Ensure Value Creation Research Articles

Cash Conversion Cycle, Asset Turnover, Capital Expenditure and Firm Value: The Mediating Role of Profitability

Purpose: To examine the impact of the cash conversion cycle, asset turnover, and capital expenditure on firm value, using profitability as the mediating factor. Methodology/approach: Using a sample consisting of 61 non-cyclical consumer goods listed firms in Indonesia from 2016 to 2021, a structural equation modeling is employed to analyze the direct, indirect, and total effects of the vari-ables being studied on firm value. Findings: The cash conversion cycle does not have signi-ficant direct or total effects on firm value, but it has a negative and significant indirect effect on firm value through profitability. Asset turnover and capital expen-ditures directly significantly affect firm value in different directions, but they both have positive and significant total effects on firm value. Profitability fully mediates the effect of the cash conversion cycle on firm value, and partially mediates the effect of capital expenditures on firm value. Practical implications: To ensure value creation, firms are suggested to monitor the cash conversion cycle, enhance asset turnover, and ensure the profitability of capital expenditures. Originality/value: Providing empirical evidence on the mediating role of profitability in analyzing the effect of the cash conversion cycle, asset turnover, and capital expenditures on firm value.

Cultivating post-acquisition employee engagement: the Danaher business system

PurposeOne of major concerns of serial acquirers is to ensure value creation. However, mergers and acquisitions (M&As) are well known for the key management problems they generate such as change management, cultural clashes and increased managerial turnover. Despite this, M&As also offer opportunities for integrating best practices. This paper aims to demonstrate how Danaher attempts to cultivate employee engagement in companies it has recently acquired.Design/methodology/approachThis paper adopts a single-case approach to show how Danaher implements its in-house method – the Danaher Business System – a management system during the take over and the postacquisition phase.FindingsThe findings from this paper demonstrate best practice management and strategies needed to ensure successful M&As. Almost 40 years after serial acquisitions, Danaher is cited as one of the most successful serial acquirers. Its human approach to takeovers has been a central part of this.Originality/valueThis paper offers a concise and clear outline of the management strategies used by Danaher to ensure successful acquisitions relying on Kaizen and LEAN with a strong focus on the human side. During the takeover and postacquisition integration, Danaher’s human approach would appear to be a key differentiating element.

Company Financial Strategy's Instituonalization: Theoretical Aspects

Under today’s conditions of exogenous and endogenous challenges for economic agents, the problem of ensuring value creation for stakeholders on a long-term horizon is becoming more acute. The lack of adequately formed institutions within Ukraine’s market infrastructure adds additional complexity to the task. The aim of this paper is to identify the features of an effective financial strategy institute in Ukraine. This paper examines issue of forming and further functioning of financial strategy institute at company, industry, and state level. The problems of Ukrainian corporate sector genesis in the context of the formation of market institutions are described. The effect of information asymmetry and principal-agent conflict on the process and results of value creation for stakeholders is highlighted. Ways to reduce the influence of the principal-agent conflict through institutionalization are proposed. Paper also considers financial strategy’s institutionalization as a factor influencing investors’ interest in the company is considered. It is noted that the existing incentive tools for the company’s managers are aimed at the short-term horizon. It is emphasized that the financial strategy’s institutionalization would contribute to overcoming excessive fixation on the company’s short-term results, instead, an adequate balance would be formed regarding short- and long-term priorities at the company level. Financial strategy institute’s placement in the company’s management architecture is defined. The conducted research may be useful for researchers in the field of corporate governance and corporate finance, private and state- owned companies, industry associations, and state authorities. Prospects for future research are an in-depth analysis of the financial strategy institute’s infrastructure, in particular, in terms of its quantitative analysis and evaluation.

Financial evaluation of value-creating biosimilar development candidates: a business case study of low-, medium- and high-sales biosimilars

ABSTRACT Background Selection of a biosimilar development candidate requires detailed and careful analysis to ensure value creation. Research design and methods We applied the net present value (NPV) model for financial evaluation of biosimilar development candidates for the global market. Biosimilar development candidates from three categories were identified based on the global sales of their respective original biological products (OBPs): >$1 and ≤$4 billion, >$4 and ≤$7 billion and >$7 and ≤$10 billion. The standard NPV and risk-adjusted NPV (rNPV) were calculated under the base-case and various scenarios related to development costs, sales, selling, general and administrative expense, cost of goods sold, and discount rates. Results A biosimilar to an OBP with sales of $1.6 billion has some financial risk. Biosimilars to OBPs with sales of $5.5 billion and $9.4 billion have very less financial risk under the base-case scenario of analysis. Sales of an OBP had impact on the financial valuation and attractiveness of a biosimilar. Sensitivity of rNPV to different parameters varied for three biosimilars. Discount rates, sales and development costs were important parameters affecting financial valuation of biosimilars. Conclusion Biosimilar development candidate selection requires a thorough financial evaluation considering product-, company- and market-specific aspects.

End of life analysis of solar photovoltaic panel: roadmap for developing economies

Purpose The purpose of this paper is to propose a conceptual framework for handling end of life (henceforth EoL) scenarios of solar photovoltaic (solar PV) panels, which includes different options available to businesses and end-users, as well as promoting the collaboration between government and all relevant stakeholders. Design/methodology/approach This paper adopts purposeful sampling, secondary data and content analysis to develop an appropriate conceptual framework that helps to create awareness of the appropriate options for dealing with the EoL cases of solar PV panels. Findings From the data analysis, it is revealed that reuse, repair and recycling of solar PV panels can ensure value creation, public-private partnership and a solution for education in sustainability, and thus, prolonging the useful life cycle of the products. Research limitations/implications This paper limits the analysis on developing economies and the use of selected literature based on the recycling of solar PV panels. Originality/value This paper is an initial attempt to create an awareness by identifying, analyzing and educating the stakeholders to handle appropriately any EoL scenario of solar PV panels.

Big Data for Creating and Capturing Value in the Digitalized Environment: Unpacking the Effects of Volume, Variety, and Veracity on Firm Performance*

Despite significant academic and managerial interest in big data, there is a dearth of research on how big data impacts the long‐term firm performance. Reasons for this gap include a lack of objective indices to measure big data availability and its impact, and the tendency of studies to ignore the costs associated with collecting and analyzing big data, assuming that big data automatically delivers benefits to firms. Focusing on how firms create and capture value from big data about customers, we use the resource‐based view and three dimensions of big data (i.e., volume, variety, and veracity) to understand when the benefits outweigh the costs. Relying on the number of downloads of mobile device applications, we find that volume of big data has a negative effect on firm performance. This result suggests that the “bigness” of big data alone does not ensure value creation for a firm, and could even constitute a “dark side” of big data. Because big data variety—measured as the number of types of information taken per each application—moderates the negative effects of big data volume, simultaneous high values of volume and variety allow firms to create value that positively affects their performance. In addition, high levels of veracity (i.e., a high percentage of employees devoted to big data analysis), are linked to firms benefiting from big data via value capture. These findings shed light on the circumstances in which big data can be beneficial for firms, contributing to a better theoretical understanding of the opportunities and challenges and providing useful indications to managers.

Measuring efficiency levels in Qatari organizations and causes of inefficiencies

Organizational efficiency is considered as one of the important factors affecting the sustainability and viability of an organization and of the larger society that such organizations are part of. Scholars in the interdisciplinary studies of engineering, business, and economics have concluded that the socioeconomic parameters of society are deeply linked with organizational efficiency. Organizational efficiency is generally defined as a measure of the relation between the input resources and output generated within a system. Organizational efficiency in public and private sector enterprises plays a crucial role in ensuring value creation and sustaining the economic and social development of countries. The importance of a sustainable economy and social well-being requires many countries around the world to design and implement tailored pathways to achieve their target of sustainable development, which requires assessing and continuously improving the efficiency of their organizations. Measuring efficiency and implementing periodic course corrections are imperative for maintaining high levels of organizational efficiency. The literature on organizational efficiency measurement is limited and qualitatively inferior, especially when it comes to sustainability considerations and for organizations operating in the Arabian Gulf. The research approach developed in this study to measure efficiency in Qatari organizations is crucial in understanding and improving the transformation journey of Qatari, and similar organizations. This paper focuses on the research approach adopted to measure organizational efficiency based on international best practices and conducts a comparative analysis on the local organizations from a sustainability perspective considering all dimensions of economics, environment and social impacts. The methodology involved in measuring and benchmarking organizational sustainability identifies the “as is” state of organizational sustainability and efficiency in the organization. Identifying the causes of the efficiency gap and improving organizational efficiency from the local perspective are the objectives. The survey result ranked the main areas for improvement within local organizations as 23% Overall organization culture and behavior, 21% Human Resources, 19% Leadership and Governance, 18% Operation, 11% Finances and 8% Quality Assurance.

Impacts of Accountability, Integrity, and Internal Control on Organizational Value Creation: Evidence from Malaysian Government Linked Companies

Credible and well-functioning governance is crucial for the value creation of firms. Recently, private sectors have undergone substantial changes by focusing on good governance as a tool to enhance value, reputation, and image. The primary features of firms with good governance include greater emphasis on accountability practices, proper implementation of a corporate integrity system, and sound internal controls in place to avoid risk and to ensure policy and procedures that are complied. Government linked companies (GLCs) as the backbone of the Malaysian Government have been harshly criticised for not being able to create value(s) despite receiving high priority in the process of getting government projects. Therefore, this study aims to examine the role of good governance systems, which are reflected through accountability systems, corporate integrity systems, and internal control systems towards value creation of Malaysian GLCs. This study collected primary data based on a set of questionnaire survey among 100 GLCs in Malaysia. Based on the regression analysis, this study found that corporate integrity systems and internal control systems were vital elements in ensuring value creation in GLCs.

A Reliability Model for Assessing Corporate Governance Using Machine Learning Techniques

Corporate governance assesses the efficiency and effectiveness of companies’ operations and decisions to ensure value creation for shareholders and optimal risk taking. As investors’ decision making process largely depends on financial information and corporate reports, transparency is capital for the stability of a company, or even the stability of a country via the corporate sector. This research introduces the system reliability theory to properly model the behaviour of companies regarding their corporate governance mechanisms. We propose the assessment of the corporate governance framework by mapping its inputs as components (either in operating or failed state) along with firm characteristics to determine an approximate Structure Function that enables alternatively modeling the functioning of the system, quantifying its reliability and detecting critical components. The advantage of the proposed mapping approach is illustrated using a sample of 1109U.S. listed companies during the period 2002–2014, reporting financial and non-financial information as components of the corporate governance system and the return on assets as the system output. The proposed approach is also useful for modelling other non-engineering sub-systems; companies, financial markets or even economies would be exposed to significant risk if these systems do not function properly.

A reliability model for assessing corporate governance using machine learning techniques

Corporate governance assesses the efficiency and effectiveness of companies’ operations and decisions to ensure value creation for shareholders and optimal risk taking. As investors’ decision making process largely depends on financial information and corporate reports, transparency is capital for the stability of a company, or even the stability of a country via the corporate sector. This research introduces the system reliability theory to properly model the behaviour of companies regarding their corporate governance mechanisms. We propose the assessment of the corporate governance framework by mapping its inputs as components (either in operating or failed state) along with firm characteristics to determine an approximate Structure Function that enables alternatively modeling the functioning of the system, quantifying its reliability and detecting critical components. The advantage of the proposed mapping approach is illustrated using a sample of 1109U.S. listed companies during the period 2002–2014, reporting financial and non-financial information as components of the corporate governance system and the return on assets as the system output. The proposed approach is also useful for modelling other non-engineering sub-systems; companies, financial markets or even economies would be exposed to significant risk if these systems do not function properly.

Platform design framework: conceptualisation and application

ABSTRACTTechnological platforms enable actors to connect their resources across markets, creating value through complementarities and network effects. The design choices related to different aspects of a platform are crucial for ensuring value creation. Building on earlier literature, we have developed a framework for platform design, involving four elements: 1) platform architecture, 2) value creation logic, 3) governance, and 4) platform competition. Using a design science approach, we provide an empirical illustration of design choices in the Mobility-as-a-Service (MaaS) platform DORA. The study presents an overarching framework for platform design, with an empirical use case illustrating its applicability.

Role of Human Resources Function in Successful Organizational Transformations for Efficiency Improvement

Organizational efficiency is generally defined as a measure of relation between the input resources and output generated within a system. Organizational efficiency in public and private sector enterprises and communities plays a key role in ensuring value creation, and thereby, ensuring economic and social sustainability of societies with effective and minimal use of resources, reduced waste and small ecological footprint. Transforming an organization is all about changing a laggard organization to an agile and responsive entity, which foresees changes, willing and adaptive to changes proactively rather, being reactive to changes, which are forced by the operating environments. A proactive organization with visionary leadership foreseeing the challenges establishes mitigation plans to overcome or reduce the impact triggered by operational challenges, while a reactive organization will be impacted by the operational challenges before it initiates changes based on the impact assessment. Transformation of an organization reduces operational costs by eliminating duplications and non-value adding processes (Robbins, 2012). The paradigm of sustainable transformation of organizations has three main components which are interactively functioning: leadership and management, human resources, and organizational culture. Sustainability is defined as ‘responsibility of an organization in sustained generation of economic, environmental and social benefits’ (Gardelliano, 2005). Organization management often gets caught in the contradiction between sustainability and profitability. The shareholders / stakeholders would want short term profitability of an organization while societies around the world are increasingly demanding corporations to be environmentally and socially responsible in its operations with utmost importance being given to their human and natural resources and communities that they operate in. Sustainability also depends on Innovation and Knowledge Development. In a knowledge economy, key engine of growth is knowledge. An economy in which knowledge is acquired, created, disseminated and applied to enhance economic development is known a knowledge economy (Building Knowledge Economy, WBI, 2011). An effective ecosystem which nurtures innovation is based on outputs generated from knowledge centers like universities, research centers, schools, consultancy agencies and other organizations engaged in similar endeavors. The knowledge generated in such centers is applied though right tools to enhance the wellbeing of humans and sustainability of organizations. This paper focuses on the impact of human resource function on the organizational transformation for efficiency improvement.

The impact of trust and commitment on value creation in asymmetric buyer–seller relationships: the mediation effect of specific asset investments

PurposePrevious studies have argued that trust and commitment can create value in cooperative relationships. However, this study observed that, in practice, trust and commitment alone may not ensure value creation in asymmetric relationships. Accordingly, this study aims to investigate the mediating role of specific assets in the effects of trust and commitment on value creation in asymmetric buyer–seller relationships.Design/methodology/approachContract manufacturers (CMs) in Asia were sampled to validate the argument proposed by this study. Most Taiwanese CMs are partnered with international brands (original equipment manufacturers [OEMs]) that have stronger bargaining power. This cooperative relationship is characteristically asymmetric. A questionnaire method was applied, and structural equation modeling was performed to verify the proposed hypotheses.FindingsSpecific asset investment (SAI) was a crucial mediator that explained the effects of trust and commitment on the relationship value of an asymmetric cooperative relationship. Past studies have claimed that power asymmetry results in an unequal distribution of benefits. Nevertheless, regarding the relationship between CMs and OEMs, the study revealed that relationship value could still be increased once the congruent goals have been achieved by both parties. This finding contradicts past theoretical predictions.Practical implicationsCharacteristically asymmetric CMs–OEMs (seller–buyer) relationships cannot be maintained merely through trust and commitment, particularly in the context of power and resource imbalances in which the stronger party often possesses a wider selection of prospective partners. The results of this study suggested that the CM should unilaterally invest in specific assets conducive to a cooperative relationship as an expression of faith in the relationship with the stronger firm, thereby creating opportunities for value cocreation.Originality/valueThe analysis of the relevance of relationship quality in the context of asymmetric cooperative relationships confirmed the mediating influences of SAI on ensuring value creation and the maintenance of the relationships. Relationship value could still be created despite the highly asymmetry power relationship. The CMs’ SAI is the key mechanism for this achievement.

Rule of law or country level corporate governance: What matters more in emerging market acquisitions?

A study of post-acquisition performance of cross border acquisitions involving emerging market firms shows that when developed market firms acquire emerging market firms, rule of law in the target country has a significant favorable impact on post-acquisition performance; while country level corporate governance has no impact. Contrarily, when emerging market firms acquire developed market firms, country level corporate governance in the target country has a significant adverse impact on post-acquisition performance, while rule of law has no impact. We provide evidence that if rule of law in the emerging market target country is less evolved but not dismally low, the developed market acquirer can seize the opportunity to enforce better discipline at the firm level in the target firm and thereby enhance post-acquisition performance. However, in the case of emerging market firms’ acquisitions, lower the difference in country level corporate governance, superior gains are assured. The study provides evidence that location level factors affect post acquisition performance differently for ADTE and AETD acquisitions and ADTE acquisitions give importance to rule of law, while AETD acquisitions emphasis on corporate governance factors to ensure value creation in acquisitions and the results are robust after controlling for country effects and year effects.

Appropriability and the retrieval of knowledge after spillovers

Research summary:Firms create and capture value through innovation. In technology‐driven firms, there has been an explicit emphasis on appropriability through imitation deterrence and cumulative inventions that build on prior firm innovation. We introduce systematic empirical evidence for a third mechanism of appropriability namely, knowledge retrieval, which is defined as the re‐absorption of previously spilled knowledge. We extend previous studies which consider technological complexity and organizational coupling as predictors of appropriability by examining their impact on knowledge retrieval. We find that technological complexity has a curvilinear relationship with retrieval while organizational coupling has a negative relationship. We discuss the implications of these findings for theories of absorptive capacity, organizational design and appropriability of innovation.Managerial summary:It is a widely held assumption that knowledge should be protected and held tightly within the firm to ensure value creation and value capture. The implicit recognition is that knowledge spillovers, or knowledge leakage, is detrimental to performance. By examining the patterns of citations among patents of 142 semiconductor firms, we study how organizational structure and technological complexity play a role. We find that moderate technological complexity improves appropriability. If imitation deterrence is paramount, then the optimal structure would be a tightly‐coupled organization. In other instances, loosely‐coupled organizations may be superior because they foster internal cumulative innovations and, if spillovers were to occur, they also maximize knowledge retrieval. Our findings suggest that all is not lost when spillovers occur and that firms can continue to benefit in downstream innovations.Copyright © 2015 John Wiley & Sons, Ltd.

The need for a project governance body

Purpose – From a project owner's perspective, it is obvious that a project shall contribute to achieving the organisation's strategic goals. The purpose of this paper is to find out what project owners can do to ensure value creation in their projects, what owners actually do in the few cases in which they are actively involved in ensuring value creation and what is the result of their choice. Design/methodology/approach – The authors have analysed 12 projects in the Norwegian construction industry, using a qualitative approach. A general business framework for understanding projects has been applied in order to identify possible shortcomings and success factors. The authors have used semi-structured in-depth interviews combined with questionnaires for data collection. Findings – The study reveals an absence of project strategy, resulting in projects which only to a small extent achieve strategic goals. This lack of strategic perspective in project management is also recognised by the research literature as a common tendency. Traditional project management approaches concentrate on time, cost and quality, instead of on providing strategic success. Based on business literature, the authors identify the value proposition and the customer value proposition as being essential. Practical implications – The authors recommend construction project owners – as described in the literature – to appoint a project sponsor responsible for communicating a value proposition and business rationale to the project supplier. The sponsor should also be responsible for aligning the suppliers’ customer value proposition with the owner's strategy. The authors recommend that the project sponsor be supported by a project governance body. This will help project owners to ensure value creation in their projects, as described in the literature. The authors pinpoint a need for bridging theory and practice. Originality/value – The originality of the paper lies in introducing insights from business literature to the construction industry. In the value proposition the owner defines the benefits the project is to provide. The customer value proposition is the statement where the supplier aligns the proposed project output with the project owner's needs. The project governance body is responsible for ensuring this communication process.

Remodelling Employment for Competitive Advantage: What will follow Japan's ‘Lifetime employment’?

Since the breakdown of the bubble economy, many people have claimed the breakdown of the seniority system. However, another main pillar of Japanese-style management, long-term, or ‘lifetime’, employment, has remained almost unchanged. Since these two systems are complementary, some inconsistency must occur when one of them changes. For competitive advantage under global competition, Japanese firms must achieve a dynamic compatibility between strategy and management style, as well as ensure value creation in innovations. This new style must reflect an element of positivity from individual employees. For long-term advantage, the output of the individual must be difficult for competitors to reproduce. In this respect, firms need to develop their own in-house human resources rather than recruit personnel from the external labor market. Such a system would augment the debate on long-term or lifetime employment and answer the demerits of such employment. Where high performers are able to move to other companies, knowledge that could give rise to nonimitability cannot accumulate within a firm. Companies must therefore cultivate a new type of commitment, based on the management of developing an attitude of autonomy or positivity in employees – in other words, empowerment.