Drivers Of Firm Performance Research Articles

Family business culture: a strategic resource and driver of firm performance

PurposeThrough a resource-based theoretical lens, we elucidate conditions under which family business culture (FBC) amplifies the positive effects of high-performance work systems (HPWS) intensity and exacerbates the negative effects of low human capital uniqueness (HCU) on firm performance. By doing so, we answer the call for more research on the conditions under which FBC influences firm outcomes.Design/methodology/approachThe present study sampled 226 small business owners across the USA, who provided their responses to online survey questions. Hypotheses were assessed via path analysis in MPlus 8.8, using maximum likelihood estimation.FindingsFBC, HPWS intensity and HCU were positively associated with firm performance. Further, the HPWS intensity – firm performance and HCU – firm performance links were moderated by FBC. Specifically, increased levels of HPWS intensity were associated with greater firm performance when FBC was high, and firms with low levels of HCU tended to have particularly decreased levels of firm performance when FBC was low.Research limitations/implicationsConsistent with the resource-based view, firms' unique resources and competitive advantage may be tied to the extent to which they have an established FBC. High levels of FBC, which are characterized by shared values, loyalty, proud involvement and care toward the organization, can play a significant role in enhancing organizational performance. Family business leaders should prioritize cultivating an enhanced FBC alongside investments in HPWS and unique human capital.Originality/valueThis study contributes to understanding the theoretical underpinnings of FBC and its relationship with firm performance by examining FBC’s interaction with HPWS intensity and HCU. We highlight FBC as a valuable intangible resource that can enhance or diminish the effectiveness of other strategic resources in family firms, further extending the application of resource-based view theory in family business research.

Management’s tone change in MD&A and tax avoidance

Purpose The purpose of this paper is to explore how variations in management’s tone within management’s discussion and analysis (MD&A) sections of 10-K reports can serve as an indicator of tax avoidance and highlight the complex relationship between such linguistic shifts and the tax avoidance decisions within firms. Design/methodology/approach The paper uses a textual analysis approach to identify linguistic cues in MD&A sections of 10-K filings related to tax avoidance, going beyond traditional quantitative measures. The study uses differences in negative word occurrences in MD&A to measure management’s tone change and examines various measures of tax avoidance. The sample covers the period from 1993 to 2017 and comprises all firms with 10-K filings available on EDGAR, totaling over 30,000 firm-year observations. Findings The findings indicate a complementary relationship between tax avoidance and other drivers of firm performance. When firms have more negative management’s tone, they are less willing to engage in tax avoidance and vice versa. The study’s approach with management’s tone change provides a different and statistically significant improvement in model fit for detecting tax avoidance. Practical implications This paper provides actionable insights for detecting tax avoidance through the analysis of management’s tone in corporate disclosures, offering a new tool for researchers, investors and tax authorities. It highlights the importance of linguistic cues as indicators of tax avoidance behavior, complementing traditional financial metrics. Originality/value The paper contributes to the literature by using management’s tone change as a time-varying factor to explain tax avoidance behavior. It uncovers a larger set of linguistic cues in MD&A that can be used to detect tax avoidance. This research provides a complementary approach to traditional quantitative tax avoidance measures and offers insights into the overall relationship between tax avoidance and firm performance, going beyond one-dimensional measures typically used in prior literature.

From passion to profit: unveiling the strengths of proactive mindset, perseverance, excellence and education in the entrepreneurial success of MSMEs

PurposeThe study investigates the linkage between personality traits and firm performance. It examines the role of the pursuit of excellence, perseverance, a proactive mindset and formal education in determining the entrepreneurial success of MSMEs.Design/methodology/approachData were collected from 432 MSME entrepreneurs using a structured questionnaire from India's two major industrial towns to analyze the impact of personality traits on firm performance. Structural equation modeling (SEM) was employed to assess the direct and indirect relationships with the help of mediation analysis.FindingsThe findings assert that personality traits improve firm performance and determine the success of MSMEs. The results reveal that the need for achievement, a proactive mindset and the pursuit of excellence are crucial to firm performance. In addition, formal education mediates between perseverance and the pursuit of excellence personality attributes on the one side and firm performance on the other.Research limitations/implicationsThe research has various theoretical and practical implications for entrepreneurs, financial institutions and policymakers. The results could be productively used to nurture the entrepreneurial ecosystem in India.Originality/valueAlthough research on personality traits as a driver of firm performance is growing, the pursuit of excellence, perseverance and proactive mindset attributes as enablers of firm performance have not garnered much attention. The study presents a precise conceptual model by integrating the aforementioned dimensions in the backdrop of an emerging market.

Learning from improvisation in New Ventures

The rapid pace of digitalization forces new ventures to cope with external changes they cannot foresee. Improvisation is a crucial way for companies to respond effectively to sudden changes. However, the mechanisms underlying the improvisation–performance link are not fully understood. This paper focuses on how improvisation affects a firm's performance. We identify two mediators for this relationship: entrepreneurial learning and routines. Our sample includes 243 new ventures in China. The results of structural equation modelling show that learning from improvisation in start-ups contributes to establishing new routines that serve as drivers of firm performance. We discuss the implications for practice and future research.

Managerial ties and learning ambidexterity: the moderating effects of manager service support and employee service rewards

PurposeManagerial ties (i.e. business ties and political ties) could help manufacturers conduct learning ambidexterity by providing external resources. However, the resource management perspective claims that merely accessing external resources does not guarantee learning ambidexterity. As manufacturers utilize their resources by implementing services, this study aims to investigate how the impact of managerial ties on learning ambidexterity depends on human resource service practices (i.e. manager service support and employee service rewards).Design/methodology/approachThis study collected data from 150 high-tech manufacturing firms through a survey-based questionnaire, which was completed by two managers in one firm. The ordinary least squares regression was employed to test the research model and hypotheses.FindingsBusiness ties hurt learning ambidexterity when manager service support is high, whereas business ties benefit learning ambidexterity when employee service rewards are high. Similar findings are not applied to political ties.Research limitations/implicationsThe authors did not examine the mechanism underlying the effect of managerial ties on learning ambidexterity. The non-significant findings on political ties suggest potential mediators for future research. Another limitation is that the study’s data are only from China. Manager ties are also important in other developing countries like Turkey. More data from other countries are needed to test the generalization of the authors’ findings.Practical implicationsFirst, managers should focus on business ties more than political ties when learning ambidexterity is important to their firms. Second, managers should reward service-oriented employees.Originality/valueThe study enriches the literature on investigating the impact of managerial ties on learning ambidexterity. The authors also contribute to the literature by examining servitization as a service context. Prior studies mainly examine servitization as a driver of firm performance. The findings suggest that servitization as a business context can affect other business activities.

The Impact of Organizational Innovativeness on Firm Performance in Poland: The Moderating Role of Innovation Culture

Purpose: The study aims to examine the relationship between organizational innovativeness and firm performance, considering the culture of innovation as a potential moderator of this relationship. The present work provides important managerial insights into drivers of firm performance. Design/Methodology/Approach: A survey was conducted across 121 random manufacturing businesses in Poland. A regression analysis series was used to assess the relationships between organizational innovation, an innovation culture, and a firm’s performance. Findings: Organizational innovativeness and innovation culture both have a substantial and positive impact on firm performance. The innovation culture played a moderating role in the relationship between innovativeness and firm performance in both high- and low-innovation cultures and across all dimensions of innovation. The moderation itself was the strongest in strategic innovativeness, whereas the market innovativeness model produced the most significant variance attributable to the moderator. Practical Implications: The study speaks to the need to consider organizational innovativeness and drivers of the innovation culture when striving for good firm performance – a notion important for management practice. Originality/Value: The literature provides ample evidence to substantiate the thesis that innovation positively impacts a firm’s performance, though findings vary substantially across studies. Furthermore, a paucity of studies would model and empirically verify the relationship between organizational innovativeness and firm performance among industrial businesses operating in Central-Eastern Europe. There is also little research demonstrating the role of the innovation culture in moderating this relationship. This research makes an essential contribution to the existing literature by empirically examining the relationship between organizational innovativeness, innovation culture, and firm performance.

Does the sector matter? An analysis of high-growth firms and industry growth rates

PurposeThis paper aims to analyze the effect of industry growth rates on the characteristics of high-growth firms (HGFs) that are active in a particular industry. By making a distinction between HGFs active in stable and declining industries and HGFs active in growing and high-growing industries, it is analyzed if the main dimensions of firm performance are significantly different for HGFs active in one of these different industry types. Gaining more insight into this industry aspect of high firm growth is important as governmental measures towards HGFs may be more effective if they have a specific sectoral focus.Design/methodology/approachA subset of 740 Belgian HGFs was analyzed. Data were gathered from the Belfirst database. HGFs were classified within their corresponding industry type: a declining industry (negative growth), a stable industry (0 −5% growth), a growing industry (5 −10% growth) and a high-growth industry (>10% growth). Four dimensions of structural firm performance that are expected to correlate with high growth were taken into consideration: productivity (value added per FTE), profitability (ROA), innovativeness (intangible assets) and financial health (solvency and liquidity).Tukey's range tests in conjunction with post-hoc analysis of variance (ANOVA) tests were carried out to test for significant differences in all the mentioned variables for the HGFs in the four different industry types.FindingsResults show that HGFs active in a stable industry are not significantly more profitable or innovative than HGFs active in a growth industry. However, significant differences could be encountered when it comes to the other two dimensions of structural firm performance: productivity and financial health. It is shown that HGFs active in declining and stable industries are significantly more productive than HGFs active in growth industries and high-growth industries. Also, HGFs active in declining and stable industries have significantly higher liquidity ratios than firms active in growth industries, pointing towards a better financial health for HGFs in nongrowing industries.Research limitations/implicationsThe results confirm the conceptual logic that the differences between resource-based view (RBV) and industrial organization (IO) propositions will have an impact on the drivers of firm performance and high business growth. Every future study that focuses on the growth determinants of HGFs should be aware that considering the subset of HGFs as one homogenous group may be suboptimal. It is likely that the growth determinants of both HGF types will indeed be fundamentally different.Originality/valueUntil now, all studies on HGFs have considered the subset of HGFs as a whole. This paper tried to disentangle the subset based on the growth rate of the industry in which HGFs are mainly active. In this proposition, a reason for the lack of knowledge about characteristics of HGFs may – at least partially – be found in the fact that industry membership plays an important role in determining the characteristics of a high-growth firm. Future studies focusing on high-growth determinants may benefit from systematically taking the industry growth rates into account, with the knowledge that the propositions of two different theories – IO and RBV – may be the fundamental drivers of a firm's high-growth rates.

How does the position of firms in the supply chain affect their performance? An empirical study

The relationship between a firm and its supply chain has been well studied, however, the association between the position of firms in complex supply chain networks and their performance has not been adequately investigated. This is primarily due to insufficient availability of empirical data on large-scale networks. To addresses this gap in the literature, we investigate the relationship between embeddedness patterns of individual firms in a supply network and their performance using empirical data from the automotive industry. In this study, we devise three measures that characterize the embeddedness of individual firms in a supply network. These are namely: centrality, tier position, and triads. Our findings caution us that centrality impacts individual performance through a diminishing returns relationship. The second measure, tier position, allows us to investigate the concept of tiers in supply networks because we find that as networks emerge, the boundaries between tiers become unclear. Performance of suppliers degrade as they move away from the focal firm (i.e., Toyota). The final measure, triads, investigates the effect of buying and selling to firms that supply the same customer, portraying the level of competition and cooperation in a supplier’s network. We find that increased coopetition (i.e., cooperative competition) is a performance enhancer, however, excessive complexity resulting from being involved in both upstream and downstream coopetition results in diminishing performance. These original insights help understand the drivers of firm performance from a network perspective and provide a basis for further research.

The Case for Ethical Non-compete Agreements: Executives Versus Sandwich-Makers

Human capital, the knowledge, skills, and abilities of employees, can be a powerful driver of firm performance, yet the mobility of human capital raises questions over how to protect it. Employee non-compete agreements, which limit an employee’s ability to start or join a rival firm, have received recent attention. While past research considers whether non-competes are effective tools at limiting employee mobility, few have considered if non-competes should be used. Filling this gap, I propose a normative schema for when employee non-competes can be considered ethical. A review of the limited existing literature on the ethics of employee non-competes finds that prior research has mostly focused on questions of property rights, which I propose as being nested within other ethical constructs. Analysis of two real-world illustrative examples of employee non-competes (an executive at Amazon and a Jimmy John’s sandwich-maker) leads to a three-prong approach to evaluating non-competes based on ethical dimensions of power, autonomy, and fairness. I end by proposing—although further research is warranted—a measure of employee-level absorptive capacity, which is closely coupled with an employee’s pre-employment human capital, as an employee-level attribute independent of, although likely coincidental with, the tripartite requirements of power/autonomy/fairness for ethical employee non-compete agreements.

Linking human resource management, entrepreneurial orientation, and firm performance: an integrative theoretical framework

As a growing field of analysis in management studies, several scholars have been looking at the role of human resource management (HRM) practices in boosting a firm's entrepreneurial orientation (Tansky et al., 2009). On the other hand, entrepreneurial orientation has been repeatedly proven to positively impact firm performance both at the organisational level, but also at the level of enterprise clusters. This means that within high-entrepreneurial orientation firm clusters, both the overall cluster and the firms' individual performances are positively affected (Yao et al., 2009). However, existing literature provides little guidance on how HRM practices could help firms improve their performance through fostering entrepreneurial orientation. This paper aims to shed more light on how human resource management could become a major driver of firm performance while leveraging on learning to translate individual and collective abilities into value adding entrepreneurial actions. For this purpose, this paper follows a systematic literature review as a recognised evidence-based tool for theory building (Tranfield et al., 2003). The objective is to develop an integrative theoretical framework that explains how HRM practices provide firms with superior performance, using entrepreneurial orientation as an intermediate construct.

The Austrian view and value co-creation process in solution-oriented firms: A seven stage, “solution prototyping” framework

ABSTRACTWe develop a conceptual framework that examines the behavior of the solutions-oriented-firm from initial solutions generation, through the “sale” and delivery to an initial customer, and its potential dissemination to the broader marketplace as a more standardized product/service offering. Particular attention is paid to the emerging discussion of value co-creation and Service-Dominant logic. Key tenets of the Austrian School of Economics are leveraged to identify how the selling firm, sales employee, and buying firm co-create value, and the “solution” itself. Thus, providing a deeper understanding of the “end-to-end” value chain of activities and drivers of firm performance.

Strategy and performance of Russian firms: an organisational capabilities perspective

This paper investigates how organisational capabilities shape business strategy and influence the performance of Russian enterprises. Although the emphases on both cost leadership and differentiation were positively associated with firm performance, the differentiation-performance link became insignificant when marketing and technology capabilities were included in a composite model. Marketing and technology capabilities - not the strategy per se - appear to be the primary and dynamic drivers of firm performance. The implications of this perspective on the capabilities-strategies-performance nexus are discussed within the Russian context.

Resource-Based View of Information Systems: Sustainable and Transient Competitive Advantage Perspectives

The resource-based view (RBV), or resource-based theory, is one of the oldest and most influential theories in the field of information systems. This paper contends that it is timely to revisit, reflect on, and reposition RBV to ensure its continued disciplinary relevance and progress. In doing so, this paper (i) provides a succinct and sharp evaluation of the conventional RBV of information systems that firms use to establish sustainable competitive advantage, and (ii) makes an original contribution by introducing a contemporary RBV of information systems that firms can use to establish transient competitive advantage. Both these contributions should advance the current and future understanding of information systems as (a) an internal firm resource, (b) a source of competitive advantage, and (c) a driver of firm performance.

The environment-strategy-structure fit and performance of industrial servitized SMEs

PurposeThe purpose of this paper is to examine the environment-strategy-structure fit in the context of industrial servitization and its impact on the profitability of manufacturing SMEs.Design/methodology/approachData were collected from face-to-face interviews with the CEOs of 184 French manufacturing SMEs. These primary data were complemented by the indicators extracted from a financial database to ensure objective measures of financial performance. Analyses were conducted by means of partial least squares structural equation modeling.FindingsThe research tests the impact of the organizational design (customer interface, service delivery system and service culture (SC)) on financial performance. It also tests the moderating effect on this relationship of servitization strategies adopted by the firm (added services (AS), activities reconfiguration (AR) and business model reconfiguration (BMR)) and the environment in which the firm is situated (industry dynamism, competitive intensity and industry munificence).Research limitations/implicationsThis study considers the coalescence of the environment-strategy-structure to be a driver of firm performance in the context of industrial firms’ servitization. Three specific servitization strategies (AS, AR and BMR) are suggested based on the service offering’s impact on the customer’s activity chain or business model.Practical implicationsThe research proposes some optimal organizational design depending on servitization strategy and environmental factors; for example, SC has a strong impact on financial performance when BMR is adopted.Originality/valueThis empirical study is based on an extended sample of 184 SMEs and provides quantitative support for the claim that good alignment between strategy and organizational design based on environmental factors increases profitability.

The Emergence of Resourcing Practices in Epistemic Communities: The Case of Drug Repurposing

Valuable resources are key drivers of firm performance. Yet, little is known about the process whereby resources obtain value. By looking at a specific setting in drug discovery in the pharmaceutical industry known as drug repurposing, we analyze antecedents of the systematic process whereby resources obtain value. Our findings show that emergence of an alternative problem solving logic and changing practices interact with systematic efforts of resourcing, and technology had a significant impact on increase in resourcing practices. In the process of emergence of alternative logics and changing practices, serendipity had a dual role as a historical case study and a narrative in the emergence of a new paradigm in drug discovery known as drug repurposing.

Exploring the link between innovation and growth in Chilean firms

We investigate the relation between the introduction of innovation and subsequent firm growth employing a dataset representative of the Chilean productive structure. By means of quantile treatment effects (QTE), we estimate the effect of the introduction of innovation by comparing firms with a similar propensity to innovate for different quantiles of the firm growth distribution. Our results indicate that process innovation positively affects sales growth for those firms located at the 75th and 90th percentiles. Contrarily, product innovation appears not to be a driver of firm performance. We also find that process innovation benefits mature firms at higher quantiles while it positively affects young firms located at low-medium quantiles.

Capability Configuration in Software Industry SMEs: The CAO Model of Ordinary Capabilities*

Ordinary capabilities contribute to firm core competencies and are prominent drivers of firm performance. However, our understanding of ordinary capabilities, and how they are leveraged to advance performance in small and medium‐sized enterprises (SMEs), remains unclear. We review prior literature and introduce the Customer‐Alignment‐Operational (CAO) model of ordinary capabilities, which identifies three types of ordinary capabilities: customer, alignment, and operational capabilities. Using data collected from software industry SMEs, we find that CAO capabilities are configured in previously undiscovered ways to enhance firm performance. The findings advance our understanding of ordinary capability types and offer insight into how ordinary capabilities are configured to generate firm value.

The reinforcing effect of a firm's customer orientation and supply-base orientation on performance

Although the merits of maintaining strategic orientations such as customer orientation and supply-base orientation have been discussed in the literature, there is relatively little understanding of how these strategic orientations interrelate. Drawing on dynamic capability theory, this study examines how these strategic orientations, through the deployment of their underlying capabilities, are drivers of firm performance. Based on a cross-industry sample, the findings indicate that firm's customer orientation and supply-base orientation are complementary strategic assets that contribute to superior performance. The findings provide new insights regarding the interplay of different strategic orientations and the importance of capability deployment.

Do All Roads Lead to Rome? The Effect of the Decision-Making Logic on Business Model Change

Business models and business model change have drawn increasing attention from both researchers and practitioners across various disciplines, including the domain of entrepreneurship. However, even though the importance of business model innovation as a driver of firm performance has been widely acknowledged, empirical studies explaining the business model change remain limited. This study contributes to prior research by examining the effects of effectual and causation-based decision- making logics on the degree of business model change in the context of small and medium-sized enterprises in Finland. The findings of hierarchical regression analysis show that both causation and effectuation-based logics have positive effects on business model change, thereby highlighting the need for both strategizing and seizing of opportunities in business model development.

A longitudinal study of innovation competence and quality management on firm performance

This study explores the relationship between innovation competences and quality management initiatives and considers how quality management initiatives infl uence both innovation competence and firm performance. A longitudinal survey of 607 high-technology firms indicates innovation competence is an important driver of firm performance, a key element of quality management initiatives. The effectiveness of innovation competence is contingent on quality management initiatives. Building on the existing literature, this study employs the resource-based view of firms and applies institutional theory as a theoretical framework for empirical analysis. The results show that an inverted U-shaped relationship exists between innovation competence and quality management in high-technology industries. We argue that the extent to which research and development (R&D) activity is associated with performance improvements depends on the extent to which a firm exceeds the minimum requirements for ISO 9000 quality certifi cation. These fi ndings help explain some inconsistent results in prior studies on innovation and quality management.