Corporate Innovation and Competitive Environment

Empirical studies have shown that the characteristics of the competitive environment influence the corporate innovation activities of U.S. firms. This study attempts to internationalize these studies in two ways. First, it examines the environment-corporate innovation relationship in Norwegian manufacturing firms. Second, it examines how the firms’ corporate innovation activities are influenced by their international activities. Results indicate that environment and internationalization are positively related to corporate innovation, but models developed using U.S. firms may not be generalizable to firms from other countries.     

Multinational Corporations and Spillovers

This paper examines spillover effects of the activities of multinational firms. Such effects are most likely to be found in host countries, where the operations of foreign multinationals may influence local firms in the MNCs own industry as well as firms in other industries. However, there is no comprehensive evidence on the exact nature or magnitude of these effects, although it is suggested that host country spillovers vary systematically between countries and industries. In particular, the positive effects of foreign investment are likely to increase with the level of local capability and competition. The spillovers to the home countries of MNCs are often more difficult to identify, for various reasons. Earlier studies suggest that the effects are generally positive, but the increasing international division of labor within multinationals complicates the analysis. The impact on the home country is likely to depend on what activities these firms concentrate at home.     

What drives financial performance-resource efficiency or resource slack?: Evidence from U.S. Based Manufacturing Firms from 1991 to 2006

Extant research in operations management has revealed divergent insights into the value potential of resource efficiency. While one view relates efficiency with good operations management and asserts that slack resources are a form of waste that should be minimized, the other view suggests that limited resource slack can impose heavy costs on firms by making them brittle. In this research, the authors build on these views to investigate the relationship of inventory, production, and marketing resource efficiency of firms with three metrics of financial performance (i.e., Stock-Returns, Tobin's Q, and Returns-on-Assets). The authors evaluate the theoretical framework using secondary information on all U.S. based publicly-owned manufacturing firms across the 16-year time period of 1991-2006. Analysis utilizing a mixed-model approach reveals that a focus on resource efficiency is positively associated with firm financial performance. However, findings also support the arguments favoring slack, indicating that the financial gains from resource efficiency exhibit diminishing returns.     

Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review

We study the relationship between diversification and firm performance in the context of the decline in levels of diversification over time. We argue that the pressure to reduce diversification may have more strongly affected those firms whose diversification strategies were most detrimental to firm performance. We employ meta‐analytical regression (MARA) in order to test our hypotheses, using a total of 267 primary studies containing 387 effect sizes based on 150,000 firm‐level observations from over 60 years of research on the diversification–firm performance relationship. The findings suggest that levels of unrelated diversification have decreased, whereas levels of related diversification have increased since the mid‐1990s, following an initial decrease in the 1970s and 1980s. Furthermore, we find that the relationship between unrelated diversification and firm performance has improved significantly over time, whereas the relationship between related diversification and performance has remained relatively stable.     

Backshoring of production activities in European manufacturing

Backshoring – the movement of manufacturing activities from locations abroad back to the home country – has gained some attention in policy discussions and in academic research in recent years. This paper presents empirical evidence on backshoring from a large sample of European manufacturing firms. The data indicate that backshoring is still uncommon among European firms. Around 4% of all firms in our sample have moved production back to the home country between 2013 and mid-2015. The most frequent reasons for backshoring are the loss of flexibility, a lack in quality of the goods produced abroad, and unemployed capacities at home. Flexibility and quality concerns are, in particular, relevant for firms that move production back from Asian countries. Backshoring is most likely for manufacturers of final products and in high-technology sectors, in particular in electrical equipment, information and communications equipment, and the Automotive industry.     

Korea''s entry into the computer industry and its acquisition of technological capability

Management of technological change has become increasingly important in many developing countries, as they evolve from agricultural to industrial societies. This paper attempts to integrate a series of recent studies undertaken in a rapidly developing country in order to identify patterns of technological change in manufacturing firms. The degree of complexity in operations technology and the scale of operations account for differences in their technological behavior among different firms in different industries.     

Impact of sequence of international entries on country exits

A classic model of international entries—the Uppsala model—postulated that firms enter foreign countries in increasing order of psychic distance between the home and the host country to minimize the risk of failure. A question that was left unanswered was whether this sequence of entry results in any performance benefits. Literature on the impact of psychic distance, or its components like culture distance, on the performance of foreign operations abounds but the order of entry that is critical to the Uppsala model remains conspicuously absent. This paper presents an analysis of foreign country entries and exits by the U.S. multinationals in the manufacturing and service sectors since 1965. Companies that enter foreign countries in increasing order of culture distance do gain a significant performance advantage over those who do not. Changes over time and across industry sectors are discussed.     

DIVERSIFICATION WITHIN AUSTRALIAN MANUFACTURING ENTERPRISE

This study examines diversification of the activities of business organizations. The meaning of diversification has been ambiguous in many studies that have used the concept as a way of describing strategic resource allocation decisions within firms. Many previous studies of diversification have suffered from a number of deficiencies. Some studies have observed the consequences of firms’ resource allocation and made inferences about the influence of organizational and external environmental factors on managers’ decisions affecting diversification. Other studies, that have been concerned with investigating diversification from a focus within the firm, have often adopted a molecular approach, being concerned with a limited number of organizational or environmental characteristics. In an attempt to redress these deficiencies, a contingency theory framework is used to describe and, in part, explain the formulation of decisions affecting diversification. This involves developing an unambiguous definition of diversification, and identifying organizational and external environmental characteristics that may be used to aid understanding of why firms diversify their activities in different ways.     

Innovation Offshoring,Institutional Context and Innovation Performance: A Meta‐Analysis

Innovation offshoring (IO) has become a widespread management practice. Yet, evidence on the performance implications is inconsistent, and scattered across disciplines and contexts. We argue that the benefits firms can derive from IO depend on the institutional environment at home. Drawing on recent work on institutional theory in international business, we explore institutions that facilitate reverse knowledge transfer and/or institutional arbitrage with respect to innovation‐related activities. The results of our meta‐analysis that synthesizes evidence from 48 samples show that IO is related positively to innovation performance. As predicted, this relationship is moderated by differences in the institutional environments across countries. Specifically, when national innovation systems are weak at home, IO appears to enable institutional arbitrage strategy whereas Confucian cultures enable more effective reverse knowledge transfer. However, contrary to our expectations, the beneficial effects of IO appear to have diminished over time.     

Turnover and Knowledge Loss: An Examination of the Differential Impact of Production Manager and Worker Turnover in Service and Manufacturing Firms

This research examines the comparative effects of production manager and worker turnover in service and manufacturing settings. We suggest that, due to the centrality of human action in services and the ability of manufacturers to insulate the technical core, service and manufacturing companies are differentially dependent on and impacted by the loss of production manager and worker knowledge. The results from a survey of 150 service and manufacturing firms provide partial support for this notion and show that turnover impacts these organizations differently. More specifically, we find that: (1) the negative impact of production worker turnover on firm performance is greater in service settings than in manufacturing settings; and (2) the negative impact of production worker turnover on firm performance is greater than the impact of production manager turnover in service firms. In addition, our findings show that organizational capital moderates the turnover–performance relationship for production workers in service firms.     

The competitive determinants of a firm's environmental management activities: Evidence from US manufacturing industries

Environmental management (EM) issues have received substantial attention in operations management. While the link between EM practices and firm performance has been well studied, little is known about the competitive drivers of a firm's EM activities. In this research, a Schumpeterian economics perspective is adopted to investigate competitive interactions among leader and challenger firms in the domain of EM, with a particular focus on operational EM activities. Using econometric methods, the empirical analysis of panel data from a broad cross-section of US manufacturing firms reveals that such rivalry does exist and that the effect of a rival's past EM activity on a focal firm's EM activity is greater for more profitable and smaller firms. In addition, firm characteristics such as market leadership, firm size and firm profitability are found to significantly affect the magnitude of a firm's EM activities. This study presents theoretical and empirical evidence of rivalrous behaviors in the domains of EM and OM and, thus, has interesting implications for operations management research and practice.     

RATIONAL MODEL OF DECISION MAKING, STRATEGY, AND FIRM PERFORMANCE

The present study tests the proposition that the normative rational model of decision making influences diversification strategy which, in turn, influences the firm’s performance. Questionnaires measuring rational decision making were mailed to 441 large U.S. manufacturing firms with a response rate of 23%. Compustat was used to measure Palepu’s entropy measures of diversification: total, related, and unrelated diversification. The results show a significant positive relationship between top management’s emphasis on rational decision making and diversification as well as a significant negative relationship between diversification and firm performance. Thus, the study shows strong support for the role of diversification strategy as a mediator between rational decision making and firm performance.     

‘Stick to the knitting’ vs. ‘the mysteriously potent charm of diversification’: the Greek evidence

This paper provides evidence on the extent, nature of and factors associated with diversification using a novel set of data, referring to both firms and plants, from the Greek manufacturing sector (1992). The paper brings together a strand of hypotheses formulated, and partially tested, in the relevant literature. More specifically, we investigate the relationship between the degree of diversification and firm/industry characteristics by separately examining the behaviour of multiplant and uniplant firms. Certain patterns emerge which are then compared with those that arose in other studies. Copyright © 1999 John Wiley & Sons, Ltd.     

Agile manufacturing: Relation to JIT, operational performance and firm performance

A structural model incorporating agile manufacturing as the focal construct is theorized and tested. The model includes the primary components of JIT (JIT-purchasing and JIT-production) as antecedents and operational performance and firm performance as consequences to agile manufacturing. Using data collected from production and operations managers working for large U.S. manufacturers, the model is assessed following a structural equation modeling methodology. The results indicate that JIT-purchasing has a direct positive relationship with agile manufacturing while the positive relationship between JIT-production and agile manufacturing is mediated by JIT-purchasing. The results also indicate that agile manufacturing has a direct positive relationship with the operational performance of the firm, that the operational performance of the firm has a direct positive relationship with the marketing performance of the firm, and that the positive relationship between the operational performance of the firm and the financial performance of the firm is mediated by the marketing performance of the firm.     

Operations strategy in an emerging economy: the case of the Ghanaian manufacturing industry

Operations strategy and its development have received a lot of attention in the operations management literature. However, as noted by Ward et al. (1995), an understanding of the factors that influence operations strategy development has not been widely studied. Further, how managers of firms in underdeveloped countries develop operations strategy has yet to receive any significant attention among researchers. This paper takes a look at the development of operations strategy in an underdeveloped economy, Ghana. Specifically, the paper examines the relationships between the business environment and the operations strategy choices made by firms in Ghana. The paper seeks to understand the influence that specific business environmental factors have on the operations strategy choices of low cost, quality, flexibility, and delivery dependability.A survey of manufacturing firms was carried out in 1998. The respondents (production managers in those firms) were asked to indicate the extent to which business costs, labor availability, competitive hostility, and environmental dynamism were of concern to them. They were also asked to indicate their extent of emphasis on the operations strategy choices of quality, cost, flexibility and delivery dependability. This paper presents the result of the analysis of the relationships between the environmental factors and the operations strategy choices. The data indicate that, among firms in Ghana, the two strongest factors that influence the degree of emphasis placed on operations strategy choices are perceived business costs and competitive hostility. Results are presented for both large and small firms, and for firms that are completely locally owned as well as for joint venture firms.     

Foreign location decisions by US transnational firms: An empirical study

The paper aims at identifying the variables that are significant in determining the choice of host countries for manufacturing subsidiaries of US transnational firms. The approach that is taken is to relate variables that on the basis on a priori theoretical reasoning influence foreign location decisions, with (a) total market penetration by US firms and (b) the choice these firms make between exporting to their foreign markets and on site manufacturing. Location decisions are viewed as emerging from the interaction of characteristics typical to the industry of the transnational firm and factors specific to potential host countries. Particular attention is devoted to finding out whether locational choices and market shares are interdependent. The sample of observations under investigation consists of the activities of US majority-owned subsidiaries, classified in fourteen industry groupings and operating twenty countries. Sub-samples of countries are also studied. It is found that for the European countries, in particular EEC members, market penetration is dependent on local manufacturing.     

Geographic and Industrial Diversification of Developing Country Firms*

ABSTRACT This paper examines the impact of the industrial and geographical diversification activities of developing country firms on their performance, and draws attention to the unique attributes of these firms and of the circumstances under which their diversification activities take place. The empirical analysis is based on data from 345 developing country firms. The findings suggest significant and positive association between industrial and geographic diversification and performance, and considerable variation of these relationships across developing regions and diversification strategies.     

Management of Sino-Sino Joint Ventures

Abstract

Since China's implementation of its open-door policy in 1979, the most effective way to obtain a foothold has proved to be to create joint ventures (JV) with a Chinese business partner. The foreign partner provides the transfer of technology, management skills, financing and access to international markets, whilst the Chinese partner contributes a production base with cheap land and labor, contacts with central and local government officials and access to the domestic Chinese market. The Chinese economy has benefited to a large extent from the creation of joint ventures in the past two decades. Hong Kong firms have used China as a production base for many years, usually with great success and to the mutual benefit of both. However, although Hong Kong firms had considerable experiences in running business and manufacturing operations in China, several have suffered substantially from their investment in joint ventures with Chinese partners. This paper evaluates various issues relating to the performance of equity joint ventures in China. The evaluation is based on a case study of four Sino-Hong Kong joint venture manufacturing firms in the electronics industry, and the findings of this paper indicate that there are number of important factors affecting the stability of joint ventures in China. Foreign investors' experiences in other areas may not be applicable to their investment in China because the operation of a joint venture in China is inevitably faced with a variety of problems that the foreign firms may not have encountered before.     

The more the merrier? Network portfolio size and innovation performance in Nigerian firms

A positive relationship between firms' networking activities and innovativeness has been consistently established in the literature on innovation. However, studies considering different innovation types, and on developing countries are scarce. This paper addresses questions concerning the relationship between networking strategies and innovativeness of firms, using innovation survey data on Nigerian firms. Quantile regression is applied to trace the link between portfolio size and innovation at different levels of innovative success. The results show a positive relationship between a firm's innovation performance and the size of its networking portfolio. This relationship varies across different innovation types and with increasing innovation performance. The findings suggest that the widely accepted portfolio approach to external search for knowledge is not necessarily always the best—its utility depends on the firm's current level of innovative success. This poses a challenge for open innovation.     

Returns to corporate diversification in the 1970s

This research analyzes the performance of large corporations during the business cycles of the 1970s. The analysis identifies the level of diversification preferred by a risk-averse investor at different stages of the business cycle. The data base is a group of 222 large industrial corporations for which the number of four-digit SIC production areas has been determined for each firm. The analytical method used is that of second-degree stochastic dominance, a method that is sensitive not only to mean differences in corporate performance but also to the skewness of profitability distributions. The findings indicate that risk-averters would prefer the ten-year performance of moderately diversified firms to the performance of firms with low levels of diversification. In addition, moderately diversified firms were preferred to highly diversified firms. Finally, the experience of the 1970s suggest that there are serious managerial diseconomies of diversification in recessions.