Managerial ownership and performance

This study revisits the classical debate about the nature of the relationship between managerial ownership and corporate performance by using a semi-parametric estimation approach. The semi-parametric approach helps sidestep concerns associated with the potential misspecification of parametric models (e.g., the arbitrary choice of a fixed number and/or location of turning points) and enables the consideration of a wider range of non-linear behaviors. The empirical results support the existence of the initial alignment effect of managerial ownership at levels lower than 15%, while they do not lead to a strong inference on the relationship between managerial ownership and corporate performance for intermediate and high levels of managerial ownership. The results cast doubt on the findings of recent studies on the subject, which critically rely on fully parametric methods, and instead suggest the use of semi-parametric methods in estimating the shape of the ownership-performance curve.     

Cross-border relationships and performance: Revisiting a complex linkage — A commentary essay

Obadia and Vida (2010) extend a prominent theme in the export performance literature, by explicitly addressing “importer role performance.” The commentary essay here builds on a significant volume of work dealing with behavioral dimensions in cross-border exchange relationship management, and points at contributions and shortcomings of Obadia and Vida's paper in terms of advancing and upgrading discussions in this area. This commentary concludes that scholars need to concentrate their future research efforts in linking the relationship dimension and export performance on introducing more comprehensive sets of mediating and moderating effects. These sets of effects may include dimensions such as opportunism, foreign market knowledge and competence, conflict reduction, commitment enhancement, partner interaction, knowledge sharing and ICT.     

High performance work systems in the global context: A commentary essay

The study by Shih, Chiang, and Hsu (2011) contributes substantially to the high performance work systems (HPWS) literature by sampling Chinese host country nationals (HCNs) of a Taiwanese firm and by introducing new mediating variables. A number of interesting issues follow from the study, including the use of perceived HPWS and the dimensionality of HPWS. This commentary essay briefly explores each of these areas.     

Foreign ownership and firm performance in German services

This study provides the first comprehensive analysis of foreign-controlled enterprises in the German service sector based on new micro-data from official German statistics. Various performance measures were examined via comparison of unconditional and conditional means and through use of quantile regression techniques. Foreign-controlled affiliates consistently performed better than German-owned affiliates. In contrast, profitability exhibited precisely the opposite trend. Moreover, labour productivity did not significantly differ when the comparison group consisted of domestically owned affiliates with a high degree of internationalization. A breakdown by country of origin showed that European affiliates pay lower wages and export less relative to non-European affiliates, and US firms have no productivity advantage as in manufacturing.     

Innovation and export performance of emerging market enterprises: The roles of state and foreign ownership in China

This article examines the role of ownership for the relationship between innovation and exports. Analyzing a large firm-level data set on Chinese manufacturing firms during 2000–2007, we find that state ownership has a positive moderating effect on the innovation–export relationship. We ascribe this effect to state-owned firms’ privileged access to complementary resources and networks that strengthen their ability to use innovation to generate exports. In contrast to many earlier studies, we also find that foreign ownership has a negative moderating effect. One likely reason is that indicators of local innovation do not reflect the flows of knowledge between foreign-owned firms and their parent companies. This finding highlights the fact that innovation and production may be geographically separated within multinational enterprises. A policy implication of the analysis is that public support to innovation is likely to have stronger effects on exports when it targets firms that carry out most of their activities in domestic market.     

Using consumer perceived ethicality as a guideline for corporate social responsibility strategy: A commentary essay

“Consumer Perceived Ethicality” presents a framework of perceived consumer ethicality as summarized from in-depth interviews with 20 citizens of the United Kingdom and Germany. The framework identifies six broad domains and 36 sub-items (6 for each domain) that serve as examples of consumer-generated “unethical corporate behaviors.” This commentary highlights the contributions, discusses the limitations and presents an alternative perspective on the study of consumer perceived ethicality.     

Managerial labor-market discipline and the characteristics of merger and acquisition transactions

This study evaluates how state regulation of noncompetition agreements affects merger and acquisition activity. Noncompetition agreements put restrictions on postemployment activities, thereby reducing management mobility and forcing top managers to bear the long-term consequences of their corporate decisions. In this sense, state regulation of noncompetition agreements functions as a mechanism to align management's interests with those of the shareholders when management makes major corporate decisions. To examine this hypothesis empirically, this study tests whether the legal enforcement of noncompetition agreements across states affects the choice of payment methods, the premium paid for targets, and the acquirers' abnormal returns on their merger or acquisition activity. The results suggest that stricter enforcement of noncompetition agreements significantly reduces the likelihood of using stock in takeovers and the premiums paid for targets. In addition, the study documents that stronger enforcement of noncompetition agreements is related with more favorable market reactions for large acquirers.     

Experience and a firm's performance in foreign markets: A commentary essay

Wu and Lin (2010) extend several prominent themes in the experience and subsidiary performance literature in their empirical examination of the foreign expansion of Taiwanese MNEs. This commentary essay considers the themes in Wu and Lin (2010) against the backdrop of the considerable volume of research that has been conducted on experiential learning and firm performance in both the international business and strategy literatures. Five weak axioms about the relationships between experience, foreign market entry strategy, and performance emerge in this review. Based on these weak axioms, the commentary concludes that scholars need to concentrate future research on understanding the management and process-related issues that concern the effective management of a firm's experiential learning processes to foster better capability and knowledge development from a firm's experience, as well as translate such developments into improved performance prospects for a firm.     

Cultural influences on global firms' decisions to cut the strategic brand ties that bind: A commentary essay

Today's global firms face increasing pressure to protect their brand identity from encroachments of copycat brands that seek to benefit from associations firms have established in the minds of consumers. This essay is a commentary to the article “Marking your trade: cultural factors in the prolongation of trademarks” by Melnyk, Giarratana and Torres that raises several important issues warranting further attention by researchers. This essay comments on the paper's contributions, limitations, and opportunities contributing to future research about trademark practices and strategies. Furthermore, the essay suggests useful extensions relative to the more general strategic issue of prolongation or abandonment of intangible brand assets in global markets and the dynamic interface between firm-created and consumer-created brand meaning.     

Dynamic learning and strategic alliances: A commentary essay

Strategic alliances and the learning benefits they foster in partner firms inspire a rich literature in the organizational sciences. Part of this literature asks whether or not alliances drive dynamic learning opportunities and thus help partner firms create or enhance dynamic competitive capabilities. Chen, Lee, and Lay (2010) show that alliances do foster the development of dynamic competitive capabilities and do this through dynamic learning mechanisms. This commentary essay critiques the merits of the authors' potential contributions to extant theory and managerial practice and offers new questions for further research.     

Research on non-market actions: A commentary essay

This commentary is about the article, “First come, first served: how market and non-market actions influence pioneer market share” (Usero and Fernández, 2009). Though non-market actions are common competitive weapons in practice, relevant studies are surprisingly rare in strategic research. The empirical results of Usero and Fernández demonstrate that in some specific contexts, traditional market actions do not affect market position, but non-market actions do. However, to erode first mover's advantage, this study considers only the relative frequency of actions and does not measure quality, timing and strength of actions. This commentary also discusses some practical and theoretical implications of Usero and Fernández's study.     

Board independence, firm performance and ownership concentration: Evidence from Chile

What determines the composition of companies' boards in the context of high ownership concentration? Are independent directors important as an internal governance mechanism in companies with high ownership concentration? Do markets favor companies whose controlling shareholders use voting rights to elect professional directors?Using a four-year, 160-company panel data, and controlling for endogeneity, this paper addresses these three related questions, finding that an increase in the proportion of outside directors affects company value. The paper also finds that companies that present more exacerbated agency conflicts tend to incorporate professional directors to the boards, in an effort to improve corporate governance and ameliorate the agency problem.     

Assessing cross-cultural marketing theory and research: A commentary essay

Cross-cultural research (CCR) is extremely important for advancing understanding of the range and limits of theoretical constructs and frameworks across different cultural contexts. CCR also provides an important understanding of the differences between countries and cultures. This commentary essay examines the review conducted by Engelen and Brettel (2010) and comments on shortcomings, as well as identifying areas where more needs to be done. A critical first step is to properly define the unit of analysis. This step is particularly critical as the concept of “national culture” is becoming increasingly less relevant and the appropriate culture unit for examination is often a smaller, more homogeneous grouping within a given geographic location. This view allows more meaningful inferences to be made and controls for possible contextual confounds, as well as providing a richer understanding of the limits of national culture in an increasingly global economy.     

Understanding how employees understand customers: A commentary essay

Young, Meterko, Mohr, Schwartz, and Lin empirically examine how service employees interpret behavioral cues and assess customers' satisfaction in the context of a large healthcare system. This commentary explores the authors' contribution to the multidisciplinary service quality literature. The commentary also considers how Young et al.'s findings align with important, emerging work in the healthcare domain.     

Corporate ownership and the theory of the multinational enterprise

This paper makes a contribution to the theory of the multinational enterprise (MNE) and, in particular, to why firms undertake foreign direct investment (FDI) rather than alternative strategies. We argue that FDI and its strategic alternatives involve different patterns of costs and returns over time, and hence different levels of risk and uncertainty. Traditional theories of the MNE conceptualize the firm as a risk-neutral decision-making entity with short-term efficiency objectives, and hence do not take these issues into account. This may be reasonable for firms with passive professional managers and widely-dispersed shareholders, operating in countries with the Anglo-American system of corporate governance. But many firms operate under quite different systems of corporate governance where concentrated shareholdings are commonplace and markets for corporate control are weak or non-existent. In these cases, shareholders exert considerable influence on all aspects of firm strategy including FDI. Furthermore, different groups of shareholders (State, family, institutions) are likely to have different objectives, different attitudes towards risk, and different decision-making time horizons. We thus suggest that the traditional theories of the MNE need to be extended to embrace consideration of corporate ownership (and other governance dimensions).     

Managers' corporate entrepreneurial actions: Examining perception and position

Are organizational factors that support entrepreneurial action supportive for all? We use the literatures on corporate entrepreneurship and managerial levels to propose that managers differ in structural ability to make the most of their organizational environment. Using a sample 458 managers and moderated Poisson regression analysis we found that the relationship between managers' perceptions of the organizational environment and the number of entrepreneurial ideas implemented varied across managers of different structural levels. Specifically, (1) the positive relationship between managerial support and entrepreneurial action is more positive for senior and middle level managers than it is for lower- (first) level managers, and (2) the positive relationship between work discretion and entrepreneurial action is more positive for senior and middle level managers than it is for first-level managers. These findings suggest that managerial level provides a structural ability to “make more of” organizational factors that support entrepreneurial action.     

Managerial perspectives on trade and consumer promotions

Understanding the perceptions of managers and the behavioral rules they employ in allocating marketing resources is important in applied research. Using survey data obtained from brand managers, this paper explores the factors managers consider important in allocating trade and consumer promotions. Importance scores on several dimensions are factor analyzed to extract the underlying factors. Indices are computed using these raw scores. The extent of mediation by several brand and category variables on managerial perceptions are then examined by correlating managers' indices and the structural variables. The impact of the structural variables and the importance scores are related to promotion to sales ratios in a regression model. While the structural variables have strong and predictable impact, the importance scores are somewhat weak in their explanatory power. These results are used to shed some light on the budgeting process of allocating marketing dollars among advertising trade and consumer promotions.     

Managerial ownership,diversification, and firm performance: Evidence from an emerging market

Numerous existing studies have explored the impact of corporate diversification on firm performance, whereas considerably less research has investigated the inter-relationships among managerial ownership, diversification, and firm performance. This paper develops several hypotheses based on the agency theory self-interest perspective and tests the relationships among managerial ownership, corporate diversification, and firm performance using a sample of 98 emerging market firms listed on the Taiwan Stock Exchange. The results show a U-shaped relationship between managerial ownership and corporate diversification, similar to that found in prior studies. However, the inflection point is 33.17%, which is lower than that found in previous studies. Moreover, in contrast to prior results, corporate diversification is found to be positively associated with short-term firm performance and bears no relationship with mid-term firm performance, while firms engaged in unrelated diversification outperform those engaged in related diversification. This paper concludes with theoretical implications and suggestions for future research.     

Reflective and formative metrics of relationship value: A commentary essay

The Journal of Business Research special issue (61/12) covers controversy about formative versus reflective model specification. This essay comments on that special issue and illustrates specific points relating to the controversy by discussing recent studies of business-to-business relationship value, comparing their differing specifications, and noting that the variations of specification result from quite distinct conceptualizations. The essay makes the more substantive conclusion that the differences in conceptualization result from more than one underlying streams of research and that each stream is conceptually quite distinct and needs to follow its own direction for future research. The specific case of relationship value illustrates the broad necessity for researchers to consider in-depth how they conceptualize models. Other research areas have distinct research streams that lie behind different conceptualizations and specifications that researchers must nurture explicitly if useful ontology is to develop effectively.     

Institutional ownership and technological relatedness: A test of endogeneity

Building on the previous literature on corporate diversification, institutional ownership and firm innovation, this study proposes an endogenous relationship between institutional ownership and corporate technological relatedness. Technological relatedness is the degree to which a set of industries in which a firm operates its businesses demand similar technological knowledge. A Vector Autoregressive analysis of data from U.S. manufacturing firms shows that firms enhancing technological relatedness attract more institutional investors and as predicted, this pattern is particularly strong for pension fund ownership. In contrast, the analysis fails to show that institutional investors cause a firm's business portfolio to increase in technological relatedness.