Introduction
Clayton County Library has experienced significant financial problems in the last few years. Some of them stem from increased access to information, which has diminished the relevance of the institution in today’s digital age. Others stem from worsening economic conditions that have limited state and federal funding to public libraries. Collectively, these factors have created financial instability for Clayton County Library. My dissertation explores financial diversification as a strategy for improving the institution’s financial stability. However, to understand this plan, first, it is important to comprehend the theoretical and conceptual frameworks that underlie the study.
Theoretical Framework
A theoretical framework is important in understanding how Clayton County Library could improve its financial position because it introduces and describes the theoretical background that explains the research problem (Evans, Coon, & Ume, 2011). My dissertation will use the modern portfolio theory as the main theoretical framework. It is equipped to evaluate the feasibility of adopting different financial options for institutions and corporations (Al-Janabi, 2012; Francis & Kim, 2013). Indeed, although it hails from the financial world, it could offer useful insights into the viability of a financial diversification strategy for Clayton County Library. Furthermore, it could provide vital information about the possible successes of each financial alternative. Although proponents of behavioral economics have criticized certain sections of the modern portfolio theory for being inconsistent (Elton, Gruber, Brown, & Goetzmann, 2009), many researchers (mostly in the financial field) have used the theoretical framework in their studies (Mayer, Wang, Egginton, & Flint, 2014). Its relevance to my dissertation stems from its ability to evaluate corporate financial options. Indeed, the proposed framework strives to explore financial diversification as a strategy for promoting financial stability.
Conceptual Framework
Different researchers have used the corporate portfolio framework to explore different topics in behavioral economics (Rocco & Plakhotnik, 2009). The conceptual framework comprises three steps. The first step involves identifying financial alternatives, while the second step involves evaluating the alternatives to identify, which strategic choice addresses the research objectives (the same process helps to assess the attractiveness of the choice in addressing institutional objectives) (Seifi, Moosavi, & Ardestani, 2012). The third step involves eliminating “wrong” strategic options. Researchers have used this conceptual framework to identify strategic options that relate to a company’s strategic competency (Rocco & Plakhotnik, 2009). Nonetheless, the first set of researchers to use the model worked in the automotive industry and wanted to explore different strategic options for improving the financial position of the firms in the sector (Seifi et al., 2012). However, its applicability has stretched to other industries (Cottrell, 2011). The corporate portfolio framework is useful to my dissertation because the proposed study is a socioeconomic paper that strives to understand the viability of using a financial diversification strategy to improve the financial position of Clayton County Library. The framework contributes to promoting the institution’s financial goals by identifying possible sources of finance for improving the library’s financial position (Frandsen & Johansen, 2013). Similarly, it identifies financial alternatives that are unsuitable for the library. This model builds on the study’s research goals. For example, it could answer one research question, which seeks to find out the financial alternatives that would improve the financial stability of Clayton County Library. By doing so, the conceptual framework would also help readers to understand if a financial diversification strategy would make the institution financially stable (McMullen, 2011).
Annotated Bibliography
Seifi, A., Moosavi, S., & Ardestani, E. (2012). A Conceptual Framework for Evaluating New Business Opportunities for Corporate Diversification. Journal of Enterprise Transformation, 2(2), 105-129.
Seifi et al. (2012) explained the corporate portfolio framework by analyzing different investment opportunities for new businesses in the US. They focused their study on exploring how the framework informed the decision-making process of an American automotive company. Their study identified 47 financial strategies for the sampled companies and, using the corporate portfolio framework, selected ten financial options that related to the company’s key competencies (Seifi et al., 2012). The researchers eliminated 26 financial options during the first step of the corporate model to emerge with the ten options in the third step (Seifi et al., 2012). Comprehensively, the researchers explained how the corporate portfolio framework works. The same model is useful to my proposed dissertation because it outlines a framework for identifying and evaluating different financial options for improving the financial stability of Clayton County Library.
Mayer, W., Wang, H., Egginton, J., & Flint, H. (2014). The Impact of Revenue Diversification on Expected Revenue and Volatility for Nonprofit Organizations. Nonprofit and Voluntary Sector Quarterly, 43(2), 374-392.
In this brief, Mayer et al. (2014) explained the relationship between revenue diversification and the financial stability of non-profit organizations. They used the modern portfolio theory to investigate this relationship and found out that diversification reduces financial volatility (Mayer et al., 2014). Although the researchers caution people against ignoring this understanding, they say that the relationship between revenue diversification and financial stability depends on portfolio management (Mayer et al., 2014). Although the article does not explain the methodology used by the researchers to come up with their findings, it encourages non-profit organizations to invest their resources in lucrative ventures and manage their portfolios properly if they want to achieve financial stability. This article is useful to my proposed dissertation because it explains the efficacy of a financial diversification strategy. This focus is appealing to me because my dissertation also focuses on exploring the viability of using a financial diversification strategy to improve the financial position of Clayton County Library. Mayer et al. (2014) provide useful insights into how this strategy may influence a firm’s financial volatility. They explore this issue by explaining how the modern portfolio theory could promote revenue diversification, as a strategy for reducing the financial volatility of a firm.
Al-Janabi, M. (2012). Risk Management in Trading and Investment Portfolios: An Optimization Algorithm for Maximum Risk-budgeting Threshold. Journal of Emerging Market Finance, 11(2), 189-229.
Al-Janabi (2012) used the modern portfolio theory to investigate the financial risks faced by Middle East companies as they strategized to expand their operations beyond their domestic markets. The researchers explained how the tool could control market risk exposures for the companies and provide significant financial options to support their growth (the companies emerged from member countries of the Gulf Cooperation Council). Al-Janabi (2012) explained how the modern portfolio theory controlled the risk exposures for different financial trading portfolios. His research is useful to my proposed dissertation because it explains the structure of the modern portfolio theory and its application in the real-world setting. Particularly, this article shows how the theoretical framework could change the financial fortunes of a company by minimizing risk and maximizing returns. This application could be useful in explaining how Clayton County Library can do the same to improve its financial stability.
Conclusion
Qualitative research approaches require a detailed understanding of the research process. This understanding highlights the importance of having a detailed research structure to guide the study. This paper highlights the modern portfolio theory and the corporate portfolio model as the main theoretical and conceptual frameworks, respectively, for the proposed study. Their composition captures the nature of the study and provides a clear model for answering the research questions. Therefore, their contributions are important to my dissertation.
References
Cottrell, T. (2011). Hedge your budget risk through service increases. Bottom Line: Managing Library Finances, 24(1), 6 – 12.
Elton, E., Gruber, M., Brown, S., & Goetzmann, W. (2009). Modern Portfolio Theory and Investment Analysis. London, UK: John Wiley & Sons.
Evans, B., Coon, D., & Ume, E. (2011). Use of Theoretical Frameworks as a Pragmatic Guide for Mixed Methods Studies. A Methodological Necessity? Journal of Mixed Methods Research, 5(4), 276-292.
Francis, J., & Kim, D. (2013). Modern Portfolio Theory: Foundations, Analysis, and New Developments. London, UK: John Wiley & Sons.
Frandsen, F., & Johansen, W. (2013). Public relations and the new institutionalism: In search of a theoretical framework. Public Relations Inquiry, 2(2), 205-221.
McMullen, A. (2011). The Yogi Berra school of library science. Bottom Line: Managing Library Finances, 24(2), 138 – 139.
Rocco, T., & Plakhotnik, M. (2009). Literature Reviews, Conceptual Frameworks, and Theoretical Frameworks: Terms, Functions, and Distinctions. Human Resource Development Review, 8(1), 120-130.