Strategic Reorientation and Responses to the Asian Financial Crisis: The Case of the Manufacturing Industry in Singapore

Taking the Asian financial crisis as a base model that triggers decline among manufacturing firms in Singapore, this paper identified two main strategies taken: offensive strategic reorientation and defensive strategic shift. We hypothesized that firms that adopt the offensive strategic reorientation strategy attributed decline to controllable factors, have a higher level of slack, and are bigger in size. On the other hand, firms that adopt defensive strategic shift attributed decline to uncontrollable factors, are under greater severity of decline, have a lower level of slack and are smaller in size. We found significant relationships for the defensive strategic shift strategy.     

Are more resources always better for growth? Resource stickiness in market and product expansion

We examine how managerial growth logics combine with financial and human resource slack to influence the short‐term revenue growth of a sample of 112 manufacturing firms drawn from a unique database provided by the Ewing Marion Kauffman Foundation. Our results provide evidence that firms pursuing product expansion logics generally grow more slowly than firms that are not expanding their product base, but that financial slack positively moderates this relationship. We also find that human resource slack enhances short‐term market expansion, but slows down short‐term product expansion. We discuss the implications of these results for resource‐based views of growth. Copyright © 2004 John Wiley & Sons, Ltd.     

Specificity and opacity as resource-based determinants of capital structure: evidence for Spanish manufacturing firms

In this work we develop an analytical framework to examine the effects of strategic investments on the financial policy of the firm. From the resource-based approach of the firm, nontradable and difficult-to-copy assets are the basis of a sustainable competitive advantage. However, imperfections in the resource markets can also be interpreted as sources of costs and/or restrictions from a financial point of view. Specificity and opacity are the features of strategic resources that enable us to identify the financial implications of the resource-based strategy. We have tested our theoretical framework using a sample of Spanish nonfinancial firms. Our results show that highly specific and opaque resources limit the borrowing capacity of the firm, while other transparent strategic assets affect financial leverage positively. Our findings suggest two main implications for strategy formulation and implementation: (1) there are unobservable financial costs that must be considered for a correct evaluation of a sustainable competitive advantage based on strategic resources; and (2) the financial policy of a ‘resource-driven’ firm is partially determined by the features of its strategic resource bundle. Copyright © 2001 John Wiley & Sons, Ltd.     

Slack resources,firm performance,and the institutional context: Evidence from privately held European firms

Research summary : Integrating the behavioral and institutional perspectives, we propose that a country's formal institutions, particularly its legal frameworks, affect managers' deployment of slack resources. Specifically, we explore the moderating effects of creditor and employee rights on the performance effects of slack. Using longitudinal data from 162,633 European private firms in 26 countries, we find that financial slack enhances firm performance at diminishing rates, whereas human resource (HR) slack lowers performance at diminishing rates. However, financial slack has a more positive effect on firm performance in countries with weaker creditor rights, whereas HR slack has a more negative effect on performance in countries with stronger employee rights. The results provide a richer view of the relationship between slack and firm performance than currently assumed in the literature. Managerial summary : A key dilemma managers often encounter is whether, on the one hand, they should build in excess resources to buffer their firms from internal and external shocks and to pursue new opportunities or whether, on the other hand, they should develop “lean” firms. Our study suggests that excess cash resources—which are usually viewed as easy to redeploy—benefit firm performance, especially when firms operate in countries with weaker creditor rights. However, excess human resources—which are usually viewed as more difficult to redeploy—hamper firm performance, particularly when firms operate in countries with stronger labor protection laws. Thus, the management of slack resources critically depends on the characteristics of these resources (e.g., redeployability) and the institutional context in which managers operate. Copyright © 2016 John Wiley & Sons, Ltd.     

R&D employment effects of financial slack generated by R&D tax exemption: The importance of firm-level contingencies

This paper focuses on R&D employment effects due to financial slack generated by an R&D tax exemption scheme in Belgium. The tax exemption is granted without firm-level requirements, which facilitates testing firm-level contingencies on the influence of the generated financial slack. We find that R&D employment effects increase with the level of the R&D tax exemption related to financial slack resources and that this positive relation is more outspoken for older firms and for firms with an intermediate share of R&D tax exemptions in the overall mix of R&D policy support. No effects are found for firm size and its R&D intensity. These findings suggest targeting the R&D tax exemption support according to firm characteristics to obtain longer term R&D employment effects. The focus on R&D employment adds to the literature on the evaluation of R&D policies which is largely oriented toward R&D expenditure and innovation outputs.     

How do interdependencies among human‐capital deployment,development, and diversification strategies affect firms' financial performance?

Using key insights from the resource‐based view of the firm, we develop and test a theory of how firms can successfully deploy and develop their strategic human assets while managing the trade‐offs in their service and geographical diversification strategies. In a sample of large law firms we find that, even though firms profit from expert human‐capital leveraging strategy and service and geographical diversification strategies individually, pursuing these strategies simultaneously at high levels produces negative interaction effects on firm profitability. In addition, the internally developed, firm‐specific associate human capital strategically fits better with high levels of expert human‐capital leveraging. While lateral hiring helps firms build new knowledge bases and take advantage of growth opportunities, pursuing high levels of both expert human‐capital leveraging and lateral hiring of associates results in lower profitability. To fully capture the economic benefits from strategies of diversification, human‐capital leveraging and lateral hiring, firms should understand and manage the complex interdependencies among multiple levels of strategy. Copyright © 2005 John Wiley & Sons, Ltd.     

More Innovation with Less? A Strategic Contingency View of Slack Resources,Information Search,and Radical Innovation

This study investigates the nonobvious interrelationship between slack resources and radical innovation. While organizational slack and innovation literature has implicitly recognized a link between these constructs, at least two important aspects of their relationship have been overlooked. First, little attention has been paid to the mechanisms by which slack resources become beneficial for radical innovation. Drawing on information search and organizational learning theories, we propose distal search activity—searching for information outside the current knowledge domain of the firm—as a mediating variable between slack resources and radical innovation. Second, little consideration has been given to the strategic orientation of the firm as the context in which slack resources are deployed to enhance radical innovation. Adopting Miles and Snow's typology of strategic archetypes, we propose a moderating role of strategy in the slack resources–distal search–radical innovation chain of relations. We tested our hypotheses on a sample of Chinese high‐technology firms, using multiple informant survey data and regression analysis. Our results indicate that slack resources are positively related to radical innovation, and that this relationship is partially mediated by distal search. Thus, there appear to be two routes (one direct, one indirect) to transform slack resources into radical innovation. Further, moderation analysis shows that the effect of slack resources on distal search is strongest among analyzers, while the effect of distal search on radical innovation is strongest among defenders. In sum, our results suggest that analyzers are relatively more dependent on the amount of slack resources compared to other strategy types, that is, resource constraints would have a more negative effect on analyzers. We discuss theoretical and managerial implications of our study and conclude by suggesting future research opportunities.     

Making sense of a market information system for superior performance: The roles of organizational responsiveness and innovation strategy

This article conceptualizes the relationships among strategic resources, strategic actions, and consequent performance by incorporating the strategic sense-making perspective into the resource-based view. Specifically, the study suggests that the firm can use both market-driven strategic actions such as organizational responsiveness and market-driving strategic actions such as innovation strategy to make sense of strategic resources such as a market information system. The firm can then translate the strategic resources into a competitive marketing advantage, which leads in turn to superior financial performance. The study tests this framework by surveying 180 manufacturing firms in China. The empirical results support the theoretical framework.     

Stock Market Response to Strategic Technical Alliances between Drug and Biotechnology Firms

Traditionally, firms in the pharmaceutical industry have depended on their internal research and development (R&D) capabilities to maintain a productive new product pipeline. During the past two decades, however, the industry's pipeline productivity has decreased compromising the industry's ability to meet shareholder expectations. As a strategy to invigorate pipeline productivity, and impact financial performance, pharmaceutical firms have increased utilization of strategic technical alliances. Earlier research shows that the degree of financial impact resulting from strategic technical alliances varies in terms of partnership type and differences between client and partner firms. This research studies strategic technical alliances between pharmaceutical and biotechnology firms from 1985 to 2012. Event study methodology is used to determine the relationship between stock market response to alliance announcements, measured as cumulative abnormal returns, and factors representing the absorptive capacity of the pharmaceutical firms in the sample. Then, variables indicating the development stage of the drugs included in the alliances are added to assess the effect of project risk on the market response. The study finds that, in general, the stock market responds in a positive manner to strategic technical alliances in the pharmaceutical industry reflecting the market's immediate response, and expectations of future firm value, resulting from the alliance. The degree of the market's response varies in terms of the client firms’ absorptive capacity with new product introductions being the strongest driver. The market responds similarly to alliances across different drug development stages, however, a stronger response is observed in preclinical and extension stages.     

Planning and financial performance of small,mature firms

This article develops a classification scheme of planning process sophistication in small firms, categorizes small firms according to planning process sophistication, and examines the relationship between planning process sophistication and the financial performance of a select group of small, mature firms. The study overcomes several methodological shortcomings of prior research on strategic planning and firm performance. Multivariate analysis of variance is used to identify statistically significant differences between the financial performance data of firms that employ structured, strategic plans and those that do not. The results confirm previous research on strategic planning and financial performance. Finally, recommendations are made for future research.     

Knowledge worth having in ‘excess’: The value of tacit and firm‐specific human resource slack

Whether holding resources in excess of what is needed to sustain routine operations (i.e., having slack) increases or decreases firm performance is a question of ongoing interest to management scholars. We contribute to existing theory by arguing that human resource slack generally decreases a firm's performance but that holding excess numbers of employees who possess important tacit knowledge that is specific to firms may benefit the firm. We find that the value of these excess resources increases as firms face competitive pressures and decreases when firms' operational choices facilitate the standardization of workflows. We obtain initial empirical evidence for our predictions by testing them on a novel dataset comprising six years of data for 4,070 manufacturing plants in Mexico. Copyright © 2013 John Wiley & Sons, Ltd.     

Achieving requisite variety in modeling firms' strategy heterogeneities: Explaining paradoxical firm-market performances

This study responds to the view that the crucial problem in strategic management (research) is firm heterogeneity—why firms adopt different strategies and structures, why heterogeneity persists, and why competitors perform differently. The present study applies complexity theory tenets and a “neo-configurational perspective” in proposing firms' complex antecedent conditions affecting firms' complex outcome conditions. The complex outcome conditions include firms with high financial performances in declining markets and firms with low financial performances in growing markets—the study focuses on seemingly paradoxical firm-market outcomes. Based on an analysis of firm strategies and outcomes for separate samples of cross sectional data of 1120 Finish and Hungarian manufacturing firms, this study bridges theory and practice in strategic management of complex firm-orientation configurations and complex firm-performance-capabilities. The study contributes by showing how executives can use “computing-with-words” (CWW) (Zadeh, 1966) for achieving requisite variety in explaining and predicting paradoxical firm performance outcomes.     

Whether and when do alliance terminations pay off?

Engaging in multiple strategic alliances, a firm forms an alliance portfolio. While a larger alliance portfolio signals investors a firm's ability to exploit new opportunities and improve financial performance, having multiple alliances may also undermine financial performance due to a firm's limited ability to effectively manage these alliances. Announcing an alliance termination, a firm signals an intention to increase the effectiveness of a larger alliance portfolio. This article examines the extent to which alliance termination announcements create value for firms with multiple alliances. Building on the resource-based view of the firm and organizational learning literature, the paper hypothesizes a U-shaped relationship between alliance portfolio size and a firm's cumulative abnormal stock return following an alliance termination announcement. This effect is moderated by the amount of a firm's alternative resources and partner-specific experience that affect its ability to effectively manage multiple alliances. The results show that alliance termination announcements create firm value when an alliance portfolio is large.     

The impact of aligning business,IT, and marketing strategies on firm performance

In order to succeed in today's competitive business environment, a firm should have a clear business strategy that is supported by other organizational strategies. While prior studies argue that strategic alignment enhances firm performance, either strategic alignment including multiple factors or strategic orientation of firms has received little attention. This study, drawing on contingency theory and configuration theory, investigates the performance impact of triadic strategic alignment among business, IT, and marketing strategies while simultaneously considers strategic orientation of firms. A research model is tested through SEM and MANOVA using data collected in a questionnaire survey of 242 Yemen managers. The findings indicate that (1) triadic strategic alignment has a positive impact on firm performance and (2) there is an ideal triadic strategic alignment for prospectors and defenders. This research contributes to strategic alignment literature and managers' understanding of how to align business, IT and marketing strategies to improve firm performance.     

The impact of earnings pressure on exploratory innovation

While earnings expectation has been shown to determine a firm’s investment decisions, the knowledge about how such expectation influences a firm’s investment horizon for innovation is still blurred. This study therefore addresses this research issue by examining the relationship between earnings pressure and exploratory innovation while investigating the moderating effects of cross‐rival effect and resource availability. By examining high‐tech industrial firms in S&P 1500 from 2000 to 2012, the results indicate that stock analysts, as information intermediaries between innovation firms and the capital market, impose pressure through earnings forecasts on firms’ exploratory innovation. Our findings also reveal that the earnings pressure‐exploratory innovation relationship can be mitigated when its competitors encounter a higher level of earnings pressure. However, a firm’s financial slack shows less significant association to moderate the earnings pressure‐exploratory innovation relationship. Possible explanations for the results in regard to their theoretical and practical implications are discussed in this study.     

Relationship of Planning and Control Systems with Strategic Choices: A Closer Look

The study finds that relative to others, firms pursuing the Prospector-like strategy (high innovation) have lower financial results uncertainty, a more long-term orientation for decision making, and more decentralized control. As well, the tightness of budgetary control is found to be negatively correlated with financial results uncertainty. Thus, we are able to reproduce in our study the result that Prospector type firms have tighter budgetary control, which many have found puzzling previously, and point to the relation between strategy and financial results uncertainty as an explanation for the result.Based on a sample of large firms in Singapore, the study also finds the impact of the 1997–1998 Asian crisis is correlated with the intensity with which the Prospector-like strategy was pursued.     

Strategic HR functions and firm performance: The moderating effects of high-involvement work practices

Although the strategic human resource management literature has emphasized the value of the integration of human resource management into strategic management, the mechanism through which the strategic integration of HR functions contributes to the improvement of firm performance is relatively unknown. Assuming that HR strategies cannot be successfully implemented without employee support for and commitment to these strategies, this research focuses on high-involvement work practices, which allow employees to participate in management decisions as potential moderators of the integration of HR functions in strategic management and firm performance. Using a sample of 203 unionized Korean firms, this research found that the effects of a strategic HR function on firm performance were moderated by high-involvement work practices such as a pay-for-performance program, a career-development program, union participation in company strategy, and temporary worker benefits. The results suggest that a strategic HR function will not be successful without institutional mechanisms that foster employee involvement.     

Organizational adaptation in an economic shock: The role of growth reconfiguration

Studies suggest that firms navigating an economic shock can adapt and improve performance by targeting perceived growth opportunities. A puzzle, however, is that an economic shock increases environmental uncertainty and therefore the risk associated with growth reconfiguration. This study finds that growth reduced performance and increased the risk of firm failure during the Asian economic shock of 1997. Growing firms differed in the extent to which they were able to mitigate the constraints imposed by the shock. However, the presence of developed external institutions played a more systematic role in their adaptation than did organizational resources represented by financial slack or product diversification. The deliberate attempt to reconfigure augmented the adverse effect of the economic shock on firm performance and survival. Copyright © 2014 John Wiley & Sons, Ltd.     

Follow the leader (or not): The influence of peer CEOs’ characteristics on interorganizational imitation

Research Summary: We argue that because charisma and narcissism represent widely held prototypes of effective and ineffective forms of leadership, respectively, the likelihood that a focal firm will imitate the practices of its peer firms is affected by these peer firms’ CEO characteristics. We theorize that peer firm CEO charisma enhances the focal firm’s imitation of peer firms’ behaviors, while peer firm CEO narcissism diminishes it. We further posit that the uncertainty of the context affects these imitation processes: industry dynamism and prior experience in a given strategic domain, respectively, strengthens and dampens focal firms’ susceptibility to these peer CEOs’ attributes. We test and find support for these ideas using a longitudinal sample of Fortune 500 firms in two distinct domains, corporate strategy and corporate social responsibility. Managerial Summary: When companies are uncertain about the costs and benefits of strategic actions this may lead them to imitate the actions of peer companies. But given the uncertainty, the challenge for executives is: which companies to emulate and which to ignore? In a sample of Fortune 500 companies, we find that the charisma or narcissism of a peer company’s CEO positively or negatively influences, respectively, the degree to which the peer company’s strategic actions are imitated. We reason that this is because these particular CEO attributes are widely believed to drive leadership effectiveness or ineffectiveness, respectively. We also find that the effects of these CEO characteristics on imitation are stronger in dynamic industry environments and weaker for companies that already have experience with the given strategy.     

Creating incentives for innovation? The relationship between pay dispersion in R&D groups and firm innovation performance

Innovation is a critical organizational outcome for its potential to generate competitive advantage. While the contribution of knowledge workers to the generation of innovation is widely recognized, little is known about how organizational incentive mechanisms stimulate or inhibit these workers' behaviors that promote innovation. This study examines the relationship between pay dispersion in R&D groups and firm innovation using employee‐level compensation data in US high‐technology firms. The results show that (1) pay dispersion in R&D groups is negatively related to firm innovation and (2) this negative relationship is alleviated in firms with greater financial slack. This study contributes to the innovation literature by illuminating the implications of organizational incentive systems for successful innovation. Copyright © 2013 John Wiley & Sons, Ltd.