Large Firms Research Articles

Competing for Talent: Large Firms and Startup Growth

Competing for Talent: Large Firms and Startup Growth

Inefficient labor market sorting

A growing empirical literature attributes much of the productivity advantages of large, “superstar” firms to their adoption of best practice management techniques that allow them to better identify and use talented workers. The reasons for the incomplete adoption of these “structured management practices” (SMPs) and their welfare implications are not well understood. This paper provides a positive and normative analysis of these issues in a theoretical framework in which SMPs induce sorting of talent across firms. Incomplete adoption arises because SMPs are costly and worker talent is in limited supply. In equilibrium there is excessive adoption of SMPs and too much sorting of talented workers into large firms. In this second-best environment, policy changes that favor large firms, such as trade liberalization, have the potential to lower welfare.

Digital Empowerment and Functional Heterogeneity of TMT: Strategies in in Large Firms and SMEs

Digital Empowerment and Functional Heterogeneity of TMT: Strategies in in Large Firms and SMEs

The nexus of tax avoidance and firms characteristics – does board gender diversity have a role? Evidence from an emerging economy

PurposeThis study examines the moderating role of female directors on the relationship between the firms’ characteristics and tax avoidance in an emerging economy.Design/methodology/approachThis study employs the second-generation unit root test and the generalised method of moments (GMM) techniques. The Kao residual cointegration test corroborates a long-run cointegration among variables.FindingsFemale directors demonstrate mixed and unusual findings. No significant impact of female directors on tax avoidance is found. In addition, the presence of female directors does not show any negative or significant moderating impacts on the relationship between leverage, firm age, board size and tax avoidance. However, having more female directors can negatively and significantly moderate the relationship between more profitable firms, larger firms and tax avoidance. These findings show that the board of directors could use the presence of female directors to maximise their opportunistic behaviour, such as to avoid tax.Research limitations/implicationsResearch limitations – The study is limited by considering only 62 listed firms. The scope could be extended to include non-listed firms.Practical implicationsResearch implications – There is increasing pressure for female directors on boards from diverse stakeholders, such as the European Commission, national governments, politicians, employer lobby groups, shareholders, and Fortune and Financial Times Stock Exchange (FTSE) rankings. This study provides input to decision-makers putting gender quota laws into practice. Our findings can help policy-makers adopt regulatory reforms to control tax avoidance practices and enhance organisational legitimacy. Policymakers can change their policy to include female directors up to the threshold suggested by the critical mass theory.Originality/valueThis is the first attempt in Bangladesh to explore the role of female directors in the relationship between the firms' characteristics and tax avoidance. The current study has significant ramifications for bringing gender diversity into practice as a component of good corporate governance.

“Where and How to Play” A Typology of Exploratory Innovation for Large Incumbent Firms

“Where and How to Play” A Typology of Exploratory Innovation for Large Incumbent Firms

Centralised Development and Inactive Business Sector: The Case of Nakhon Si Thammarat City Municipality

This article examines the relationship between the business sector and the policymaking of Nakhon Si Thammarat City Municipality in Southern Thailand. We find that business influence on local policy remains highly limited. We argue that this is primarily due to two factors: political and economic centralisation which limits the capacity of the municipal government, and the limited economic opportunities for medium and large businesses within the municipal borders. The result is that medium and large firms tend to focus their attention on and cultivate links with officials at the provincial and national level. At the same time, small businesses have expanded in the municipality. However, their inability to coordinate to make collective demands limits their influence on municipal policymaking. Instead, small entrepreneurs individually lobby the local government through the same channels as the general public, appealing for allocations from the government's limited community service budget.

Green taxes: Productivity effects of tax-based environmental regulations on heavily polluting firms

Environmental regulations, particularly tax-based measures, significantly impact firm productivity and corporate behavior. This study uses China's Environmental Protection Tax (EPT) law as a quasi-natural experiment to explore whether and how such tax-based environmental regulations influence the productivity of heavily polluting firms. Using a difference-in-differences approach, we find that the EPT law has positively impacted firm productivity by fostering higher research and development investments and encouraging the substitution of labor with capital. The productivity-enhancing effect is more pronounced for state-owned enterprises, large firms, firms with fewer financial constraints, firms receiving more government subsidies, and firms operating in less competitive sectors. These findings support the Porter hypothesis, suggesting that well-designed environmental regulations can stimulate innovation and improve competitiveness, ultimately enhancing productivity. This study underscores the importance of tax-based environmental regulations in promoting productivity and economic growth, providing valuable insights for policymakers aiming to balance environmental protection with economic development.

Competing with the platform: Complementor positioning and cross‐platform response to entry

AbstractResearch SummaryThis study contrasts traditional entry dynamics with platform owner entry into a complementor market and examines cross‐platform complementor response to competition with the platform. Generalists experience low repositioning cost and are more likely to shift effort away, while specialists focus their effort on the focal platform. We examine Apple's “Files” app entry and find support for our hypotheses: generalists shift effort toward the competing platform, while specialists double down on the focal platform. Moreover, empirically comparing Apple's entry with that of other large firms, we find that only the platform owner elicits a strong complementor response. This article contributes to the competitive and corporate strategy literatures, underscoring how complementor heterogeneity affects cross‐platform allocation of effort when the platform owner becomes a competitor in complementor spaces.Managerial SummaryGiven the growing managerial and regulatory interest in competitive arenas on digital platforms, we analyze how firms respond to competition with the platform owner. We hypothesize that platform‐enabled firms (complementors) with an outside option—those who also operate on a different platform—reposition, while firms only focused on a single platform double down. Examining the case of the “Files” app on Apple's App Store, we find support for these predictions. We also study other large firm entries on App Store (by Microsoft and SanDisk), but do not observe a meaningful response by complementors. We describe how market entry by the platform owner differs from traditional entry and argue stakeholders may benefit from a deeper understanding of the unique nature of competing with a platform.

Technology Adoption Among SMEs: How Is It? And What Can Be Done to Strengthen It?

Businesses have benefited tremendously from technological advancements, particularly in production, outsourcing, logistics, and marketing. Although large firms and Multinational Companies (MNCs) are in a better position concerning the use and adoption of technologies, small and medium-sized enterprises (SMEs) have both the agility and potential to leverage their resources, market conditions, globalization’s opportunities, and networks to improve the way they use technology and ultimately enhance their competitiveness. As seen in the literature, most research that has addressed the topic of technology adoption among SMEs has emphasized specific issues such as digitalization, information technology, cloud computing, cybersecurity, and Industry 4.0. This paper has gone beyond such a limited view to touch upon different technological aspects that are important to the functioning and/or survival of SMEs and the conditions surrounding the implementation and use of technologies. Specifically, this study examines the realities of SMEs’ technology adoption and draws lessons for policymakers in developing countries.

Firms’ digitalization during the COVID-19 pandemic: a tale of two stories

Abstract The COVID-19 pandemic accelerated the digital transformation of businesses. Using a unique global panel dataset, this paper documents the patterns of digital adoption during the pandemic across firms in 57 (mostly developing) countries. The data show the tale of two stories. On one hand, the pandemic drove firms to increase the use of digital platforms and invest in digital solutions. On the other hand, the digital divide increased across several dimensions. There remain substantial gaps between small and large firms as well as across sectors, particularly for new investments in digital solutions. Firms that did not use any digital platform or channel before the pandemic, also lagged in their response to the pandemic, increasing the gap with those that were more digitally ready. Moreover, although the share of online sales across firms for all size groups increased, there is a growing concentration of online sales among top firms. The paper analyzes some of the factors associated with this increase in the digital divide and discusses the policy implications addressing the widening digital divide and leveraging the benefits of rapid digitalization.

Green credit policy and bankruptcy risk of heavily polluting enterprises

We investigate the impact of a green credit policy (GCP) on the bankruptcy risk of heavily polluting enterprises (HPEs). We find that a GCP strengthens the bank supervision of HPEs’ production and management behavior (not limited to environmental behavior), thereby reducing their bankruptcy risk. However, since banks are unlikely to strictly supervise local state-owned enterprises and large firms, the negative correlation between the bankruptcy risk of HPEs and a GCP is weakened for such enterprises and firms. We suggest that a GCP can promote the coordinated development of the economy and the environment.

Product market competition, debt rollover risk and financial default risk: evidence from Indian corporates

PurposeThe study investigates the impact of the interaction effect of product market competition and rollover risk on the default risk of the firms.Design/methodology/approachThe study used the sample of unbalanced panel data from Indian corporates without any survivability bias over the period from 2009 to 2020 consisting of 30,396 firm-year observations of 6,718 firms spread across 143 industry groups. The panel data regression tests the interaction effect in the context of the asset substitution problem, predation threat theory, competitive shock, and competitive risk.FindingsThe empirical results highlighted the dominance of the predatory effect of competition over the disciplinary advantage of short-term debts. The competitive shock to the industry results in a higher credit spread for refinancing short-term debt and significantly increases rollover risk for firms. Smaller firms have higher default risk from rollover losses than larger firms in the face of competition due to asset-substitution problems and strong rivalry. For firms with weaker fundamentals, the interaction effect of rollover risk and competition exacerbates the flight-to-quality problem, resulting in a systemic event.Practical implicationsThe investors can benefit by factoring ex-ante the interdependence of competition, debt market illiquidity, and default premia while calculating the credit risk. The shareholders of competitive firms can reduce the moral hazard of refinancing the rollover losses and defaulting at a higher fundamental default threshold, by reducing sub-optimal utilization of funds by managers and agency costs.Originality/valueAs per the best of author knowledge, the present study is the first to study the moderating effect of product market competition in exacerbating default risk through the rollover channel.

Individual entrepreneurial orientation and firm performance: The mediating role of sustainable entrepreneurship practices

The entrepreneurship landscape has undergone a significant transformation towards sustainability in both large and small business firms. This study investigated the effect of individual entrepreneurship orientation on sustainable entrepreneurship practices and firm performance of fisheries small and medium enterprises. The study used a structured questionnaire to gather data from a sample of 389 entrepreneurs working in the Tanzanian Nile perch fishery in Lake Victoria. Descriptive statistics and the partial least squares structural equation modeling technique were used to analyse the quantitative data. The study's findings indicated that the risk-taking, innovativeness, and proactiveness substantially impact sustainable entrepreneurship practices in fisheries small and medium enterprises but does not have a direct relationship with the firm's performance except for the innovativeness. Additionally, it was discovered that sustainable entrepreneurship practices have a complete mediation role in risk-taking and proactiveness, while they have a partial mediation role in innovativeness. Therefore, the study recommends advocacy for policies and incentives to foster the implementation of sustainable entrepreneurship enterprises among small and medium enterprises in the fisheries industry for sustainable businesses and the natural environment.

Health and equity impacts of global consultancy firms

BackgroundConcern is growing over the power, influence, and threats to health and equity from the operations of large global consultancy firms. Collectively, these firms support a neoliberal policy environment promoting business interests ahead of public health. Global consultancy firms act as commercial determinants of health, an evolving area of research over recent years. However, this research mainly focuses on specific corporations or industry sectors, especially those which produce harmful products, including ultra-processed food, alcohol, and fossil fuels. It is therefore important to expand the focus to include large global consultancy firms and place a public health and equity lens over their operations.Main bodyGlobal consultancy firms have wide-ranging conflicts of interest. These arise from the ‘revolving door’ employment strategies between their own staff and those from government and regulatory bodies. These firms also advise governments on taxation and other matters while concurrently advising corporate clients on ways to minimise taxation. They advise fossil fuel corporations while also advising governments on climate and health policies. These firms undermine the capabilities of the public sector through the outsourcing of traditional public sector roles to these private interests. Consultancy firms foster private interests through their engagement with the higher education sector, and thereby weaken the tradition of transparent management of university affairs by accountable university councils. While private consultancies cannot be blamed for all the negative consequences for health and equity caused by the problems associated with globalisation and advanced capitalism, they have played a role in amplifying them.ConclusionAddressing the negative impacts of global consultancy firms will require strengthening the public sector, enforcing greater transparency, accountability, and minimising conflicts of interest. It will also demand critical thought, counter discourses, and activism to reframe the narratives supporting neo-liberal ideas of governance that are promoted in both government and business arenas.

Big Tech Acquisitions and Product Discontinuation

Abstract The five largest firms by market capitalization, Alphabet, Amazon, Apple, Meta, and Microsoft have massively acquired companies during the last decades, mainly but not exclusively young tech startups. Interestingly, most of the acquired products are discontinued post-acquisition. In this paper, we have collected data on the acquisitions of the big techs for a period of 7 years spanning from 2015 to 2021 and we analyze the evolution of the acquired firms’ products post-acquisition. To analyze the decision to continue or not a product post-acquisition, we classify acquisition in four categories: products that are still offered under their initial brand name, products integrated in the acquirer’s ecosystem, products that are no longer available and products that are killed by the acquirer. We use these classifications to provide detailed information and statistics on the discontinuation decision of the acquiring firm and we run Probit estimation to explain their determinants.

Employer Dominance and Worker Earnings in Finance.

A few large firms in the U.S. financial system achieve substantial economic gains. Their dominance sets them apart while also raising concerns about the suppression of worker earnings. Utilizing administrative data, this study reveals that the largest financial firms pay workers an average of 30.2% more than their smallest counterparts, significantly exceeding the 7.9% disparity in nonfinance sectors. This positive size-earnings relationship is consistently more pronounced in finance, even during the 2008 crisis or compared to the high-tech sector. Evidence suggests that large financial firms' excessive gains, coupled with their workers' sought-after skills, explain this distinct relationship. (JEL G20, J31, J42, L11, L12, L13).

Debt trap or innovation motivation? the impact of public debt on corporate substantive innovation: Evidence from Chinese listed companies

This study examines the impact of local government public debt on substantive enterprise innovation. We found that expanding public debt significantly reduces corporate substantive innovation by strengthening financing constraints and decreasing fiscal subsidies. This correlation was more significant in regions with lower levels of financial development and less significant in regions with higher levels of financial development. Moreover, the correlation was more significant in small firms with lower research and development (R&D) input but not significant in large firms with higher R&D input.

The Real Effects of Credit Supply Shocks: Evidence from an Emerging Economy

AbstractWhat role do credit supply shocks (CSS) play in macroeconomic dynamics in emerging economies? We exploit Russia's setting, including the 2014 Western sanctions, and show that a negative CSS normalized to 0.5 p.p. increase in the lending rate leads to a decrease of 2 p.p. in the output growth rate, 1.5 p.p. in the consumption growth rate and 5 p.p. in the investment growth rate within a quarter. The heterogeneity of the household and firm responses to CSS is driven by debt‐to‐income and leverage ratios, with indebted poorer households and larger firms being more sensitive to fluctuations in credit conditions.

Use of Chipless Radio Frequency Identification Technology for Smart Food Packaging: An Economic Analysis for an Australian Seafood Industry

Effective monitoring of perishable food products has become increasingly important for ensuring quality, enabling smart packaging to be a key consideration for food companies. Among the promising technologies available for transforming packaging into intelligent packaging, chipless radio frequency identification (RFID) sensors stand out. Despite the high initial implementation costs associated with chipless RFID technology, the potential benefits could outweigh the costs if electrical challenges can be overcome. We examine various economic methods to analyze the economic benefits of chipless RFID technology, evaluating the benefits of using this technology for the quality monitoring of seafood products of an Australian seafood producer, Tassal. The analysis considers three primary business drivers, viz. quality monitoring, operational efficiency, and tracking and tracing, using net present value and return on investment as the key indicators to assess the feasibility of implementing the technology. Based on sensitivity analysis, we suggest chipless RFID technology is currently best suited for large firms facing significant quality monitoring and operational efficiency challenges. However, as the cost of chipless RFID sensors decreases with further development, this technology may become a more viable option for small businesses in the future.

The role of dynamic capabilities in the development of organisational ambidexterity and its effect on timely responsiveness in emerging market high‐tech firms

Although organisational ambidexterity (hereafter referred to as ambidexterity) allows emerging market high‐tech firms (EMHTFs) to align themselves with existing markets and to explore and seize new market opportunities to retain their competitiveness in rapidly changing business environments, little is known about how ambidexterity is developed and the role that dynamic capabilities play in the development of ambidexterity. We examine how dynamic capabilities, specifically, sensing and reconfiguring capabilities, influence the development of ambidexterity and the effect of ambidexterity on timely responsiveness. We also investigate the moderating effects of firm characteristics (i.e. firm size, sector, age, and status) and environmental turbulence (i.e. market, competitive, and technological turbulence) on both relationships. We find that the application of sensing and reconfiguring capabilities enables EMHTFs to develop ambidexterity and that ambidexterity improves timely responsiveness. Additionally, the relationship between the use of sensing capability and ambidexterity and between ambidexterity and timely responsiveness, appear robust across varying levels of market, competitive, and technological turbulence, and regardless of firm size, sector, age, and status. Furthermore, while EMHTFs across different sectors, age groups, and status benefit from using the reconfiguring capability to develop ambidexterity, we find that large firms benefit more than SMEs as the resource availability advantage of large firms allow them to reconfigure resources to support ambidextrous orientations in various ways. Hence, large firms can develop greater ambidexterity than SMEs, whose scarce resources limit how they can reconfigure resources to support ambidextrous orientations.