Methods

The research method for this thesis has been developed in reference to the main research area issues. A mixed method has been employed to examine the extent to which SOEs are successful in attaining the government’s objectives. Qualitative methods are used to investigate the issues which are developed as the propositions. The methods used to evaluate the propositions are historical path, interpretative and content analysis. Quantitative methods—two-sample t-test and regression test—are employed to examine the hypotheses. This section is developed into three sub-sections: historical path analysis, content analysis and quantitative method.

5.1.1 Historical Path Analysis

Historical path analysis is selected as the analysis tool because the method focuses on history and path or sequence events, which are key factors for this thesis. The key topic of this thesis is changes where sequences of time as evolution are crucial. From the conceptual framework in Chapter 3, a historical path is developed by combining path dependence and the historical method as the framework for analysing the phenomena of change in the government’s objectives for SOEs and SOEs’ structure and objectives. Path analysis points out the important role of continuing events during a period, while an event that is unrelated may influence the variable or continuity (Newman, 2000). Historical analysis has also been selected to examine the cause–effect and movement of the events during the process of change. Time is the main factor in the historical method, as it reconstructs or tells what has happened and seeks to untangle complex causes and movements of human events in the past (Smith and Lux, 1993).

The selection of historical path analysis is based on the knowledge gaps identified in the literature review in Chapter 2, as well as problems identified in Chapter 1. The literature review in Chapter 2 underlined that the government’s policy and objectives statement for SOEs is often related to the situation when the SOE is established. The review also mentioned the possibility of the government and firms making changes driven by changes in the market or political environment. Historical analysis provides procedures that allow the researcher to investigate the issues deeply and to eliminate these potential bias issues, while path analysis emphasises the evolution and changes. There are two approaches in the historical study: constructionist/hermeneutic, which focuses on changes or continuity over time; and positivist, which emphasises data analysis to interpret and present causal evidence (Thompson, 2010). For this study, both the constructionist and positivist approaches are combined and employed. The positivist approach is utilised to examine changes by identifying the causal evidence, while the constructionist approach uses continuity events as the key analysis.

The selection of the historical path analysis method for this study has been motivated by some considerations. The most important reason is the relation between the research method, hypothesis, framework and research questions. The main research question, propositions and hypotheses focus on the evolution of government policy and objectives for SOEs. There are some advantages of historical analysis. First, it provides procedures and rules that help the researcher to collect the evidence and facts based on connections among facts, including the interpretation and selection of facts (Lucey, 1984). Further, it gives researchers procedures to reconstruct the past, and it explains the complex causes of change, demonstrates the persistence of phenomena and analyses the trends (Smith and Lux, 1993). Second, the historical analysis method offers possibilities for the researcher to search and make deep considerations regarding contemporary issues, including factors that influence the issue (Lucey, 1984; Parker, 2004; Rowlinson, 2004), along with the possibility of obtaining insights into the precedents and conditioning factors (Parker, 1997). This method gives researchers the opportunity to search values, relationships, significance, causation and explanations of certain events or facts (Parker, 2004). Third, using the historical analysis method, the government’s policies and objectives are reconstructed, and the researcher can identify whether the changes have consequences for the current structure and performance. Meanwhile, path analysis is combined, as it focuses on chronological constraints and unusual deviations. The continuity of events, times, places and manners is used to evaluate the events by developing a map of the periodisation or sequence of events. The historical analysis method systematically collects all possible facts and information and then examines them through chronological constraints before presenting them as knowledge or proof (Lucey, 1984). At the same time, path analysis is utilised to identify and analyse the crucial events that significantly affect the evolution. Based on these results, the past is reconstructed by developing a map of periodisation or events. This process is the historical path analyst’s main concern.

As part of this historical method, interpretive analysis is employed to support the historical path analysis. It is utilised to help understand the meaning and content of the data. As mentioned previously, the government’s policy and objectives statement is often biased or vague; thus, interpretive analysis is expected to reduce these barriers by focusing on the meaning of each objective and policy statement as a text. Interpretive analysis brings sense to text or text analogues that are found in hermeneutic studies about interpretation (Myers, 1994). The importance of meaning in analysing the government’s policy and objectives is examined using interpretative analysis.

Historical analysis is employed to analyse the propositions. It is utilised to reconstruct the government’s objectives for SOEs based on evolution and historical changes. There are two parts to

the analysis of SOEs’ evolution. The first part is the structure and objectives of SOEs during the period of evolution, from 1945 to 2010. The second part is the structure and objectives of SOEs and new privatised firms after the introduction of fast-track privatisation during 2004 to 2010. Detailed data analysis is presented in Section 5.4.

5.1.2 Content Analysis for Evaluating the Government-Stated Objectives

Content analysis has been selected as the second qualitative method to analyse the implications of the government’s policy on SOEs’ objectives. The selection of content analysis is mainly rationalised by the importance of the text (Duriau et al., 2007). The literature review in Chapter 2 emphasised that the government’s policy and objectives statement is potentially biased or vague (Ramamurti, 1987; Zif, 1981) and it is not clearly elaborated for public sector firms (Wong, 2004). This ambiguity is a reason for this thesis to employ content analysis. Content analysis is used to reveal the implicit and explicit meanings of government policy for SOEs using documents and archival records when the policy was developed and promulgated. Neumann (2006) suggested that content analysis could be used to reveal the unseen or difficult aspects of a text’s content (Neumann, 2006).

The advantage of content analysis is the detail of the information. The relations and implications of the government’s policy and objectives on SOEs are important aspects of analysis. The government and SOEs’ manuscripts are the focus of resources to gain detailed information, both explicit and implicit, that significantly affects SOEs’ objectives. A deeper meaning of the text and the latent content will enrich the interpretation. Content analysis is employed to understand the content and text related to the government and the privatisation policy, which affects SOEs’ objectives and business activities. This is an important part of this study, as content analysis also engages with value, intention and cognition. Content analysis is specifically utilised for this thesis to explore the message, value and intention of the government-stated objectives for SOEs. This message, value and intention are reflected through policies and regulations where the deep meaning of the content and text is investigated for the purpose of this thesis.

The next step of the content analysis method is coding, which is utilised to quantitatively analyse the content and text from every manuscript, particularly those that have similar values, intentions and meanings. Coding is developed to describe the message based on the quantitative approach. Berelson (cited in Marshal and Rossman, 2006) described content analysis as an objective and neutral way of obtaining a quantitative description of the content of various forms of communication; thus, it was important to count the number of times that specific items were mentioned (Marshall and Rossman, 2006). The content or information is selected based on what was written—both word and theme—in the policies and reports. As part of this process, the content or

information is counted to find the frequency with which the information appears (Neumann, 2006). The next step is to record all of the content or information from the government’s policies and SOEs’ reports that indicate the objectives. Coding is classified into various categories based on patterns, themes and chronological events of policy changes. In this method, the objectives are identified and then categorised into social and economic objectives. This method is also employed to identify the dominant objectives based on the frequency with which they appear. These objectives are then used as ‘variables’, which examine whether each institution makes any changes during the period of study. Two key processes of content analysis in this thesis are the meaning and coding as the basis for further quantitative analysis.

Interpretive analysis is also employed in this thesis to help understand the meaning and context of the data. Interpretive analysis focuses on the text as the object of study, which is important for the study in order to ensure that the text is clear, coherent and makes sense (Myers, 1994; Maitland- Gholson and Ettinger, 1994). For this study, interpretive analysis is employed to understand the meaning, sense and coherence of each text or text analogue found in the archival records. Interpretive analysis is employed because the main data for this study are government and SOEs’ public records. Interpretive analysis is utilised to evaluate the statements and eliminate the bias that is often found within government records. Some record statements may be written in general terms for a particular purpose, or the source and value of the policy may not be explicitly stated or interpreted as stated (Furgeson et al., 2008). These situations may cause these laws and regulations to be interpreted broadly or in different ways. Therefore, interpretive analysis is employed to make both the text and text analogues clear and coherent.

5.1.3 Quantitative Method for Relations and Performance Measurement

There are two main purposes for employing the quantitative method. The first is to examine whether Indonesian SOEs successfully attain the government’s objectives. The second is to evaluate whether changes in objectives affect SOEs’ performance. Therefore, this section focuses on providing the methods for measuring the relations and implications of the government’s objectives on SOEs’ business activities as reflected in their performance. Financial performance indicators and quantitative tools are utilised to test the relations and implications of the objectives and performance. Two statistic parameters—two-sample t-test and regression model—are used to test these relations and implications of the government’s objectives and performance.

A mixed method of qualitative and quantitative analysis is employed because both methods complement each other. A combination of both qualitative and quantitative methods is an effective way to conduct research where validity is crucial. A study of mixed methods notes that the

quantitative method can identify the representative sample, while the qualitative method assists in the development of conceptual and instruments of analysis (Johnson et al., 2007). From the historical path and content analyses, conceptual changes are developed based on patterns, while instruments of analysis are established based on the identifying samples. Later, quantitative analysis is employed to confirm and support the analysis by providing richer data and results (Johnson et al., 2007). The relations and performance implications are measured as the quantitative method for this study, and the method aims to support and confirm the results.

Measuring performance is an effective tool for evaluating the effectiveness of the control system and achieving the objectives. There are many tools for measuring the effectiveness of companies’ operations. The most common tool is a financial statement such as earning per share (EPS), economic value added (Devarajan et al., 1996) or accounting system. Most of these indicators declare to be effective tools in presenting performance. However, there is no single performance indicator that is accepted worldwide as the most effective control for business processes (Monks and Minow, 2008), as most performance indicators have limitations. For example, they can only present a picture of the company in a limited framework, period or field of performance. Most tools demonstrate a lack of presenting the whole picture of the corporation. The lack of a single performance indicator is clear when it is applied to SOEs. For example, the implementation of common performance measurements, such as private companies, may not be suitable for SOEs. In several cases, measuring SOEs’ performance is commonly based on the benchmark across similar industries (Morck and Stangeland, 1996). In practice, this measuring tool cannot accommodate the social welfare and non-economic objectives. The measuring tool potentially causes problems when it is not suitable for the objectives. For example, employment productivity may not be a good tool for SOEs when employment creation is part of the objective. In this thesis, some financial performances are employed as representative of SOEs’ social welfare. This is described in detail in Chapter 10. Two statistic parameters are employed in this thesis: two-sample t-test and regression model. The two-sample t-test has been selected to determine whether the objectives cause SOEs’ financial performance to present differently from those without the objectives. The result from this test will signify whether the objectives have a relationship to SOEs’ financial performance. Further, the regression model is used to examine and estimate the relationship between independent variables (objectives) and dependent variables (SOEs’ financial performance) where the dependent variables (performance) are specifically selected from all possible values of independent variables (Groebner et al., 2005). To support the analysis, the regression model is used to examine the value or implication of objectives on SOEs’ performance. A similar model is used to test whether the

objectives are complementary or conflicting. From this test, a further evaluation is conducted to test whether the conflicting objectives affect SOEs’ performance.

5.2 Unit Analysis

Unit analysis is key case or variable in research analysis. It is defined as a kind of case, phenomenon or variable that is collected, researched and analysed (Collis and Hussey, 2003). In social science, unit analysis is determined as a case or social phenomenon where concept and measuring tools are developed in data analysis (Neumann, 2006). From these definitions, unit analysis contains two key factors: a case and an analysis tool or process. Unit analysis varies depending on the main purpose of the study. The rule for the best selection of unit analysis is the lower or simple level of the phenomenon, individual case or variable, event, object, relationship or aggregate (Collis and Hussey, 2003). In this study, unit analysis is a relationship between the government and SOEs in the context of objectives.

The objectives are the variables of analysis. Variables are determined based on whether the objectives are changed following changes in the government’s objectives and policy. Objectives are also used to measure the extent to which they affect SOEs’ performance. Early studies that presented the influence of the government’s socio-political objectives on SOEs’ performance are identified through the effect of the company’s inefficiency and loss (Aivazian et al., 2005; Bhatt, 1984; Guthrie and English, 1997; Hill, 1982; Morley et al., 1999; Willner, 1999). This study mainly focuses on the emergence and effect of multiple objectives, and the relations of objectives with measureable performance. The reason to focus on these variables is the existence of multiple objectives and characteristic differences that may provide an opportunity for this thesis to develop a new theory of SOEs. However, measuring SOEs’ objectives is not easy. Performance measurements for these social welfare objectives often raise a number of critiques. The issue of determining the framework of social objectives as the government’s objectives is still controversial among a number of researchers, as the accountability will be biased unless there is a clear definition of social objectives (Baird, 2001). Several financial performances can be used as a representative of social welfare financial measurements such as tax or employees. In this thesis, unit analysis uses the government’s objectives as stated or found through the government and SOEs’ public data, and SOEs’ performance as shown in their financial reports.