Theory Of The Firm Research Articles

What Drives the Top Management Team's Sentiment and Perception of Future Risk and Uncertainty? A Selling-Capability Based View

ABSTRACT Purpose This study postulates that a firm’s level of value appropriation capability (viz. selling capability) plays a pivotal role in influencing a firm’s top management team’s (TMT) sentiment and its perception of future risk and uncertainty. Further, the current study posits that the nexus between firm-level selling capability and the TMT’s sentiment and future risk perception is contingent upon the firm’s industry growth. Design/methodology/approach This research employs a textual analysis-based measure of TMT’s sentiment and perception of future risk and uncertainty and data envelopment analysis (DEA)-based measure of firm-level selling capability, using a sample of 243 USA-based firms during the period 2014 to 2020 and employing an endogeneity-robust econometric modeling technique. Findings The current study demonstrates that selling capability positively affects a firm’s TMT’s sentiment and negatively impacts the TMT’s perception of future risk and uncertainty. Furthermore, the association between selling capability and TMT’s sentiment and future risk perception are accentuated by industry growth. Research limitations/implications Future studies are warranted to unearth how the association between the focal variables changes depending on the effect of other firm-specific internal boundary conditions. Practical implications The results demonstrate sales and marketing managers should develop efficient sales organization and management techniques to bolster the overall firm-level selling capability. Managers should focus on enhancing their firm-level selling capability to maximize the positive impact on the TMT’s sentiment. Originality/value Although studies have shown the effect of managerial sentiment on firm behavior, there is no empirical evidence, to our knowledge, as to what drives TMT’s sentiment and perception of risk and uncertainty. The present treatise shows that a firm’s selling capability and industry growth affect the TMT’s sentiment and the perception of future risk and uncertainty.

Family successor CEO and innovation investment: a study based on the theoretical upper echelons and conflict theory

PurposeGrounded in upper echelons theory (UET) and conflict theory, the purpose of this study is to analyzes the innovative behavior of family firms from the perspective of the cognitive differences between successors and senior managers.Design/methodology/approachThis research employed a sample listed family firms in China. The obtained results were subjected to hierarchical regression analysis, complemented by rigorous model robustness testing through propensity score matching and regression with substitution variables.FindingsSuccessors engender task conflicts with family members in the top management team (TMT) due to cognitive differences, thereby stimulating corporate innovation. Conversely, successors engender relationship conflicts with non-family members in the TMT, impeding innovation. Furthermore, the performance expectations and the gender of the successor CEO also influence the relationship between cognitive differences and innovation between the successor and the TMT.Originality/valueThis study's originality and value lie in its innovative application of UET and conflict perspectives to dissect the intricate layers of intergenerational cognitive differences and their impact on the innovative behavior of family firms. It augments our comprehension of how the internal dynamics within family firms shape strategic innovation decisions.

Top management team attributes and corporate entrepreneurship: A meta‐analysis

AbstractHow do the attributes of a firm's top management team (TMT) influence corporate entrepreneurship across organizational and national contexts? Drawing on upper echelons theory and the managerial discretion perspective, this meta‐analytic study examines the dynamic relationship between TMTs' attributes and corporate entrepreneurship, focusing on the moderating role of managerial discretion arising from organizational and national‐level factors. To provide insights into the micro‐foundations of firm behavior, we explore how key TMT attributes—diversity, size, transformational leadership, tenure, general human capital, and entrepreneurial human capital—affect corporate entrepreneurship. A comprehensive meta‐analysis of 57 primary studies reveals that the effect of a TMT's attributes is context‐dependent and is significantly influenced by the approach to managerial discretion taken by the country in which the firm operates. By showing that transformational leadership and the TMT's entrepreneurial human capital and size affect corporate entrepreneurship, while attributes like tenure, diversity, and general human capital have limited or no impact, our findings challenge the prevailing view that a standardized approach to the TMT's composition drives corporate entrepreneurship. The study also underscores the role of the national‐level managerial discretion and finds that firms in institutional environments that feature low managerial discretion must align their TMT strategies with local institutional contexts to maximize their corporate entrepreneurship. These findings advance upper echelons theory by demonstrating that managerial discretion acts as a boundary condition in shaping how the TMT's attributes influence corporate entrepreneurship based on the national context. This research contributes to the fields of strategic and innovation management and offers practical insights for leaders who seek to harness the full potential of their TMTs.

Green performance appraisal impact on organizational sustainability: exploring the role of green knowledge and behavior in Lebanese firms

Purpose This research aims to reveal the impact of Green Performance Appraisal (GPA) on Organizational Sustainability (OS) and to explore the effect of GPA on Employee Green Behavior (EGB). Moreover, it investigates the factors underlying the relationship between GPA, EGB and OS. Further, it intends to examine the role of Green Knowledge Usage (GKU) in the relationship between EGB and OS. Design/methodology/approach Partial Least Squares Structural Equation Modelling technique, SPSS and the Smart PLS 4 Software were used to test the hypotheses and the data collected via a cross sectional online survey conducted among Lebanese firms registered in the local chamber of commerce. Findings The results show that GPA plays a significant role in enhancing EGB and in promoting OS. It proves also that EGB partially mediates the relationship between GPA and OS. Further, it reveals the moderating role of GKU in reinforcing the relationship between EGB and OS. Research limitations/implications Although the study has some limitations related to the limited sample targeted and the cross-sectional data used, the findings provide various managerial implications and help in enhancing OS. It also advances green human resources management practices theoretically and practically. Originality/value This research aims to fill the gaps observed in the literature and explores the impact of GPA on OS examining the mediating role of EGB and the moderating effect of GKU.

Employer Screening and Optimal Unemployment Insurance

Abstract Field experiments show that employers are less likely to consider long-term unemployed job-seekers for interviews. We study the implications for optimal unemployment insurance (UI). Based on a structural model of job search and recruitment, estimated with German data, we analyse the optimal two-tier unemployment system. We find that screening makes the optimal initial benefit level four percentage points higher and the potential benefit duration seven months longer. Using an extended Baily-Chetty formula, we study the mechanisms through which screening affects the consumption smoothing gain and moral hazard cost of providing UI and highlight the role of the externality from endogenous firm behaviour.

Determinants of Generative AI System Adoption and Usage Behavior in Korean Companies: Applying the UTAUT Model

This study addresses the academic gap in the adoption of generative AI systems by investigating the factors influencing technology acceptance and usage behavior in Korean firms. Although recent advancements in AI are accelerating digital transformation and innovation, empirical research on the adoption of these systems remains scarce. To fill this gap, this study applies the Unified Theory of Acceptance and Use of Technology (UTAUT) model, surveying 300 employees from both large and small enterprises in South Korea. The findings reveal that effort expectancy and social influence significantly influence employees’ behavioral intention to use generative AI systems. Specifically, effort expectancy plays a critical role in the early stages of adoption, while social influence, including support from supervisors and peers, strongly drives the adoption process. In contrast, performance expectancy and facilitating conditions show no significant impact. The study also highlights the differential effects of age and work experience on behavioral intention and usage behavior. For older employees, social support is a key factor in technology acceptance, whereas employees with more experience exhibit a more positive attitude toward adopting new technologies. Conversely, facilitating conditions are more critical for younger employees. This study contributes to the understanding of the interaction between various factors in AI technology adoption and offers strategic insights for the successful implementation of AI systems in Korean companies.

A Simple Measure of Anchoring for Short-Run Expected Inflation in FIRE Models

We show that the fraction of non-reoptimizing firms that index prices to the inflation target, rather than lagged inflation, provides a simple measure of anchoring for short-run expected inflation in a New Keynesian model with full-information rational expectations. Higher values of the anchoring measure imply less sensitivity of rational inflation forecasts to movements in actual inflation. The approximate value of the model’s anchoring measure can be inferred from observable data generated by the model itself, as given by 1 minus the autocorrelation statistic for quarterly inflation. We show that a shift in the collective indexing behavior of firms allows the model to account for numerous features of evolving U.S. inflation behavior since 1960.

Public sector corruption, FDI and sustainable development in Africa: Does the pollution halo or haven hypothesis hold in Ghana?

This paper examines the effects of corruption and FDI on sustainable development in Africa, particularly Ghana. The study observes the behaviour of firms using foreign direct investment to track MNEs' role in carbon emission. The study employs a quantitative approach with an ex-post facto research design type to inquiry using data from the World Bank, the Global Footprint Network and Transparency International from 1980 to 2023. The symmetric result discloses that corruption and FDI depress sustainability significantly in the long run. In the short run, it turns out that corruption and FDI stimulate sustainability. However, the short-run asymmetric effect shows that the positive and negative shocks of corruption and FDI exude negative effects on sustainability. This provides strong and consistent evidence of the pollution haven hypothesis of FDI in Ghana. Therefore, firms under the one-district, one-factory (1D1F) flagship policy and beyond must be encouraged to adhere to the strict carbon policy of the host country. The decision of the government to introduce an emission tax in the 2024 budget is tenable but the tax must be properly targeted to achieve the desired outcome.

Globalisation and competitive strategies of firms in traditional manufacturing sectors of the West Midlands

In the context of globalisation, the sustainability of traditional manufacturing sectors depends on the ability of firms to modernise and diversify. To remain competitive against emerging economies in high-volume and low-technology areas, firms must engage in high-value manufacturing. This paper uses theoretical underpinnings from strategic management and place-based approaches to provide a historical account of competitive strategies of traditional manufacturing firms in the West Midlands region of the UK between 2010 and 2012 where the automotive, ceramics, glass and clothing sectors are examined. The research methodology is based on critical realist philosophy, which emphasizes an in-depth understanding of firm behaviour and acknowledges sensitivity to differences in decision-making. The paper highlights the complexity of competitive behaviour, which is influenced by enabling and constraining factors. While the evidence presented in the paper is from 2010 to 2012, it emphasizes the need for a participatory, farsighted, and proactive policy approach to retain the historic industrial character of the region.

Firm heterogeneity and export behavior: evidence from Tunisia

ABSTRACT We use unique enterprise survey data to explore the export behavior of firms in Tunisia, a small, trade-dependent country with a complex policy environment regarding exporting. Firms may export directly or indirectly through intermediaries, and can also sell to ‘offshore’ firms, which are export manufacturing firms with special legal status. Firm size, a proxy for productivity, is strongly associated with exporting of either type as well as with sales to offshore firms. In contrast to some studies, exporting is not positively associated with firm age (i.e., experience). Domestic-owned firms are more likely to use intermediaries to export while foreign-owned firms as well as those with more educated managers are more likely to export directly. Multinomial logit results reject the hypothesis of progression from indirect exports through direct plus indirect exporting and then to direct-only exporting as firm size increases; instead, the largest exporting firms are more likely to combine direct and indirect exporting, possibly to reduce risk. The findings from this study – the first to examine the heterogeneity of exporting behavior in Tunisia – reveal a complex picture of such behavior and confirm the importance of trade intermediaries for less sophisticated firms (those with lower manager education and internet access), pointing to potential measures to encourage exporting among such enterprises. The findings also suggest that efforts to encourage exporting may also improve firms’ ability to sell to ‘offshore’ firms, enhancing the so far elusive linkages of that sector with the rest of the economy.

Determinants of energy conservation behaviour in small hospitality firms: application of the extended value belief norm theory

The study aims to investigate the energy conservation behaviour of owners and managers of small hospitality firms by incorporating social norms into an extended Value-Belief-Norm (VBN) model. In addition, the study examines the mediating effects of causal chain of the VBN model in the context of energy conservation behaviour. The world faces serious environmental challenges such as loss of biodiversity, pollution, depletion of natural resources and global warming. One of the causes of these environmental challenges is the production and consumption of energy by households and firms. The hospitality sector uses a significant amount of energy in its operation leading to negative environmental impacts. Reducing energy use will improve environmental and financial sustainability of hospitality firms. Energy conservation behaviour is one of the significant ways to reduce energy consumption. The study adopts the survey method for data collection and the respondents are conveniently sampled. The Partial Least Square Structural Equation Modelling is used for data analysis. Based on a dataset of 360 respondents, the study finds that the extended VBM model that includes social norms is applicable in explaining the energy conservation behaviour of owners/managers of small hospitality firms. The mediating effects of the causal chain of the VBN model are significant. The theoretical implication is the applicability of an extended VBN model that includes social norms to predict energy conservation behaviour. Recommendations on how to improve energy conservation behaviour include improving the level of awareness of ecological problems caused by energy consumption. The study aims to investigate the energy conservation behaviour of owners and managers of small hospitality firms by incorporating social norms into an extended Value-Belief-Norm (VBN) model. In addition, the study examines the mediating effects of causal chain of the VBN model in the context of energy conservation behaviour. The world faces serious environmental challenges such as loss of biodiversity, pollution, depletion of natural resources and global warming. One of the causes of these environmental challenges is the production and consumption of energy by households and firms. The hospitality sector uses a significant amount of energy in its operation leading to negative environmental impacts. Reducing energy use will improve environmental and financial sustainability of hospitality firms. Energy conservation behaviour is one of the significant ways to reduce energy consumption. The study adopts the survey method for data collection and the respondents are conveniently sampled. The Partial Least Square Structural Equation Modelling is used for data analysis. Based on a dataset of 360 respondents, the study finds that the extended VBM model that includes social norms is applicable in explaining the energy conservation behaviour of owners/managers of small hospitality firms. The mediating effects of the causal chain of the VBN model are significant. The theoretical implication is the applicability of an extended VBN model that includes social norms to predict energy conservation behaviour. Recommendations on how to improve energy conservation behaviour include improving the level of awareness of ecological problems caused by energy consumption.

Firm-level political risk and labor performance

This study examines how firm-level political risk relates to labor performance, measured as the ratio of the total of net income and labor cost to the number of employees. Using a sample of 9508 firm-year observations consisting of U.S. firms during the years 2002–2021, we find a significant and negative relation between political risk and labor performance. Our empirical tests show that after controlling for other factors, firms facing a higher level of political risk demonstrate lower labor performance, highlighting the negative impact of political risk on firm behavior and outcomes.

Examining the behaviour of Chinese high-tech firms throughout their lifecycle of certification: A microeconomic perspective

This study examines whether the behaviour of high-tech firms (earnings management) differs between the period immediately before certification and the period during certification. Additionally, the influence of the Chinese government's equity ownership on the earnings management tendencies of high-tech firms is examined. This study is focused on Chinese companies that are listed on the Chinese stock exchange from 2009 to 2020. Empirical analyses, including descriptive statistics, correlation analysis, and regression analysis, were conducted to obtain the results. The two main findings are as follows: First, during the certification period, high-tech firms tend to engage in earnings-minimising activities, due to the continuous supervision and management required to meet and maintain the certification requirements imposed by the Chinese government. Second, firms with higher equity ownership by the Chinese government tend to engage in more earnings management immediately before achieving high-tech firm certification than during the certification period. This behaviour can be attributed to the differential taxation of high-tech firms and the Chinese government's intensive supervision, management, and regulation of firms. This study contributes to the literature on the impact of government supervision, management, and/or regulations on the level of earnings management activities by high-tech firms. It examines the effect of government ownership of firms and the corporate structure of high-tech firms on earnings management. It also provides foreign investors with information about how high-tech firms and the Chinese government behave in terms of certification.

Family firms’ equity entry modes: Bridging family business and international business

Abstract In the global economy, the international strategies of family firms, influenced by family ownership and management, remain underexplored. Bridging the family business and international business fields, we use the socioemotional wealth lens to examine 1,236 international expansions from 2007 to 2013. Categorizing firms into pure family, nearly pure family, borderline family, and non-family typologies, we assess the influence of internal (experience, knowledge) and external (country risk) factors on their entry modes. Results indicate that higher family involvement in ownership/management increases the preference for greenfield investments over acquisitions or equity alliances, a relationship further moderated by international experience and country risk. This study provides nuanced insights into the international behaviors of family firms.

Industry clusters and macroeconomic (in)stability

Abstract While the competitive behavior of firms with regard to entry and exit activities serves as a driving force behind the business cycle, little attention has been paid to the issue of industry clusters when discussing belief-driven cyclical fluctuations. Faced with this deficiency, this study analyzes the possibility of the emergence of equilibrium indeterminacy from the perspective of industrial organization. By analyzing the effects of endogenous overhead costs in the market, this paper finds that belief-driven business cycle fluctuations are related to industry clusters. More specifically, a stronger spillover effect or a less pronounced congestion effect tends to increase the likelihood of local indeterminacy.

The automated sustainability auditor: Does artificial intelligence curtail greenwashing behavior in Chinese firms?

AbstractCorporate stakeholders are intrigued by the potential collaboration between AI and environmental reporting to maintain competitiveness in the digital and sustainable economy. This exploration is crucial given the persistent pressures driving companies to engage in greenwashing practices for legitimacy. Aiming to shed light on the function of AI in reducing the prevalence of greenwashing by Chinese businesses, the findings, derived from panel data estimation of Chinese A‐share firms, suggest that the implementation of AI has a positive impact on the fight against greenwashing. The investigation presents compelling evidence that greenwashing mechanism control can be accelerated by AI technologies. Organizations that invest strategically in artificial intelligence exhibit a diminished propensity to obfuscate environmental performance by means of AI‐enabled automation and enhanced data‐driven decision‐making. Intriguingly, the study demonstrates that the substantial disparate greenwashing impact of AI depends on ownership structure. In comparison to non‐SOEs, state‐owned enterprises (SOEs) demonstrate diminished AI control over greenwashing. Significantly, the research utilizes a variety of validation methods, such as instrumental variable approach, propensity score matching, and two‐stage least squares, to ensure the validity of the primary findings.

Cultural norms and tax compliance: Evidence from China

Existing studies suggest that formal institutions can effectively constrain corporate tax evasion and increase tax compliance, but little has been said about the role of informal institutions regarding tax compliance. This study empirically examines the long-term effect of Confucian cultural norms on corporate tax compliance using unique cultural and historical data from China. We find that the intergenerational transmission of the Confucian culture can significantly promote the tax compliance of modern firms, thereby effectively reducing tax evasion. Simultaneously, the compliance effect is more pronounced in informal firms, such as small-scale, non-listed, and local firms. In terms of mechanism analysis, the normative effect of the Confucian culture is a key mechanism for explaining variations in corporate tax compliance behaviors under different cultural norms. Overall, this study fills a gap in the research on how informal institutions regulate the behavior of firms to a certain extent, and at the same time supplements the existing literature on understanding the long-term effects of the Confucian culture.

Environmental performance shortfalls and corporate green innovation: The role of green credit regulation

This paper investigates the effects of environmental performance shortfalls on corporate green innovation. On the basis of the theoretical framework of environmental performance feedback and using a sample of eight major energy-consuming industries in China, a negative relationship is confirmed that environmental performance below but in the neighborhood of peer level makes firms more inclined to pursue green innovation. Higher risk-taking willingness for firms with environmental performance below but close to peer level strengthens innovative intention. This correlation is pronounced when corporate financial performance, green innovation performance, and executive compensation are below peer level. We also find that green credit constrained firms prefer to engage in innovation activities when their environmental performance is below but near peer level and they have fewer bank loans simultaneously. The findings offer insights into the innovation behavior of firms in response to environmental underperformance.

All Is Well Until It Isn’t: Socioemotional Wealth Congruence and Employee Behavior in Family Firms

This article explores the counterintuitive notion that congruence in the importance family firm supervisors and their employees place on socioemotional wealth is negatively associated with employee citizenship and proactive behaviors, while incongruence has positive effects. Results from polynomial regression analysis of data collected from 159 family firm supervisor–employee dyads support our complacency theory-based model, suggesting that congruence creates attentional lethargy and complacency toward organizational citizenship and proactivity while incongruence makes the need to engage in beneficial behaviors more salient. The negative effects of congruence are alleviated by higher levels of leader–member exchange. Theoretical and practical implications are discussed.

Does geopolitical risk alleviate the “sticky” cost behavior of firms? Evidence from India

Does geopolitical risk alleviate the “sticky” cost behavior of firms? Evidence from India