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The IUP Journal of Managerial Economics

This issue contains four research papers. The issue opens with a research paper on the relevance of small enterprises and entrepreneurship in the development prospects of North Eastern India. The North Eastern Region (NER) of India has had problems with regard to making the most appropriate use of the relatively abundant supply of the natural resources it is endowed with. The Central Government had created the North Eastern Council (NEC) as a special grant disbursement, allocation, and planning body with representatives from all the states of this region. However, arguably, not enough has been achieved in making the best use of the significant literacy and education levels among the youth. Therefore, this paper titled, "Potentials of Village and Small Enterprise Sector in the North Eastern Region of India", by an academician serving this region, S K Mishra, is a very important addition to the existing literature on the region. The author has used very elaborate data to discuss the possibility of using small industrial units in areas like food-processing and handicrafts to bolster growth and development in the region. He has also brought his knowledge of the literature of institutional economics dating back to the remarkable work by Thorstein Veblen. This contribution is considered valuable since it discusses the basic philosophy of economic organization.

The second paper, "R&D and the Persistence of Profits" by two Swedish authors, Johan E Eklund and Daniel Wiberg, carries out a study on the correlation between R&D expenditures of firms and increase in profits as a result of it. This is an interesting study since it has always been an open question as to whether such kind of investments have a payoff in terms of bottom lines and if so, what are the conditions. Although economic theory tells us that profits above the industry norm cannot persist in the absence of significant barriers to entry and exit, evidence continues to accumulate contrary to this supposition. This study adds to the growing literature that emphasizes dynamic analysis while trying to estimate the determinants of firm and industry profits.

The third paper, "On R&D Investment", by Massoud Khazabi, discusses yet another feature of R&D, viz., gains from disclosures of breakthrough research. There is always a trade off in the competitive oligopoly market for more than one reason. It is similar to disclosures by oil exploration firms regarding their finds. On the one hand, the firms can be robbed of a sustained exploitation of the findings by further research. On the other hand, it offers a chance to pitchfork the firm into a higher share value firm globally, with all the related financial benefits in the long run. The paper presents a theoretical model of R&D investment and extensively studies the expensing policy of the development-related costs. By developing an R&D model, the paper demonstrates how different market elements could alter the monopolist's innovation investment and expensing decision-making process.

The final paper, "An Econometric Analysis of Personal Consumption Expenditure in Ethiopia", by Ch. Paramaiah and Oman Amulu Akway, studies the personal consumption expenditure of a strife and famine ridden nation, Ethiopia. This study uses specific data sources to explore the determinants of personal consumption expenditure in Ethiopia, and tries to update the data series by including other explanatory variables. The authors have used variations of models from Keynesian Macroeconomics to study and comment on the nature of factors influencing the consumption expenditure. A backward nation like Ethiopia must be more concerned about avoiding wastage of resources that can occur due to market forces. This study conveys an important message to the governments of all developing nations.

- Syamasundar Tallury
Consulting Editor

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.


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Managerial Economics