Global Firms Research Articles

International Trade and Innovation Dynamics with Endogenous Markups

Abstract We argue that the recent increases in market concentration and markups are partly due to an ‘innovation feedback effect’ of globalisation. Lower trade costs increase innovation incentives for global firms. As the winners of the ensuing innovation race increase their technological advantage, concentration and markups rise. We develop an endogenous growth model capturing this effect and calibrate it to US manufacturing data. We find that the increase in trade between 1989 and 2007 raised the aggregate markup by 3.5 percentage points. This is entirely due to innovation: without the innovation response, markups would have fallen by 4 percentage points.

Application of PDCA as A Tool for Improving Managerial Performance

This study aims to demonstrate how PDCA may be utilized to improve managerial performance. A management system is defined as a strategic organizational process that is based on a comprehensive set of guidelines and well formulated guiding principles for carrying out organizational activities in order to accomplish organizational goals. The guidelines in this article focus on the key components of properly carrying out organizational operational responsibilities. The PDCA's essential elements are emphasized in the study's conclusion. This paper examines numerous academic sources and using a desk-based research technique with secondary data analysis to show how the use of PDCA as a tool for enhancing managerial performance may be demonstrated. The result has broad ramifications for academia. Global firms may need to take three crucial steps in order to implement PDCA as a technique for enhancing management performance. By demonstrating how to use PDCA as a tool, the findings can assist both academics and practitioners in improving managerial performance. In contrast to other studies on the subject, this one show how to use the PDCA method to increase managerial effectiveness. It explains how to improve managerial performance using the PDCA method.

Accelerated internationalization of SMEs and microfoundations of dynamic capabilities: towards an integrated conceptual framework

PurposeStriving for growth since their early stages, many small and medium enterprises (SMEs) are increasingly adopting an entrepreneurial behavior based on a rapid and early international expansion. Although some extant research have been done on the dynamic capabilities of SMEs’ accelerated internationalization–born global (BG) SMEs, no study was, to the best of the authors’ knowledge, carried on the microfoundations underlying this phenomenon. This paper aims to fill this gap in the literature and contribute to the growing theory development of SME’s microfoundations.Design/methodology/approachThis paper proposes an integrated conceptual framework to better identify the microfoundations that influence born global SMEs internationalization by integrating individual, structural and processual – the microfoundations approach within the dynamic capabilities of sensing, seizing and reconfiguring.FindingsOur propositions argue that born global SMEs are characterized by dynamic capabilities based on a combination of some individual (manager’s human and social capital, such as its personal orientation, experiences, cognition and intuition), process (market learning, technology development) and structural (agility, communication/coordination) factors that helps a lot in the acceleration of the internationalization process.Research limitations/implicationsEmpirical study should be done to enrich the conceptual material.Practical implicationsTo identify some international opportunities, companies should rely on the entrepreneurial orientation of its managers, its experience and network as well as the market-related learning and technological processes. The managerial cognition is important to seize opportunities while the manager’s human capital is needed to reconfigure resources while internationalizing rapidly.Social implicationsThis research shows that individual attributes are important but insufficient to accelerate the internationalization process. Some individual characteristics are more useful in sensing international opportunities rapidly, such as manager’s international entrepreneurial, past experience and network, However, the managerial cognition is important to seize opportunities, whereas the manager’s human capital is needed to reconfigure resources while internationalizing rapidly.Originality/valueBorn global firms must develop several dynamic capabilities to foster their accelerated early international development. This paper gives insights about the individual, structural and processual of sensing international opportunities, seizing and reconfiguring resources and competencies for born globals.

Investigating biodiversity and circular economy disclosure practices: Insights from global firms

AbstractBusiness activity has contributed to biodiversity loss. The Circular Economy (CE) system is recommended as a way of recovery and to improve global resilience. Combining accounting and ecology, we examine the intersectionality between biodiversity and CE. Therefore, the research aims to investigate the companies' reporting practices on both CE system implemented, and the corrective actions taken to repair biodiversity. To achieve the research aim, we developed a new disclosure index that includes both biodiversity and CE measures. Data is collected from 28 companies operating in three different industries sectors (aerospace and defense, motor vehicle and parts, and transportation) for 4 years (2012, 2014, 2016 and 2018). Our results show, in general, the overall scoring of disclosures is low, with companies providing minimal and vague information and many companies scored ZERO in all of our disclosure items showing that companies have a lack of knowledge on the biodiversity and CE concept. However, there is an increase in the level of disclosures on both biodiversity and CE between 2012, 2014, and 2016 and there is a small decrease for the 2018. Furthermore, the Motor industry is providing more disclosure on both biodiversity and CE, followed by Aerospace & Defense and Transportation industry was the lowest in providing disclosure on both biodiversity and CE. Our study contributes to both biodiversity and CE literature as well as providing some insights on the interconnection of both concepts which is crucial for the future sustainable development.

Financial Performance and Characteristics: A Comparison of Born Global and Gradual Internationalization Firms in China

This study examines the financial performance and characteristics of born global firms (BGs) in China. While the literature on BGs is growing, few systematic studies have investigated their financial performance, especially for BGs from developing economies like China. This study compares the financial ratios and rates of BGs with those of gradual internationalization firms (GIs) using analysis of variance and data on 1,069 listed companies in China’s manufacturing industry. The results show that BGs are inferior to GIs in profitability, debt paying ability, growth potential, and asset quality but are similar to GIs in terms of asset management capabilities. Born global firms’ ROA, operating profit margin ratio, gross profit margin ratio, current ratio, quick ratio, P/BV, Tobin’s q, and growth ratios are lower than those of GIs; their debt ratio is higher than that of GIs, but their operating activity ratios are not statistically significantly different. The study also finds that ownership and size differences exert significantly impacts on the financial performance of BGs.

Increased focus on operational resilience

A wide range of recent well-publicised risks to operational continuity, including but not limited to cyber threats, combined with seemingly more frequent natural disasters and extreme weather-related events have contributed to a broad, heightened interest in operational resilience, which features as an area of considerable focus for corporates and financial institutions, as well as the global regulatory community. This paper discusses the key principles of a strong operational risk framework that remain relevant even as technology and tools advance. These principles include a deep understanding of the businesses and activities that are of greatest operational importance and the specific resources required to execute them, the development and maintenance of business continuity and crisis management plans and the performance of robust testing that is designed to illuminate opportunities for improvement. Recent developments in the global regulatory focus and approach to operational resilience are discussed, including the important differences between regulators and the lack of a single set of universal rules. While this creates challenges for global firms, the authors discuss how the global Custody business and its related ecosystem has been demonstrating its resilience throughout the COVID-19 pandemic, highlighting the interdependency of the participants on each others' resiliency.

Social auditing in the supply chain: business legitimisation strategy rather than a change agent

PurposeThis paper aims to examine the role of social auditing in legitimising the relationship between the buyer and supplier firms rather than strengthening corporate accountability in the global supply chain.Design/methodology/approachApplying case study methodology and drawing on Suchman’s theory on societal legitimacy, it is argued that social audits are artefacts of legitimacy, and global firms dominate the buyer–supplier relationship across the supply chain. The analysis is based on data collected from different secondary sources, including Walmart’s corporate sustainability reports.FindingsUsing Walmart’s relationship with Tazreen Fashions Limited around the Tazreen factory fire incident as a case study, it explains that the practices which attempt to symbolically demonstrate accountability from social audits need to shift to a more continuous and sincere demonstration of accountability through the social audit process. For this to occur, the cognitive and pragmatic approaches that international buyers have previously used in auditing their supply firms’ social responsibility are no longer sufficient to achieve societal legitimacy. Instead, a moral turn needs to underpin the intentions and actions of these buyers to maintain legitimacy and demonstrate accountability across the supply industry in developing economies.Originality/valueThe findings of the study answer the questions raised in the extant literature about the expectation from social auditing and whether social auditing serves to ensure corporate accountability. The paper contributes to the policymaking discussion of how social auditing can be configured to include a legal provision to ensure that social auditing is not a parroting tool for corporations.

How environmental, social, and governance disclosure promotes sales? Empirical evidence from global firms

ABSTRACT This paper investigates the influence of environmental (E), social (S) and governance (G) disclosure, and composite ESG on sales performance. The study analyses 826 global firms across 7 years spanning the 2008 financial crisis to understand how firms use ESG to promote sales in normal and disruptive periods. The effects of ESG and S alone on sales are significantly positive, while no significant effect of E and/or G is found. ESG has a significant effect on sales in the time of market turbulence, but the effect is not robust in normal time. The interaction of E*S/E*G/S*G is also analysed. Even the effect of E alone on sales tends to be negative, the interactive effect of S and E positively affects sales. This paper is among the first to investigate the influence of ESG in whole or in part on sales, taking into account a contextual factor, i.e. market turbulence time.

Unlocking corporate social responsibility in smaller firms: Compliance, conviction, burden, or opportunity?

AbstractThere is a recognition that corporate social responsibility (CSR) by smaller firms could have greater social and environmental impacts if these engagements are meaningful. Small firms are players in the global eco‐system as they supply to larger global firms as subcontractors or suppliers. However, do they practice CSR with a conviction or as a compliance measure? Using stakeholder theory, in‐depth interviews were carried out with 31 firms in Singapore. We found that these firms in highly normative sectors practice CSR due to compliance in the interests of stakeholders. But in less‐normative sectors, where regulations and norms are minimal, a majority of firms practice CSR out of conviction. All firms acknowledged that their businesses have a responsibility toward society and our results further revealed the importance of careful stakeholder involvement in these firms.

Employees’ fit to telework and work well-being: (in)voluntariness in telework as a mediating variable?

PurposeThe present study aims to examine the mediating role of (in)voluntariness in teleworking in explaining the relationship between employees’ fit to telework and work well-being (i.e. work engagement and exhaustion).Design/methodology/approachA cross-sectional survey design was used in this study. The sample comprised 222 individuals performing telework in Portugal. Statistical analyses employed were descriptive statistics, Pearson’s correlation, confirmatory factor and structural equation analyses, and mediation analysis using Hayes Process macro.FindingsThe findings confirmed the hypothesis that employees’ fit to telework raises the voluntariness in telework and decreases involuntariness in telework. However, contrary to expectations, no significant relationships were found between voluntariness in telework, work engagement and exhaustion. Yet, involuntariness in telework showed a significant role in decreasing work engagement and increasing workers’ exhaustion. The mediating role of involuntariness in telework was confirmed in explaining the relationship between employees’ fit to telework and exhaustion.Practical implicationsManagers in global firms can draw from the results to understand how employees’ fit to telework directly and/or indirectly contributes to work well-being and develop human resource (HR) management practices aiming to increase employees’ fit to telework.Originality/valueAlthough teleworking is already studied, to the best of the authors’ knowledge, no studies have analyzed the same conceptual model employees’ fit to telework, (in)voluntariness in teleworking and work well-being.

Corporate codes of conduct and labour turnover in global apparel supply chains

AbstractResearch on private regulation of labour issues in global supply chains has focused extensively on whether supplier factories comply with the codes of conduct of global companies. Less is known about how such compliance relates to the preferences and behaviours of workers at export factories. This study analyses a unique dataset of factory audits matched with a survey of worker turnover rates from 622 factories in 28 countries supplying a large global apparel retailer. The results show that violations of the retailer's codes of conduct for suppliers are generally related to turnover, but that workers ‘vote with their feet’ primarily for violations of wages and benefits, relative to violations of other code provisions such as environment protection and safety standards. This ‘means‐ends’ decoupling between factory practices and worker preferences implies that global firms need to incorporate the livelihood logic that underlies workers' turnover decisions while implementing their private regulation programmes.

Innovation in the legal service industry: Examining the roles of human and social capital, and knowledge and technology transfer

Business research has rarely explored service innovation for the traditionally conservative legal industry. Using a resource-based and practice-based view blend as its theoretical backbone we develop an understanding of the parameters underpinning law firm innovation as a facilitator of operations management enhancement and possible source of entrepreneurship. The paper presents a survey answered by 106 legal professionals from 19 countries exploring four thematic areas referring to human capital, social capital, knowledge and technology transfer that were hypothesised to define innovation. Ordered probit regression modelling was used. Evidence is presented that cybersecurity threats, inadequate and limited training on IT, excessive paperwork and lack of efficient teamwork, collaboration and communication are key challenges to innovation adoption, which is a pathway to sustainable, inclusive and resilient firm growth. Firm size and internationalisation are innovation-altering factors; SMEs differ from large global firms in their ability to operate ‘outside-the-box’. Our results recommend that legal enterprises need to adopt innovation as a robust transformation-enabling toolkit that could facilitate a performance-enhancing business ethos.

Using Domain Redefinition to explain Born Global Firms’ Behaviour

Many academics cite research gaps in the literature concerning the strategies used by Born Global (BG) organisations to enable competitive advantage and business continuance. (Andersson et al 2020; Eggers et al, 2020; Ibeh et al, 2019; Oyna and Alon, 2018). For the purposes of this paper, the definition of the Born Global is taken from Gabrielsson et al, (2008): “the organisation should be an independent small or medium sized business, have a global vision from inception and demonstrate internationalisation with precocity and speed”. Purpose This paper investigates Domain Redefinition (DR) a component of Corporate Entrepreneurship (CE), as a viable construct to explain competitive advantage and business sustainment in Born Global Firms (BG).

Do green supply chain management practices improve organizational resilience during the COVID-19 crisis? A survival analysis of global firms.

This study investigates whether green supply chain management (GSCM) practices help companies to be resilient against the buffer effect in the context of COVID-19. Building on the instrumental version of stakeholder theory, companies implementing GSCM practices should build environmental skills and competitive advantage to cope with a crisis caused by supply chain disruptions. Our survival analysis, conducted on 5,696 firms headquartered in 35 countries, shows clear evidence that GSCM companies’ market prices recover quickly from the shock. Considering mounting pressure on environmental issues, this study documents the new benefits of GSCM for companies confronted with a global financial shock. By applying a large sample, the study has originality and implications for stakeholders, including investors, governments, and policymakers, to push firms to become more eco-friendly and resilient.

Corporate Sustainability Reporting and Managerial Agency Problem in Global Firms: A Chicken or Egg?

This paper examines the causality between the managerial agency problem and sustainability reporting of a firm. The research uses the dataset of 621 global corporations based in 31 countries from 2012 to 2018 and the two-stage least square instrumental variable method to analyse the data. The managerial agency problem is proxied by four indicators (i.e., the total assets per sales ratio adjusted by the ratio of CEO salary to country-average CEO salary, the expenditure per sales ratio adjusted by the ratio of CEO salary to country-average CEO salary, the CEO cash bonus to income ratio and CEO perk to income ratio). Corporate sustainability reporting is proxied by Bloomberg ESG scores. The paper reports a significantly negative two-way association between the managerial agency problem and sustainability reporting. The results are consistent across three proxies for the agency problem and hold across robustness check models. The results indicate that the managerial agency problem leads to less sustainability information reported by a firm, which, consequently, makes the managerial agency problem more severe due to a lack of transparency. The study highlights the benefits of sustainability reporting as an effective corporate governance instrument to mitigate the managerial agency problem.

Technological innovation and Knowledge in Chinese Space

Chinese firms have made considerable progress in the space industry within recent decades; some larger state entities have joined the Fortune Global 500 list. The market liberalization, since 2014, has further attracted aspiring entrepreneurial entrants. This article develops a conceptual model by synthesizing business process and technical knowledge among high tech employees to understand technological accumulation within the context of the quadruple helix. We examine the case study of Zhuhai Orbita Aerospace Science and Technology in the Southern Guangdong Province of China, basing on extensive primary and secondary data collection. The findings in this article suggest that technological accumulation within the firm is linked to cultural mechanisms, and therefore provides a broad perspective on managing knowledge and innovation. The findings in this article also suggest that global firms that connects with China's past are more likely to motivate talented employees in the industry.

Start-up Context, Social Ties, and Growth Strategies of Second-Generation Immigrant Entrepreneurs

Second generation immigrant entrepreneurs (SGIEs) in developed economies have contributed to the emergence of new areas of business activity. An understanding of their growth strategies can shed light on the role of individual immigrants in the founding of potentially global firms competing with large multinational enterprises. Based on eleven case studies of SGIEs of Indian origin in the UK, our findings reveal that SGIEs are heterogeneous in their growth strategies contingent on their start-up context and use of social ties. Founder SGIEs combining non-co-ethnic ties with non-family co-ethnic ties geographically expand outward to other foreign countries, including their country of origin. In contrast, successor SGIEs combining non-co-ethnic ties with family ties expand their product/ service scope within the UK; they exploit foreign market links, including their country of origin, to source supplies or customers through inward internationalization. These findings contribute to the immigrant entrepreneurship, international business and international entrepreneurship literatures.

A Classification of Carbon Abatement Opportunities of Global Firms

Problem definition: Carbon abatement opportunities are diverse, making it difficult to classify them. Do latent classes of carbon abatement opportunities exist and is there a type that is financially and environmentally superior? Methodology/results: In this study, we classify 16,525 implemented carbon abatement projects using text analysis. We benchmark our clustering method to the latent Dirichlet allocation model and verify our classifications using a crowd-sourcing platform. We then compare the payback period, financial hurdle (measured in upfront cost), savings, and carbon emissions reduction by type. Our results show that latent classes exist, and they statistically differ in the metrics we examine. Our regression results show that the type of project explains more of the variation in the financial and environmental outcomes than the firm-level financial controls we included. We find that liquidity (measured using cash-to-asset and current ratios) is associated with the number of reported projects, but the magnitude and direction varies by type. Our extension shows that marginal abatement costs statistically differ by type with a few exceptions. Lastly, we show that our classification is robust to sector-level variation. Managerial implications: Although the results show that no single type of opportunity dominates in all four metrics, our classification provides a ranking of the types firms should pursue depending on their goals. Our results suggest that firms likely place different weights across these four metrics. This means that policies targeted at making investment costs more attractive (e.g., subsidies or better financing) may not have the same impact on firms that put more weight on savings compared with those more sensitive to costs. A classification of opportunities can contribute toward understanding whether a unifying theory or pattern across carbon abatement activities may exist or not.

Understanding the dynamics of global supply chain sustainability initiatives: The role of institutional distance from the buyer's perspective

Research points to sustainable supply chain management as a core strategic goal for most global firms. However, managers continue to struggle with implementing successful sustainability initiatives both internally and throughout their globally dispersed supply chains. Using grounded theory, our findings uncover a potential explanation for how firms manage sustainability initiatives in the context of global supply chain management, from a buyer's perspective. Institutional theory of the firm is applied to help explain the challenges of developing and implementing global supply chain sustainability-related initiatives within buyer-supplier relationships. Analysis of the data from qualitative interviews show that institutional distance is an influential factor that produces mixed effects on the global buyer-supplier relationships in our sample in the context of buyer and supplier strategic orientation toward sustainability. The findings can help guide managers when approaching sustainability-related initiatives in the context of global supply chains. Theoretical and managerial implications are discussed as well as areas for future research.

Effect of COVID-19 Stimulus Packages on Nations’ Competitive Advantage

The study examines the country’s competitive advantage variations due to fiscal stimulus allocated for COVID-19 by the G-20 governments. It predicts that G-20 countries that are more likely to attract future investments from global firms will improve their trade share in the post-COVID-19 scenario. The study uses the growth-share matrix and 4E (entrenching, empowering, enterprising, enriching) framework. Findings indicate that Japan, the USA, India, Australia, and Canada have allocated significantly large stimulus as a percentage of gross domestic product (GDP) compared to their world trade share. It is likely to provide them with a competitive advantage in the future. The findings further reveal that the Governments have significantly allocated the stimulus to four sectors, that is, health, social security, industry and construction, and small and medium enterprises (SMEs). In the post-COVID-19 scenario, global firms may seek market entry or expansion strategies in these sectors in the nations mentioned above.