Prospector Strategy Research Articles

Towards green development: does business strategy affect enterprise green total factor productivity?

This study investigates the influence of business strategy on green total factor productivity (GTFP), focusing on the mediating effect of digital transformation and the moderating effect of organizational legitimacy. Leveraging micro-data from China’s listed industrial enterprises spanning from 2011 to 2021, findings reveal: (1) Prospector strategies exhibit a greater propensity to enhance GTFP compared to defender strategies. (2) Digital transformation partially mediates between business strategy and GTFP. (3) Organizational legitimacy moderates between business strategy and GTFP. Specifically, when a company possesses robust financial standing (pragmatic legitimacy), a better environmental track record (moral legitimacy), and establishment of Environmental Management System certification (cognitive legitimacy), the positive relationship between business strategy and GTFP is strengthened. (4) Further research indicates that business strategy exerts a more pronounced effect on enhancing GTFP for companies with larger scales and weaker political connections, as well as those situated in regions characterized by high fiscal revenue and favorable legal environments.

Social capital and business strategy

PurposeThis study aims to investigate the influence of social capital on firms’ business strategies, focusing on Miles and Snow (1978) dichotomy between “prospector” and “defender” strategies.Design/methodology/approachThe authors perform multivariate regression analyses using a sample of US firms spanning the period from 1995 to 2021. The authors use a two-stage least squares model to alleviate endogeneity concerns and perform several cross-sectional tests and path analyses.FindingsThe authors find a significant and positive association between social capital and defender-type business strategies. Results from cross-sectional analyses reveal that this relationship is more pronounced in highly competitive product markets and among firms led by highly qualified CEOs. In addition, the authors find that CEO compensation mediates the effect of social capital on business strategy. Overall, the results suggest that low social capital regions foster prospector strategies due to managers’ self-maximizing incentives. Finally, the authors find that business strategy acts as a mediating factor, connecting social capital to firms’ financial reporting outcomes.Social implicationsIn light of recent public concerns over declining social capital in major economies and the growing globalization and multiculturism in societies, the findings are of interest to policymakers and the wider society by highlighting the far-reaching implications of social capital on businesses and the capital market.Originality/valueTo the best of the authors’ knowledge, this study documents the first empirical evidence on the association between a society’s social capital and firms’ business strategies. The study contributes to the research on the determinants of a firm’s business strategy and extends the literature on the relationship between social capital and firm behavior.

Business strategy and stock price crash risk: The mediating role of financial constraints

The global financial crisis increased uncertainty in economic policy. Firms manage challenges through business strategies and financial constraints and deal with crash risk more proactively to overcome these impediments. This paper investigates the mediating role of financial constraints in the association between business strategy and crash risk, and the type of business strategy that influenced crash risk in Egyptian firms from 2014 to 2021. Data were obtained from financial statements and reports available in the Thomson Reuters database. A total of 792 observations were collected, representing 99 Egyptian firms. The statistical techniques employed in the analysis included ordinary least squares, modified least squares, and path analysis. The results indicate that a higher financial constraint ratio increases crash risk and has a mediating effect on business strategy and crash risk. Results show a positive impact of prospector strategy on crash risk using OLS and GLS, in line with the bad news hoarding hypothesis. Further research shows that prospector strategies have a positive effect on financial constraints. Egyptian firms have higher levels of information asymmetry, which leads to adopting a prospector business strategy and exerts a more pronounced positive influence on the likelihood of crash risk. A robustness check confirms the positive effect of financial constraints as a mediator variable on the relationship between prospector business strategy and crash risk.

Business Strategy, Short-Term Debt, and Cost Stickiness

This research delves into the dynamics that underlie the relationship between changes in a company's sales and its cost structure. It also explores the influence of short-term debt, often associated with sales, on a phenomenon known as cost stickiness. Furthermore, we examine the roles of product market competition and various business strategies in shaping these interactions. We used financial data from 153 companies listed on the Tehran Stock Exchange from 2015 to 2021 to conduct a rigorous regression analysis to unearth significant insights. Our findings reveal that short-term debt serves as a mechanism for companies to effectively manage their financial obligations with lenders and creditors, and it is inversely correlated with cost stickiness. Moreover, our results shed light on how the impact of short-term debt on cost stickiness varies in response to the competitive nature of the product market and a company's chosen business strategy. Specifically, when companies adopt a "prospector strategy" to explore new markets and expand their product offerings, the negative association between short-term debt and cost stickiness weakens. In a broader context, our study contributes to comprehending cost stickiness and carries practical implications for industry professionals and future scholarly pursuits.

Unveiling the impact of foreign competition on the bond market: Insights from S&P debt ratings

This study investigates the influence of foreign competition on U.S. firms’ debt ratings. The findings reveal a significant downgrade in ratings with increased foreign competition, in particular affecting firms with prospector strategies, low organizational capital, high information asymmetry, weak governance, and reshaping creditworthiness assessment.

Does Environmental Uncertainty Play Moderating Role in Relation Between Business Strategy and Tax Avoidance

This research aims to analyze the effect of implementing a company's business strategy on the level of tax avoidance with environmental Uncertainty as a moderating variable. The population in this research is manufacturing companies on the Indonesia Stock Exchange in 2019-2022. The sampling technique used purposive sampling and obtained 91 companies. This quantitative research uses secondary data in the form of annual reports of manufacturing companies. The model used is panel data regression with a Random Effect (RE) testing model. This research produced three critical findings. First, the prospector strategy has a significant positive effect and is more aggressive in tax avoidance than the defender and analyzer strategies. Second, the defender strategy negatively and less aggressively influences tax avoidance compared to the prospector and analyzer strategies. Third, the relationship between business strategy and tax avoidance is moderated by environmental Uncertainty because it can strengthen the relationship between prospector strategy and tax avoidance and weaken the relationship between defender and analyzer strategies and tax avoidance. (weakening) Moreover, it can positively moderate the relationship between prospector strategy and tax avoidance (strengthening).

Top Management Characteristics, Performance Measurement Systems Design and Strategic Change of Reformed Public Hospitals in Indonesia

This study examined the impact of top management characteristics on strategic change in public hospitals in Indonesia, focusing on the mediating role of performance measurement system (PMS) design. Questionnaires were distributed to 157 top managers from Indonesian regional public hospitals undergoing reform. The findings indicate that younger, short-tenured top managers with business administration backgrounds are likelier to lead the strategic change, specifically the shift from a defender to a prospector strategy. Additionally, PMS design partially mediates the relationship between top managers' age, educational background, and strategic change. However, no significant mediation effect of PMS design was observed in the relationship between top managers' tenure and strategic change. These results suggest that healthcare organizations should consider their top managers' characteristics when planning and implementing strategic change. The role of PMS design in facilitating strategic change should also be carefully evaluated, especially when considering younger and less-tenured top managers as change leaders.

Does business strategy of the state‐owned enterprise affect the participation of non‐state‐owned capital?: Empirical evidence from China

AbstractHow to improve the operational efficiency of state‐owned enterprises (SOEs) is an important issue facing emerging economies or developing countries. This study investigates whether and how business strategies of SOEs affect the participation of non‐state‐owned capital using Chinese enterprises from 2008 to 2019. The study finds that there is a positive effect of aggressive corporate strategy on the motivation of private capital to participate in mixed ownership reform. Mechanism tests have shown that prospector strategy increases the reform motivation of SOEs by boosting investment in technological and knowledge capital and financing demand and also increase the willingness of private enterprises to participate by increasing SOEs' value. Further research is found that when the SOEs are more politically connected, in commercial competition industries, and located in regions with cleaner governments, the effect of business strategy on the participation of non‐state‐owned capital is more significant. This study not only enriches relevant research on the factors influencing mixed ownership reform at the micro level but also provides valuable experience and reference for economic reforms in emerging markets and developing countries.

The Impact of Historical Performance and Managerial Risk-taking Propensity on the Behavior of Choosing Prospector Strategy and Using Strategic Management Accounting Information in Viet Nam Manufacturer

Strategic management accounting (SMA) supports managers in decision-making and activity control to accomplish both short- and long-term objectives. This study, based on the Upper Echelons Theory (UET), investigates how the CFO’s psychological trait—the propensity to take managerial risks, affects the decision to choose prospector strategy and uses SMA information. The main objective of this study is to find out what factors influence the behavior using SMA information. This study also takes into account the internal locus of control “s moderating role effect in some relationships. The CFOs of Vietnamese major manufacturers are investigated. The results have shown that: (1) the lower of the historical performance, the more likely CFOs are to choose the prospector strategy, the more CFOs have managerial risk-taking propensity, the more SMA information usage behavior increases; (2) the more CFOs have managerial risk-taking propensity, the more likely they are to choose the prospector strategy, and the behavior of using SMA information also increases; (3) the CFOs” internal locus of control (ILOC) trait plays a moderator role in increasing their SMA information usage behavior and prospector strategy selection trend. This study adds to accounting expertise by highlighting the significance of SMA information for decision-making, the CFO’s management risk-taking propensity, and helping top managers develop an effective SMA system.

Business strategy and environmental information disclosure from a Confucian cultural perspective: Evidence from China

AbstractBased on social contract theory, this study investigates the impact of business strategy on environmental information disclosure from an informal institutional perspective. Using empirical data from a panel of Chinese listed A‐share firms in Shanghai and Shenzhen from 2010 to 2020, we demonstrate that firms following prospector strategies have higher levels of environmental information disclosure compared to those following defender strategies. Our findings also reveal that Confucian culture positively moderates the relationship between business strategy and environmental information disclosure. Specifically, we find that when environmental uncertainty increases, the moderating effect of Confucian culture weakens, while effective legal supervision strengthens the positive moderating effect of Confucian culture. Additionally, our results show that business strategy affects environmental information disclosure through the dual channels of economic benefits contract and social recognition contract. Overall, this research provides valuable insights for corporate sustainable development and effective government environmental governance.

The Effects of Business Strategy and Product Market Competition on Real Earnings Management

This research investigated the singular and combined effects of firm-level business strategy (BS) and industry-level market competition (MC) on real activities-based earnings management (REM). A composite strategy score based on Miles and Snow’s framework was used to empirically assess BS, while MC was measured through three distinct metrics, and REM was calculated based on Roychowdhury’s (2006) models of abnormal level of production, sales, and discretionary expenditures. Archival data from United Stated (U.S.) non-financial public listed firms in the period 1987-2020 was analyzed using Ordinary Least Squares (OLS) regressions, controlled for industry and year fixed effects. Findings suggested that firms following an innovation-oriented prospector strategy are associated with lower levels of REM than firms following an efficiency-oriented defender strategy. While MC alone did not have a significant effect on REM, the combined effect of BS and MC reveals that prospectors in more competitive markets engage less in REM activities, which confirms the relevance of competition in the relationship between BS and REM. This research contributes to earnings management literature by documenting that REM practices are affected not only by internal choices of resource allocation in accordance with a business strategy, but also by exogenous determinants of market competition.

Corporate strategic positioning and environmental information disclosure under circular economy: evidence from China

PurposeThe authors intend to investigate the relations between corporate strategic positioning and environmental information disclosure (EID) behaviors in the context of the circular economy. The authors argue that the development of the circular economy is crucial to address environmental issues and achieve sustainable development, and companies play a vital role in this process as micro-entities. By examining corporate EID behaviors, the authors could understand their adoption of circular practices to a certain extent.Design/methodology/approachThe authors conduct a content analysis of companies' annual fiscal reports, social responsibility reports and environmental reports and develop text-based proxies for both strategic positioning and EID quality to explore the relationship between them.FindingsThe authors find that corporate strategic positioning does affect corporate EID behaviors. Specifically, firms that implement a prospector strategy are more likely to engage in high-quality EID. Furthermore, the results suggest that green innovation is one of the mediators through which strategic positioning affects EID. Compared with defenders, prospectors are more likely to engage in green innovation, which, in turn, leads to higher-quality EID and demonstrates a more active approach to the circular economy.Originality/valueThis study contributes to the literature on strategic positioning and corporate EID by providing empirical evidence on the impact of corporate strategic positioning on EID behaviors. Moreover, the study employs a textual analysis approach to measure corporate strategy and EID, which is a relatively new research method in this field.

Strategic orientation, risk‐taking, corporate life cycle and environmental, social and governance (ESG) practices: Evidence from ASEAN countries

AbstractEnvironmental, social, and governance (ESG) considerations have become increasingly important in the business world. Companies are expected to operate responsibly and sustainably, and stakeholders are demanding greater transparency and accountability. Our research aims to examine the influence of determinants on ESG practices in ASEAN countries (Indonesia, Malaysia, Singapore, the Philippines, Thailand, and Vietnam), as measured by ESG performance on the Refinitiv Eikon. Although there have been many studies discussing ESG, only a few have discussed this relationship by involving strategic orientation, risk taking and corporate life cycle simultaneously. We use panel regression based on a sample of 2373 observations from 2004 to 2022. The results show that the prospector strategy orientation encourages a greater increase in ESG practices compared to the defender strategy orientation, which means that companies with a prospector orientation are more willing to practice ESG because they have strategic resources. The increasing risk‐taking by companies will reduce ESG practices. The more mature the company's life cycle stage will improve ESG practices. This brings implications that the strategy orientation chosen by the company, risk‐taking, and corporate life cycle are the determining factors for companies implementing ESG practices in ASEAN countries. This research contributes to the literature related to corporate sustainability by considering ESG as one of the measurements of sustainability which is currently the main investment trend being observed in financial markets, especially ASEAN countries which are the best areas to invest.

The moderating effect of corporate size on the relationship between prospector strategy and management accounting practices

The moderating effect of corporate size on the relationship between prospector strategy and management accounting practices

Mixed-ownership reform and strategic choice of Chinese state-owned enterprises.

The strategic choice of state-owned enterprises (SOEs) is crucial to the sustainable development of China's economy. This paper explores the impact of mixed-ownership reform on the strategic choice of SOEs from the shareholder power and the board power. We find that the greater the diversity of mixed shareholders, the depth of mixed equity, the control of mixed equity, and the excess control of mixed equity, the higher the degree of mixed-ownership reform, and the more likely it is to promote SOEs to choose the prospector strategy. The mechanism test states that the impact of mixed-ownership reform on enterprise strategy is achieved through the balance effect between non-state-owned shareholders and state-owned controlling shareholders with the same power, and the synergy effect between different powers of non-state shareholders. Further research indicates that the mixed-ownership reform has a stronger driving effect on the prospector strategy in SOEs under strict external supervision, competitive industries, and local areas. This study clarifies the governance logic of non-state-owned shareholders on the strategic positioning of SOEs by dual control rights, and it provides empirical evidence for the formulation of enterprises' market-oriented strategic objectives.

Pengaruh Misfit antara Strategi Prospektor dan Sistem Pengendalian Manajemen terhadap Kinerja Perusahaan

Management Control System (MCS) is closely related to firm performance. This research to eximine the influence of misfit between prospector strategy with MCS on financial performance and non-financial performance. Financing company in East Java as a population research were registered in the Financial Services Authority (OJK). Technique of sampling done by purposive sampling with criterion as managers of intermediate level and below. Questionnaires as data collection materials. First, identify misfit that residual of the prospector's strategy orientation and MCS. The hypotheses was tested by regression analysis. The outcome indicate misfit between prospector strategy and MCS had a positive effect on financial and non-financial performance. This is because financing institutions have their own regulations that are regulated by the OJK and BI, especially in terms of management control, with action and result control orientation.
 Keywords: Management Control System; Business Strategy; Misfit; Company Performance

Strategic stances and organizational performance: Are strategic performance measurement systems the missing link?

PurposeAlthough prior researchers have consistently established a significant relationship between different strategic stances and organizational performances across different research contexts, the mechanisms underlying this link remain unclear. This study attempts to fill this gap in the literature by testing the mediating effect of the use of strategic performance measurement systems (SPMS) on the relationship between strategic stances (prospector, defender, and reactor) and organizational performance in the public sector.Design/methodology/approachThis research is based on data collected by surveying 224 managers at public organizations in the Turkish Republic of Northern Cyprus (TRNC) and conducts an analysis using structural equation modeling (SEM).FindingsThe study findings show that prospector strategy is positively associated with organizational performance through the use of SPMS. The reactor strategy was negatively related to organizational performance through the use of SPMS. The defender strategy shows mixed results in terms of its effect on the use of SPMS and organizational performance.Research limitations/implicationsThe results obtained here provide strong evidence of the vitality of the use of SPMS for efficiency and effectiveness as a mediator between prospector strategy and organizational performance. To extend this position, future researchers could incorporate other contingent variables, such as structural autonomy, or use experimental design methods during economic austerity in the aftermath of the coronavirus disease 2019 (COVID-19) global pandemic.Originality/valueThis study represents an attempt to address public administration literature' general calls for grounded research that spells out to practitioners how different strategic stances are likely to affect the use of SPMS to achieve organizational performance levels in the public sector. The present study extends the public administration literature by examining the unexplored linkage of the use of SPMS through which strategic stances influence organizational performance in major public sector organizations.

Environmental Uncertainty: Typology Of Strategy And Strategic Management Accounting Techniques On Company Performance

Uncertain environmental conditions and typology of corporate strategy are the determining factors in improving company performance. This study aims to prove the analysis results of the typology of strategic management accounting techniques on company performance and test the role of environmental uncertainty in moderating the typology of strategies on company performance. This research is quantitative research with data collection using a survey method. The sample in this study was 237 managers of manufacturing companies listed on the Indonesia Stock Exchange (IDX). Sampling using the type of probability sampling. Data analysis in this study used the PLS-SEM (partial least square modeling) analysis method through the SmartPLS 3.0 program. There are three findings in this study, namely. First, the typology of strategy has a significant effect on company performance. Second, strategic management accounting techniques have a substantial impact on company performance. Third, environmental uncertainty has strengthened the influence of strategy typology on company performance. This study also analyzes the results of the 'Fit' contingency test for the prospector, defender, and analyzer strategy typology variables on company performance through crosstab analysis using the SPSS.25 program. Based on the results of the contingency fittest, it has been proven that when conditions of environmental uncertainty are high in a competitive environment, companies can use a strategy typology with a prospector strategy rather than a company with a defender or analyzer strategy. The fittest prospector strategy typology is more appropriate for companies to improve performance.

THE INFLUENCE OF DEFENDER AND PROSPECTOR STRATEGY TYPOLOGY ON COMPANY PERFORMANCE AND ENVIRONMENTAL UNCERTAINTY AS MODERATION VARIABLES

This research aims to analyze and understand the influence of typology of defender and prospector strategies on company performance by using moderation of environmental uncertainty. This research is an explanatory study using a quantitative approach with survey methods. This research uses a questionnaire instrument that researchers distribute to managers of companies listed on the Indonesia Stock Exchange (IDX). Data analysis uses moderation regression analysis (MRA). The results showed that the typology of defender and prospector strategies significantly affected the company's performance and environmental uncertainty moderated the influence of defenderand prospector strategy typology on company performance.

Business strategy typologies: do the board of commissioners and audit committee concern about prospector-type strategies?

PurposeThe study aims to provide new evidence on the relationship between the board of commissioners (BOCs) and audit committee (AC) as a primary corporate governance structure toward business strategy typologies.Design/methodology/approachThe authors use logistic regression analyses with a sample of industrial companies listed on the Indonesia Stock Exchange from 2012–2018. Data of the BOC and AC are hand-collected from the annual reports and analyzed using the content analysis.FindingsThe study finds evidence that the effectiveness of the BOC is more likely to have a positive association with the prospector strategies. The authors also find that the AC's effectiveness is more likely to associate negatively with prospector strategies. As the board monitoring system, the findings appear to disclose that the BOC and ACs following the prospector strategies are more likely to focus on achieving the entity's strategy than monitoring financial reporting and internal control functions compared with the defender strategies.Practical implicationsThe results have significant practical implications to help explain that despite the corporate governance mechanisms that are likely to exist, prospectors are still likely to have weaker internal control and less likely to remediate material weaknesses (MWs) than defenders due to their specific business strategy related attributes.Originality/valueThe study extends the studies on the corporate governance mechanism using the BOC and the AC's roles in business strategy setting from the strategic management literature using Miles and Snow's (1978; 2003) framework.