Auditors gone wild: The “other” problem in public accounting

Following the scandals involving Enron, WorldCom, and Qwest Communications, the accounting profession has spent the past several years trying to get back on track. While Sarbanes-Oxley may improve the decision-making of audit professionals, and help prevent future large-scale catastrophes that hurt stockholders and bring down firms, there is another problem in public accounting that few consider and nobody has proposed to solve: deviant workplace behavior. Previous research describes deviant workplace behavior as the voluntary behavior of organizational members that violates significant organizational norms and, in so doing, threatens the well being of the organization and/or its members. Building from recent work in various business literatures, this is the first research since the passage of Sarbanes-Oxley to examine workplace deviance at Big 4 accounting firms. Taking a cross-disciplinary, collaborative approach, the authors endeavor to explain why workplace deviance has infiltrated accounting firms and how it is undermining their effectiveness and derailing their long-term prospects for success. After describing its genesis and effects, the authors prescribe several managerial strategies for preventing deviance and minimizing its effects on a firm.     

Factors affecting family firms’ communication behaviour: a cross-cultural study

This study explores heterogeneity in family firms’ communication behaviour across cultures. The authors propose that variations in the background of family firms, including culture, industry, public or private status, and age, influence their propensity to reference their family identity on their corporate web communications. Websites have become an increasingly important medium of marketing communications in today’s interconnected world. Yet, limited research has been done to understand firms’ web communication behaviour. Based on a study of 432 family firms from 41 countries across the world, this research empirically demonstrates that family firms which are from collectivist cultures and publicly traded are significantly less likely to reference their family identity in online marketing communications compared to their counterparts. In addition, the research shows that there is an inverted-U curvilinear relationship between a family firm’s age and the likelihood of referencing their family background. Contributions and implications of the research and findings are discussed.     

The impact of habitual entrepreneurial experience on new firm closure outcomes

In this paper, we argue that it is difficult for habitual entrepreneurs to use their experiential knowledge to develop a more viable new firm than novice entrepreneurs. Hindered by the difficulty of disentangling how actions lead to outcomes in low predictive environments such as new firm settings; hampered by the novelty and uncertainty of new firm closure; and misguided by subjective beliefs about their ability, we contend that habitual entrepreneurs close their new firm just as quickly as novice entrepreneurs and are just as likely to go bankrupt. Using large-scale panel data that track new firm closure amongst 7400 new German firms, we find that the new firms run by habitual entrepreneurs close just as quickly as those run by novice entrepreneurs. We also find that habituals are just as likely as novices to see their new business go bankrupt.     

Connecting the Two Faces of CSR: Does Employee Volunteerism Improve Compliance?

In 2004, the United States Sentencing Commission amended the Federal Sentencing Guidelines to allow firms that create “effective compliance and ethics programs” to receive better treatment if prosecuted for fraud. Effective compliance and ethics, however, appear to be limited to activities focused on complying with the firms’ internal legal and ethical standards. We explored a potential connection between the firms’ external corporate social responsibility (CSR) behaviors and internal compliance: Is there an organizationally valid relationship between these two firm activities? That is, when organizations demonstrate CSR with behaviors external to the firm, such as employee volunteerism, are their employees more likely to demonstrate uncompromised legal and ethical compliance behavior internally? We collected data from 164 working professionals enrolled in a top-tier MBA program in the southeastern United States regarding their employer-sponsored volunteer activities and their intentions to comply in various organizational compliance vignettes. We found that employer-sponsored volunteerism is associated with uncompromised compliance choices in one of the three vignettes. This finding indicates preliminary support for further inquiry into the relationship within the firm between external CSR behaviors and policies regarding organizational compliance. Post hoc analyses suggest that employer-sponsored volunteerism is strongly associated with a positive organizational identity, but organizational identity is not associated with the significant compliance vignette. This evidence suggests that the underlying mechanism that connects external CSR behaviors and internal compliance intentions is complex and requires future study.     

Variation in Corporate Governance and Firm Valuation – an International Study

In this paper, we investigate the types of firms that are likely to deviate from common practice in corporate governance of their home countries and examine how the deviation is correlated with firm value. Our results show that firms with higher institutional holdings, lower insider holdings, and higher sales growth are more likely to deviate from common practice in civil law countries, whereas, in common law countries, especially in the USA, firms with lower institutional holdings, higher insider holdings, and lower sales growth are likely to deviate from common practice. We document a strong positive correlation between governance deviation and firm value in civil law countries. This relationship is robust to different testing and sample selection methods. The results, however, are mixed for US firms and not significant in other common law countries. Using the deviation from common practice as a proxy of firm‐level impact on corporate governance, our results provide evidence that firm‐level effect matters in governance quality and the effect varies across countries.     

The economics of enforcement: The case of OSHA

A model of enforcement is developed that determines the impacts of OSHA actions on regulated parties. This model analyzes the effect of decision procedures developed by OSHA to enforce the law and their effect on resource allocation within the firm. It is concluded that the impacts from both the initial inspection and reinspection programs on the resource allocations of firms have likely been insignificantly different from zero. If OSHA is to increase the allocation of injury control resources of firms through its enforcement program, it must increase the costs of noncompliance that it imposes on firms.     

(Not So) Easy Come, (Still) Easy Go? Footloose Multinationals Revisited

The central question of this paper is to test whether multinational firms (MNFs) are more likely to exit the local market than domestic firms. Using firm‐level data for Belgium, we estimate a random effects probit model taking into account the endogeneity of firm size, total factor productivity (TFP) and sunk costs in firm exit. Our results highlight two features of the ‘footloose’ nature of MNFs. First, controlling for firm and sector characteristics, the exit probability of MNFs is larger than that of domestic firms. Second, MNFs have a lower sensitivity to TFP and size than do domestic firms. This means that an improvement in economic performance on the local market will not prevent a multinational from closing its local plant as much as it would for a domestic firm.     

Doing More with Less: The Disordinal Implications of Firm Age for Leveraging Capabilities for Innovation Activity*

Innovation requires the entrepreneurial capabilities of opportunity recognition and opportunity exploitation. Such capabilities generally accrue over time from a firm's cumulative learning and experience. In this study, we theorize that firm age should therefore moderate the firm's ability to leverage these capabilities for innovation activity, such that older firms can obtain higher outputs from their capabilities than younger firms can. We examine this relationship using a sample of 676 small and medium enterprises. We find that when both younger and older firms have highly developed innovation capabilities, older firms appear to enjoy higher levels of innovation activity than younger firms do. However, younger firms generally appear more likely to have higher levels of innovation activity than older firms do, when neither firm has highly developed innovation capabilities. We conclude with a discussion of the implications of these findings for research and practice.     

Firm growth during infancy

In this paper, we study the post-entry patterns of survival and growth of firms established in Portuguese manufacturing in 1983. Our data suggest the existence of a highly turbulent economy, with a very large number of small firms being created, but a great proportion of new firms disappearing in the first years subsequent to their birth. Survivors, however, grow quite fast and we found that small firms grow faster than their larger counterparts. Moreover, we found that the growth decision of firms is affected by a firm specific component, which is also correlated with firm size. These two effects are oppositely signed and, therefore, estimates that fail to take this firm specific effect into account are likely to be strongly biased towards zero.     

The Determinants of Plant Exit: the Evolution of the U.S. Refining Industry

This paper analyzes the exit and expansion of U.S. petroleum refineries using plant-level data from 1947 to 2013. We find that small refineries and refineries owned by a multi-plant firm are more likely to close. If a multi-plant firm closes a refinery, it closes a smaller one. Unlike previous research, we find no clear relationship between a firm’s share of national refining capacity and the probability of refinery exit. We also find that refineries close when the industry as a whole has low capacity utilization. In total, firms close small, likely inefficient, refineries when refinery utilization is low.     

Corporate Social Responsibility and Its Impact on Firms’ Investment Policy, Organizational Structure, and Performance

This study examines the determinants of corporate social responsibility (CSR) and its implications on firms’ investment policy, organizational strategy, and performance. First, we find that firms with better performance, higher R&D intensity, better financial health, and firms in new economy industries are more likely to engage in CSR activities, while riskier firms are less likely to do so. We also find U-shaped relation between firm size and CSR, indicating that either very small or very large firms exhibit high levels of CSR strengths and concerns. Next, we find that firms’ CSR strengths relate favorably with their investments, organizational strategy, and performance, whereas CSR concerns and firm attributes are by and large negatively related. Using a 2SLS procedure, we verify that the CSR–performance relation is robust to corrections for endogeneity through reverse causation and/or biases introduced by time varying omitted variables. Finally, we find that the CSR–firm attributes relation is strengthened when the CEO’s incentives are below the sample median, suggesting that CSR participation is especially important when monetary incentives are lower than benchmark levels.     

Family-centred non-economic goals and the internationalisation of family firms: Evidence from Australia

Despite the growing body of literature on the internationalisation of family firms, further research is required to understand the underlying factors that influence their international behaviour. Past research has consistently shown that family firms are less likely to adopt an internationalisation strategy compared to their non-family counterparts, yet we still have limited understanding of the underlying reasons why this is so. By incorporating the bifurcation bias concept to the socioemotional wealth perspective of family firm behaviour, we argue that greater attention needs to be given to the influence of family-centred non-economic (FCNE) goals on the family firm’s international behaviour. Using survey data collected on over 300 Australian family firms, regression analysis was used to examine the influence of FCNE goals on the family firm’s extent of international involvement. The results suggest that business families which emphasise FCNE goals are more likely to exhibit a lower attitudinal commitment towards international expansion, which in turn determines the level of international involvement of the family firm. Results also suggest that the extent of international involvement of the family firm has a significant negative effect on the level of achievement of FCNE goals.     

Revisiting the entrepreneur gender–performance relationship: a firm perspective

Research shows that firms started by women underperform those started by men but the relationship may not be as straightforward as previously thought. Using a sample of 4,540 Korean ventures in 2002 we investigated the effects of three firm characteristics—resources, industry, and regional location—on firm performance. Results indicate that firms started by male entrepreneurs, compared to female, have greater firm assets, compete in high-technology manufacturing industries, and are more likely to locate in clustered regions. Further, these firm characteristics are positively associated with domestic and international firm performance. Findings suggest firm resource and context characteristics fully mediate the entrepreneur gender–firm performance relationship. Overall, gender is not a determinant of domestic or international firm performance.     

To Groupon or not to Groupon: The profitability of deep discounts

We examine the profitability and implications of online discount vouchers, a relatively new marketing tool that offers consumers large discounts when they prepay for participating firms’ goods and services. Within a model of repeat experience good purchase, we examine two mechanisms whereby a discount voucher service can benefit affiliated firms: price discrimination and advertising. For vouchers to provide successful price discrimination, the valuations of consumers with access to vouchers must generally be lower than those of consumers who do not have access to vouchers. Offering vouchers tends to be more profitable for firms that are patient or relatively unknown, and for firms with low marginal costs. Extensions to our model accommodate the possibilities of firm price reoptimization and multiple voucher purchases. We find potential benefits of online discount vouchers to certain firms in certain circumstances, but vouchers are likely to increase firm profits under relatively narrow conditions.     

DEVELOPING SOCIAL IDENTITY AND SOCIAL CAPITAL FOR SUPPLY CHAIN MANAGEMENT

Competition involves not firm against firm but rather supply chain against supply chain, but few studies explain theoretically the subsistence of a supply chain as a social entity or the operating mechanisms through which firms socialize to obtain better business performance. On the bases of social identity theory and social capital theory, the authors suggest that the salience of supply chain identity accumulates social capital in a supply chain, which then facilitates supply chain management and improves business performance.     

Knowledge,innovation and firm performance in high- and low-technology regimes

Industries with greater aggregate levels of research and development (R&D) intensity are home to higher rates of firm-level innovation, according to survey data from 845 Canadian manufacturing firms. And, though innovation is more common when industry dynamism is high, innovative firms are likely to enjoy revenue growth, irrespective of the industry in which they operate. The research also shows that firm knowledge, industry dynamism and innovation interact in the way they influence firm performance. A highly skilled workforce is most beneficial to firm performance in dynamic environments, while firms in stable manufacturing industries benefit more from investments in training.     

Determinants of Bribery in Asian Firms: Evidence from the World Business Environment Survey

While it is widely believed that bribery is ubiquitous among Asian firms, few studies have offered systematic evidence of such activities, and the dynamics of bribery in Asian firms have not been well understood. The research reported here used World Business Environment Survey data to examine some distinct characteristics of bribery in Asian firms and to empirically test 10 hypotheses on determinants of bribery. We find that firm characteristics such as firm size, growth rate, and corporate governance are important determinants of bribery activities at the firm level, and that Asian firms are more likely to bribe when faced with fierce market competition, corrupted court systems, convoluted licensing requirements, nontransparent interpretation of laws and regulations, inefficient government service delivery, and high taxes.     

Who instigates university–industry collaborations? University scientists versus firm employees

While evidence on the causes and effects of university–industry interaction is abundant, little is known about how, and particularly by whom, such interaction is instigated in the first place and subsequently managed. In this paper, we investigate which mode of collaboration (joint research, contract research, consulting, in-licensing, or informal contacts) is more likely to be initiated and managed by firm employees versus by university scientists. Moreover, we are interested in the differences between small and large firms to see whether initiation and management are affected by firm size. Using a sample of 833 German manufacturing firms, our results indicate that university scientists typically start collaborations with industry, while firm employees would take over the management of projects. Results vary markedly between small and large firms, with university scientists having somewhat higher difficulties initiating collaborations with large firms than with small firms.     

Innovation and Exporting: Does Quality Matter?

We study the effect of innovation on a firm’s propensity to export, developing a simple model where heterogeneous firms operate in a monopolistically competitive market and set their prices as a markup above the marginal cost. The key proposition of our model is that firms that invest in better quality products are more likely to export. We test it using Italian firms’ data. Econometric results suggest that innovation, defined as quality upgrading, has a significant effect on the firms’ propensity to export; and, for those who are already exporting, innovation—defined as new products—has a significant effect on a firm’s turnover.     

Exploring the innovation strategies of young firms: Corporate venture capital and venture capital impact on alliance innovation strategy

We investigate how governance structure and power influence alliance exploration strategy. Adopting a real options perspective and the agency view, we suggest that innovation strategies differ based on the firm's governance authority. We find that the motivations of corporate venture capitalist firms, venture capitalists, and firm founders may have an impact on the formation of exploratory alliances among adolescent firms. Using a sample of 122 adolescent firms, we examine the influence that governance structure has on the firm's alliance portfolio and innovation potential. While the influence of corporate venture capitalist firms alone do affect alliance formation strategy, corporate venture-backed firms with founders having high influence (knowledge or ownership in the firm) are more likely to form innovation-focused alliances. In contrast, venture capitalist-backed firms tend to avoid innovation-focused alliances, preferring more exploitive ones, even when founders have high influence within the firm.