wi ), based on the inputs (xi ) and the impact of the
output (yi ). The output of a neuron can be calculated as a weighted sum of the inputs
(equation 2) on which the activation function f is applied (equation 1).
y=f(z) (1)
n
z= � xi wi +b (2)
i=1
Where 𝑏𝑏 represents the bias.
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Using the activation function introduces non-linearity into the neuron’s output. The neuron
will be fired if the output value is greater than a given threshold, or it can be inhibited if the
output is smaller than the threshold (equation 3). For the RELU (rectified linear unit)
activation function:
y=f(z)=max(0,z) (3)
Backpropagation means the information travels back from the output layer to the input layer.
The model’s error is used to update the network parameters, with respect to the objective
function (i.e., error minimization). The way network parameters are updated is governed by
the optimization algorithm (Kingma and Ba, 2015).
2.2. Recurrent Neural Networks
A Recurrent Neural Network (RNN) can be obtained when feedback connections are added,
and are performant while using sequential data. The applications in the time series field are
important since the prediction of a time step may depend on multiple steps backwards. The
RNN can be defined using the following equations (Pascanu, et al., 2014):
ht =fh (xt ,ht-1 )=ϕh (W T ht-1 +UT xt ) (4)
yt =fo (ht ,xt )=ϕo (V T ht ) (5)
Where xt = input vector; ht = hidden state; ht-1 = previous step hidden state; yt = output vector;
W, U, V= parameter matrices and fh , fo =activation functions. The input xt and the previous
hidden state ht-1 are concatenated. The newly created vector contains information of both the
current input and the previous state. This vector is passed through a tanh activation function,
resulting in output of the current state. The tanh layer regulates the output by fitting the values
between -1 and 1 (figure no. 2).
Figure no. 2. Recurrent Neural Network high level architecture

While FFNN is using backpropagation for training, RNN is using backpropagation through
time (BPTT) (Rumelhart, Hilton and Williams, 1986). BPTT is suitable for network

applications where model parameters are updated in discrete time steps. The design of the
RNN is vulnerable to exploding or vanishing gradient issues (Bengio, Simard and Frasconi,
1994).
2.3. Long-Short Term Memory
Long-Short Term Memory design (LSTM) (Hochreiter and Schmidhuber, 1997) retains the
capabilities of the RNN to work with time series data, but it reduces information morphing
and the issues related to vanishing and exploding gradients. The novelty of LSTM (figure no.
3) lies in a gating system that can manage the way information flows: the internal gating
system ensures that input information can be kept or forgotten, according to its significance
to the problem at hand.
Figure no. 3. Long-short term memory high level architecture

According to the theoretical fundamentals in the cell state relevant information of the earlier
steps is stored, reducing the negative impact of information morphing. A network’s gating
system consists of three gates: the input gate, the forget gate and the output gate. These three
gates are essentially neural networks. As the tanh activation function squashes the results
between -1 and 1, the sigmoid activation function performs the same task, but within 0 and
1. The forget gate then decides which information of the previous cell state is to be kept or
discarded (equation 6).
ft =σ�xt U f +ht-1 W f +bf � (6)
Where U f and W f are the weights of the current state input and previous cell output, with
respect to the forget gate. The input gate consists of two mathematical layers. The first layer
decides the new information that will be stored in the cell state (equation 7). This layer acts
in a similar way to the forget gate: current state input and previous state cell output are passed
through a sigmoid function. The differentiation is made by considering its own bias and
weights for the current input and previous state cell output, bi , U i and W i , respectively.
𝑖𝑖t =σ(xt U i +ht-1 W i +bi ) (7)
Vol. 23 • No. 57 • May 2021 417

The second layer of the input gate takes the same current input and previous cell state and passes
them through a tanh activation function (equation 8). This time, the bias and the weight matrices
are specific to this second layer. The new candidate for the cell state is calculated as:
C�t =tanh(xt U g +ht-1 W g +bc ) (8)
The new cell state:

Ct =σ�ft ∙Ct-1 +it ∙C�t � (9)
At this point, it decides what information is to be kept from the previous cell state, through
the pointwise multiplication of the forget gate vector with the previous state cell vector. The
newly computed cell state (equation 9), current input 𝑥𝑥𝑡𝑡 and previous hidden state ht-1 are
then used to compute a new hidden state. The output is calculated using the current state input
and the previous hidden state, both with weights appropriate for this gate:
ot =σ(xt U o +ht-1 W o +bo ) (10)
Through a tanh activation function, the newly calculated cell state Ct is regulated and further
multiplied with the output gate result:
ht =tanh(Ct )∙ot (11)
Now the current cell state Ct , known as long-term memory and the hidden state ht , known as
short-term memory are computed. The logic described above is repeated for all the new time
steps considered. The output of each time step is obtained using the short-term memory.
2.4. Gated Recurrent Unit
GRU it is a relatively new design (Cho, et al., 2014), which has been gaining popularity since
its inception. As with the LSTM, this design aims to reduce the issues related to long-term
dependencies and vanishing or exploding gradients. GRU logic is similar to that implemented
in the LSTM, in that the information flow is regulated by a gating system (figure no. 4).
Figure no. 4. Gated recurrent unit high level architecture

However, the gating system of GRU consists of only two gates: an update gate and a reset
gate. Another difference is represented by the cell state, which is not part of GRU. Both the
reset and update gate functionality are governed by the sigmoid activation functions. In this
way, only relevant data is kept. The reset gate has a similar functionality as LSTM’s forget
gate, deciding what information from the previous hidden state is to be discarded.
rt =σ(xt U r +ht-1 W r +br ) (12)
The update gate works in the same way as LSTM’s input gate, filtering the information
coming from the previous state and the information of the current input, selecting the new
information to be added.
zt =σ(xt U z +ht-1 W z +bz ) (13)
Where r (equation 12) and z (equation 13) indicate that the weights are proper for the reset
gate and the update gate. If the values of the update gate are close to one, then the information
of the old state is kept, while the current state input is ignored. The reset gate ensures the
short-term dependencies are captured, while the update gate does the same but for long-term
dependencies. The new hidden state candidate is governed by the following equation:
� � �
h�t =tanh�xt U h +(ht-1 ∙rt )W h +b ht � (14)
After assimilating the effect of the reset gate into the new hidden state candidate, then the
impact of the update gate output is incorporated into the current hidden state:
ht =(1-zt )∙ ht-1 +zt ∙h�t (15)
In this way, GRU manages to deal with short and long-term dependencies and gradient-
related issues with less calculations, being less computationally expensive than the LSTM.
2.5. Convolutional Neural Networks

Convolutional Neural Networks (CNN) represent a branch of neural-based models invented
for computer vision tasks, initially for handwritten digit recognition (Le Cun, et al., 1990).
Modern CNNs started to be used on one-dimensional (1D CNN) sequential data of
applications, like time series, text, or audio analysis (Zhang, et al., 2020). CNNs might result
in more computationally efficient architectures due to the ease of computation parallelization
across graphical power unit cores and fewer parameters, compared to fully-connected
architectures.
A typical 1D CNN configuration for a time series prediction problem consists of: input data,
a convolutional layer, a pooling layer, a concatenation layer, a dense layer and an output layer
(figure no. 5). Convolutional layer processes the input data and learn to extract the features
appropriate for the regression made by the dense layer (Abdeljaber, et al., 2017).
Vol. 23 • No. 57 • May 2021 419

Figure no. 5. One-dimensional convolutional neural network (1D CNN)

high level architecture
The forward propagation in a 1D CNN layer uses the following equation (Kiranyaz, et al.,
2020):
Nl-1
xkl =blk + � conv1D�wik

l-1 l-1
,si � (16)
i=1
Where blk = bias of the k th neuron at layer l;wik l-1

= kernel from the ith neuron at layer l-1 to
the k neuron at layer l; si = output of the i neuron at layer l-1; xkl = input. By passing
th l-1 th
through the activation function, the input xkl , the intermediate output ykl can be obtained.
ykl =f�xkl � (17)
As a step-by-step approach, first a kernel must be selected, which is then translated along the
time series, one step at a time. For each step, the dot product of the kernel is calculated and
fitted to the time series. The convolution is represented by the resulting sequence of dot
products between the kernel and time series (End to End Machine Learning School, 2020).
The pooling layer functions to reduce the number of trainable parameters and to retain the
information. Flattening the pooling layer output results in a one-dimensional array, which
has the right shape for using in the fully connected layer, which is essentially a feed forward
neural network.
3. Methodology
Between 2005 and 2017 the amount of wind energy produced by the European Union
increased by 414%. Romania is one country which has reached the European Commission
target for renewable energy for 2020 (European Court of Auditors, 2019), having a total wind
power capacity of 3040 MW (Sava, 2020). In 2018, 42% of Romania’s energy consumption
was represented by renewable energy, while the average in the European Union is 32%. Of
this, 15% of Romania’s renewable energy is created by wind energy (Botea, 2020). This

impressive increase has resulted in growing complexity of the tasks needed to ensure optimal
and safe operation of wind energy, adding uncertainty to the power systems. The uncertainty
and volatility have a significant impact, since the contribution of wind power to the total
power is increasing. Wind turbine operators need to deal with these previously mentioned
challenges, without impacting the grid or creating disruptions to the customers. IoT
technologies can create mechanisms for automatic monitoring and controlling systems,
enabling the operator to implement strategies with respect to these challenges. Ultimately,
the wind energy prediction results are used to support production, in order to deliver energy
without suffering gaps in supply.
A high-level view of a typical IIoT architecture consists of three major layers: the connect
layer, the acquisition layer and the analytics layer (figure no. 6).
Figure no. 6. High-level overview of the proposed IIoT architecture

The connections of these layers are bidirectional (Krishna, et al., 2018) and compliant with
cyber security protocols. The connect layer consists of physical devices, such as sensors for
monitoring and actuators for control. Besides sensors to record data, these devices must be
able to connect to the IT infrastructure for sending and receiving data. Additionally, data
standardization and transformation can be made. The connection to the internet is done using
an IoT gateway. This device has bigger computational capabilities compared to the existing
devices on the connect layer and is capable of aggregating data from multiple sensors and
sending it in the cloud. As part of the acquisition layer, cloud hosted servers host the data
received from IoT gateways. Cloud storage has advantages, such as scalability, usability,
accessibility, security, cost-efficiency, and automation (Singh, 2020). In the analytics layer,
the real-world operational data is transformed into actionable insights for managing and
improving business operations. The analytics layer can contain various types of data analytics
(Hanski, et al., 2018): this study focuses on the descriptive and predictive analytics. On top
of the analytics layer, the Cross-Industry Standard for Data Mining (CRISP-DM) is
implemented (IBM, 2019). This robust methodology gives a structured approach for data
mining projects. The step-by-step guidance describes the main tasks to be completed during
each phase and the interactions between these phases. CRISP-DM is essential in real-world
business cases and consists of the following six phases: business understanding, data
understanding, data preparation, modeling, evaluation, and deployment. The first phase,
business understanding, has been covered extensively in the previous sections. The second
phase of CRISP-DM is represented by data understanding. The data was made available by
Open Power System Data (Neon Neue Energieökonomik, 2020). The wind energy production
time series is aggregated by hour and consists of 15336 data records between 01/01/2019 and
30/09/2020 (table no. 1). Open Power System Data is a platform for data gathered from the
European power system, with freely available data for researchers.
Vol. 23 • No. 57 • May 2021 421

Table no. 1. Wind energy production time series description
count mean std min 25% 50% 75% max
Wind energy
15336 774.03 665.99 0 237 573 1165.5 2809
production
Note: Count = total number of data points; std = standard deviation; min = minimum value; 25% =
first quartile; 50% = median value; 75% = third quartile; max = maximum value.
Figure no. 7 shows the average wind energy production, plotted by day. This data confirms
the intermittent nature of wind energy.
Figure no. 7. Wind energy production daily average

For this time series there are no quality issues, such as missing data, outliers or differences
in data format. In the modeling phase, five techniques were considered: FFNN, RNN, LSTM,
GRU and CNN, described in detail in Section 2. Selected metrics for the evaluation phase
enable an objective comparison. The three metrics selected are: coefficient of determination,
mean absolute error (MAE) and training time. The coefficient of determination (R2 ) measures
how much of the variability in the outcome can be explained by the model (equation 18).
This coefficient is bound between 0 and 1. The closer to 1, the better the model is in
explaining the variability in the outcome. The MAE averages the absolute values of the
prediction errors (equation 19). This mean does not take into account if the error value is
negative or positive.
∑ni=1 (yi -y� i )

R2 =1- (18)
∑ni=1 (yi -y� i )2
n
1
MAE= �|yi -y� i | (19)
n
i=1

Where yi is the actual value and y� i is the predicted value. Training time assesses the resources
spent on training and if the model training can happen within consecutive timestamps. The
sixth phase of CRISP-DM, deployment, has not been covered in this research. The entire
experiment happened offline.
All the proposed algorithms were implemented in Python, using Keras (Chollet, 2017) with
TensorFlow on the backend. The hardware setup consisted of a Dell Precision 7350 equipped
with a Nvidia Quadro P2000 GPU, 32 GB RAM, Intel Core i5-8400H @ 2.5 GHz CPU,
Windows 10, and Python 3.6.10. The learning process used a supervised paradigm. Pairs of
input-output training data subset records were fed into the models during the training process.
The models then learned to generalize based on this training data. Testing happened using
unseen data ‒ i.e., a test data subset that was not part of the training. During the testing phase,
the performance of the models was assessed (Fawcett and Provost, 2013).
4. Results and discussion

For the selected models, the final performance and training times represented the average of
three trials, with different ratios between training and testing data subsets (table no. 2 and
figures no. 8-10). This ensured meaningful results, unrelated to the data split.
Table no. 2. Parameter selection
Results
Model Parameters
Training
𝑅𝑅2 MAE
Time[s]
FFNN batch=8, e=197, nn=47, hl=2, opt=Adam, 0.963 82.3 350.7
lr=0.001, wi=Xavier Uniform, activation=RELU
RNN batch=128, e=20, nn=128, hl=2, opt=Adam, 0.971 70 93.3

lr=0.001, wi=Xavier uniform, activation=RELU
LSTM batch=128, e=29, nn=128, hl=2, opt=Adam, 0.972 69.9 701.8

GRU batch=128, e=25, nn=128, hl=2, opt= Adam, 0.971 70 427.5

batch=32, e=12, nndl=64, hldl=1, filters=64, 0.961 82.5 17.6

1D kernel=3, pool=2, opt=Adam, lr=0.001,
CNN wi=Xavier uniform, activation=RELU
Note: FFNN = feedforward neural network, RNN = recurrent neural network, LSTM = long short-
term memory, GRU = gated recurrent unit, 1D CNN = one dimensional convolutional neural network,
batch = batch size, e = number of epochs, nn = number of neurons on hidden layer, hl = number of
hidden layers, opt = optimization algorithm, lr = learning rate, wi = weights initialization, activation
= activation function, nndl = number of neurons dense layer, hldl = number of hidden dense layers,
filters = number of filters, kernel = kernel size, pool = max pooling size.
Vol. 23 • No. 57 • May 2021 423

Figure no. 8. Comparison of coefficient of determination and training time

R2 = coefficient of determination.
Figure no. 9. Comparison of coefficient of determination and mean absolute error

R2 = coefficient of determination, MAE = mean absolute error.
Due to the highly configurable character of network-based models and their outstanding
capability to learn and generalize, the results can be considered meaningful and reliable.
There are no significant differences between RNN, LSTM and GRU, in terms of 𝑅𝑅2 and
MAE. However, the LSTM training time is expected to be the longest, due to its complex

mechanisms for capturing short ‒ and long-term dependencies. Among the selected models,
LSTM is the most computationally expensive. FFNN can be considered the least
sophisticated model, but it provides a reasonable 𝑅𝑅2 in half the training time of the LSTM.
According to the theoretical considerations, 1D CNN was the least expensive, in terms of
computational power. Even if 𝑅𝑅2 results of the considered models appear similar, MAE
provides another perspective (figure no. 9): for a real-world business case the increase of
MAE, even the training time takes just few seconds, might not be feasible.
Figure no. 10. Wind energy prediction by hour

Note: FFNN = feedforward neural network, RNN = recurrent neural network, LSTM = long short-term
memory, GRU = gated recurrent unit, CNN = convolutional neural network.
Conclusions
The energy industry must keep pace with the other industries that it is setting in motion.
Energy demand, and the way customers use it, is becoming more complex. The pattern of
consumption is highly influenced by the devices used, while the distributed character of the
power systems is influenced by household or small business renewable energy systems. The
key to safe and optimal operation of power grids relies on predictability across the entire
energy supply chain. IoT technologies can act as enablers, gathering together all the “things”
to create synergy. Geographically dispersed assets can, with the help of IIoT technologies,
be managed more efficiently, preventing and minimizing the costly downtimes, while
maximizing the output and reducing the negative impact of production volatility. Through
IIoT, multiple energy resources, such as solar, geothermal, hydro and biomass, can be
integrated and managed. As well as the IIoT, the CIoT is crucial for providing an end-to-end
solution. The predictive analysis results from this case study show that LSTM produced the
best prediction. Even with the long training time, the impact of such a prediction in a business
will create the premises for a proper hardware upgrade to reduce the training time. This will
allow the prediction to be made within consecutive data points for a more discrete time scale.
MAE gives a measure of the performance in relation to an absolute value, namely the energy
produced. In the case of RNN, LSTM, and GRU, the MAE values are differentiated at the
decimal level and even if the unit of measurement is MW, at the time of deployment in
production other elements must be considered. For a fully informed deployment, it is
Vol. 23 • No. 57 • May 2021 425

important that the three models are used in parallel to determine the best solution. The
complexity of the tasks for identifying the parameters and the stability of the models or the
frequency with which the training must be repeated are decisive in selecting the best solution.
The values of R2 are close between the selected models and are also close to the value 1,
meaning that the models can, to a large extent, explain the variability in the results.
Comparing the results with those obtained by other researchers was not possible due to the
way the metrics are typically selected; specifically, the metrics allow a comparison of models
that are trained using the same data set, but do not allow a comparison of models trained on
different data sets. In this regard, the use of the coefficient of determination, the complete
description of the models’ parameters, and the software and hardware configuration will
allow other researchers to use this article for comparative studies. The performance of the
models might be increased by adding exogenous variables, such as wind speed, wind shear,
ambient temperature and pressure, dew point temperature and humidity.
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INTRUSIVENESS AND DATA PROTECTION IN IoT SOLUTIONS

FOR SMART HOMES
Irina Maiorescu1∗, Larisa Gabudeanu2, Alexandru - Lucian Vîlcea3,
Gabriel - Cristian Sabou4 and Marian Dârdală5
1)3)4)5)
2)
Babeș-Bolyai University, Cluj-Napoca, Romania.

Maiorescu, I., Gabudeanu, L., Vilcea, A.L, Sabou, Received: 30 December 2020
G.C. and Dardala, M., 2021. Intrusiveness and Data Revised: 3 February 2021
Protection in Iot Solutions for Smart Homes. Accepted: 17 March 2021
DOI: 10.24818/EA/2021/57/429
Abstract
The use of Internet of Things devices (IoT) by individuals in their homes has led to new
opportunities for companies, to adapt their products, services and offers, based on the user
profile. At the same time, these new services involve the reinterpretation of existing
requirements regarding data protection, especially in terms of the ethics of using data and
the security of personal data. The paper analyses in the scientific literature the intrusiveness
generated by aggregations of personal data, the responsibility for data protection and user's
perception of these issues. It presents further the results of a quantitative research on
183 respondents of all genders and working in different sectors of activity, with the aim of
assessing the perception of intrusiveness and data protection in the use of their smart
devices, with potential for IoT home interconnection. The results provide a new perspective
on how smart device users relate to key issues from European data protection legislation.
The study shows that there are differences explained by gender, age and parental status in
the perception of intrusiveness and responsibilities for ensuring the security of aggregated
data through IoT solutions. The results also show that accessing certain types of data is
perceived as being more intrusive than others, and that respondents rely on other users'
reviews to learn how data protection is provided through the IoT device.
Keywords: Internet of Things (IoT); GDPR; smart homes; smart devices; intrusiveness;
data protection; data security;
JEL Classification: L86, M31, N44
∗
Corresponding author, Irina Maiorescu – e-mail: irina.maiorescu@com.ase.ro
Authors’ ORCID:
Irina Maiorescu: orcid.org/0000-0003-1472-5136
Larisa Gabudeanu: orcid.org/0000-0002-2562-5344
Alexandru - Lucian Vîlcea: /orcid.org/0000-0002-0870-5668
Gabriel – Cristian Sabou: orcid.org/0000-0001-6428-2930
Marian Dârdală: orcid.org/0000-0003-2087-8817
Vol. 23 • No. 57 • May 2021 429

AE Intrusiveness and Data Protection in Iot Solutions for Smart Homes
Introduction
IoT solutions can be used in various areas, from industrial ones (e.g. factories, agriculture,
producing and distributing energy), to those in the public interest (e.g. smart cities, smart
and interconnected vehicles) and individual ones, such as smart homes (Maayan, 2020). In
the last years, the use of smart devices with the potential of interconnection within IoT
networks has increased (Statista, 2021). This rise has been noticed both for businesses,
approximatively 34% of them using IoT solutions in 2019 (Vodafone, 2019), and for
individuals (Maple, 2017).
People use various types of IoT solutions for their personal comfort and within their homes,
such as smart TV, smart personal assistants, utility devices (e.g. light sources, outlets),
smart surveillance cameras, smart electronic devices such as refrigerator, vacuum cleaner,
air conditioning (Zheng et al., 2018), often in connection with a smart phone, smart watch
or computer. There are debates in the scientific literature whether the smartphone can be
included in the category of IoT objects (Futurelearn, 2020). However, the capabilities of
this device to collect and transmit user data, such as location, pulse, temperature,
applications used etc., turn it into IoT object (El Khaddar and Boulmalf, 2017; Norton,
2020). Furthermore, the European Union considers the term Internet of Things (IoT) as
making reference to “the general concept of objects (electronic devices and daily used
objects) that can be read, recognized, accessed, tracked and/or controlled remotely through
the internet” (JO, 2010). An IoT device is “smart” through its hardware part, but also
through its software part that can communicate and interact with the external environment,
with other IoT devices or with the general management of the IoT device network
(Dorsenmaine et al., 2015).
The interaction of these objects with the external environment and with other devices/IT
systems involves the collection, storing and transfer of significant amounts of data,
including personal data of their users or of those individuals found in their proximity. Such
aggregated data are very valuable for companies, because they lead to understanding
behavioural patterns, to creating user profiles (EDPS, 2016) – and, implicitly, exploiting
these for own commercial purposes. At the same time, these smart devices can be the target
of specific cybernetic attacks with the purpose of intercepting the data they transmit and
obtaining gains for such data.
Data collected by the IoT devices – most often personal data, are usually stored also in
other locations than in the IoT device used at home (such as cloud, various servers). For
this reason, their protection, which is a legal requirement (EU Regulation 679/2016) is
essential. The manner in which data has to be protected (including ensuring their security
against improper processing and against unauthorized access) and used is stated by existing
European legislation which includes the GDPR (EU Regulation 679/2016), liability for
products and services and consumer protection. The proportionality of data processing (as
mentioned under article 5 of the GDPR) implies the management of personal data in a
manner expected by the user and not in manners which have an unjustified effect over the
individual (ICO, 2018). Breaching the proportionality of data processing is closely linked to
the intrusiveness concept described in the GDPR. At the same time, certain types of
personal data need to be processed in order to ensure the security of IoT solution and for
the improvement of existing systems.

The issue at hand is to find an equilibrium between intrusiveness and the obligation of IoT
solutions providers to ensure security of the IoT devices; in addition, a balance is needed
also between proportional processing of data and improvement of products/services, by
understanding the needs of their customers ‒ users of IoT solutions. There are studies in the
scientific literature that analyse the behaviour of smart device users in terms of data
protection and confidentiality (Abdi, Ramokapane and Such, 2019; Zheng et al., 2018;
Tabassum, Kosinki and Lipford, 2019). This paper contributes to this area by investigating
the manner in which essential European legislation aspects concerning data protection are
perceived by users of IoT devices.
The paper is structured in four parts. Thus, the first part presents a literature review of (1)
aspects concerning the intrusiveness of data provided by the IoT devices (1.1),
responsibility for data protection (1.2), transparency and informing in data protection (1.3),
data protection in the context of data aggregation for commercial purposes (1.4), as well as
perception of personal data protection by IoT solution users (1.5). The second part of the
paper describes the objectives, hypotheses and the methodology of the quantitative
research, which aims to identify the perception of intrusiveness and data protection by users
of IoT solutions (2). The third part presents the results and discusses them in relation to the
established objectives and hypotheses (3). Finally, the fourth part presents the conclusions
of the paper, emphasizing its theoretical and managerial implications, as well as future
research directions.
In the last years, researchers and public or private entities have been focused on data
protection following its two main dimensions: collection, distribution and processing of
data, respectively, ensuring security of data (Torre et al., 2016; Duan et al., 2019).
Intrusiveness, as a consequence of insufficient data protection, brings different damages to
users (CNIL, 2018). As per European legislation, there are multiple principles to be taken
into account for ensuring data protection, such as predictability of data processing,
transparency of data protection mechanisms, reduction of aggregation to the minimum
required and accountability for data protection (EU Regulation 679/2016). However, this is
a topic that is not evaluated in a uniform manner, given the cultural differences, personal
opinion, evaluation criteria and the actual subjective nature of this concept (Solove and
Citron, 2017).
The user, whose personal data is being collected and processed, is the only one that can
evaluate the degree of feeling used and the damages incurred in this respect. The European
legislation provides the framework through which the user of smart devices benefits from
data protection, but whether he/she is informed and uses his/her rights is debatable (Haney,
Furman and Acar, 2020).
1.1. Intrusiveness of data provided through IoT devices
The breach of the GDPR principles by entities involved in the provision of IoT solutions
generates intrusiveness in the personal life of individuals whose data is collected and used
without their consent. The principle of predictability of processing, in order to be properly
implemented, requires a clear description of the reasons for which the data processing is
needed. For example, the automated security solutions, for providing efficient services,
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have to access and analyse data that are not necessarily needed for the functioning of smart
devices (for example, IP address of the source/destination of the communication, patterns
of the traffic data, information concerning the network to which the device is connected
etc.) (Von Maltzan, 2019).
In addition, in order to avoid intrusiveness, the principle of data minimization has to be
implemented, which entails that only the data necessary for providing the service should be
collected and processed (Wright and Raab, 2014), taking into account the purpose of
processing, disclosing or processing the data (Comas and Ferrer, 2015). If the data have
already been collected and stored, the processing or disclosure to third parties has to respect
this principle as well (Bolognini et al., 2019). An example in this respect is the decision of
the European Court of Justice (ECJ, 2014) in terms of the metadata collected about an
individual. This decision found the collection of data for providing voice messaging or call
location, such as the telephone number or IP address of the device as being excessive, since
these can provide a detailed profile of the user (Barbaro, Zeller and Hansell, 2006). There is
research in this direction that has concentrated on the amount of data collected that is
considered by users as justified in exchange for benefiting from a specific service provided
by the IoT device (Naeini et al., 2017; de Boer, van Deursen and Van Rompay, 2019), but
finding a common ground for the proper data quantity that should be collected and
processed is difficult.
Unauthorized access to data is channelled through the vulnerabilities of the security
protocols. These cybernetic attacks target different level of the IoT networks and,
consequently, require a wide range of incident identification and prevention measures in
order to ensure protection. Initially, such measures targeted identification of known attack
types and static measures (Andrea, Chrysostomou and Hadjichristofi, 2015; Amanullah, et
al., 2020; Yoon, 2020). Nevertheless, in the last years, given the development rate of new
attack types, the idea of dynamic solutions has been adopted by using machine learning
(Badsha, Vakilinia and Sengupta, 2019; Chesney, Roy and Khorsandroo, 2020), for
identification of incidents in early stages (e.g. before exploitation). Currently, the security
solutions focus on confidentiality, integrity and availability, but they are beginning also to
analyse matters related to monitoring of data protection (Leloglu, 2017).
From a business perspective, preventing intrusiveness is closely linked to the principles
mentioned by the consumer protection legislation, and as such, influencing the way IoT
solutions are designed and implemented. Finding the balance between data confidentiality
and data processing in a non-intrusive manner ensures the stability for selling products and
services, given that users show a higher level of trust in such cases (Feng and Xie, 2019).
Thus, although European legislation aims to minimize the intrusiveness felt by the user, it is
important to find out how the user perceives this intrusiveness in relation to his/her personal
data that is taken and processed.
1.2. The responsibility for protecting data accessed through IoT devices
The accountability principle, according to the GDPR, refers to the responsibility for
implementing all appropriate mechanisms, procedures and controls (Wolters, 2017), to
ensure that all legal requirements concerning personal data are implemented and can be
proven (Working Party Article 29/2010). The clear explanation of the role and
responsibility of each stakeholder for personal data processing leads to increasing the trust
of the consumer and, implicitly, to positive effects on the long term.

From the perspective of data protection, according to the legislation, the responsibility for
data processing pertains in general to the data controller. Further, the data controller
generally remains liable for the actions of its data processors, with the exception of specific
situations in which the data processor acts deliberately against the instructions of the data
controller (EU Regulation 679/2016). In terms of data transfer, the entity that discloses the
data is liable for the compliance with legal requirements, including for information of
individuals about such disclosure of data (Fisk et al., 2015).
When referring to IoT solutions for smart homes, the following stakeholders can hold this
position: IoT device hardware manufacturer, IoT device software manufacturer, storing
service provider, IoT device management platform provider (Lee, Cha and Kim, 2019). In
general, these stakeholders act as independent data controllers and are individually liable
for their actions. Regardless, if they were to act together for processing data, they would be
held jointly liable. Given the stakeholders involved and responsible for data protection (in
collecting and processing activities, but also in data securing activities), we advance the
question about the level of responsibility that users associate with the various entities
involved in the protection of their data.
1.3. Transparency and informing in data protection
The transparency principle, mentioned by the GDPR states that users are to be informed
about what happens to their data and should consent for certain types of collection,
processing and disclosure of their data. The information notices for users, about the
processing of their personal data should be concise, clear, intelligible, easy to understand
and easy to access. In case of using a two-layer approach (text and a link to the entire
information notice), the text next to the link should contain sufficient information (data
processing purposes, rights of individuals, name of data controller) from the information
notice (EU Regulation 679/2016).
In the case of IoT solutions, information about the data processing should be adjusted in
accordance with the type of activity performed by the IoT device (Melicher et al., 2016).
Thus, if, traditionally, the information notice is provided when the device is installed or is
included in the documentation pertaining to the device (in electronic or paper format), an
approach that ensures the proper knowledge about the data processing entails push
notifications/alerts before any change in data processing (Castelluccia et al., 2018). The
same approach can be considered in order to obtain/re-obtain consent, if this is the legal
processing basis (Lee, Cha and Kim, 2019). The transparency in involving third parties and
adequate management of data processing can prove difficult and involve adequate internal
procedures within the involved organizations. Moreover, the data retention period can be
difficult to establish and to implement (Jin, 2017). If anonymization / pseudo-
anonymization is required (according to the principle of data minimization), it must be
implemented in a manner that does not have serious consequences for the individuals
whose data is being collected or for the individuals on which the inferred results are applied
(Khalteuner and Bietti, 2018). This has proven difficult to implement in practice, as, even
anonymized data can contain information that can lead to negative or discriminatory
consequences/ damages to individuals (Polonetsky, Tene and Finch, 2013). Further, the
concept of protection of group personal data and their rights, according to the data
protection legislation increases the complexity of this aspect (Wachter and Mittelstadt,
2019). The responsibility for data protection, therefore, involves informing users, but we
Vol. 23 • No. 57 • May 2021 433

raise the question of how appropriate, in fact, the different methods of informing users
about their data protection are.
1.4. Aspects concerning data protection in the context of data aggregation for
commercial purposes
Data aggregation is essential for creating user profiles to improve services or products, for
creating personalized offers (EDPS, 2016), as well as for providing targeted security
functionalities that can identify a threat at the moment it enters the network or very soon
after that moment (Working Party Article 29/2010). Big Data analysis on the aggregated
data about previous attacks ensures a better learning mechanism for the machine learning
algorithms used to identify and manage IoT network anomalies (Hussain et al., 2020). This
represents a method of enhancing the security of the entire IoT home system and,
consequently, of increasing users’ trust in such devices, and accordingly the number of IoT
devices in their homes (Thierer, 2015).
In case of complex systems, such as smart homes are, aggregation of data can be performed
by multiple entities: IoT device manufacturer, providers of IoT management software,
providers of the security solution installed etc. The aggregation can be local or general,
including all devices managed by the respective providers in the world; further, the
providers can transfer data between themselves with the aim of understanding better the
different user profiles (Datta, Tschantz and Datta, 2015).
Aggregation of users' personal data brings various benefits to companies, such as: reducing
costs and resources needed to create the traditional customer profile, hence increased time
and budget for research and innovation, appropriate delivery of services to customers etc.
Consumers also benefit from useful services provided at the right time, at a lower price,
without straining to find the most suitable offers (Elvy, 2017). On the other hand, data
aggregation and distribution can jeopardize transparency in the relationship with consumers
and involve great responsibilities (Tene and Polonetsky, 2013). From a user’s perspective,
collecting a large quantity of personal data or transferring it to third parties can be seen as
intrusive, except in cases when it is necessary for the functioning of the devices and the
negative consequences on him/her are mitigated (Kleek et al., 2018). This raises the
question of whether users perceive the intrusiveness differently, depending on the purpose
for which the data is aggregated (i.e. commercial purposes vs. data security).
1.5. Perception on data protection by users of smart home IoT devices
The studies concerning the perception of data confidentiality and security by IoT home
devices users indicate, in general, that they do not fully understand what data protection
entails and what happens to their data. The research performed by Abdi, Ramokapane and
Such (2019), which analyses the perception of users on Intelligent Personal Assistants
(IPA), shows that users did not understand or had an incomplete image about where their
personal data is stored, processed and disclosed. Another aspect of this research showed
that, although users are aware that IPAs have the capacity to learn, they are reluctant to
allow these devices to learn everything about them and about their behaviour. Even if users
are sceptical about the policies that IoT manufacturers have about how personal data is
processed, their confidentiality behaviour is not strongly influenced by these (Tabassum,
Kosinki and Lipford, 2019).

Another study, carried out in order to understand smart devices holders’ perception about the
confidentiality of data managed by these, highlighted that the responsibility for ensuring the
protection of personal data is believed to lie largely with the manufacturers of smart devices. It
also revealed that users' attitude and behaviour towards data protection are influenced by the
ease of using services and interconnecting IoT devices (Zheng et al., 2018).
Regarding the influence of demographic variables upon consumer perception concerning
smart home security and confidentiality aspects, the research performed by Haney, Furman
and Acar (2020) has shown that, although users are aware about the risks to which they are
exposed, they fail to take measures to reduce such risks. The justification that stems from
the study is considered to be the lack of users’ technical knowledge. Also, according to
Kim and Yoon (2019) it is indicated that the concern about data security and privacy seems
to depend on the marital status of respondents. Hence it results that, to some extent,
demographic variables influence users’ attitude and perception of personal data protection.
The question we raise in this respect, is whether other demographic variables, such as
gender, age, parental status, influence the opinions and attitudes of IoT smart home users.
2. Objectives and research methodology

Starting from the questions that occurred while studying the scientific literature, we set
accordingly the objectives for our research:
• O 1 – Assessing the particularities of IoT devices use in homes.
• O 2 – Identifying users’ attitude about the protection of personal data collected by IoT
devices in their homes.
• O 3 – Determining the perception of intrusive data processing in general, and
particularly for: a) commercial purposes; b) ensuring data security of the IoT device
• O 4 – The evaluation of users’ opinions on the entities that are responsible for data
protection (data processing and assuring the data security).
To answer these questions, we set the research hypotheses, as following:
H1 – There is no difference related to the use of the IoT smart home devices associated
with: a) gender; b) age; c) parental status; corresponding to O 1 .
H2 – The perception of negative consequences generated by the improper processing of
personal data is the same, regardless of: a) gender; b) age; c) parental status; corresponding
to O 2 .
H3 – The perception of personal data exposure through different types of unauthorized
access (cybernetic attacks) to IoT networks is the same, regardless of: a) gender; b) age; c)
parental status; corresponding to O 2 .
H4 – Respondents consider that the request to access different types of data, through their
IoT devices, is similarly intrusive; corresponding to O 3 .
H5 – There are no differences between perceived intrusiveness for commercial purposes
(either for personalized or for general offers), and the perceived intrusiveness for
developing data security services; corresponding to O 3 .
Vol. 23 • No. 57 • May 2021 435

H6 – The perception of intrusiveness with the purpose of providing data security services is
not influenced by a) gender; b) age; c) parental status; corresponding to O 3 .
H7 – The perceived responsibility for processing data retrieved through IoT home devices
is not influenced by: a) gender; b) age; corresponding to O 4 .
H8 – The perceived liability for ensuring the security of respondents' data, when using IoT
home devices, is not influenced by: a) gender; b) age; corresponding to O 4 .
Consequently, we conducted a quantitative research aimed at assessing the intrusiveness
and protection of personal data, as perceived by users of IoT smart home solutions. Studies
indicate that using online questionnaires is increasingly popular, both in academia and in
business, because it has notable advantages (Aaker et al., 2013). Hence, the quantitative
research was based on an online questionnaire, designed on the Question Pro platform,
which contained 19 questions. It was initially tested in terms of clarity of wording on a mini
sample of 8 people. Following the feedback received, the questionnaire was revised for a
better understanding of the questions meaning. It was online distributed in October 2020 to
277 people, aged between 19 and 65, professionally active, living in different regions of the
country, through several accounts of LinkedIn social network which belong to people
working in the legal, teaching, business environment (sales and marketing), IT and
constructions ‒ engineering. Respondents who stated at the beginning of the questionnaire
that they do not have a smart device were asked to stop completing the questionnaire. The
sampling was non-probabilistic, with a total of 183 complete and valid questionnaire
responses.
The data taken from the online reporting platform of the questionnaire were first processed
with Microsoft Excel and then analysed with the statistical software Minitab 16. The
internal consistency of the results for the intrusion perception was verified, the Cronbach
Alfa coefficient being 0.773. Similarly, for the responsibility for data protection, the
Cronbach Alpha coefficient is 0.719, which provides the premises for their validity.

Starting from the first objective (O 1 ), we wanted to know what smart devices are used by
respondents in their own homes. As such, they were asked to select all the smart devices
that they use. From the analysis of their responses, it resulted that the most popular devices
are the smart phones, followed by smart TVs (see Table no.1). Other devices, like smart
watches or smart baby monitors were indicated by less than 3% of respondents.
Table no. 1: The use of different smart devices in the respondents’ homes
Smart Smart Smart utility Smart Smart Smart household Others
TV personal devices surveillance phones appliances
assistants (i.e. lighting, devices (i.e. refrigerator,
(i.e. Google outlets) vacuum cleaner,
Home) A/C units)
70.5% 14.2% 27.9% 19.1% 89.6% 55.2% 2.7%
If the high percentage of the owners of smart phones or TVs does not surprise, it’s
remarkable that more than half of the respondents own at least one smart household
appliance device. Still, this may be explained by the fact that, due to the coronavirus

pandemic in 2020, when the population spent a significant amount of time in their homes,
the investments focused on keeping a clean and comfortable environment, the consumers
being interested especially in robotic cleaning devices (Neagu, 2021).
We also tested the validity of H1 hypothesis, corresponding also to O 1 . The Pearson Chi
Square test indicates a correlation between the use of IoT devices and the age of the
respondents, the resulting Pearson Chi Square coefficient being 13.624 for 3 degrees of
freedom, and an associated p-value of 0.003 – lower than the set cut-off level at 0.05. The
analysis of the responses distribution indicates that users younger than 35 years are using
these devices more than the other age categories. The distribution based on gender is:
111 females (60.7%) and 72 males (39.3%). We identified a correlation between the gender
of the respondent and the use of smart personal assistants (e.g. Google Home), the Pearson
Chi Square coefficient being 4.275 for 1 degree of freedom, the associated p-value being
0.039, the male respondents using more than expected this kind of device. At the limit, the
Pearson Chi Square coefficient of 3.596 for 1 degree of freedom and an associated p-value
of 0.058 indicates an association between the owners of surveillance systems and the
parental status, the results indicating that the respondents who are parents use these more
than respondents with no children. This contradicts up to some extent the results of Kim
and Yoon (2019), where it is claimed that single persons or freshly married couples tend to
be more interested in the security aspects of their homes, while families with children don’t
seem to pay a special interest to these aspects, but rather to the main advantages that smart
homes offer, namely easing the household activities and providing more free time. Between
the use of other devices and the age, gender and, respectively, parental status, we could not
find any other associations. Still, the identified differences invalidate H1 hypothesis.
Related to the second objective (O 2 ), we wanted to know what is the attitude of the
respondents regarding how they obtain information about processing and protection of their
personal data, before purchasing a smart device that is able to connect to the IoT network of
their homes. They were asked to indicate up to what extent a certain attitude is describing
them, on a scale from 1 to 5 (1 – describes me very little, 5 – describes me very much). The
distribution of data looks quite symmetrical for each of these variables (the skewness
coefficients vary from 0.05 and 0.56). As such, in order to find what attitude characterizes
most of the respondents when they search for information regarding personal data
protection, we applied the One Sample Wilcoxon Signed Rank test, comparing the median
of each variable with the value of 3, the middle value of our scale (Rey and Neuhauser,
2011; Voraprateep, 2013; Rotenstein, 2020). The results are shown in Table no.2. As we
can notice, most of the respondents rely much and very much on other users’
recommendations, when it comes to getting informed about personal data protection, the
other attitudes not describing the majority of respondents.
Vol. 23 • No. 57 • May 2021 437

Table no. 2: The One Sample Wilcoxon Signed Rank test for evaluating respondents’
attitude about obtaining information about the processing of their personal data
Null hypothesis (H 0 ) vs.
Respondent’ Estimated
alternative hypothesis (H a ) P-value* Decision
s attitude median
– statistic context
I read the terms,
conditions and policies
Accept
regarding data 0.386 3.0
H0
protection related to the
device
I rely on friends’ median = 3.0 Accept
0.204 3.0
recommendations H0
vs. median >3.0
I rely on other users’
0.002 Reject H 0 3.5
reviews
I take into account the
utility of the device
Accept
without analysing how 0.991 3.0
H0
personal information is
processed
* significance level <0.05
Next, respondents were asked to rate on a scale of 1-5 the usefulness of the different
manners of obtaining their consent when being informed about data processing policies (see
table no. 3). Due to the skewness to the left of the analysed data sets (the skewness
coefficients being -1.61, respectively -0.94, -1.69 and -1.81) we tested the median against
the value of 4, on a scale from 1-5, using the Sign Test (Rotenstein, 2020).
Table no. 3: The sign test regarding the proper manners of giving informed consent
for the processing of personal data
Manner to get informed
alternative hypothesis (H a ) P-value* Decision Median
and give consent
– statistic context
During the installation 0.0000 Reject H 0 5.0
process
On the website of IoT median = 4.0 0.0046 Reject H 0 5.0
device manufacturer
versus
On email 0.0000 Reject H 0 5.0
median >4.0
In the software 0.0000 Reject H 0 5.0
application for the
management of the IoT
device
* 0.05 significance level

As the test results show in table no.3, most of the respondents think that all the means of
getting information are useful (the median of each variable is 5, on a scale from 1 to 5). The
results confirm the other research in the scientific literature that emphasize the importance
of displaying the policies of processing the personal data in multiple ways and multiple
places (Castelluccia et al., 2018), this giving the users the sense of control over the personal
data that they share (Wright and Rabb, 2014). Further on, we wanted to know what is the
period of time over which the data should be stored to provide proper security to their IoT
devices. The responses are presented in Table no.4.
Table no. 4: The opinion of the respondents related to the optimal period of time for
storing personal data for providing proper security to IoT devices
The period set
<1 month 1-3 months 3-6 months 6 months – 1 year > 1 year by the security
solution provider
15.3% 10.4% 13.7% 8.2% 4.4% 48.1%
It is interesting that almost half of the respondents are willing to let the security solution
provider decide the optimal period for storing their personal data in order to ensure
adequate security services for their IoT devices. Only a small percentage (15.3%) considers
that the stored information should be deleted after no more than one month from the
moment it was recorded.
Regarding the H2 research hypothesis we aimed to see if there are statistically significant
differences explained by gender, age or parental status in perceiving the consequences of
improper personal data processing. Thus, respondents were asked to rate on a scale of 1 to 5
(1 ‒ very mild, 5 ‒ very severe) the severity of the following consequences of improper
data processing: disclosure of personal data to unauthorized persons, use of data for
personalized marketing offers, use of data to create general user profiles, transfer of data to
other entities (institutions / companies / authorities) without their consent. In all cases, the
Sign Test places the median at 5, which indicates that all these consequences are seen as
very serious by most respondents. We applied Kruskal Wallis test on each of these
consequences cross checked against demographic variables, but no statistically significant
differences were found. Thus hypothesis H2 is validated.
Regarding H3, respondents were asked to rate on a scale of 1 to 5, the extent to which they
consider that unauthorized access (cybernetic attacks) to various components of an IoT
network, exposes their personal data to attackers. For all these possible scenarios of a
cybernetic attack, the sign test points to a median of 5, indicating the fact that most of the
respondents consider that the unauthorized access to data, no matter where it takes place
(network, management software solution, cloud or the device itself), is exposing in a very
high extent their personal data. However, analysing these results in correlation with
demographic variables using Kruskal Wallis test, we found significant statistical
differences. They are presented in Table no.5.
Vol. 23 • No. 57 • May 2021 439

Table no. 5: The results of Kruskal Wallis test for hypothesis H3

Null hypothesis
Research Cross
(H 0 ) ‒ statistic Tested variable Decision P-value*
hypothesis variable
context
Unauthorized access
of the IoT device Reject H 0 0.003
The distribution itself
of the tested Unauthorized access
H3 variable is the same of the Age
in all the categories mobile/desktop
of the cross variable Reject H 0 0.035
management
software solution
of the IoT device
*0.05 significance level
The percentage of respondents under the age of 25 which consider “unauthorized access of
and IoT device itself” and “unauthorized access of the mobile/desktop management
software solution of the IoT device” as being situations that expose in a very high extent
personal data, is lower than that of the other age groups. These differences lead to the
invalidation of H3.
Table no. 6: The sign test regarding the willingness of the respondents to grant access
to different types of personal data through IoT devices
Null hypothesis
Willingness to grant access (H 0 ) vs. Alternative
P-value* Decision Median
to personal data as: hypothesis (H a ) –
statistic context
Video/audio 0.000 Reject 2.0
H0
About health and physical 0.000 Reject 2.0
H 0 median = 3.0
condition H0
vs.
Identification data 0.001 Reject 2.0
H a median < 3.0
(i.e. name, date of birth) H0
About habits of using IoT 0.004 Reject 3.0
devices H0
Next, we analysed the perception of intrusiveness in various circumstances (O 3 ), hence we
evaluated first the willingness of respondents to grant access to various types of personal
data. As it can be observed in Table no. 6, even if the medians of the different types of data
are located under 3 (on a scale from 1 – very low willingness, to 5 – very high willingness),
their testing was needed to see if between them there are significant static differences.

Table no. 7. The result of Mann Whitney test for testing the H4 research hypothesis
Tested variables N Median Results
Willingness to grant access to 183 W = 30787.0
2.0000
video/audio personal data Test ETA1 = ETA2 vs ETA1
not = ETA2 is significant for p
Willingness to grant access to data 183
3.0000 value 0.0058
about habits of using the IoT device
Willingness to grant access to data 183 W = 30229.5

2.0000 Test ETA1 = ETA2 vs ETA1
about health and physical condition
not = ETA2 is significant for p
Willingness to grant access data 183 value 0.0009
3.0000
about using habits of IoT devices
The Mann Whitney test applied to the independent variables “video/audio personal data”
and “data about the usage habits of IoT devices” indicates a difference between the medians
(see Table no.7), with the majority of respondents considering more intrusive the access to
audio/video personal data than the access to data about the habits of using their IoT devices
(a lower willingness to grant access to data indicates a higher perception of intrusiveness).
Similarly, the users seem more reticent to grant access to data about health and physical
condition, than to data about usage habits. Thus, hypothesis H4 is rejected.
Further, the respondents were asked up to what extent they perceive as intrusive collecting
and using their data for different purposes (personalized offers, general offers and security
solutions). The One Sample Wilcoxon Signed Rank was applied, under data symmetry
conditions. This indicates the fact that the majority of respondents perceive, irrespective of
the purpose, the use of personal data as highly and very highly intrusive, with the median in
all three cases being greater than 3 – the middle on a scale from 1 to 5 (see Table no.8).
Table no. 8. The One Sample Wilcoxon Signed Rank test for estimating the median of
intrusiveness of aggregated personal data for different purposes
Intrusiveness of personal P- Estimated
Alternative hypothesis Decision
data aggregation for: value* median
(H a ) –statistical context
Personalized commercial 0.005 Reject H 0 3.5
offers
H 0 median = 3.0
General commercial 0.000 Reject H 0 3.5
vs.
offers aimed at all users
H a median > 3.0
Security solutions for IoT 0.000 Reject H 0 3.5
devices
* significance level <0.05
As data in groups don’t have a normal distribution (the Kolmogorov-Smirnov test for
normality was performed), we used Mann Whitney Test to compare intrusiveness for
creating commercial personalized offers versus intrusiveness for creating commercial offers
to all users. The result of comparing ETA1 = ETA2 vs ETA1 < ETA2 is significant at
0.0360, W = 31759.0. It shows that the percentage of high and very high perception of
intrusiveness for personalized commercial offers is lower than that of intrusiveness for
general offers. There were found no significant differences between intrusiveness perceived
Vol. 23 • No. 57 • May 2021 441

for commercial purposes (neither for personalized offers, nor for offers dedicated to all
users) and the intrusion in personal data for developing security solutions, the associated p-
values being 0.63, respectively 0.15). It is confirmed thus the set hypothesis H5.
To verify H6, whether the perception of the intrusiveness of data aggregation for
developing security solutions is influenced by the variables: gender, age or parental status,
we applied the Kruskal Wallis test. The test resulted in a statistically significant association
between intrusion and parental status. It appears that respondents, who are also parents,
consider in higher percentage than respondents without children (p-value = 0.049 <0.05, the
significance threshold) that access to their personal data and that of their family is highly
intrusive. No statistically significant differences in respondents' perceptions by gender or
age were observed. This invalidates H6.
In order to identify possible differences regarding the entities responsible for data
protection (O 4 ), depending on gender and age, we performed an analysis, both in terms of
appropriate, ethical collection and processing of data retrieved through IoT devices (H7), as
well as from the point of view of data security (H8).The respondents over 35 years consider
in a higher percentage than the other age categories that the responsibility for processing
the personal data belongs to the cloud storing solution provider (p value - 0.04). The male
respondents consider in a higher extent than female respondents, that the responsibility for
the collecting and processing of personal data by IoT devices belongs to the user and to the
manufacturer of the IoT device (p value 0.034, respectively 0.036). Therefore, H7 is
invalidated. Testing H8, we remarked that respondents over 45 years, consider in a higher
proportion than other age categories that the cloud storing solution administrator (p value -
0.001) and the provider of the security solution installed on the IoT devices (p-value 0.052)
are entities responsible in a very high degree for ensuring the security of the data. Again,
the male respondents consider in a higher percentage that the responsibility for ensuring the
security of data pertains to the user in a high degree (p-value 0.004). H8 is invalidated.
Table no. 9. Median of responsibilities for data protection (collecting – processing
and ensuring security) of various entities, on a scale from 1 to 5
Security
Mobile/desktop
IoT device solutions Cloud storage
Responsibility IoT management User
producer installed by administrator
software provider
user
Collecting and
4.0 5.0 4.0 5.0 4.0
processing data
Ensuring the
4.0 5.0 4.0 5.0 4.0
security of data
It is interesting to notice that, even though the questions related to the responsibility of
different entities on processing personal data and ensuring data security were not
consecutive in the survey, the median is identical (see table no.9). Confirming previous
research, the majority of users consider that the IoT device producers are responsible in a
high extent for data security (Zheng et al., 2018). However, from our analysis, that included
the other entities involved in data protection, the provider of the management software
solution and the cloud database administrators also share a high responsibility in processing
and securing personal data from IoT smart home solutions.

Conclusions
As the intelligence of IoT devices increases, they collect and process increasing amounts of
data. There is a need for a clear delimitation between the aggregation of personal data to
improve the functionality and security of IoT solutions and the intrusion into the lives of
individuals for the benefit of other entities. European data protection legislation, although
strict in this regard, does not limit or standardize the amount of data that can be
downloaded from users of IoT smart devices. Taking into account the main requirements of
the legislation, as well research in the field, we developed a quantitative research that had
as objectives the assessment of using IoT home devices particularities, the identification of
users' attitudes towards data protection practices, determining the perception of data
processing intrusion in general, and in particular for the commercial purposes and data
security, as well as assessing respondents' views on entities responsible for data protection
of IoT home devices (data processing and data security).
The research showed that before purchasing a smart device, respondents rely on the reviews
of other users for information, rather than reading the terms, processing and protection
policies provided by the supplier. The ways of informing and giving consent to these, such
as email, the manufacturer's website, the IoT device installation program, the IoT device
administration application are considered useful and very useful by most respondents.
These results can contribute to the understanding and implementation of the principle of
transparency by IoT solution providers.
In terms of intrusion, the respondents perceive the processing of video/audio data and of
health/physical condition data as being more intrusive than data about interaction habits
with the IoT device, for example. Intrusiveness, regardless of the purpose for which the
data are collected and used, is similarly perceived by the respondents. Although using
personal data for developing security solutions is generally perceived as being intrusive,
almost half of the respondents state that the provider of the security solution can store their
personal data as much as it considers necessary. In terms of responsibility, there are certain
differences in perception, depending on gender and age. It is interesting that the male
respondents consider in high percentage than the female respondents that the user is the one
most responsible for ensuring the security of the IoT device. In general, the responsibility
for both ethical data collection and processing, as well as for ensuring data security, is
associated more with the entities that create smart device management applications and data
cloud solution administrators. This research emphasizes also, that the attitude of IoT
solutions users about data protection and the perceived intrusiveness, when their data are
accessed and used by third parties, depend on demographic variables such as age, gender,
parental status. It is interesting to notice that, although users do not inform themselves, by
reading data processing and protection policies when purchasing an IoT device (even
though these policies could mention that personal data may be accessed and processed by
third parties), they feel that unauthorized access and improper processing of personal data is
very serious.
The results of the research, even if limited in terms of the sampling method used, contribute
to the theory in the field and to a better understanding of how users of IoT devices perceive
intrusiveness, due to the aggregation of their data. Also of what is their attitude towards key
points related to personal data protection. The results provide an interesting perspective to
companies involved in developing IoT solutions, as well as for the standardization
organizations and for regulators. Nevertheless, these results have to be complemented by
detailed research into those elements that predominantly contribute to the formation of the
intrusiveness’ perception. A future direction of research would be investigating the reasons
Vol. 23 • No. 57 • May 2021 443

for which privacy policies are not read, in order to identify aspects that have to be improved
to ensure wider awareness and understanding of personal data processing consequences.
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Vol. 23 • No. 57 • May 2021 447

AE Internet of Things (Iot), Challenges and Perspectives in Romania:
A Qualitative Research
INTERNET OF THINGS (IoT), CHALLENGES AND PERSPECTIVES

IN ROMANIA: A QUALITATIVE RESEARCH
Silviu-Gabriel Szentesi1*, Lavinia Denisia Cuc2, Ramona Lile3
and Paul Nichita Cuc4
1)2)3)
Universitatea Aurel Vlaicu, Arad, România
4)
University College London, United Kingdom

Szentesi, S.G., Cuc, L.D., Lile, R. and Cuc, P.N., 2021. Received: 30 December 2020
Internet of Things (IoT), Challenges and Perspectives in Revised: 9 February 2021
Romania: A Qualitative Research. Amfiteatru Accepted: 27 March 2021
Economic, 23(57), pp.448-464.
DOI: 10.24818/EA/2021/57/448
Abstract
One may notice that there is a lack at a national level of studies providing scientific answers
to problems such as: data safety, security and confidentiality of the data, economic viability,
and impact, regarding internet interconnection of devices and equipment called the Internet
of objects, and in English the Internet of Things. The implementation in industry,
transportation and related services of the Internet of Things system is relatively new, being
known and developed by Romanian companies more in the last five years, according to our
study. The scientific research carried out was based on the semi-structured interview method,
recorded audio and video through the Zoom interface. Data processing of was carried out by
statistical methods advanced in the R program. The data obtained within the study provides
relevant information at the level of users in the analysed fields based on a qualitative research
and allows the creation of a first impression on the state of the implementation of the Internet
of Objects in Romania, which represents the basis for the initiation of more focused
quantitative research on all the implications of the development and use of the
interconnection of devices via the Internet or other interconnection access systems.
Keywords: internet of things (IoT), industrial internet (IIoT), semi-structured interview,

perceived risks, hypotheses, IoT perspectives.
JEL Classification: O14
*
Corresponding author, Silviu-Gabriel Szentesi – e-mail: silviuszentesi@yahoo.com
Authors’ ORCID:
Silviu-Gabriel Szentesi: orcid.org/0000-0001-7254-040X
Lavinia Denisia Cuc: orcid.org/0000-0002-6416-259X
Ramona Lile: orcid.org/0000-0002-0021-0046
Paul Nichita Cuc: orcid.org/0000-0001-7434-3645

Challenges of IoT Technologies for Business and Consumers AE
Introduction
The term Internet of things was invented by Kevin Ashton when he wanted to draw the
attention of Procter & Gamble management to the usefulness of the radio frequency
identification system in its 1999 presentation. Also, in the same year Professor Neil
Gershenfeld in his book, When Things Start to Think, which appeared in 1999, did not
exactly use the exact term, but provided a clear view of the issues IoT refers to (Gershenfeld,
1999).
The Internet of Things (English abbreviated IoT) is a network in which "objects" or devices
embedded with sensors are interconnected over a private or public network. IoT devices can
be remotely controlled to achieve the desired functionality (Khan and Salah, 2018). The
Internet of Things (IoT) is a new technological paradigm, designed as a global network of
machines and devices capable of interacting with each other (Lee and Lee, 2015). The
exchange of information between devices then takes place through the network using
standard communication protocols. Connected smart devices or "objects" range from simple
portable accessories to large machines, each containing sensor chips(Khan and Salah,
2018). The IoT network can generate large amounts of data in different formats and use
different protocols that can be stored and processed in the cloud (Chang, 2020). In the last
year the use of IoT system has been accelerated and, in some cases, new systems and
applications were performed. For this reason, a qualitative study on the factors that may have
an influence on IoT integration in the activity of industrial enterprises in Romania and the
prospects for IoT development for the next period is necessary and useful to fill the
knowledge gap in this field.
Since the implementation in industry, road transportation especially for industrial purposes
and related support services of the IoT system is relatively new being known and developed
by Romanian companies more in the last five years (according to our study) it is necessary
to obtain new data on these aspects. In order to obtain complex user-level data from the
analysed fields, this study was carried out on the basis of qualitative research which allows
catching a first impression on these issues that underpins the initiation of more focused
quantitative research on all the implications of the development and use of IoT.
In order to develop IoT, the 5G system is important. The 5G technology represents the basis
for the augmented reality and virtual reality, as well as cloud-based activity platforms that
can be implemented anywhere, anytime. We can say that IoT is the anteroom of the devoting
of systems of production and management of processes based on artificial intelligence. The
new systems open the possibility of communicating medical risks in real time, and the results
of previous studies are already increasingly being applied in Romania and other countries
(Szentesi et al., 2018). The effectiveness of these research steps has now been particularly
proven during the pandemic period when risks are communicated permanently, and
consumers have more and more smart devices allowing a monitoring of health risks and
health condition (Szentesi et al., 2018). By 2020, connected devices in all technologies will
reach at least 20 billion (Mahmood, 2019).
As a dynamic socio-technical system, IoT contains well-known cybersecurity risks and
endemic uncertainties that arise as IoT adoption increases and the system evolves. As recent
regulatory responses begin to address IoT security risks, crucial weaknesses need to be
addressed – in particular related to the feedback needed to keep up with emerging risks and
uncertainties (Brass et al., 2020). This article presents issues such as: development of IoT
Vol. 23 • No. 57 • May 2021 449

area in the future and new challenges for the research, for literature’s revision, research
methodology, results and their interpretation and conclusions.
1. The development of the IoT field in the coming period and the new challenges for
research
IoT development gained a huge momentum in 2013-2020, thus there was an increase in the
number of IoT devices from half to twice as many compared to traditionally connected
devices(Blanter and Holman, 2020). By 2020, IoT technology will have an impact of almost
6% of the global economy and will take years for the potential of IoT to be realized (Blanter
and Holman, 2020). The challenges for the implementation of IoT and the evaluation of IoT's
perspectives span several areas, so we have: the lack of integrated head-to-tail solutions that
offer value; lack of standards for critical aspects of IoT solutions (such as security-related
ones); organizational and governmental policies that do not keep pace with technological
advances; complex interoperability; companies' concern about the design and complexity of
implementation (Blanter and Holman, 2020). All these aspects lead to the need to carry out
studies for IoT in Romania and to the knowledge and analysis of aspects that stimulate or
hinder the development of IoT in the field of industry and support services for industry.
In this period there is a development of the Internet of things worldwide and as a result there
are large-scale initiatives or they are ongoing in China, Japan, the US, India, South Korea
and European countries where industry, associated organisations and government collaborate
on complex programmes addressing the large-scale IoT implementation (Ghaffari et al.,
2019; Blanter and Holman, 2020), and from this point of view research on various aspects of
IoT at this circumstance is desirable at this time.
There is a lack of national studies providing scientific answers to issues such as: data safety,
security and confidentiality, economic viability, impact on Internet interconnection of
devices and equipment (Internet of Things) under various aspects. The collection of quality
data by the semi-structured interview method is not currently carried out at the level of
Romania, and an analysis of the Internet of Things (IoT) is not sufficiently studied in terms
of use, development, and implementation in Romania, and even in the European Union,
compared to the USA and China and other Asian countries. The development of the Gaia-X
system, an EU project proposed by Germany and France (Bundesministerium für Wirtschaft
und Energie, 2020), a project to be completed in 2021 and which is taking an important step
towards an European sovereign digital infrastructure will boost the development of IoT and
related applications. On the other hand, there are a number of serious user concerns about the
dangers of the Internet of things growth, in particular in the areas of privacy and security
(Brass et al., 2020).
In the current pandemic and economic conjuncture conditions, the study on the Internet of
objects from industrial area, also called industrial Internet (IIoT) is clearly required because
it has great potential for almost all aspects of industrial operations, including quality control,
predictive maintenance, real-time monitoring of asset status, sustainability, and business
continuity. IIoT also promises increased safety, better reliability, smart metering, as well as
efficient inventory management, equipment tracking and installation management.
According to IBM, the latent business value that can be unlocked by the industrial IoT vision
could reach up to $3.7 trillion in 2025. However, there are also numerous challenges in the
adoption of IIoT, including operational complexity, connectivity challenges, service

availability, data security, diversity of connected objects, lack of ubiquitous interoperability,
high cost of necessary infrastructure, complexity of large data analysis, as well as the
insufficiency of Internet bandwidth and the insecurity of the current Internet (Mahmood et
al., 2019), issues that of course need to be studied in detail.
Ozdemir Vural in his 2018 article, The Dark Side of the Moon, drew attention to the dangers
of achieving full connectivity enhanced by artificial intelligence and Industry 4.0.
The 4.0 Industry concept uses the Internet of Things (IoT) to connect, communicate and
collect large data from sensors embedded in living and inanimate objects. When we add real-
time data analysis and artificial intelligence (AI) to IoT, a state of extreme global connectivity
or the so-called "quantified planet" is created. With its emphasis on system connectivity,
Industry 4.0 is of interest in the manufacture of health products and the automation of services
in medicine, biology, ecology, and society. But there are also uncontrolled assumptions,
extreme connectivity creates an "all eggs in one basket" problem and thus the potential for
complete network collapse into a domino effect when a component of a highly integrated
system fails. (Ozdemir,2018).
In this context the paper contributes to the development of knowledge in the field of IoT
because it makes a contextual analysis of the development and the future of IoT in Romania,
it obtains qualitative information giving a first impression and picture on the IIoT situation.
This data collected from Romanian companies, by semi-structured interview, allows to
identify the level of integration of IoT in the activity of companies, a first capture of potential
risks perceived by users in industry, car transportation and support services, or of the barriers
in the implementation and use of IoT. It has been captured also the availability of the internet
of objects’ users (IoT) to develop in the near future this way of realization of this way of
realization, management, monitoring of activities. The semi-structured interview and the
coding of the results allow qualitative and quantitative interpretation of the results and a data
processing on a statistical basis (Hillman and Radel 2018), through the R program. Within
this sense, in this article, literature’s revision has been done, and research methodology has
been presented, as well as the results and the conclusions of the article.
2. Review of scientific literature

The rapid development and deployment of intelligent and IoT-based technologies (Internet
of Things) have enabled remarkable technological advances for various aspects of life. The
main purpose of IoT technologies is to simplify processes in different fields, to ensure better
efficiency of systems (specific technologies or processes) and, ultimately, to improve the
quality of life (Nizetic et al., 2020). From this perspective, the transdisciplinary and
interdisciplinary approach seems increasingly necessary (Feher et al., 2019), and in this
respect in 2019 at the SpliTech2019 Conference held in Croatia, a better link was made
between IoT experts from different engineering professions, industrial experts and finally
with academic researchers (Nizetic et al., 2020).
Another important aspect is the quality of IoT services and the concern for their
standardisation for a better interoperability. The Internet of things (IoT) comprises several
standards of communication network technology and most of them work in isolation from
each other, for example on a system, process, department, etc. (Bello and Zeadally, 2019).
However, in order to achieve the main objective of the IoT paradigm, which is to provide
efficient and high-quality intelligent services, it is necessary to interoperate between different
Vol. 23 • No. 57 • May 2021 451

IoT standards. Therefore, interoperability and quality assurance of services are two of the
basic requirements for current and future standards operating in the IoT ecosystem (Bello
and Zeadally, 2019).
The adoption and implementation of "Internet of things" (IoT) technologies leads to
architectural changes to automation and industrial control systems, including greater
connectivity to industrial systems (Boyes et al., 2018). In this case, the risks associated with
a gradual or sudden opening of the internal system also increase the risk of external exposure
(Boyes et al., 2018).
In the specialized literature diverse concerns are expressed regarding the dangers in the growth
connected to the IoT implementation and development, particularly in the areas of privacy and
security (Colakovic et al., 2018). Security and privacy issues are identified as key challenges
in implementing IoT solutions, as there are numerous examples of threats, vulnerabilities, and
risks (Qi, J., et al. 2014). Several security models and threat taxonomy models for IoT systems
have been proposed (Chen et al., 2018). According to the Hewlett Packard Enterprise Research
study, most problems related to the privacy of devices raised due to: insufficient authentication
and authorization, lack of transport encryption, unsafe web interface, unsafe software and
firmware, etc. Colakovic and Hadžialic examine the most common IoT security and privacy
issues. These may include: attack detection, scalable approach, encryption, data leakage, data
integrity, antivirus protection, trust management, recovery and self-recovery, access control,
authentication, context awareness, standardized mechanisms and real-time protection. Security
features must be incorporated at each level of the IoT architecture and effective trust
management must be implemented (Adat and Gupta, 2018).
This is the reason that IoT security architecture is still under development (Sicaria et al.,
2016), as well as various mechanisms developed to improve security and privacy. Security
mechanisms should provide authentication, controlled access (access control), data integrity
and privacy, encryption and other functions, while allowing automatic data processing based
on user-configured policies and rules. These mechanisms must work in real time and must
be cost-effective and scalable in order to minimise complexity and maximise usability. It
should be noted that there are many key features of IoT that make it difficult to develop robust
security architectures for IoT applications (Chen, et al., 2018) and for this reason these
aspects must also be studied from the user's perspective. Challenges in applying IoT security
risk mitigation due to physical connection, heterogeneity, resource constraints,
confidentiality, high level of activities, trust management and a certain lack of preparation to
ensure the security of IoT system activities are current challenges (Mohamad Noor and
Hassan, 2019).
The future of IoT is based on technological developments that allow easy use of the Internet
of things and a large-scale development of this device connection technology. Such an
example is the traditional wireless communications technologies, such as Bluetooth and Wi-
Fi, which were widely used over the past two decades (Muratkar et al., 2020). They offer
various advantages, such as: higher levels of data connection, good coverage, mobility,
expandability, ease of use, etc. Even in this way, traditional wireless communications
solutions are expensive and also consume the battery life of devices connected to them. The
Internet of things (IoT) requires devices consuming very little energy and are less bulky
(Muratkar et al., 2020). Such a solution to this is the new passive technology called the
Ambient Backscatter Communication System. It is a first version of a cutting-edge
technology allowing wireless communication between devices by using ambient radio

frequency (RF) signals of TV and cellular transmissions. This new technology allows a very
low energy consumption during communication and brings us closer to the world of IoT and
its applications (Muratkar et al., 2020).
To ensure high performance and real-time reliability, new research challenges arise from
both the IoT platform and the application. From a platform point of view, built-in detection
devices have limited storage capacity and cannot retain many copies of data for
retransmission, and in addition, both devices and IoT gateways do not have sufficient
network bandwidth, neither for data retransmission nor for data replication (Wang et al.,
2020). The gateway represents an access point on the network (a server or even a special
network) that serves as an entry into another network.
IoT can stimulate and change the way people operate in the construction industry. There is
research to find out the impact factors that influence the willingness of practitioners to adopt
IoT in the construction industry in various Asian countries such as Taiwan. Studies target
future issues such as: anticipated benefits that significantly influence users' readiness to adopt
IoT, efforts that significantly influence users' willingness to adopt IoT, and company
expectations that significantly influence users' willingness to adopt IoT (Chen et al., 2020).
4.0 industry allows for a rapid fusion of technologies that successively dissolve the dividing
line between the physical and virtual worlds and is closely linked to IoT. In the age of
industrial digitization, companies are increasingly investing in tools and solutions that enable
technological processes, machines, employees and even products themselves to be integrated
into a single network for data collection, data analysis, evaluation, company development
and performance improvement. This requires simultaneous development of IoT and Industry
4.0. In Eastern European countries, such as Hungary, companies operating within 4.0
industry, linked to Internet of Things (IoT) tools, lead to more efficient production processes
and high productivity and economies of scale that could lead to increased economic
sustainability. In these circumstances, one may notice that, in Hungary, companies have
started on the path of digitisation and investments in digitalisation, 4.0 industry and the
Internet of things have already started. (Nagy et al., 2018).
Internet of Things (IoT) devices and technology are increasingly integrated into smart grids.
These devices have many security vulnerabilities. To combat this, IoT protocols have been
expanded with security mechanisms. However, these mechanisms shall introduce into the
system additional processing which may lead to delays. These delays may affect the reliable
operation of a smart power system on which prompt communication depends. Recent studies
are investigating in real time the properties of the security protocols of the communications
systems used (Kondoro, et al., 2021). In the industrial sector, IoT promises to reshape the
entire landscape, as the value of the Internet of things business in the industrial sector has
been recognized as very high one. For this reason, the Internet of things in the industrial
sector, also called the Industrial Internet, often called Industrial IoT (IIoT), is becoming
increasingly ubiquitous, especially as digitalisation and automation are becoming a business
reality for many organisations in sectors such as production, logistics, oil and gas, water and
electricity, renewable energy, mining, transportation, aviation and many others. Thus, the
market opportunities for the IIOT paradigm are huge. According to research, the IIOT market
is estimated to reach $125 billion by 2021. The basic philosophy behind IIoT is that smart
machines are more efficient than humans in capturing, transmitting and accurately processing
real-time data for market observation of business and corporate information relevant
to decision-making (Mahmood, 2019). In practice, many areas of IoT applications, such as
Vol. 23 • No. 57 • May 2021 453

industrial car transportation in the fleet system of trains, are related to the tracking,
monitoring and transport of targets, can make extensive use of Wireless Sensor Networks
(WSN) technology. The development of cloud computing technologies and the increasing
increase in big-data traffic caused by the incorporation of the Internet of things (IoT) poses
the problem of secure authentication. At this situation generated by the reality of the end of
2020, secure authentication of users for remote access plays a crucial role. In the future,
cloud-based IoT applications will be developed to enable easy and secure remote access to
the system (Deebak and Al-Turjman, 2021).
With rapid technological progress in the Internet of things (IoT) and Artificial Intelligence
(AI), various human-machine touch interfaces (ITOM-HMI) have been widely developed as
critical elements for providing information between people and machines in large
applications. Recently, ITOMs based on wearable flexible sensors have been extensively
investigated on the basis of intelligent skin in applications of physiological monitoring,
motion detection, robotics, healthcare and virtual reality / augmented reality (Tang et al.,
2021). With the rapid growth of distributed renewable energy and the development of IoT-
related technologies, energy can be transferred bidirectional and traded flexibly in an open
market, which opens up a new operational field for the extensive use of IoT (Wu, et al., 2021).
An important aspect which worth further studying is related to concerns about the
environmental and human health impact of the Internet of things (IoT). Greater social
responsibility, in English Corporate Social Responsibility (CSR), towards the natural
environment and public health, due to side effects that could occur due to the use of these
technologies Industry 4.0, the Internet of things and the use of the 5G network, are important
research concerns in Romania (Feher et al., 2019). Thus, CSR contribution to the
development of society is a subject of extensive debate in the literature (Crișan-Mitra and
Stanca and Dabija, 2020). Despite the proliferation of CSR in academic and organisational
spheres, empirical evidence in this area remains limited, especially in the context of emerging
countries such as Romania. (Crișan-Mitra et al., 2020).
Starting from the research literature review within the research, we sought answers to issues
such as: 1) some barriers that are considered relevant, by involved persons and decision-
makers, in the integration of the Internet of objects into industry, in transportation for industry
and support services. Support services consist of information and communication technology
(ITC) activities to support and implement IoT in the work of organizations, as well as
activities of specialized companies providing IoT solutions and services to industrial and
domestic consumers; (2) what is the perspective of the decision-makers involved in IoT on
the factors influencing the decision to extend IoT into industry, transportation and support
services, the risks and the perception of the existence of barriers to implementation, such as
staff scarcity; 3) the influence of the level of knowledge of IoT, on the one hand, and
familiarity with the benefits of the Internet of Things, on the other, on the expansion of the
Internet of Things in industry (IOT); 4) what is the view of users on the prospects for the
development and implementation of IoT in their own activity in the industry, car
transportation for industry and support services regarding support and implementation.
The research methodology used by the research team is based on the semi-structured
interview technique and the use of a communication interface, in this case the Zoom platform.

The interviews have been archived audio and video and led to the creation of the
information/data base for an in-depth study. Since the research methodology adopted
presents aspects relevant to each situation analysed, we have opted for the semi-structured
interview method.
During this pandemic period, we chose to record online interviews, an interview lasting
between 30 and 40 minutes based on a preconfigured interview structure named in the semi-
structured literature (Hillman and Radel 2018), the semi-structured interview offers the
possibility of drawing association tables between qualitative variables which allow
quantitative analyses such as the chi-squared independence test and the calculation of the
Cramer’s V coefficient (Lile, Szenteși et al., 2015). Interviews were conducted by the
research team during the fourth quarter of 2020. We have launched the invitation to
participate in this research for 60 companies from across Romania. We received a favorable
response from 28 companies, of which 25 people, representatives of the companies, actually
participated in the study, who gave the interview which was recorded audio and video. The
persons interviewed are CEOs, managers of various levels in the technical and economic
field or various experts from firms (Annex 1). The analyzed companies operate in the field
of industrial production, car transport for industry and support services such as Internet of
objects software (IoT). Information on businesses and respondents is listed in Annex No. 1.
The questions are semi-structured, with possibility of a free answer option, and they are the
following:
The questions formulated and addressed in a structured way to users were:
• You own in your company/organization part/devices/machines/installations that can be
operated over the internet?
• Can you give an example of such a device in your company/organization?
• How do you use this device in your company/organization?
• How familiar are you with the Internet of things (IoT) concept or devices connected
over the Internet?
• How many types of devices/apart/cars/installations/that can be operated over the
internet do you have in your company/organization?
• How many devices/apart/cars/installations/that can be operated over the internet do you
own in your company/organization?
• What is the aspect that holds you back/concerns most about the use of these
devices/apart/machines/installations?
• What are the obvious advantages of using the Internet of Things (IoT)?
• What are the issues/issues that make you most unhappy with the use of these
devices/apart/machines/installations in the IoT system?
• Do you think that in the future it is also right to implement these IoT solutions at
European level?
• Have you heard about GAIA-X, the EU's recently launched European net management
and Google search engine project?
Vol. 23 • No. 57 • May 2021 455

• Do you want to develop and implement more and more IoT solutions in your business
in the near future?
• Do you consider that the advantages compared to the disadvantages/risks of
implementing an IoT system are on the side of the advantages?
• In the sector where you operate this system is suitable/fits very well:
• On a scale of 1 to 100 (percentage) how safe are you in the future development or large-
scale implementation of the IoT system in your company/organization?
• Do you think this IoT will transform the way we live and work over the next 3 years?
• How Pandemic Sars-Cov-2 influenced the development of the Internet of Things in your
enterprise
In addition to the aspects mentioned in the specific reviewed literature, such as the risks and
prospects of IoT development, we have proposed to verify also some hypotheses with regards
to issues reported by respondents during the interviews which are interesting or sensitive to
the IoT problem in Romania. The questions raised in the interview were aimed at capturing
the qualitative aspects of IoT in Romania and the foundation of the testing of some
hypotheses. Based on the responses obtained on the basis of the semi-structured interview,
we have encoded the data, and a centralization and aggregation of data was carried out for
qualitative analysis and further quantitative processing.
The hypotheses proposed by the research team are:
H 1 : The Internet of Things is implemented in industry on a smaller scale than in
transportation and support services, namely there are fewer types of devices.
H 2 : The level of implementation of IoT in the organization depends on the familiarity with
the concept of IoT.
H 3 : The large-scale implementation of the IoT system in the company/organisation depends
on the benefit (benefit)/risk(cost) ratio.
H 4 : The most important risk perceived by respondents (over 50%) is related to the possibility
of computer attack on devices and data when using IoT.
H 5 : The number of Connected Devices IoT depends on the size of the company.
H 6 : Respondents' impression of how we will live and work over the next 3 years also depends
on their knowledge of the Gaia X project.
H 7 : A large number over 3, respectively from 4-7 problems that displease respondents
regarding the use of these devices/equipment/cars/installations in IoT system affect the desire
to develop and implement more and more IoT solutions in the company's activity.
H 8 : Respondents' impression that IoT will transform the way we live and work over the next
3 years also depends on work and remote work control/telework/homework within the
organization.
H 9 : Respondents' impression of the development of IoT and how we will live and work over
the next 3 years also depends on the influence of the pandemic and Covid 19 disease.

With the data obtained, a database was created and they were processed through the R
econometric analysis program. The information was encoded and standardized and advanced
data processing as well as a descriptive statistic was carried out. Statistical assumptions
related to production and service activity were tested on the basis of the chi-squared test and
the correlation coefficient Cramer’s V, for a significance threshold of 5%.
4. Results and interpretations

The data were analysed quantitatively and qualitatively, encoded for easier econometric
processing and for the development of descriptive statistics.
A total of 25 valid interviews were recorded. The data set consists of 19 men and 6 women
in senior positions in companies whose activities, such as automotive, logistics or electrical
engineering, are implementing IoT systems. First, we divided these areas into 2 groups,
production (e.g. production of electrical parts, production of medical devices, etc.) and
services (e.g. software development, logistics, etc.). There are 12 people in the production
category and 13 in the service category. In general, their level of understanding of the subject
in question was high so 12 people said they knew the subject very well, 6 well, 6 enough and
only 1 person was not having enough knowledge on the subject. Furthermore, we do notice
that people in the service category better evaluate their understanding of the IoT topic than
the production category. The main advantage identified both by services category and
production one is acting and control from distance of those devices through IoT system.
But in terms of disadvantages, while both groups mention the resistance of the device in
critical situations as a significant problem, for the production group the rarity of staff with
adequate qualifications is another big disadvantage and the possibility of a system error for
the service group. In addition, both subsets agree that the major risks of implementing IoT
on a scale are data protection issues that can reach service providers or cyber-attacks.
Both subsets want to deploy more IoT devices in the future, but most of them consider a
medium term for this event to take place. On a scale from 0 to 100 it has been checked how
sure are respondents that this implementation takes place. The overall average is 78.71%, so
we then check whether the average response is different between the two groups: production
and support services (Figure no.1). The result of testing the nine hypotheses proposed in the
methodology is found in Table 1, where the relevant statistic values are synthetically
presented for their confirmation or denial.
Table no. 1. Result of testing the hypotheses
Hypotheses Chi-squared value Cramer’s V Chi-squared p-value (<0,05)
H1 0.02 0.04 0.89
H2 2.52 0.32 0.11
H3 4.17 0.41 0.96
H4 13.79 0.53 0.001
H5 6.29 0.36 0.17
H6 1.14 0.21 0.29
H7 0.20 0.09 0.65
H8 5.21 0.46 0.02
H9 7.14 0.54 0.03
Source: own research
Vol. 23 • No. 57 • May 2021 457

The data have been processed in programme R and the results obtained allow an analysis of
the assumptions made. Hypothesis H 1 : The Internet of Things is implemented in industry on
a smaller scale than in transportation and support services, namely the answers at the Q5
question associated with the answers at question Q17, namely the fact that there are fewer
types of devices in the industry than in support services is an unconfirmed hypothesis. Based
on the result obtained on the test, Cramer’s V coefficient is 0,04 and indicates no association.
H 2 : The level of implementation of IoT in the organization depends on the familiarity with
the concept of IoT. According to Cramer’s V and chi-squared hypothesis H 2 is not confirmed,
thus the level of implementation of IoT in the organization does not depend on the familiarity
regarding the concept of IoT. The H 3 hypothesis assumes that the large-scale implementation
of the IoT system in the company depends on the benefit-risk ratio. The value of the chi-
squared test is greater than 3,814 (table value), but we do not reject the null hypothesis since
the p value of the test is 0.96, being above the significance level of 0.05. Thus, a clear link
between the desire for implementation and the benefit-risk ratio is not confirmed. Hypothesis
H 4 : The most important perceived risk of respondents (over 50%) is related to the possibility
of computer attack on devices and data when using IoT. The association between Q7abc and
secure implementation over 90% at Q15 is confirmed. It is found that the p value of the chi-
squared test is 0.001 and Cramer's V correlation coefficient is 0.54 and therefore there is a
strong relationship between the perceived risk and the desire to develop new IoT systems and
applications.
It is noted that there is no relationship between the desire to implement more and more IoT
solutions in the company's activity and the number of problems that displease respondents
regarding the use of devices in ioT (H 7) system, between the respondents' opinion on the
impact of IoT on the way of life and the knowledge of the Gaia X project (H 6 ) and between
the number of IoT devices connected and the size of the company (H 5 ), since the p values of
the chi-squared tests are 0.65, 0.29 and 0.17; assumptions H 5 , H 6 and H 7 are infirmed.
Hypothesis H 8 : The impression of respondents on how we will live and work over the next
3 years also depends on the work and control of remote work within the organization, namely
Q16 related to Q24, is confirmed. Based on the chi-squared dining test, the p value of which
was 0.03, it results that there is a relationship between the fact that IoT technology will
change society over the next three years (Q16) and remote work control within the
company. Cramer's V correlation coefficient is 0.46, which is a fairly strong association.
Hypothesis H 9 : Respondents' impression of how we will live and work over the next three
years also depends on the influence of the pandemic and Covid19 disease, respectively Q16
related to Q25 is also confirmed. In this case, the null hypothesis is: the two variables are
independent, and the alternative hypothesis is: the two variables are dependent. We reject the
null hypothesis because the p-value of the test is 0.03, being below the significance level of
0.05. We conclude that they are not independent, so we continue to check how strong this
relationship is by calculating Cramer's V correlation coefficient for the two sets. We get a
value of 0.54, which is a strong association.
It also checks the normality of the Q15 dataset, the certainty of the future implementation of
IoT, by performing a Shapiro-Wilk test. We take the null hypothesis H 0 : the population
is distributed normally and the alternative hypothesis H1: the population is not distributed
normally. The p-value of 0.0016 of the test suggests that we should reject the null hypothesis
and conclude the same, this set was not collected from a normal distribution. We checked the
two groups associated with production and services respectively. We used a non-parametric
Wilcoxon test to check the median of the two associated groups. We take the null H0

hypothesis: the two data sets, namely services and production, have equal medians and the
alternative H1 hypothesis: the two data sets do not have equal medians. The p value of the
test is 0.031, which is less than the alpha significance level = 0.05. We can conclude that the
median certainty of the services category regarding the future implementation of IoT in their
company is significantly different from the median certainty of the production-related areas;
We perform a chi-squared test for specific pairs of variables, as Q5-Q12, Q6-Q12, Q18-Q25,
Q15-Q4, Q14-Q16, Q14-Q15 to check if there are categorical variables with a significant
correlation between them. We have as a null hypothesis H0: no relationship exists between
category variables; are independent and the alternative hypothesis H1: the variables are not
independent. We conclude that there is no relationship between how many IoT devices and
how many types of devices an enterprise has (Q5 and Q6) and their likelihood of deploying
multiple devices in the future (Q12), since their chi-squared test values are 0.16 and 0.19
respectively, so we can reject the null hypothesis at a significance level of 0.05. The size of
the company is also independent of the influence of the Sars-Cov-2 pandemic, we do not
reject the null hypothesis that the two variables are independent because the p value is 0.20.
A chi-squared test has been performed regarding the certainty of implementing in the future
and IoT (Q15) and the suitability of IoT technology in the activity area of the company (Q14).
The null hypothesis H0 is that the two variables are independent, and the alternative H1
hypothesis is that the two values are dependent. We reject the null hypothesis as we get a p-
value of 0.026, which is below the significance level of 0.05. We conclude that those are not
independent, thus we keep checking how strong this relationship is by calculating Cramer's
V correlation coefficient for the two sets. We get a value of 0.81, representing a strong
association.
Finally, for the relationship between the suitability of IoT technology in their field of activity
(Q14) and the respondents' opinion that IoT technology will change society in the future
(Q16) we are again calculating Cramer's V correlation coefficient. We get a value of 0.53
which is a strong association between the two category variables. Question Q9 finds that 36%
of firms have problems with the lack or rarity of staff with adequate qualifications which is
not mentioned in the literature as one of the barriers in the implementation of IoT by
companies, although in Romania this aspect is considered by respondents quite important.
Recent studies are investigating in real time the properties of the security protocols of the
communications system used (Kondoro et al., 2021), which leads to certain delays and some
uncertainty in the management of some production systems, which is partially confirmed by
this research although in our study it is found that the main problem is the protection of
devices and data against hackers and other organizations and less aspects of system
management. In some firms there is a reluctance to implement IoT widely due to poor system
reliability and sometimes connection problems that increase insecurity (28% of respondents)
issues that have been mentioned by other authors (Mohamad and Hassan, 2019). We find that
the average number of devices used in the IoT system per organization/firm is about 6.6
devices (Figure 2) a relatively small comparative with countries such as Hungary (Nagy et
al., 2018).
Vol. 23 • No. 57 • May 2021 459

Figure no. 1. Certitude of IoT development according to activity subareas

Source: own research
Figure no. 2. Number of devices per Figure no. 3. Risks percentage analysis
company per risk type
Source: own research Source: own research
Conclusions
a. Theoretical contributions. The study is important for business and academia because it
brings to the attention a first perception of the use, barriers and risks associated with use as
well as the prospects for the development of the Internet of Things in the industry and support
services (IIoT) in Romania. Information has been learned about the impact of remote and
home office work and of the pandemic on how we will live and work over the next three
years (H 8 and H 9 , confirmed). The implementation of IoT in the opinion of the company
representatives also depends on how much it fits at the moment the use of an IoT system in
their field of activity. In Romanian companies there is, according to h 2 conclusions, a definite
relationship between the level of implementation of IoT in the organization and the
familiarity regarding the concept of IoT which indicates a determination at the decision-
making level to implement IoT even if there is no high familiarity regarding the industrial

internet of things (IOT). Our study shows that 92% of the firms analysed are very familiar
with this concept and 8% are well or sufficiently familiar. Most of these devices are not used
in a modern system and fully integrated into the company's business. 88% of the connection
is made by wire (internet cable) or wi-fi, but there are also companies that have more
advanced systems at their disposal. In the analysed companies there is a fairly high
percentage of 56% that have a maximum of 5 types of devices connected to the IoT system,
16% between 5-10 devices and 28% with more than 10 types of devices, which denotes a
fairly advanced use of IoT in this last category. Regarding the risk and retention aspects of
the extended use of IoT, companies put first, aspect which corresponds to the presentation
of risks regarding IoT from reviewed literature, with a percentage of 28,26%, uncertainty
regarding the protection of devices/devices/machines/installations that can be attacked
informatically (by hackers or other organizations), the second place of preference and
uncertainty, with a percentage of 19,56% the protection of the company's data that can reach
internet providers or service generators. This risk to service generators is also perceived to
some extent due to the lack of information on the European Union (EU) Gaia-X project which
will become operational in 2021 and will provide services to European Union companies in
compliance with data protection of companies in accordance with European Union law.
Thirdly, it is pointed out the concerns about the possibility of third parties entering through
the net connection in the management/ administration/ management of the company and high
acquisition/implementation/high implementation time (15.22%). Uncertainties were also
expressed as to effective profitability (6.52%) as well as concerns about the environmental
and human health impact (2.17%), and 13.05% of views as diverse as dependence on
suppliers or the difficulty of implementing a truly efficient system.
b. Managerial implications. An important aspect of the research is that the risk in various
forms represents a significant restraint to the expansion of IoT and IIOT in Romania, which
is in correlation with the concerns and barriers to the development of IoT mentioned in other
works. Issues such as: protection of company data that can reach internet providers or service
generators, protection of devices that can be informatically attacked (by hackers, other
organisations), the possibility of third parties to enter through the net connection into the
gestion/ management of the company, are concerns of the majority of the company's
representatives, while concerns about issues such as: high acquisition and implementation
costs, high implementation time, uncertainties about effective profitability, concerns about
the environmental and human health impact, other ethical and/or legal issues still unresolved,
etc. represent 44% of concerns. Thus, the assumption of the significant influence of risks and
uncertainty on the implementation of IoT is confirmed. In particular, there is a significant
risk of leaking information through IoT and the possibility of cyber-attacks by hackers or
other organizations. Another important aspect to be mentioned is the fact that in some
companies there is a hold in terms of the wide implementation of IoT due to poor system
reliability and sometimes connection problems that increase uncertainty (28% of
respondents). The study found that 36% of the firms analysed had problems with the lack or
rarity of staff with adequate qualifications, indicating the need to accelerate staff training at
company level and to initiate the establishment of the academic specialisations needed to
support the development of IoT.
c. Limits. Qualitative research carried out on a relatively small number of threads gives a first
impression on the state of implementation of IoT in Romania, but it is necessary to initiate
more focused quantitative research on all the implications of the development and use of the
interconnection of devices via the Internet or other systems of access to interconnection.
d. Perspective. In conclusion, the qualitative study, on the factors that may have an influence
on the integration of IoT in the activity of industrial enterprises in Romania and the prospects
Vol. 23 • No. 57 • May 2021 461

of IoT development in the next period, provides a first impression on the use of IioT in the
Romanian industry and support services, the barriers to the use and implementation on a
larger scale of IoT and provides a first forecast of the future on the development of IoT and
how we will live and work in the coming years. From the literature review we conclude that
IoT is a forward-looking technology but over average duration it can only develop with a
substantial input from artificial intelligence systems.
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Annex no. 1. Data regarding companies and respondents

Contents
Economic Interferences
The Effect of Corporate Income Tax of Agricultural Companies on
National Budget ‒ the Case of the Slovak Republic ...................................................... 466
Juraj Chebeň, Renáta Krajčírová, Alexandra Ferenczi Vaňová and Michal Munk
Assessment of the Role of a Leader in Shaping Sustainable

Organizational Culture .................................................................................................... 483
Dalia Streimikiene, Asta Mikalauskiene, Lina Digriene and Grigorios Kyriakopoulos
Quantitative Assessment of the Dynamics of Socioeconomic Processes ...................... 504

Romualdas Ginevičius, Martin Schieg, Magdalena Kot-Radojewska and Marta Jarocka
Inflation Forecasting in the Western Balkans and EU:

A Comparison of Holt-Winters, ARIMA and NNAR Models ...................................... 517
Vesna Karadzic and Bojan Pejovic
Vol. 23 • No. 57 • May 2021 465

AE The Effect of Corporate Income Tax of Agricultural Companies
on National Budget ‒ the Case of the Slovak Republic
THE EFFECT OF CORPORATE INCOME TAX OF AGRICULTURAL COMPANIES

ON NATIONAL BUDGET ‒ THE CASE OF THE SLOVAK REPUBLIC
Juraj Chebeň1∗, Renáta Krajčírová2, Alexandra Ferenczi Vaňová3
and Michal Munk4
1)
University College of Business in Prague, Czech Republic
2)3)
Slovak University of Agriculture in Nitra, Slovak Republic
4)
University of Constantine the Philosopher in Nitra, Slovak Republic

Chebeň, J., Krajčírová, R., Vaňová, A.F. and Munk, Received: 17 November 2020
M., 2021. The Effect of Corporate Income Tax of Revised: 4 February 2021
Agricultural Companies on National Budget ‒ the Case Accepted: 3 March 2021
of the Slovak Republic. Amfiteatru Economic, 23(57),
pp.466-482.
DOI: 10.24818/EA/2021/57/466
Abstract
Corporate income tax significantly affects the overall amount of government tax revenue. In spite of
the attention being paid to many macroeconomic indicators (e.g. GDP, inflation, unemployment rate,
etc.) influencing the total amount of tax revenues influence, we can hardly find empirical research
focused on the microeconomic view where the data is based on of the individual financial statements
and tax returns of companies. Although the study is very practical, it assesses the extent of the mutual
co-dependence between the corporate income tax and assorted variables via non-parametric correlation.
Moreover, it presents the impact of the corporate income tax on the national tax revenue of the Slovak
Republic within the sample of evaluated taxpayers operating in agriculture, forestry and fishing in
2011-2015 from SK NACE Rev. 2 section “A” category of companies as legal entities ‒ Agriculture,
forestry and fishing in 2011-2015. The study theoretically contributes to microeconomic-based view
grounded on the adequate data of the legal entities, which were obtained from the corporate income tax
returns provided by the Slovak Republic’s Financial Directorate.
The authors found out a significant rate of dependency between selected evaluated variables in all
groups in the reviewed period. This dependency, especially between total income and tax base, as well
as between total income and corporate income tax, is an essential part of the accounting result
determined in the double-entry bookkeeping. The reliance is also the basis for the income tax base
calculation from which the adjusted tax base is declared, and subsequently the corporate income tax is
calculated. Research results tell the corporate income tax revenue of our sample makes up for, largely,
1.6% of the total tax revenue flowing to the Slovak national budget. Therefore, a set of
recommendations was put forth in order to strive for a maximization of these tax revenues within the
agricultural sector.
Keywords: tax revenues, corporate income tax, corporate income tax rate, accounting result, income
tax base
JEL Classification: H25, H61, H71, K34
∗ Corresponding author, Juraj Chebeň – e-mail: j_cheben@yahoo.com

Authors’ ORCID:
Juraj Chebeň: orcid.org/0000-0002-2624-8659
Renáta Krajčírová: orcid.org/0000-0001-8581-5994
Alexandra Ferenczi Vaňová: orcid.org/0000-0003-1598-5271
Michal Munk: orcid.org/0000-0002-9913-3596

Economic Interferences AE
Introduction
Taxation is one of the most important ways of increasing government earnings of tax
revenues in which developing countries can mobilise own resources for sustainable
development (OECD, 2008). Taxes as a flow of national revenues fulfils the basic state
functions for the implementation of the budgetary policy and the primary interest of
government is to maximise tax revenues as such (Brennan and Buchanan, 1980). The
corporate taxes are collected by the government as primary source of direct income taxes.
Direct taxes are articulated anywhere in the tax on personal income and in the tax on
corporate income (Taxation in European Union, 2017). The Slovak Republic as a member
state of the Organisation for Economic Co-operation and Development (OECD) follows
OECD guidelines and principles.
Many research studies focus on macroeconomic indicators and concluded that the amount of
tax revenues is influenced by many macroeconomic indicators (Jones et al., 1997; Stejskal,
2008; Sobotovičová and Blechová, 2017; Andrejovská and Puliková, 2018), but surprisingly,
these studies that would explore the variables affecting the determination of corporate income
tax in the companies are missing. This research study is the first in that assesses the
relationship between the corporate income tax, variables that play a significant part in the
determination and calculation of corporate income tax of the Slovak companies and input to
the transformation of accounting result into the income tax base.
Furthermore, the article presents the amount of corporate income tax as a part of tax revenues
on the national budget of the Slovak Republic within the sample of legal entities operating in
the agriculture, forestry and fishing. In respect of this value, the article pointed out also the
necessity to introduce the tax reliefs for agricultural companies in the Slovak Republic. It
should be noted that the amount of corporate income tax on the total tax revenues in the
companies interested in agriculture sector has not been yet examined.
The tax imposed on companies is usually known as corporate income tax and obviously is
levied at a flat rate. The corporate income tax in the Slovak Republic is imposed on a
company’s accounting result (profit/loss) determined according to the accounting rules in the
Slovak accounting system and generated from the business activities within the one taxation
period. The accounting result is adjusted out of the Slovak accounting system to the income
tax base. The tax base is generally the total income of the company deducted by eligible
expenses modified by a number of adjusting items increasing or decreasing the tax base
before calculation of corporate income tax. The company with the seat or the place of
effective management is located in the territory of the Slovak Republic are considered as
Slovak resident and is taxed on their worldwide income. Non resident is liable to pay
corporate income tax only on income derived from Slovak sources (Income Tax Act, 2019).
The corporate income tax rate in the Slovak Republic has been changing significantly over
two decades. The standard corporate income tax rates in 1995 amounted 40%, the current
general corporate income tax rate is 21% of the tax base. The Slovak government initiated a
number of tax reforms, including a radical reform of tax system in 2004. The goal of the tax
reform was to eliminate the complications and ambiguities of the previous taxation system.
The average top rate of tax on corporate income in the EU was 21.7% at the beginning of
2019 (Taxation trends in the European Union, 2019). Regarding corporate income tax, the
attention of authors observes on items reducing a tax base and items decreasing company’s
final tax liability (Lisztwanova and Ratmanova, 2017). The income tax of legal entities is
generally a stable source of tax revenue of the European governments. However, in the
development of corporate income tax revenues over the last 25 years, it has been observed
Vol. 23 • No. 57 • May 2021 467

their increasing, more precisely a stagnating trend with decreasing statutory tax rates and
with increasing amount of actions to expand the tax base (Tahlová and Banociová, 2019).
The paper is structured as follows: first, a literature review on factors influencing the total amount
of tax revenues, then a conceptual framework in the methodological part including the sample,
and analytical methods. Finally, results, discussion, and conclusions are presented.

Taxes are dominant revenues of public budget and represent significant economic tool of
each state. A tax policy realized through the tax system is an important part of a fiscal policy
of each state (Lisztwanova and Ratmanova, 2017). In its implementation, the state applies
certain rules and steps to create its own tax framework. This framework varies in the structure
of tax systems, the extent of income and property taxation, tax base legislation, the direct and
indirect tax burden and the system of tax revenue redistribution (Schultzová et al., 2009).
According to Baštincová (2016) the success rate of using taxes as an economic tool depends
on an appropriate tax system development as well as being linked to other economic tools of
a state policy. It is concluded that tax system reflects existing economic relations of a society
and it is one of the means for the implementation of financial goals and aims of a state.
A number of authors in their publications and studies presents a wide range of opinions on
the impact of taxation on economic objectives (Jones, Manuelli and Rossi, 1997; Stejskal,
2008; Margan, 2012; Vítek, 2012). State tax policy affects also business entity choice
decision (Luna and Murray, 2010). The objective of fiscal function is to generate enough
revenues to cover public spending. Income taxes are part of each contemporary tax system
and represent substantial revenues of public budget (Sobotovičová and Blechová, 2017).
Corporate income tax revenues include tax determinants which have a direct link to the
corporate tax structure itself and effect the size and profitability of the corporate sector
(Tahlová and Banociová, 2019).
The corporate income tax is relatively volatile, given it is assessed on the basis of its extent
further specified by variables such as tax rates, the way of defining tax base and aspects of
following tax regulations. The corporate income tax is also influenced by entrepreneurship
on a single market and therefore we can say that there exist rather large differences in overall
taxation within the EU (Thematic information overview: Tax system, 2017). The corporate
tax is a fundamental tool of the fiscal system due to its collection capacity. Its sensitivity to
the economic cycle and the influence that it can have on the economic decisions enterprises
(Delgado, Fernandez-Rodriguez and Martinez-Arias, 2014).
It is obvious that the differences of the tax systems of the EU member countries are being
gradually unified even at the corporate income tax level (Działo, 2015). There exist various
concepts talking about the relation of the corporate income tax base and the accounting results
are concerned. A lot of experts point at tax base unification (Baštincová, 2016; Skalicka,
2017; Nerudová and Solilová, 2018). Statutory corporate income tax rates differ substantially
across countries within the EU countries, ranging from 9% in Hungary to 34.4% in France.
The average combined (central and sub-central government) statutory tax rates for all OECD
jurisdictions was 21.4% in 2018, compared to 21.7% in 2017 and 28.6% in 2000 (OECD,
2019). The corporate income tax has been characterized in recent years by a gradual decrease
of the statutory tax rate and the countries of the EU are no exception. It can be observed that
the lower corporate tax rates are manifested in EU newcomers while the former members
reflect higher corporate tax rates.

Recently, many countries, including France, Italy, Spain and the UK have announced cuts in the
corporate statutory tax rate (Collier, 2017). Freebairn (2017) argues that a lower corporate tax
rate results in a larger reduction in the effective tax burden facing businesses. According to
Clausing (2007) a reduction of corporate tax rates can produce an incentive effect the increases
the level of the economic activity, reduces tax evasion and attracts foreign investment. The same
author pointed out the growing importance of non-tax factors supported by the period of
increasing internationalization and globalization (Clausing, 2016). Recent research studies that
compare and identify important factors influencing the corporate tax rate are focused on
macroeconomic variables: Gesko (2014); Nemec and Dulak (2017); Zabinski (2017); Vintila,
Gherghina and Paunescu (2018); Kim and Im (2017); Graham et al. (2017); Tahlová and
Banociová (2019). According to Delgado et al. (2019) the corporate income tax is permanently
under debate in recent decades with respect to coordination and competition. The taxation of
legal entities is known to be incorporating various tax rates since there are some differences in
the transformation of the accounting results into tax base in the EU countries. The economic
result found in bookkeeping is the cornerstone for a proper tax base identification.
The article assesses the extent of the mutual codependence between the corporate income tax
and assorted variables via non-parametric correlation. Moreover, it focuses the impact the
corporate income tax on the national tax revenue of the Slovak Republic within the sample
of evaluated taxpayers doing business in agriculture, forestry and fishing in the period of
2011-2015. The variables represent indicators that significantly affect transformation of
accounting result into corporate income tax base in the Slovak Republic, as well as the
amount of payable income tax as one of major sources of the national budget revenue.
The data that helped us to accurately describe the problematics was provided by the Financial
Directorate of the Slovak Republic as a sample of legal entities that were categorized
according to statistical classification of economic activities – SK NACE Rev. 2, section A –
Agriculture, forestry and fishing. These were obtained from filed corporate income tax
returns of taxpayer for taxation period of 2011-2015. This article assesses mutual
dependencies among assorted variables (Figure no. 1), such as:
• Total income represents gross taxable income of the legal entity recorded from all
economic activities of the legal entity;
• Accounting result is from the accounting perspective to be defined as the final result
of the entity’s activities achieved during the accounting and taxation period. It is calculated
as the difference between the total income and total expenses;
• Tax base is generally the total income of the entity decreased by related expenses,
modified by a number of adjusting items. The adjusting items are to be (i) tax deductible
items which increase the tax base and (ii) non-taxable items decrease the tax base. The
adjusted tax base is taxed by the standard corporate income tax rate;
• Corporate income tax (CIT) is calculated from the adjusted tax base of the legal entity.
It can be determined as corporate income tax before applying tax reliefs and corporate income
tax after tax reliefs. Tax reliefs represent the amount of reliefs by which the corporate income
tax is decreased in accordance with the national tax legislation. Generally, tax reliefs may
Vol. 23 • No. 57 • May 2021 469

have a form of investment grants or subtraction of expenditures for research and development
(R&D) as well as the reliefs of a foreign tax credit. Investment grants and subtraction of
expenditures for R&D are subject to special rules. A credit for foreign tax paid by a Slovak
tax resident on foreign source income taxable in the Slovak Republic is available in case
where the bilateral treaties concluded between the Slovak Republic and the foreign country
states so. The credit of foreign tax can be applied up to the amount of tax that would be
payable on that income in the Slovak Republic.
• Corporate income tax before reliefs (CIT before reliefs) is treated as tax liability
before applying tax reliefs mentioned above;
• Corporate income tax after tax reliefs (CIT after reliefs) is to be calculated as final
tax liability of the legal entity for the respective taxation period.
Figure no. 1. Transformation of accounting result into the tax base

Statistical classification of economic activities SK NACE Rev. 2 is a harmonized EU
classification NACE Rev. 2 and for the EU member countries it is authorized by the Regulation
of the European Parliament no. 1893/2008, from 20 December 2006. This nomenclature of
economic activities represents those activities that are carried out by economic operators. The
aforementioned activities are further subcategorized into three divisions.
Section A – Agriculture, forestry and fishing includes the use of animal and plant resources.
The section is comprised of activities such as cultivation of crops, raising livestock, timber
extraction and use of other plants and animals on farms as well as in their natural habitat.
In the field of statistics, the use of this classification and its national version is obligatory for
all the EU member states.
For the purposes of the research reviewed complex of legal entities is comprised of taxpayers
represented by legal entities in the field of agriculture, forestry and fishing which has to be
subcategorized into the following subgroups:
• Crop production (SK NACE 1),
• Animal production (SK NACE 2),
• Mixed farming and services (SK NACE 3),
• Forestry and other activities including fishing (SK NACE 4).
Following the analysis, the research also uses the data provided by the Financial Directorate
of the Slovak Republic pertaining to the national budget’s revenue tax compliance in the
period 2011-2015. As mentioned above, corporate income tax after reliefs represents final

tax liability of the legal entity calculated in the respective taxation period. This variable is
essential from the tax point of view in the process of transformation of accounting result into
the tax base and therefore is tested as the source of national tax revenue. By mean of corporate
income tax after reliefs is to be assessed statistical significance of corporate income tax as a
part of tax revenue of the Slovak Republic. The final corporate income tax is assessed in all
four sub categories in the field of agriculture, forestry and fishing.
In order to accurately assess the variables of the research, the null hypothesis is tested which
declare that selected evaluated variables are independent. This means that Total income is
not dependent on Accounting result, Tax base, CIT before reliefs or CIT after reliefs. The
variables Accounting result and Tax base are not dependent. The variables, CIT before reliefs
and CIT after reliefs are not dependent (Munk et al., 2017).
The Shapiro-Wilk`s W test is used for testing of normality. The value of variables Accounting
result, Tax base, CIT before reliefs, CIT after reliefs and Total income in the selected period
of years 2011-2015 do not come from typical distribution (2011: N = 41, W = 0.3706~0.4375,
p < 0.001; 2012: N = 41, W = 0.3919~0.4588, p < 0.001; 2013: N = 44, W = 0.4365~0.5676,
p < 0.001; 2014: N = 43, W = 0.4457~0.4585, p < 0.001; 2015: N = 43, W = 0.3999~0.4746,
p < 0.001), this means, that the null hypothesis at the 0.1% significance level which declare
that the value of variables come from assumed distribution.
The correlation coefficient can be influenced in both directions. The only extreme case in
large database can significantly decrease strong dependence and create strong dependence
where there is not any. As for variations of normality, thus presence of extreme values is not
influenced by non-parametric correlation. As measure of relation in case of presence of
extreme values between two intensive variables (ordinal or metrical) we can use Spearman
correlation coefficient, Kendal Tau coefficient and Gama coefficient.
Due to the identified variances from normality the nonparametric correlation is used,
especially Kendall Tau which presents a nonparametric measure of correlation defined as
follows:
T = (# agreements ‒ # disagreements) / total number of pairs.
Kendall Tau represents a probability; that is, it is the difference between the probability that
the two variables are in the same order in the observed data versus the probability that the
two variables are in different orders (Hill and Lewicki, 2007).

The tendencies of accounting result development for the assessed sample of legal entities
operating within SK NACE Rev. 2, section A – Agriculture, forestry and fishing are contingent
on total income and expenses, while both the former and the latter depend on subsidies and the
price level of agricultural commodities. This is confirmed also by Serenčéš et al. (2014).
Financial situation of agricultural companies was influenced by the system of subsidies and
common agricultural policy after the accession of the Slovak Republic to the EU.
Subsidies partially compensated the loss, without them the majority of agricultural
companies would report the loss (Report on agriculture and food industry in the Slovak
Republic for the year 2015). The biggest increase in operational subsidies occurred in
Slovakia in the period 2004-2012 (Svoboda, Lososová and Zdeněk, 2015). Subsidies of
Vol. 23 • No. 57 • May 2021 471

investment and non-investment character belong to the forms of government intervention to

the financing of companies. Received subsidies of non-investment character as a part of other
income from operation activities underlie the obtained level of profit or loss of the companies.
By means of the specific function and the importance of agriculture within the national
economy this sector is the subject of government regulations which deforms a market and
market prices as these are the input for accounting systems of agricultural companies and
significantly influence the profit or loss of agricultural companies and the assessment of their
economic performance (Dvořáková, 2012).
The amount of total income and above all the sales of legal entities operating in the field of
agricultural sector in respective accounting and taxation period is influenced by the structure
of agricultural production and its seasonal characteristics. Biological nature of primary
agricultural production significantly impact on the economic performance of legal entities
(Gyurián and Kútna, 2015). According to Tóth, Matveev and Boháčiková (2016) climate and
weather related risks have a strong effect on agricultural production.
The measure of success of any company is the accounting result, its volume, structure and
foremost its focus on production and performance. The relation between Total income and
Accounting result of taxpayers from all groups (Tables no. 1-5) exhibits a moderate rate of
dependency in 2011 and 2014 (Kendall Tau = 0.34-0.43), a low rate of dependency in 2012
and 2015 (Kendall Tau = 0.21-0.22) and trivial dependency in 2013 (Kendall Tau = 0.06).
Table no. 1. All Groups Kendall Tau Correlations for the year 2011
Valid
Pair of Variables N Kendall Tau Z p-value
Total income & Accounting result 41 0.34 3.0907 0.00200
Total income & Tax base 41 0.45 4.1696 0.00003
Total income & CIT before reliefs 41 0.82 7.5537 0.00000
Total income & CIT after reliefs 41 0.82 7.5311 0.00000
Accounting result & Tax base 41 0.74 6.8290 0.00000
CIT before reliefs & CIT after reliefs 41 1.00 9.1874 0.00000
Furthermore, statistically significant level of correlation between selected variables, at which
the null hypothesis is rejected at the 5% significance level in 2011 (p = 0.0020), 2014
(p = 0.0000) and 2015 (p = 0.0354). This means that Total income and Accounting result are
dependent. The exception is presented in 2012 and 2013, in which the statistically
insignificant correlation is determined between selected variables, at which the null
hypothesis is accepted. It means, that Total income and Accounting result are not dependent.
The subgroups of taxpayers whose main business operations are mixed farming and services
(SK NACE 3), forestry and other activities including fishing (SK NACE 4) exhibit a high
and a very high rate of dependency (Kendall Tau = 0.60-0.73) of assessed variables in 2011
and 2014.
Accounting result found in double-entry bookkeeping is a subtraction of total income and
total expenses and as such is regulated by the provisions of the income tax legislation for tax
base purposes. The rate of dependency between Total income and Tax base of taxpayers from
all groups (Tables no. 1-5) exhibits a higher rate of dependency compared to the rate of
dependency between Total income and Accounting result in the assessed sample of taxpayers.

In 2014, the dependency between Total income and Tax base was moderate (Kendall
Tau = 0.56), in 2011, 2012 and 2015, it was low (Kendall Tau = 0.36-0.45).
Valid
Furthermore, the statistically significant correlation between selected variables is determined
in the years 2011-2015, i.e. the null hypothesis is rejected at the 5% significance level (p <
0.05). This means, that Total income and Tax base are dependent. In the subgroups of
taxpayers whose main business operations are mixed farming and services (SK NACE 3),
forestry and other activities including fishing (SK NACE 4) exhibit a high and a very high
rate of dependency between Total income and Tax base (Kendall Tau = 0.60-0.71) in 2011
and (Kendall Tau = 0.78-0.87) in 2015 respectively.
Valid
A transformation of accounting result into the income tax base, influenced by items
increasing and decreasing the tax base, is carried out within the framework of the tax analysis.
A relevant transformation of total income and expenses is carried out in order to calculate the
corporate income tax accurately and subsequently to calculate the payable income tax.
Following the results in the rate of dependency between the assessed variables, it can be
argued that the taxpayers operating in the field of agriculture sector carry out minimal
changes in the process of transformation of accounting result into tax base. Adjusted tax base
is taxed by linear corporate income tax rate serves as a variable to calculate final corporate
income tax.
The research results in the assessed sample of taxpayers doing business in the field of
agriculture, forestry and fishing in the monitored period of 2011-2015 show almost perfect
dependence between CIT before reliefs and CIT after reliefs.
The corporate income tax before reliefs in the assessed sample of taxpayers operating in the
field of agriculture, forestry and fishing does not include according to the national income
tax legislation of the Slovak Republic (Figure no. 1) the reliefs of investment beneficiaries,
Vol. 23 • No. 57 • May 2021 473

the reliefs of incentive beneficiaries and subtraction of expenditures for R&D as well as the
reliefs of a foreign tax credit. The results show that the assessed variables – Corporate income
tax before and after reliefs are identical.
Pair of Variables Valid N Kendall Tau Z p-value

There is a high rate of dependency (Kendall Tau = 0.80-0.82) between Total income and CIT
before and after reliefs of taxpayers from all groups in 2011-2015 (Tables no. 1-5).
Furthermore, the statistically significant dependency was determined in the analyzed years
between selected variables, i.e. the null hypothesis is rejected at the 1% significance level (p
= 0.0000). This means, that Total income and CIT before and after reliefs are dependent.
There was a near perfect dependency (Kendall Tau = 0.96) in 2011 and (Kendall Tau = 0.91)
in 2015 in the subgroup of taxpayers whose main business operations are animal production
(SK NACE 2). A near perfect dependency was also found in the case of taxpayers whose
main business operations are forestry and other activities including fishing (SK NACE 4) in
2011 (Kendall Tau = 0.93), 2014 and 2015 (Kendall Tau = 0.94).
According to the statistical evaluation of the variables, it can be argued that tax reliefs
regulating the value of corporate income tax are generally not applied in the field of
agriculture, forestry and fishing. The 2017 Report on agriculture and food industry in the
Slovak Republic also states that certain particular tax reliefs do not apply in the field of
agriculture. From the legal viewpoint, their redistribution and presumptions of their
redistribution,DELETE IN RED the reliefs such as tax incentives have significant influence
on investments entrepreneurial operations might potentially make. By granting some of the
tax incentives, the state is deprived of a part of its budget revenues. On the other hand it can
increase the amount of foreign investments as to support particular fields of economy
(Vavrová, 2015).
Pair of Variables Valid N Kendall Tau Z p-value

Based on the statistical evaluation between Accounting result and Tax base of taxpayers from
all groups (Tables no. 1-5), a high rate of dependency was found in 2011-2015 (Kendall

Tau = 0.61-0.77). Moreover, the statistically significant dependency is presented between
selected variables in the analyzed years, i.e. the null hypothesis is rejected at the 1%
significance level (p = 0.0000). It means, that Accounting result and Tax base are dependent.
In the case of individual subgroups, there was a near perfect rate of dependency between
Accounting result and Tax base in crop production (SK NACE 1) in 2011 (Kendall Tau =
0.96), forestry and other activities including fishing (SK NACE 4) in 2012 (Kendall Tau =
0.93), mixed farming and services (SK NACE 3) in 2013 (Kendall Tau = 1.00), forestry and
other activities including fishing (SK NACE 4) in 2014 (Kendall Tau = 0.94) and animal
production (SK NACE 2) in 2015 (Kendall Tau = 0.94).
Specific way of calculating tax base depends on a specific way of accounting. As far as
double-entry bookkeeping is concerned, which is also obligatory for business operations
listed in the Commercial register of the Slovak Republic, the tax base is the accounting result
calculated as a subtraction of total income and expenses. Generally, the corporate tax base is
the amount of total taxable income subject to tax, achieved in the respective taxation period
and reduced by tax-deductible expenses while respecting their material and temporal
connection.
The EU member countries’ tax systems are gradually being harmonised even at the level of
corporate income tax. It entails an application of the same taxes, tax bases and the same tax
rates (Baštincová, 2016).
One of the most ambitious projects of the harmonization effort was introduction of the
proposal of Directive on common corporate consolidated tax base (Nerudová and Solilová,
2018) and in October 2016 the European Commission introduced proposals for Council
Directive on a common consolidated corporate tax base (Skalicka, 2017). Another reason on
the level of EU Member States is the fact that they need to define how best to raise revenues
while providing the right incentives for employment, innovation and long-term investment.
According to the national tax legislation of the Slovak Republic, the transformation of
accounting results is carried out outside the double-entry bookkeeping system via corporate
income tax return. In general, every legal entity undertaking any business operations is
legally bound to file the corporate income tax return. Corporate income tax return pertaining
to the previous taxation period must be filed by each taxpayer, whose registered office or an
actual centre of management is located in the territory of the Slovak Republic. This obligation
also relates to foreign legal entities provided that their income comes from the resources of
the Slovak Republic, and the tax thereof is or is not taxed by withholding taxes and the
withholding tax may be deemed an advance (Income Tax Act, 2019).
It is also important to note that while filling in a tax return a tax entity provides an DELETE
SK NACE code with registration data of economic operators for statistical purposes. The SK
NACE entry must be filled in pursuant to Regulation no. 306/2007 of the Slovak statistical
authority that serves to issue a statistical classification of economic activities. The taxpayer
must declare the most profitable activity in the respective taxation period.
The dependency rate between CIT before and after reliefs of taxpayers from all groups
(Tables no. 1-5) was nearly perfect in the observed period of 2011-2015 (Kendall
Tau = 1.00). Furthermore, the statistically significant dependency is presented between
selected variables in the analyzed years, i.e. the null hypothesis is rejected at the 1%
significance level (p = 0.0000). It means that CIT before reliefs and CIT after reliefs are
dependent. A similar phenomenon can be observed in the assessed subgroups of taxpayers,
Vol. 23 • No. 57 • May 2021 475

within the framework of which a nearly perfect dependency rate was found in the same period
(Kendall Tau = 1.00). It naturally follows that these variables show identical values.
The amount of corporate income tax is contingent on a valid statutory corporate income tax
rate in the respective year as well as the volume of accounting result before tax and its
transformation into tax base outside double-entry bookkeeping. In the Slovak Republic in
2019, the valid corporate tax rate is set to 21%.
The corporate income tax rate in the Slovak Republic has undergone significant
developments. Since 1993, the corporate income tax rate has been 45%, which, along with
the taxation of profit shares in the same period, represented a 60% taxation of businesses. In
our opinion, the most favourable model of the tax system can be seen in the period from 2004
to 2010. In general, the 2004 tax reform meant a simplification of tax legislation, the
introduction of a flat rate income tax, the elimination of double taxation, and thus meant a
positive change in the business environment and attracted foreign investors. Tax reforms
affect economic performance by changing incentives for business formation, expansion and
operation (Hines, 2017).
A very similar development could be seen in the Czech Republic, since both countries were
based on a common legislative concept. However, the Czech Republic is more conservative.
It does not make radical changes and plays a waiting game in a carry out the relevant
measures later. The income tax system in the Slovak Republic is more effective, less costly
and more socially just than the income tax system of the Czech Republic (Lipková, Grešš
and Poncarová, 2017). Hungary may be considered the most progressive in its system of
corporate income tax rates, where the tax rate of 18% was introduced in 1995. Since 2017,
the tax rate has only been 9%, which is the lowest corporate income tax rate within the V4
countries.
From the international perspective, corporate income tax has been characterised in recent
years by a gradual decrease of the nominal tax rate and the countries of the EU are no
exception (Delgado, Fernandez-Rodriguez and Martinez-Arias, 2014).
The research results achieved in the assessed sample of taxpayers doing business in the field
of agriculture, forestry and fishing in the observed period of 2011-2015 show a significant
level of dependencies between total income and tax base as well as total income and corporate
income tax.
Tax revenues represent the highest portion of the Slovak Republic’s budget income, which
also includes the corporate income tax. Both of these are significantly affected by the
corporate income tax rate as well as the total taxable income, calculation of the tax base,
identification of non-taxable expenses and total non-taxable income.
In the assessed time period of 2011-2015 it is possible to observe a constant development of
the growth of the national tax revenues as well as a positive development of the corporate
income tax classified SK NACE Rev. 2 in Section A – Agriculture, forestry and fishing of
the statistical classification of economic activities. Based on an actual collection of revenues
of the Slovak national budget, the total tax revenue in 2014 amounted EUR 9,296,027,088.
In 2014, the corporate income tax revenue amounted EUR 1,917,032,718 (Overview on
collection of tax and non-tax revenue as at 31 December 2014).
Similarly, in 2015 the actual tax revenue collected for the state budget of the Slovak Republic
in amounted to EUR 10,614,245,541, specifically the corporate income tax amounted to EUR

2,607,803,894 (Overview on collection of tax and non-tax revenue as at 31 December 2015).
To put things in perspective, in 2018 the tax revenue of the state budget of the Slovak
Republic amounted to EUR 11,967,565,852 and the value of the corporate income tax
recorded a positive increase to the level of EUR 2,801,568,898 (Overview on collection of
tax and non-tax revenue as at 31 December 2018 of the Slovak Republic).
The results show that in 2015 the corporate income tax of the assessed sample of legal entities
classified in SK NACE Rev. 2 in Section A – Agriculture, forestry and fishing represented
less than 1.6% of the total tax revenue in the Slovak Republic (Figure no. 2).
Figure no. 2. Development of corporate income tax revenue

We are of the opinion that the above-mentioned increase in tax revenues, namely corporate
income tax in the assessed period, was also due to the introduction of the tax license institute
in 2014. The aim of this government precaution was the inflow of financial means to a state
budget, namely from entrepreneurs who did not disclose their real tax obligation. Following
our previous research nearly 90% of companies from selected sample agricultural legal
entities (app. 2,570 entities) paid for the taxation period 2015 in 2016 the tax license. The
reason for which the obligation to pay tax license arose in the Slovak Republic is the fact that
there has existed the majority of companies which have disclosed a tax loss or very low tax
obligation so they would have not had paid income tax or only a small amount (Ölvecká,
2016). From 1 January 2018 the institute of tax license has been cancelled and in our opinion
this amendment has negative impact on the national budget of public administration in the
Slovak Republic. The corporate income tax is one of the means the government uses to
support the business environment.
Vol. 23 • No. 57 • May 2021 477

Conclusion
The accounting result, as a difference between the total income and total expenses calculated
in double-entry bookkeeping, provides conclusive data for the determination of the corporate
income tax base. The correct determination of the tax base and consequently the calculation
of the corporation tax payable depends on several factors set by the national law. The basis
for the determination of tax obligations is provided by the Slovak accounting system, which
requires application of the provability of tax laws in the subject and content of business
accounting. Business management should include a tax analysis to optimize the income tax
base and consequently the corporate income tax liability for the respective taxation period.
Based on a statistical assessment, statistically significant rate of dependency is declared
between total income and accounting result, total income and tax base, total income and CIT
before reliefs, total income and CIT after reliefs, accounting result and tax base and CIT before
reliefs and CIT after reliefs in all groups of the assessed sample of taxpayers in the field in
agriculture, forestry and fishing within SK NACE Rev. 2, within the reviewed period with
exception of dependency between total income and accounting result in 2012 and 2013. It is
due to the fact that total income is an essential part of the accounting result determined in the
double-entry bookkeeping and the latter is the basis for the income tax base calculation from
which the adjusted tax base is declared and subsequently the corporate income tax is calculated.
The range of items adjusting the accounting result as well as the applicable tax rate affect the
tax burden on corporate income tax. Departing from the achieved results, we are of the
opinion that businesses operating in the field of agriculture, forestry and fishing do not make
sufficient use of the conditions and scope of the application of the items affecting the income
tax base regulated by the Slovak tax legislation. We believe that the generated and recognized
revenues represent primarily total income, i.e. subject to corporate income tax and the
subsequently recognized expenses are primarily tax expenses in the assessed sample of
agricultural companies.
In general, tax reliefs regulating the amount of corporate income tax do not apply in the field
of agriculture, forestry and fishing (Report on agriculture and food industry in the Slovak
Republic for the year 2017) and were provided to other sectors of the national economy of
the Slovak Republic in the monitored period. For this reason, we propose to consider granting
special tax reliefs to taxpayers operating in the sector concerned. In our opinion, the
agricultural’s taxation should be in any way supported within the national tax system.
Based on the author’s research studies and surveys and in terms of our research results
concerning the impact of the value of corporate income tax on the national tax revenues, it
can be stated that decreasing the corporate income tax rate in the EU countries has a positive
impact on the amount of the state budget. In regard to the above-mentioned, it is therefore
reasonable to consider introducing a reduced Slovak corporate income tax rate for taxpayers
engaged in agriculture, forestry and fishing in the Slovak Republic within Section A of
NACE Rev. 2. In addition, it is proposed preferential rules for subtraction of expenditures
for R&D in the sector concerned due to unique nature of their activities.
Based on the previous research, it can be also stated that the tax license was a significant
source of tax revenues to the state budget of the Slovak Republic in 2014-2018 in the case of
corporate income tax. We believe that doing away with it will significantly affect the amount
of tax revenues to the state budget. Therefore, we recommend considering a reintroduction
of a tax license for taxpayers regardless of the classification within the national economy of

the Slovak Republic. We are of the opinion, that high tax burden, complicated and rapidly
changing legislation, as well as the absence of tax reliefs within the agricultural sector have
essential impact on the Slovak agribusiness environment.
While this study provides useful findings contributing to mutual relationship of corporate
income tax and assorted variables that are a part of the transformation of accounting result
into the tax base and its determination it also has limitations for further research. The first
restriction of fully applying our research results is a context limitation, i.e. it is suitable for
countries where the transformation of accounting result to the tax base and calculation of
corporate income tax is determined by similar method. In our opinion, it should be perfect
for central and eastern European countries, especially for the countries of Visegrad region.
Further limitation research would also be the fact that non tax expenses have not to be taken
into consideration in the determination process of the tax base due to the fact that these are
presented in the corporate income tax return in aggregate amount and therefore is difficult to
identified. It is therefore suggested in further research that tax expenses and non tax expenses
might be examined in the respective companies.
Acknowledgement
This work was supported by the Scientific Grant Agency of the MoESRS and of Slovak
Academy of Sciences under the contract No. VEGA-1/0776/18.
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ASSESSMENT OF THE ROLE OF A LEADER

IN SHAPING SUSTAINABLE ORGANIZATIONAL CULTURE
Dalia Streimikiene1*, Asta Mikalauskiene2, Lina Digriene3
and Grigorios Kyriakopoulos4
1)2)3)
Vilnius University, Kaunas, Lithuania
4)
National Technical University of Athens, Greece

Streimikiene, D., Mikalauskiene, A., Digriene, L. and Received: 10 November 2020
Kyriakopoulos, G., 2021. Assessment of the Role of a Revised: 27 January 2021
Leader in Shaping Sustainable Organizational Culture. Accepted: 10 March 2021
DOI: 10.24818/EA/2021/57/483
Abstract
The sustainable organization culture is one of the most important intangible assets and driver
of competitiveness of organizations. The aim of this article is to reveal the role of various
form of leadership in shaping organisational culture by conducting empirical study in the
network of pharmaceutical companies distinguished with high share of young females
working in such companies in Lithuania. This is very competitive sector and has important
implications on public health and other sustainability issues therefore this area was selected
for the empirical study on testing leadership impacts. The main focus of the study is leader’s
personal features and their impact on team work and relationships with clients, what effect
male and female managers have on innovation culture in the network of pharmaceutical
companies and what impact leader’s characteristics have on sustainable of organizational
culture and long-term development goals of the company. The study results showed that
transformational leadership can provide for more effective organisational culture than
transactional leader, because such a leader is oriented towards the transformation of
employee expectations and can create more opportunities for sustainable organizational
culture.
Keywords: leadership, sustainability, organizational culture, pharmaceutical companies.
JEL Classification: O10, D23, M14
*
Corresponding author, Dalia Streimikiene – e-mail: daliastreimikiene@mruni.eu
Authors’ ORCID:
Dalia Streimikiene: orcid.org/0000-0002-3247-9912
Asta Mikalauskiene: orcid.org/0000-0002-4301-2058
Grigorios Kyriakopoulos: orcid.org/0000-0003-4875-8534
Vol. 23 • No. 57 • May 2021 483

AE Assessment of the Role of a Leader
in Shaping Sustainable Organizational Culture
Introduction
Nowadays, with the ongoing process of globalisation, dynamic change in organisations, it is
important to maintain the organisational culture by pointing it in the right direction in order
to achieve efficiency. Each organisation has its own peculiar organisational culture. Each
culture has deep-rooted values that are difficult to change (Schein, 2004). However, a leader,
by using own power, influence and employing creativity, is capable to change organisational
culture. A human being spends most of time at work; thus, it is important to ensure that a
person feels good at work, works productively, does not experience negative emotions (due
to bullying, ignorance, misfit).
The main task of organisational leaders is to ensure such environment, where members of the
organisation, reaching common organisational goals, would be motivated to gain knowledge,
develop, use and share (Yang, et al., 2020). Leadership has a direct and indirect impact on
the organisational culture, its value, symbols, heroes and rituals (Hofstede, 2001).
Organisational culture is a powerful force that directs and shapes individual behaviour in the
organisation, while also unveiling personal traits of a leader including ability to reflect on
other people’s emotions, high emotional intelligence, and determination.
The presence of a leader is very important in the contemporary organisations, because
organisations usually are oriented towards results, regardless the long-term perspective, only
thinking of a good/profitable present. Leadership is the driving force as an organizational
tool of understanding business world and peoples’ needs. Another important asset of
leadership is how a leader can shape organisational culture towards sustainability (Bedrule-
Grigoruta, et al., 2019). The creation of organisational culture of the surrounding
environment enable organisational effectiveness and competitiveness, since it impacts on
regional competitiveness successful organisations are directly related to satisfied and well
living conditions of working employees (Saseanu, et al, 2019; Bedrule-Grigoruta, et al.,
2019; Wang, et al., 2020).
Though there are several studies conducted on the impact of leadership on organizational
development (Silva, et al., 2015; Halle, 2016; Ukaidi, 2016, Khan and Nawaz, 2016;
Mathews, 2017). However these studies are lacking to systematically consider the impact of
leadership on sustainability of organizational culture. The aim of this article is to reveal the
role of a leader in shaping organisational culture by conducting an empirical study in the
network of pharmaceutical companies in Lithuania. This is very competitive sector having
important implications on public health and arouses other sustainability issues. Research
focus was given on leader’s personal features and their impact on team work and relationships
developed with clients. Besides, the key-aspects affecting male and female managers to
nurture an innovation culture in the network of pharmaceutical companies and leadership
characteristics, they were also examined towards achieving organisational and personal
development goals linked to sustainability (Chalikias, et al., 2014).
In the first section of paper literature review on the subject is provided; in section 2 the study
framework and methods are introduced; in section 3 the methodology has been developed,
and in section 4 the results are discussed and compared with results of other studies, while in
section 5 conclusions are given.

1.1 Leadership
Definitions of leadership are plentiful and renewed year after year, adding new elements, but
some elements remain unchanged. Leadership is a group phenomenon (it includes a leader
and a group), implying an influential affiliation among team work members and
prerequisiting the accomplishment of goals. Leadership is a process; meaning that leaders
affect followers and vice versa: followers affect leader (either positively or negatively). In
general, leadership is an art of envisaging reality, trying to achieve the set goal by attracting
as many people/followers as possible, influence them to put efforts independently in order to
reach group goals. Viewing leadership as a process suggests that leadership is an occurrence
that is contextual, proposing that it can be educated and that leadership is noticeable through
what leaders do or how they perform (Northhouse, 2007). K. Lewin (Ukaidi, 2016), who is
thought to be the father of social psychology, has distinguished three classic styles of
leadership:
• Autocratic. He has little faith and belief in his subordinates giving guidelines and
demands that they would be carried out. The group members confirm no responsibility for
the performance and just do what they are said. So, production is good when the leader is
current, but drops in his absence (Ukaidi, 2016).
• Democratic style of leadership reflects a leader to follower relationship. The decision-
making is shared by the leaders and members of the group. Under democratic leadership
style, criticism and praise are objectively given. A feeling of responsibility develops within
the group, and productivity is enhanced. The performances are usually high. Moreover, new
ideas and changes are developed (Ukaidi, 2016).
• Laisez faire leader has no confidence in his leadership ability (Ukaidi, 2016). He/she
does not set goals for the group, and decision-making is performed by whoever in the group
is willing to accept it. Productivity is generally low, and work is sloppy. The group has little
interest in their work morale and teamwork, which are generally low. Staff is provided with
as much freedom as they need, having to determine goals, make decisions and resolve
problems on their own with enthousiasm and reliability. This style of leadership is as well
called hands-off style (Khan, et al., 2015).
In literature (Yukl, 1990; Winston, 2006; Halle, 2016; Khan and Nawaz, 2016) there have
been found newer, more modern styles of leadership, such as transactional and
transformational:
Transactional leadership. Transactional leader (as well called a transaction, interactional
leader) tries to implement set goals; rules are clearly defined; staff is directed to achieve set
goals. In other words, the main attention is allocated to the interaction between a leader and
the subordinates (Khan and Nawaz, 2016). When clearly understanding the goal, a
manager/leader leads the organisation forward, but at the same time, supressing workers’
initiative, creativity, confidence in own strength and competence. Transactional leaders
encourage on the basis of merits: it is a process of exchange between a leader and the
followers, during which the efforts of followers are exchanged to specific incentive. This
could be called a barter exchange between a leader and workers, when worker’s services are
exchanged to reward (Sergiovanni, 1990). According to Khan and Nawaz (2016) such
exchange could be economic as well as psychological value. For the transactional
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(transactions’) leaders, it is most important to retain efficiency standards and determine what
actions can reduce conflicts, how to change one goal with another and implement decisions.
However, these leaders are not capable to create a strong connection with workers as, for
example, a transformational leader. Transformational leadership, as well called leadership
of changes, is a process where leaders and followers lift one another into the higher level of
morale and motivation (Paraschiv, 2013).
Transformational leadership is related to emotions, values, ethics, standards and long-term
goals. In contrast to other leadership theories, transformational leadership is focused on
mutual growth, development of a leader and follower. This style of leadership reflects a
possibility to take risks and provide dynamics to the organisation. These leaders distinguish
from others with high motivation and strong emotional connection (Wiltshire, 2012;
Nerdinger and Pundt, 2012). Changes are one of the main motives of transformational
leadership. Leaders of changes view their followers as future leaders. The goal of a leader is
to initiate changes in followers, motivate them and expand the limits of workers’ motivation.
However, aiming to reach this goal, one should have certain characteristics that are peculiar
to a leader, but not every manager can claim to have them. A leader can be a manager, but
not every manager can be a leader (Northouse, 2007; Zaleznik, 2012). Therefore, it could be
stated that a leader encourages change, new challenges, works to understand other people’s
needs (aiming their acknowledgement), focuses more on people, trusts them and encourages
to act. The main task of a leader is not to gather as many followers as possible, but to raise
as many leaders as possible. Managers, on the contrary, encourage stability, authority; they
work in order to accomplish tasks, focusing on present, short-term perspective. Matthews
(2017) analysing the characteristics of effective leaders has distinguished seven of them:
Emotional intelligence. Leader’s emotional intelligence, as the ability to recognize and
interpret, manage the emotions of surrounding people, is one of the essential components in
organisational management. Emotional competences allow leader to treat personal and
workers’ emotions as resources and improve the effectiveness of personal and organisational
activities (Simanskiene and Zuperkiene, 2014).
Integrity. According to Hooijberg and Lane (2005), integrity is the likelihood of a leader and
the ability to transform words and promises into actions, real behaviour. This characteristic
is attributed to “authentic leadership”, because a person acts sincerely. Such leader has more
moral capacities to solve dilemmas. Honesty is named as one of the most important
characteristics of a leader, because workers want honest and trustworthy leaders. Honesty in
a workplace is being a moral and honest leader that always wants to do the right things, firmly
following the code of work ethics, procedures and framework (Bashir, 2017; Moorman and
Grover, 2009).
Drive. Effective leader has to have ambitious goals. This tenaciousness shows leader’s inner
motivation, achievement of personal goals and encouragement of others to reach the set goals
together. The tenaciousness and energy of a leader inspire unlimited curiosity and need for
continuous learning.
Leadership motivation. Leaders have a strong need for power, because they want to influence
others. Effective leaders have the need for socialised power, because motivation is thought
to be a strong source of altruism and several responsibilities.
Self-confidence. Effective leaders have to be self-confident in order to be able to lead others.
According to McCosh (2012) those leaders that have self-confidence can be less humble to

their subordinates, feeling emotionally safe and quickly regaining strength, what is peculiar
to the effective leadership.
Intelligence. According to Mathews (2017) leaders have higher than average cognitive ability
to process huge amounts of information. This does not mean they are geniuses. This shows
that leaders have a superior ability to analyse various situations and identify potential
possibilities: wisdom (deep understanding of people, things, events or situations, resulting in
the ability to choose or act accordingly to produce optimum results), character (develops
moral excellence), social (how we read others and approach them to gain the best possible
connection) and spiritual (to show kindness to others) (Garcia, 2012).
Knowledge of business. Effective leaders have excellent knowledge of their work
environment. This allows to intuitively recognise various possibilities and understand
organisational abilities to capture opportunities (Mathews, 2017).
1.2 Organisational culture

Each organisation is characterised by unique organisational culture. Jahanian and Salehi
(2013) analysing organisational culture in detail, have figuratively compared it to the iceberg
under water. Organisational culture is a set of key values, beliefs and feelings of despair
written guide that exposes the organisation. However, there is no single definition that would
define all components and the essence of organisational culture (table no.1).
Table no. 1. Definitions of organisational culture
Definition
Organisational culture is a set of broad tacitly understood rules which lead employees
performing tasks that occur under different circumstances (Camerer and Vepsalainen,
1988)
Organisational culture is conceptualized as shared beliefs and values within the
organization that helps to shape the behaviour patterns of employees (Adewale and
Anthonia, 2013)
Organisation culture is brought about as a result of different factors, some of which include
the influences of national culture, previous events in the organization, the different
personalities and the socialization individual members experienced as a result of past
educational and work settings (Adewale and Anthonia, 2013)
Organisational culture can be defined as a culture that is intentionally produced by the top
management and has to be unique, distinguished from other similar cultures.
Organisational culture as a link unifies efforts of all employees on the grounds of human,
emotional, cultural values to reach for common goals in the organisation (Simanskiene
and Zuperkiene, 2014)
Organisational culture is a dynamic phenomenon inside the organisation that is renewable,
interesting, interactive, shaped by leader and employees’ gestures, behaviours and
attitudes (Schein, 2004).
Summing and reflecting on the definitions of organisational culture provided by different

authors, it could be stated that organisational culture is a dynamic phenomenon in the
organisation that is acknowledged by the members of the organisation, expressed through
symbols, traditions, rituals, ceremonies, philosophy; it is a system of core values.
Vol. 23 • No. 57 • May 2021 487

Organisational culture, according to Jahanian and Salehi (2013) has the following
characteristics:
• Culture is learned, not innate culture or instinctive trait;
• Culture is learned, humans can pass on their learned habits;
• Culture is a subjective phenomenon, the idea of which is that culture come from the
group’s habits or patterns of behaviour norms;
• Compatibility of the detector. Culture change, adapt and cope with the changes that occur;
• Culture is the only instrument. Elements of each culture tend to have a unified body and
grow together to create a consistency and consistency for time needs.
According to Yueh-Shian and Weng-Kun (2012), cultural differences influence leadership
behaviours. Leaders can utilize the effect of organisational culture to direct subordinates to
the highest level of motivation for accomplishing organisational goals. It is important to
stress that the need for power, implied by leadership, is not caused by violence, dictatorship
or repression for a leadership to be effective. On the contrary, power can be used as a non-
compulsory way to mobilize members of the organisation, direct them and manage them in
order to achieve the main goals of the organisation and ensure sustainable development of it
(Yueh-Shian and Weng-Kun, 2012). Hofstede and Hofstede (2005) when analysing
organisational culture, have distinguished six dimensions: Process-oriented versus results-
oriented; Job-oriented versus employee-oriented; Professional versus parochial; Open
systems versus closed systems; Tight versus lose control; Pragmatic versus normative.
According to Schein (2004) organisational culture is very important because it reveals what
decisions organisation consider to be the right ones. Moreover, it shows what workers value,
what behaviour is considered acceptable in the organisation, and how they interact within the
organisation; it defines the speed and effectiveness when performing tasks, organisation’s
openness to change, which is as well important for the external stakeholders’ opinion that
they have considering the organisation (Kyriakopoulos, 2011). In other words, culture can
encourage or prevent from showing initiative or achieve personal goals. Indeed, since
organisational culture is usually created by the managers, the personality of a manager is very
important. Future questions arise: how to measure and assess organisational culture in an
organisation, what methods to choose, and where to focus on the data analysis.
2. Methodology
It is important to create organisational culture for a particular organisation as well for regional
competitiveness, because the more successful are the organisations, the more satisfied and
well working people live in that specific region. The authors have provided three levels of
organisational culture:
• What is seen; it includes: symbols, external features, organisational structure and
control systems;
• Values and norms; it encompasses rituals and procedures;
• Silent beliefs and assumptions; it is stated that organisational culture can encourage
workers’ productivity, and this is the best motivation for successful activities.

In order to perform the assessment of organisational culture, first, it is important to study the
organisation’s hierarchical structure, because in each organisation, different style of
leadership and attitudes towards a worker prevail. For a research to be objective, it should be
based on more than one research results: several research methods and instruments should be
applied. Simanskiene and Sandu (2014) agree with Hofstede (2001) stating that
organisation’s cultural symbols are very informative. The hidden meanings of organisational
culture could be revealed in the analysis of heroes, anecdotes and stories. Moreover, the
influence of external surroundings should not be disregarded as well: organisation’s clients
and guests are good information sources (table no. 2).
Table no. 2. Methods of organisational culture analysis

Organizational Author
Culture analysis Steps of analysis Ott Vveinhardt
methods (1989) (2018)
Analysis It is advised to study physical + +
of physical organisation’s environment. Buildings,
environment work environment, the differences between
the working environments of highest-level
managers and ordinary employees can
show how strong company’s organisational
culture is.
Analysis It is advised to study internal organisation’s +
of organisation documents, review external articles on the
literature internet, media, promotional brochures.
Analysis It is advised to survey organisation’s + +
of employee employees or conduct expert interviews,
attitudes aiming to find out their opinion on what is
the most important for the company.
Analyse the employee responses in public
press releases.
Analysis It is advised to conduct organisational +
of management hierarchical structure analysis. Each type of
structure leadership reveals different attitude
towards the employee.
Activity It is advised to monitor activities, aiming to +
monitoring determine the difference between what
people say and do.
Analysis of It is advised to research the meanings of + +
culture symbols company’s heroes, anecdotes and stories.
Analysis It is advised to analyse premises where +
of relationship quests are welcomed, the style of
with clients communication with clients, analyse
clients’ reviews.
As it is seen in table no. 2, Simanskiene (2018) and Ott (1989) have unanimously
distinguished that when wanting to research organisational culture, it is very important to
analyse not only the physical environment, but the opinion of organisation’s employees as
Vol. 23 • No. 57 • May 2021 489

well, because employees put their physical efforts, knowledge and share emotions. All this
determines how an employee will feel at work and contribute to the organisation’s success.
Another important method of analysis is to analyse organisation’s cultural symbols and their
meanings. Values, symbols, heroes, rituals strengthen the organisation’s image, encourage
employee loyalty to the organisation and faster adaptation of new employees. Thus, the
effects of inner as well as external environments are important (Kyriakopoulos, 2011). While
conducting organisational culture analysis, the characteristics of organisational culture are
analysed as well (table no. 3).
Table no. 3. Characteristics of organisational culture analysis
Characteristics of OC analysis Steps of analysis
Personal initiative It is advised to determine the level of employee
independence and accountability.
Risk level It is advised to determine the risk norms in the
organisation.
Compatibility of actions It is advised to determine the level of cooperation
between different departments of the organisation.
Manager support It is advised to determine whether employees feel the
manager support.
Control It is advised to determine how norms and rules are
followed in the organisation.
Identification It is advised to determine the level of employee
identification with the organisation that is analysed.
Reward system It is advised to determine how employees are
rewarded.
Conflict level It is advised to determine if employees have the right
to express a controversial opinion.
Cooperation, expressed It is advised to research managerial structure of the
by formal hierarchy organisation.
Source: created by authors based on Simanskiene and Sandu (2014)
As it could be seen in (table no. 3), various characteristics are assessed when conducting
analysis. For example, manager support is assessed. If a manager has characteristics and traits
of a leader, then, the employees will feel the support, take on new challenges, grow as
persons, create a future vision together and, maybe, one day become leaders themselves,
because the calling of a leader is not to increase the number of followers but to educate new
leaders. The manager’s style of management can be reflected in the risk level as well as
control: strict manager that does not trust employees will want to be in control all the time,
demonstrate personal authority, in contrast to a leader who tries to gather teams, uses conflicts
for positive changes. Another important step in the process is the choice of data collection
methods. According to Schein (2004), cultural research can be qualitative as well as
quantitative. Qualitative research help to compose a full picture of a culture, what is
impossible to achieve when conducting a quantitative research, but it is not always possible
to compare data objectively.
Leadership and culture could be seen as two sides of a coin: one side alone does not tell
anything. On the one hand, cultural norms show how an organisation defines what leadership
is: who and for what merits will receive promotion, who will receive the attention of the
followers. On the other hand, it could be proved that the main goal of a leader is to create and

manage culture that the exceptional talent of a leader is the ability to understand and work
with culture. One of the ultimate acts of leadership is that it can destroy dysfunctional culture
(Schein, 2004). According to Sharma and Jain (2013) there exits two forces that command
how to performance within the organisation, i.e., culture and climate. Each organisation has
its own characteristic culture, which is a mixture of the creators, past leadership, current
leadership, disasters, proceedings, history and size. Thus, organisational culture is a long-
term multifaceted phenomenon. Culture reveals the shared prospects and self-image of the
organisation. These are mature values that create traditions, and they differ in each
organisation. An organisation with existing strong organisational culture, a cohesive and
motivated team can successfully compete in a constantly pulsating market, expect the best
results from the activities and the biggest profit. Organisational culture is as a social
attachment of connecting people and feel a part of the organisation, or as a compass that
shows the direction, while retaining the best working employees (Adewale and Anthonia,
2013). Leadership is closely related to the effectiveness of the organisation, being determined
by the five components, below (Hogan and Kaiser, 2005):
• Talented personnel. Comparing simple and talented personnel (under the same
circumstances), the latter will have more advantages and will be ahead of the less talented
personnel. Talented employees are selected by using well-chosen methods, and they are
brought together by good leadership;
• Motivated personnel are people who are willing to perform to the limits of their ability.
Comparing motivated and demoralized teams, under the same circumstances, motivated team
will perform more effectively;
• Talented management team;
• Effective strategy for outperforming the competition. Effective strategy depends on
systematic research and deep knowledge of industry trends;
• Monitoring systems that allows senior leadership to keep track of the talent level of the
staff, the motivation level of staff, the performance of the management group and the
effectiveness of the business strategy.
Thus, the duty of a leader is to combine all these components; then, a good leadership is a
key to the effectiveness of the organisation. Hao and Yazdanifard (2015) agreed that a
positive organisational culture not only improves productivity, but also makes it easier to find
solutions for internal organisational problems. When a good organisational culture is
established, which does not discriminate based on race, religion etc., it provides a pleasant
work environment, reduces internal conflicts, encourages discussions and cooperation. In
addition, healthy competition is encouraged that motivates employees to be more innovative.
Therefore, a strong organisational culture can change the overall effectiveness of the
organisation. It is important for a leader to have a vision, see how to achieve it and have
leadership characteristics: such as emotional maturity, ability to communicate, enthusiasm
and ability to create connections within the organisation as well as outside.
The sustainability of a company can be ensured by implementing certain forms of
organisational behaviour (including public influence, environmental impact, culture and
finance), using management tools and available human resources (Chalikias, et al., 2014;
Streimikiene, et al., 2019). Company’s sustainability or the organisation’s transformation
into a sustainable company could ensure the application of leadership principle because
Vol. 23 • No. 57 • May 2021 491

leadership is an effective tool to form the organisation’s culture. The creation of such good
organisational culture in a company requires constant maintenance, fostering as well as
reaction to changes happening in organisation and environment. The creation and fostering
of organisational culture, as well as the compatibility of values with the organisation’s
employees, is a difficult problem. When organisation’s culture is strong, companies on the
market are competitive and reach a wide range of objectives such as higher profits, satisfied
customers, productivity, declining costs, and reduction of pollution and negative impact on
the environment. When an organisation reaches these objectives, it becomes sustainable and
can spread sustainability by constantly monitoring and evaluating whether a higher level is
achieved (Kyriakopoulos, 2012). The following components are necessary for the formation
of an organisation’s culture, formulation of values and leadership of cultural changes in the
organisation: to lead the process, to appoint a leader of change, to identify threats that
stimulate change, to carry out transition rituals, to organise intensive training, to provide new
direction signs, and to emphasise employment security. As someone can infer from these
components, only through leadership the new organisation’s culture can be created and
transformed into a harmonious one (Streimikiene, et al., 2019). High culture organisations
recognise and foster values of sustainable development and strive for sustainable
development objectives. These organisations recognise the principles of social responsibility
and their importance and seek to position themselves as socially responsible companies since
this, in particular, meets their values (Streimikiene, et al., 2019).
Based on the reviewed scientific literature on the theoretical level and conducted empirical
research in Lithuania and abroad, there was created a hypothetical assessment model that
illustrates the influence of the role of a leader in shaping organisational culture and bringing
organization towards sustainable development path (figure no. 1). In the creation of
assessment model scientists agree that leadership can shape good and effective organisational
culture. A questionnaire survey has been used to perform this research. This method, in
comparison to the number of interview, allows gathering more questionnaires; respondents
can fill the questionnaire at a convenient time and their own pace. The questionnaire
sustained 19 questions’ grouped according to the research objectives. Most of the questions
are closed, requiring a short answer; it is easy to qualitatively process, classify the responses.
There was provided a possibility to write own response (named as “other”) that the
respondents could express their opinion on certain issues and not only answer given
questions. The researcher does not have to upload data, because it is instantly moved to the
database; data can be processed right away. Moreover, it is possible to know how the
respondents behaved in the past, what are their future intentions. The questionnaire is
composed of three parts:
• The introductory part of the questionnaire shortly presents who and for what purpose is
conducting the research. The significance of responses is stressed in the introductory part of
the questionnaire, and it is informed that the questionnaire is anonymous.
• The main part of the questionnaire contains questions of the performed research.
• The demographic part of the questionnaire contains the questions about the respondent
(sex, age, education, work experience, occupied position in the organisation).

Figure no. 1. Model of interdependence between leadership and organisational culture

Excel programing was used to process the data obtained during the research, which is well
suited for data monitoring, systematising and displaying. Moreover, the relations between
certain variables were searched with SPSS program. In order to make sure that the obtained
correlation is a not a random coincidence, p meaning was calculated that shows if correlation
is statistically significant. Relations where p<0.05 were considered statistically significant.
The reliability of questions was determined (Cronbach Alpha) to be 0.749. Good reliability
is when alpha value is from 0.75 to 1; thus, based on this, the questionnaire is reliable; high
homogeneity has been noticed as well. Based on the determined sample size (n=301), it could
be firmly stated that the data are representative, reflecting the features peculiar to the
researched population. Data revealed what impact a) leader’s personal features have on team
work and relationships with clients, b) male and female managers have on innovation culture
in the network of pharmaceutical companies “X” and c) leader’s characteristics have on the
Vol. 23 • No. 57 • May 2021 493

achievement of organisational and personal goals. Most of the respondents are female (90%);
almost half of the respondents are 26-35 years old; most of the respondents have acquired
higher university education and have been working in the organisation for 3-5 years.
3. Discussion of results
3.1. Characteristics of managers
The first question of the research showed that most of the respondents that participated in the
research named as the most important characteristics of a leader self-confidence (9.5%) and
responsibility (8.1%). Moreover, a big part of respondents that participated in the research
consider communicability (7%), creativity (5.9%), positivity (6%), agility (5.7%),
intelligence (6.3%), charisma (5.6%), high emotional intelligence (5.5%) and determination
(5.8%) to be important characteristics of a leader. The respondents that participated in the
research identified a developed sense of humour (3.5%) to be the least important
characteristic of a leader. During the research, it has been determined that the importance of
positivity (χ2= 12.436; p<0.05), courage (χ2= 16.934; p<0.05), determination (χ2= 23.982;
p<0.05) for a leader were mentioned more by 26-35 year old respondents rather than
36-42 year old respondents (χ2= 12.436; p<0.05). Whereas the intelligence as a characteristic
of a leader was more important for the respondents whose work experience is 3-5 years,
rather than <1 year (χ2= 11.752; p<0.05). Thus, it could be stated that manager’s positivity,
courage and determination are more important for younger (26-35 years old) people, because,
as they are young, wanting to learn from the best managers/leaders they have ever met, it
would not restrain youth maximalism, as the whole carrier is in the future. Employees that
have recently graduated from studies are full of enthusiasm and academic knowledge. For
the employees that have been working in a company for a longer period, the intelligence of
a manager is more important, because such a manager will probably try to see rationality and
expect rational basis from the others.
The second question asked what functions a leader should perform at work. Data allowed
determining the functions in organisational activities that are most frequently assigned to a
leader and revealed that most of participants considered that the most important functions of
a leader at work are determining strategy and vision (19.3%), initiating changes (15.7%) and
team building (16.2%). The participants named the following functions as the most important
ones for a leader less frequently: creating workplaces (3.7%) and minimising risks (5.2%).
During the research, it has been noticed that team building as a function of a leader is more
important for 26-35 year olds, rather than 36-42-year-old participants (χ2= 17.408; p<0.05).
It is noteworthy because a leader develops employee involvement, gathers a team and
stimulates individuals, forms general vision, develops the talents and creates a synergic
effect: teamwork can accomplish more than individual work. Leadership is a science (seeking
to understand business nuances) and art (aiming to understand people).
The following question stated what personal characteristics their managers have. Most of
participants stated that their managers have such characteristics as responsibility (11.1%),
self-confidence (11.2%), demand (10.7%), control (8.7%), tolerance (7.3%). The most rarely
mentioned characteristics of a leader selected by the participants were emotionality (3.9%)
and a developed sense of humour (4.6%).

Considering the obtained research results and based on the insights made by F. C. Lunenburg
(2012) on differences between manager and leader’s characteristics, the following conclusion
could be made: the managers of network of pharmaceutical companies “X” are more of
managerial type rather than managers with qualities of a leader, because such characteristics
as demand, control, strong expression of responsibility (contrary to the determination that
has been selected by 6.9% of participants) are named as typical characteristics of a manager.
However, at work, where all activities are strictly regulated by various laws, the expression
of responsibility and control is inevitable. Most of the participants tended to completely
agree with the importance to create a strong team (67%); a portion of 48% participants
completely agree with the statement that a manager should have characteristics of a leader.
Moreover, more than half of participants tended to agree with the statements that they believe
they will achieve the set goals (53%), they plan their time responsibly (50%). Slightly more
than one third of participants (38%) could not clearly identify if company’s goals are above
their personal goals.
3.2. Personality characteristics and working experience

During the research, it has been determined that 26-35 years old, rather than 36-42-year-old
respondents, were more likely to completely agree with the statement that a manager should
have the characteristics of a leader (χ2= 67.034; p<0.05). Whereas, the employees whose
work experience was from 6 to 10 years were more likely to completely agree with the
statement that the more complex is the task, the more enjoyable is the work, in contrast to the
employees with work experience <1 year (χ2= 34.862; p<0.05).
According to research results, participants whose work experience in the analysed
organisation is longer are not afraid of solving complex situations, because they are well
aware of the work specifics, are self-confident and know what actions should be taken in
order to solve the situations that occur. It is important for the younger employees (26-35
years) that a manager would be not only a manager, but would have the characteristics of a
leader. The younger employees of the present are future leaders. Companies that encourage
senior manager’s management and experience can create and maintain talents working in the
organisation. It is very important when talking about organisational competitiveness. A
portion of 42% participants argued that male managers are assessed more positively than
female managers. Slightly more than one third of participants agreed with the statements that
male managers have higher status in the organisation’s hierarchy (37%), and female
managers are more likely to adapt than male managers (34%). Participants were least likely
to agree with statements that male managers are able to achieve higher results than female
managers (13%) and that female managers are more predictable than male managers (11%).
During the research, it has been determined that respondents that have work experience
longer than 11 years, in comparison to <1 year, were more likely to agree with the statement
that female managers are more creative than male managers (χ2= 34.875; p<0.05); whereas
respondents that have from 1 to 2 years work experience, in contrast to those who have more
than 11 years, more frequently agreed with the statement that male managers have higher
status in organisation’s hierarchy (χ2= 33.169; p<0.05).
According to the results of the research, it could be said that respondents that have shorter
working experience in the analysed network of pharmaceutical companies “X” think that
males have higher status in the organisation’s hierarchy, because male managers appreciate
Vol. 23 • No. 57 • May 2021 495

career development (what is very relevant for the younger employees), innovation, possible
promotions, career opportunities more. The results of the research reaffirmed the conclusions
that males, in comparison to females, usually have a higher status in the organisation’s
hierarchy; thus, due to the climate of independence, they can make decisions and decide by
themselves what is right or wrong, based on personal moral beliefs. Female managers are
more creative, because an assumption could be made that females, more than males,
appreciate the positive psychological climate in the organisation, seek to maintain a friendly
atmosphere, favour communication more; thus, the creativity needs to be employed.
Almost one third of respondents (30%) that participated in the research have identified that
they are very satisfied with their relationships with colleagues. Slightly more than half of the
respondents were satisfied with their relationships with clients (56%), trust (54%), workload
(53%), control (52%), working environment (51%), time planning (50%), rational work
organisation (50%). The respondents most rarely were likely to agree with the statement that
they are satisfied with a reward system (31%). During the research, it has been determined
that 26-35-year-old respondents, rather than 36-42 year old respondents, were satisfied more
with their emotional environment (χ2= 35.154; p<0.05), values (χ2= 39.891; p<0.05). Less
than half of the respondents that participated in the research (47%) declared that when urgent
tasks appear, they instantly complete the tasks by themselves, because they do not trust
anyone, and only a small part of participants (18%) said that when urgent tasks appear, they
instantly delegate them to the others who are competent to perform the given task, while they
carry on with their work. Thus, it could be stated that even in delegating tasks, the aspect of
control prevails strong as well as a strong sense of responsibility. Slightly less than half of
participants were likely to completely agree with the statement that in their opinion, when
working together, people should create such an atmosphere that they would be not afraid to
express their dissatisfaction (42%). Slightly more than half of the participants (59%) argued
that the opinions of other people that participate in the discussion matters to them. Whereas
one third of participants (29%) agreed with the statement that they are more listeners than
active participants in a discussion.
3.3. Organisational features and goals
During the research, it has been determined that respondents whose work experience is less
than 1 year, rather than more than 11 years, more frequently agreed with the statement that
they are more listeners than active participants in a discussion (χ2= 26.510; p<0.05). An
assumption could be made that employees with shorter work experience in the organisation
are afraid to express their opinion, stay silent, avoiding rejection or talking in a way that
would be considered unacceptable. Less than half of the respondents (44%) that participated
in the research stated that there is a strong connection between them and their team, whereas
a similar part of respondents (47%) said that there is a neither strong, nor week connection
between them and their leader. Thus, an assumption could be made that respondents have
created stronger connections between themselves and the team, because they are united by
more commonalities: work results and motivational system depend on the concentration at
work. Whereas a leader is more occupied with organisational goals, creating and achieving
strategic goals; thus, it is possible that the connection between a leader and the team is
weaker.
The most of the respondents that participated in the research said that the appearance of
innovation at work are mostly influenced by creativity (12.5%), manager support (12.2%),
safe environment for sharing ideas (9.2%), allowing to make mistakes (8.8%), organisational

culture (8.4%). The respondents identified the following factors that influence the appearance
of innovation at work the least: flexible approach to rules (4%) and flexible working hours.
The fact that the manager support influences the appearance of innovation at work were more
frequently selected by 26-35 years old respondents rather than 36-42 years old (χ2= 11.813;
p<0.05).
As it was shown in the research data, most of the respondents that participated in the research
(62%) tended to agree with the statement that they are not afraid to take responsibility.
Slightly less respondents were likely to agree with the statements that they react to client
complaints quickly (59%), organisation seeks long-term goals (53%), cooperation is
preferred instead of competition (53%), they are valued and respected at work (53%), work
is performed according to procedures, provided rules (53%), they easily adapt to changes that
appear in the organisation (53%). The respondents that participated in the research were the
least likely to agree with the statements that managers of all levels are unanimous (25%),
there are too many process management systems in the organisation (19%), changes in the
organisation appear too quickly (18%).
During the research, it has been determined that 26-35 years old respondents, contrary to 36-
42 years old, more frequently agree with statements that they are valued and respected at
work (χ2= 31.727; p<0.05), they offer ideas to the management (χ2= 32.448; p<0.05), when
working in a team, they seek for organisational goals and not for personal benefits (χ2=
34.072; p<0.05). When assessing the results of the research, it could be stated that employees
are responsible and oriented towards achieving long-term goals. It has been noticed as well
that managers of all levels are not unanimous: the competition between the departments of
the office wastes energy and time resources, creates tension at work, which is not useful: it
does not encourage better results, rather on the contrary. This energy should be used for the
management of the processes that appear in the organisation, because the employees named
that they occur too quickly.
In the network of pharmaceutical companies “X”, there is created an organisational culture
with deep-rooted core values: the employees can bravely express their opinion that may not
always be acceptable to the others; they try to maintain traditions; birthdays and other
significant celebrations are celebrated together. In order to strengthen the interrelations in the
network of pharmaceutical companies “X”, free lunch for the office employees are organised
on Fridays; the employees celebrating their birthdays are publicly congratulated; various trips
are organised; invitations to various events are given to the employees. However, most of the
employees (45%) stated that their values match organisational values. Research constraints
are that organisation with limited culture, people receive their identity from the organisation
where they work, with which they share social values, beliefs and norms. Therefore, an
organisation is interested in recruiting employees whom personal values are compatible with
organisational culture. Almost one third of respondents that participated in the research
(33%) identified that they try to make long-term connections with clients; fewer respondents
(27%) stated that they aim to adapt in order to achieve the desired result. The smallest part
of respondents (10%) said that in cooperation, they improve conditions offered to the clients.
According to the results of the research and the insights of P. Northouse employees (30%)
have characteristics of a leader or are influenced by him/her, because one of the goals of a
leader is a long-term orientation and a long-term relationship.
Vol. 23 • No. 57 • May 2021 497

3.4 Organisational culture and transformational leadership

Based on analysis of the role of a leader in the organisational culture, it has been found that
leader is the driving force, authority that makes a big impression and strong impact on the
other members of the organisation. Besides, transformational leadership has vastly affecting
employee emotional state, psychological climate at work, encouragement of moral values,
mutual growth of a leader and followers, ensuring good microclimate in the organisation.
Transformational leadership also influenced the balanced employee activities, while
employee responsibility to the organisation is related to leadership and manager’s gender.
It has been determined that the stronger is the expression of personal leader’s characteristics
(ability to identify talents r=0.261, responsibility r=0.266, determination r=0.276, agility
r=0.255, communicability as well as initiative), the more employees feel the need to gather
teams. There has been found an inverse correlation relationship between personal leader’s
characteristics and relationships with clients: the more agile is the leader, the less attention is
given to the relationships with clients (r=-0. 203). The most important task of a leader is to
create and manage culture, ensuring a good emotional environment at work, taking care of
forming a strong team, employee motivation; then, the employees will take care of the clients
(Schein, 2004). A leader encourages his/her followers to improve, solve various problems
that appear by themselves, orienting followers that they could develop, create new
relationships. The leader’s agility motivates them to achieve the personal and collective goals
(Ahmed and Bach, 2014). There has been found a weak, but statistically significant relation
that females have more impact on innovation culture appearance than males (r= 0.138,
p<0.01). During the research of the network of pharmaceutical companies, it has been found
that respondents whose working experience is more than 11 years, rather than <1 year, were
more likely to agree with the statement that female managers are more creative than male
managers (χ2= 34.875; p<0.05), arguing that females are more creative and likely to be
acclimated and present group norms, communication paths, or requirements than males. Less
than half of the respondents (42%) participated in the research tended to agree with the
statement that male managers are assessed more positively than female managers: they are
allowed to make mistakes more; they usually have a higher position in the organisation’s
hierarchy.
Conclusions
Based on the analysis of definitions of leadership and organisational culture, it is noteworthy
that leadership is a process, art and ability to make vision into reality, trying to achieve the
set goal by attracting as many people/followers as possible, influence them to put efforts
independently in order to reach group goals.
Organisational culture is proven one of the most important staff characteristics; having it own
deeply rooted values that are difficult to change. Organisational culture is also important for
the staff. However, a leader by using own power, influence and employing creativity s/he is
capable to change organisational culture.
A leader is reciprocally influencing organisational culture and vice versa: A leader by using
his/her influence, power, personal characteristics and employing creativity can create an
effective organisational culture that would ensure all: emotional climate, innovation,
effective teamwork, strong expression of community spirit, can encourage moral values.

Transformational leader can create a more effective organisational culture than transactional
leader, because such a leader focuses on the transformation of employee expectations, their
development. Not everyone is born a leader, but anyone can become one.
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Vol. 23 • No. 57 • May 2021 503

AE Quantitative Assessment of the Dynamics of Socioeconomic Processes
QUANTITATIVE ASSESSMENT OF THE DYNAMICS

OF SOCIOECONOMIC PROCESSES
Romualdas Ginevičius1*, Martin Schieg2, Magdalena Kot-Radojewska3
and Marta Jarocka4
1),4)
Bialystok University of Technology, Białystok, Poland
2)
Technical University of Munich, Munich, Germany
3)
WSB University, Dąbrowa, Poland

Ginevičius, R., Schieg, M., Kot-Radojewska, M. and Received: 27 December 2020
Jarocka, M., 2021. Quantitative Assessment of the Revised: 10 January 2021
Dynamics of Socioeconomic Processes. Amfiteatru Accepted: 12 March 2021
Economic, 23(57), pp.504-516.
DOI: 10.24818/EA/2021/57/504
Abstract
The efficiency of correlation-regression analysis would significantly expand if both of its
essential variables – a dependent and an independent – conveyed the information on the
dynamic rather than static state of a phenomenon under consideration. For this objective,
the dynamic development of the socioeconomic processes should be based on the
quantitative assessment. Existing methodologies call for improvement as they do not fully
reflect the state of particular phenomena. In this article, authors provide the quantitative
assessment methodology to analyse the dynamics of socioeconomic processes. It was
applied for assessing real situations, which confirmed adequacy and applicability of this
methodology.
Keywords: socioeconomic processes, their fluctuations, quantitative assessment of the

fluctuation dynamics.
JEL Classification: C13, C61, B16
*
Corresponding author, Romualdas Ginevičius – e-mail: romualdas.ginevicius@vgtu.lt
Authors’ ORCID:
Romualdas Ginevičius: orcid.org/0000-0003-2067-4398
Martin Schieg: orcid.org/0000-0003-0843-7605
Magdalena Kot-Radojewska: orcid.org/0000-0002-7323-1913
Marta Jarocka: orcid.org/0000-0002-2610-8007

Introduction
All economic agents that conduct production, service provision, maintenance, consumption
and similar processes belong to particular socioeconomic systems, i.e. the social systems
incorporating material, technical, informational and other resources. In order to survive,
they need to be in constant evolvement process. It is a condition of their existence.
Development refers to the changes in system parameters. Evolution of these changes,
ongoing consistently in the course of time, forms the development process. Thus,
development is a process. Because it is a process of a socioeconomic system development,
it can be understood as a socioeconomic process (SEP) (Ginevicius, et al., 2018). It defines
the situation in a socioeconomic system.
Correlation-regression is the most universal and most common method of the SEP analysis
and fluctuation forecast. It is based on determination of the strength and nature of the
effects that independent variables, or determinants, have on the phenomenon under
consideration. The core of regression analysis is the correlation field which helps to
determine the nature of the effect. A point in this field represents the intersection between a
dependent and an independent variable. If an independent variable, for instance, represents
the condition of the SEP development over particular time period, and a dependent variable
represents the value of a particular determinant affecting the condition of the phenomenon
researched, the question arises as to how informative the abovementioned point is, i.e. how
much and what sort of information the point has accumulated. From what the point reflects,
it becomes clear that it represents the information about the statistical condition of the SEP,
but it does not provide the information on the nature of the development of either a
dependent or an independent variable. On the other hand, if a point in the correlation field
represents the intersection between the development of an independent variable over
particular period and the development of a dependent variable over the same period, it will
contain an incomparably larger amount of information as it will reflect a dynamic rather
than a static condition of the variables, i.e. it will indicate long-term fluctuations and
tendencies. Hence, if a correlation-regression analysis incorporates the variables that reflect
a dynamic rather than a static condition, it provides more opportunities to raise research
efficiency and expand applicability and adequacy of the results because it indicates how
long-term fluctuations and trends affect the long-term changes in the phenomena under
research.
1. The potential of quantitative assessment of the dynamics for the SEP development
Being multiple and complex by their nature, socioeconomic processes are affected by a
number of destabilising factors. Together, they form the environment that requires a
constant adaptation. The result of such situation is that the development of the
socioeconomic processes is not ideal, i.e. it is not smooth, and its intensity may vary in
different time slots. The development is considered to be ideally smooth, if an increase in
the SEP development is equal over all time slots during the entire period under
consideration, i.e. if ∆q i = ∆q i + 1 ; here ∆q i represents an increase in the SEP development
over the ith time slot of the entire period T, e.g. a year ( i = 1, n ). In this case, an ideal
trajectory of the SEP development would look as depicted in Figure no. 1:
Vol. 23 • No. 57 • May 2021 505

Figure no. 1. An ideal trajectory of the SEP development over period T

The efforts of a socioeconomic system to adapt to its environment distort the ideal
trajectory of the SEP development depicted in Figure 1, i.e. an increase in the SEP
development over time slot t i + 1 is not equal to an increase over time t i . The factual
trajectory (see Figure no. 2) of the SEP development represents real situation.
Figure no. 2. The factual SEP development during the analysed time period
The method of Measuring of Dynamics of Development (MDD) is proposed as the one that
allows to quantitatively assess the factual trajectory of the SEP development depicted in
Figure no. 2. Based on this method, the dynamics of economic development was estimated
for a group of the EU member states (Ginevičius, et al., 2018). The SEP development itself

compromises two sides – qualitative and quantitative, which represents the intensity of the
development and also the smoothness of the process. The combination of both indicators
produces and integrated indicator, which could be applied for the analysis of the dynamics
of SEP development.
The smoothness indicator calculated as the ratio of the length of the analysed time period
and the length of the SEP development factual trajectory over this time period. The length
of the factual trajectory is based on the development fluctuations over the particular time
slots of the entire period researched (a year). The fluctuations are expressed as the
difference between the development values based on two adjacent time slots. The length of
the SEP development factual trajectory over the entire period under consideration is a
diagonal of a right triangle. One perpendicular of this triangle is the difference between the
development values estimated for nearby time slots, while the other perpendicular is the
length of the entire analysed period. For this situation, the length l i of the diagonal line of
the right triangle i is estimated as follows (Ginevičius et al.,2018):
li = 1 + Δqi 2 . (1)
The length L i of the SEP development factual trajectory over the entire analysed time
period T is equal to the sum of the values l i :
N
LT = ∑ li . (2)
i =1
The indicator D T represents the SEP development smoothness over the analysed period T is
estimated by formula:
T . (3)
DT =
Li
Intensity, another partial indicator of the SEP development dynamics, is evaluated as the
ratio of of the SEP development the value at the start of period T and the SEP development
value at the end of this period:
Qf
DI = , (4)
Qb
here D I represents intensity of the SEP development over the entire period T; Q f marks the
value the SEP development at the beginning of period T; Q b stands for the value of the SEP
development at the end of period T.
The main SEP development dynamics indicator is described as the result of the
development smoothness and intensity factors:
D = DT ⋅ DI. (5)
2. SEP development dynamics quantitative assessment methodology

Practical application of the MDD methodology for quantitative assessment of the SEP
development dynamics revealed that this methodology calls for improvement. As it can be
Vol. 23 • No. 57 • May 2021 507

seen in Figure no. 2, the length of one perpendicular in the right triangle in time slot i over
the period T is equal to the difference in the values at the beginning and the end of this time
slot. The length of the other perpendicular is evaluated based on the duration of period T (in
years), is divided by the number years. For example, if T = 10 years, it covers 10 time slots.
In this case, length l i of the perpendicular is equal to l i = 10 : 10 = 1.
In order to improve the existing methodology and not to abandon its principles, it is
necessary to clarify the estimation of both the ideal and factual trajectories of the SEP
development and calculate the development intensity indicator.
Evaluation of the SEP development ideal trajectory length. Based on MDD methodology,
this length is equal to the duration of period T. In essence, a separate case of the SEP
development is faced when no increase in the development is recorded during all time slots
of period T, i.e. ∆q = ∆q i+1 . The indicators of the SEP development show that such cases
are practically non-existent because any process functions only when it evolves. Thus, real
processes develop with varying intensity.
The structure of the ideal trajectory length estimation for the SEP development over time
period T is represented in Figure no. 1 which shows that the length of this trajectory is
equal to the length of the diagonal line Q b Q f in the triangle Q b Q f Q′ b . It is represented in
following formula (Ginevičius, et al., 2018):
LT = T 2 + ∆Q 2 , (6)
L T ‒ the length of SEP development ideal trajectory.

L T is equal to the sum of the SEP development ideal trajectories lengths in different time
slots over period T (Figure no. 1):
n
LT = ∑ li , (7)
i =1
l i is the SEP development ideal trajectory length in ith time slot over period T.
The SEP development value for ith time slot corresponding to the ideal trajectory of the SEP
development over the period under consideration is estimated as follows:
∆Q , (8)
∆q~i = Qb + i
n
∆q~i is the value of the SEP development for ith time slot represented by the ideal trajectory
of the SEP development.
Evaluation of the SEP development factual trajectory length. Accordingly, in previously
described method for the SEP development ideal trajectory length, the factual trajectory
length of the of the SEP development in ith time slot over period T is evaluated based on the
triangle ∆q i ∆q i+1 ∆q′ i (Figure no. 3).

qi + 1
∆q i
qi q′i
Figure no. 3. The factual trajectory (q i = q′ i ) of the SEP development

in ith time slot over period T
In the Figure no. 3, the factual trajectory length for the SEP development in ith time slot
over period T is equal to the line q i q i+1 of the represented triangle. The length of the
perpendicular q i q′ i is estimated by dividing the total duration of period T (in this case, 10
10
years) by the number of its time slots, i.e. 10: = 1.0. The ∆q i of the perpendicular q i+1 q i
10
is calculated by formula:
∆qi = qi − q~i . (9)
The factual trajectory length of the SEP development over period T is equal to:
n
2
Lf = ∑ 1 + ∆qi . (10)
i =1
Estimation of the SEP development dynamics index. With reference to formulas (6) and
(10), the index representing the SEP development smoothness over period T can be
estimated as follows:
LT T 2 + ∆Q 2 , (11)
DT = = n
LF ∑ 1 + ∆q 2
i
i =1
here: D T marks the index representing the SEP development smoothness over period T.
Formula (11) shows that the SEP development smoothness value in an ideal situation is
equal to 1 regardless of the existing development intensity. Based on the MDD
methodology for the quantitative analysis of the dynamics of SEP development, the
smoothness indicator should be applied in combination with the development intensity
indicator. The MDD methodology proposes to estimate this index based on formula (5). A
deeper analysis of its implication, however, shows that the methodology calls for
improvement. In an ideal case, the SEP development smoothness D T = 1.0. If ∆Q = 0
(Figure no. 1), then Q f = Q b and D I = 1.0, while D = 1.0. This goes against logic because if
∆Q = 0, i.e. if no SEP development over period T has been observed, the SEP dynamics
Vol. 23 • No. 57 • May 2021 509

index should be equal to 0. Considering this, the SEP development intensity index should
be estimated as follows:
Q f − Qb . (12)
DI =
Qf
Formula (13) indicates that when Q f = Q b , then D I = 0. With growing ∆Q, i.e. the
difference Q f − Q b , the value of the SEP development intensity index is also rising.
Formula (5), for the quantitative analysis of the dynamics of SEP development, remains
unchanged, only both of its variables – the development smoothness D T and the
development intensity D I – are determined in a different way:
Q f − Qb T 2 + ∆Q 2 . (13)
D = DT ⋅ DI = ⋅ n
Qf ∑ 1 + ∆qi
2
i =1
The economic development analysis in different countries revealed that there exists a rather
elastic relationship between the development smoothness and intensity: when intensity is
growing, smoothness is decreasing (Ginevičius, et al., 2018). This proposes that formula (5),
representing the SEP development dynamics, should incorporate both quantitative and
qualitative factors affecting this dynamics. Methods that take into account both the values and
significance of the indicators, i.e. multi-criteria assessment methods (Hwang and Yoon, 1981;
Hwang and Lin, 1987), are best suited for this purpose. These days multi-criteria assessment
methods are applied for quantitative assessment of a wide variety of complex engineering-
technological (Álvarez, et al., 2017; Juodagalvienė, 2018; Bielinskas, 2018; Binkytė, 2018),
socio-economic (Ejdys, et al., 2016; Gedvilaitė, 2018; Oželienė, 2019; Volkov, 2018) and
other phenomena and processes. Some of them are less (Hwang and Yoon, 1981; Hwang and
Lin, 1987; Zavadskas, et al., 1994), while others are more sophisticated (Balcomb and
Curtner, 2000; Saaty, 1980; Vallee and Zielniewicz, 1994; Hwang and Yoon, 1981).
In any case, the philosophy of multi-criteria assessment is embodied in the most common
classical SAW (Simple Additive Weighting) method, expressed as follows (MacCrimmon
1968; Hwang and Yoon 1981):
n
kj = ∑ ωi ⋅ q~i , (14)
j =1
here k j marks the value of the multi-criteria assessment by the SAW method estimated for
jth variation of a phenomenon under consideration; ω i is the significance of the ith indicator;
q~i ‒ a normalised value of the ith indicator.
Based on formula (14), the SEP development dynamics is quantitatively assessed as
follows:
~
D = ω1 ⋅ DI + ω2 ⋅ DT , (15)
~
here D – the SEP development dynamics index incorporating the significance of both the
development intensity and smoothness; ω1 – the SEP development intensity significance;
ω 2 – the SEP development smoothness significance.

3. Analysis of the economic development dynamics of in Cyprus and Romania
(2009-2018)
Quantitative analysis methodology for the dynamics of SEP development, which is referred
to as MDD-M, will be illustrated by the assessment of the GDP per capita shifts in Cyprus
and Romania over the 2009−2018 period (Jia, et al., 2017; Čiegis, et al., 2010; Chursan,
2013; Babu and Datta, 2015; Bolcarova and Košta, 2015; Lisiński, et al., 2020;
Molendowski and Petraškevičius, 2020; Nikonenko, et al., 2020; Radlińska, et al., 2020).
The abovementioned countries were selected due to the significant differences in the nature
of their economic development observed over the period under consideration (Table no. 1,
Figure no. 4).
Table no. 1. Data of GDP per capita in Cyprus and Romania (2009-2018)
Year
Country
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Cyprus 23.1 23.3 23.2 22.6 21.0 20.7 20.9 21.7 22.8 24.3
Romania 6.1 6.2 6.5 6.6 7.2 7.6 8.1 8.6 9.6 10.5
Source: compiled by the author with reference to Eurostat, 2020
Romania GDP
Cyprus GDP
26 12
24 10
Cyprus
22 8
Romania
20 6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year
Figure no. 4. Changes in GDP per capita data in Cyprus (axis 1) and Romania (axis 2)
over the 2009-2018 period
Source: compiled by the author with reference to Eurostat, 2020
Table no. 2 shows the values for the variables Q b , Q f , ∆Q and ∆q̃.
Vol. 23 • No. 57 • May 2021 511

Table no. 2. The values of indicators Q b , Q f , ∆Q and ∆q̃ for the economic development
in Cyprus and Romania over the 2009-2018 period
Indicator values, EUR
Country
Qb Qf, ∆Q ∆q ̃
Cyprus 23.1 24.3 1.2 0.133
Romania 6.1 10.5 4.4 0.489
The ideal trajectory of GDP fluctuations in the countries under consideration over the 2009-
2018 period can be depicted as follows (Figures no. 5-6):
Figure no. 5. The ideal trajectory of GDP fluctuations in Cyprus

Figure no. 6. Representation of the ideal trajectory of the GDP changes in Romania

Further analysis based on formulas (10)-(13), shows that values L I and L f be regarded as
the ideal and factual trajectories lengths of the economic development in the countries
under consideration over the 2009-2018 period were estimated along with the development
intensity indicator D I and the development dynamics indicator D T (Table no. 3).
Table no. 3. Economic development dynamic factors in Cyprus and Romania
Indicator values, EUR
Country
LI Lf, DI DT D̅
Cyprus 9.08 11.32 0.05 0.802 0.04
Romania 10.02 10.29 0.42 0.974 0.41
Table no. 3 shows that the values of GDP fluctuation smoothness over the 2009-2018
period are high. This is because the phenomenon under consideration, i.e. GDP fluctuation,
is extremely complex. The development of such phenomena is always characterised by
great inertia. This characteristic resonates with one of the laws of physics proposing that
mass is a measure of inertia.
For the comparison of GDP development dynamics in both countries, it is necessary to
assess the level they have achieved. For this purpose, coefficient K j will be employed:
Q fj , (16)
Kj =
Q max
f
K j – is the coefficient for the economic development intensity adjustment of in the jth
country in relation to the other country;
Q fj – is the economic development value of the j th country at the end of the analysed period;
Q max
f
– is the economic development value of the country which is higher at the end of the
analysed period.
For further analysis formulas (12) and (16), are used for the evaluation of the intensity of
the economic development in the j th country in relation to the other country:
~ Q fj − Qbj ∆Q j . (17)
Dj = = max
Q max
f Qj
After application of the formula (17) and reassessment of the economic development
intensity indicator in the analysed countries, the development dynamics values also
changed (Table no. 4):
Table no. 4. Economic development dynamics indicators of the Cyprus and Romania
based of the context of the other country (2009-2018)
Indicator values
Country
Dj D Tj D
Cyprus 0.05 0.802 0.04
Romania 0.18 0.974 0.18
For the evaluation of the development intensity and smoothness impact on the development
dynamics, it is important to evaluate the significance those indicators on the development
Vol. 23 • No. 57 • May 2021 513

process. The expert evaluation showed that ω 1 = 0.7, while ω2 = 0.3, which defines the
development dynamics indicator values (Table no. 5):
Table no. 5. Economic development dynamics indicators based on the significance
of the development intensity and smoothness (2009-2018)
Country The value of the economic development dynamics indicator
Cyprus 0.28
Romania 0.54
Implemented analysis shows that the dynamics indicator value is more affected by the
development intensity rather than the development smoothness.
Conclusions
1. In order to increase the efficiency of correlation-regression analysis, which these days is
the most common method of the SEP analysis and fluctuation forecast, both independent,
i.e. input, and dependent, i.e. output, variables need to be expressed in their dynamic rather
than static condition. For this purpose, their fluctuations over a particular period, i.e. the
dynamics of their fluctuations, need to be quantitatively assessed.
2. The main point if the SEP development dynamics quantitative analysis is the difference
ratio between the ideal and the factual trajectory lengths of the development. Ideal trajectory
length reflects the maximum possible smoothness. The current MDD (Measuring of
Dynamics of Development) methodology calls for improvement for several reasons: firstly, it
does not fully reflect the real SEP development; also, the factual trajectory length of the SEP
development in all cases is compared with the duration of analysed time period T.
3. Based on the proposed methodology, which is named as MDD-M, SEP development
factual trajectory length is evaluated based on the length of the diagonal line in the triangle.
Perpendicular in this triangle represents the SEP development scale over the analysed
period of time, while the other one is represents to the duration of this time period.
4. For the evaluation of the SEP development factual trajectory length the sum of the
diagonals in the triangles based on separate time slots inside the analysed whole time
period. In order to evaluate the length of a perpendicular inside triangles it is needed to
divide the total duration of the analysed time period by the number of separate time slots. In
this analysis the length of another perpendicular is evaluated as the difference between the
the development factual value at the end of the ith time slot and the ideal trajectory value in
this time slot.
5. The more accurate result of quantitative assessment is obtained by considering the
significance of both quantitative and qualitative sides of the SEP development, represented
by the development intensity and smoothness respectively.
The proposed quantitative assessment methodology, for the analysis of the SEP
development dynamics, can be applied not only to raise the adequacy of correlation-
regression. It can also be applied for analysing the development of various socio-economic
processes: assessment of GDP, investment, sectoral economic, social, shadow economy
related fluctuations and tendencies, etc.

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INFLATION FORECASTING IN THE WESTERN BALKANS AND EU:

A COMPARISON OF HOLT-WINTERS, ARIMA AND NNAR MODELS
Vesna Karadzic1* and Bojan Pejovic2
1)2)
University of Montenegro, Podgorica, Montenegro

Karadzic, V. and Pejovic, B., 2021. Inflation Received: 16 December 2020
Forecasting in the Western Balkans and EU: A Revised: 8 February 2021
Comparison of Holt-Winters, ARIMA and NNAR Accepted: 15 March 2021
Models. Amfiteatru Economic, 23(57), pp.517-532.
DOI: 10.24818/EA/2021/57/517
Abstract
The purpose of this paper is to compare the accuracy of the three types of models:
Autoregressive Integrated Moving Average (ARIMA) models, Holt-Winters models and
Neural Network Auto-Regressive (NNAR) models in forcasting the Harmonized Index of
Consumer Prices (HICP) for the countries of European Union and the Western Balkans
(Montenegro, Serbia and Northern Macedonia). The models are compared based on the
values of ME, RMSE, MAE, MPE, MAPE, MASE and Theil's U for the out-of-sample
forecast. The key finding of this paper is that NNAR models give the most accurate forecast
for the Western Balkans countries while ARIMA model gives the most accurate forecast of
twelve-month inflation in EU countries. The Holt-Winters (additive and multiplicative)
method proved to be the second best method in case of both group of countries. The obtained
results correspond to the fact that the European Union has been implementing a policy of
strict inflation targeting for a long time, so the ARIMA models give the most accurate
forecast of inflation future values. In the countries of the Western Balkans the targeting policy
is not implemented in the same way and the NNAR models are better for inflation forecasting.
Keywords: Inflation, Holt-Winters models, Autoregressive Integrated Moving Average

models, Neural Network Auto-regression models, forecasting
JEL Classification: C51, C53, E31, E37
*
Corresponding author, Vesna Karadzic – e-mail: vesnaka@ac.me
Authors’ ORCID:
Vesna Karadzic: orcid.org/0000-0003-4979-7674
Bojan Pejovic: orcid.org/0000-0001-9220-9327
Vol. 23 • No. 57 • May 2021 517

AE Inflation Forecasting in the Western Balkans and EU:
A Comparison of Holt-Winters, ARIMA and NNAR Models
Introduction
Price stability is one of the goals of all countries, especially the countries of the European
Union and its potential members, as documented through the political agendas of the
European Union and the Maastricht convergence criteria (Golinelli and Orsi, 2002).
Predicting the future value of inflation is of particular importance for all countries, whether
or not they have clearly declared inflation targeting policies. Historically, the European
Union has successfully pursued a policy of targeting inflation and has not had high
inflationary developments in the past, while the countries of the Western Balkans aspiring to
become members of the European Union had high inflation during the late twentieth century
caused by the numerous factors. The countries of the Western Balkans have diverse foreign
exchange systems, Montenegro is a dollarized (euroized) economy, while Serbia and
Macedonia have their own currencies. The Harmonized Index of Consumer Prices (HICP)
monitored for the European Union comprises a number of countries and their diverse foreign
exchange systems.
The paper examins the possibilities for application of Auto-Regressive Integrated Moving
Average (ARIMA), Holt-Winters and Neural Network Auto-Regressive (NNAR) models in
the inflation forecasting for the three countries of the Western Balkans (Montenegro, Serbia,
North Macedonia) and full member countries of the European Union during the observed
2010-2020 period. The dual possibility of comparing the models is considered. Firstly,
models are compared within their own class, and then the best models from each class are
mutually compared.
There are many models that can be used for inflation modeling and forecasting. In this paper
the possibility of inflation modeling and accuracy of its forecasting with univariate models
are tested. The forecast of future values is based only on historical data on inflation. This
type of models often give a faster and more accurate forecast compared to more complex
factor models. This is a consequence of the unpredictability and impossibility of accurate
measurement and evaluation of numerous factors, as well as their erroneous specifications in
the models of traditional econometric analysis. An additional limitation is the need to predict
the values of all determinants of the observed series, which further complicates the work and
leads to inaccuracies in forecasting.
The paper is organized as follows. A literature review is presented in the next section. The
third section reviews the basic methodological bases of development and specifications of
econometric models. The fourth section presents the empirical analyses and comparison of
estimated models. Finally, conclusions are presented in the fifth section.
Today, in modern monetary theory and central banking practice price stability is usually
associated with moderate price growth (Ascari and Sbordone, 2014). The level and degree of
change in inflation have always been an interesting research topic for many researchers.
Researchers' interest in the field reflected the current level of development of empirical
apparatus for forecasting time series.
Meyler, Kenny and Quinn (1998) forecast inflation in Ireland by comparing the ARIMA
models obtained using the Box-Jenkins methodology and objective penalty function
methods. Pufnik and Kunovac (2006) give a forecast of short-term inflation based on the

ARIMA model by observing the consumer price index (CPI) in Croatia. Other papers also
deal with inflation forecasting using the ARIMA model with the most frequent use of Box-
Jenkins methodology in model evaluation (Alnaa and Ahiakpor, 2011; Okafor and Shaibu,
2013). A comparison of the power to predict inflation by using the Holt-Winters and ARIMA
models is presented by Omane-Adjepong, Oduro and Oduro (2013).
In the literature special attention is given to comparisons of more advanced prognostic
models, such as comparisons of ARMA, ARIMA and GARCH models (Nyoni, 2018),
comparison of VAR and ARIMA models in HICP prognosis in Austria (Fritzer, Moser and
Scharler, 2002), comparison of ARIMA, VAR and ECM models (Uko and Nkoro, 2012).
Suhartono (2005) compares the prognostic performances of the Neural Networks, ARIMA
and ARIMAX models in inflation forecasting in Indonesia, where it is concluded that the
Neural Networks model gives a more accurate inflation forecast compared to traditional
econometric time series models. Sari, Mahmudy and Wibawa (2016) give an inflation
forecast using the Backpropagation Neural Network method. McNelis and McAdam (2004)
apply linear and neural network-based “thick” models for inflation forecast in the USA, Japan
and in the euro area. Hubrich (2005) studies inflation in the European Union measured by
the change in HICP and investigates whether the forecasting accuracy of forecasting
aggregate euro area inflation can be improved by aggregating forecasts of sub-indices of the
HICP as opposed to forecasting the aggregate HICP directly.
2.1. ARIMA models
ARIMA models are particularly suitable for short-term forecasts and the model evaluation
methodology is the result of the work of Box and Jenkins (1976). ARIMA models have two
components, the autoregressive component (AR) and the moving average component (MA).
The AR component refers to the autocorrection coefficients of the previous data, while the
MA component represents moving averages with a corresponding lag. I represents the level
of integration of the series, i.e. is the series stationary with the original data, on the first or
second difference. After model identification, evaluation of model parameters is tested to
meet the statistical and econometric criteria of model validity. If the model meets all the
validity criteria it can be used for forecasting. Seasonal ARIMA models can be represented
by ARIMA (p, d, q) (P, D, Q) s , where (p, d, q) represents the non-seasonal part of the model,
while (P, D, Q) s is the seasonal part where s represents the number of periods during one
year.
(1 − 𝜙𝜙1 𝐵𝐵) (1 − Φ1 𝐵𝐵12 )(1 − 𝐵𝐵)(1 − 𝐵𝐵12 )𝑦𝑦𝑦𝑦 = (1 + θ1 𝐵𝐵) (1 + Θ1 𝐵𝐵12 )𝜀𝜀𝑡𝑡 (1)
In seasonal ARIMA models p represents the number of autoregressive elements, d is the level
of series differentiation, q is the number of moving average elements, while P is the number
of seasonal autoregressive elements, D is the number of seasonal differences and Q is the
number of seasonal moving average elements.
2.2. Holt-Winters models

Holt (2004) and Winters (1960) have developed a method for forecasting time series that
can successfully capture the level, trend and seasonality in the series. When forecasting
Vol. 23 • No. 57 • May 2021 519

future values of a time series, values that are closer to the current one are more important
than previous values that are further away. The method can be used for short, medium and
long term forecasts. There are two types of methods in relation to the nature of time series,
and these are additive and multiplicative models. The additive method is used when
seasonal fluctuations are at approximately the same level during a time series, while the
multiplicative method is used when seasonal variations change in proportion to the time
series level.
Equations for the additive method:
Forecast: 𝑦𝑦�𝑡𝑡+ℎ|t = ℓ𝑡𝑡 + ℎ𝑏𝑏𝑡𝑡 + 𝑠𝑠𝑡𝑡+ℎ−𝑚𝑚(𝑘𝑘+1) (2)
Level: ℓ𝑡𝑡 = α(𝑦𝑦𝑡𝑡 − 𝑠𝑠𝑡𝑡−𝑚𝑚 ) + (1 − α)(ℓ𝑡𝑡−1 + 𝑏𝑏𝑡𝑡−1 ) (3)
Trend: 𝑏𝑏𝑡𝑡 = 𝛽𝛽 ∗ (ℓ𝑡𝑡 − ℓ𝑡𝑡−1 ) + (1 − 𝛽𝛽 ∗)𝑏𝑏𝑡𝑡−1 (4)
Seasonal: 𝑠𝑠𝑡𝑡 = γ(𝑦𝑦𝑡𝑡 − ℓ𝑡𝑡−1 − 𝑏𝑏𝑡𝑡−1 ) + (1 − γ)𝑠𝑠𝑡𝑡−𝑚𝑚 (5)
Equations for the multiplicative method:
Forecast: 𝑦𝑦�𝑡𝑡+ℎ|t = (ℓ𝑡𝑡 + ℎ𝑏𝑏𝑡𝑡 )𝑠𝑠𝑡𝑡+ℎ−𝑚𝑚(𝑘𝑘+1) (6)
𝑦𝑦
Level: ℓ𝑡𝑡 = α 𝑡𝑡 + (1 − α)(ℓ𝑡𝑡−1 + 𝑏𝑏𝑡𝑡−1 ) (7)
𝑠𝑠𝑡𝑡−𝑚𝑚
Trend: 𝑏𝑏𝑡𝑡 = β ∗ (ℓ𝑡𝑡 − ℓ𝑡𝑡−1 ) + (1 − β ∗)𝑏𝑏𝑡𝑡−1 (8)
𝑦𝑦
Seasonal: st = γ (ℓ 𝑡𝑡 ) + (1 − γ)𝑠𝑠𝑡𝑡−𝑚𝑚 (9)
𝑡𝑡−1 +𝑏𝑏𝑡𝑡−1
where is the observed series, s is the length of the seasonal cycle, gives the level of the
series, represents the trend, 0 ≤ α ≤ 1, 0 ≤ β ≤ 1, 0 ≤ ≤1 and presents forecast for
h-periods ahead.
2.3. Neural Network Auto-Regression models

NNAR models are a newer way that allows modeling of complex connections between inputs
and outputs. In the case of the NNAR model, the previously lagged values of the observed
time series serve as inputs for forecasting future values. Due to the seasonality of the observed
HICP time series, the NNAR (p, P, k)m model will be used.
Figure no. 1 represents an NNAR model with one hidden layer, k hidden neurons, also known
as a multilayer feed-forward network where each layer of nodes receives inputs from the
previous one and sends it on to the next one (Hyndman and Athanasopoulos, 2018). The
inputs of each node are obtained based on the linear combination function. The results are
then modified by a nonlinear function and forwarded. The linear combination function for
node j is formulated as: , it is then modified by a non-linear function,
such as a sigmoid, and it is sent to the next layer. This aims to reduce the effects
of extreme values and to make networks more resistant to extreme values. The notation p
represents the number of lagged autoregressive components of the model, while the notation
P represents the number of lagged seasonal autoregressive components of order m. The k
mark represents the number of nodes in the hidden layer.

Figure no. 1. A diagrammatic representation of the NNAR (p, P, k)m model
2.4. Comparasion of forecast accuracy

The comparison of the evaluated models for each of the observed time series will be
performed on the basis of 7 criteria:
1 𝑔𝑔
Mean error: 𝑀𝑀𝑀𝑀 = 𝑔𝑔 ∑𝑗𝑗=1(𝑥𝑥𝑚𝑚+𝑗𝑗 − 𝑥𝑥�𝑚𝑚(𝑗𝑗) ) (10)
1 𝑔𝑔
Root mean square error: 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = � ∑𝑗𝑗=1(𝑥𝑥𝑚𝑚+𝑗𝑗 − 𝑥𝑥�𝑚𝑚(𝑗𝑗) )2 (11)
𝑔𝑔
𝑔𝑔 1
Mean absolute error: 𝑀𝑀𝑀𝑀𝑀𝑀 = ∑𝑗𝑗=1�𝑥𝑥𝑚𝑚+𝑗𝑗 − 𝑥𝑥�𝑚𝑚(𝑗𝑗) � (12)
𝑔𝑔
100 𝑥𝑥𝑚𝑚+𝑗𝑗 − 𝑥𝑥� (𝑗𝑗) 100 𝑥𝑥� (𝑗𝑗)

Mean percentage error: 𝑀𝑀𝑀𝑀𝑀𝑀 = ∑𝑔𝑔𝑗𝑗=1 𝑚𝑚
= ∑𝑔𝑔𝑗𝑗=1 1 − 𝑚𝑚
(13)
𝑔𝑔 𝑥𝑥𝑚𝑚+𝑗𝑗 𝑔𝑔 𝑥𝑥𝑚𝑚+𝑗𝑗
100 𝑥𝑥𝑚𝑚+𝑗𝑗 − 𝑥𝑥� (𝑗𝑗)

Mean absolute percentage error: 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 = ∑𝑔𝑔𝑗𝑗=1 � 𝑚𝑚
� (14)
𝑔𝑔 𝑥𝑥𝑚𝑚+𝑗𝑗
ej
Mean absolute scaled error: q𝑗𝑗 = 1 , (15)
∑T
t=m+1 |Xt −Xt−m |
T−m
𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 = mean(�q𝑗𝑗 �) (16)
� 𝑡𝑡+1 −𝑋𝑋𝑡𝑡+1 2
𝑋𝑋
∑𝑛𝑛−1
𝑡𝑡=1 � �
𝑋𝑋𝑡𝑡
Theil's U statistic: 𝑈𝑈 = � 𝑋𝑋𝑡𝑡+1 −𝑋𝑋𝑡𝑡 2
(17)
∑𝑛𝑛−1
𝑡𝑡=1 � �
𝑋𝑋𝑡𝑡
where 𝑥𝑥𝑚𝑚+1 − 𝑥𝑥�𝑚𝑚(𝑗𝑗) represents the forecast error, i.e. the difference between the actual and
the predicted value of the time series. Smaller values of forecast accuracy statistics
correspond to a better forecast model. In theory there are no exact limits for the values of
forecast statistics that separate good from bad models. Therefore, we take the criterion that
the best model has lower values of all statistics compared to competitors. The best model
minimizes all ME, RMSE, MAE, MPE, MAPE, MASE and Theil's U values.
Vol. 23 • No. 57 • May 2021 521

Data base for this research consist of time series of Harmonized Index of Consumer Prices
(HICP). The data are presented on a monthly basis, for the period from January 2010 to
March 2020.
R software package was used for analysis purposes.

The analysis uses logarithmic data of the Harmonized Index of Consumer Prices (HICP) for
the countries of the Western Balkans: Montenegro, Serbia, Northern Macedonia, as well as
for the full member countries of the European Union in the observed period. The observed
period is from January 2010 to March 2019, while the data from April 2019 to March 2020
are used to test the forecasting power of the model. The original values of the observed series
are shown in figure no. 2.
Figure no. 2. HICP log for the period from 2010 to 2019
Source: MONSTAT, 2020 and EUROSTAT, 2020
3.1. ARIMA forecasting

From observing the ACF (Auto Correlation Function) and PACF (Partial Auto Correlation
Function) of logarithmic HICP data, in figure no. 3, it is clearl that all series are nonstationary
and are characterized by the presence of a unit root. The graphical conclusion will be checked
by ADF (Augmented Dickey-Fuller), PP (Phillips-Perron) and KPSS (Kwiatkowski–
Phillips–Schmidt–Shin) empirical tests. (Table no. 1)

Figure no. 3. ACF and PACF of HICP

Table no. 1. Stationarity tests of HICP
Stationarity tests log(HICP) Montenegro Serbia North Macedonia EU
ADF -2.322 -2.367 -2.426 -2.226
p-value 0.443 0.424 0.400 0.483
PP -9.729 -4.212 -12.560 -8.878
p-value 0.553 0.873 0.388 0.602
KPSS 2.027 2.043 2.013 2.031
p-value 0.010 0.010 0.010 0.010
Based on the values of ADF and PP test statistics and calculated p probabilities for all four
data series, it can be concluded that the null hypothesis is confirmed and that the series have
at least one unit root, i.e. that they are not stationary. We reach the same conclusion on the
basis of KPSS test statistics and p values, where we reject the null hypothesis that the series
is stationary and provide an alternative that the series have at least one unit root. In order to
obtain a stationary time series that can be used in further analysis, the first difference of all
series was determined. The results of ADF and PP tests proved that the first differences of
all series are stationary, and that as such they can be used in the further Box-Jenkins
procedure. The results of the applied KPSS test in the case of Serbia are in contradiction with
the obtained results of other unit root tests. In order to meet the requirements of all three unit
root tests, the time series needs to be differentiated once again. Simultaneous use of a larger
number of tests leads to better results due to the elimination of the shortcomings of the use
of individual tests. In this research the strictest criterion is used for fulfilling the conditions
of all three unit root tests.
The ACF and PACF given in figure no. 4 are used in determining the order of the AR and
MA models for each of the observed series. The results of the unit root tests of the first
difference data are given in table no. 2. From the correlogram of all series the presence of
seasonal components is clearly noticed, which will influence the further evaluation of
seasonal ARIMA models, i.e. SARIMA models. Depending on the observed series, SARIMA
models will be of different order, with or without seasonal differentiation of the series. The
appropriate SARIMA model is evaluated for each of the observed series, and information
criteria is used as a criterion in selecting the optimal model. The best model for each of the
Vol. 23 • No. 57 • May 2021 523

countries will minimize the values of all information criteria: Akaike information criterion
(AIC), Akaike information criterion for small sample (AICc), and Bayesian information
criterion (BIC).
Figure no. 4. ACF and PACF of HICP (first differences)

Table no. 2. Stationarity tests of HICP (first differences)
North
Stationarity tests diff(log(HICP)) Montenegro Serbia EU
Macedonia
ADF -4.973 -3.868 -5.027 -6.904
p-value 0.010 0.018 0.010 0.010
PP -62.570 -87.560 -93.360 -78.040
p-value 0.010 0.010 0.010 0.010
KPSS 0.087 0.767 0.088 0.329
p-value 0.100 0.010 0.100 0.100
After the confirmed stationarity of the first difference of the time series HICP in Montenegro,
the identification and evaluation of the best model was performed. The ARIMA (1,1,0)
(1,0,0) [12] with drift model was chosen as the best model in the case of Montenegro. (Table
no. 3)
Table no. 3: Identification and evaluation of the model in the case of Montenegro
Models AICc Best model: ARIMA(1,1,0)(1,0,0)[12] with drift

ARIMA(1,1,0)(1,0,0)[12] Series: Montenegro
-895.574 ARIMA(1,1,0)(1,0,0)[12] with drift
with drift
ARIMA(1,1,0)(0,0,1)[12] Coefficients:
-895.565 ar1 sar1 drift
with drift
ARIMA(2,1,0)(1,0,0)[12] 0.3236 0.3384 0.0015
-893.836 s.e. 0.0945 0.0941 0.0008
with drift
ARIMA(1,1,1)(1,0,0)[12] sigma^2 estimated as 1.62e-05: log likelihood =
-893.667 451.98
with drift
ARIMA(1,1,0)(1,0,0)[12] -894.617 AIC=-895.95 AICc=-895.57 BIC=-885.15
In the case of data for Serbia, we previously concluded that the series on the first difference
is not stationary, so the second difference of the original data series was determined and its
stationarity examined. Based on the statistics values of all unit root tests, it is confirmed that
the second difference of the series is stationary. (Table no. 4)

Table no. 4. Stationarity test of HICP Serbia (second differences)
Serbia ADF p-value PP p-value KPSS p-value
Stationarity test
-9.151 0.01 -9.151 0.01 0.0299 0.1
diff(diff(log(HICP)))
The ARIMA (1,2,1) (1,0,0) [12] model is chosen as the best model in the case of Serbia. The
observed series of the Harmonized Consumer Price Index for Northern Macedonia is
stationary on the first difference, so this series was used in the evaluation and selection of
models. (Table no. 5)
Table no. 5. Identification and evaluation of the model in the case of Serbia
The ARIMA (0,1,0) (1,0,1) [12] with drift model is chosen as the best model in the case of
North Macedonia. Analyzing the results of the unit root test of the first time series difference
for the European Union, it was noticed that the series is characterized by the presence of a
unit seasonal root. In order to minimize the assessment of the standard deviation in the time
series, in addition to the first difference of the series, the seasonal difference of order 12 was
determined. (Table no. 6)
Table no. 6. Identification and evaluation of the model in the case of North Macedonia
Models AICc Best model: ARIMA(0,1,0)(1,0,1)[12] with drift
ARIMA(1,1,0)(1,0,1)[12] Series: North Macedonia
-849.391
with drift ARIMA(0,1,0)(1,0,1)[12] with drift
ARIMA(0,1,0)(1,0,1)[12] Coefficients:
-851.086
with drift sar1 sma1 drift
ARIMA(0,1,0)(1,0,0)[12] 0.785 -0.443 0.001
-849.487
with drift s.e. 0.125 0.178 0.001
ARIMA(0,1,0)(2,0,0)[12] sigma^2 estimated as 2.37e-05: log
-850.123
with drift likelihood=429.73
ARIMA(0,1,0)(1,0,1)[12] -850.867 AIC=-851.47 AICc=-851.09 BIC=-840.67
The ARIMA (1,1,0) (0,1,1) [12] model is chosen as the best model in the case of European
Union. (Table no. 7)
Vol. 23 • No. 57 • May 2021 525

Table no. 7. Identification and evaluation of the model in the case of European Union
Model AICc Best model: ARIMA(1,1,0)(0,1,1)[12]
ARIMA(0,1,1)(0,1,1)[12] -950.854 Series: EU
ARIMA(0,1,1)(0,1,2)[12] -950.837 ARIMA(1,1,0)(0,1,1)[12]
ARIMA(1,1,0)(0,1,1)[12] -954.105 Coefficients:
ARIMA(1,1,0)(0,1,2)[12] -953.569 ar1 sma1
ARIMA(1,1,0)(1,1,2)[12] -953.257 0.37 -0.693
s.e. 0.10 0.152
sigma^2 estimated as 5.8e-06: log
likelihood=480.18
After selecting the best models for each AIC=-954.36 AICc=-954.11 BIC=-946.61
country separately, minimizing the values of the information criteria, it is necessary to
examine the existence of an autocorrelation between the residuals and the normality of their
distribution. Based on the value of Ljung-Box statistics and the corresponding p value with
a risk of error of 5%, the null hypothesis can be confirmed that all autocorrelation coefficients
are statistically equal to zero, even up to 22th lag. The residual distributions from all the
described models can be approximated by the normal distribution. Hence, the models meet
both required characteristics of model validity (absence of autocorrelation and normality of
residual distribution), and can be used in further analysis as a benchmark in model
comparison. (Table no. 8)
Table no. 8. Ljung-Box residual test for all ARIMA model
Montenegro Serbia North Macedonia EU
Ljung-Box test Ljung-Box test Ljung-Box test Ljung-Box test
data: Residuals data: Residuals data: Residuals data: Residuals
from from from from
ARIMA(1,1,0)(1,0, ARIMA(1,2,1)(1,0, ARIMA(0,1,0)(1,0, ARIMA(1,1,0)(0,1,
0)[12] with drift 0)[12] 1)[12] with drift 1)[12]
Q* = 20.86, df = Q* = 22.19, df = Q* = 12.64, df = Q* = 11.97, df =
19, p-value = 0.345 19, p-value = 0.275 19, p-value = 0.857 20, p-value = 0.917
Model df: 3. Total Model df: 3. Total Model df: 3. Total Model df: 2. Total
lags used: 22 lags used: 22 lags used: 22 lags used: 22
Models that meet all the required properties can be used to predict future time series values.
Figure no. 5 gives 12-month forecasts of all four selected ARIMA models with 80% and 95%
confidence intervals. Forecasts of the future value of the logarithm of the Harmonized Index
of Consumer Prices represent the basis for calculating the statistics of the evaluation of the
forecast in comparison with the actually realized values. The predicted values will be used
not only for comparison with the actual values but also for comparison with the predicted
values obtained by the Holt-Winters method and the use of neural networks. A comparison
of prognostic methods will be given separately for each of the observed countries.

Figure no. 5. Forecast based on ARIMA models
3.2. Holt-Winters forecasting

The type of time series is of special importance for the forecast of future values of the
observed time series when using the Holt-Winters method. Forecasts for both types of
methods (additive and multiplicative) are given in the analysis and the choice of the better
method was made on the basis of forecast statistics. Data for all countries were observed
separately, and the selection of the best forecast model was made based on minimizing the
forecast error. (Table no. 9)
Table no. 9. Forecast statistics HW Additive and HW Multiplicative methods
ME RMSE MAE MPE MAPE MASE Theil's U
HW A -0.007 0.008 0.007 -0.140 0.142 0.315 3.996
Montenegro
HW M -0.008 0.009 0.008 -0.170 0.170 0.377 4.230
HW A -0.005 0.007 0.006 -0.115 0.130 0.139 2.332
Serbia
HW M -0.009 0.011 0.009 -0.187 0.202 0.217 3.479
North HW A -0.009 0.013 0.011 -0.199 0.242 0.670 1.987
Macedonia HW M -0.008 0.011 0.010 -0.179 0.214 0.592 1.714
European HW A 0.003 0.004 0.004 0.072 0.082 0.257 1.383
Union HW M 0.002 0.003 0.003 0.053 0.063 0.196 1.033
Based on the calculated statistics, we notice that for Montenegro and Serbia the Holt-Winters
Additive method gives better results, while for Northern Macedonia and the countries of the
European Union the HW Multiplicative method is better. In the further analysis, the predicted
values based on better methods will be used as a benchmark. Figure no. 6 shows the values
of time series for the observed period, forecasts based on two Holt-Winters methods and
actual series values for the out-of-the-sample period and which serves as a test of the model's
Vol. 23 • No. 57 • May 2021 527

prognostic performance. Previously calculated forecast statistics and the choice of a better
forecast method can also be clearly seen in the figure no. 6 because these values are closer to
the actual observed data that serve as test data.
Figure no. 6. Forecasts based on the Holt-Winters methods
3.3. Neural Network Auto-Regression forecasting

Using artificial neural networks, i.e. a special type of Neural Network Auto-Regression
model (NNAR), the model was evaluated, and then a forecast was made for out of the sample
periods. NNAR (1,1,2) [12] models were evaluated for all observed time series, with one
autoregressive element, one seasonal autoregressive element of order 12 and two neurons in
the hidden layer. The estimated models are presented in table no. 10.
Table no. 10. Selected NNAR models
Montenegro Model: NNAR(1,1,2)[12] sigma^2 estimated as 1.84e-05

Serbia Model: NNAR(1,1,2)[12] sigma^2 estimated as 2.74e-05
North Macedonia Model: NNAR(1,1,2)[12] sigma^2 estimated as 2.16e-05
European Union Model: NNAR(1,1,2)[12] sigma^2 estimated as 8.99e-06
Data from January 2010 to March 2019 are used to evaluate the model, while data for the
next 12 months until March 2020 are used to test predictive power of the model. For the
forecast of one period out-of-the sample, all available data are used, for the forecast of two
periods in advance, in addition to the data from the sample, the first forecast values are used.
A twelve-month forecast was formed in the same way. The distribution of the residuals of
the evaluated models can be approximated by the normal distribution, so the models can be

used as adequate in the further analysis. Forecasts based on the evaluated models, for all
observed time series are given in figure no. 7.
Figure no. 7. Forecast based on NNAR models
3.4. Comparasion of forecast accuracy ARIMA, Holt-Winters and NNAR models

In order to compare the estimated models, it is necessary to calculate forecast errors for the
out-of-the sample period. Forecast errors were calculated by comparing the actual (observed)
values of the time series of the Harmonized Consumer Price Index (HICP) logarithm and the
predicted values based on three types of models. The aim of this paper is to determine the
class of models that gives the most accurate forecast individually for each observed series.
The values of the calculated forecast statistics for all countries are shown in table no. 11.
Table no. 11. Comparison of forecasting accuracy measurement statistics
ME RMSE MAE MPE MAPE MASE Theil's U

ARIMA -0.007 0.009 0.007 -0.156 0.156 0.345 4.096
Montenegro HW A -0.007 0.008 0.007 -0.140 0.142 0.315 3.996
NNAR 0.001 0.002 0.002 0.016 0.044 0.098 1.151
ARIMA -0.008 0.010 0.009 -0.175 0.189 0.203 3.153
Serbia HW A -0.005 0.007 0.006 -0.115 0.130 0.139 2.332
NNAR 0.005 0.007 0.005 0.099 0.114 0.123 2.131
ARIMA -0.016 0.019 0.018 -0.351 0.381 1.052 2.941
North
HW M -0.008 0.011 0.010 -0.179 0.214 0.592 1.714
Macedonia
NNAR -0.004 0.009 0.008 -0.080 0.171 0.473 1.297
ARIMA 0.002 0.003 0.002 0.049 0.053 0.166 0.860
European
HW M 0.002 0.003 0.003 0.053 0.063 0.196 1.033
Union
NNAR 0.006 0.006 0.006 0.125 0.125 0.392 1.987
In case of inflation forecasts for Montenegro, Serbia and North Macedonia Neural Network
Auto-Regressive (NNAR) models give the most accurate forecasts. The application of the
Vol. 23 • No. 57 • May 2021 529

Holt-Winters model for forecasting (multiplicative or additive) gives slightly worse results,
while the use of autoregressive moving averages (ARIMA) models give the most inaccurate
forecast of inflation. In the case of the inflation forecast for the European Union, the
autoregressive moving averages (ARIMA) model gives the most accurate forecast, followed
by the Holt-Winters multiplicative model, while the Neural Network Auto-Regressive
(NNAR) model gives the most inaccurate forecast of twelve-month inflation. (Figure no. 8)
Figure no. 8. Comparison of the models for the 12-month inflation forecast
Conclusions
Inflation targeting is one of the key goals of all European Union countries, as well as of the
countries aspiring to become future members of EU. It is of particular importance to all
Western Balkan countries that experienced severe hyper-inflation at the end of the twentieth
century. Having in mind the convergence criteria that EU has put before its future member
states, the dynamics of inflation measured by the change of the harmonized index of
consumer prices (HICP) and its forecast is very important topic.
The purpose of this paper was to estimate adequate models for inflation forecasting and to
compare their forecasting performances for the case of the three Western Balkans countries
(Montenegro, Serbia, North Macedonia) and EU countries. This analysis has been carried out
considering three methodologies, ARIMA, Holt-Winters and NNAR models. A comparison
of the models for forecasting monthly inflation at several levels was performed. When
comparing the models from the ARIMA class, the AICs information criterion was used. The
Holt-Winters method comparison was performed based on the forecast error. An automatic
evaluation procedure was used to evaluate the NNAR model. After selecting the best model
from each of the model classes, a final comparison of the prognostic performances of the
models is done on the bases of the forecast errors. For all analyzed countries of the Western

Balkans, the NNAR models give the best results in forecasting inflation. In case of the
European Union the evaluated ARIMA model gave the best results. The Holt-Winters
(multiplicative or additive) method is the second best in forecasting for the case of all
analyzed countries.
The results of the research represent a framework for further analysis and do not provide final
solutions to this problem in the observed countries. It is interesting to compare the
possibilities of forecasting inflation for the countries that have different legacies that act
through psychological factors, regardless of the fact that they are not included in the analysis
empirically. The models do not take into account other factors that determine inflation, and
therefore represent the forecast of future values only on the basis of previous values of the
observed phenomenon. Although the models give a very accurate forecast, for long-term
forecasts they may show certain shortcomings due to the univariate nature of the model. In
the world that is characterized by numerous, rapid and sudden changes and a large number
of factors and influences, even forecasts of the best model that can be evaluated can only give
a rough picture of the always uncertain and challenging future.
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Contents
Amfiteatru Economic recommends

Synergy of Neoliberalism, Alternative Institutions and Transitional Crisis ............... 534
Veselin Draskovic, Sergey A. Kravchenko and Milica Delibasic
An Assessment of the Social Work Program in Turkey in Terms

of Labour Market Experience and Professional Skill Attainment .............................. 548
Bulent Arpat, Mete Kaan Namal, Mustafa Kocanci and Aynur Yumurtaci
Book Review: 10 (ten) projects Internet of Things. Author: Radu Pietraru .............. 570
Vol. 23 • No. 57 • May 2021 533

AE Synergy of Neoliberalism, Alternative Institutions and Transitional Crisis
SYNERGY OF NEOLIBERALISM, ALTERNATIVE INSTITUTIONS

AND TRANSITIONAL CRISIS
Veselin Draskovic1*, Sergey A. Kravchenko2 and Milica Delibasic3
1)
University of Social Sciences, Poland; University of Montenegro, Montenegro
2)
MGIMO-University, Moscow, Russia; Moscow State Institute of International
Relations, MFA of Russia of Foreign Affairs of Russia (MGIMO-University),
Moscow, Russia
3)
University of Mediteranian, Podgorica, Montenegro

Draskovic, V., Kravchenko, S.A. and Delibasic, M., Received: 14 November 2020
2021. Synergy of Neoliberalism, Alternative Revised: 30 January 2021
Institutions and Transitional Crisis. Amfiteatru Accepted: 18 March 2021
Economic, 23(57), pp.534-547.
DOI: 10.24818/EA/2021/57/534
Abstract
The subject of this paper is a critique of the quasi-neoliberal violence of alternative institutions, which are
the most problematic and most threatening brake phenomenon of transition. They have been produced,
strengthened and reproduced by the authorities of most post-socialist countries in the last three decades.
The aim of this paper is to demystify neoliberalism, its ideological, philosophical, and monistic
absolutizations, as well as quasi-neoliberal manifestations, which in many post-socialist countries were
carried out directly under the auspices of alternative institutions. Also, the goal is to shed light on the
causes of the long-term crisis, chaos, institutional violence, and lawlessness, and to enable the recognition
of too visible (albeit blurred), rhetorical and “messianic” recipes, which are, in fact, developmental
shackles. The paper is based on two hypotheses: first, that alternative institutions have abused and
enslaved formal and informal institutions in most transition countries, which has led to numerous
economic and social problems, including threats to the rule of law, freedoms, and civilizational
development, and second, that a transitional hindering mechanism was created, which generated a neo-
exploitative, apologetic, neo-totalitarian and crisis environment. The paper uses common methods of
social and economic sciences, including the methods of generalization, description, abstraction,
comparison, induction and deduction. In conclusion, it is stated that the phenomenological identification
and critical demystification of the interest connections and conditioning of neoliberalism, alternative
institutions, and the crisis have been carried out, and that their exponents (alleged reformers and new
elites) had an extremely negative impact on social, economic, scientific, educational, cultural and
institutional development, because they degraded and destroyed them.
Keywords: Neoliberalism, quasi-neoliberal violence, alternative institutions, transition countries,
transitional crisis.
JEL Classification: O17, P37
*
Corresponding author, Veselin Draskovic – e-mail: vesodraskovic@gmail.com
Authors’ ORCID:
Veselin Draskovic: orcid.org/0000-0003-3968-422X
Sergey A. Kravchenko: orcid.org/0000-0003-2528-5703
Milica Delibasic: orcid.org/0000-0003-1036-3836

Amfiteatru Economic recommends AE
Introduction
Neoliberalism as an ideology (and especially quasi-neoliberalism as its abuse) has many
negative and dark sides, which its proponents have never pointed out or commented on. On
the contrary, they knowingly (but clumsily) hid them. That is why we have tried in many
works to prove that mysticism and simulacrum have no place in economics, and other
social sciences, because civil behavior, rational choice, and competition are the essence of
optimizing the social life. However, they have been distorted, reduced, blurred, and
determined by a privileged minority, which has been politically, lobbyistically, and
interestingly organized in most transition countries, subjected to social traumas. For three
decades, this minority (the so-called new elites) has been directing, controlling, and
exploiting the disorganized majority (broad masses of the people) in accordance with their
networked interests, preferences, and goals.
If we view the the multiple crises in most post-socialist countries through the prism of basic
causes (sophisticated forms of dictatorship, dogmatization, absolutization, ideologization,
quasi-institutionalization (Draskovic, et al., 2019), neo-totalitarianization, and neo-
imperialization), it can be seen that all these processes were mainly based on monistic and
privileged uncontrolled by people centers of power. In such a context, economic freedoms,
competition, private property, and entrepreneurship (Panikarova, et al., 2000) as a desirable
democratic phenomenon, remained just a slogan and a promise. They have been replaced
by new and sophisticated forms of institutional and other violence.
The iterative reproduction of the multiple crises, including the transitional one, cannot be
explained without critical light shed on alternative institutions as its main cause and
instrument of governance and enrichment. For, they (as a specific form of informal and
illegal rules of conduct) essentially denied and subordinated all formal and informal
institutions to their influence. In this way, they directly weakened, denied, and/or
relativized the corrective role of state regulatory institution. This is contrary not only to the
logic of common sense regarding the possibility of implementing a consistent strategy of
social and economic development, but also to the practice of developed countries. Due to
all this, the paper attempts to explain:
• relations of connection and interdependence between neoliberalism, alternative
institutions, and the transitional crisis,
• fact that neoliberalism in its pseudo form of manifestation has immorally legitimized
egoism, i.e. individualism of narrow and privileged strata of society, and
• phenomenology of alternative institutions.
1. Neoliberal ideology
The practice of post-socialist countries which have implemented neoliberal ideology,
philosophy, culture and the alleged messianic recipe for development, has immorally
legitimized egoism, individualism of privileged and alternative institutions, instead of
legitimizing widely propagated individualism and freedom on a mass scale. On the other
hand, it has ignored goodwill, sacrifice, commitment, solidarity, and many civilizational
values, and rejected every form of collectivism, even the most positive and socially
necessary forms. Privileged interests have been turned into the sole guide and motive for
Vol. 23 • No. 57 • May 2021 535

economic and every other behavior. This has turned society into a managerial organization
in which all social values have been marginalized and adapted to the greedy culture of
business (Horvathova and Mokrisova, 2020), that has produced new risks and
vulnerabilities (Kravchenko, 2018).
What has long been called neoliberalism in literature and rhetoric was actually a cover for
the plunder of the people (middle and lower classes) by the top authorities (as the leaders of
the alleged new elites and big capital). Neoliberalism has proved to be very strong and
resilient in the United States, Great Britain, and the EU. It was based on the economic
dominance of financial capital, the instruments of globalization, the phrases and apologetics
of some theorists, and the control of economy and society by the leading parties.
Accordingly, the neoliberals were ideological employees of financial and corporate capital
(Tomas, 2000).
In most transition countries, however, the seductiveness of neoliberalism was much greater
in terms of ideological symbolism, rhetoric, and false promises, than in the real and chaotic
life (results) of post-socialist civilization. Under the slogan of neoliberalism, a quasi-
neoliberal project has been realized secretly or openly, with all its vices, which spread
everywhere like weeds, not even bringing the illusion of happiness and welfare, but only
negative phenomenology, which openly and repeatedly threatens to destroy many
achievements of previous civilizations in most post-socialist countries (Draskovic, 2020).
Neoliberalism was and remains an ideological attempt to impose a universal and
submissive concept of power, which Western elites exported to many post-socialist and
other underdeveloped countries. They presented it as the only (non-alternative) solution to
all social and economic problems. But in fact, it was only a temporary and palliative
solution to the accumulated problems of global elites, who have been buying foreign
resources cheaply for years. At the same time, it was the main problem of the vast majority
of the world's population and an effective instrument for realizing the interests of the
political, corporate, and financial elite of the Western world.
For reminders, neoliberalism has advocated that the Washington Consensus
recommendations should be seen as the ultimate (absolute) truth. Neoliberal ideology has
been presented as a supposedly scientifically based, socially, economically, politically,
geopolitically and geoeconomically useful philosophy ‒ as the end of history. However, its
basis was neither theoretical, nor consistent. It was an attempt of interest parties
(organizations and individuals) to present this interest-driven and highly unjust ideology as
sustainable and infallible.
There is no official state ideology in Western countries. But that does not mean that there is
no quasi-state, a dominant ideology. This was and remains the illusion produced by many
neoliberals. In the West (as a general term, and not specifically in each country) still
dominates neoliberal ideology, which is persistently and sophisticatedly imposed on the rest
of the world. Unlike culture as the most general social milieu, which essentially consists of
many subcultures, different teachings and trends (multi-culturalism, which has no
authoritarian inner core), each ideology strives for the privileged status of addressed social
domination. Because of this, the attempt to impose neoliberal ideology as a neoliberal
culture to the world is a great deception. A feature of every ideology is the desire of its
bearers to spread concepts beyond the boundaries of the system ruled by that ideology.

The neoliberal aspiration to impose its value system as universal, which should be
dominated by an unjust relationship between the center and the periphery (in the general
sense), is a monistic-totalitarian and highly interest-driven project of the ruling elites (big
capital). This project cynically implies the existence of (Draskovic, 2020):
• freedom for privileged elites, as opposed to mass freedoms for the vast majority
(peoples and states),
• exploitation of subordinates,
• capital concentrations,
• various forms of monopoly,
• large differences in development and wealth,
• direct and indirect privileges,
• free institutional channels for capital expansion,
• abuse of the state regulatory institutions,
• rule of law deficit,
• strong alternative institutions,
• domination of financial neocolonialism,
• constant growth of external indebtedness,
• degradation of human freedoms and rights,
• ignoring the common good and social interest, and
• one global center of power.
All of the aforesaid drastically deforms not only culture (as a general social capsule and,
conditionally, a synonym for informal institutions) (Alesina and Guliano, 2015), but also all
value criteria, preferences, needs, and motivation, thus producing “normal anomie”
(Kravchenko, 2014, pp. 3-10).
2. Destructivity of neoliberal philosophy and phenomenology

If countries and societies with implemented neoliberalism want to develop in the future,
they must eliminate neoliberalism, not only in practice, but also in its intellectual basis. In
other words, neoliberalism must be liquidated from the realm of the real and from the realm
of the possible. For, the philosophy of neoliberalism enables and justifies a broad corpus of
socio-economic destructions. It indoctrinates and cripples all segments of society,
producing dehumanization and increasing effects of “normal traumas” (Kravchenko, 2020,
pp. 150-159).
In order to prevent the spread of destructiveness, generated by neoliberalism, it is necessary
to abandon this wrong and malicious concept, which proclaims the enormous damage it has
proclaimed as good deeds! In order to get rid of neoliberal or quasi-neoliberal phrase called
Vol. 23 • No. 57 • May 2021 537

minimal state (or mockingly: market state – a term by D. Stojanov, 2013, p. 295) and the
consequent modern anti-civilization shackles, people must understand the vicious role of
intoxicating privileged interests, which are contained in the foundations of neoliberal
philosophy.
The difference between small and large nations, underdeveloped and developed countries,
post-socialist (institutionally hybrid) and Western (civil) societies is, among other things, in
a very noticeable, widespread, and negative phenomenon. Namely, the former glorify,
advocate, and respect the opinions of unruly alibi-economists and classic interest-driven
party switchers, who have transformed from one monism to another, from socialist planners
through neoliberal ideologues to alleged returnees to institutional frameworks. In latter,
they are (very rare) simply marginalized.
Hayek's idea that neoliberalism (embodied in the free market) is the main weapon against
the elements of neototalitarianism has been turned by false (alibi) reformers through
alternative institutions into the ideology of neototalitarianism! In that sense, they used not
only this new invention (alternative institutions) for controlling political, economic and
social processes, but also the latest information and communication technologies, the so-
called tools of soft power, smart power strategies, methods of organizing pink and velvet
revolutions, information, network and hybrid wars.
The entire civilized, developed and democratic world is fighting resolutely and consistently
against privileges with all its might. The existence of alternative institutions and other
forms of institutional monism is inconceivable there (Popovic, et al., 2020). Due to this
fact, normal people must ask themselves: why exemplary models of developed countries
were not an inspiration in most post-socialist countries, but quasi-institutional, quasi-
neoliberal, non-market, and illegal enrichment at any cost, which led to the functioning of
the economy and society under the limited access to resources regime (North, et al.,
2009)?!
The neoliberal story on structural reforms (without real institutional reforms) has always
been and continues to be ‒ illusion, fiction, absurdity, mere mask and farce. For,
everywhere politics dominates over the economy. This is not only a problem of economics,
but also of history, psychology, philosophy, sociology, and culture, without which
economics cannot be understood and functions successfully.
In the three-decade period of transition, alternative institutions were active. They were
closely linked to neoliberal recipes. This negative synergistic connection has constantly
deepened the destructive economic, social, legal, ethical, and cultural phenomena, which
have turned into a negative trend of breaking without building, and have significantly
contributed to the overall crisis environment of transition. The mosaic of this general crisis
picture was completed by the following problems:
• lack of political consensus with very pronounced internal political, religious, identity,
and other divisions, as well as intensified political struggle for power,
• collectivist mentality of the people in relation to the government,
• manifestation of some anachronistic behaviors characteristic of patriarchal and
paternalistic society,
• emphasized rhetoric of false promises,

• conglomerate inconsistency (organizational, institutional, and normative vacuum),

• mutant recombined order, which contains many anachronistic structures of the old
system, and outdated rigid elements of the capitalist system,
• strategically meaningless, inconsistent, and palliative reforms,
• pronounced negative (usually party) selection of staff,
• expensive, interest-driven, and unsuccessful improvisations of economic reformers,
• replacing the former ideals with vices,
• ignoring successful role models and competition at all levels and in all areas,
• interference of state-political bodies in making economic decisions, etc.
These problems have been accompanied by a personality cult, the development of
autocracy, concentration of power and economic power, long-term unchangeable
government, populist rhetoric and arrogance, unjust and irrational growth of party
intellectuals, nepotism, demagogic promises, imitation of democratic standards, mass
apathy, controversial conditioning of employment by party membership, spreading the
paradoxical superiority of superiors and subordinates, endangering human existence and
dignity, degrading the educational system, hampering the development of the knowledge-
based economy, etc.
Figure no. 1 shows new shackles (postsocialist) from the aspect of generating areas (origin).
Figure no. 1. New shackles from the aspect of generating areas
Vol. 23 • No. 57 • May 2021 539

We hypothesized that there are four basic areas that have predominantly influenced the
generation of so-called new shackles: international community, culture, institutions and
knowledge. In that sense, only the neo-imperialists shackles were generated in all of the
mentioned areas. In three areas (culture, institutions and knowledge), five types of shackles
were generated: neo-totalitarian, ideological and political, apologetic, quasi-neoliberal and
alternative institutions. Finally, in two areas (institutions and knowledge), four types of
shackles were generated: non-market, system, monistic and anti-development.
Starting from the criteria of the so-called systemic paradigms (Kornai, 2002), all analyzes
of practice in most transition countries clearly show that this is a quasi-neoliberal concept
of interest, as a new, disastrous and dogmatic experiment. Through the formation and
strengthening of alternative institutions, it contributed to the emergence of new shackles,
i.e. great abuses, turmoil, and anti-development issues problems in many transition
countries. Therefore, this paper indicates the need to reconsider and eliminate the
aforementioned socially unjust order.
3. Alternative institutions
The challenge of transitional (reform) changes in post-socialist countries appeared long
ago, at a time when they were burdened by the ballast of the past and the uncertainty of the
future. Most of them have not yet found a rational and effective response to that challenge.
We believe that the main cause is insufficient and unsuccessful institutional change, i.e. the
act of alternative institutions. There are very few articles in the economic literature which
directly determine the existence and/or analyze the functioning of alternative institutions.
This is understandable for Western authors, due to the absence or negligible importance of
alternative institutions in developed countries. But, the authors from transition countries
unjustifiably neglect the existence, functioning and great social and economic impact of
alternative institutions.
They are always associated with quasi-institutional actions (from the shadow, criminal,
opportunistic), therefore, they are not easy to investigate and explain. However, there are
institutional and other indicators, which directly or indirectly indicate existence and
negative impact of alternative institutions. These include the rule of law index, economic
freedoms, innovation capacity, perceptions of corruption, global competitiveness, degree of
inequality, non-market redistribution of resources, etc.
Although alternative institutions are not a direct subject of research in developed countries,
nevertheless, traces related to them can be found in Western literature, such as:
• “exploitative approach to the state” within the so-called “interest approach” (North,
1981, p. 22) and the theory of social (public) choice (Buchanan, 1990),
• “rent-oriented motivation theory” (Krueger, 1974; Posner, 1975; Buchanan, et al.,
1980; Tullock, 1996; Rose-Ackerman, 1999; Acemoglu and Verdier, 2000; Congleton and
Hillman, 2015),
• theory of externalities (Buchanan and Tullock, 1997),
• theory of “predatory states” (Evans, 1993; Robinson, 1999; Przeworski and Limongi,
1993; Marcouiller and Young, 1995),

• theory of “total institutions” (Goffman, 1968, p. 41),

• theory of the influence of powerful administrative-bureaucratic groups (Mc Auley,
1991, p. 26),
• theory of “violence” (“system with limited access to resources”) (North, et al., 2009),
• theory of opportunistic behavior and limited rationality (Williamson, 1985; 1985a)
and
• theory of the so-called "rational bandits", who rule the so-called predatory state,
creating the majority of the population deprived (alienated) of property (Olson, 2010).
The existence of alternative institutions is a characteristic of underdeveloped countries.
This has been proved by many socio-pathological phenomena (corruption, non-market and
legal enrichment, interest-lobbying log-rolling, monopolies, and various forms of market
restrictions (Draskovic, et al., 2020). The reasons for this are numerous, from dependence
on path dependency (work habits, mentality, achieved level of industrial development, way
of regulating economy, level of investment in science, democratic achievements and
traditions, economic, market and other freedoms, party monopoly, deficit of economic,
legal, and other institutions, inherited cult of leader, effects of cultural factors (mentality,
education and social consent) and the effects of social capital), through foreign economic
and political influences (war environment, integrations, globalization, geopolitics, and geo-
economics) to reduced and selective application of neoliberal economic policy. The latter
has ignored the Pareto principle and enabled the domination of uncontrolled and privileged
economic freedoms over institutions (instead of complementarity of mass freedoms and
institutions). This has led to the institutionalization of the privileges of rare (politically
selected) individuals, procedural forms of domination and sophisticated forms of neo-
totalitarianism, which imposed modern forms of social and economic "shackles"
(development barriers).
Western authors distinguish between good and bad institutions (e.g., Rodrik, 2007),
extractive and inclusive regimes (Acemoglu and Robinson, 2012), as well as limited access
to resources and open access to resources (North, et al., 2009). In this way, they emphasize
the objective conditions in which alternative institutions can exist and operate.
Undoubtedly, the protection of property rights is the main factor, which serves to
distinguish good institutions from bad institutions. North, et al. (Ibid.) noted and described
in detail the existence of anti-competitive economic institutions in societies with limited
access to resources. They attributed them to the conscious action of elites (especially those
in government structures). Although they do not mention the existence and functioning of
alternative institutions, they state and analyze in detail social violence, privileges, ballasts
of feudalism, political rent-seeking, non-market redistribution, rule of law in favor of elites,
and other negative social phenomena.
They conclude that the actions of the elites lead to the creation of violence in society
(which is carried out precisely through the mechanism of alternative institutions ‒ author's
note). The institutional violence analyzed by the mentioned authors has the character of
anti-institutional, and it comes from elites, and not from ordinary people (nations). This
directly leads to redistributive effects, which benefit the ruling elites. Some Western
authors emphasize the negative role of elites and government nomenclatures (Acemoglu, et
al., 2004), as well as privileged individuals (Clark, 2009).
Vol. 23 • No. 57 • May 2021 541

Figure no. 2. Environment of the alternative institutions

Source: Draskovic, 2018, 2020
Figure no. 2 shows that the environment of alternative institutions is very complex,
composed of diverse elements. However, what all these influencing factors have in
common is the fact that they all stem from path dependency, while mostly derive from the
behavior of the authorities. This is logical, given that the authorities are taking the initial
impulse to create a system of alternative institutions, with their decision to abuse and
subjugate formal and informal institutions for a long time.
In the period of the strongest waves of neoliberalism (more precisely: quasi-neoliberalism
as an ideology of alternative institutions and a specific form of quasi-institutional monism),
we criticized it sharply and argumentatively (hopefully competently), to the same extent as
dirigisme (another polarized form of institutional monism). We have always advocated
institutional pluralism, which objectively exists in various combinations in all developed
countries. We have pointed out that every futile theorizing, which is aimed at any monistic
glorification of a certain institutional order, is doomed to failure, because practice
convincingly denies it.
In most so-called transition countries, the motivation of the reformers and the
nomenclature of power have resulted in their enormous enrichment, which from the very
beginning was accompanied by the strengthening of alternative institutions, quasi-
institutional violence, and appropriate control. All this was possible only in the conditions
of immoral and obscure abuse of formal and informal institutions. The rhetoric on
economic freedoms sounded demagogic, primitive, vulgar, and underestimating. It has led
to their mass marginalization. As a result, abused liberalization dominated real institutional
change and turned into quasi-institutionalization. Quasi-neoliberal macroeconomic recipes
had a purely ideological character (a market mask for non-market appropriation).
Objectively, this could not create a healthy micro and macro economic environment, nor
solve the problem of harmonizing the freedom of choice of individuals with collective
interests. It was only a quasi-theoretical and ideological basis for the creation and
strengthening of quasi-institutional monism, the natural result of which was the gradual and
growing dominance of alternative institutions. In this way, real institutional changes were
prevented, and they can be achieved only in the conditions of quality and legal institutional
control, and institutional competition (key drivers of economic and social development).
The dominance of alternative institutions has enabled the promotion of anti-institutional
activities and the blockade of real institutional changes. Delibasic (2019) rightly states that

many theoretical analyzes of institutional models have shown that socio-economic
development includes not only economic factors (as a subsystem), but also a wide range of
non-economic variables, including formal and informal institutions, cultural and other value
systems, as well as all forms of opportunistic behavior, which have been established by
alternative institutions (as a cultural-institutional subsystem).
In figure no. 3 we adapted the scheme created by Y. Hayami and Y. Godo (1997). We
believe that this is completely justified when it comes to most post-socialist states, whose
social system is very much created by alternative institutions, even more than legal (formal
and informal) institutions.
Figure no. 3. Interrelated developments in the social system

Source: adapted from Hayami and Godo, 1997, p. 10
Neoliberalism as the ideological foundation of alternative institutions in transition countries
has failed to satisfy any element of the lowest common denominator of economic success:
integration into the world economy, high labor mobility (Radukic, et al., 2019), large
savings, significant investments, strengthening government competencies, commitment to
economic development and social welfare, etc. Even the most liberal countries in the world
are not in favor of an uncontrolled market, institutional monism, and non-market
appropriation. Not to mention their extremely negative attitude towards quasi-institutional
monism and the role of alternative institutions. If the former is true, then, clearly,
underdeveloped countries cannot be dominated in global relations if developed countries
recommend their own recipes to them. Late acknowledgments (M. Spence, A. Grispen, J.
Williamson, etc.) after the 2008 global financial and economic crisis for misconceptions
about free market efficiency seemed cynical.
Alternative institutions have an illegal, personified, socio-pathological, and destructive
character. Their consequences are symptomatic and indicative. In that sense, it is necessary
to analyze and explain the functional connection (relationship) of individuals and
collectives, through the prism of their joint responsibility for creating favorable conditions
for the emergence, operation, and strengthening of alternative institutions. We believe that
the uncivilized, primitive, and dogmatic deformation of this relationship has significantly
contributed to the institutional fiasco in many transition countries, resulting in the
dominance of alternative institutions.
Institutional pluralism is a rational combination (synergy) of complementary conditioned
individualistic and collectivist institutional actions, arrangements, efforts, and choices. It
enables healthy and productive institutional competition. Ignoring institutional pluralism and
forcing any form of institutional monism leads to the creation of a perverted individualism of
interests (rare and privileged). During the transition period, quasi-neoliberal dogmas, utopias,
Vol. 23 • No. 57 • May 2021 543

and illusions about individualism were applied in many countries. They were
methodologically, epistemologically (understood as the difference between truth and faith), and
ontologically in constant (inevitable) conflict with neo-institutional economic theories and
practices of developed countries, which promote institutional pluralism.
The mentioned monistic dogmas were based on the so-called market fundamentalism. That
corresponded to the abstract, amoral, and unfounded story about the so-called minimal
state. We have long ago proved the methodological unsustainability of this primitive, futile,
vulgar, and orchestrated story, stating that it is not clear whether it refers to a social,
economic, political or legal state?! Minimizing each of these state functions would
realistically mean its collapse (Figure no. 4).
Changes in social, economic, and institutional dialectics, as well as civilized norms

of behavior by methods of neoliberal rhetoric and practice
↓
A paradoxical discrepancy between the promise of massiveness and its denial in practice
↓
Dominance of "good players" (elite) over "good rules" (institutions)
↓
Ignoring perceptions:
a) J.S. Mill on the balance between the independence of the individual
and the need for social control,
b) R. Nozick that "minimization" of the state cannot be limited
to "narrow functions of protection against force, theft, fraud, enforcement, etc.",
c) A. Smith that “each individual promotes public interest best
when promoting his/her self-interest”, and
d) Pareto optimum and Popper’s paradox by restricting the freedoms of all individuals
with regard to legality, morality, and unpunished harm to others
↓
Reducing the "normal" boundaries of the state regulatory institutions
has created the conditions for neo-totalitarianism, economic reductionism, and the crisis
Turning greed into an ominous urge for rapid illegitimate and non-market enrichment
(and strengthening power and influence in society)
↓
Abuse and subordination of institutions and economic policy,
which began to serve private and party interests
↓
Creation and strengthening of alternative institutions, which strive for domination
and complete control
Figure no. 4. Logic of forming and strengthening the alternative institutions
Source: adapted from Draskovic, 2018, 2020.
Unlimited quasi-neoliberal demagoguery and the dynamics of experimental deregulation
have violated all moral and institutional limitations of economic reality and rational human

behavior. As a result, reforms have not been successfully implemented in most transition
countries. Government structures have decided to recombine institutions. This has directly
and indirectly enabled the establishment of various forms of quasi-institutional relations. In
fact, forcing of institutional monism (market type) has caused enormous consequences, the
flourishing of uncontrolled market and non-market forms, and a protracted crisis. Such a
factual situation is characterized by an insurmountable gap between repressed mass and
privileged individualism, which exists in parallel with the growth of public debt, inefficient
governance models, systemic corruption at all levels, pronounced social apathy and
economic demotivation, and many other social costs caused by anti-development strategy.
Conclusion
This descriptive analysis has clearly shown that alternative institutions are the result of
systemic and institutional fiasco, which in a paradoxical and organized way (through abuse
and manipulation) enabled the domination of privileged elections, as well as interest-driven
individualism over institutionalism. The alternative institutions are a weird transition child.
Their domination over freedoms, knowledge, institutions, and truths is certainly the result
of the influence of traditional culture and dogmatic thinking, susceptibility to some
anachronistic cults, myths and prejudices, but also the actions of neoliberal ideology. To
overcome them, it is necessary to accept the civilizational and pluralistic paradigm of
development of humanistic type, as well as scientifically consistent and well-argued
critiques of all monistic conceptions and illusions, especially neoliberal and dirigistic ones,
which have always been an integral part of the braking mechanism, due to their
restrictiveness and exclusivity.
Instead of individual greed and fraudulent neoliberal grail, socio-economic development
must be sought in the civilizational adjustment – to political, economic, institutional,
geopolitical, geo-economic, environmental, and etic norms. For decades, on all meridians,
it has been lived on paradoxical and ironic consensus of fear, domination, blackmail,
interests, stratification, division, integration, identity, greed, negative selection, apologetics
and much more that confuses common sense. And all this under the thick and blurry layers
of apparent democracy, doomed to betrayal by the dirigistic forces of power, alienated from
the people (who elected them)!
For the success (sustainable development) of any country and/or nation, it is necessary to
have a critical culture and humanistic thinking, rule of law, education, knowledge, science,
institutions, patriotism, morality, freedom of choice, competition, control, transparency,
security, solidarity, employment, work habits, entrepreneurship, private property on a mass
scale, and innovation. Otherwise, the significant influence (and especially the dominance)
of alternative institutions, opportunity and redistributive behavior, social pathology and all
other traumatic trends, which are pointed out in this text ‒ will not enable social and
economic progress and will juristically lead to multiple crises.
Aggressive neoliberal values have been established for 30 years in society, economy and
impersonal market, flooded with vanity, egoism, monism, ideology, politics, anachronism,
monopoly, paradoxes and privileges. Freedom, democracy, sustainable development, rule
of law, strong and efficient institutions, knowledge and other civilizational achievements,
i.e. elimination of greedy nomenclatures of power and privileged abuse of state and
people's interests are needed for a better, fairer and more humane order. This is the only
way to realize in practice the acceptable world (term by H. Simon), which implies the
parallel construction and improvement of the state and society.
Vol. 23 • No. 57 • May 2021 545

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Vol. 23 • No. 57 • May 2021 547

AE An Assessment of the Social Work Program in Turkey in Terms
of Labour Market Experience and Professional Skill Attainmen
AN ASSESSMENT OF THE SOCIAL WORK PROGRAM IN TURKEY

IN TERMS OF LABOUR MARKET EXPERIENCE
AND PROFESSIONAL SKILL ATTAINMENT
Bulent Arpat1, Mete Kaan Namal2, Mustafa Kocanci3 and Aynur Yumurtaci4∗
1)
Bandırma 17 September University, Balıkesir, Turkey
2)3)
Akdeniz University, Antalya, Turkey
4)
İstanbul University, İstanbul, Turkey

Arpat, B., Namal, M.K., Kocanci, M. and Yumurtaci, A., Received: 3 November 2020
2021. An Assessment of the Social Work Program in Revised: 25 January 2021
Turkey in Terms of Labour Market Experience and Accepted: 22 March 2021
Professional Skill Attainment. Amfiteatru Economic,
23(57), pp.548-569.
DOI: 10.24818/EA/2021/57/548
Abstract
Dominance of theory-based education is not well connected by the current practices. So, the
knowledge delivered within higher education institutions cannot create adequate value in the
market and in turn which causes the youth unemployment to become a chronicle problem.
Therefore, work placement opportunities within higher education create significant
advantages during the transition to the labour market. This study aims to evaluate the
efficiency of the Social Work Program in Turkey, in which students work at public
institutions during their university education to gain experience, professional skills, and
knowledge about the labour market. The research makes use of mixed methods and a cross-
sectional approach. In terms of the research analysis, descriptive and inferential methods, as
well as content analysis, are utilized. The findings show that, while the Social Work Program
procured remarkable attainments for the students about the labour market, it is mostly
inadequate for professional skill-building. The reason, it is determined as a lack of overlap
between the students’ field of education and their designated work placement. If the program
is redesigned according to this approach, it might be predicted to become prominent as an
active and robust workplace policy in fighting youth unemployment.
Keywords: youth unemployment, social work program, utility program, professional skills,
labour market.
JEL Classification: E24, R23, J2, J21
∗
Corresponding author, Aynur Yumurtaci – e-mail: aynur.yumurtaci@gmail.com
This study has been presented at the VII. International Strategic Researches Congress (ISRC) as an oral
presentation.
Authors’ ORCID:
Bulent Arpat: orcid.org/0000-0002-3512-9969
Mete Kaan Namal: orcid.org/0000-0002-0937-8355
Mustafa Kocanci: orcid.org/0000-0002-3950-3532
Aynur Yumurtaci: orcid.org/0000-0003-0277-5750

Introduction
As an essential factor of material and non-material development, education has a vital
function in creating a qualified labour force and making it easier for individuals to enter the
labour market (Ozguler, 2019). However, young people in higher education who take place
in the final and efficient link of schooling are more disadvantaged than the other groups in
the matter of facing unemployment during the transition from school to the labour market.
With the working conditions gradually worsening and turning into vulnerable employment,
problems, especially about employment and unemployment, become prominent for
university graduate young people nowadays. During the transition of young graduates into
the labour market, low wages, lack of experience, and their qualifications falling short of
labour force demands cause this group to come face to face with important problems
transitioning into the labour market (Cansever and Namal, 2019). Social Work Program
(SWP) is a program created to solve this problem and aid the economic situation of higher
education students (Arpat, 2020). The program is based on having higher education students
(excluding distance education and postgraduate students) get to know work-life and gain
work discipline by working at public institutions for a maximum of three months within June,
July, August, and September. The students work in public workplaces, which undertake
environmental protection, restoration, protection and introduction of the cultural heritage,
maintenance and organization of the libraries and supporting the cultural and social services
of the public institutions (Regulation of the Amendment of the Active Workforce Services
Code, 2018 )Unemployment is both an individual and social problem that has been presented
since the expansion of the labour force for production, and it has exponentially grown against
all economic and social precautions in the last century (Kumas, 2001). It may occur because
of the lack of labour force demand and workplaces, non-operation of the current workplaces,
low wages, and workers not having the necessary skills and abilities for the job (Koklu,
1984). Therefore, the present research focuses on the supply aspect of the labour market.
One of the critical life stages sustaining the development of the skills and abilities is the
university education stage. In the context of the relationship between education and
unemployment, it is stated that unemployment will decrease as the education level rises
(Gursel and Ulusoy, 1999). However, despite the increase in education level, the expected
decrease in unemployment does not occur (Bozdaglioglu, 2008).
Thus, there is a high unemployment rate among university graduates. The reasons for this are:
• The theoretical education is not well connected to the current practices, the knowledge
delivered within higher education cannot create adequate value in the market (Ozdemir, 2012).
• University graduates look for jobs with higher pay than their elementary school or high
school graduate counterparts and thus remain unemployed longer (Guney, 2019). Active Labour
Market Policies (henceforth ALMP) that help solve these problems and help university graduates
get to know and experience the working life and gain adequate professional skills are becoming
more critical. In this way, it will be possible for university graduates to achieve decent work
opportunities in line with their expectations and qualifications within the primary labour market.
The number of university graduate unemployed people in Turkey is overwhelmingly high.
According to the Turkish Employment Agency (TEA) data, as of April 2020, there are 370,169
unemployed people with associate degrees and 565,265 with bachelor’s degrees registered in
their database. The ratio of registered associate and bachelor’s degree-owning unemployed
people is 26% out of all registered unemployed people, which shows that a quarter of the
registered people awaiting employment is university graduates (TEA, 2020a). The university
Vol. 23 • No. 57 • May 2021 549

graduate unemployment is within the scope of youth unemployment. The rate of youth
unemployment in Turkey is 24.4%, and the number of unemployed young people is 1,032,000
(TURKSTAT, 2020b).
This research aims to assess the SWP in Turkey, wherein students work at public institutions
throughout their university education to gain experience, professional skills, and knowledge
about the labour market. Our study carries importance because it provides in-depth
information with help of survey analysis about the impact of ALMP and SWP in the fight
against youth unemployment. The first part of the study deals extensively with the labour
market in Turkey and SWP. The second part analyses the problems of university graduates
during their transition into the labour market. The third part explains the methodology, and
finally, the fourth part demonstrates and discusses the findings before moving onto the
conclusion and policy suggestions.
1. Social Work Program and youth unemployment in Turkey

1.1. The origin and the characteristics of the Social Work Program
SWP is an implementation that intersects in many aspects with the Public Beneficiary
Program (henceforth PBP), which has been in effect since 1999. The difference between
SWP and PBP is that the people employed are university students. With the amendment made
to the PBP in summer 2019, a limited number of university students have been added to the
scope, and this amendment has been named as SWP. Within the range of SWP, basic
activities, such as gathering student preferences, choosing the number of students as per the
quota, work placements, and wages, are handled via TEA. The aim of the program is for
university students to get to know and experience the working life and gain work discipline.
In this sense, an essential expectation from the SWP is for it to create a solution to the high
unemployment rate among university graduates and young people.
To better understand the SWP, it is necessary to understand the procedures, fundamentals,
and the purpose of the PBP. PBP is one of the ALMPs implementation, which develops a
qualified labour force, raise the employment rate, and decrease the unemployment rate. This
program is put to action extensively by TEA, which provides employment services for the
general public (Askin and Askin, 2017). The primary target groups of the PBP, which is a
component of the creation of demand-side employment policies between ALMPs are young
people, long term unemployed people, women, elderly, the disabled, and refugees that do not
have a high chance of employment (Usen, 2007). Due to the high cost of ALMPs, only these
groups are included in the program. Thus, instead of all unemployed people, people who are
under-qualified, who do not have extensive work experience and/or people who have been
unemployed long term. The other characteristic of these groups is that they are all at a
disadvantage when it comes to first time employment or re-employment after a long period
(Vazquez-Alvarez, 2004). PBP is especially implemented after an economic recession or
crisis to lessen the severity of the rising unemployment and poverty (Dar and Tzannatos,
1999). With the program, the unemployed people are employed temporarily in jobs which
creating within the public sector. The created jobs are usually about infrastructure, protecting
and bettering the environment, the maintenance and repair of public places, healthcare and
welfare services, and municipal services (Evans-Klock, et al., 1998; Kapar, 2005). According
to the TEA data, 6,322 PBP (including the SWP) programs have been started in 2019. It is
stated that 309,373 people have benefited from these programs. 127,152 (41.1%) of these

people were male and 182,221 (58.9%) were female (TEA, 2020b). This number includes
the 20,172 university students who also took part in the scope of SWP. The jobs within PBP
are usually criticized for being irregular, lacking social security, low paying, and unable to
relieve poverty (Gun, 2013). According to previous studies, the programs have short-term
positive effects, but are unable to create positive results for the attendants’ position in the
workplace in the long term (Erhel, et al., 1996; Dar and Tzannatos, 1999; Caliendo and
Schmidl, 2016; Askin and Askin, 2017).
The fundamentals of SWP are evaluated on below in terms of experiencing the labour market
and gaining professional skills:
• Utilization period: It is applied maximum 3 months. While this period makes it
possible for the participants to take part in the scheme more than once, it is limited to 90 days
throughout the university experience. A maximum of 42 days of work is allowed in one term.
It can be argued that the longer the student stays within the program, the more he/she gets to
know and experiences the labour market. Accordingly, previous research on long term work
placements (implemented under different names) that take place within the university
curricula also supports this claim (Saribiyik, 2013; Arpat, 2018). In the findings of the
aforementioned studies, it is understood that the gained professional skills increase as the
duration of the program increases.
• Application window: During the implementation period of SWP, students with
ongoing classes, and students who are doing a mandatory internship cannot benefit from this
program. Having the placement outside the classwork period and having the students do the
placement full-time can help them better concentrate on the placement without the burden of
theoretical classwork, and in turn, can help get to know and experience the labour force as
well as acquire better professional skills.
• Working period: It is set forth for the students to work at the workplaces for three days
a week and 8 hours a day. Even though three days a week seems short, it looks sufficient
when we consider the total implementation period for getting to know and experiencing the
labour market and acquiring better professional skills. On the other hand, students having the
same 8-hour workday with the permanent/contractual workers is regarded to be a sufficient
timeframe to actualize the aforementioned purposes.
• Leave period: During the practice, the students have a right to 5 days of unpaid leave.
Granting the students with this right may help them with getting to know and experiencing
the labour market and acquiring better professional skills as well as increase their work
performance.
• Wages: The students get paid an amount calculated by having the minimum wage
multiplied by the working days. No payment is made for the weekends and the off days. A
transparent wage system that is based on rules and shaped by skills and abilities is an
important motivational factor for the individual and an element that increases the labour force
performance and productivity (Balta, 2007). Thus, having the students’ payments at the same
level as a worker on the minimum wage level is possible to aid the aforementioned purposes
with the high-level motivation it will provide.
When the work relationship variables explained above are evaluated as a whole, it is
considered possible for the university students to carry out the SWP practices to get to know
Vol. 23 • No. 57 • May 2021 551

and experience the labour market as well as acquire better professional skills to make a
satisfactory contribution.
Specific additional criteria must also be met to benefit from SWP. Below are the conditions
where the students’ SWP applications will be rejected:
• Applicants who have an ongoing internship, who work within the scope of long term
insurance programs or who state being insured by only short term insurance programs from
another workplace at the date of application or the period of the program,
• Students who have a GPA below 2.00 out of 4.00 or below 53.33 out of 100 (TEA,
2019b).
According to these criteria, those who are in mandatory university internships and full or
part-time workers are excluded from the program during these times. In addition, it is
observed that students with low academic performance are also excluded from the SWP
application. When the irrelevance between a student’s professional knowledge and
experience gained by workplace practices and academic performance is taken into account,
the 53.33 point academic achievement criteria is an important restraint against students with
low academic performance who have a potential to raise their professional performance
(Aksit, Arpat and Kalfa, 2017).
1.2. Youth unemployment amongst university graduates and the Social Work Program
Unemployment is a situation described as an individual’s inability to find employment
despite being willing to work and using all manners of job hunting (Akyildiz, 2019). On the
other hand, unemployment at the social level is defined difference between the number of
labour force and the number of people employed in the labour market in a country (Zaim,
1997). At the same time, it is described as a part of the productive forces’ inability to find a
place within the labour market (Erkol, 2012). Unemployed is defined as a person who is
willing and able to work within the current wage range but cannot find a reasonable and
suitable job (Yavuz, 2010). Turkish Statistical Institute (TURKSTAT, 2020a) describes
unemployment as in following:
individuals at the age of 15 and above who have approached at least one channel of
employment and can start working in 2 weeks which has been unemployed in the reference
period (people who have never worked at a workplace in exchange of profit, daily wage, by
the wage of or free of charge and have no connection with a workplace whatsoever) are
included in the unemployed population (TURKSTAT, 2020a).
Meanwhile, an unemployed young person is defined as an individual between the ages of
15-24 who have not worked more than one hour in the reference period but ready to start
working and actively looking for a job (Ata, 2007; Murat and Sahin, 2011). According to
February 2020 data, the rate of youth unemployment in Turkey is 24.4% (TURKSTAT,
2020b). In Turkey, the ratio of unemployment in associate and bachelor degree owners is
twice as high compared to other groups (Arpat, 2018). According to International Labour
Organization (ILO) data, youth unemployment is 2.9 times higher than the ratio of adult
unemployment (ILO, 2015). While demand for skilled labour is increasing in Turkey, it has
seen that there is a mismatch between labour demand and labour supply in the context of
competence dimension (Izgi, 2012). Taking this into account it is expressed that the

vocational education could not be conducted as per the market’s desired quality and
attributions and the education-employment connection could not be established
(Bozdaglioglu, 2008). SWP can resolve these disadvantages with the right policies and
practices. On the other hand, it is known that young people usually quit work because of
dissatisfaction with their primary positions and their current/future earnings; while the
employers terminate the work contract because of lack of experience, lack thereof or non-
compatibility of the skills, unable to meet the wage expectations and the lesser cost of
termination (Secer, 2006). SWP may eradicate the reasons for termination both for the
workers and bosses with the advantage of getting to know and experience the working life.
When the reasons for termination mentioned above are taken into account, it may not seem
possible for the SWP to directly solve the problems students will face in the labour market
such as low wages, lack of experience, and other qualification incompatibilities. But the
practice may help the students to experience possible workplace problems and build
necessary coping skills. Furthermore, it may help students gain an awareness to understand
the difficulties of working life on the basis of communications and interactions with the other
workers and thus develop suitable attitudes. When it is taken into account that there are only
short term internships within the curricula of most associate and bachelor's degrees, some
high education curricula do not even contain internships; it could be said that SWP will create
a significant opportunity to get to know and experience the working life. On the other hand,
it is highly emphasized that the correlation between university education and vocational
education is getting less and less essential to succeed in working life. In another way, it is
asserted that there are findings proving building professional skills without academic
education creates better options in the labour market (Lerman, 2013). Even this assertion
shows that by making the SWP to help the students’ vocational skills, it can create better
opportunities for them to find employment after graduation.
It is asserted that the effect of the ALMPs’ on the employment and the cost-effectiveness is
dependent on the design of the AWMPs (Brown and Koetti, 2015). According to this it could
be said that the variables such as the number of the benefits, the quality of the work done and
compatibility with the education, the terms for utilization and wage limits will affect the
success of the program. On the other hand, it is emphasized that if the ALMP expenses are
low, youth unemployment may occur or could not be prevented (Marques and Hörisch,
2019). Thus it is possible for a little budget SWP practice with limited entry to have an only
marginal effect on the youth unemployment independent of the student preferences.
According to another data backing up this claim, it is asserted that if the government
expenditure is insufficient compared to private initiatives, unemployment occurs-grows
(Kaboub, 2007, narrated by Ozdemir, 2019, p. 2540). Taking these data into account, it is
possible for a SWP design with higher participation will create an effect of decreasing youth
unemployment.
1.3. The possible effects of the Social Work Program on the labour force
The active population of a country is the total of people within and out of the labour force.
SWP is an implementation expected to contribute to the groups of people who are employed,
unemployed, and out of the labour force which shows in the (figure no.1).
Vol. 23 • No. 57 • May 2021 553

Active Population
Labor Force Not in Labor Force
Youth In Higher
Employed Unemployed Graduate NEET Other Groups
Education
Unemployed Young
Gradutae Employees Other Employees Other Unemployed
Graduates
SWP SWP SWP

(1) (2) (3)
Figure no. 1. The scope of active population and the groups in which the Social
Working Program is expected to create a positive effect
Source: Adapted by the authors from Gundogan, 2013.
The possible positive effects of the SWP on these groups are explained as follows:
• Effect on employment: SWP has two positive effects on the employment of university
graduates. The first being the graduates’ possibility of finding work in better quality jobs.
After graduation, students are expected to have the chance to work in jobs with better pay
and higher working conditions, with the positive effects of SWP. It also allows the graduate
to transition into a position more relevant to his education. One of the fundamental conditions
required to find a job related to one’s expertise is experience. The SWP can be used to help
university graduates find a post relevant to his education by matching him with a suitable
workplace. If not handled properly, however, SWP could even cause the graduate to face
unemployment, as well as not making any contribution towards his transition into a
workplace or finding a suitable job. In other words, even if these graduates can find
employment opportunities within the labour market, they may have to work in insecure jobs
with low wages and/or informal sector which is unrelated to their education. Thus when the
National Employment Strategy of the Republic of Turkey is analyzed, it can be seen that the
education-employment connection is given a high level of priority. In the document, it is
stated that it is the education system's responsibility to supply the qualified labour force that
the labour market needs and to continually enhance current skills and abilities (Ministry of
Family, Labour and Social Services, 2017) SWP as a practice, demonstrating that the
government also contributes to the execution of the obligations given to the educational
institutions. In order to get the maximum benefits from these practices, a policy of choosing
suitable students for SWP and taking education relevance into account should be adopted.
• The effect on youth unemployment: SWP can eliminate or lessen the probability of
unemployment by providing college students who face post-graduation unemployment the
opportunity to get to know and experience the labour market, especially in economies with
high unemployment rates such as Turkey. Also, through these policies, university students
will have the chance to experience working within the labour market and increase their
professional skills during their student years.

• The effect on groups out of the labour force: Groups out of the labour force include
students, retirees, home-makers, seasonal workers, and those who cannot work because of
disability, illness, and old age. SWP can also employ groups outside this definition, such as
students in ongoing education (those who are willing to work but not looking for a job) and
university graduates Not in Employment, Education or Training (NEET). The probable
effects of SWP on these two groups are explained as follows:
- Continuing University Studies: Students within secondary education (evening school)
prefer to work part-time or full time in the morning hours. Students in this group who are
willing can have the option of working before they complete their university education using
the experience and skills gained through the SWP. Indeed, Karadeniz and Kumas (2016)
shows that 44% of senior students who undertake long-term vocational education within the
labour force receive business offers. Also, this rate is 37% in the study of Arpat, et al. (2017).
- Unemployed university graduates who gave up looking for a job because of repeated
failure in finding one, but they are ready to start working who are included within the out of
labour force group, are categorized as other. These individuals are also named discouraged
workers. Within this group, people who are not employed nor studying have an important
place and include young university graduates (NEET). i SWP practices can save this students
from entering the NEET category. Thus, the students will get to know the qualities,
characteristics, and necessary skills required by the labour market, and at the same time,
gradually attain them through professional experience in the workplace.
As can be seen, SWP is a procedure capable of obtaining solutions to problems such as
university graduates not being able to find a job (youth unemployment), and increasing the
quality of the labour force, provided it is implemented well. Likewise, unemployment
(especially youth unemployment) is the first and foremost macroeconomic problem area for
all countries, whatever their development stage is (Isik, 2019). Furthermore, as
unemployment has become chronic in the young population, some of these groups are
starting to be referred to as disadvantaged (Cansever and Namal, 2019). According to the
research of Arpat (2018), which is based on TURKSTAT data, the percentage young people
between the ages of 15 and 24 holding an associate degree is 26.6%, three times higher than
their peers. When the number of young people who are discouraged about finding a job is
also taken into account, the unemployment rate of associate and bachelor degree graduates is
stated to rise to 40.6%. It is highly essential to enable these young people to join the labour
market through ALMPs. If SWP is applied with a view of helping this group to get to know
and experience the work environment and to gain professional skills, it can become an
effective kind of ALMPs that will ensure employments rates rising after graduation.
2. Methodology
The aim of this research is to recognize SWP applications and analyze the effects of these
applications on students. Thus, it will be evaluated through the eyes of students who have
iTurkey has the highest young NEET population amongst OECD member countries (Tas, et al., 2018),
standing at 26.7% as of February 2020 (TURKSTAT, 2020b).
Vol. 23 • No. 57 • May 2021 555

experienced the practice of how SWP serves its mission. The research questions are as
follows:
• Did the SWP practice contribute towards the students getting to know the labour
market?
• Did the SWP contribute towards the students’ developing their professional skills in
their area of expertise?
• What are the SWPs needs for reformation? Do university students think that SWP is a
useful application?
The study is designed under the cross-sectional and mixed methods. Cross-sectional research
aims to observe a sample during a certain timeframe (Tutar, 2020). The primary principle in
mixed methods research is expressed as gathering multiple data using different strategies,
methods, and approaches (Johnson and Turner, 2003). By using both quantitative and
qualitative approaches together, researchers can better understand and solve the problems
compared to using only one of these approaches (Creswell, 2006) and different views and
understandings that could be otherwise overlooked are brought into the light (Johnson and
Onwuegbuzie, 2004). Mixed methods research also used for increasing the generalization of
the data (Baki and Gokcek, 2012). By using mixed methods study, we thoroughly analyze
whether the SWP practices as a whole serve the purpose of getting to know and aim to
generalize these findings with more certainty.
The SWP was put into practice for the first time in Turkey during the June-September 2019
period. 20,000 students benefited from it in the first year. According to this, the research
population comprised of 20,000 students. In the instance of a 20,000 person, the primary
audience, the population size is calculated to be 377 participants for a 95% confidence interval
with a 5% error margin (Krejcie and Morgan, 1970). Based on this, a student group of 500
people from seven regions of Turkey has been randomly chosen for research (figure no. 2).
Figure no. 2. The regional distribution of the cities where the participants worked
In this study, questionnaire has been used for data collection. The questionnaire consists of
three parts. In the first part, eight questions with 5-point Likert scale answers have been
directed to students in order to determine the SWP’s performance in getting to know and
experiencing the workplace. The second part, it has comprised of 10 questions to specify the
participants’ demographic characteristics and correspondence of the work and the areas
where they are studying. As a last part, within the survey form, two open-ended questions

have been directed to the participants. One of these questions is how they express the overlap
and dissociation of the workplace and study area. The second question is what their criticisms
are towards SWP. The given answers have not turned into quantitative data by coding of the
research, thematic and illustrative analyses were used for strengthening the data during the
arguing of the quantitative data.
The SWP research has done after the commencement of the 2019-2020 educational term after
its first application in the summer of 2019. The reason for this particular timing as the start
of the education term is that the practice had just been completed, and the students still had
bright and fresh opinions about it. The questionnaire collection ended in November 2019
after the target sample size was reached. The contact information of the participants provided
by TEA. Also, the survey conducted online. Most of the students participated in the survey
via mobile devices. The quantitative and qualitative data within the research design obtained
simultaneously with the questions included in the same questionnaire. The data analysis was
carried out with independent use of methods within quantitative and qualitative approaches.
In the quantitative approach, descriptive and inferential technics were designed. Similarly,
the data gathered from open-ended questions were used to support the quantitative figures
directly with the applicants’ statements. The descriptive methods used were frequency and
percentage analysis, mean, mode, median and standard deviation. For the inferential analysis,
independent samples t-test was used. In terms of qualitative analysis, content analysis was
made, and a word cloud was generated. Before the creation of the word cloud,
similar/synonymous concepts were recorded by stating a joint concept that indicates the same
meaning. The Cronbach’s alpha consistency reliability coefficient of internal consistency is
used to estimate the internal consistency of the tools by that use a Likert-type weighted score
(Okursoy and Turan 2014). In this study, the Cronbach’s alpha value has been found to be
0.750. Tests with a Cronbach’s alpha coefficient between 0.70 and 0.80 is considered to have
very good reliability (Nunnaly, 1978; Alpar, 2011). Since the Cronbach’s alpha coefficient
of the questionnaire is between the given ranges, it is decided that it is possible to apply
statistical analysis on the data gathered from the survey.
3. Findings
When the demographic data are examined, it is observed that there are more females (70.2%)
than males. Also, there are more 21 years and above students (60.2%) than 18-20-year-olds.
Meanwhile, equal weight students (41.7%) constitute a more dominant group than others. In
addition, students with a GPA between 2.51-3.00 (35.8%) are the most remarkable group
(table no. 1).
Table no. 1. Demographic characteristics of the students
Groups Frequency % Groups Frequency %
Main Field of study GPA (On a Scale of 4)
Math 122 25.4

2.00-2.50 112 23.3
Verbal 81 16.9
Equal Weight 200 41.7 2.51-3.00 172 35.8
Vol. 23 • No. 57 • May 2021 557

Groups Frequency % Groups Frequency %
Main Field of study GPA (On a Scale of 4)
Basic
58 12.1 3.01-3.50 118 24.6
Competences*
Linguistics 19 4.0 3.51-4.00 78 16.3
Total 480 100.0 Total 480 100.0
Gender Age
Male 143 29.9 Between 18-20 191 39.9
Female 337 70.2 21 and above 289 60.2
Total 480 100.0 Total 480 100.0
* The score type used to place students into vocational schools of higher education.
Meanwhile, the students ideas about SWPs contribution to get to know the market have been
evaluated by the 5-point Likert scale at the level of I agree (59.4%). When the options I agree
and I completely agree are evaluated together, this ratio reaches 81.1%. The median score on
this item is 3.9813 (table no. 2). This score represents a high level on the interval scale in a
5-point scale ii. It is possible to say that SWP fulfilled an important function towards the
university students in getting to know the working life. According to this, the students had
the opportunity to get to know and experience working life in public workplaces.
Table no. 2. SWP’s Contribution in Getting to Know the Labour Market
¯
Frequency % % 𝒙𝒙 Median
I completely agree 104 21.7 4

81.1 3.9813
I agree 285 59.4 (I Agree)
Neither agree nor

79 16.5 16.5 Mode S.D.
disagree
I disagree 2 0.4
2.5 4
I completely disagree 10 2.1 0.76569
(I Agree)
Total 480 100.0 100.0
iiThe Likert component of 5 has a range of 4 points. This range has been split into five equal parts and
interpreted as between 1.00-1.79 is “very low”, 1.80-2.59 “low”, 2.60-3.39 “average”, 3.40-4.19
“high”, 4.20-5.00 “very high” (Yurekli and Kalfa, 2016).

SWP has created a significant change in students’ ideas about the work market’s
characteristics and entering the labour market. This change in students' ideas can be attributed
to the fact that they did not have any previous theoretical and practical knowledge about the
work market. It is understood that SWP has changed the ideas of 47% of the students’ about
the work market. While out of 33.8% of students are unsure about it, 19.2% of the students
have not changed in their ideas. The median of 3.36 corresponds to a score that is close to
the high level on the scale (table no. 3).
Table no. 3. The degree to which SWP has changed the students’ ideas
about the labour market
¯

47.0 3.3688 (Nor agree Nor
I agree 161 33.5 disagree)
Neither agree nor

162 33.8 33.8 Mode S.D.
disagree
I disagree 70 14.6
19.2 3
I completely disagree 22 4.6 (Neither agree 1.03562
Nor disagree)
Total 480 100.0 100.0
For students the idea of finding a job is difficult or not after graduation has been evaluated.
In this context, how much awareness students have reached regarding the transition to labour
force and difficulties during employment has been analyzed by SWP applications. The
students think that being employed is hard after the SWP experience (52.6%). 21.3% of the
students are undecided whether they will find a job after SWP. Moreover, 27.1% of the
students have not assessed the transition into the work-life as difficult (table no. 4). The
reasoning for the latter 27.1% of the group could be interpreted as them having done a work
placement with better correspondence to their field of education compared to the other
students, and because of them having better The Higher Education Institutions Examination
(YKS) iii scores and thus pursue their education in better-qualified universities. Another
reason for this finding could be that these students had prior work experience with pay.
Indeed, when this 27.1% is analyzed, it was found that 47% of these students have GPAs
over 3.00 (out of 4.00), and the remaining 53% have GPAs under 3.00.
iii TheHigher Education Institutions Examination is made for student’s selection to the university. YKS
is conducted by Measurement, Selection and Placement Center (OSYM) in order to place students in
higher education institutions on the basis of their preferences depending on their exam score. YKS
covers 3 sessions. First Session of YKS is the Basic Proficiency Test (TYT). Attending the first session
is mandatory for all candidates. The second session includes the Field Proficiency Test (AYT) and the
third session covers the Foreign Language Test (YDT). These two sessions are optional to attend. The
TYT includes the Turkish Test, Social Sciences Test, Basic Mathematics Test and Science Test. The
AYT covers the Turkish Language and Literature-Social Sciences-1 Test, Social Sciences-2 Test,
Mathematics Test and Science Test. YDT contains the German, Arabic, French, English and Russian
tests. All applications are made online via the web page on http://www.osym.gov.tr (OSYM, 2020).
Vol. 23 • No. 57 • May 2021 559

Table no. 4. Evaluation of the statement after SWP experience that it is difficult to
find a job after graduation
¯
I Completely agree 88 19.3 4

52.6 3.3729
I agree 160 33.3 (I Agree)
Neither agree nor

102 21.3 21.3 Mode S.D.
disagree
I don’t agree 103 21.5

27.1 4
Completely disagree 27 5.6 1.17049
(I Agree)
Total 480 100.0 100.0
The reason for the former group of students feeling that employment after graduation is easy
could be because of their high self-confidence due to deeming themselves successful. The
reason for the latter group could be that they had a working relationship before SWP and
having the experience of employment and sustaining a working relationship due to this.
When the effects of SWP on students’ professional experiences are evaluated, it can be seen
that 45.2% of the students could not gain (adequate) any professional experience after SWP
experience. On the contrary, 40.8% of students express that SWP added professional
experience to them. The median score of 2.83 indicates that the professional expertise gained
is on an average level. The most used score being 1 and average score being 3 shows that
SWP could not make enough contribution to their professional experience (table no. 5).
Table no. 5. Contribution of SWP to professional experience of students
¯

40.8 2.8396 (Nor Agree Nor
I agree 120 25.0 Disagree)
Neither agree nor

67 14.0 14.0 Mode S.D.
disagree
I don’t agree 85 17.7

45.2 1
I completely disagree 132 27.5 I Completely 1.46258
Disagree)
Total 480 100,0
According to the findings, it is understood that the students were appointed to individual
institutions without taking the field of education-work placement correspondence into account.
With this lack of relevance and the median score of 2.83 in mind, it is understood that SWP is
not an application that provides professional knowledge and skills to students. Furthermore, the

low ratio of professional skill gains was caused coincidentally, where the field of education-
work placement corresponded well. Meanwhile, it has been requested from the students that to
evaluate the SWPs contribution for themselves. Accordingly, the most highly ranked
contributions attained by students are getting to know the working life, generating income, and
forming good relationships with colleagues, respectively (table no. 6).
Table no. 6. Contributions of SWPs to the Students
Primary Secondary Tertiary

Contribution Contribution Contribution
Contribution
Frequency % Frequency % Frequency %
Getting to know the

213 44.4 148 30.8 87 18.1
working life
Generating income 128 26.7 156 32.5 152 31.7
Forming good
relationships with 51 10.6 129 26.9 161 33.5
colleagues
Gaining practical skills

72 15.0 32 6.7 49 10.2
in my field of study
Others 10 2.1 7 1.5 13 2.7
Unresponded 6 1.3 8 1.7 18 3.8
Total 480 100.0 480 100.0 480 100.0
The internship practices during one’s university education is a relatively short practice that
puts the students into the workplace and is similar to SWP in terms of its purpose and
application. Because of this similarity, it is expected that a significant difference will emerge
between students who have previously practiced internship and did not, in terms of
recognizing the labour market. In our study, the ratio of students who have done internships
amongst the students who participated in SWP is quite low (17.7%) (table no. 7). Thus, one
can argue that internship activities within the university curricula in which students can gain
practical skills by utilizing their technical knowledge is quite limited in Turkey. Even though
the GPAs of those who completed internships are high, it is not statistically significant at the
0.05 significance level (p=0.686 > 0.05). Thus, there is no statistically significant difference
between those who have or have not done professional practices such as internships. Looking
at table (table no. 7), one can argue that the students have benefited from having a chance to
put their knowledge into practice by joining the labour force in terms of knowing the labour
market. It is argued that the longer workplace practices are, the more detailed the knowledge
students have obtained (Arpat, et al., 2017).
Vol. 23 • No. 57 • May 2021 561

Table no. 7. The correlation between internship experience-SWP

in terms of getting to know the workplace
Doing ¯
Frequency % 𝒙𝒙 S.D. t df p
Internship
Yes 85 17.7 4.0118 0.66358

No 395 82.3 3.9747 0.78654
0.405 478 0.686
Levene’s p
Total 480 100.0
0.681
At the same time, university internships are criticized for not helping to gain professional
skills due to their shortness. When the effects on professional gains obtained by internships
and SWP are examined, it can be said that there is no statistically significant difference
between the two groups regarding gaining professional experience (p=0.959>0.05). Thus, all
students, whether they have completed internships or not, obtain similar professional gains
from SWP (table no. 8).
Table no. 8. The internship-SWP correlation in terms of gaining job experience
Doing ¯
Internship
Yes 85 17.7 2.8471 1.41847
No 395 82.3 2.8380 1.47365

0.052 478 0.959
Levene’s p
Total 480 100.0
0.399
In the other hand, the average scores of students who have prior work experience to SWP on
the getting to know the labour market is lower than students without experience.
The difference between the groups is statistically significant (%95 significance value, α=0.05
margin of error, p=0.041<0.05) (table no. 9).
Table no. 9. The effect of prior work practice on getting to know the labour market
Working ¯
State
Yes 182 37.9 3.8901 0.82033
No 298 62.1 4.0369 0.72612

-2.045 478 0.041
Levene’s p
Total 480 100.0
0.102

In this context, considering the effects of previous work experiences on professional skill
acquisition are evaluated. According to that, the average scores of gaining professional
experience for students who have no prior work experience is higher than students who had
prior job experience (table no. 10). But this difference is not statistically significant (95%
significance value, α=0.05 margin of error) (p=0.488>0.05). Thus, it is not possible to say
that having working experience before SWP makes a meaningful contribution towards
gaining professional experience.
Table no. 10. The effect of prior work practice on gaining professional skills
Previous
¯
Work Frequency % 𝒙𝒙 S.D. t df p
Experience
Yes 182 37.9 2.7802 1.48512
No 298 62.1 2.8758 1.44996

-0.695 478 0.488
Levene’s p
Total 480 100.0
0.258
Considering the relationship between the SWP students’ field of study and their assigned
work placement, it is seen that the students’ assigned workplaces and their fields of study are
largely unrelated or poorly connected (57.5%) (table no. 11). These scores shed light on the
reason why students participating in SWP claim not to have had professional contributions.
Table no. 11. The relationship between SWP and the field of study
Education-Work
¯
placement Frequency % % 𝒙𝒙 Median
relationship
No Relationship 181 37.7 2

57.5 2.3625 Poorly
Poor Relationship 95 19.8 Connected
Average
102 21.3 21.3 Mode S.D.
Relationship
High Relationship 53 11.0
Very High 21.2 1

49 10.2 1.34996
Relationship No Relationship
Total 480 100.0
Also, the open-ended questions base on participants’ non-quantitative observations show that
there are differences among students of social sciences, STEM students, and life sciences and
languages in terms of field of study-work placement relationship. While there is a closer
relationship between work placement and field of study for students in the field of social
sciences, this relationship is weakened for mathematics, engineering, languages, medicine
and nursing schools students (figure no. 3).
Vol. 23 • No. 57 • May 2021 563

Figure no. 3. Work placement and field of study relationship

In terms of work placement relevance, students majoring in social sciences said that the jobs
they did were more closely related to their fields of study. For example, a male participant
aged 23 from Ankara stated I’m studying sociology. I’ve worked in social services, and the
job I’ve worked was closely related to my major. Additionally, students who have worked in
humanities and social sciences areas such as psychology, social services, and call centers
have higher scores on the field of study-work placement correspondence. On the other hand,
students who have been studying engineering, science and languages complain about having
little overlap between their field of study and the work placement. For example, while a 21-
year-old female participant from Ankara says I’m studying Molecular Biology and Genetics.
I’ve been appointed to a nursing home. I’ve made photocopies of documents and filled in
record books all through my work experience. Another 20-year-old female participant from
Burdur has stated that there is no relationship between my work placement and the field of
my study. I’m studying Teachers of English to Speakers of Other Languages (TESOL). The
institution I’ve worked at was a youth center. If you ask me what I did, I’ve served tea and
copied documents… The word cloud gathered from the students' assessments of SWP also
supports these statements (figure no. 4).
Figure no. 4. The participants’ assessment of SWP in word cloud

The students express in their assessment of SWP that they have been appointed to places
without field of study-work placement relationship. Also they define workplace practices as
drudgery work which is not related to their field of study.

The students also state that they have been through problems with the appointment process
of TEA, have not paid (on time), and have had specific issues with other colleagues and
administrative groups. The other issues expressed by the students have been thematically
grouped as follows
• Problems about socio-economic rights
• Problems with the application
• Problems related to the working life
• Problems about occupational health and safety
Conclusion and recommendations

Just as in the global economy, youth unemployment consists of a significant problem in
Turkey as well, and the effectiveness of the ALMP practices gradually gains greater
importance. SWP is known as an older ALMP practice, however, with a new aspect of
appointing university graduates. SWP has first implemented during the 2019 summer period.
Since then, SWP has been assessed as useful and practical by the students, who will be part
of the labour force in the near future, in helping them get to know and experience the labour
market, generating income and having positive social interactions with other workers.
However, as the results of our field research show, SWP has been largely ineffective on
gaining professional skills with its practical dimension. Appointment of the students to their
workplaces without considering education-work placement relationship is prominently
evaluated as the main reason for this situation.
In general, SWP is an ALMP which is derived from PBP, is being carried out for the
university students to get to know the working life and gain professional discipline. However,
employing university graduates within public service solely for this purpose is not possible
to make a significant contribution to the fight against youth unemployment. When we
consider the reasons why students do not have the necessary skills for employment, we can
say that SWP is inadequate for solving this problem. In this aspect, SWP has to be redesigned
to help students obtaining skills relevant to their field of study. This is necessary to make
SWP a practical application and to utilize public funds optimally.
In our study the results indicate that students regard getting to know the work market as a
more significant advantage than getting paid. Regardless, university students still assess SWP
as an essential practice to create solutions to possible unemployment problems. Hence, the
field of study-work placement relationship and other improvements to SWP may help it
become a practical application that eases the transition into working life post-graduation and
helps increase youth employment. So, this can make significant contribution to solve the
current socio-economic problem rooted in youth unemployment. However, appointing
students with careful consideration of the field of study-work placement correspondence is
not possible since the application only includes jobs related to preserving nature, restoration,
protection and introduction of cultural heritage, the maintenance and order of libraries and
supporting the cultural and social services of public institutions. Since social services are
allotted only a small part of the overall budget in current economies, it is not possible to
ensure a high field of study-work placement relationship for all students even if all public
workplaces are included within the scope.
Vol. 23 • No. 57 • May 2021 565

In this context, private sector workplaces could be included within the scope. If the
application is made in the same period of the year, economic incentives can be given to
workplaces such as premiums and tax reductions. Thus, professional skill development and
cost advantages can be obtained. Furthermore, students may obtain high quality vocational
skills, abilities, and experience with practices available in the private sector. More students
may have access to this program with the economic benefits obtained. Thus the macro-
economic indicators of Turkey could get better, and socio-economic problems could be
solved. Also, it could also be possible that student-private sector interactions could be
increased, and universities could obtain information about the expectations regarding the
skills-abilities of the labour market and update their curricula accordingly with the
collaboration of universities and the industry. The practical implementation of the program
could also provide cost advantages. Especially, it reduces the training costs of workplaces
such as orientation processes for the students post-graduation.
Some universities in Turkey arrange work placement opportunities for their students under
the name of on-the-job training to gain skills-qualifications and get to know the working life
within the private sector for 14-16 weeks (per semester). These placements cannot take place
at public institutions, and few students utilize this opportunity since it is not part of their
universities’ curricula. By merging the on-the-job programs with SWPs under the
coordination of TEA and financing them with public funds, significant gains could be
obtained in terms of designing SWP to have an effective content and fighting against youth
unemployment. When employers need new labour, they will select people who have
experience before in their own company under the SWP instead of training new employees
which will decrease youth unemployment and make important contributions towards fighting
structural unemployment. To combat with youth unemployment, further research is needed
and it should be carried out within the frame of specifying the procedures and principles of
merging job training with the SWP practices of the public authorities as per the benefits
discussed in this paper. Briefly, SWPs, which aim to get to know the labour market and to
provide professional skills, it should also have an education-work harmony and cover private
sector workplaces and all students.
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AE 10 (ten) projects Internet of Things. Author: Radu Pietraru
Book Review
10 (ten) projects Internet of Things. Author: Radu Pietraru

Politehnica University of Bucharest, România
Please cite this article as:

Merezeanu D.M., 2021. Book Review: 10 (ten) projects Internet of Things. Author: Radu
Pietraru. Amfiteatru Economic, 23(57), pp.570-574.
DOI: 10.24818/EA/2021/57/570
The Internet of Things (IoT) is an increasingly widely used term lately, as people use smart
devices to take advantage of advanced features and their connectivity. At the same time,
however, given the multitude of devices, the Internet of Things also raises the issue of
security risks, for example as regards access to the local equipment or network to which they
belong, i.e. the collection of users' personal data.
Generically speaking, the Internet of Things includes any device
that can communicate with other devices over the Internet. From
the point of view of the field of use we identify two major areas
for the Internet of Things: the industrial field and the living
space. The main difference between the two areas is the
implementation scale.
The book 10 (ten) Internet of Things projects is aimed at those
who want to take the first steps in the world of the Internet of
Things. Over the course of 233 pages, the author aims to provide
readers with knowledge and skills in this fascinating field
through the realization of attractive projects, a total of ten in
number. Each of these projects is designed to highlight the
implementation of various aspects of the Internet of Things
domain. We will review the ten chapters of the book, insisting on the main ideas brought by
each project. The book is structured in ten chapters, with the author allocating a separate
chapter for each of the ten projects under discussion.
In the first chapter, “Internet of Flowers” is described the realization of a project for an
Internet monitoring system of environmental conditions (soil moisture and ambient
temperature) for houseplants ‒ flower pots or other decorative plants. Even if the intended
purpose for this project is limited to houseplants, it can be easily extended to plant
greenhouses or outdoor gardens.

The system includes data acquisition modules that measure soil moisture and ambient
temperature parameters and radio the measured values to a base module that allows the
logging of measurements in the io.adafruit cloud system. Internet logging then allows the
user to remotely track measurements and receive alerts through specific mechanisms (e.g.,
email). Access to the data is recorded on the io.adafruit server can be made from any station
or mobile system connected to the Internet via a web client. The stages of the project are
presented logically and clearly. Project development and improvement directions are also
suggested, going as far as transforming it from a simple purchasing system into an automatic
drive and/or adjustment system.
A second project, “Internet of Events” proposes to implement a simple mechanism for
monitoring events produced on the Internet. Typically, the user interacts with these events
through computer, laptop, tablet or smartphone equipment connected to the Internet. Usually,
these terminals do not allow the complete separation of the sources available online: in other
words, open the terminal to check if you have received an email and notice that you have a
message from a social network, finish the message and then an advertisement attracts you to
visit an online store with amazing discounts, etc. As a result, the user is constantly
manipulated by the flow of information from the online environment and unwittingly
becomes the prisoner of their events. Discipline of online activity is a difficult thing to do,
even for an experienced user. This is exactly what the project aims to do ‒ building a device
that only announces the occurrence of major events, without deceiving the user in the universe
of Internet temptations. The operation of the project is based on two online platforms: IFTTT
(online service to monitor the occurrence of events generated by various Internet
applications) and data.sparkfun.com.
The “Internet of Weather Stations” project addresses the realization of a weather station
system in two implementation variants. Both solutions allow remote reporting over the
Internet. The creation of a weather station system connected to the Internet is an interesting
challenge from a technical point of view and involves the appropriation of important concepts
related to the acquisition and processing of data from the environment but is also useful, such
a system can be used as a daily tool for reporting the weather. Weather station systems vary
widely in complexity (number of parameters purchased, operating environment, power
supply) and purpose (reporting, prediction, integration into a larger collection and prediction
system). This is why this project details two implementation variants, trying to cover as many
techniques used in the design and realization of this kind of systems. The two variants of
weather stations are: WiFi weather station and GPRS weather station respectively.
The first variant of implementation, WiFi weather station, is a data acquisition system for the
following parameters: air temperature and humidity, atmospheric pressure and intensity of
solar radiation; the system has no user interface, and information acquired from the
environment will be reported to the IoT ThingPeak service and can be accessed over the
Internet from anywhere and from any system. The station connects to the Internet via a WiFi
network connection; hence the result is the limitation of the urban use of the WiFi weather
station.
GPRS weather station, is a slightly more complex system, with possibilities of operating in
isolated environments. The GPRS weather station can acquire the following parameters from
the environment: wind speed and direction, amount of precipitation, air temperature and
humidity, atmospheric pressure and ultraviolet radiation factor. The purchased information
will be made remotely to the Weather Underground independent weather prediction service.
Vol. 23 • No. 57 • May 2021 571

This service allows forecasts based on information from a personal weather station. The
Weather Underground service complements the functionality of the weather station with the
history and prediction of the weather evolution and will also be how the user will be able to
view the information provided by the weather station. The system is based on Internet
communication via GSM 2G – GPRS mobile networks and can be located wherever there is
coverage of such a network – even in an isolated area. Autonomous operation in an isolated
area can be sustained by a battery-based rechargeable battery through a solar energy capture
system using a photovoltaic panel.
The “Internet of Solar Cells” project describes the development of a system for monitoring
the production capacity of electricity for photovoltaic panels. Monitoring elements,
measuring stations, are autonomous and will communicate wirelessly with a central station –
the Emoncms gateway station. The role of the central gateway station is to retrieve data from
all measuring stations and forward it via the Internet network to the emoncms.org server, a
dedicated server that provides specialized IoT services to monitor the production,
consumption and exchange of electricity. The user can then track from a smart mobile station
or device connected to the Internet the power generated by each photovoltaic panel, thus
being able to accurately assess the operating efficiency, the state of operation and the quality
of the location for each photovoltaic panel. The user has access to the stored data and reports
generated by Emoncms through a web browser or through the Android Emoncms Open
Energy Monitor Tools mobile app. The radio communication structure between the
measuring stations and the central gateway station has been chosen in such a way as to ensure
long-range reporting capacity, through the possibility of retransmitting information from one
station to another to the central station with low consumption – thus ensuring a long range of
measurement stations.
The “Internet of Lonely Cars” project examines the possibility of remote surveillance of
parked cars using LoRa long-range radio communications and details a simple and efficient
way of monitoring cars that stay in the parking lot for long periods. Given the likely large
distance between the parking space and a central monitoring station, the project uses a
433MHz LoRa (Long Range) ISM band radio transmission. Reporting of information from
the machine module is done to a basic module that is intended to forward via the Internet to
an IoT service the data received. Due to the technical characteristics of the LoRa module, the
radio transmission may have a coverage of several kilometers (up to 20 km). Thanks to
integration with the IoT service, information from the machine module can be viewed by the
user from anywhere via a web browser or mobile app. As with other projects, the operation
of the IoT system is based on two online data collection platforms: DeviceHub.net and
SmartLiving.
The “Internet of Sunsets” project presents an automatic solution for shooting and saving
sunset images in the cloud. Among the most sought after photos by all the beautiful
aficionados are those that capture the sunset. Obviously, choosing the perfect moment can
make the difference between a spectacular photo and a banal one. And how is it usually a
gamble to capture the exact moment when the sun casts the last rays before sunset by
reddening the sky and coloring the clouds what if we can do this automatically? Not just once,
but every day. It's exactly the goal of the “Internet of Sunsets” project – to photograph every
day sunset and save photography to the cloud and on a social network. It's an Internet-
connected video camera that's able to calculate every day what time the sun goes down, take

a snapshot, and save that photo on Dropbox. From Dropbox the photo will be automatically
transferred to the Facebook social network via the online service IFTTT.
The chapter “Internet of Homes” describes a project detailing the realization of a home
automation system made using the OpenHab platform, the Raspberry Pi development board
and wireless devices that allow temperature regulation, maintaining environmental
parameters (temperature and humidity) in certain ranges of values, controlling alternative
energy production (solar, wind energy), controlling and efficiency of electricity consumption,
and so on. The control interface can be accessed both from the local Raspberry Pi
development card network and via the Internet network using the myopenHAB cloud service.
An extremely interesting problem is that it explores the universe of artificial intelligence,
explored within the project “Internet of Talking Robots”, in which various solutions are
proposed to implement automatic conversation mechanisms. Automated conversation apps
are tools that are increasingly common on the Internet. Whether it's automated customer
support apps or just recreational apps, they're becoming increasingly complex and become
extremely important elements of Internet applications by introducing artificial intelligence
algorithms into their own operation. Naturally more and more devices such as mobile robots
or mobile communication devices acquire the ability to interact through natural language with
users and, moreover, become able to respond intelligently to their requests so that this
example is a reference one.
The “Internet of Wheels” project is studying the possibility of creating a mobile robotic
platform controlled by natural language (voice) using the IBM Bluemix cloud service. The
project involves several phases of development: the realization of the mobile platform, the
programming of the engine control card, the use of the IBM Bluemix service to implement
the voice command.
Last but not least, the “Internet of Things” project presents a LoRaWAN radio network
solution based on The Things Network platform. The project is of great interest, the field of
LoRaWAN networks being a very current topic. It is worth noting in particular that LoRa
modulation allows the transmission of data by radio waves at distances of kilometers or tens
of kilometers with very low energy consumption. Moreover, LoRaWAN specifications
enable the creation of networks of standardized electronic devices that communicate with the
Internet network via LoRa modulation (LoRa RF LoRaWAN), the LoRaWAN architecture
involving radio network nodes (acquisition or drive systems), gateway systems
(concentrators) linking the radio network to the Internet and software platforms for network
management and information flow. In addition to the construction of the purchasing system
and the gateway system, the project will use the TTN and IFTTT services as management
software platforms. Note also that all communications within a LoRaWAN network are
encrypted ensuring a high level of security to network data.
The book 10 (ten) Internet of Things projects is a true plea for a reality in which on can
identify an increasing trend of interconnection of objects from anywhere in a global network
of devices accessible over the Internet. The ten chapters of the book, one per each project
discussed, have a clear and unified structure. Sub-chapters are present in each chapter such
as: presentation of the components necessary for the realization of the project, description of
the project, presentation of the architectures of possible data acquisition modules and the
basic module, configuration of possible additional services, presentation of possible
developments of the project, bibliographic resources.
Vol. 23 • No. 57 • May 2021 573

Given the clarity of the presentation of ideas, the wealth of the bibliographic resources made
available, and the multitude of examples used as support for the ideas discussed in the ten
chapters of the book reviewed, I believe this book will be of real use to anyone who wants to
learn more about the IoT field and either has average technical knowledge or is even new to
the field but has a desire to learn.
About the author
Lecturer RADU PIETRARU, Ph.D.
Politehnica University of Bucharest, România
E-mail: radu.pietraru@upb.ro
Mr. Radu Pietraru is a graduate of the Faculty of Automatics and Computers, specializing in
“Systems Engineering”, Class of 2000. He graduated from the in-depth study cycle “Open
Architecture Systems” in 2001. He has been a doctor in the field of Systems Engineering
since 2009 and is a professor in the Department of Automatics and Industrial Informatics,
Polytechnic University of Bucharest, since 2000 he has held the undergraduate courses
“Integrated Microprocessor Systems”, “Microprocessor Systems” and “Performing
Computer Architects”.
He has published 7 books in the Romanian language of CNCSIS-recognized publishers and
more than 20 scientific papers. He is a member of the Romanian Society of Automatics and
Technical Informatics and is part of the editorial staff of the international magazine “Journal
of Control Engineering and Applied Informatics”. He has been the leader of more than
100 diploma and dissertation papers in the last 10 years. The main areas of research are
Internet of Things systems, Low Power Wide Area Network communication systems and
hazard management.

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Amfiteatru Economic Journal

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Challenges of IoT Technologies for Businesses and Consumers .................................. 321

Challenges of IoT Technologies for Businesses and Consumers

The IoT Technologies Acceptance in Education by the Students

Factors That Influence the Adoption of the Internet of Things

Wearable Technology Adoption Among Romanian Students:

Business Model Innovation for IoT Solutions: An Exploratory Study

Usage of Neural-Based Predictive Modeling and IIoT

Intrusiveness and Data Protection in Iot Solutions

Internet of Things (IoT), Challenges and Perspectives in Romania:

Vol. 23 • No. 57 • May 2021 319

Assessment of the Role of a Leader in Shaping Sustainable

Quantitative Assessment of the Dynamics of Socioeconomic Processes ...................... 504

Inflation Forecasting in the Western Balkans and EU:

Amfiteatru Economic recommends

An Assessment of the Social Work Program in Turkey in Terms

320 Amfiteatru Economic

Please cite this article as:

Vol. 23 • No. 57 • May 2021 321

322 Amfiteatru Economic

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Challenges of IoT Technologies for Businesses and Consumers

The IoT Technologies Acceptance in Education by the Students

Factors That Influence the Adoption of the Internet of Things

Wearable Technology Adoption Among Romanian Students:

Business Model Innovation for IoT Solutions: An Exploratory Study

Usage of Neural-Based Predictive Modeling and IIoT

Intrusiveness and Data Protection in Iot Solutions

Internet of Things (IoT), Challenges and Perspectives in Romania:

324 Amfiteatru Economic

ADOPTING IoT-BASED SOLUTIONS FOR SMART HOMES.

Please cite this article as: Article History

∗ Corresponding author, Irina Albăstroiu ‒ e-mail: irina.albastroiu@com.ase.ro

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• identification – have an unique identifier and can be recognized either by an

328 Amfiteatru Economic

• Regarding Industrial IoT, applicability of IoT technologies would allow an increased

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330 Amfiteatru Economic

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3. Results and discussions

332 Amfiteatru Economic

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Table no. 4. Diagnostic tests of the binary logistic regression model

336 Amfiteatru Economic

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