Industry-level Factors Research Articles

Is SDG reporting substantial or symbolic? An examination of controversial and environmentally sensitive industries

Although sustainability development goals look for the “common good”, the question of whether macro-objectives related to the fight against poverty, gender discrimination or environmental degradation affect firms’ financial results is not easily answered. This article examines whether sustainable development goal reporting is symbolic or substantive. We specifically analyze the role this reporting plays in companies belonging to controversial and environmentally sensitive industries, where the incentives to use sustainable development goal disclosures as a symbolic strategy can be greater. This paper addresses existing research gaps by first examining the influence of sustainable development goal reporting on firm performance, and second, the effect of industry-level factors in moderating the relationship between addressing sustainable development goals in sustainability reports and corporate performance. We examine our research hypotheses with the use of a European database comprising 523 firm-year observations from 2015 to 2016. After controlling for endogeneity, our evidence reports the lack of an effect of sustainable development goal reporting on firm performance, supporting the symbolic value of this information for stakeholders. However, our main findings confirm an effect of this reporting on performance in controversial sectors, such as alcohol, gambling, tobacco, and firearms, as well as in environmentally sensitive industries. Results suggest the value-enhancement of sustainable development goal reporting only happens in companies under high social scrutiny and with stakeholders concerned about ethical and environmental issues.

Convergence and Divergence in Multi-level Innovation Patterns: Evidence from the Chinese Manufacturing Industry

Owing to the evolving nature of markets, firms’ ability to enact strategic innovation plays an essential role when adapting to environmental changes and maintaining advantages under intense competition. Incumbent firms will exhibit superior performance in sustainable growth if they can appropriately and promptly integrate novel strategies into their production procedures according to the situations they encounter. Heterogeneity in such an ability between firms leads them to deploy various innovation patterns. We suggest that convergence will emerge in firms’ innovation processes within an industry for two reasons. Primarily, latecomers in innovation refer to their predecessors’ experiences to improve their innovation patterns, increasing the similarities between their practices. Second, the marginal effect of the same strategic innovation on firms’ growth decreases for predecessors while it remains high for latecomers. That is, latecomers are likely to catch up with predecessors from an innovation perspective. In addition, considering that effective strategic deployment derives from firms’ adaptive adjustments to innovation patterns, firms will show different preferences in updating strategies. Hence, we propose that divergence will also arise in innovation processes. Accordingly, we introduced the multi-level structures of markets into our study on innovation patterns, such as firm and industry level factors, to observe their impact on convergence and divergence simultaneously. We focused on the Chinese manufacturing industry and conducted a survey consisting of onsite interviews, field visits, and archive-data analyses. We provide explanations on how firms outperform their rivals in innovation activities.

When more is better: a contingent view of alliance partner multiplicity and a focal firm’s product innovation performance in China

ABSTRACT Whereas strategic alliances have been widely used to foster product innovation, the extant literature offers inconsistent arguments and inconclusive empirical evidence regarding how the number of partners (i.e., partner multiplicity) in an alliance affects a focal firm’s product innovation performance. The resource-based view (RBV) posits that having more partners in an alliance should benefit a focal firm’s product innovation because of more diverse and a large shared knowledge pool among partners, whereas transaction cost economies (TCE) holds that alliance partner multiplicity may hurt a focal firm’s product innovation due to highex-ante and ex-post costs, and increased governance difficulty and coordination complexity. Building on the RBV and TCE, this study examines the contingent roles of partner-, alliance-, and industry-level factors (i.e., alliance foreignness, alliance duration, and industrial competition). Drawn from multi-informant survey data, the findings reveal that alliance partner multiplicity does not significantly affect a focal firm’s product innovation performance in an emerging market. However, such an effect becomes positive in alliances that involve only domestic partners, operate for relatively short durations, or operate in highly competitive industries. These findings yield new insights with which to disentangle inconsistent arguments in the existing literature and offer important implications for firms seeking innovation benefits from multilateral partnerships.

Export performance research: Where should we go next?

Objective: Research into firm-level exporting, has been criticised for being excessively fragmented and inconsistent. The objective of this paper is to review extant research on export performance and propose a research framework which will go beyond the currently studied relationships and variables, and therefore formulate several recommendations for future research.Research Design & Methods: In doing so, the review adopts a broader view of export performance, which accounts for the possibility of a negative development of export ventures.Findings: The paper finds that institution-based, resource-based and industry-based views have been often used to address the determinants of export performance. While there are some complex interactions between host-country institutional factors, firm-level factors, and industry-level factors, these have been studied to a lesser extent. Also, the review highlights the need for a more nuanced and fine-grained understanding of export strategy, particularly embracing modern business models and devoting more attention to foreign market partners.Implications & Recommendations: Scholars should be more sensitive to previously neglected variables which can enhance the understanding of export performance and lead to more comprehensive empirical studies.Contribution & Value Added: The paper includes a conceptual framework proposing directions for future research, whereby a broader understanding of export performance is adopted, including also the possibility of export exits.

Stigma and Firm Reactivity: Understanding the Drivers of Human Rights Policy Adoption at MNEs

While global supply chains have long been implicated in human rights abuses, the processes firms use to discover, remedy, and prevent abuses in their operations are still emerging. The primary objective of this research is to analyze the emergence of new corporate behaviors, specifically the diffusion of corporate human rights policies amongst MNEs. We build an “Awareness-Motivation-Capability (AMC)” model to identify and analyze firm and industry-level factors that shape a firm’s decision to adopt a human right policy. This paper contributes to empirical research on business and human rights by systematically analyzing corporate adoption of human rights policies at 7,400 global companies over time, 1999 – 2018, using ASSET4 data. Given the dynamic nature of policy adoption, we employ a Cox proportional hazard model. This enables us to understand the significance of each factor and whether it delays or advances the timing of policy adoption. Recognizing that the human rights abuses of MNEs are “stigma-producing” events helps explain our surprising finding; the occurrence of human rights controversies motivates firms to respond with human rights policy activity only when the firm itself is affected, implying reactive rather than proactive policy adoption strategy is at play for MNEs.

Effects of industry-level factors, brand credibility and brand reputation on brand trust in safe food: evidence from the safe vegetable sector in Vietnam

PurposeWhile the essential role of brand trust toward consumer decision to purchase food products has been well addressed, there has been still little research on its influential factors. The primary purpose of this study was to explore factors affecting consumer trust in brands of safe vegetables.Design/methodology/approachStructural equation modeling technique was applied to test the hypothetical relationships based on a sample of 361 consumers from a face-to-face interview in the urban areas of Hanoi city, Vietnam, in March and April 2018.FindingsThe authors' findings show that both brand credibility and brand reputation positively affected brand trust. The trustworthiness of a safe vegetable system had a more important role than the competence in building brand trust. While the effects of system trustworthiness on brand trust were found directly and indirectly (through brand credibility), system competence only had an indirect influence on brand trust via brand reputation. Notably, while risk recall directly reduced brand trust, risk information caused a directly positive effect on brand trust. In addition, the impact of food hazards on brand trust was indirect through brand credibility.Practical implicationsBased on our results, the Vietnamese government and stakeholders in the safe vegetable chain should improve brand trust based on fulfilling comprehensive traceability, expanding the brand reputation and providing an appropriate risk communication strategy to the public.Originality/valueThis study is one of the first attempts to model and evaluate factors affecting brand trust in the food sector directly and indirectly.

State and determinants of inter-regional market entry practices in the Chinese construction industry: evidence from national quality award projects

PurposeDue to the lack of industrywide data, now there is only perceptual knowledge, through survey data, that construction firms may face great challenges in geographical diversification. The article aims to provide an objective description on the state of interregional market entry practices in the Chinese construction industry. How these practices are influenced by related set of regional and industry-related factors is further studied.Design/methodology/approachDescription analysis of the practices is first performed based on a first-hand industrial data set including 1,020 projects and 404 construction firms. Combining provincial panel data in the National Bureau of Statistics of China, related regional and industry-related factors on these practices are further analyzed through hierarchical regression models.Findings(1) Interregional market entry practices are not quite prevalent during the past two decades, only involving 271 projects and 111 firms which accounts for 26.57% and 27.47% of the analyzed subjects respectively; (2) Large, state-owned and experienced firms are more frequently involved in the practices; (3) A number of regional factors such as local market protection and industry scale also significantly impact the practices.Research limitations/implicationsThe empirical analysis of this study was conducted using the specific dataset from the National Quality Award Projects where firms tend to be national, which may limit the generalizability of the findings to the whole industry contexts.Originality/valueWhile most of the research on market entry practices in the project-based construction industry is undertaken at project or firm level based on survey data, this research represents an exploratory effort of using objective data to provide a macro overview of the practices at the industry level. The findings could contribute to a deepened understanding of how these practices are impacted by related regional- and industry-level factors.

Public family businesses and corporate social responsibility assurance: The role of mimetic pressures

Extant research focuses on firms’ voluntary demand for corporate social responsibility assurance (CSRA) and highlights the roles of country- and industry-level factors on firms’ CSRA decisions. We use different types of agency problems to explain their CSRA decisions at the firm level and explain why over time public family businesses (PFBs) vary in their resistance to the mimetic pressures from earlier CSRA adopters in the same sector. We analyze a sample of firms listed on the Taiwan Stock Exchange and Taipei Exchange firms during 2014–2017 and find that the likelihood of acquiring CSRA is lower in PFBs than in non-family firms. Furthermore, we find that the industry-level mimetic pressures weaken the negative association between the likelihood of acquiring CSRA and PFBs with less severe central agency problems. However, PFBs with severer central agency problems are still unwilling to acquire CSRA even under the pressure from peer CSRA adopters.

Sub-additivity in Resource Combinations

Various growth strategies can result in multiple resources as well as overlapping resources in a firm. Prior research has largely assumed additivity or super-additivity in resource combinations. Fungibility, scale-free property, and relatedness have been identified as the potential drivers of super-additivity. We argue that such resource attributes can also substantially diminish the value in resource combinations, leading to sub-additivity, i.e., the value of combined resources is smaller than the sum of values of individual resources. This study explores the antecedents of sub-additivity in resource combinations. This sub-additivity is independent of any synergistic potential in resource combinations, and thus, it can diminish any anticipated gains from scale and scope economies. Resource attributes as well as both dyad-level and industry-level factors affect the added value of a bundle of resources to the demand side and can therefore determine the outcome of resource combinations. We identify the key conditions for sub-additivity at those multiple levels of analysis: fungibility, scale-free property, imperfect tradability, complementary resources, resource symmetry, and information asymmetry. We discuss the conceptual and managerial implications of resource sub-additivity in broad managerial contexts, including the resource-based view, internally competing projects or resources, and M&A.

Characteristics Contributing to Low- and Minimum-Wage Labour in Germany

AbstractIn this article we examine the correlation between characteristics of individuals, companies, and industries involved in low-wage labour in Germany and the risks workers face of earning hourly wages that are below the minimum-wage or low-wage thresholds. To identify these characteristics, we use the Structure of Earnings Survey (SES) 2014. The SES is a mandatory survey of companies which provides information on wages and working hours from about 1 million jobs and nearly 70,000 companies from all industries. This data allows us to present the first systematic analysis of the interaction of individual-, company-, and industry-level factors on minimum- and low-wage working in Germany. Using a descriptive analysis, we first give an overview of typical low-paying jobs, companies, and industries. Second, we use random intercept-only models to estimate the explanatory power of the individual, company, and industry levels. One main finding is that the influence of individual characteristics on wage levels is often overstated: Less than 25 % of the differences in the employment situation regarding being employed in minimum-wage or low-wage jobs can be attributed to the individual level. Third, we performed logistic and linear regression estimations to assess the risks of having a minimum- or low-wage job and the distance between a worker’s actual earnings and the minimum- or low-wage thresholds. Our findings allow us to conclude that several determinants related to individuals appear to suggest a high low-wage incidence, but in fact lose their explanatory power once controls are added for factors relating to the companies or industries that employ these individuals.

Distance and the completion of Chinese cross-border mergers and acquisitions

PurposeThe purpose of this paper is to draw attention to the significant lower completion rate of mergers and acquisitions (M&As) by firms from emerging economies (EEs) (China in particular) compared with firms from advanced economies, and identify the country- and industry-level factors that affect the completion of cross-border M&As by Chinese firms.Design/methodology/approachThis study explores the effects of economic, cultural and institutional distances and target firms in technology- and knowledge-intensive industries on the completion of cross-border M&As by Chinese firms. It also examines the interplay between distance factors and technology- and knowledge-intensive industries on cross-border M&A completion. This study adopts a quantitative approach and is based on a sample of 768 announced cross-border M&A deals by firms in China between 2000 and 2015.FindingsThe results indicate that economic distance increases the likelihood of the completion of cross-border M&As when the target is in a more developed economy than China, but decreases when the target is in a less developed economy. Cultural and institutional distances have a significant, negative impact on the completion of cross-border M&As. In addition, target technology-intensive industries have a significant direct negative effect on cross-border M&A completion and moderate the relationship between the distance factors and the likelihood of cross-border M&A completion.Research limitations/implicationsThe results reveal factors that affect the completion of cross-border M&As by emerging market firms (EMFs). Further research, however, is needed to discover how distance factors affect how EMFs find, evaluate and negotiate international bids. To broaden the scope of the research, data for firms from other EEs would also be required.Originality/valueThe study expands the literature that considers the effects of major distances on cross-border M&A completion. In addition, the importance of defining and measuring distances in the context of cross-border M&As is highlighted. Finally, the study expands knowledge on how cross-border M&As affect the internationalization strategies of EMFs by conceptualizing and testing how target industries affect cross-border M&A completion.

Earnings Management, Managerial Ability, and the Role of Competition

I contribute to the extensive earnings management literature by examining the effect of market competition on the relationship between managerial ability and earnings management. The results show that in the face of increased competition, high quality managers manipulate earnings via accruals rather than more costly real earnings management. As a result, competition amplifies accrual earnings management by superior managers, but does not result in greater amounts of real earnings management. This reaction to the pressure of competition reflects the optimal contracting between firms and more able managers that creates mutual benefits to both parties. The results emphasize the importance of understanding how industry level factors influence managerial decisions at the firm level.

Regulations, Governance, and Resolution of Non-Performing Loan: Evidence from an Emerging Economy

ABSTRACTHow do banks resolve a severe bad loan problem in a capital-constrained, low-income economy when a government bailout is not an option? We address this question by examining new evidence from a sharp decline in bad loan ratios in a panel of conventional commercial banks in Bangladesh. On the aggregate level, the bad loan ratio in this market has dropped from 41% in 1999 to only 10% in 2012. We find that at a micro level, this dramatic improvement is associated with bank management quality and internal governance that were substantially enhanced during a decade of large-scale regulatory reforms. The bank-level findings persist even after controlling for market monitoring, bank- and industry-level factors, and macroeconomic variables. Both economic growth and financial development paved the way for banks operating in this macroeconomic environment to reduce non-performing loans over time.

CSR committees on boards: the impact of the external country level factors

This article explores the spread of corporate social responsibility (CSR) committees in the European countries, examining whether and what country level external conditions can have a positive impact for their presence on boards. CSR committees are becoming increasingly important as tools of corporate governance to fight corruption, protect stakeholders, create shared value in the long run and, in general, reduce company’s exposure to responsibility failures in a context where the management of CSR is even more complicated. Taking into consideration more than 22,000 boards of European companies from 2000 to 2016, we first developed a descriptive analysis on the level of spread of CSR committees, and then quantitatively prove that the non-financial disclosure mandatory requirements have a positive impact on the presence of CSR committees on boards. This study contributes to the prior studies about the extent to which CSR committees have been adopted by companies and to the existing literature about corporate governance and CSR, supports legislators and regulators by information about the more effective actions to encourage companies in CSR committees’ establishment, and suggests companies a special corporate governance structure to better manage their global responsibility towards stakeholders. Finally, this research can be the starting point for future studies about what industry level factors are potential driver for CSR committees on boards.

Political activities of oil and gas firms in the United States

ABSTRACTFollowing recent empirical studies testing the outcomes of firm-level political strategies, this article models the financial performance associated with three specific political actions: (i) political donations, (ii) lobbying, and (iii) political connections. This is done in an industry that consistently ranks near the top in political spending—oil and gas—yet, to date, has not been the focus of such research. The author finds, in a sample of 46 oil and gas service firms over 11 years, that firm-level profitability (earnings before interest and taxes) is associated with prior political efforts. All three explanatory variables were significant in a fixed-effects estimation after controlling for macroeconomic level, industry-level, time-level, and firm-level factors. Additionally, these results were robust to several post hoc tests.

Foreign firms’ strategic positioning and performance in a host market

PurposeStrategic positioning of foreign firms in a host market is vital for their success. By integrating the resource partitioning theory and the resource-based view, this study aims to investigate foreign firms’ strategic positioning (i.e. their choice of generalist or specialist positioning strategy) and its performance implications in the US market.Design/methodology/approachThe final sample includes 212 foreign companies from 28 countries operating in the US market. Multiple data sources were used to collect data of these foreign companies’ subsidiaries in the USA This study used logistic regression to test its major hypotheses.FindingsThe results of this study suggest that a generalist positioning strategy is positively related to performance in a host market. It is also found that market concentration and local market knowledge moderate this strategic positioning – performance relationship.Research limitations/implicationsFor a foreign firm that enters a host market, market concentration (an industry-level factor) in the host market and the firm’s local market knowledge (a firm-specific factor) play prominent roles in the strategic positioning – performance relationship.Originality/valueThis study offers a novel perspective of international business strategy by applying the lens of resource partitioning theory to study the relationships between multinational enterprises’ strategic positioning and performance. This study contributes to the strategy literature in that it examines the performance implications of firms’ strategic positioning (i.e. generalist or specialist positioning).

Salesperson regulatory knowledge and sales performance

Salesperson knowledge is an important factor leading to sales performance. Extant literature, however, is silent on the impact of a specific sub-dimension of knowledge—namely, regulatory knowledge or a salesperson's understanding of his or her industry's regulatory environment. This study proposes that salesperson regulatory knowledge is positively associated with sales performance and that individual-level factors (i.e., self-efficacy and customer orientation) and the industry-level factor regulatory turbulence positively moderate this direct effect. Furthermore, the study predicts that the firm-level factor organizational entrepreneurial orientation (EO) positively influences salesperson regulatory knowledge. Two studies analyzing business-to-business salespeople test the conceptual model. The results show that regulatory knowledge is positively associated with sales performance and that customer orientation and industry regulatory turbulence positively moderate this relationship. The findings also reveal that organizational EO is an antecedent to salesperson regulatory knowledge.

International asset allocations and capital flows: The benchmark effect

Benchmark indexes have become important in financial markets for portfolio investment. In this paper, we study how international equity and bond market indexes impact asset allocations, capital flows, asset prices, and exchange rates across countries. We use unique monthly micro-level data of benchmark compositions and mutual fund investments during 1996–2014. We find that movements in benchmarks appear to have important effects on equity and bond mutual fund portfolio allocations, including passive and active funds. The effects persist after controlling for time-varying industry-level factors, country-specific effects, and macroeconomic fundamentals. Changes in benchmarks not only impact asset allocations, but also capital flows, abnormal returns in aggregate stock and bond prices, and exchange rates. These systemic effects occur not just when benchmark changes are announced, but also later, when they become effective. By impacting country allocations, benchmarks explain apparently counterintuitive movements in capital flows and asset prices, as well as contagion effects.

FDI location choice: the role of locational ambidexterity

PurposeThis paper proposes locational ambidexterity as a location-specific factor based on an operation flexibility perspective, and explores why and how multinational corporations (MNCs) proactively deal with uncertainty by valuing locational ambidexterity in making location decisions.Design/methodology/approachLocation choice data for foreign direct investment (FDI) at a sub-national level in China is used to test the role of locational ambidexterity.FindingsWe find that FDI generally prefers locations with high ambidexterity. Moreover, investments from a heterogeneous country context are more sensitive to locational ambidexterity than those from a similar country context. However, there is no significant evidence that wholly owned investments favor locational ambidexterity more than do international joint ventures.Research limitations/implicationsAn alternative operationalization of locational ambidexterity may be needed. Future research could explore the sources of locational ambidexterity, identify other firm- and industry-level factors that could alter the value of ambidexterity, investigate how MNCs integrate locational ambidexterity into organization-specific option creation strategies and test the ambidexterity perspective with micro-level location choice data.Practical implicationsLocational ambidexterity may reduce the overall risk and adjustment cost of future changes. FDI may choose a location with high ambidexterity, i.e. a balanced portfolio of location-specific determinants, under uncertainty about the future.Originality/valueDrawing on the notion of location flexibility from Buckley and Casson (1998), this study identifies a new location character, locational ambidexterity, and proposes that MNCs address uncertainty by choosing ambidextrous locations that offer more flexibility for MNCs to change or respond to potential volatility. Selecting locations with high ambidexterity is thus an alternative and complement to the organization-specific flexibility creation strategies suggested by the literature on real option and flexibility.

Intra-Cultural Variation, Zone of Acceptance and Managerial Discretion: A Theoretical Discussion

This paper examines the theoretical relationship between intra-cultural variation and managerial discretion. Research into the degree of discretion, or latitude of actions, has primarily focused on the individual-, organizational-, and industry-level factors, which either allow or constrain executives to take strategic actions. Despite, the recent attempt to discover the impact of national culture, mainly values, on managerial discretion, culture has been studied on an aggregate level by assuming spatial homogeneity within a country. However, recent evidences have shown that intra-cultural variation could be as salient as or sometimes even more than inter-country variation, yet there has been no discussion on its potential association with managerial discretion. As such, we address this gap and investigate the relationship of this cultural aspect with managerial discretion. Using institutional, stakeholder and upper echelons theories, our study proposes a strong relationship between intra-cultural variation and managerial discretion. Therefore, our study contributes to the strategic management and culture literature by providing a more nuanced understanding of such relationship and most importantly by introducing a new national construct that could play an important role in the strategic decision making of business executives.