Work in Britain's Informal Economy: Learning from Road‐Side Hand Car Washes

The United Kingdom has over 10,000 hand car washes (HCWs). This article examines two research questions: what do HCWs reveal about the informalization of employment? and what is the prospect of regulation of them? Setting HCWs in a theoretical framework shows that they are part of a growing industry which is becoming an increasingly familiar and visible part of the economy, where control of labour costs is a key factor. Employers make a strategic choice to engage precarious and vulnerable, usually migrant, labour securing further competitive advantage at the cost of pronounced labour exploitation and long hours — the tendency towards informalization. Therein a low‐cost business model disciplines competition to usurp higher productivity mechanized car washing.     

MARKET COMPETITION,R&D AND FIRM PROFITS IN ASYMMETRIC OLIGOPOLY*

We investigate a Cournot model with strategic R&D investments wherein efficient low‐cost firms compete against less efficient high‐cost firms. We find that an increase in the number of high‐cost firms can stimulate R&D by the low‐cost firms, while it always reduces R&D by the high‐cost firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the low‐cost firms' profits may indeed increase with the number of high‐cost firms. An implication of this result is far‐reaching, as it gives low‐cost firms an incentive to help, rather than harm, high‐cost competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford's strategy of disclosing its know‐how publicly and extensively at the beginning of the 20th century.     

Applying Industrial Design and Cost Engineering to New Product Development in Early‐Stage Firms

For early‐stage firms, successful commercialization of each new product is critically important, given the shortage of financial resources, the limited product portfolio, and small staffs typical of such firms. This paper investigates two key contributing factors for new product success in entrepreneurial firms: designing products that are appealing to target users in both form and function and designing products that can be manufactured at an attractive margin so that the new enterprise can generate much needed positive cash flow. These two practices—industrial design and cost engineering—are well studied in the context of larger, established corporations but have not been explored in the context of new ventures. This study focuses on the intensity of individual and combined adoption of design and cost engineering as measured by product development efficiency and effectiveness. The study was conducted on a homogeneous sample of early‐stage firms that develop physical, assembled products where design plays a role. The data collection focused only on the first product developed by each firm respectively. The results show that when implemented together, industrial design and cost engineering enhance both the effectiveness and efficiency of new product development in early‐stage firms, to greater effect than each does individually. Intensive individual adoption of practices had a negative impact on development efficiency measures such as development cost and duration. Only cost engineering individually had a beneficial impact on development effectiveness as measured by product margins. When combined, these two practices had a beneficial impact on both development duration and cost for the company's first commercial product, thereby reducing time‐to‐market and precious cash expenditures while maximizing project breakeven timing. The most successful firms in the study achieved a balance between creative innovation and cost discipline in the NPD process with third‐party design and manufacturing resources. It was found that integrating third‐party design firms into the development process can challenge, simplify, and add additional creative resources to the core entrepreneurial team, maximizing the ability to catalyze beneficial tension between creativity and cost discipline.     

Employment Systems in Japan's Financial Industry: Globalization,Growing Divergence and Institutional Change

This article examines growing divergence and change in the employment systems of Japan's financial industry from the early 1990s until shortly after the so‐called Lehman Shock. This was a period which saw accelerated deregulation and globalization strongly impact the country's financial markets, leading to intensified competition over human resources. Foreign multinational corporations introduced into Japan's local product and labour markets new global ‘rules of the game’; in response, some native firms were forced to alter core aspects of a traditional employment model. The result was the emergence of diverging patterns of employment. The present study will demonstrate that the interaction of two key factors — national ownership and variation among core products and services offered — is shaping employment diversification, mediated by firms’ individual policies and practices. This research contributes to the debate on the effects of globalization on the divergence and change of employment systems.     

The power of imperfect imitation

We examine the power and limitations of imitation. Naive intuition may hold that the efficacy of imitation would be diminished by imperfections in copying high‐performing firms. Employing a computational model, we study the dynamics of imitation when firms are subject to bounded rationality that limits their ability to copy the market leader. We find that imperfect imitation can generate unexpectedly good outcomes for follower firms—indeed, better than the outcomes achieved if they were perfect imitators. Moreover, imperfect imitation, from time to time, enables follower firms to surpass superior firms. These findings suggest there is an adaptive role to mechanisms, such as bounded rationality, that make perfect imitation difficult. Copyright © 2012 John Wiley & Sons, Ltd.     

The Paradox of Liberalization — Understanding Dualism and the Recovery of the German Political Economy

What do the recent trends in German economic development convey about the trajectory of change? Has liberalization prepared the German economy to deal with new challenges? What effects will liberalization have on the co‐ordinating capacities of economic institutions? This article argues that co‐ordination and liberalization are two sides of the same coin in the process of corporate restructuring in the face of economic shocks. Firms seek labour co‐operation in the face of tighter competitive pressures and exploit institutional advantages of co‐ordination. However, tighter co‐operation with core workers sharpened insider–outsider divisions and were built upon service sector cost cutting through liberalization. The combination of plant‐level restructuring and social policy change forms a trajectory of institutional adjustment of forming complementary economic segments which work under different rules. The process is driven by producer coalitions of export‐oriented firms and core workers’ representatives, rather than by firms per se.     

We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany

This article establishes a link between the degree of productivity dispersion within an industry and collective bargaining coverage of the firms in the industry. In a stylized unionized oligopoly model, we show that differences in productivity levels can affect the design of collective wage contracts a sector‐union offers to heterogeneous firms. Using German linked employer–employee data, we test a range of our theoretical hypotheses and find empirical support for them. The dispersion of sector‐level labour productivity decreases the likelihood of firms being covered by a collective bargaining agreement on the industry level, but increases the likelihood of firms being covered by firm‐level agreements. The results hold for different subsamples and (panel) estimation techniques.     

Benefiting from network position: firm capabilities,structural holes,and performance

While strategy scholars primarily focus on internal firm capabilities and network scholars typically examine network structure, we posit that firms with superior network structures may be better able to exploit their internal capabilities and thus enhance their performance. We examine how innovative capabilities—both those of focal firms and those they access through their networks—influence the performance of Canadian mutual fund companies. We find that a firm's innovative capabilities and its network structure both enhance firm performance, while the innovativeness of its contacts does not do so directly. Innovative firms that also bridge structural holes get a further performance boost, suggesting that firms need to develop network‐enabled capabilities—capabilities accruing to innovative firms that bridge structural holes. Copyright © 2005 John Wiley & Sons, Ltd.     

Productivity and Wage Effects of Firm-Level Collective Agreements: Evidence from Belgian Linked Panel Data

How do firm-level collective agreements affect firm performance in a multi-level bargaining system? Using detailed Belgian-linked employer–employee panel data, our findings show that firm-level agreements increase both wage costs and labour productivity (with respect to sector-level agreements). Relying on approaches developed by Bartolucci and Hellerstein et al., they also indicate that firm-level agreements exert a stronger impact on wages than on productivity, so that profitability is hampered. However, this rent-sharing effect mostly holds in sectors where firms are more concentrated or less exposed to international competition. Firm agreements are thus mainly found to raise wages beyond labour productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm-level agreements benefit both employers and employees — through higher productivity and wages — without being very detrimental to firms’ performance.     

The impact of R&D‐specific factors on the attractiveness of small‐ and medium‐sized enterprises as partners vis‐à‐vis alliance formation in large emerging economies

This study examines the impact of research and development (R&D)‐specific factors in determining the likelihood of small‐ and medium‐sized enterprises (SMEs) from developed countries to be attractive partners vis‐à‐vis forming alliances with SMEs from large emerging economies (LEEs). This study is founded on the knowledge‐accessing theory of alliance formation, which emphasises the higher efficiency gains of knowledge application as opposed to knowledge generation. We extend this theory to SMEs on the basis that smaller firms, because of their resources constraints and drive to survive, are likely to use alliances to access external knowledge bases leading to new product development (NPD) opportunities because of the low feasibility of acquiring knowledge. As a mix of complex knowledge is necessary to develop most modern products and services, SMEs are also likely to adopt a more flexible operational approach and to accept compromises to forge knowledge‐accessing alliances. We illustrate this theoretical development using primary data collected from British and German biotechnology SMEs, declaring the intention prospectively to form alliances with their counterparts in Brazil. Binary logistic regression was used to identify the factors influencing the likelihood of a firm as an attractive alliance partner. Our results indicate that R&D‐specific factors influence the likelihood of firms to be attractive alliance partners. In particular, firms showing an in‐house innovation history focused on one or few products are more likely to be attractive alliance partners with LEE firms than those that do not. Another R&D‐specific predictor that enhances the chances of alliance partner attractiveness with LEE firms is the firm's focused searching and identifying capability relative to technology or equipment that demonstrates good prospects to improve the firm's line of products. A third predictor refers to the firm's awareness regarding non‐cost obstacles for its own technological development. Implications for policy makers and practitioners are also discussed.     

How much you know versus how well I know you: selecting a supplier for a technically innovative component

How do firms select a supplier for an innovative component? Three literatures speak to this question. Transaction cost economics focuses on the value of internalization, the literature on inter‐firm relationships on the value of past relationships, and the firm capabilities literature on the value of superior capabilities. Choosing a supplier means choosing a bundle of these characteristics—internal vs. external, amount of prior transactions, and capabilities—but no study has integrated all three characteristics, making it impossible to understand the trade‐offs involved either theoretically or managerially. I propose and test a model integrating all three factors, allowing us to understand the trade‐offs involved. I find that when uncertainty is low, the decision is made primarily on the basis of differences in technical capabilities. As uncertainty increases, prior relationships and a supplier being internal take on greater positive significance relative to the importance of technical capabilities. At extreme levels of uncertainty, the value of internal supply relationships becomes very high and past relationships lose their significance. While adherents of each literature have criticized the others for what they omit, this model moves beyond this mutual recrimination by incorporating the key concerns of each literature, setting the stage for future research that draws upon the strength of each. The model provides guidance for any situation where a firm must chose a partner under uncertainty. Lastly, it addresses the strategic question of how companies should organize in the long run to access the capabilities needed for competitive success. Copyright © 2004 John Wiley & Sons, Ltd.     

Do Broad‐based Employee Ownership,Profit Sharing and Stock Options Help the Best Firms Do Even Better?

This article analyses the linkages among group incentive methods of compensation (broad‐based employee ownership, profit sharing and stock options), labour practices, worker assessments of workplace culture, turnover and firm performance in firms that applied to the ‘100 Best Companies to Work For in America’ competition from 2005 to 2007. Although employers with good labour practices self‐select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labour policies and outcomes, we find that employees in the firms that use group incentive pay more extensively participate more in decisions, have greater information sharing, trust supervisors more and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity.     

Knowledge spillover in corporate financing networks: embeddedness and the firm's debt performance

Building on social embeddedness theory, we examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor—a strategic process we dub ‘network transitivity.’ Focusing on the properties of network transitivity in the context of small‐firm corporate finance, we consider how embedded relations between a firm and its banks facilitate the firm's access to distinctive capabilities that enable it to strategically manage its trade‐credit financing relationships. We apply theory and original case‐study fieldwork to explore the types of resources and competencies available through bank–firm relationships and to derive hypotheses about how embedded bank–firm relationships affect the strategy of small‐ to medium‐sized firms. Using a separate large‐scale data set, we then test the generalizability of our hypotheses. Our qualitative analyses show that embedded bank–firm ties provide special governance arrangements that facilitate the firm's access to bank‐centered informational and capital resources, which uniquely enhance the firm's ability to manage trade credit. Consistent with our arguments, our statistical analyses show that small‐ to medium‐sized firms with embedded ties to their bankers were more likely to take lucrative early‐payment trade discounts and avoid costly late‐payment penalties than were similar firms that lacked embedded ties—suggesting that social embeddedness beneficially affects the financial performance of the firm. Copyright © 2002 John Wiley & Sons, Ltd.     

Winning us with trifles: Adverse selection in the use of philanthropy as insurance

Research Summary: We study the use of corporate philanthropy as a form of reputation insurance, developing a formal model of such insurance to examine how the terms of insurance in equilibrium change under different assumptions about the firm and its stakeholders. We then test the predictions from this model in the U.S. petroleum industry and find that philanthropic donations offer insurance‐like benefits, but are also positively associated with subsequent oil spills—firms that give more, spill more—with this association being stronger for spills that are under firms’ control and in states with low civic capacity. These results are consistent with an adverse selection/moral hazard equilibrium and suggest that the use of philanthropy as reputation insurance may benefit firms at the cost of society. Managerial Summary: Firms that donate to social causes develop a reputation for being socially responsible, and are often given the benefit of doubt when negative information about them comes to light. But are philanthropic firms truly more responsible? We argue that firms that donate more may be more likely to do harm—those that expect to do harm later are likely to give more now, and those that know their reputation protects them may become less careful. Evidence from the U.S. petroleum industry is consistent with this argument, with firms that give more having more subsequent oil spills, but only the type of spills that are under the firm's control, and only in states where the firm faces weaker scrutiny.     

The Union Avoidance Industry in the United States

This paper analyses the development of the union avoidance industry in the United States during the past half‐century. Focusing on one leading example from each group, it examines the activities of the four main actors that constitute that industry: consultants, law firms, industry psychologists and strike management firms. Although these firms have experienced a fall in business as unions have declined in strength and numbers — a development that the union avoidance industry has contributed to — they continue to play an important role in the US system of industrial relations. Over three‐quarters of employers hire consultants when confronted by organizing campaigns, and large union avoidance firms are increasingly seeking export markets for their expertise.     

The role of digital technologies in open innovation processes: an exploratory multiple case study analysis

Digital transformation has undoubtedly become a key enabler of innovation as evidenced by the numerous firms that use digital technologies to manage their innovation processes. This issue is even more relevant today when innovation processes have become more open and require greater resources in the different implementation phases to capture and transfer knowledge within and outside the firm's boundaries. This implies additional challenges in managing the increasing amount of knowledge and information flows. Accordingly, digital technologies can be used and implemented to manage open innovation processes through easier access and sharing the knowledge created and transferred. Nevertheless, literature in these fields does not provide a structured view of how and why digital technologies are used to manage innovation processes in an open perspective. This paper aims to bridge this gap by adopting the theoretical lenses of change management to identify the managerial actions at organizational and process level that companies perform to implement digital technologies in their open innovation processes. Accordingly, the paper investigates how and why these managerial actions required for and enabled by digital technologies help firms to develop and nurture open innovation. From an empirical point of view, the exploratory multiple case study analyzes nine firms operating in different industries and varying in size, market share, and organizational structure.     

A path to value creation for foreign entrepreneurs

Research summary : Firms founded by foreign entrepreneurs constitute an influential and growing part of the world economy. Yet, the existing research has given little consideration to the strategies of foreign entrepreneurs beyond their decisions to start a firm. In this article, we address this gap by examining how foreign entrepreneurs may bring value to their firms as firm managers. We argue that foreign owner‐managers may benefit their firms by having access to home‐country resources. We demonstrate that, compared to hired local managers, foreign owner‐managers reduce firms' operating costs by disproportionately hiring home‐country labor when this labor is more cost‐efficient. This effect is larger for labor‐intensive industries and for entrepreneurs from less wealthy countries. Managerial summary : Foreign entrepreneurs represent an important part of the world economy. Yet, we know little of how foreign entrepreneurs manage their firms. In this article, we examine whether foreign entrepreneurs and domestic managers hire different employees. We find that when foreign entrepreneurs manage their firms personally, they hire a larger number of foreign workers, and such workers are cheaper and more productive than the local labor. Conversely, domestic managers tend to hire local employees, despite their higher relative wages. Foreign owner‐managers are particularly valuable in labor‐intensive industries and when their home‐country labor is inexpensive. Copyright © 2015 John Wiley & Sons, Ltd.     

The digital marketing capabilities gap

Over the past two decades, digitalization has revolutionized not only consumer marketing but also industrial marketing. Both industrial marketing scholars and industrial marketers seek insights to understand how our knowledge and practice of digital marketing has been structured and configured. To address this gap, we adopt the resource-based perspective as an organizing framework and systematically review 129 articles spanning two decades of research to identify different digital marketing capabilities in industrial firms. From this analysis, we identify four themes: channels, social media, digital relationships, and digital technologies. We then stress-test this knowledge with managerial practices by conducting an online survey of 169 managers, designed to establish the repertoire of current and future marketing capability needs of industrial firms. Herein, we identify two marketing capabilities gaps: the practice gap—which identifies the deficit between managers' ‘current’ practices and their ‘ideal’ digital marketing capabilities; and, the knowledge gap—which demonstrates a significant divide between the digital marketing transformations in industrial firms and the extant scholarly knowledge that underpins this. Based on these results, we build an agenda for future research on digital marketing capabilities.     

Beyond institutional voids: Business groups,incomplete markets,and organizational form

We extend the “institutional voids” perspective on business groups by examining the value‐adding potential of two of the characteristic features of business groups: their diverse portfolio and multi‐entity organizational form. We maintain that portfolio diversity affords affiliates privileged access to opportunities hidden by incomplete strategic factor markets. We hypothesize that the multi‐entity organizational form enables superior sensing and seizing of these growth opportunities by affiliate firms. We further suggest that, in the context of institutional reforms, these characteristics strengthen business group affiliates' ability to capitalize on the expanded set of opportunities made available by the reform program. Empirical analyses on a sample of Indian firms over the period 1994–2010 support our hypotheses. Implications for theory and future directions are discussed. Copyright © 2013 John Wiley & Sons, Ltd.     

Strategizing industry structure: the case of open systems in a low‐tech industry

Open systems strategy enables a sponsor to diffuse its technology and promotes standardization in an industry. However, this strategy has been studied in high‐tech settings. We hypothesize that, in a non‐high‐tech industry, a sponsor giving access to its technical knowledge may impact industry structure. Based on a survey of the U.S. tabletop role‐playing game (RPG) industry, our results highlight that the introduction of an open system in a sector creates an entry induction phenomenon and that these new entrants adopt more readily the open system than incumbents. Moreover, the average size of the firms in the industry decreases due to vertical specialization. Copyright © 2006 John Wiley & Sons, Ltd.