Combining Formal Controls to Improve Firm Performance

Formal controls are an essential part of organizational design, and are theorized to positively influence organizational performance. Mello and Hunt ([2009] Transportation Journal, 48:20–39) were the first to suggest using formal controls to influence truck drivers' behavior. Extending the salesperson control literature, they documented an underresearched method of formal control that we term technology control, whereby firms use on‐board and communications technology to influence drivers. We build on their work by investigating the contingent effects of formal controls that influence the behavior of truck drivers and thereby influence the operational performance of firms in the U.S. motor carrier industry. Our work integrates the monitoring aspect of agency theory with the theory of operant conditioning and the theory of psychological reactance to develop a rationale for hypothesized contingent effects of formal controls on motor carriers' operational performance. We collected primary data pertaining to the controls used to influence truck drivers' behavior from a large sample of U.S. motor carrier firms. The results of our analyses using nonlinear structural equation modeling suggest a complex set of relationships between formal controls and operational performance. Our results shed light on scenarios where using technology to monitor driver behavior can result in positive and/or negative organizational outcomes.     

How Does Driver Turnover Affect Motor Carrier Safety Performance and What Can Managers Do About It?

The trucking industry is the lifeblood of supply chains. Truck driver turnover and motor carrier safety are two salient issues affecting this industry. While turnover by itself presents a challenge due to the cost of replacing drivers, it takes on additional urgency because turnover may affect motor carrier safety. However, driver turnover research has focused predominantly on identifying factors affecting turnover, thus resulting in limited understanding of how turnover affects motor carrier performance, particularly with regard to safety. This reduces our ability to provide guidance to managers who have to address driver turnover. In this article, we extend prior research by drawing from several theoretical lenses to develop and test theory of the turnover–safety relationship. Furthermore, we investigate whether carrier managers can mitigate the effect of turnover on safety by embedding knowledge in carriers’ routines using activity control, a formal management control mechanism. We employ a longitudinal data set composed of primary and secondary data sources to test our hypotheses. We find the turnover–safety relationship is best characterized by a monotonic negative attenuated pattern and that high levels of activity control mitigate the negative effect of driver turnover on motor carrier safety in domains more under drivers’ control.     

The Influence of Workplace Justice Perceptions on Commercial Driver Turnover Intentions

Employee retention is a critical and challenging workplace issue including in the U.S. motor carrier industry with its perennially high driver turnover rates. Truck driver retention affects supply chain performance because of its impact on carrier operating safety and the service capacity of the trucking industry. Government authorities exert an influence on truck driver retention via the safety policies, labor policies, and regulations they mandate. A proposed rule requiring electronic on‐board recorders of some carrier drivers offers an opportunity to investigate the influence of government policy on driver work intentions. In this study we examine this influence through the lens of procedural justice theory. Drawing on procedural justice literature, we develop a model which examines the procedural justice perceptions of commercial drivers and the subsequent impact on their decision‐making behavior, including their organizational and industry intentions to remain or quit.     

Adoption of multiple electronic marketplaces: Antecedents from a grounded theory study

To achieve economies of scope, most motor carriers combine long-term contracts with shippers and brokers with periodic spot assignments found on electronic marketplaces (EMs). While previous research has addressed how carriers adopt an EM, we know little about factors that influence carriers to adopt multiple EMs. Given the rise of the platform economy of the trucking industry, we chose to address this gap and generate mid-range theory on adopting multiple EMs in a logistics context. To do this, we applied grounded theory and conducted 23 interviews with motor carriers and EM experts in North America and Europe until we reached theoretical saturation. Our findings reveal that many motor carriers adopt a portfolio of different EMs, and that their awareness of platforms, expected and realized benefits, attitude, and vigilance determine how they configure their EM portfolios. The implication for existing theory is that, while previous studies depicted EM adoption from a single-system perspective, we found that it is actually a continuous selection process that follows a portfolio perspective. Our paper also has implications for practice in that it illuminates the rationales behind EM portfolio development and identifies actionable factors that can help managers configure stronger portfolios.     

The Effect of Truckload Driver Turnover on Truckload Freight Pricing

High rates of truck driver turnover have long plagued the full truckload (TL) sector. While greater driver turnover raises TL carriers’ costs, no research has examined how changes in industry-wide TL driver turnover rates affect industry-wide prices shippers pay for TL transportation. Drawing on economic theory regarding firms’ asymmetric adjustment of prices in response to changing costs, we explain why increases in driver turnover are expected to increase the prices carriers charge for their services, whereas decreases in driver turnover are expected to have limited effect on the prices carriers charge for their services. We further explain why the positive impact of increases in industry-wide TL driver turnover rates on prices will be more pronounced when industry employment is rising more rapidly. To test our theory, we assemble a time series data set combining proprietary driver turnover data with publicly available data regarding TL pricing, trucking employment, diesel prices, and aggregate industry activity. Results from fitting a set of time series econometric models corroborate our theorized predictions. We explain the implications of these findings for theory and practice.     

TO CHANGE OR NOT TO CHANGE: HOW MOTOR CARRIERS RESPONDED FOLLOWING 9/11

What happens when firms are confronted by a strategic surprise—defined as “sudden, urgent, unfamiliar change” (Ansoff 1975, p. 22)—such as the terrorist attacks that occurred on September 11, 2001? Numerous studies have examined how strategic change, in the aftermath of a significant environmental event, contributes to organizational survival and success. But, is strategic change the appropriate response to unexpected and disruptive environmental change? And is there a preferred trajectory for change, such that certain strategies are better suited than others to the post‐surprise environment? This exploratory research examines whether or not strategic change is an appropriate response to strategic surprise affecting the firms in the trucking industry by considering the actions of motor carriers in the aftermath of 9/11. The data evidences significant disruption to the trucking industry following the event: among the sample, mean operating ratios declined by more than 50%. While nearly 40% of the carriers studied changed strategies in the post‐9/11 environment, this did not guarantee better performance. All carriers fared worse following the attacks, but those carriers that changed strategies actually performed significantly worse than those that persisted with pre‐9/11 strategies.     

DRIVER RELATIONSHIPS WITH CUSTOMERS AND DRIVER TURNOVER: KEY MEDIATING VARIABLES AFFECTING DRIVER PERFORMANCE IN THE FIELD

To reduce cost and improve service, logistics managers must give attention to the critical interaction between customers and the carriers who deliver products. This research tests the premise that internal marketing with truck drivers is associated with improved relationships with customers, retention of customer‐conscious drivers, and higher driver performance.     

Reverse logistics: Understanding end-of-life product management

As firms respond to stricter regulations and increasing consumer expectations, reverse logistics programs to support end-of-life product management strategies have become more prevalent. Despite a growing body of theoretical literature on this topic, many firms struggle to implement efficient and effective reverse logistics systems. In this article, we identify common strategic, tactical, and operational considerations needed to design reverse logistics programs and offer industry examples to show how organizations have excelled in these areas. Through a synthesis of literature and examples, we provide key takeaways across a range of reverse logistics activities. We present ways in which managers can implement best practices in reverse logistics that not only benefit the environment but also generate societal and stakeholder value, augment and improve customer service and loyalty, and increase market share and revenue capabilities.     

B‐TO‐B E‐COMMERCE: A CONTENT ANALYTICAL ASSESSMENT OF MOTOR CARRIER WEBSITES

An Internet presence is a critical early component in the process of building towards a fully operational and unified e‐commerce strategy. E‐commerce has significantly impacted logistics/supply chain strategies and the development and implementation of a website have become key issues for many firms within the transportation industry. This study provides an overview of website content within the motor carrier industry. Content analysis was used to assess the site design, informational content, and the interactive content of 152 motor carrier websites, and to compare the features offered on the Top 100 motor carrier firm websites with those offered on the sites of smaller carrier firms.     

The internationalization of small firms: The relationship between the global mindset and firms’ internationalization behavior

Some firms in internationally oriented industries are internationalized while other comparable firms in the same sector or industry do not. Observing this difference in strategic behavior among small firms led us to consider how differences in CEOs’ attitudes, international orientation, and mindset might explain it. Therefore, this study adopts a cognitive perspective on management to explore the formation of the global mindset and the relationship between the global mindset of small-firm decision makers and their firms’ internationalization behavior. A theory-based conceptual model and measurement instrument are developed and—using structural equation modeling—the model is estimated based on empirical data from cross-sectional samples of small Norwegian and Portuguese firms. The study finds: (1) a strong causal relationship between the global mindset and firms’ internationalization behavior; (2) the combination of the findings and substantive theory indicates that the main driver of firms’ internationalization operates through the global mindset. This study also covers the factors that strongly influence the formation of a global mindset, especially the decision makers’ work experience and personal characteristics in terms of propensity to interdisciplinary collaboration, cognitive flexibility, and networking capability. Based on these findings, suggestions are made for policies that can foster the internationalization of small firms.     

The Interplay of Project Control and Interorganizational Learning: Mitigating Effects on Cultural Differences in Global,Multisource ISD Outsourcing Projects

Research into global, multisource, information systems development outsourcing projects has uncovered management challenges, including cultural differences on multiple levels. While control mechanisms and interorganizational learning have been shown to contribute to the mitigation of cultural differences in such projects, a gap persists regarding the effect of the interplay between these mechanisms. This study employs an exploratory single-case study design to analyze how formal and informal control mechanisms and interorganizational learning interact and thus contribute to the mitigation of cultural differences in global, multisource, information systems development outsourcing projects. With the key finding that the influence of informal controls and interorganizational learning on formal controls changes over time, this research helps expand the domain of control dynamics in global IS projects. This study also contributes to literature on ways to handle cultural differences in global, multisource, IS outsourcing projects.     

REVERSE LOGISTICS: THE IMPACT OF TIMING AND RESOURCES

Although reverse logistics has become a competitive necessity in many industries, there is a lack of agreement as to when formal reverse logistics programs should be introduced. The current research examines the issue of program introduction timing (first, early, late) in the context of the automobile aftermarket industry. The findings indicate that firms developing formal reverse logistics programs early in their industries – but not first – may be best positioned; however, there is also evidence that the timing/performance relationship can be influenced by resource commitment.     

Does religion influence location choice in the hotel industry?

Relying on data from the Spanish hotel industry, this paper analyzes the role of informal institutional factors (IIF) in location choice. Earlier studies mostly use an aggregate level of cultural differences as informal institutional factors. We, however, go deeper into this concept and study the impact of two distinct but interrelated informal institutional factors, religion and language, on the location decisions of hotel chains. We resolve the overlapping problem between these two highly correlated IIF by means of a ‘layer’ measurement in Confirmatory Factor Analysis. Our results show that the higher the informal institutional differences (IID), the lower the presence of the hotels in the foreign country. While physical distance plays a key moderating role, formal institutional differences (FID) did not show any effect. We contribute by unravelling the role of language and religion in location choice in the internationalization process of service firms. Moreover, we test the moderating role of formal institutions in these decisions, thus combining the impact of formal and informal institutions on location choices in service firms.     

The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors

Despite a large literature investigating the impacts of trade on firm productivity, there is almost no evidence on how small firms react to trade liberalization. Using a unique dataset of firm-level surveys that are representative of the entire Indian manufacturing industry, I show that India's unilateral reduction in final goods tariffs increased the average productivity of small, informal firms, which account for 80% of Indian manufacturing employment but have been excluded from previous studies. In contrast, the increase in productivity among larger, formal firms was driven primarily by the concurrent reduction in input tariffs. By examining the effect of the tariff liberalization on the distributions of productivity and firm size, I find evidence consistent with the exit of the smallest, least productive firms from the informal sector. In addition, I find that although the decline in final goods tariffs did not significantly impact average formal sector productivity, it did increase productivity among the top quantiles of the distribution.     

Translating strategy into action: The importance of an agile mindset and agile slack in international business

There is growing recognition that agility, the ability to respond quickly, is essential for international business (IB) in times of daunting challenges. Drawing on the resource-based view, we argue that agility is more than a capability and therefore should be investigated from a broader perspective. The current study offers insights for the IB literature by introducing agile resources (mindset and slack) as drivers of marketing strategy effectiveness capability. An agile mindset drives firms to seek out and introduce new management methods and approaches by encouraging their members to be alert to new and innovative ways of doing things. Agile slack refers to unutilized resources that can be quickly deployed in new strategic initiatives. An analysis of survey data from 179 managers via structural equation modeling shows that an agile mindset and agile slack strongly drive marketing strategy effectiveness capability. Marketing strategy effectiveness is a crucial driver of international performance. Nevertheless, the results suggest that while agile resources are important drivers of marketing strategy effectiveness, they do not influence performance directly. Hence, a firm’s ability to exploit resources through capabilities is critical, and to be truly agile, firms must invest in agile slack resources. Managers are advised to improve their firm’s effectiveness and performance by adopting an agile mindset while relying on agile slack resources.     

Determinants and Performance Effects of Social Performance Measurement Systems

This study investigates the performance measurement systems adopted by companies to manage their social responsibility activities, a theme that remains under-researched despite the important role that these mechanisms may play in helping firms control and improve their social performance. An integrative model is developed to examine how the three fundamental drivers of corporate social strategies, i.e., business motivations, perceived stakeholder pressures, and top management’s social commitment, influence the use of social performance indicators for internal decision-making and control and how such use impacts companies’ social and economic performance. The results from a survey of 97 Italian companies suggest that economic motivations and top management’s commitment are associated with a more intensive use of social performance indicators for decision-making and control, whereas perceived pressures from stakeholders do not represent a significant determinant of such use. The use of social performance indicators, in turn, is found to directly influence a firm’s social performance and, indirectly, its bottom line.     

The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors

Despite a large literature investigating the impacts of trade on firm productivity, there is almost no evidence on how small firms react to trade liberalization. Using a unique dataset of firm-level surveys that are representative of the entire Indian manufacturing industry, I show that India's unilateral reduction in final goods tariffs increased the average productivity of small, informal firms, which account for 80% of Indian manufacturing employment but have been excluded from previous studies. In contrast, the increase in productivity among larger, formal firms was driven primarily by the concurrent reduction in input tariffs. By examining the effect of the tariff liberalization on the distributions of productivity and firm size, I find evidence consistent with the exit of the smallest, least productive firms from the informal sector. In addition, I find that although the decline in final goods tariffs did not significantly impact average formal sector productivity, it did increase productivity among the top quantiles of the distribution.     

Sweating the Assets: Asset Leanness and Financial Performance in the Motor Carrier Industry

Originally adopted by the automotive manufacturers, lean management practices have since been applied to many other manufacturing industries. This study reviews the different theoretical perspectives on the leanness‐performance relationship in the context of the motor carriage industry. Drawing on both the lean management in logistics and organizational slack literatures, we develop hypotheses addressing the link between asset leanness and financial performance. These hypotheses are empirically tested using a comprehensive panel data set of 1,172 firm‐quarter observations from the U.S. publicly traded truckload motor carriers. Initially expecting an inverted U‐shaped relationship between asset leanness and performance, findings indicated a U‐shaped relationship, both for carriers' total assets and the subset of trailer assets.     

Beyond the Formal–Informal Dichotomy of Small Firm Strategy‐Making in Stable and Dynamic Environments

Strategy‐making assists small firms in managing change and uncertainty by developing suitable strategic options. We move beyond the conventional formal–informal dichotomy to show how three informal approaches—internal participation, external participation, and centralized strategy‐making—help both entrepreneurial firms and conservative firms to navigate more or less dynamic environments. In an empirical study of 320 small firms, we find that participation during strategy‐making relates positively to performance whereas centralization only matters for conservative firms in stable environments. In dynamic environments, better performance in entrepreneurial firms is associated with all three approaches. Our findings highlight the importance of viewing strategy‐making in small firms as multifaceted and context specific.