Topic: an investigation into the effect of balance score card adoption on the profitability of firms in emerging economies. A case study of Malaysian and Indonesian firmsResearch Methodology 3.1 Introduction Rajasekar, Philominathan & Chinnathanbil (2006) described research methodology as procedures researchers adopted in their work of describing, explaining and predicting a phenomena. The efficacy of a research outcome depends on the robustness and reliability of the methodology adopted, hence research methodology can be considered as the most significant aspect of any research study (Clark & Creswell, 2004). From the above description of research methodology, it can be deducted that the sole aim of a research methodology is to provide the work plan of a research. 3.2 Research process onion Saunders, Lewis & Thornhill (2009) developed a research methodology in the form of an onion. The research problem rest in the centre, the layers are the important processes that must be considered in determining the research methodology for a specific research study. This chapter will be adopting the steps presented by the research process onion in presenting the research design for this study. 3.3 Research design 3.3.1 Research philosophy. According to Fig 3.1 above, a research study can adopt either positivism, realism or interpretivism as its research philosophy. Johnson and Clark (2006) pointed out that researchers need to be aware of the philosophical commitment they adhere to, through their research strategy since this has significant impact on the both what they do and also on what they understand that they are investigating. To start with, Realism proposes the fact that most aspect of our reality exists in-dependable of human thoughts and knowledge of their existence, and it is interpreted through social conditioning (Saunders, Lewis & Thornhill (2009). Since realism concentrate on the philosophical nature of research, it is not appropriate for this research. Robson (2011) pointed out that positivism philosophy, is that cause is established through demonstrating empirical regularities or constant conjunctions. Positivism is the philosophy that suite this research, but the data for a positivistic study must be factual and incorporate large data observation for analysis. Therefore, this study includes interpretivism stance to its philosophy as it has too small sample for the positivist domain and requires analysis that is influenced by the analyst. Collis & Hussey (2009) pointed out that Interpretivism involves an inductive process with the view of providing interpretative understanding of social phenomena with a specific context. The study is on the impact of balanced scorecard on the financial performance of firms in emerging economies. There exist observable social reality and there are existing theories relevant to this study, the priority of this study is to verify if such theory hold true in this case study. Therefore, the research philosophy for this study is between positivism and interpretivism philosophy. 3.3.2 Research Approach According to the research process onion (Fig 3.1), there are two approaches to a research study (inductive and deductive approach). Saunders, Lewis & Thornhill (2009) stated that inductive approach involves the collection of data and observation, which are then organised and developed into a theory. While deductive approach moves from theory to data. Saunders, Lewis & Thornhill (2009) stipulated that deductive approach involve the identification of relevant literature review which result to the construction of hypothesis which are tested to either credit or discredit the theories. A deductive approach (Robson, 2011) is adopted where pre-existing theoretical ideas or concepts are tested. This study has adopted the use of appropriate variables, and the relationship between variable will be determined by testing already formed hypothesis. This research at the end will raise observations that will either approve or disapprove the theories, which will result to the modification or formulation of new theories. 3.3.3 Research Strategy There are lots of research strategy that are proposed in the research onion in fig 3.1, ranging from experimental to action research. These are strategies a researcher can adopt to obtain a significant and credible result. What is the best suitable strategy for this research? This study is clearly not an action research. The grounded theory and ethnography theory methods both stems from inductive approach and this research is a deductive one. They are not appropriate for this study. The strategy that is appropriate for this study is the case study method. Robson (2002) described a case study method as a strategy for doing research which involves an empirical investigation of a specific contemporary phenomena within its real life context using a multiple sources of evidence. This study focusses on a single case study, though it is investigating the effect of balance scorecard adoption on profitability of firms in emerging economies. The study selected a as a single point of concentration, the effect on profitability for its examination. According to Morris and Wood (1991) the case study method help in understanding of the context research answering questions, which are why? What? And how? The interest of this study is to show: why firms adopt balanced scorecard, what are the effects of the balanced scorecard adoption on the profitability of firms, how can it be implemented so as to enhance the profitability of firms in emerging economies. 3.3.4 Time Horizon for the research The time horizon for the study to be conducted is a major concentration for the methodology adopted for this study. Based on the research process onion (Fig 3.1), a study can be cross sectional or longitudinal. A cross-sectional study takes place when a phenomena is studied at a specified time period (Saunders, Lewis & Thornhill, 2009). This study is a longitudinal study. It is an investigation into the financial performances of firms in emerging economies in five years before and five years after adopting the balanced scorecard (10-years period). Longitudinal studies according to Sekaran & Bougie (2010) is a study in which the researcher want to study a phenomena at more than one period in time in order to answer the research question. The idea of conducting this study over a period of time is to better understand and study changes and effects on the profitability of firms before and after the balanced scorecard adoption. 3.4 Method of data collection This study involve an empirical study of the profitability of firms in Malaysia and Indonesia, five years before and five years after implementation of the balanced scorecard. Annual financial data were collected for this period. The historic annual financial performance data were all secondary and were downloaded from Osiris database and each firm s annual report on their website. (Found in the appendices). 3.5 Data Reliability and Validity Saunders, Lewis & Thornhill (2009) stated that in a research design, much attention needs to be paid on data reliability and validity so as to reduce the possibility of getting the answer wrong. Therefore, it is necessary to verify the reliability and validity of the data collected for this research study because it will determine the credibility and accuracy of this research findings. Reliability of data is concerned with the credibility of research findings and it ensures that the evidence and conclusions stand up to the closest scrutiny (Hussey & Hussey, 1997). According to Saunders, Lewis & Thornhill (2009) a reliable data is capable of answering satisfactorily these questions: Will the data and measures yield the same results on other occasions? Will similar observations be reached by other observers? Is there transparency in how sense was made from the data? The data employed for this study are all secondary data. They are historic data records of the profitability of each firm recorded over the years. The source of the data is from Osiris database and each firm s annual report, a publication accessible on each firm s website that publishes the annual financial performances of each firm. Therefore the data from the profitability performance are evaluated through their performances in their profitability ratios such as their annual profit margin, return on equity (ROE), return on assets (ROA), earning per share (EPS) etc. Validity of a data is the extent to which findings accurately represent what is really happening in the situation (Hussey & Hussey, 1997). The source of the data makes the validity of the data fit for this study. The research philosophy and research approach is the exact method adopted by various researchers who have conducted related studies. 3.6 Method of data analysis Robson (2011) identified the fact that data collected does not speak for themselves since they are in the raw form this is influenced by the researcher and their analytical capability which can sometimes lead to biasness and needs to be managed. They need to be analysed to unleash the hidden messages. This study focuses on Maybank (experimental group), AMMB Bank and Hong Leong Bank (control groups) from Malaysia banking sector, and Bank Mandiri (experimental group), Rakyat Bank and Panin Bank (Control groups) from Indonesia banking sector. All the firms are among the top multinational banks in Asia (In annual revenue ranking 2015). To perform a multiple case comparative study this study employed a rigid ?quasi-experimental analysis method . The data collected are from five (5) years before and five (5) years after balanced scorecard was implemented in each company. Differences of financial performance and accomplishment of strategic goals before and after implementing the balanced scorecard was observed. Thorpe & Lowe (2002) stated that this method of data analysis evaluate a range of designs which make use of multiple measures over-time in order to reduce the effects of control and experimental groups not fully matched. Financial performance data was collected from the annual report of all the companies, five years before and after the experimental groups implemented the balanced scorecard. The significance of the control group was to be compared with the experimental data regarding the financial performance and accomplishment of strategic goals. In a series of comparison of financial performance, it is expected that the experimental data should maintain a steady accomplishment of financial targets or a higher degree of financial performance than the control data. The financial performance of all the firms will be analysed by using a couple of profitability ratios such as: Earnings per share (EPS) = (Net income/ average outstanding common shares). Profit margin= (net income / net sales). Return on assets (ROA) = (net profits/average total assets). Return on equity (ROE) = (net income/ average stockholders equity). The profitability ratios will be calculated with the data before tax was paid, so as to fairly compare the financial performance of firms in Malaysian and Indonesian. This is necessary because of the fact that companies are taxed at different rates and rules. 3.7 Limitation of the Methodology Hussey & Hussey (1997) stated that limitations identifies potential weaknesses in a research. Therefore it is paramount to this study that effort should be made to collect valid and reliable data and analyse it in an objective form so as to produce a high quality academic research. The main limitation of this study may stems from the control of certain variables that may be of much influence to the research data. Such variables includes: Credit crunch which may be as a result of market forces or the effect of the 1997 and 1998 Asian financial crises (Beng &Ying, 2001) or the effect the 2007 and 2008 global financial crisis (Goldstein & Xie, 2009). Partial or full adoption of the balanced scorecard. Interest rate policy such as the Indonesia (2005) negative (-25%) interest rate policy which led to Indonesian economic stagnation and increase in inflation and unemployment in Indonesia. Adoption of other strategic tools such as the ABC chart or customer value analysis (CVA). Environmental challenges, such as earthquakes and air pollution that confronted Malaysian in the 2007 and 2008. Another limitation of this study is the fact that it deals exclusively on the financial performance of companies before and after balanced scorecard adoption. The researcher did not include other balanced scorecard perspectives because of the researcher s inability to access the actual performance data of the three other perspectives of the balanced scorecard (Customer perspective, internal business process perspective and learning and growth perspective). The time-period specified for the financial performance data collection also create another form of limitation. The research is conducted over time-period of ten years (five years before and five years after adoption of the balanced scorecard) and this may be insufficient for robust review. Another limitation stems from the fact that this research excluded small and medium enterprise firms in Malaysia and Indonesia, as most annual report of small and medium enterprise in Malaysia and Indonesia were not written in English language but were written in their nation language and the researcher cannot interpret it. However, this research should include small and medium enterprise firms so as to give room for generalisation of result after conducting the study for future research.3.8 Summary Fig 3.2 Summary of chapter 3 This chapter described the methodology employed in this research, it was stated that the research approach was a deductive one and the research philosophy is primarily interpretivist. The method of data collection and analysis and the limitations were also discussed.