Firms Gain Research Articles

Do social ties matter for the emergence of dominant design? The moderating roles of technological turbulence and IRP enforcement

Abstract Social ties can help firms gain and secure resources. However, it is unclear whether social ties facilitate or inhibit firms’ decision-making on dominant design generation. Our study distinguishes the variant roles of business ties and political ties and examines how contextual factors moderate the effects of these ties. Based on archival data of 443 Chinese automotive firms embedded in standard alliances during the period 2005–2009, we find that weak business ties enhance firms’ influence on dominant design, and the positive effect of the number of business ties is even stronger when firms operate in a context with higher IRP enforcement. Moreover, the empirical results indicate that when either the IPR enforcement or the technological turbulence is high, establishing political ties is detrimental to a firm’s influence on dominant design. Our findings add new insights to the research on social capital, dominant design, and open innovation in the automotive industry. The findings also provide significant implications for managers by showing how they can utilize social ties to influence the emergence of dominant designs in an industry.

Monopoly Profits, Efficiency Profits, and Teaching Strategic Management

Structure-conduct-performance (SCP) and resource-based logics are two prominent theoretical explanations within strategic management for how firms gain and sustain competitive advantages. Pedagogic...

Local governance and business performance in Vietnam: the transaction costs’ perspective

ABSTRACTLocal governance and business performance in Vietnam: the transaction costs’ perspective. Regional Studies. This paper adopts a transaction costs’ perspective to explain why the growth of small and medium-sized enterprises (SMEs) may vary across regions of an emerging economy. Furthermore, it is argued that young and small firms gain more from the improvement of local governance than do old and large firms. In addition, depending on the institutional history, SMEs will respond differently to the incentives provided by local governance. Analysing more than 300,000 SMEs in Vietnam during 2006–12, it is shown that higher-quality local governance positively influences local SME revenue growth; this effect is stronger for young and small firms, and matters more where institutional history suggests there is less support for entrepreneurship.

Promotional support: a formative scale development

PurposeIn pharmaceutical marketing, salespeople require promotional instruments to satisfy and retain their customers (physicians), but companies ignore the need because of the costs involved. It appears that the importance of promotional support is understood differently by managers and sales representatives. This study aims at developing a new construct called “promotional support”, as a resource support provided to salespeople to help them satisfy customer needs and achieve sales goals.Design/methodology/approachA detailed review of literature is followed by in-depth interviews to create items for the construct “promotional support”. Substantive validity is performed for identification of items measuring the construct. To initially validate the measures, a vignette study is performed. Formative index development procedure is followed. Data from a sample of 124 pharmaceutical sales representatives are collected and analyzed.FindingsA formative construct is developed which possesses convergent (redundancy analysis) and nomological validity. The results of post hoc validation tests like confirmatory tetrad analysis and inter-item correlation are satisfactory and confirm the authors’ conceptualization.Research limitations/implicationsThe scale requires external validation by testing it with different samples such as managers of pharmaceutical firms.Practical implicationsThis study will help managers of pharmaceutical firms gain insights into the role and importance of promotional inputs given to their sales representatives.Originality/valueThis study uses the formative scale development procedure to develop promotional support. This construct can be used to understand the effect of promotional support given to pharmaceutical sales representatives on other constructs, which in turn helps in theory-building.

Institutional Regime Shift in Intellectual Property Rights and Innovation Strategies of Firms in China

This study develops a novel conceptual framework to understand the differential impact of formal institutional regime shift in intellectual property rights on the innovation and patenting strategies of Chinese and Western firms operating in China. We argue that to the extent that Chinese firms have been deeply embedded in China’s informal institutions, they are less responsive to formal institutional changes than Western firms operating in China. Using the major China patent law reform of 2001 as an exogenous event, we find results consistent with our key arguments: With the strengthening of the previously weak (utility model) patent protection, Chinese firms are less likely to apply for such patents to safeguard their innovations than Western firms. However, this difference becomes less pronounced in regions with higher quality intellectual property rights and legal institutions that foster research and development and innovation, and when Western firms gain longer operational experience in China. This study advances our understanding of the intricate interaction between formal and informal institutions and specifically how “stickiness” may arise in their substitutive relationship because of the embeddedness of firms in informal institutional environments. It also provides important implications for policy and innovation strategies for policy makers and firms in emerging economies.

Organization identity and earnings manipulation

Management scholars are beginning to provide empirical evidence that organization identity (OI) can be a powerful means of reducing agency costs. We examine whether an individual's identity with the firm influences the agency costs associated with incentive contracts, namely earnings manipulation. Based on OI theory, we expect that managers who identify with the firm gain utility by taking actions that in their view benefits the firm, and experience disutility from taking actions that are harmful to the firm. Drawing on a third-party survey database, we find that performance-based compensation is associated with higher levels of earnings manipulation. Importantly, we also find that managers with incentive-based compensation engage in lower levels of opportunistic earnings manipulation when they identify with the firm.

Environmental Costs and Firm Value

Using a unique worldwide dataset, this paper examines how environmental costs affect firm value. We maintain that firms gain reputation and enhance firm value by decreasing their environmental costs. This argument is labeled as the stakeholder value maximization-based reputation building hypothesis. Our results, however, show that there are regional variations in the relation between firm value and environmental costs. We further find that an increased firm value resulting from lower environmental costs is pronounced among firms during the Kyoto Protocol commitment period, especially in environmentally conscious countries. This evidence is consistent with the view of the differential recognition hypothesis.

Does Adoption of Management Standards Deliver Efficiency Gain in Firms’ Pursuit of Sustainability Performance? An Empirical Investigation of Chinese Manufacturing Firms

Building on longitudinal data from 73 Chinese manufacturing firms during 2009–2012, we assess whether and how firms gain higher efficiency in achieving their sustainability goals by adopting management practice standards (ISO 9001, ISO 14001, and/or OHSAS 18001). We propose four pathways for firms to gain sustainability efficiency in their certification journey: participation, qualitative integration, quantitative expansion, and temporal accumulation. Our results confirm that firms certifying management standards gain higher efficiency in pursuing their sustainability goals than firms without these standards. We also find some support for increased efficiency effect in firms with diverse management systems over firms with only a single certificate in 2011. Finally, our results highlight the experiential and temporal accumulation effect of such efficiency gains, that is, firms with prior certification experience or having a longer certification history demonstrate higher efficiency gains in pursuing their sustainability goals.

Sovereign Credit Ratings and the Stock Price Informativeness of Cross-Listings

This paper examines the benefits foreign firms gain from cross-listing shares on a major U.S. exchange. I study sovereign credit rating changes in 49 countries to investigate whether secondary listings in the U.S. are associated with improvements in a firm’s information environment. I document that firms without a cross-listing experience significantly negative abnormal returns around negative sovereign rating events, while foreign firms with secondary listings on major U.S. exchanges on average experience no significant surprise reaction. I show that these events are value-relevant for cross-listed firms and that the difference in abnormal return behavior is not a result of unobservable disparities in firm characteristics between cross-listed firms and firms without a secondary listing. Several proxies for the amount of (private) information incorporated in U.S. share prices are determinants of abnormal return behavior for cross-listed firms around sovereign rating announcements. Ownership of cross-listed U.S. shares by more informed investors similarly reduces price sensitivity to these events for cross-listed firms. In addition, I examine the lead-lag relationship between returns of cross-listed U.S. shares and the underlying home market shares and document information spillovers from the U.S. to the home market shares in the period prior to a sovereign rating announcement. These results provide an information based rather than corporate governance related explanation for the observed value premium of cross-listed firms.

Big Data: Innovation and Competitive Advantage in an Information Media Analytics Company

The advent of technology has allowed for the capture of large volumes of data from a variety of sources. This has led to an ever-increasing number of firms collecting large amounts of data with the belief that this will give the firm an advantage over its competitors. However, the question is, does big data by itself really lead to firm advantage? And if not, how can firms gain an advantage from big data? This paper investigates the role that big data plays in innovation and firm advantage. Using the Resource-Based View and Dynamic Capabilities framework, this paper looks at how a firm can gain an advantage from big data. Through the analysis of a case-study concerning a global information/media analytics company, this paper provides an example of how to build a capability in Digital Data Generation that can lead to improved product or service innovation, and possibly help a firm gain an advantage over its competitors.

Imported Intermediate Inputs and Firms’ Productivity Growth: Evidence from the Food Industry

AbstractImported goods play a central role in determining the gains from trade. Using detailed trade and firm‐level data for Italy and France, we investigate the relationship between trade integration, imported intermediate inputs and firm performance in the food industry. Our main findings show that an increase in import competition spurs firm‐level productivity growth. Furthermore, the productivity growth effect attributable to imported intermediate inputs is significantly stronger than the effect due to imported final products. In addition, we find that new imported inputs are of particular importance, especially for Italian food firms, though less so for the French firms. Finally, the productivity growth effect of trade integration tends to be asymmetric across firms: more productive firms gain more from trade integration. These stylised facts have interesting policy implications.

Migrants’ Influence on Firm-level Exports

We examine the role of migrants in trade using a firm-level approach. We exploit a new employer–employee panel for Sweden, which encompasses close to 600,000 full-time employees, approximately 12,000 firms and data for 176 countries for the period 1998–2007. The resulting analysis provides novel firm-level evidence on the trade-migration relationship. Foreign-born workers have a positive association with firm exports. However, immigrants do not have an unconditional positive impact on firm trade. Mainly small firms gain from hiring foreign-born workers, and migrants need to be skilled and recently arrived to have a clear positive impact on firm export performance.

An innovative approach to modeling the benefits of supply chain collaboration by using interpretive structural modeling

Supply chain collaboration means the firms within the supply chain collaborate with each other to work together and gain mutual objective by sharing of ideas, information, knowledge, risks and rewards among all supply chain partners. Facing uncertainty in supply and demand, firms have strived to achieve greater collaboration to leverage the resources and knowledge among supply chain partners. Supply chain collaborative firms gain more benefits by satisfying customer’s requirements as compared with firms those work individually and having no collaborative relation within partners of supply chain. Therefore there must be a proper understanding of the collaboration and its application within supply chain. One of the best methods to understand and create interest in collaboration is the understanding of the benefits which are come out from supply chain collaboration. Therefore in this study we indentify various benefits of supply chain collaboration from literature and design a relation between these benefits with each others, so those decision makers understand these benefits and proceed towards collaborative supply chain. In this study ISM methodology is used for modeling the benefits and MICMAC analysis is used for classifying these benefits according to driving and dependence power. The study is helpful for supply chain decision makers to implement collaboration in supply chain.

Does Exporting Improve Matching? Evidence from French Employer-Employee Data

Does opening a market to international trade affect the pattern of matching between firms and workers? This paper answers this question both theoretically and empirically in three parts. We set up a model of matching between heterogeneous workers and firms in which variation in the worker type at the firm level exists in equilibrium only because of the presence of search costs. When firms gain access to the foreign market, their revenue potential increases. When stakes are high, matching with the right worker becomes particularly important because deviations from the ideal match quickly reduce the value of the relationship. Hence, exporting firms select sets of workers that are less dispersed relative to the average. We then document a novel fact about the hiring decisions of exporting firms versus non-exporting firms in a French matched employer-employee dataset. We construct the type of each worker using both a traditional wage regression and a model-based approach and construct measures of the average worker type and worker type dispersion at the firm level. We find that exporting firms feature a lower type dispersion in the pool of workers they hire. This effect is comparable and larger than the common finding in the literature that exporters pay higher wages because, among other factors, they employ better workers. The matching between exporting firms and workers is even tighter in sectors characterized by better exporting opportunities as measured by foreign demand or tariff shocks. Finally, we show that revenue loss is lower relative to the optimum allocation for exporting and more productive firms. This analysis is suggestive of the potenti al presence of additional gains from trade due to improved sorting.

The Impact of Innovative New Economy Products on Market Competition: Competition Might Decrease

This paper presents a parametric Cournot type of game theoretic model that uses Rogers’ Diffusion of Innovations Theory to construct a model that simulates the strategic interaction between firms. The constructed model simulates the strategic interaction of old economy firms that compete with the adoption of an innovative information and communication technologies based product, which is produced by a monopolistic New Economy firm. The model incorporates the accelerated product innovation process, globalization and interaction of firms in competitive environment. This paper confirms the expected result that innovator firms gain by adopting profitable New Economy products; however, surprisingly, under some circumstances market competition might decrease even when there is globalization. It is proven that this result is valid for markets with large (customer) demands when firms of the New Economy that produce innovative products charge high prices for their products. Firms of the New Economy that produce innovative products are given the privilege to be monopolists for the duration of their patent, but according to the findings of this paper they need to be regulated by competition authorities.

Foreign direct investment and technology spillover in Iran: The role of technological capabilities of subsidiaries

Foreign direct investment (FDI) plays a significant role in global business by providing new markets and marketing channels, cheaper resources, access to new technologies, products, skills and financing. One of the most important aspects of FDI for a host country is technology spillover trough which domestic firms gain access to new technologies from international enterprises. Iran, as a developing country, has had some form of engagement with foreign capital for more than 150years. Nevertheless, there are limited studies on the role of FDI in technology spillover in Iran. This study investigates the effect of technological capabilities of foreign subsidiaries on the relationship between FDI and technology spillover channels including Demonstration effect, Training effect, Collaboration effect, Linkage effect and Worker turnover. A questionnaire was completed by 100 subsidiary units based in Iran. The sample consists of all foreign subsidiaries active in different industry or service sections all over the country. The results of running logistic regression model on data from questionnaires showed that FDI could not affect spillover channels directly. Yet, the results proved that technological capabilities of subsidiary units, as mediating players, have a positive influence on two spillover channels namely Demonstration effect and Training effect.

Does Greenwashing Pay Off? Understanding the Relationship Between Environmental Actions and Environmental Legitimacy

Do firms gain environmental legitimacy when they conform to external expectations regarding the natural environment? Drawing on institutional logic and signaling theory, we investigate sources of heterogeneity in the impacts of environmental actions on environmental legitimacy. Longitudinal data (1997–2001) about 325 publicly traded U.S. firms in polluting industries support the notion that environmental actions help firms gain environmental legitimacy. However, some actions instead can harm this legitimacy if environmental performance deteriorates and the firm is subject to intense scrutiny from nongovernmental organizations. Thus, an important contribution of this research is to identify conditions under which greenwashing can backfire.

The long-term performance of cross-border mergers and acquisitions

Purpose – The purpose of this paper is to examine Chinese firms’ long-term value creation derived from cross-border mergers and acquisitions (CBMAs). Design/methodology/approach – The authors collected a sample of 140 CBMAs conducted by Chinese firms listed in Shenzhen and Shanghai stock markets between 1997 and 2010. Long-horizon event study methodology was used to test hypotheses. Findings – The authors find Chinese firms gain long-term value from CBMAs. In particular, the authors find that Chinese firms tend to gain more value from targets from developed countries, and Chinese state-owned firms are more capable of gaining value from CBMAs than Chinese private firms. Originality/value – Given Chinese firms are increasingly acquiring targets outside of China in recent years, it is still unclear about whether Chinese firms gain value from these very expensive cross-border deals. This is one of the first studies that address the question: What are the long-term performance outcomes of Chinese CBMAs in recent years?

Unpacking experience effects in developing novel products for new markets

A key process for exploration is to develop products in order to serve new markets. An implicit assumption in the organizational learning literature, not yet tested empirically, is that the increasing breadth of knowledge and experience firms gain by expanding into new product markets (i.e. exploration experience) may enhance their capacity to innovate in the future. We address how firms may find it more challenging to learn from their exploration experience when they develop new technology instead of employing their existing technology to create new products. In our theory and analyses, we address endogeneity by accounting for the behavioral learning process that leads managers to explore new markets following periods of poor firm performance. We test our model using fine-grained data on new product development projects initiated by 52 biopharmaceutical firms between 1979 and 2000 and find empirical support. Our study identifies a theoretical boundary condition on the relationship between exploration experience in new product markets and subsequent performance in developing novel products.

Evolution of Service Products on Travel Sites and the Effect of that on Traffic: A Longitudinal Study

Evolution of Service Products on Travel Sites and the Effect of that on Traffic: A Longitudinal Study