Firm factors, industry structure and performance variation: New empirical evidence to a classic debate

The quest to understand the determinants of performance has created a bifurcated view. On one side of the debate are the structural characteristics of industries. On the other side of the debate are firm-specific resources. However, in recent years, the nature of competition and the shifting of economic conditions have led to increased challenges of the assumptions upon which industry structure theories have been built. In today's business environment, arguments suggest that structural characteristics of industries are becoming less relevant determinants of performance while firm resources are becoming the basis upon which firms compete. Through studying 285 Australian firms, this research explores the relative importance of distinct resources and industry structure variables in explaining firm-level performance variation. Across the aggregated sample, the results demonstrate that resources are more important than industry structure. In service firms, resources are found to be much more important to explaining performance variation than in manufacturing firms. Lastly, in both manufacturing and services firms, intangible assets and capabilities explain performance variation while, as hypothesized, tangible resources do not.     

A multi-sector comparison of relational learning and information and communication technologies adoption

This paper analyses the nature of the impact of relational learning on the adoption of information and communication technologies (ICT) and vice versa. The authors investigate the implementation of ICT through a relational learning process by means of an empirical investigation of 203 small- and medium-sized enterprises in the Spanish telecommunication and the Spanish construction industries (107 firms from the telecommunications sector and 96 from the construction sector). In the analysis, it is proposed that the relational learning process can be structured into three phases (transfer, transformation, and harvesting of knowledge). Structural equation modelling reveals that, in order to implement these relational learning phases, companies need to provide and support ICT as prior steps and this is most significant for those in the telecommunications sector. These results have implications for managers when they come to formulating policies and making a choice as to the organisational capabilities to target in order to ensure the effective adoption of ICT.     

The influence of firm-specific and country-specific advantages in the internationalization of emerging market firms: Evidence from Turkey

This paper examines the role of institutional factors that enable firm- and country-specific drivers of emerging market (EM) firms’ internationalization based on case-based research conducted in one EM, Turkey. Findings indicate that 10 major factors comprised of firm-specific and country-specific advantages drove the focal case study firms abroad: the firm-specific factors ranged from financial and operations supremacy; excellence in value chain activities; inexpensive human resources; rapid learning capabilities in production and technology development; and adaptability to foreign markets; while the country-specific factors included home-government policies supporting internationalization; logistical advantages arising from geographical position; adaptability capabilities resulting from former survival through institutional voids; strong social ties formed through networks; and availability of low cost resources. These findings are discussed and future research questions are offered.     

The Effect of Digital Transformation and Supply Chain Integration on Enterprise Performance: The Moderating Role of Entrepreneurship

Digital transformation provides companies with a productive approach to transforming and upgrading enterprise resources and capabilities and to exploiting external subject forces to unleash and magnify their potential, thus advancing high-quality enterprise development. Therefore, using regression analysis of the data of China's non-financial listed firms from 2007‒2019 obtained by Python, this paper finds that digital transformation has enormously improved enterprise performance. Furthermore, digital transformation has powerfully boosted supply chain integration, which has played a mediation role in the impact of digital transformation on enterprise performance. Finally, entrepreneurship plays a positive moderating effect on enterprise performance through supply chain integration during digital transformation. The further heterogeneity analysis finds that digital transformation performs better in large, public, state-owned, mature, and non-manufacturing (service industry) enterprises. However, the positive effect of digital transformation on enterprise performance and supply chain integration is not significant in small and medium-sized enterprises. Therefore, supply chain integration cannot play a mediating role in the impact of digital transformation of manufacturing enterprises upon their performance. This paper probes the realization mechanism and micro-foundation of digital transformation, and its conclusion contributes to high-quality digital transformation．     

Collaborative Strategies in the Event of Technological Discontinuities: The Case of Nokia in the Mobile Telecommunication Industry

The paper examines the extent to which collaboration between large and small companies has been able to deal with the effects of discontinuous technological change. In applying an evolutionary perspective, the paper examines the process by which technological competencies and resources of large firms evolve and its effects on the characteristics of their collaboration with smaller companies. In focusing on the issue of complementary between local and international sourcing of capabilities and resources in the mobile telecommunication industry, it combines an empirical analysis of the structure of Finnish Science Parks with an examination of internationalisation strategies of large Finnish companies. The papershows that Nokia has increasingly become engaged in sourcing capabilities internationally, this might, however, pose some long-term problems for the local embeddedness of the company in Finland.     

Firm-specific assets and the internationalization–performance relationship in the U.S. movie studio industry

We study the role that firm-specific assets (FSAs) play in the processes underlying the internationalization–performance relationship. International business scholars have begun studying the interrelationship between FSAs, internationalization, and performance; however, this research is still emergent, and has produced inconclusive results. We believe that this may be due, in part, to research designs involving the same FSAs across many industries, even though individual industries may rely on different FSAs in their internationalization strategies. We address this issue in a single industry study of U.S. movie studios, which typically rely on blockbuster production capabilities as FSAs in their internationalization efforts. We show how these FSAs co-evolve with firms’ degree of internationalization, and how each factor mediates the positive effect of the other on performance. Our results highlight the importance of studying specific industries and their salient FSAs when assessing their role of such resources in the internationalization–performance relationship.     

The impact of management capability on the resource-performance linkage: Examining Indian outsourcing providers

The increase in offshore outsourcing of information technology-enabled business processes has renewed scholarly attention to better understand the dynamics of service provider firms. In this study, we examine how offshore outsourcing service providers’ internal and relational resources and capabilities jointly predict their economic performance. Analysis of data collected from a sample of 105 Indian service providers suggest that rent generation from firm-specific, idiosyncratic resources is positively moderated by the level of management capability possessed by such firms. Theoretical and managerial implications of the findings are discussed and avenues of future research are offered.     

Learning Networks as an Aid to Developing Strategic Capability among Small and Medium-Sized Enterprises: A Case Study from the Irish Polymer Industry

Strategic decision making within small to medium-sized enterprises (SMEs) is a necessary element for business growth. SMEs must adapt and become more efficient and dynamic within current business paths and in finding new paths. Traditional philosophies are not focused on delivering new capabilities or developing new business paths. Learning networks are cooperative associations of partner firms that share knowledge, physical resources, and expertise to improve current performance and to advance new business paths. Ireland has emerged as a significant net contributor of plastics to the global medical device, telecommunications, and ophthalmic sectors. The role of the first polymer network as a catalyst for both new business development and increased technological enhancement is advanced in this study of Mould-Tech, an Irish polymer manufacturing firm. Adaptation of dynamic learning networks as expounded in this study present participant firms with new opportunities both to learn and earn—that is, to enhance and acquire new capabilities and to grow their businesses.     

Businesses without glamour? an analysis of resources on performance by size and age in small service and retail firms

Research on factors influencing performance in new and small companies is extensive. Earlier work found that strategies (e.g. cost, quality, differentiation, etc.) affected performance contingent on industry conditions, the environment, and the entrepreneur’s background. Although this work provides a solid basis for understanding differences in entrepreneurial performance, some firms are limited in their choices of strategy due to size, age, or industry. Often these firms are in industries where entry barriers are low and competitive advantages are easily imitated.Small service and retail businesses operate in sectors where these conditions are apparent. Comprising more than 50% of all small firms, they require minimal start-up investments but face intense competition. Lacking the “glamour” of high innovation/high growth firms, service and retail companies are at the “end” of the value chain, their fortunes rising and falling as a result of the direct influence of the owner-founder. Hence, performance variation may be better explained by the capabilities of the firm or individual competencies of the owner-founder, that is the resource-base and resource combinations, rather than strategy.The strategic importance of an organization’s resources and capabilities is the foundation of resource-based theory. Resources are tangible and intangible assets tied to the firm in a relatively permanent fashion. Their combinations are heterogeneous and form the basis for product/market strategies. Studies of resources, strategies, and performance are emerging in the entrepreneurial area. Research shows that various resources in concert with different strategy types can lead to above average performance over the business life cycle, and that combinations of resources are related to survival. Yet the vast majority of work focuses on high growth, high tech, or manufacturing businesses. Less is known about the relationships of resources to performance in less “glamorous” sectors. In these small service and retail businesses, we speculate that resources, in particular human and organizational resources, may play a greater role in explaining performance than strategy. Further, as other authors have suggested, it is expected that the combinations of these resources will vary across age and size.This study examines the influence of human and organizational resources on performance in a sample of 195 service and retail firms operating in central New Jersey, using a structured questionnaire. All companies utilized a focus strategy (either focused cost or focused differentiation) and employed a minimum of 3 to a maximum of 100 employees. All measures had theoretical and/or empirical precedent and were tested statistically for reliability. We used factor analysis to reduce the independent variables to: two human resource variables (owner resources and commitment), one organizational resource variable (comprised of planning, systems, and staff skills), and one strategy variable (focused cost and focused differentiation). Control variables were business age, business size, environmental benignness, and industry growth. The dependent variable performance was measured in two ways: net cash flow and log of growth in employees over 3 years.The study first examined whether strategy or resources had a greater influence on performance. Results showed that strategy influenced performance less than human and organizational resources both individually and interactively. The influence of owner resources (background and attitudes) on net cash flow was stronger than on growth, where the only significant variable was industry (market) growth.To analyze effects of resources on performance by size, we divided the sample by size groupings, selecting the smallest (maximum five employees) and largest quartiles (minimum 16 employees), which were comprised of 55 and 50 companies, respectively. These analyses showed that owner resources, commitment, and organizational resources contributed positively to net cash flow in very small firms; however, interactive effects of these resource combinations were negative. For instance, owner resources and organizational resources together, and organizational resources and commitment together, resulted in less positive cash flow than when analyzed separately. This implies that different resource combinations can have negative influences in these very small firms.We examined age effects in the same manner as size—dividing the sample into age group quartiles and conducting an analysis only for very young (fewer than 5 years) and very old (minimum 19 years) groups, which comprised 54 and 52 companies, respectively. These analyses showed that although growth was more rapid among the youngest firms, there were no distinctive resource-based correlates to growth in either age group. Substantive increases in formalized systems and procedures were not apparent among the oldest of these companies compared with the youngest, contrary to previous work showing the evolution of these over business life cycles.Results of this study are applicable only in the context of service and retail firms, and, readers should note this sample was nonrandom and geographically concentrated. Our purpose was not to predict, but describe associations between resources and performance. This study shows that, for firms in competitive industries at the end of the value chain, type of strategy is less important than resource combinations for certain types of performance. Human and organizational resources are associated with more positive cash flow, whereas industry and market factors are related to growth. These results imply that firms seeking growth are best served by selecting and entering growth markets and industries. On the other hand, if strong positive cash flows are the primary objective, attention to combinations of resources is more important. For instance, owner-founders having a strong business and managerial background, and industry experience will need less formalized systems, whereas those owner-founders with weaker managerial resources might benefit from more formalized procedures and skilled staff.     

Capabilities and competitive tactics influences on performance: Implications of the moment of entry

This article examines the implications that the moment of market entry has for the effect of capabilities and competitive tactics on firm performance, using a sample of 253 companies from the information and communications technology industry. The results show that technical capabilities and low cost orientation are learning factors in the firms' performance, regardless of the moment of entry into the market. The study shows how the two perspectives of competitive strategy and resource-based view complement each other to incorporate different competitive factors in a coherent model for the study of entry timing. The study takes the sustainability model of competitive advantage further, by demonstrating that certain capabilities and competitive tactics can allow pioneers and early followers to achieve and maintain superior performance in a dynamic, hostile and with high level of imitation industry. This study also shows that the availability of a combination of marketing capabilities and low cost orientation will allow late followers' firms to take advantage of early entrants' mistakes.     

Defining the Relationship among Founding Resources,Strategies, and Performance in Technology-Intensive New Ventures: Evidence from the Semiconductor Silicon Industry*

The degree to which a firm's performance is dependent on its resources and strategies is widely debated in the literature. We examine this issue by analyzing historical data on the entire population of new independent firms started worldwide in the semiconductor silicon industry for the first 50 years of its existence. We measure resources (managerial capabilities and technological competencies) and strategies (emphasis on demand pull or technology push) at the time of founding and test their relationship with each other as well as with multiple measures of performance (lifespan and best year's sales). We find that firms founded on managerial capabilities emphasize demand-pull strategies at founding, whereas firms founded upon technological competencies emphasize technology-push strategies at founding. We also find that firms emphasizing technology-push strategies perform better than firms emphasizing demand-pull strategies. Lastly, we find that though managerial capabilities are related to a firm's best year's sales, this relationship is mediated by the firm's founding strategy.     

A study on motivating employees’ learning commitment in the post-downsizing era: Job satisfaction perspective

From the resource-based perspective, organization learning is the foundation of firms creating their special resources and thereby increasing their competitive advantage. Organization learning is indeed derived from individual learning within the organization. However, many firms have adopted downsizing strategies to reduce the redundancy. Nevertheless, it had a great impact both on laid-off employees and remaining ones. The remaining employees lost their trust, loyalty toward the firm and eventually left. The consequence not only affected the firms’ daily operation but also impacted employees’ learning motivation for improving their ability to enhance the firm's competitive advantage. In the post-downsizing era, applying appropriate human resource management practices to motivate employees would be a critical issue. The study began with two psychological constructs: job satisfaction and learning commitment to explore the content of job satisfaction which significantly influenced remaining employees’ learning commitment. The study used both qualitative and quantitative methods to collect and analyze the data. The results revealed that the two criterion in job satisfaction “the relationship with colleagues” and “the relationship with the family” significantly influenced employees’ learning commitment. However, this was clearly different from managers’ subjective expectation. The findings provide important implications for both the research field and practical management of downsizing, employee motivation, cross-culture management and strategic HRM practices.     

Small exporting firms’ choice of exchange mode in international marketing channels for perishable products: A contingency approach

This study investigates how small, resource-constrained firms identify international marketing strategies for perishable products. Although international marketing of perishable products poses challenges for the exporter, many small companies manage to survive and thrive on an international business arena. Over the past decades, there has been a growing interest in how small firms design their international marketing channels. However, little is known about the conditions leading to the choice of a particular exchange modality. Drawing from the contingency framework, we investigate the role of firm-specific and industry-related factors in the choice of exchange mode among resource-constrained exporters. Based on insights from the Norwegian seafood industry, we introduce a contingency framework and develop a typology of exchange modalities. We suggest that resource-constrained exporters are inclined to engage in a succession of transactional exchanges. We offer propositions on the choice among alternative exchange modalities contingent upon firm and industry factors.     

The decision to export: Firm heterogeneity,sunk costs,and spatial concentration

Integrating perspectives of the Uppsala model of internationalization process, international new ventures and trade theories of heterogeneous firms, this paper develops a dynamic discrete-choice model of export decisions by a profit-maximizing firm. Empirical analyses based on a panel data set of Chinese firms show that sunk costs, productivity, firm size, foreign ownership, industry competition and spatial concentration are positively associated with the decision to export, while state ownership has a negative association with the probability of exporting. However, we find that the relationships are not always uniform and depend on firm-specific idiosyncrasies. The results show that foreign-invested firms and large firms (regardless of ownership) rely on productivity performance related advantages for expanding overseas, while domestic firms, especially small- and medium-sized enterprises, build competitive advantage by leveraging agglomeration economies and the associated spillovers. Our results highlight the role of firm heterogeneity, sunk costs and spatial concentration in shaping the export behavior of firms.     

Cure or curse: Does downsizing increase the likelihood of bankruptcy?

Downsizing is a common organizational practice, yet research on the outcomes of downsizing has produced mixed findings. To contribute to this debate, we use an organizational change perspective to investigate whether the large-scale changes inherent in downsizing set firms on a negative path that is difficult to overcome and ultimately increases the likelihood of bankruptcy. Additionally, we investigate what factors, if any, can mitigate this likelihood. To do so, we build on the resource-based view to suggest that valuable resources can reduce the likelihood that downsizing will lead to bankruptcy. We find support for our theorizing across a sample of publicly traded firms. Our findings suggest that downsizing firms are significantly more likely to declare bankruptcy than firms that do not engage in downsizing and that intangible resources help to mitigate this likelihood. We do not, however, find support for the role of physical and financial resources in preventing bankruptcy.     

What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks

This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.     

What Determines Principle-Based Standards Implementation? Reporting on Global Compact Adoption in Spanish Firms

International Accountability Standards have proliferated in the last 20 years, with the UN Global Compact (GC) as the most widely accepted principle-based standard catalyzing voluntary participation by firms. This study aims to improve understanding about the factors that determine companies’ progress in adopting principle-based standards. Drawing on the resource-based view of the firm, we examine the direct and combined influences of different organizational resources (firm-specific resources, innovative capability, length of participation, and internationalization of the firm) on standard implementation as perceived by 213 Spanish GC signatories. Our results reveal that the level of firm-specific resources has a positive effect on the extent of GC principles implementation and that innovative capability and length of GC participation strengthen this effect. Contrary to our expectations, we find that the internationalization of firms does not have an effect on GC principles implementation. We discuss the implications of these findings for scholars and practicing managers.     

Multinational family firms’ internationalization depth and breadth following the global financial crisis

This study examines how large family firms react to a macroeconomic shock in terms of their internationalization depth and breadth. Building on new internalization theory and acknowledging the dysfunctional manifestations of bifurcation bias in large family-owned MNEs, we argue that an unexpected shock induces family firms to recombine their family firm-specific resources with their thus far underutilized or unequally treated nonfamily resources. This recombination allows most family firms to economize on bifurcation bias and leverage their resources as firm-specific advantages (FSAs) resulting in an increased depth and breadth of internationalization post shock (while some of them may continue to suffer from bifurcation bias). Testing our theory on a panel dataset incorporating large family-owned (compared to nonfamily-owned) MNEs headquartered in Germany before and after the global financial crisis lends support to our theory. We discuss how our study contributes to new internalization theory, to the broader IB literature on MNEs’ unexpected shock response, and to family firm internationalization research.     

Governing Corporate Social Responsibility: An Assessment of the Contribution of the UN Global Compact to CSR Strategies in the Telecommunications Industry

CSR has become an important element in the business strategy of a growing number of companies worldwide. A large number of initiatives have been developed that aim to support companies in developing, implementing, and communicating about CSR. The Global Compact (GC), initiated by the United Nations, stands out. Since its launch in 2000, it has grown to about 2900 companies and 3800 members in total. The GC combines several mechanisms to support CSR strategies: normative principles, networks for learning and co-operation, and communication and transparency about CSR activities. However, up to now only a few empirical evaluations of the contribution of the GC to CSR strategies have been conducted that however have not differentiated between different types of companies (regarding type of industry or regarding the maturity of CSR). This paper aims to partly fill this knowledge gap by a case study examination of three frontrunner companies in the telecommunications industry. The results show that the GC is only one of the many initiatives that these companies employ in shaping, implementing, and reporting about their CSR strategies, and that its role is at most modest. There are two important reasons. One is that many of the CSR issues that these companies deal with are industry specific and are hence addressed in specific networks. The second reason is that the GC principles are perceived as minimum requirements that do not provide many incentives to the three case study companies to perform better. A differentiation of norms for GC members is expected to enhance the contribution of the GC to CSR strategy employment, not only for frontrunner companies but as well for other categories of companies.     

Exploring the role of dynamic capabilities in firm performance under the resource-based view framework

This study investigates the role of dynamic capabilities in the resource-based view framework, and also explores the relationships among different resources, different dynamic capabilities and firm performance. Employing samples of top 1000 Taiwanese companies, the findings show that dynamic capabilities can mediate the firm's valuable, rare, inimitable and non-substitutable (VRIN) resources to improve performance. On the contrary, non-VRIN resources have an insignificant mediating effect. Among three types of dynamic capabilities, dynamic learning capability most effectively mediates the influence of VRIN resources on performance. Furthermore, the important role of VRIN resources is addressed because of their direct effects on performance based on RBV, as well as their indirect effect via the mediation of dynamic capabilities.