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Public Relations Review 38 (2012) 288– 293

Contents lists available at SciVerse ScienceDirect

Public Relations Review

esearch in brief

he impact of internal communication on strategic and economicffects in Serbian companies

ilan Nikolic ∗, Edit Terek1, Jelena Vukonjanski2, Dragica Ivin3

epartment of Management, University of Novi Sad, Technical Faculty, “Mihajlo Pupin”, Djure Djakovica bb, 23000 Zrenjanin, Serbia

r t i c l e i n f o

rticle history:eceived 14 August 2011eceived in revised form0 November 2011ccepted 13 December 2011

eywords:nternal communicationtrategic effectsconomic effectsultivariate analysis

erbia

a b s t r a c t

This paper presents the research results in relation to examining and defining dependencesand the impact of internal communication on certain strategic and economic businesseffects. Serbian companies were the focus of this research. The data were collected bypolling 100 managers from 100 companies. Afterwards, multivariate regression and cor-relation was carried out in the aim of the final determination of requested dependences.This research confirmed a strong positive relation between internal communication andstrategic and economic business effects.

© 2011 Elsevier Inc. All rights reserved.

. Introduction

According to (Baskin et al., 2000), PR can be observed and interpreted as a profession, process, communication with theeneral public and practice. Its objective is to build up good relationships with various segments of the general public onhe basis of publicity, building up a positive corporate image and resolving problems generated by unfavourable rumoursnd events. By establishing an efficient PR function, a company is able to impact on forming, maintaining and developingts image in a positive direction. In addition, a company should also pay due attention to building up positive interpersonalelationships within the company itself (internal PR and internal communication).

The development of PR is particularly important in companies operating in countries in transition. However, PR is stilln the early stages of establishing itself on the Serbian market. At the same time, not enough attention is paid to internalR and internal communication in Serbian companies. According to (Taylor, 2004), a somehow more favourable situations present in referent neighbouring countries (Croatia, Bosnia and Herzegovina, Hungary, Romania, and Bulgaria). The mostavourable PR situation in the CEE region is in Slovenia (Vercic & Tkalac Vercic, 2007; Vercic, Tkalac Vercic, & Laco, 2006).
his research was motivated by the need to carry out research into the impact of internal communication on strategic andconomic aspects of business in Serbian companies.
∗ Corresponding author. Tel.: +381 0 64 248 5763; fax: +381 0 23 550 520.E-mail addresses: [email protected] (M. Nikolic), [email protected] (E. Terek), [email protected] (J. Vukonjanski),

vin [email protected] (D. Ivin).1 Tel.: +381 0 63 893 2625; fax: +381 0 23 550 520.2 Tel.: +381 0 63 520 707; fax: +381 0 23 550 520.3 Tel.: +381 0 62 801 9764; fax: +381 0 23 550 520.

363-8111/$ – see front matter © 2011 Elsevier Inc. All rights reserved.oi:10.1016/j.pubrev.2011.12.014

dx.doi.org/10.1016/j.pubrev.2011.12.014

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dx.doi.org/10.1016/j.pubrev.2011.12.014

M. Nikolic et al. / Public Relations Review 38 (2012) 288– 293 289

2. Theory and hypothesis

The impact of public relations and internal communication on certain aspects of business is present in many references.In the references (Lee & Yoon, 2010; Podnar, Lah, & Golob, 2009) the bonds between public relations and business effects andeconomic theory were studied. The improvement of internal communication leads to raising the level of various strategicaspects, such as strategic decision making and better coordination of strategic actions (Andersen, 2001). Also, according to(Andersen & Segars, 2001), improving internal communication leads to better financial performance. According to (Ehling,White, & Grunig, 1992), efficient internal communication is a leading indicator of financial performance in organizations.In the reference (Yates, 2006) the author points out the importance of internal communication and its impact on financialresults and organizational stability. In the reference (Opitz & Hinner, 2003) it was proved that internal communication hada direct impact on company productivity.

Taking all of the above into consideration, the following hypotheses were set:

H1: Internal communication has a statistically significant predictive effect on the strategic business effects in companies inSerbia.H2: Internal communication has a statistically significant predictive effect on the economic business effects in companiesin Serbia.H3: Internal communication has a statistically significant correlation with the strategic and economic business effects incompanies in Serbia.

3. Method

3.1. Survey instruments (measures)

The following parameters have been adopted for internal communication representatives: IC1 – State of communicationand information flow within the company, IC2 – State of internal relationships within the company (relationships betweenemployees), IC3 – State of employee business conduct.

The following parameters have been adopted for strategic business effects: S1 – Position and perspectives of employees,S2 – Company orientation towards strategic aspects of business (strategic decision making, strategic planning and strategicactions), S3 – Company aspirations towards originality and customer satisfaction. The selected strategic performances canbe found in the literature, for example: position and perspectives of employees (Freitag & Picherit-Duthler, 2004; Reiche,2008); strategic decision making, strategic planning and strategic actions (Andersen, 2001; Rudd, Greenley, Beatson, & Lings,2008); customer satisfaction (Gök, 2009; Hsu, 2008).

The following parameters have been adopted for economic business effects: E1 – Share of salaries in business revenues, E2– Productivity, E3 – Profitability. Some research has focused on studying the impact on profitability (Den Hartog & Verburg,2004; Eriksen & Knudsen, 2003), some on productivity (Bonfiglioli, 2008; Bridgman, Gomes, & Teixeira, 2011), some onsalaries (Bachmann & Makan, 1997; Pantazi & Straoanu, 2011).

After that, a questionnaire was compiled. Table 1 presents the parameters of internal communication as well as thoseselected for strategic and economic effects. The managers in Serbian companies were asked to assign values to each parameterthrough five-point Likert scales. The mark should represent the level of the current state of the examined parameter intheir company. The height of grade is based on free estimation and opinion of respondents. The marks have the followingmeaning: 1 – Highly unfavourable, 2 – Unfavourable, 3 – Average, 4 – Favourable, 5 – Very favourable. A similar approachto the parameter assessment is applied in the research (Tan & Litsschert, 1994; Wang, Tsui, & Xin, 2011).

3.2. Participants and data collection

The research was carried out in Serbian companies. A total of N = 100 managers from 100 companies answered thequestions. The respondents are people in senior managerial positions in their respective companies and those who have

Table 1Dependences S1 – Position and perspectives of employees from internal communication.

Univariate tests of significance for S1.The corrected determination index: R2 = 0.51; Std. Error ofEstimate: 0.8304684.

Effect SS Degree of freedom MS F p

Intercept 0.43112 1 0.43112 0.62510 0.431106IC1 26.92879 1 26.92879 39.04546 0.000000IC2 8.53730 1 8.53730 12.37867 0.000665IC3 0.99122 1 0.99122 1.43722 0.233541Error 66.20907 96 0.68968

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90 M. Nikolic et al. / Public Relations Review 38 (2012) 288– 293

onsiderable insight into the company’s strategy, the relationships within the company, etc. The research lasted in the periodetween April and September, 2010.

.3. Data analysis

Multivariate regression and correlation were used to establish the interdependence of internal communication andtrategic and economic effects. The influences of internal communication on each selected parametres of strategic andconomic effects were determined separately.

. Results

.1. Regression analysis

The values of Cronbach’s Alpha for the three observed dimensions (Internal communication, Strategic effects and Eco-omic effects) are as follows: ˛(IC) = 0.703, ˛(S) = 0.761, ˛(E) = 0.708. The results of the regression analysis are presented inhe tables (Tables 1–8). The bold values in the tables point at statistically significant coefficients. In the first rows withinhese eight tables appropriate values of the corrected determination indexes (R2) can be seen.

.2. Correlation analysis

Table 9 presents the correlations of all observed parameters. The bold values are statistically significant in the basic set.n Table 9 all values are significant. The strongest relations are in the grey fields.

able 2ependences S2 – Orientation of the company to strategic aspects of business from internal communication.




able 3ependences S3 – Aspirations of the company towards originality and customer satisfaction from internal communication.




able 4ependences S – The all parameters of strategic business effects dimension from internal communication.

Univariate tests of significance for S-average.The corrected determination index: R2 = 0.56; Std. Error ofEstimate: 0.6285612.




Table 5Dependences E1 – Share of salaries in business revenues from internal communication.

Univariate tests of significance for E1.The corrected determination index: R2 = 0.17; Std. Error ofEstimate: 0.9896271.



Table 6Dependences E2 – Productivity from internal communication.




Table 7Dependences E3 – Profitability from internal communication.




Table 8Dependences E – The all parameters of economic business effects dimension from internal communication.

Univariate tests of significance for E-average.The corrected determination index: R2 = 0.40; Std. Error ofEstimate: 0.6457308.



Table 9Correlations of all observed parameters.

Marked correlations are significant at p < 0.05000 N = 100.(Casewise deletion of missing data)

Means Std. Dev. IC1 IC2 IC3 S1 S2 S3 E1 E2 E3 S-av. E-av.

IC1 3.53 1.1499 –IC2 3.61 1.0815 0.3060 –IC3 3.65 1.1404 0.4587 0.5598 –S1 3.13 1.1862 0.6376 0.5123 0.5044 –S2 3.64 1.1592 0.4931 0.4831 0.5150 0.6147 –S3 3.84 1.1076 0.3369 0.4196 0.5150 0.4542 0.4739 –E1 3.55 1.0860 0.3628 0.3307 0.3446 0.4144 0.5681 0.2587 –E2 3.62 1.0804 0.5865 0.2263 0.5222 0.5512 0.5268 0.4552 0.4726 –E3 3.73 0.9832 0.2797 0.4129 0.5094 0.4721 0.4279 0.3959 0.4148 0.4539 –S-av. 3.537 0.9474 0.5985 0.5744 0.6212 0.8450 0.8491 0.7725 0.5054 0.6223 0.5258 –E-av. 3.633 0.8348 0.5201 0.4031 0.5747 0.6028 0.6415 0.4639 0.8003 0.8145 0.7683 0.6940 –

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. Discussion

IC1 followed by IC2 had the greatest and most significant impact on S1 – Position and perspectives of employees. S2 –ompany orientation towards strategic aspects of business was influenced the most by IC1 and then the other two param-ters: IC2 and IC3. IC3 had the greatest impact on S3 – Company aspirations towards originality and customer satisfaction.

totally (average), was influenced the most by IC1 and then the other two parameters: IC2 and IC3. IC1 had the great-st impact on E1 – Share of salaries in business revenues. E2 – Productivity was the most influenced by IC1, followed byC3. E3 – Profitability, was influenced to the greatest degree by IC3. IC1 and then IC3 had the greatest impact on E totallyaverage).

On the basis of Table 9, IC1 has the greatest correlation with S1 and E2. IC2 has the greatest correlation with S1 and2. IC3 has the greatest correlation with E2 and equally strong correlations with S2 and S3. Out of all strategic param-ters, S1 has the greatest correlation with internal communication, and out of all economic parameters this is E2. Onhe basis of the correlation parameters of internal communication with S totally (average) and E totally (average), itan be concluded that internal communication has a greater correlation with strategic than with economic aspects ofusiness.

In reference (Nikolic, Savic, Cockalo, Spasojevic-Brkic, & Ivin, 2011), results confirm the existence of a significant directelation between public relations and economic indices. There are similarities with the obtained results. Based on these twotudies, one can say that public relations and internal communication is equally affecting profitability. On the share of salariesn business revenues public relation has bigger influence than internal communication. When we talk about productivity its the opposite: a greater impact on productivity has internal communication rather than public relations.

. Conclusion

This research confirmed a strong relation between internal communication and strategic and economic business effects,n Serbian companies. By increasing the level of internal communication, the strategic and economic effects in companieslso improve. In this way, all three of the hypotheses set at the baseline of the research are confirmed.

The parameters of internal communication which have the strongest impact on strategic and economic business effectsere determined. The set multivariate regression models enable the calculation of the values of some strategic and economic

usiness effects, depending on the value and level of the parameters concerning internal communication in companies. Bysing the corrected determination indices the impact (in percentage) of internal communication on some strategic andconomic business effects was determined. Based on the correlation value, the strongest relations among the analysedariables can be noticed. Through the implementation of the previously mentioned results, the level of strategic and economicusiness effects can be increased.

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the impact of internal communication on strategic and economic effects in serbian companies

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