Firm Sales Research Articles

Wearing your success on your sleeve: How salesperson luxury brand consumption affects consumers’ perceptions

First impressions matter. Just as salespeople assess potential customers, consumers make judgments about salespeople, using cues from a salesperson's appearance and behavior to shape their expectations. In this research, we propose that a salesperson's personal display of luxury-branded products (e.g., wearing a Burberry scarf or driving a BMW) in a non-luxury retail setting is an unexplored but consequential cue that negatively frames consumers’ expectations of a pending negotiation. Across four studies, we demonstrate that, in business-to-consumer contexts, when a salesperson displays luxury-branded products, consumers reduce their expectations of receiving a favorable deal compared to when no luxury brands are displayed. Such expectations are problematic as they deter consumers from approaching salespeople, which can lead to lost sales for firms. Further, we find that the negative effect of luxury-branded products on deal expectations is sequentially mediated by consumers’ perceptions of salesperson materialism and moral character. Finally, we demonstrate that cues signaling the salesperson's customer orientation fail to negate the damaging effects of luxury-brand displays and may backfire depending on the signaler. As such, this research provides takeaways for salespeople who sell non-luxury products and offers important contributions to theory.

The mediating role of corporate borrowings in the nexus between financial inclusion and performance of ICT firms: new insights from Vietnam

ABSTRACT This paper examines the effect of financial inclusion on firm performance and whether corporate borrowings serve as an effective channel of the impact. In doing so, we use principal component analysis to calculate a financial inclusion index for Vietnam. We then conduct mediation analysis on this index and a large panel of Vietnamese firms in information and communication technology sector from 2008 to 2018. Empirical results indicate a negative influence of financial inclusion on firms’ return on assets. More importantly, corporate borrowings significantly mediate this relationship. In particular, financial inclusion increases corporate borrowings, which then affects return on assets. Although corporate borrowings are positively associated with firm sales, they reduce return on assets and net profit margin of firms. The findings are robust to different estimation methods and inclusion of control variables. They convey important policy implications for governments, academic researchers, and industry practitioners wishing to design programmes and policies to help firms obtain the financial resources necessary for their development.

Digital vs. Traditional Advertising and the Recognition of Brand Intangible Assets

This paper examines how different advertising categories are associated with attributes of brand asset recognition arising in the context of acquisitions. Prior research documents that aggregate advertising is positively associated with firm sales and brand values, but it fails to consider major recent shifts in advertising from traditional channels (such as TV) to digital advertising (such as paid search and online display). Using proprietary data, I decompose advertising expenditures into the categories of traditional, online display, and paid search. Consistent with expectations, results confirm that target firms’ traditional and online display advertising exhibit a higher likelihood of brand asset recognition and higher recognized brand values as compared with paid search advertising. Confirming the economic substance of the recognized brands, additional results reveal positive investor equity market reactions to brand value, which are driven by firms investing more in traditional and online display advertising. Overall, these results confirm that certain advertising channels exhibit stronger associations with the recognition and characteristics of the underlying brand asset, consistent with their heterogeneous properties. This paper was accepted by Suraj Srinivasan, accounting. Funding: I acknowledge the financial support from my advisor, Eddie Riedl, as well as from the UNH Paul College of Business and Economics Summer Research Support Award. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.00387 .

R&D, Product and Process Innovation, and Firm Performance: A Case Study of the Chinese Firms

Alongside rapid economic growth, the Chinese economy has witnessed a notable increase in research and development (R&D) expenditure, escalating from 0.56 per cent of GDP in 1996 to 2.43 per cent in 2021. Recognising the significance of innovation in economic growth, this article utilises unique firm-level data from China for the year 2012 to investigate the influence of R&D, product innovation and process innovation on firm productivity. The findings suggest that R&D positively affects the performance of Chinese firms, as measured by either firm sales or sales per permanent full-time employee. Moreover, product innovation may have a detrimental impact on firm performance, whereas the impact of process innovation lacks robustness. JEL: D22, N65, O32

Bankruptcy judicial reform and corporate trade credit financing

In this paper, we rely on an exogenous shock to examine the impact of bankruptcy judicial reform on firms' trade credit financing. We employ a staggered difference-in-differences design based on the introduction of bankruptcy courts in China and find that the implementation of bankruptcy judicial reform significantly reduces firms' trade credit financing. Mechanism tests reveal that improved judicial efficiency increases the risk perception of local firms, which discourages trade credit financing. Heterogeneity tests show that the above effect is more pronounced in firms with higher bankruptcy risks, firms with state ownership, and in regions where bankruptcy administrators have been established. Conversely, higher supplier concentration attenuates the inhibitory effect of bankruptcy judicial reform. Further analyses show that the reform mainly reduces firms' trade credit provided by customers and the trade credit with financial attributes. In addition, the reform lowers the sales of firms' suppliers but does not affect their earnings performance, while customers benefit from the reform as their earnings increase while sales do not change significantly. The findings of this paper shed light on the impact of bankruptcy judicial efficiency on corporate financing structure, and provide policy implications for promoting the construction of China's bankruptcy rule of law and preventing financial risks.

U.S. Market Concentration and Import Competition

Abstract Many studies have documented that the sales concentration of U.S. producers has risen in recent decades. In this article, we show that this increase was accompanied by more entry and growth of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in production concentration was counteracted by the expansion of foreign firms, which reduced domestic firms’ share of the U.S. market inclusive of foreign firms’ sales. We find that once the sales of foreign exporters are taken into account, U.S. market concentration in manufacturing was stable between 1992 and 2012.

Machine Learning-Based Causality Analysis of Human Resource Practices on Firm Performance

An organization’s human resource management practices are essential for its competitive advantage. This study specifically examined human resource (HR) practices that predict corporate performance (employee turnover and firm sales) based on a backpropagation neural network (BPN)-based causality analysis. This study aims to test how to optimize human resource practices to improve organizational performance. This study elucidated the effect of HR practices and organizational-level factors on predicting employee turnover and firm sales. The BPN-based causality analysis revealed the relative importance of explanatory variables on firm performance. To test the model, it employed the Human Capital Corporate Panel open data on Korean companies’ HR practices and other characteristics. The analysis identifies causal relationships between specific HR practices and firm performance. The results show that compensation-related HR practices are most influential in predicting firm sales and employee turnover. Moreover, training-related HR practices were modest, and talent acquisition and performance management practices had relatively weak effects on the two outcomes. The study provides insights into how human resource practices can be optimized to improve firm performance and enhance organizational effectiveness. The findings of this study contribute to the growing body of research on the use of machine learning in HR management and suggest practical implications for managers’ insights to optimize HR practices.

The Effect of Working Capital Management on The Profitability of the Textile Industry: Evidence from Pakistan Textile Industry

The working capital management has significant importance in business investment because it impact on company’s Profitability and efficiency. The current study has taken the textile sector of Pakistan comprising of three sectors , that is spinning weaving and composite comprising of 155 companies in total . The aim of the paper is to investigate the effect of working capital management on profitability of the textile firms. A sample of 20 businesses is randomly selected for a period of six years to carry out the current study. In the existing study ROA is taken as a measure of profitability of the firm. While the working capital is taken as the measure of the cash conversion cycle. Account receivable collection period, Account payable time period size of the firm sales growth and current ration. Regression analysis is done and to address the issue of multicollinearity VIF test is done. The study's conclusions demonstrate that working capital utilization matters to Pakistani textile enterprises and that effective working capital utilization affects profitability. Studies show that when a company's inventory turnover period increases, its profitability decreases. The prompt transformation of raw materials into final products has a significant impact on the profitability of the company. The analysis did not uncover any proof that profitability and the cash conversion cycle (CCC) were significantly correlated.

Mapping green innovation with machine learning: Evidence from China

Achieving green innovation to eliminate the environmental impact of economic activities has been an important task for firms across industries. This study uses the resource-based view (RBV) and upper echelons theory (UET) to develop a green innovation determinants model and explore how firm characteristics, chief executive officer (CEO) characteristics, environmental actions, environmental disclosures, and industry characteristics influence corporate green innovation. Using a large-scale dataset of Chinese companies from 2010 to 2019 to identify the determinants of green innovation through machine learning algorithms, our results suggest that the extreme gradient boosting (XGBoost) method is the best model for predicting green innovation. After that, we visualized the effects and importance of the various feature variables through the best prediction model. Our results indicate that the environmental, social, and governance (ESG) rating is the most crucial determinant for green innovation, followed by internationalization, CEO pay, firm sales, industry size, research and development (R&D) intensity, and CEO education. Overall, our findings contribute to a broader understanding of the drivers of green innovation and offer critical implications for managers and policymakers to improve sustainable development.

Long shadows of the walking dead on economic activity

This paper presents the panorama of zombie firms in the Turkish economy, which are highly inefficient, highly indebted firms that have low or sometimes negative productivity, and provides an analysis of the impact of these firms on economic activity for the period 2012–2015. Our results suggest that the number of zombie firms in Türkiye has increased. The share of these firms in sales and employment has also increased, but at a lower rate. These firms are mainly found in low-technology manufacturing and transportation and distribution services. The paper also shows that healthy firms increase total factor productivity, employment growth, and the investment-to-capital ratio in the economy in a robust manner. The sales of zombie firms have no distorting effect on the economic activity of healthy firms. However, capital sunk into zombie firms has a differential impact on the performance of healthy firms. When the share of zombie capital in a sector increases, the TFP growth of manufacturing firms decreases, while the employment growth of medium-sized service firms increases.

The TCJA and Domestic Corporate Tax Rates

We study changes in tax positions for U.S. C corporations following passage of the 2017 tax legislation commonly known as the Tax Cuts and Jobs Act (TCJA). While existing research has focused primarily on publicly traded companies, data limitations have prevented more holistic analyses of the corporate sector. Using a representative sample of U.S. corporate tax returns, we highlight how trends in effective tax rates (ETRs) and exposure to the legislation’s main provisions varied for public, private, multinational, domestic, and large versus small firms. We document several novel facts, including that ETRs increased on average for privately held, domestic firms and for firms in the bottom 90% of the firm sales distribution after TCJA. In contrast, public, multinational, and large firms saw substantial ETR cuts on average. We find that firms' pre-TCJA exposure to changes in the corporate tax rate and treatment of net operating losses have the strongest correlation with post-TCJA ETR changes. Overall, the analysis underscores the divergent impacts of TCJA on different firm types and illuminates the economic scope and relative significance of TCJA’s myriad provisions.

Informal sector in India and adoption of digital technologies

PurposeAccording to the Government of India’s Ministry of Labour and Employment Report (2015), almost 90% of the Indian workforce can still be categorized as informally employed, generating approximately 50% of the national product. Challenges with data availability have made a rigorous analysis of the informal economy in India often difficult and inadequate for policy formulations. This study aims to fill the gap by providing an empirical analysis of the informal economy in India using micro-data from the World Bank’s Informal Enterprise Surveys.Design/methodology/approachThe authors contribute by empirically testing the association between the adoption of digital technology (payments) and firm performance proxied by firm sales. Matching models are used to mitigate sample selection bias arising out of simultaneous sample selection.FindingsThe results suggest that the participation in digital platforms, namely, use of digital payment instruments, is associated with higher sales for firms. The results of this study also show that adoption of digital payments helps in both situations – whether a firm has been using digital technology or has just started using it since the outbreak.Research limitations/implicationsMore in-depth data over time, spanning across more cities of India, is needed to conduct a further detailed investigation.Social implicationsThe results should allow policymakers in India to reconsider youth-centric and women-centric business needs, even within the informal sector, which does not often enter the purview of the government but remains responsible for the growth and sustenance of 90% of the country’s workforce. If further research on this issue could engage with the impact of demonetization of currency in 2016 as a lagged shock on sales and reestimate subsequent growth, it would perhaps offer a wider spectrum of how the performance of the informal economy in India affects the entire economy, which has over the last four years and before the onset of Covid reported slower growth.Originality/valueProductivity is measured in terms of sales of informal firms in India in a regular month or in recent period like last month. Adoption of technology such as making payments using digital platforms can enhance productivity of firms by lowering standard transaction costs and time spent for visiting banks or financial institutions. Albeit not extensively, the literature has investigated digital technology adoption in the context of firms achieving comparative advantage (D’Ippolito et al. 2019; Scuotto et al. 2017), firms generating value creation (Magistretti, Dell’Era and Petruzzelli, 2019), and in helping with strategic initiatives and agility of firms (Ghezzi and Cavallo, 2018; Piccoli and Ives, 2005). Nonetheless, it would incur certain fixed costs, including acquiring skills and awareness, to manage digital platforms. In addition, physical access to instruments such as smartphones or computers and internet connectivity are prerequisites for productivity enhancements. Firms belonging to the informal sector in India generally face these challenges but may also benefit significantly following successful adoption. To the best of the authors’ knowledge, this is the first study to conduct a preliminary empirical analysis of the impact of digital technology adoption on the performance of informal sector firms in India.

Determinants of Firm Value: Property, Real Estate and Building Construction Companies (IDX)

This research aims to obtain empirical evidence regarding the factors on firm value for property, real estate and building construction companies listed in Indonesia Stock Exchange. The independent variables used in this research are firm size, capital structure, firm sales, profitability and liquidity. In this research, 11 property, real estate and building construction companies were used as samples listed on the Indonesia Stock Exchange with a total 8 years raging from the period of 2013-2020. The sample was selected based on purposive sampling technique. The data analysis method that were used in this research is descriptive statistics, panel data analysis model, data quality test, classic assumption tests, coefficient of correlation, coefficient of determination, multiple linear regression, goodness-of-fit test, and hypothesis test. The results of this research shows that firm size has a negative impact on firm value and profitability has a positive impact on firm value. Whereas for capital structure, firm sales and liquidity has no impact on firm value.

The effect of trade credit on firm performance: Evidence from Korean firms during the Global Financial Crisis

This paper empirically investigates the effects of two primary types of debt financing − bank credit and trade credit − on firm sales performance during the Global Financial Crisis using Korean firm-level data. I find that firms who relied more on bank credit tended to have slower sales growth, whereas those relied more on trade credit performed better during the crisis and afterwards. However, the mitigating effect of trade credit did not exist for exporters. Also, there was evidence of heterogeneous effect of trade credit among non-exporters, depending on firms' degree of financial access; the effect of trade credit during the crisis significantly diminished for firms with better financial access. The findings overall indicate that for domestic firms with limited financial access trade credit was a more stable type of financing than bank credit, limiting the deteriorating effect of financing on firm performance.

Corporate market power and monetary policy transmission in Asia

This paper empirically examines the effect of corporate market power on monetary policy transmission in Asia. Using panel local projections based on a firm-level dataset for 11 advanced and emerging Asian economies, we find that after a monetary policy tightening, the real sales of firms with low market power significantly decline, while real sales of firms with high market power respond little. Moreover, we find that the average responses of firms’ real sales to monetary policy shocks are driven by firms with low markups. Our findings indicate that rising market power impairs the effective transmission of monetary policy. We discuss the implications in terms of balancing the need for industrial policies that promote innovation-led productivity against effective competition policy to compress heterogeneity in market power dynamics and enhance the monetary policy transmission mechanism.

Government Corruption and Corporate Social Responsibility: An Instrumental Perspective

This study examines the relationship between government corruption and corporate social responsibility (CSR). While existing research in CSR has suggested that reduced moral incentive is a key reason for firms’ low CSR engagement in regions with high government corruption, we postulate that government corruption in the region where a firm is headquartered also decreases its instrumental motivation to engage in CSR. The instrumental value of CSR will significantly decrease due to the diminished returns, which come from decreased stakeholder reciprocation and increased risk of becoming a rent-seeking target of corrupt officials. We furthermore suggest that the negative effect of government corruption on CSR may change depending on the levels of firm political risk, financial performance, and firm sales to government, which alter the returns of CSR. The findings, based on a sample of publicly listed US firms and political corruption data from the US Department of Justice during the 2003 through 2013 period, support our arguments. Our study contributes to CSR literature by highlighting and testing the instrumental perspective to examine the influence of government corruption on CSR.

Rating systems and increased heterogeneity in firm performance: Evidence from the New York City Restaurant Industry, 1994–2013

AbstractResearch SummaryWe investigate the extent to which the increasing availability of ratings information has affected heterogeneity in firm performance and, if so, what market segments are responsible for these changes. A unique dataset was constructed with restricted‐access government data to examine these questions in the context of the New York City restaurant industry between 1994 and 2013. We find that firms serving tourist and expensive price point market segments experienced increasing sales discrepancies as a function of rating differentials when ratings information became more easily accessible with the advent of online rating platforms. These findings depict how the prevalence of online rating systems have shaped competition and value capture, thus providing insight into the determinants of firm performance heterogeneity.Managerial SummaryWe examine the extent to which increasing availability of ratings information has affected firm performance by estimating changes in comparative sales between New York City restaurants between 1994 and 2013. Analyses indicate that increased access to ratings information during this period had a considerable effect on comparative sales for firms serving the tourist and the expensive price point market segments. These results provide insights into other industries where access to evaluations and rating systems have also increased. This work suggests that online ratings have affected how firms compete and capture value, and managers have opportunities to use rating systems to their advantage.

First offer pricing in small and medium-sized firm sales: Developing a scale for practitioners

ABSTRACT This research offers practical insights into the emotional factors that small and medium-sized enterprise (SME) owners consider when setting a selling price for their business when transferring ownership to nonfamily successors. Many SME owners rely on their personal experiences and emotions to determine the initial offer price, which can often lead to failed transactions if the price expectation does not reflect the true value of the business. However, existing research on this topic is limited, and there is no standardized measurement scale to quantify the impact of emotional factors on the first-offer price. This article introduces a newly developed hands-on scale and explains its use for practitioners such as SME owners, successors, advisors, and other parties to reflect on the owner’s emotional motivations for setting the initial offer price.

The Scope of Software Patent Protection in the Digital Age: Evidence from Alice

Previous studies on software patents using data from the 1990s and early 2000s found a positive association between strong patent rights and sales within the software industry. Our research expands on this work in three ways. First, we consider more recent data from 2010 to 2018, which better represent the advancements in digitalization. Second, we shift our focus to the breadth of software patent protection rather than the quantity of patents held by a firm. Third, we provide evidence showing increased open-source involvement and sales for software firms when software patent protection is more limited. Put simply, a more restricted scope of software patent protection could foster a beneficial situation for both software firms and society. Despite less reliance on formal patent protection, companies can still generate and profit from their innovations without excluding societal members from utilizing these advancements. This “less-is-more” approach may extend to a wider array of software-related innovations, including but not limited to artificial intelligence, blockchain, and other emerging digital technologies.

No Pain, No Gain: Work Demand, Work Effort, and Worker Health

Abstract We employ Danish worker-firm data to study the effect of rising workload on health. Using both within-job-spell regression analyses and cohort event studies, we show that increases in firm sales lead workers to log longer hours and experience higher probabilities of stress, depression, heart disease, and strokes, with more pronounced effects for high-risk groups such as older workers, job-strained workers, and those with long initial work hours. We calculate that the average worker's ex-ante welfare loss due to higher sickness rates accounts for nearly one quarter of her earnings gains from rising firm sales.