Higher Firm Performance Research Articles

How to configure the supply chain to stimulate firm innovation performance?

Supply chain characteristics are an important driving force for innovation at the focal firm. Previous research has separately examined the impact of structural, relational, and capability dimensions of the supply chain on firm innovation. Relying on the structure-relationship-capability framework, this study explores the configurational impact of geographical distance, business concentration, and partner innovation of both the supplier-base and the customer-base on firm innovation. Necessary causality analysis (NCA) and fuzzy-set qualitative comparative analysis (fsQCA) are employed. Based on a dataset of 123 Chinese listed firms in high-tech manufacturing sectors, we provide novel insights on the antecedent configurations of the partner characteristics in both ends of supply chains for facilitating firm innovation. Our findings indicate that there are no necessary conditions for high firm innovation performance. We identify three distinct paths - namely, innovation-driven, customer-dominated, and relationship-driven configurations - that consistently lead to high firm innovation performance. From a configurational perspective, this research contributes to the innovation and supply chain literature and provides practical implications for managers to facilitate firm innovation.

Financial performance and carbon emission disclosure

PurposeThis study aims to investigate the impact of financial performance on carbon emission disclosure.Design/methodology/approachThe study uses ordinary least squares (OLS) multiple regression analysis on a sample of 177 Financial Times Stock Exchange 350 index (FTSE-350) non-financial firms to test the impact of market (Tobin’s Q) and accounting (return on equity) financial performance indicators on carbon emission disclosure.FindingsThe results show that the financial performance market indicator has a significant positive impact on carbon emission disclosure. The accounting indicator illustrates similar results except for Scope 3, where the results are insignificant. This study may help firms understand how financial performance affects carbon emission disclosure, particularly by showing that high-performing firms are motivated to maintain strong environmental practices and enhance carbon emission awareness.Originality/valueThis paper enhances stakeholders’ understanding of how firms’ environmental policies align with their financial objectives, thereby expanding knowledge in carbon accounting.

Configuring Technology Resources and Organizational Practices for Innovation Success

Overview: As novel technologies and organizational practices become available, innovation managers must identify and invest in those best suiting their needs. To ensure their firm’s innovativeness, innovation managers must integrate these new technologies and organizational practices into their resource portfolio and deploy them in combination with existing resources. In this article, we demonstrate the orchestration of technologies and practices that set the most innovative firms apart from less innovative. Using the fsQCA method, we found that high-performing firms configure their technological resources and organizational capabilities in bundles, whereas their less innovative counterparts are preoccupied with investing in technologies alone. Resource orchestration management is therefore a novel innovation management capability, which may accelerate a firm’s innovative capabilities. We offer practitioners managerial implications that emphasize the development of innovation managers’ resource orchestration capabilities.

Enhancing micro‐enterprises performance: The role of the regional environment

AbstractThis paper investigates the impact of the regional environment on firm performance, focusing on a sample of 97,838 manufacturing firms in Italy. Utilizing multilevel modeling, the study reveals several key findings. First, the regional context explains approximately 10% of the variability in firm performance. Second, micro‐enterprises demonstrate lower performance levels compared to larger counterparts. Third, a more competitive regional environment is associated with higher firm performance across all sizes of firms. Importantly, micro‐enterprises tend to benefit relatively more in competitive regions, leading to a narrowing performance gap with larger firms. These findings underscore the importance of policy initiatives aimed at enhancing regional competitiveness, particularly in supporting micro‐enterprises to address their inherent weaknesses and improve overall performance.

Assessing the Impact of Accounting Analytic Capabilities on Firm Performance

ABSTRACT This study establishes the relevance of accounting analytic capabilities (AAC) as a predictor of firm performance (FP) in a controlled environment characterized by strong informal controls (IC) and an undercurrent of user resistance to embracing technology. Analysis of data from 118 accounting and finance professionals from India revealed that user resistance was rendered “not relevant” in predicting high FP. This connotes that, in settings of substantial IC and user resistance to change (RTC), AAC on their own can drive superior FP, since their benefits more than counter-balance user resistance to AAC. Furthermore, since this result is independent of firm size or industry type, it signals strong implications for practice and theory. The effectiveness of AAC in an environment of IC (and in the setting of user resistance) is established and discussed.

Unpacking the effects of performance feedback on strategic change: the moderating role of industry conditions

PurposeThis paper aims to integrate insights from the behavioral theory of the firm and the dynamic capabilities perspective to explain how the historical and social attainment discrepancies motivate firms to change. Specifically, this paper proposes that a negative historical attainment discrepancy encourages the firm to engage in strategic change to solve its performance problems. In contrast, this paper advanced that a positive social attainment discrepancy motivates strategic change as a mechanism to bolster the firm’s position within the industry. Further, this paper integrated the moderating effects of industry dynamism and industry munificence.Design/methodology/approachThis paper tests hypotheses using panel data on 2,435 US public firms over the years from 1996 to 2018. This paper uses a fixed-effects regression model to empirically test these hypotheses.FindingsThis paper finds empirical support for the effects of both the negative historical attainment discrepancy and the positive social attainment discrepancy on the firm’s tendency to engage in strategic change. As for the hypothesized moderating effects, this paper finds that industry munificence accentuated the effects of both attainment discrepancies on the firm’s tendency to engage in strategic change. However, the results do not support the hypothesized moderating effect of industry dynamism on either of these attainment discrepancies.Originality/valueThis paper contributes to the research on the separate effects of historical and social comparisons within the context of strategic change. Further, the paper bolsters our understanding of how performance feedback increases the firm’s tendency to change. Finally, the paper integrates theoretical views from the behavioral theory of the firm and the dynamic capabilities perspective on how socially high-performing firms may build and sustain their competitive advantage through organizational change.

Board gender diversity and corporate litigation: evidence from China

PurposeThis study aims to examine the effect of board gender diversity on corporate litigation in China’s listed firms. The key questions this study addresses are: what are the effect of board gender diversity on corporate litigation in terms of both the frequency and severity of consequence, is there any heterogeneous effects of the relationships across firm performance?Design/methodology/approachA sample consists of 25,668 firm-year observations from over 3,340 firms is examined using logistic regression analysis and negative binomial regression analysis. The authors also use event study method and ordinary least square (OLS) regression to explore female directors’ effects on reducing the negative consequences of litigation. The logistic regression and OLS regression are reestimated with interaction terms when examining the firm performance heterogeneity.FindingsThe authors document that firms with greater female representation on their boards experience fewer and less severe corporate litigations. Moreover, in high-performing firms, board gender diversity plays a more potent role in reducing the frequency and consequences of corporate litigation than low-performing firms.Originality/valueThis study is among the first to examine the relationship between board gender diversity and the comprehensive corporate litigations under Chinese context. It sheds new light on China’s boardroom dynamics, offering valuable empirical implication to Chinese corporate policymakers on the role of female directors.

Is past performance a guarantee for current results? The influence of learning on business performance in manufacturing

PurposeThis paper investigates the relationship between past performance and the development of operational capabilities in manufacturing firms, focusing on the role of intra- and inter-organisational learning mechanisms.Design/methodology/approachThis study is based on a survey database collected in 208 manufacturing plants in 15 countries from three industries: electronics, machinery and transport components. The authors developed a model and tested the study hypotheses using the structural equation modelling technique with two-stage analytical procedures.FindingsIn the analysis of the overall sample, the study findings support prior literature by suggesting that firms with successful experiences may become complacent and less motivated to engage in learning, leading to a decline in performance. However, high-performance firms overcome the “success trap” by engaging supply chain partners. In contrast, low-performance firms exhibit limited learning from past poor performance, leading to organisational inertia and further declines in their current performance.Practical implicationsThis research provides practical guidance for managers in developing operational capabilities, highlighting collaboration with suppliers as an essential element for high-performance firms.Originality/valueThis study focuses on the little-researched topic of how past performance influences the development of operational capabilities in manufacturing firms. The authors highlight the path for developing capabilities in high- and low-performance firms based on intra- and inter-organisational learning mechanisms.

Authentic leadership, organizational culture, competitive advantages, and firm performance – Empirical evidence from Vietnam.

In the context of international integration and fierce competition, improving competitive advantages (CA) is a decisive factor to the competitiveness of any economy and each business organization. It is a general belief that there is a connection between leadership and organizational culture (OC), between OC and CA, or CA and firm performance (FP). However, no study investigates the relaionship among these factors simultaneously. To fill the gap, we collected data from 119 firms located in Ho Chi Minh City by survey questionnaires and processed by using SmartPLS. The findings indicate that authentic leadership (AL) has a positive direct and indirect impact on CA through OC significantly at 5%. OC has a positive direct and indirect impact on FP through CA at the signiicance level of 1%. We also found the positive relationship among our factors (AL, OC, CA, and FP) at the signiicance level of 5%. The findings imply that AL drives positive OC, then enhances CA, and finally results in high FP. Keywords: Authentic leadership, competitive advantages, organizational culture, firm performance, Ho Chi Minh City

Executives' horizon and trade credit

AbstractUsing executives' decision horizon as a measure of internal governance, this study examines the association between customer's internal governance and supplier's extension of trade credit. Suppliers may extend more trade credit to customers with strong internal governance because of their lower operational risk, higher firm performance, and better information environment. However, firms with better internal governance may have easier access to other sources of financing, and thus may need less trade credit. Using a sample of US listed firms between 1992 and 2021, we find that suppliers extend more trade credit to customers with strong internal governance. We also find that the association between internal governance and trade credit is more pronounced for financially, and informationally constrained firms. Our results are robust to alternative measures and specifications. Incremental to prior studies, we show that effectiveness of customers' internal governance affects suppliers' lending decisions.

Indirect Effect of Earnings Quality in the Linkage between Managerial Ability and Firm Performance: Evidence from an Emerging Economy

Purpose: This paper investigates the associations among managerial ability (MA), earnings quality (EQ) and financial performance of the firm (FP) in the context of Pakistani economy.
 Design/methodology/approach: For testing objectives, the research proposed panel data model based on three earnings quality attributes, such as predictability, smoothness, and conservatism, between the managerial ability and corporate financial performance. For estimation, the study analyzed an unbalanced panel of 219 non-financial listed firms on the Pakistan Stock Exchange (PSX) for 2008-2021. To address the concerns of heteroscedasticity and autocorrelation, the study applied fixed effect regression with robust standard errors clustered at the firm level, as suggested by Newey and West (1987).
 Findings: -The study provides that overall managerial ability enhances earnings quality and firm performance. In addition, it is observed that earnings quality plays a significant role in enhancing the firm financial performance. Furthermore, the findings also indicate that earnings quality partially mediates the linkage between managerial ability and firm performance. These results support the hypothesis that efficient managers enhance the earnings quality, reduce information asymmetries which translates into higher firm performance.
 Research limitations/implications: The current research is limited to the non-financial sector; however, the study findings are undeniably beneficial for corporate managers in the context of developing economies where the managerial skills, quality of earnings and regulatory control is poor.
 Originality/value: -The novelty of the study lies in the managerial ability and performance linkage considering earning quality as a mediator. Standard-setters and regulators can use the study's findings to understand how managerial skills affect corporate practices, accounting standards and behaviour.

Judge Bias in Labor Courts and Firm Performance

Abstract This paper documents the existence of judge-specific differences on granting compensation for wrongful dismissal and shows that their consequences are different for small low-performing firms than for other firms. Pro-worker judge bias reduces job creation for all firms, increases the destruction of permanent jobs in small and low-performing firms but reduces it in large high-performing firms. Pro-worker bias reduces employment and survival for small and low-performing firms but has no significant effects on these outcomes for the other firms. The probability that permanent incumbent workers keep their job in firms judged by a pro-worker judge increases in large and high-performing firms, while it decreases in small, poorly performing firms.

Is Environmental, Social and Governance (ESG) Disclosure Value Enhancing? Evidence from Top 100 Companies

Embracing environmental, social, and governance (ESG) megatrend among Malaysian firms is becoming crucial as ESG compliance and disclosure are still in the infancy stage, especially after the coronavirus disease (COVID-19) outbreak. Aligned with the government’s initiatives, this study examined the effects of ESG disclosure on firm performance. Using 180 firm-year observations from the top 100 firms listed on Bursa Malaysia from 2018 to 2021, we found that the ESG score boosted firm performance, as its disclosure attracted investor confidence and indirectly increased investment and firm performance. However, it was discovered that controversies provide a positive signal to investors in emerging countries as it improved their firm performance; further analysis was conducted to investigate which ESG pillars had a positive effect on the firm performance. The social pillar was associated with higher firm performance as it can influence workplace culture and indirectly increase firm performance. Contrasting findings were also found on the governance pillar on firm performance which indicated that governance did not improve firm performance directly, but good governance may contribute to better ESG investment and disclosure. Indirectly, it can improve firm performance. This study adds important evidence on the effects of ESG pillars and ESG controversies on firm performance. Keywords: Environmental Social Governance (ESG), firm performance, sustainability

The audit committee and dividend policy: an empirical study of the post-SOX era

PurposePost-Sarbanes Oxley Act (SOX), the audit committee has been empowered greatly to play a central role in the corporate governance of firms. Embedded in agency theory, this study aims to examine the effect of the audit committee on the likelihood by firms to pay dividends.Design/methodology/approachThe study population is US firms in the Institutional Shareholder Services (ISS) database from 2007 to 2018. The authors apply the multivariate logit fixed-effect regression for the analyses after conducting the appropriate statistical tests.FindingsFrom the results of the research model, the authors find that there is a positive relationship between the size and gender diversity of the audit committee and the propensity to pay dividends suggesting that a larger audit committee with substantial women representation improve the information environment in firms leading to higher dividend distribution. The extent of busyness of the audit committee impacts negatively on the propensity to pay dividends. The results are driven by high-performing firms and not driven by specific levels of firm size.Research limitations/implicationsThe findings of the study give impetus to the audit committee as an important component of the corporate governance mechanism that advances the interest of stakeholders. Thus, efforts that seeks to promote the audit committee’s resourcefulness must be embraced by all stakeholders.Originality/valueTo the best of the authors’ knowledge, this study is the first to focus on audit committee and dividend payout policy of US firms post-SOX. The study demonstrates how the audit committee characteristics including its size, gender diversity and busyness affect dividend policy by mitigating information asymmetry problems.

Understanding ESG scores and firm performance: Are high-performing firms E, S, and G-balanced?

What is the relationship among independent third-party rating agency weighted ESG scores, balanced weighted ESG scores, and firm performance? Research studies show that the relationship between rating agency ESG scores and firm performance is mixed and likely inconclusive. This is because rating agencies have the discretion to choose from among many comparable E, S, and G measures that are not the same in scope and measurement, leading to variations in component weights that can cause material differences in reported weighted average ESG scores. To overcome this variation, we propose an extension to organisational ambidexterity theory that incorporates ESG activities and use balanced E, S, and G weights to calculate ESG scores. Using a combination of quantitative and qualitative methodologies on a sample 562 U.S. firms in the Forbes 2000 ranking, we find balanced weighted ESG scores are associated with firm performance, and the greater the positive percent difference between rating agency ESG scores and balanced ESG scores the lower the firm performance. Rating agency weighting methodologies may unknowingly be encouraging firm greenwashing.

CEO international experience and firm performance revisited: What’s culture got to do with it?

PurposeThis paper examines the relationship between chief executive officer (CEO) international experience (IE) and firm performance. The authors also examine the symmetry of this relationship, whereby home and host countries would be interchangeable without any significant change in the impact of each cultural dimension on firm performance.Design/methodology/approachFor a sample of CEOs from Fortune's list of Global 500 companies, firm performance was measured as average net margin for the first four years of CEO tenure. IE was the difference between home country culture and that where CEO experience was gained, based on the GLOBE cultural dimensions. Regression then tested the IE/firm performance relationship. For symmetry, distance direction was coded as either positive or negative, depending on whether home country score on a given dimension was higher or lower than that of the host. Moderator regression then tested for whether distance direction impacted the relationship between IE and firm performance.FindingsResults show that overall distance between home and host cultures in aggregate does not have a significant effect on firm performance. However, for specific dimensions, greater distances between the CEO's countries of experience and that of the parent company on in-group collectiveness and performance orientation are associated with higher firm performance, and greater distances on power distance and assertiveness are associated with lower performance. The authors further find asymmetric patterns in the IE–performance relationship, attributable primarily to the fact that, when scores on performance orientation are greater for the home than host country, organizational performance is significantly enhanced.Originality/valueThis study's hypotheses are grounded in theory, combining the human capital perspective with cultural paradox theory. In addition, the authors offer a unique approach for measuring the dimensional distance of culture.

The Effect of Firm Financial Performance, Free Cash Flow and Cash Holding on Overinvestment

Purpose: This study examines the impact of firm financial performance, free cash flow, and cash holding on the overinvestment of manufacturing companies listed on the Indonesia Stock Exchange in 2017-2021. Methodology: We employed 315 manufacturing companies listed on the Indonesia Stock Exchange for the 2017-2021 period as samples. The data required is correlated to financial performance, free cash flow, cash holding, and company overinvestment. Data is input manually from the financial reports obtained from the website of each firm. To examine the hypothesis, this study applied multiple regression analysis methods. Findings: The results show that free cash flow has a significant and negative effect on overinvestment. It illustrates that higher free cash flow does not encourage a manager to overinvestment. This result support hypothesis 1 (H1). Cash holding affects overinvestment positively and significantly. These results indicate that higher cash holdings inspire managers to overinvestment. These results support hypothesis 2 (H2). Firm performance influences overinvestment negatively and significantly. This result indicates that higher firm performance does not motivate a manager to overinvestment. These results support hypothesis 3 (H3). Originality/Value: Difference from the previous study, this study examines the impact of financial performance, free cash flow, and cash holding on overinvestment in one comprehensive model.

Supply chain agility and sustainability performance: A configurational approach to sustainable supply chain management practices

The sustainable supply chain management literature points to a positive relationship between sustainability practices and firm performance. However, firms have limited resources to apply toward competing strategies and initiatives and managers are therefore challenged with making decisions about which sustainability initiatives to pursue. Two potential solutions to this challenge include combining supply chain agility with sustainability practices and utilising the resource orchestration theory framework (ROT) to help supply chain managers make more informed sustainability-related decisions. The purpose of this study is to investigate the different potential combinations of firm and supply chain sustainability practices and supply chain agility which result in high firm performance. This study uses ROT and applies a configurational approach and qualitative comparative analysis methodology. The findings indicate that high sustainability performance can be reached through different paths (equifinality) entailing both high and low values of each proposed sustainability initiative and supply chain agility (asymmetry). The findings also reveal that results are dependent on how practices are combined, rather than on their single effects.

Does corruption affect firm growth? New evidence from Mozambique

This paper estimates the effect of corruption on firm growth; specifically, in the context of Mozambique. Using instrumental variable estimation to address potential problems of endogeneity and measurement error, the paper finds that corruption has a robust negative effect on sales and productivity growth. The effect is not constant but declines as firm performance drops and corruption increases. This means corruption is most damaging to high-performance firms, meaning firms with higher sales and productivity growth rates, and to firms with lower bribe rates. For low-performance firms and firms with higher bribe rates, the effect gradually approaches zero. The paper contributes to the literatures in two ways. First, it offers a more nuanced understanding of the relationship between corruption and firm growth by showing that the effect of corruption is conditional on firm-specific factors. Second, the paper extends the empirical research on corruption and firm growth to Southern Africa, which has previously been excluded from the literature.

Explaining Firm Performance During the COVID-19 With fsQCA: The Role of Supply Network Complexity, Inventory Turns, and Geographic Dispersion.

The COVID-19 pandemic has significantly affected firm performance. As a result, many studies have examined the significance of supply network complexity. Our paper uses the fuzzy set qualitative comparative analysis (fsQCA) method to investigate the causal relationships among the supply network complexity, geographic dispersion, inventory turns, and firm performance. Using a sample of 263 Chinese listed firms, we find that no single factor is necessary to achieve high firm performance during COVID-19 and reveal four paths to produce high performance: operational level driven, supply base complexity driven, and customer base complexity driven with supplier distance, and supply network complexity absence. Furthermore, our findings suggest that supply-based complexity-driven and customer-based complexity-driven can improve firm performance, but not all supply network complexity dimensions can improve firm performance. Hence, firms need to choose the suitable path based on their specific situations.