Commercial Use of the
Euro
by European
Companies Prior to Mandatory Adoption
Yvonne M. van Everdingen
ERASMUSUNIVERSITYROTTERDAMGary J. Bamossy
VRIJEUNIVERSITYAMSTERDAM ANDUNIVERSITY OFUTAH
Based on the diffusion literature and an extensive pilot study among CFOs moving towards these two goals, member states have struggled over the past four decades with the political and economic
of European firms and European banking experts, a conceptual adoption
model identifying the various sets of factors that influence the adoption processes of realizing a European Monetary Union (EMU) with a single European currency. The Maastricht Treaty, signed at
of theEurofor commercial purposes was developed and tested.1These
factors fit into four broad categories: the perceived innovation characteris- the end of 1991 and ratified in 1992 by all member states of the European Union (EU), provided a clear political
commit-tics, perceptions of the political and business environment, organizational
characteristics, and internal communication behavior. A series of logit ment to achieve a European Monetary Union (EMU) with a single European currency before the end of this century.
analysis on these factors was carried out based on survey data collected
from a sample of 214 firms across five European countries (The Nether- European Monetary Union and the use of theEurowill become a “practicing reality” for financial institutions, banks, and
fi-lands, Italy, France, Germany, and the United Kingdom). This sample
includes 77 organizations that have already adopted theEuroand 137 nancial managers of European companies on January 1, 1999. This first phase of adopting and using theEurowill be
com-nonadopter organizations. Survey results show that tangible advantages,
such as task simplification and degree of network externalities increased prised of all EU countries except Greece, which has not as yet qualified for membership based on economic performance
the likelihood ofEuroadoption prior to the mandatory 1999 date, as do
strong positive signals within a company from Chief Financial Officers figures of 1997, while Sweden, Denmark, and the United Kingdom, have opted to remain out until a future date.
and top management. Concerns about the costs of switching over to the
Euroand negative perceptions regarding the political turmoil on the road The Euro, then known as the ECU, a basket of national currencies of the EU member states, came into existence in
to European Monetary Union significantly reduced the likelihood of using
1979 as an integral part of the European Monetary System
the Euro. Both the quantitative survey data and the qualitative interview
for the purposes of stabilizing the exchange rates of the EU
data suggest a degree of ambivalence on the part of European managers
currencies. Currently, theEuro is used by many companies
regarding the use of theEuroprior to the upcoming mandatory adoption
primarily as a financial instrument for purposes of borrowing,
date of 1999. J BUSN RES2000. 48.123–133. 2000 Elsevier Science
investing, and the issuing of share capital. In contrast, the
Inc. All rights reserved.
commercial use of the Euro, such as internal and external invoicing, settlements, pricing, and budgeting, is a rather new phenomenon and can be considered an innovation that is languishing in the introductory stage of adoption. At the start
S
ince as early as the 1960s, European countries have beenof our study, the share of the Euro as an instrument for involved in a dialogue expressing the desirability for
settlements regarding international import and export activi-political and monetary union. In the long process of
ties was, on average, less than 1% of total trade volume (Com-mittee of Governors of the Central Banks, 1992). “It is, how-Address correspondence to G. J. Bamossy, Department of Marketing, Univer- ever, the domain in which the Euro should increasingly be sity of Utah, Salt Lake City, UT 84112, USA.
1The Euro is the official name of the currency. Throughout much of the used during the transition period in order to become Europe’s historical development of the European Monetary Union, the monetary unit common currency.” TheEuro’s development is necessary to was referred to as the ECU (European Currency Unit). At the time of the
field study, the term “ECU” was also used. ensure the neutrality of the monetary integration process and Journal of Business Research 48, 123–133 (2000)
2000 Elsevier Science Inc. All rights reserved. ISSN 0148-2963/00/$–see front matter
to familiarize the markets with theEuroand with its advantages teristics, such as size and the degree of international orienta-tion of a company positively influence the adoporienta-tion decision of as a common currency (Commission of European
Communi-organizations (Gatignon and Robertson, 1989; Rogers, 1995; ties, 1991, pp. 137–141).
Frambach, forthcoming). Also, dimensions of the corporate Given the importance of expanding the acceptance and
culture such as the resistance to change and the level of uses of theEuroduring the transition stage towards full EMU,
conflict have been found to influence the adoption behavior the purpose of this study is to obtain insights into the broad
of organizations (Robertson and Wind, 1980). sets of factors that stimulate as well as inhibit the adoption
The “external environment” in which a firm operates also of theEurofor commercial purposes by European companies.
is critical to the functioning of organizations and has been These insights can be used for the development of policies
shown to have an influence on the organizations’ adoption and campaigns to foster the commercial use of the Euro in
decision (Zaltman, Duncan, and Holbeck, 1984; Robertson the countries of the EU.
and Gatignon, 1989). Therefore, perceptions regarding the en-The following sections discuss variables that have been
vironment are included as a third set of variables in the concep-identified in the marketing literature as having an influence
tual adoption model. Rogers (1995) provides considerable on the attitudes towards the subsequent adoption or
nonadop-empirical evidence that an important aspect of facilitating the tion of innovations. Based on this overview, these factors are
adoption and diffusion process within an organization comes hypothesized as having an influence on the adoption of the
from creating and sharing information about the innovation
Euro.Next, the data collection methods and the scales that
among the potential adopters. Consequently, “communication are used to measure the proposed relationships are explained.
behavior” within the firm is included as the final set of variables The results of logit analyses carried out to test the strengths
in the conceptual adoption model regarding theEuro.
of these relationships are then presented, followed by a
discus-Once the literature review was well under way, we began sion of a subsequent qualitative field study of financial
manag-our second approach to understanding the adoption process. ers from adopting and nonadopting firms. The article
con-This involved a year-long pilot study that provided us with cludes with some marketing suggestions to reduce the
multiple perspectives. Throughout the year, we attended sev-resistance to the commercial use of theEuroprior to
manda-eral European conferences and seminars on EMU. We also tory adoption.
carried out a series of personal interviews with Chief Financial Officers of eight Dutch companies, with five bankers and financial experts from the Netherlands, Belgium, and the
Theoretical Background
United Kingdom and with the director of the Association for
and the Development
the Monetary Union in Europe. The basic purpose of this
of the Conceptual Model
qualitative pilot study was to improve our understanding ofthe above mentioned factors and processes involved in adopt-Two approaches were taken in developing the conceptual
ing theEuro.This systematic review of the marketing literature, model of howEuropean firms proceed in the adoption process
coupled with the extensive discussions with European finan-of theEuro.First, variables were identified based on a thorough
cial experts led to the development of the conceptual adoption review of the marketing literature that theoretically and
empir-model of theEuro, shown in Figure 1. ically examines the adoption process. Beginning in the 1960s,
the marketing literature on product acceptance typically paid
Perceived Innovation Characteristics
attention to the investigation of the factors that influence the
adoption and diffusion of innovations, a research perspective In forming an attitude toward theEuro, perceived advantages that has resulted in useful conceptual frameworks, for both regarding the financial innovation play an important role. consumer and industrial innovations (Webster, 1969). The Based on the literature (Commission of the European Commu-latter research stream is relevant for this study, since we focus nities, 1990; Jozzo, 1989) and our pilot study, a number on the adoption of a financial innovation, the commercial use of perceived advantages were identified. The first advantage of theEuroby European companies. involves the simplification of currency management and its’ Four broad sets of variables influencing the rate of adoption related cost reductions. Foreign exchange exposure of a com-of innovations by companies were identified in the marketing pany, when using the Euro, will be restricted to the receipts diffusion literature. First, “innovation characteristics” are con- and debts denominated in the currencies of countries outside sidered to be important predictors of adoption. In many stud- the EU. The use of theEuro for transactions within the EU ies, the perceived relative advantage of an innovation has been cuts the relatively high costs (bid and ask spreads, commission shown to be positively related to its rate of adoption (Rogers, fees) typically involved in dealing with different currencies. 1995; Frambach, forthcoming). “Organization characteristics” Second, the central management’s task of control and evalua-is a second group of variables that has generally been accepted tion will be simplified, as the more transparentEuroallows as having an influence on the adoption decision process. Con- for more direct comparisons of the performance evaluations
charac-Figure 1. The conceptual adoption model.
Finally, a somewhat more speculative advantage was often Association for the Monetary Union in Europe (1990) has revealed a number of potential obstacles in the minds of mentioned by financial managers: since theEurois anticipated
to become one of the world’s dominant currencies, along with managers regarding the use of the Euro. A first obstacle is the general limitations of the Eurofinancial market. Not all the dollar and yen, its use should give an organization a stronger
European image and ultimately result in some global competi- financial transactions that are possible in EU currencies are also possible inEuros. European countries just recently have tive advantages. For example, carrying out multinational
mar-keting activities in theEurowould mean fewer price list revi- fixed their exchange rates, which will go into effect on January 1, 1999 (Bray, N. “The Euro Revolution: Changing How Eu-sions and thus stable prices for customer groups, which may
contribute to more stable relationships and customer loyalty. rope Does Business.”Wall Street Journal, Europe, R1-R14, May 16, 1998.). Before this, the Euro (then the ECU) has been a Taken together, the characteristics of theEurooffer some
innovative advantages that would suggest the following sets currency basket, based on the value of its underlying currenc-ies. Independent country’s fiscal revisions were not ruled out of relationships in terms of company adoption: the stronger
the perceptions of theEuro as a currency that will simplify then, which may have caused a delay in the decision to adopt. Another obstacle to the Euro’scommercial use is percep-treasury management tasks as well as performance and
evalua-tion tasks of general managers, the greater the likelihood that tions of the formidable switching costs of changing over to theEuro.Considerable costs are anticipated in changing ac-the Euro will be used. Furthermore, the more positive the
manager’s perceptions of the “nontangible” values of theEuro, counting and information systems, business and financial op-erations, and in staff training. From the personal interviews, such as its ability to create a stronger “European image” and
competitive advantage also will positively influence the deci- it seemed that financial managers were more willing and able to quantify the switching costs of theEuro and less able to sion process of adopting theEurofor commercial purposes.
The proposed relationships above are consistent with mar- quantify the potential savings that accrue from the Euro’s potential advantages.
keting literature that suggests that the belief in the relative
advantages of the proposed innovation will induce adoption. A final innovation characteristic that may negatively influ-ence the adoption decision regarding theEurois the perceived Despite these possible advantages, the commercial use of the
Eurohas been quite limited. Consistent comments from the risk or uncertainty associated with the proposed development and timetable of EMU. Even though the Maastricht Treaty have pilot study suggest that a reason for the limited use might be
that managers have not as yet “experienced” these advantages been ratified by all EU member states, the mind-set of European managers three years prior to mandatory adoption still seemed and tend to focus more on the potential disadvantages or
Euro-pean currency. Here, the focus is on the perceived risk of company is the degree of the firm’s European orientation, since the advantages of using theEurowould be most obvious adopting theEurowithin the framework of EMU. The
follow-ing section reviews more specific environmental factors. for organizations with many trading partners in multiple coun-tries of the EU, relative to organizations with many trading partners outside Europe. Two factors that are related closely
Perceptions of the Environment
to a firm’s international orientation are the extent of foreign One of the variables in the business environment hypothesized
exchange transactions and the foreign exchange rate risk. If to influence the adoption decision regarding theEurois the
all foreign revenues are expressed in only a few currencies or concept of network externalities, which refers to the condition
in relatively stable currencies, the level of perceived currency wherein the utility of using a product depends upon the number
risks will be lower and an organization will be less inclined of other users of the same product. Innovators and early
to use theEurorelative to firms that operate in many European adopters are not only interested in “current” users but also
currencies or relatively unstable currencies. are concerned with the likelihood of “future” adopters of that
A final organizational variable that might influence the innovation (Katz and Shapiro, 1986). Thus, the incentive to
adoption of theEurois “innovation conflict”, which is defined use theEurois not only positively influenced by the proportion
by the extent and pattern of agreement or disagreement in of current users of theEurobut also by the expectation that
decision making about the use of an innovation among members a large number of organizations will adopt theEurofor
com-of the decision making group. TheEurois of importance for mercial purposes in the future. This leads to the following
all departments of the company, and conflict between the proposed set of relationships: European firms that require a
departments about the decision to adopt theEurofor commer-higher percentage of establishedEurousers before it will
con-cial purposes may cause a delay in the adoption decision. sider adoption of theEurowill be less likely to adopt, relative
to firms who have a lower requirement of current users.
Fol-Internal Communication Behavior
lowing this line of logic, firms with more positive expectations
Treasury departments within a firm are concerned with cur-of greater network externalities in the future are more likely
rency and foreign exchange management and are seen as to adopt the Euro, relative to firms who are less optimistic
possessing the technical knowledge, special skills, and experi-about the amount of future users.
ence necessary to evaluate the commercial use of theEuro.In The political environment also may positively stimulate the
line with this, the treasury department has the most access adoption decision process of European organizations by taking
to information that is relevant to the decision to adopt the credible actions in order to create a catalyst for the
introduc-Euro for commercial purposes and could be regarded as a tion of theEuro.Example of such actions are the design and
gatekeeper. Previous research (Jozzo, 1989) revealed that trea-ratification of the Maastricht Treaty, which included a clear
sury departments indeed were the first to consider and to timetable for the introduction of theEuroas the single
Euro-suggest the use of the Euro for invoicing purposes. Taken pean currency and the more recent fixed bilateral exchange
together, we would expect that more communication between rates between individual EU countries. Although the public
departments regarding theEurowould enhance the likelihood signals from EU member states (in particular, Germany) have
of its adoption, and that the amount of information and advice stressed that they keep striving for the establishment of a
that specifically comes from the treasury department would monetary union and a common European currency, financial
be positively related to adoption. turmoil within the EU in the past years may negatively
influ-Finally, the transition from a multicurrency system to the ence managers’ attitudes towards theEuroand the intention
Euro in a Pan-European organization can be considered a to adopt theEurofor commercial purposes.
strategic decision, especially if the firm aggressively adopts Finally, the upcoming monetary integration and the
imple-the Euro for commercial use prior to the establishment of mentation of one single European currency is widely touted
EMU. Within this context it might be expected that top manag-as generally improving functioning of the common European
ers, based on their hierarchical position, may strongly influ-market and the economic activities of organizations within
ence the adoption decision process regarding the commercial European countries (Briones, 1998). Managers who indeed
use of theEuro.An active and positive dialogue regarding the perceive the existence of a single currency to be positive for
importance of theEuro, which comes from the top down, is the functioning of the common market and the economic
hypothesized to increase the likelihood that a firm would use activities of their own organization will be more likely to adopt
theEurobefore mandatory adoption. theEurofor commercial purposes.
Organizational Characteristics
Data Collection
Previous research on the acceptance and use of theEuro(Jozzo,
Development of the Questionnaire and
1989) reveals that companies that regularly or occasionally
Sampling Frame
practiced Euro invoicing were on average the largest in the
countries: The Netherlands, Italy, France, Germany, and the organizational characteristics, and (4) the internal communi-cation behavior. Table 1 provides a more detailed overview United Kingdom. These five countries are most actively
in-volved in trade both within the EU and with the rest of the of the measures used for this study. world and represent a total of 77.6% of the population of the
European Union (Europe’s Monetary Future: From Here to
Results
EMU.The Economist, 1993, pp. 29–31; 1996 and All That.The
Economist, 1994, pp. 15–17). The questionnaire was pretested The response to the survey included 77 organizations that with accountants and banking managers who have expertise already have adopted theEuroand 137 nonadopting organiza-in admorganiza-inistratorganiza-ing and managorganiza-ing theEuroas a financial instru- tions. A complete assessment of the nonresponse bias is diffi-ment and with business people who have commercial experi- cult, since no information is available regardingEuroattitudes ence with theEuro.Based on this pretest, the final version of and usage by nonrespondents. To gain some insights into the the questionnaire was developed. possible nonresponse bias, two approaches were taken. The At this point in time, the use of theEuro is likely more first assessment examined to what extent a nonresponse bias relevant for large, multinational companies than for small exists with respect to company turnover and industrial sector. firms. Therefore, large companies were selected for this study. The companies selected for this study are all top 150 companies The European Business Press Group in Brussels provided a in each of the five countries with respect to turnover. The list of the top 150 companies in each country with respect to nonresponding companies normally are distributed throughout turnover. Prior to the survey mailing, an introductory letter this ordinal list, suggesting that the level of turnover does not in the respondent’s native language was sent which overviewed influence the likelihood of responding to the questionnaire. the study’s objectives, assured the respondent’s anonymity, Furthermore, the nonrespondents do not overrepresent any and asked for their cooperation. A total of 668 questionnaires particular sector but were found across all sectors. As a second were mailed to the directors of the treasury departments of approach, groups of early and late respondents were devel-organizations across the five countries (119, 122, 140, 137, oped and compared on a number of key characteristics, such and 150, respectively, to Dutch, Italian, French, German, and as the use of the Euro, perceived currency risks due to the British treasurers). Except for the Netherlands, all respondents use of European currencies, their international orientation, received the questionnaire in their own language. The final and attitudes towards theEuroand the EMU. Here again, no English version was translated into the German, French, and significant differences were found.
Italian language by native speakers and then back-translated In order to examine the proposed relationships in Figure into English again. Discrepancies in the back translations were 1, a series of four logit analyses, with adoption or nonadoption all resolved in discussion with members of the research team. as the dependent variable, was carried out. Examination of A total of 214 usable questionnaires were returned, for a the correlation matrix of the independent variables showed response rate of 33.2% across the countries, which is a rather that only two of the predictor variables were correlated above high response rate for international survey research. Response 0.50 (.54 and .51), suggesting that problems related to multi-rates per country were: The Netherlands, 46.2%; Italy, 32.0%; collinearity would be minimal.
France, 25.0%; Germany, 35.0%; and the United Kingdom, Table 2 summarizes the results of the four logit analyses.
29.2%. The classification accuracy of all models was higher than that
of the proportional chance criterion and ranged from 62.8%
Measures
to 71.2%. Interestingly, the models always performed best atcorrectly classifying nonuser firms, while user firms were most The proposed relationships shown in the model that were
thought to influence the adoption decision were developed often misclassified as nonusers. Except for the model on orga-nizational characteristics, all models produced significant and operationalized based on previous research, as well as on
the results of the pilot study. In this study, the dependent functions at the 0.01 level, suggesting that organizational char-acteristics have less explanatory power with respect to variable of interest is the outcome of the organization’s
adop-tion decision regarding the commercial use of theEuroprior tion relative to the other groups of variables.
In terms of the innovative characteristics of the Euro, the to the mandatory adoption date of 1999. The treasurers were
asked to indicate for their own department as well as for the perceptions of task simplification (and it’s subsequent cost reductions) and perceived cost disadvantages significantly in-purchasing and sales department of their company, if they
(1) already use the Euro, (2) have definitive plans to start fluence the likelihood ofEuroadoption, with greater percep-tions of task simplification having a positive influence and using the Euro, or (3) do not use theEuro. If one of these
departments uses theEurofor commercial purposes, then that perceived cost disadvantages having a negative influence. None of the more “intangible” variables such as European organization was considered to be an Euro user. Following
the proposed set of relationships shown in Figure 1, questions image, competitive advantage, or beliefs in EMU were signifi-cant in this model. Taken together, these results suggest that regarding the Euro adoption process were formulated with
Table 1. Measures
Variable Measure
Perceived innovation characteristics: How likely/important are the following advantaages/disadvantages
(5-point scale: 15very unlikely/unimportant; 55very likely/important): Simplification (4 items,a 50.84) The use of theEurowill: reduce currency risks; reduce transition
costs; simplify treasury management; simplify intragroup accounting procedures.
Easier performance evaluation (2 items, The business results of subsidiaries will be easier to compare.
corr50.63) The use of theEuromakes the evaluation of the performance of the
managers easier.
Psychological advantages The use of theEurogives our firm a European image.
Competitive advantages We gain a competitive advantage if our company uses theEurobefore the establishment of the Monetary Union in Europe.
Limitations of theEuromarket (3 items, The inefficiency of theEuroclearing system.
a 50.77) The existence of restrictions on the size ofEurotransactions.
A lack of suitable banking and support services. Problems related to the current status of A lack of end uses for theEuro.
theEuro(3 items,a 50.73) TheEurodoes not have a legal tender status anywhere.
TheEurois still a basket and therefore revision are not ruled out. Costs disadvantages (2 items, corr50.61) The costs of changing over to theEuroare high.
The advantages of using theEuroare not quantifiable.
Please indicate to what extent you agree or disagree with the following statements (5-point scale: 15strongly disagree; 55strongly agree): Uncertainty futureEuro(2 items, corr50.67) TheEurois the most appropriate currency to use as the single European
currency.
TheEurowill become the future currency of Europe.
Perceptions of the political and business environment
Required % of other Euro users (network Would your company adopt theEurofor commercial purposes,
externalities) regardless of the percentage of other European companies that are willing
to adopt theEurofor commercial purposes? (Yes/No). If not, then please indicate the minimum required % of otherEurousers. Expected increase in Euro use (network To what extent do you expect an increase in the number of European
externalities) companies that will use theEurofor commercial purposes within the
next two years? (5-point scale: 15no increase; 55strong increase). Please indicate to what extent you agree or disagree with the following Influence of political actions (3 items, statements: (5-point scale: 15strongly disagree; 55strongly agree):
a 50.67) The establishment of the single market encourages our company to use
theEurofor commercial purposes.
A clear political will regarding the establishment of the Monetary Union would encourage our company to use theEurofor commercial purposes. Our department’s attitude toward the commercial use of theEurohas
been positively influenced by the Maastricht Treaty. The recent turmoil in the EMS has negatively influenced our
department’s attitude toward the commercial use of theEuro.
Turmoil in EMS Do you consider the existence of “a single currency” for Europe in the
near future to be positive or negative for (5-point scale: 15very negative; 55very positive):
Perceptions about EMU (5 items,a 50.82) The competitive position of Europe in the global market; the
functioning of the Single Market within Europe; the economic activity of your country; your company’s businesses; your department’s activities.
Organizational characteristics
Size of the organization What was the amount of global sales in 1992? (open question).
European orientation In which European countries are your company’s trading partners
located? (05no export within Europe; 125trade with partners in all twelve EU countries).
Level of currency risks How would you assess the currency risk of your company due to the use of European currencies? (5-point scale: 15very high; 55very low)
Table 1. continued
Variable Measure
To what extent do you agree or disagree with the following statement (5-point scale: 15strongly disagree; 55strongly agree):
Level of agreement between departments Between different departments within our company, general agreement exists about the decision to use theEurofor commercial purposes.
Internal communication behavior To what extent do you agree or disagree with the following statements (5-point scale: 15strongly disagree; 55strongly agree):
Communication flow between departments There is a good flow of communication between the department’s in our company regarding the commercial use of theEuro.
Information by treasurers at own initiative The treasury/financial department disseminates information about possible use of theEuroat their own initative.
Advice by treasurers The treasury/financial department gives advice about theEuroif other departments ask for it.
Information by top managers Our top management sends signals about the importance of the Eurofor our
(4 items,a 50.86) company.
Adoption behavior Is your department currently using theEuro?
Is your organization’s sales department currently using theEuro? Is your organization’s purchasing department currently using theEuro?
(not used, definite plans to start using, already using).
The analyses regarding environmental factors suggest that Three of the four communication variables tested are shown to significantly influence the probability to adopt the Euro, the probability to adopt the Euro is influenced strongly by
network externalities. Nonadopters require a significantly highlighting the importance of internal communication in the adoption decision process. The probability of being an adopter higher percentage of other organizations that should have
adopted the Euro before they are willing to use the Euro, increases with: (1) the perceived amount of information that treasurers disseminate within the company at their own initia-relative to adopters. Nonadopting firms also reported being
much more unwilling to adopt the Euro until (on average) tive, (2) the perceived amount of advice about the possible use of theEuroprovided by the treasury department if other 40% of other European companies make use of theEuro.This
is a rather high requirement, given that currently less than departments ask for it, and (3) by the perceived level of signals of top management about the importance of theEuro.
2% of all European companies use theEurocommercially. It
seems that companies are waiting for each other’s initiative Although these results suggest the importance of communica-tion variables in the adopcommunica-tion decision, survey data does not to start using theEuro.Adoption decisions also are positively
influenced by positive perceptions about European Monetary allow for clear interpretation of the direction of the relation-ship. It may well be that the relationship is the other way Union. All firms appeared to hold generally positive
percep-tions about EMU, with user companies responding signifi- around, and that more communication takes placeafter the
Eurois adopted. Adoption may lead to more communication cantly more positive about the future European Monetary
Union. about theEuro.
By estimating four independent logit models in order to Of particular interest is the fact that the results of this
field survey suggest that the probability of adopting is not test the proposed relationships, the influence of a possible correlation between the groups of independent variables on significantly influenced by the level of a firm’s perceived
cur-rency risks. This is a surprising result, since one of the most the results of the analyses is ignored. In other words, these partial models test only the individual influence of the groups frequently mentioned advantages of using the Euro is the
reduction of currency risks. However, a subsequent examina- of predictor variables and not the joint influence of all pre-dictor variables. Therefore, a logit model including all variables tion of the relation between the perceived level of currency
risks wherein firms were grouped based on their self-reported that were found to significantly influence the adoption deci-sion based on the separate logit analyses was estimated. The currency risk (low/average/high levels of risk) revealed a
signif-icant influence of the perceived level of currency risks on the results of this analysis are reported in Table 3 and show that the adoption decision is significantly influenced by one need for using a single European currency (F58.93; DF5
2,294,p5 0.00). It appears that a firm’s perceived level of variable out of each of the three significant but independent partial logit models. The significant variables from this final currency risks does influence the desire for using a single
Table 2. The Results of the Logit Analyses
Variable b SE t-value
Perceived innovation characteristics
Simplification of tasks/cost reduction 0.019 0.01 1.97a
Easier performance evaluation 20.011 0.02 20.53
Creating a European image 0.051 0.04 1.43
Competitive advantages 20.026 0.05 20.54
Limitations of theEuromarket 20.015 0.01 21.25
Current status of theEuro 0.012 0.01 0.94
Cost disadvantages 20.051 0.02 22.64a
Belief in futureEuro 0.038 0.09 0.41
Constant 20.760 0.91 20.84
Model chi-square522.694 (DF58);p50.00 Classification accuracy568.9%
Perceptions of the environment
Required % of otherEurousers 20.020 0.01 22.83a
Expected increase inEurouse 0.256 0.18 1.41
Influence of political environment 0.093 0.08 1.21
Turmoil in EMS 20.122 0.16 20.79
Perceptions about EMU 0.122 0.07 1.68a
Constant 23.059 1.28 20.24
Modelx2528.579 (DF55);p50.00
Classification accuracy571.2%
Organizational characteristics
Size of the organization 20.032 0.11 20.30
European orientation 0.068 0.05 1.49
Perceived currency risks 0.086 0.14 0.71
Agreement between departments 0.225 0.13 1.80a
Constant 21.900 0.77 22.87
Modelx256.477 (DF54);p50.16 Classification accuracy562.8%
Internal communication behavior
Communication between departments 0.103 0.16 0.65
Information by treasurers 0.197 0.12 1.61a
Amount of advice by treasurers 0.308 0.13 2.42a
Signals from top management 0.318 0.15 2.14a
Constant 23.378 0.73 24.65
Modelx2521.848 (DF54);p50.00
Classification accuracy563.8%
n5214.
aOne-tailed tests, significant atp,0.05 level.
Table 3. The Results of the Logit Analyses on the Significant Variables
Variable b SE t-value
Simplification of tasks/cost reduction 0.010 0.01 1.00
Cost disadvantages 20.055 0.02 22.75a
Required % of otherEurousers 20.011 0.01 21.10
Perceptions about EMU 0.149 0.08 1.86a
Agreement between departments 0.230 0.18 1.28
Information by treasurers 0.166 0.18 0.92
Amount of advice by treasurers 0.348 0.17 2.05a
Signals from top management 0.015 0.20 0.08
Constant 24.590 1.74 2.64
Modelx2531.173 (DF58);p50.00 Classification accuracy572.13%
n5214.
of advice about the uses of theEurogiven by treasurers if other treasury managers confirmed their positive opinions about EMU, while simultaneously appearing to be rather negative departments ask for it. These results suggest that treasurers can
play a key role in communicating information regarding two about the current use of the Euro, primarily because of its perceived lack of clear and quantifiable financial advantages. factors that the firm has some control over: cost perceptions
and the need for information on how to use theEuro. The treasurers interviewed admitted that the advantages of cost reduction and simplification of tasks could be important motives to use theEuro, but they anticipate these advantages
Discussion
to be more apparent if a large number of their trading partnersare willing to use the Euro or when the Euro becomes the The results of the quantitative field study revealed that the
single European currency. They did not expect a significant probability of adopting theEuroincreases with (1) more
posi-increase in Euro use during the next few years leading up tive perceptions of the simplification of tasks/cost reduction,
to mandatory adoption, however. Even current user firms (2) more positive perceptions about European Monetary
perceived the Euro as not offering many advantages. These Union, (3) greater perceptions of the level of intradepartmental
managers mentioned the occasional demand of trading part-agreement regarding the adoption decision, (4) an increase
ners for using theEuroas the most important reason for their in the amount of advice given by treasurers at their own
current use of theEuro.Among the interviewed treasurers in initiative and, if asked for, by other departments, and (5) an
both user and nonuser firms, the concept of network externali-increase in the amount of signals from top management about
ties was cited as one of the most important factors in the final theEurouse. The likelihood of adopting decreases with (1)
adoption decision. greater negative perceptions of cost disadvantages, and (2)
Of all other factors that were found to significantly influ-greater expectations regarding the percentage of other
compa-ence the adoption decision, the treasurers mentioned the cost nies that should use theEuro before potential adopters are
disadvantages of changing over to theEuroas a particularly willing to adopt (network externalities).
important impediment to using theEuro, which supports the Although a number of the suggested relationships were
results reported in Table 3. Implementing the Euro as the supported, the results of the quantitative field study also
sug-single currency within a company will entail high switching gested some ambivalence in respondent’s viewpoints
regard-costs, mostly related to the practical implementation of new ing the European Monetary Union and the commercial use
administrative systems, and the conversion of commercial of theEuro.European managers reported positive perceptions
contracts and debts into theEuro.This implementation pro-about the future of theEuro, in spite of its limited use currently.
cess clearly is not anticipated with any sense of enthusiasm However, in spite of mandatory adoption in 1999, managers
and is viewed as an expensive, tedious task. The treasurers hold no strong expectations of increasedEurousage.
Further-indicated that they are not willing to bear those costs until more, a number of the proposed factors that should predict
they are convinced that the EMU will be established before adoption and use of theEuro could not be confirmed from
the end of this century. the survey data. Taken together, these results led to the next
As the mandatory adoption date approaches, this “wait and step in the data collection process. In order to get managers’
see” attitude continues to be the prevailing mood among EU interpretations of the findings, a qualitative field study was
members, although the degree of optimism varies from one carried out among financial managers of both adopting and
country to another. Germany continues to show real anxiety nonadopting companies. These follow-up personal interviews
over the pending use of the Euro, in spite of being the key provide additional insights into the survey data results, and
player and architect of EMU and theEuro.Similar expressions the reflections of these respondents (all of whom are
treasur-of reluctance come from the French, while Sweden, the United ers) are discussed below.
Kingdom, and Denmark have elected to truly “wait and see” The most surprising result of the logit analyses was the
by not participating until some later date of their own choos-nonsignificant influence of the perceived level of currency
ing. In stark contrast to the Germans, Italy is one of the risks on the adoption decision. During the final round of
most enthusiastic boosters of theEuro, since the new money personal interviews, the treasurers unanimously supported
represents stable politics, cheaper bank loans, and less risky this result for a number of reasons. First, treasurers are of the
investments (Hudson, R., Lavin, D. Rohwedder, C. and Klein, opinion that the currency risks within Europe are manageable,
M. “Europe Launches New Currency, but Summit Fight Casts and they claim to have enough financial instruments to hedge
Shadow”Wall Street Journal, Europe, p. 1, May 4, 1998.) fairly well against those risks. Second, they pointed out that
the use of theEuro would involve higher currency risks as
long as the Euro is seen primarily by companies as a 13th
Conclusions and Recommendations
currency, in addition to the other European Union currencies.Nonetheless, the managers interviewed perceive theEuro to The use of theEurofor import and export activities has only marginally increased since the beginning of the nineties. More-be an effective instrument to reduce currency risks when it
qualitative field study anticipate only a small increase inEuro sional but clear sense of ambivalence that came out of the use on the road to EMU and expressed skepticism and ambiva- personal interviews as well as the survey data, we believe lence over the timely establishment of EMU. In spite of this, that studies that use ethnographic approaches and prolonged the results suggest that the advantages of using theEurowould engagement in organizations will allow for a deeper under-increase with an increasing number ofEurousers. standing of theEuroadoption process.
Consequently, the use of theEuroshould be actively pro- This study described the adoption decision process regard-moted by the European Commission, the national govern- ing theEuroat the organizational level and did not take into ments and the banking industry, in order to generate a critical account differences in attitudes or adoption behavior that one mass of Euro users. The European Commission spent U.S. might expect from different functional departments. It might $20 million in 1996 for a promotion campaign, and the expec- be interesting to examine differences between companies with tation is that this amount will increase in future years. Taking a singleEuro-using department versus those that use theEuro
into account the results of this study, this campaign should in two or three departments. The results of such an analysis focus on a number of aspects. Since the positive perceptions might give an indication of the characteristics of heavy user about EMU appeared to have a positive influence on the companies. Furthermore, additional research needs to con-probability to adopt theEuro, the campaign should emphasize sider how the Euro diffuses across the departments of an both the practical and financial consequences of EMU for the organization. This research could focus on the key variables European business community. In addition, the campaign influencing the adoption behavior of the separate departments, should offer credible examples of how the extensive use of as well as into the time-order in which the departments of an theEurowill lead to simplification of currency management as organization adopt the Euro. These insights may provide a well asquantifiableexamples of cost reductions. This campaign basis for a differentiated promotion strategy, fitting the con-could be part of the European Monetary Institute’s develop- cerns and characteristics of the specific departments. ment of the uniform payment system, called “Target”, that is On the surface, the initial activities to launch the common designed to facilitate fast and cheapEurotransactions. European currency in January 1999 will be a matter primarily Furthermore, the promotional campaign should continue for bankers, finance ministers, and financial managers within to clearly communicate to European companies how and when organizations. But if fact, the mandatory adoption of theEuro
EMU will materialize and when it is the most appropriate is the opening shot in a financial and commercial revolution time to start taking preparatory actions. Based in political regarding the ways in which Europe functions. How smoothly expediency, the political environment has not always sent these final stages progress towards full EMU andEurouse in clear signals that EMU will indeed be established before the 2002 will depend not only on the political will of the member end of this century. As a result, companies have been reluctant nations but also on developing understanding and insights to begin the process of changing over to theEuro(and taking into the key forces within European companies that drive the
on the switching costs). adoption and use of theEuro.
Finally, the European Commission should provide
infor-mation that promotes the size, depth, and liquidity of the The authors thank Berend Wierenga, Srinivas Durvasula, Richard Semenik, the anonymous reviewers, and the editor for their helpful advice and
com-Euro Capital Market and encourage central banks to adjust
ments. We also acknowledge the financial support provided for the field
their portfolio of reserves. To meet this end, they also could
study by the Tinbergen Institute, Amsterdam.
develop strategies and offerings to make the current use of theEuro financially more attractive. This seems imperative,
given that treasurers appear to be rather negative about the
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