The roles of R&;D in new firm growth

Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of research and development (R&D) on new product development, interfirm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative of the whole population of start-ups. This dataset covers the first 6 years of the life course of firms. It is revealed that R&D plays several roles during the early life course of high-tech as well as high-growth firms. The effect of initial R&D on high-tech firm growth is through increasing levels of interfirm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high-tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low-tech firms, which seem to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high-tech and high-growth firms, which are key in innovation and entrepreneurship policies.

Founding family leadership and industry profitability

In this article, we argue that firms in high-margin industries can benefit from founding family influence. Specifically, in more profitable markets, the influence of the founding family provides an additional corporate governance-monitoring function. The sample consists of 294 firm-year observations from 98 publicly traded companies headquartered in Sweden, representing approximately half of all non-financial traded firms. Our support that the effect of family leadership in publicly held firms should be assessed in relation to the intensity of industry competition.

Corporate diversification and CEO turnover in family businesses: self-entrenchment or risk reduction?

Our study investigates differences in CEO turnover between focused and diversified firms to determine whether diversification strategies are necessarily associated with governance efficiency in family businesses. We find that large family CEO firms are more likely to engage in corporate diversification than are small non-family CEO firms and their CEOs are seldom replaced. Large family CEO diversified firms also have lower turnover sensitivity relative to focused firms. The results imply that the CEOs of diversified firms have entrenched themselves, thereby increasing agency costs within family businesses. However, we fail to find diversification discounts in family businesses. It is interesting that CEOs tend to diversify their businesses in order to decrease firm risk. Founding families favor risk-reducing decisions in order to maintain family wealth and prestige; suggesting that family businesses are more interested in survival than growth. Although family businesses may benefit from risk reduction, a negative relationship between diversification level and CEO turnover is still evidence of poor corporate governance. Agency theory may not completely account for the adoption of diversification strategies in family businesses and corporate diversification may weaken the effectiveness of internal monitoring mechanisms.

Alliance-Based New Product Development Success: The Role of Formalization in Exploration and Exploitation Contexts

Purpose: Although alliances offer tremendous strategic potential, firms still struggle to successfully manage new product development alliances (NPD alliances). A prominent explanation for this is the institutional economics' view (see Williamson 1985 Williamson, O. E. 1985. The economic institutions of capitalism: Firms, markets, relational contracting, New York: The Free Press.  [Google Scholar]) that, in general, a key disadvantage of alliances versus vertical integration is that administrative control mechanisms are weaker. Here, a key control mechanism is formalization (the use of explicit rules to govern business activities).

However, regarding formalization's influence on both NPD and alliance performance, conceptual views and empirical findings are mixed, which suggest that unexamined variables moderate formalization's influence on NPD performance.

Therefore, it is surprising that there is no research on whether formalization's influence differs in alliances pursuing an NPD exploration strategy versus an NPD exploitation strategy because both (1) require varying levels of freedom of action and adherence to procedural rules to achieve success, and (2) are extensively employed in NPD.

Further, there is also surprisingly little intrafirm NPD and non-NPD alliance research on formalization in exploration and exploitation contexts because here as well formalization's influence on performance (1) is central, and (2) differs based on the project's innovative and learning intent.

The purpose of this research is to begin to close important literature and industry practice knowledge gaps about formalization's influence on NPD alliance performance in exploitation versus exploration strategic contexts.

Originality, value, and contribution: This research is the first examination ever of two key NPD strategies—exploration and exploitation—in an NPD alliance context. The research sheds light on conflicting views about formalization's NPD performance-enhancing and inhibiting aspects, and offers implications for industry best practices.

Methodology/approach: Empirical examination of survey data from 151 NPD alliances via hierarchical regression and tests of group moderation.

Findings: Results shed light on when and why formalization moderates the influence of key fundamental alliance success mechanisms on NPD alliance performance based on strategic context.     

Strategic Positioning of Alliances

In this paper we use a simple linear demand structure to analyze firms’ and alliances’ strategic positioning with regard to cost reduction and product differentiation. In particular, we compare investment decisions under competition and in alliances and analyze comparative static properties concerning changes in market size. In contrast to Porter (1980 Porter, M.E. 1980. Competitive Strategy, New York: The Free Press. [Crossref] [Google Scholar]), this model explicitly allows firms to allocate their budget between the two strategies. The analysis reveals that the optimal allocation of resources for strategic positioning changes markedly when a firm enters an alliance: the general investment level decreases with a shift towards more cost reduction and less product differentiation. Another finding is that alliances (as well as independent firms) in larger markets invest more in both strategies and investment is driven towards product differentiation. These results are in line with Klepper’s (1996 Klepper, S. 1996. Entry, exit, and innovation over the product life cycle. American Economic Review, 86(3): 562–83.  [Google Scholar]) findings as they show that the attractiveness of following cost leadership or differentiation strategies changes through industry evolution.     

Child Influence: Depth Interviews with Pre-Operational Child Consumers and Their Parents

The purpose of this research was to investigate the phenomenon of pre-operational child consumers (age 2–7; Piaget, 1928 Piaget, J. 1928. The child's conception of the world, New York, NY: Harcourt.  [Google Scholar]) and their influence on household purchases. The conceptual framework was based on research on family interaction, child development, and consumer socialization. The research methodology utilized depth interviews with both pre-operational children and their parents. The analysis of the depth interviews revealed the pervasive use of child influence strategies in typical shopping excursions and significant parental yielding in response to those child influence attempts. Study results were consistent with consumer socialization and family interaction theories that surmise the prevalence and power of child influence.     

Alternative Investment Market: A Way to Promote Entrepreneurship

The aim of this paper is to investigate the relationship between firm performance after the IPO and its entrepreneurial orientation (EO). In our work we want to test if entrepreneurial oriented firms show a better market performance signalling that investors valuate it positively. To this purpose, we focus on a particular sample of entrepreneurial firms, i.e. companies that went public on the Alternative Investment Market (AIM) through IPO during the period from 1995 to 2006. Along the lines of Miller (Manage Sci 29:770–791, 1983), Covin and Slevin (Entrep Theory Pract 16:7–25, 1991) and Lumpkin and Dess (Acad Manage Rev 21:135–172, 1996), firms’ entrepreneurial orientation is measured in terms of risk taking, innovation and proactivity. Following the literature in management on investor valuation we use the percent price premium as dependent variable of our model. Our findings confirm a positive impact of entrepreneurial orientation on investors’ valuation. The results of this work underline the relevance of secondary markets, such as the AIM, as a valuable alternative to traditional financial institutions in providing capital to small and entrepreneurial companies.     

Foreign direct investment and wages in domestic firms in Ireland: Productivity spillovers versus labour‐market crowding out

There is a large literature on the positive spillovers frequently thought to be associated with inward foreign direct investment. Aitken et al. (1996 Aitken, BJ, Harrison, AE and Lipsey, RE. (1996). Wages and foreign ownership: a comparative study of Mexico, Venezuela, and the United States. Journal of International Economics, 40: pp. 345–71 [Google Scholar]) identify several cases, however, where inward FDI appears to have reduced wages in domestic firms. They suggest that this might arise either because foreign firms increase the degree of product‐market competition that domestic firms face, or because they poach the best workers from domestic firms. We concentrate on the second effect, arguing that the first is unlikely to arise in the Irish case to which our data pertain. In a theoretical section we show that the labour‐market poaching effect cannot generate the results postulated if labour markets are competitive and production functions are of the Cobb–Douglas variety, but that it can arise if production functions display higher elasticities of substitution. In an empirical section based on a sample of larger Irish firms we show that, consistent with our theoretical model, foreign presence has different effects on wages and productivity in domestic exporting and non‐exporting establishments.     

Multinational Firms’ Leadership Role in Corporate Social Responsibility in Latin America

This paper explores the commitment to corporate citizenship on the part of the largest U.S.-based multinationals in the emerging market region of Latin America. The websites of the largest U.S.-based firms – according to the 2007 Fortune 500 list – are reviewed and their CSR efforts in Latin America are noted. The firms’ positions on corporate citizenship in Latin America are mapped onto a three-by-three matrix in which firms’ commitment to corporate citizenship ranges from profit-making motivations to a more holistic approach where support for non-profit causes is embraced by the entire firm and implemented at all levels (Marsden, Business and Society Review 105(1), 9–26, 2000). The largest U.S.-based multinationals were selected for this study because of their leadership role and the fact that other firms within their respective industries may seek to emulate the firms’ level of commitment to corporate citizenship. While the matrix can be used to evaluate corporate citizenship efforts in any market – or globally – the emphasis in this study is on Latin America, a region of interest for two reasons: because of the paucity of research on this particular emerging market region as it relates to CSR, and because there is some evidence to suggest that philanthropic initiatives by the region’s wealthy individuals lag behind individual philanthropic efforts in other world regions (Oppenheimer, Latin America’s Rich Should Donate More. McClatchey-Tribune Regional News, 2007). If this is the case, this study aims to identify whether companies are picking up the slack.

“You make a living by what you get; but you make a life by what you give.” Winston Churchill

     

The timing of version releases: A dynamic duopoly model

In many R&D-intensive consumer product categories, firms deliver value to consumers through the quality enhancements provided by new and improved versions of existing products. Therefore, important marketing decisions relate to a firm’s strategy for developing quality enhancements and releasing new versions. This paper explores this type of product development using a dynamic duopoly model that endogenizes each firm’s decisions over how much to invest in R&D and when to release new versions. Specifically, I explore how two key industry fundamentals—the degree of horizontal differentiation and the cost of releasing a new version—affect firms’ product development strategies and, accordingly, the evolution of industry structure. I find that varying the degree of horizontal differentiation gives rise to three distinctly different types of competitive dynamics: preemption races when the degree of horizontal differentiation is low; phases of accommodation when it is moderate; and asymmetric R&D wars when it is high. Furthermore, I find that an increase in the cost of releasing a new version can induce firms to compete more aggressively for the lead and, in doing so, release new versions more frequently despite the higher cost.     

Boards of directors in family firms: a generational perspective

The purpose of this study is to advance the understanding of boards of directors in family firms. Building on generational changes in family attributes, we argue that firms in a different generational phase have different governance needs and characteristics. With regard to board task needs, the empirical results indicate a convex generational evolution in the need for board advice, and a rise over the generations in the need for board control. With regard to board composition, we find that the likelihood of having an outside director on the board has a convex generational trend. This relationship seems to be fully mediated by the firm’s board task needs. Furthermore, the number of family directors seems to increase over the generations. This study demonstrates that it is important to consider the generational phase of the family firm in order to understand its governance system.

Governance and strategy of entrepreneurial networks: an introduction

This special issue focuses on empirical and theoretical papers that help us to better understand the strategy and governance of entrepreneurial networks, such as franchise chains, alliances, and cooperative networks. The following central themes are covered: (I) Which formal governance mechanisms do entrepreneurial networks use in order to reduce transaction cost/agency cost and to increase strategic value? (II) What is the role of relational governance mechanisms (such as information exchange and social ties) for the performance outcomes in franchise chains and cooperatives? (III) Which alliance strategies do entrepreneurial firms pursue to realize a competitive advantage, and what is the impact of resources and capabilities on performance outcomes of entrepreneurial firms. To address these issues, insights from organizational economics (transaction cost theory, agency theory, signaling theory), strategic management perspectives (resource-based, knowledge-based and organizational capabilities theory), entrepreneurship theory and the relational governance view are used.     

The Influence of Innovative Organizational Culture on Marketing Strategy Formulation and Results

ABSTRACT

This article's objective is to analyze the influence innovative organizational culture has on marketing strategy formulation and results, and how this relationship affects organizational performance. The theoretical basis lies in Menon et al.'s (1999 Menon , A. , Bharadwaj , S. G. , Adidam , P. T. , and Edison , S. W. ( 1999 ). Antecedents and consequences of marketing strategy making: A model and a test . Journal of Marketing , 63 , 18 – 40 .[Crossref], [Web of Science ®] , [Google Scholar]) model. The methodology included a survey with medium to large Brazilian companies in different sectors. The final sample consisted of 153 questionnaires that were valid for analysis. Techniques for statistical analysis including singular and multivariate methods were used, from which the relationships between constructs were established by structural equation modeling. Results show a positive relationship between innovative organizational culture, the marketing strategy process, and organizational performance. However, innovative culture does not have a direct influence on performance.     

Modeling of FDI in business services: Additional effects in case of Ukraine's European integration

To analyze Ukraine's deep and comprehensive integration with the EU, we develop a multi-regional general-equilibrium simulation model incorporating heterogeneous firms and Foreign Direct Investment (FDI) in business services. This allows for consideration of (a) trade growth in new varieties; (b) aggregate productivity changes attributed to reallocation of resources across and within an industry; and (c) productivity growth in manufacturing due to increased access to business services. The results indicate relatively small gains for the EU, whereas Ukraine benefits with a welfare increase of over 8%. The deindustrialization impact, previously found by Olekseyuk and Balistreri (2014 Olekseyuk, Z., and E.J. Balistreri. 2014. “Trade Liberalization Gains under Different Trade Theories: A Case Study for Ukraine.” Working Paper 2014-13. Colorado School of Mines, Division of Economics and Business. Golden. [Google Scholar]) in a comparison of different modeling structures, is supported by our findings. Ukraine's welfare gains are higher under an Armington structure compared to monopolistic competition. This is due to a movement of resources into Ukraine's traditional export sectors producing under constant returns. Implementation of the FDI modeling approach and liberalization of barriers to FDI, however, mitigates the deindustrialization impact as multinational firms enter the Ukrainian market. This increases the number of available varieties and, consequently, induces productivity growth of manufacturing sectors due to improved access to business services as critical inputs.     

Internationalisation of technology-oriented firms in Germany and the UK

Based on longitudinal data, this article examines empirically the long-term export behaviour of German and British technology-oriented firms founded between 1987 and 1996. Applying logit models, the results show that firms can overcome high entry costs by acquiring firm-specific assets. Similarly, firm-specific resources prevent high-tech companies from exiting the international market. The strategic role of investment in R&D is stressed in particular by the data.

Technology strategy and performance: a study of information technology service providers from selected Asian countries

The provision of information technology (IT) services to support a wide range of information and communication technology (ICT) products has experienced rapid growth in recent years, particularly in less developed countries in Asia. This paper develops a conceptual model to test the impacts of the technology strategy of IT service providers on two measures of performance based on the experience of a sample of 98 IT firms from Korea, China, Thailand and the Philippines. It is found that technology strategy related to the adoption and diffusion of technology contributes positively to both performance measures. While the technology capabilities of firms, both internal and external, are important for financial performance, internal technological capabilities are more effective for the firm’s response to market changes. The technology competence of employees reflected by their education levels and the availability of in-house training are also found to be crucial for financial performance. The overall results suggest that technology strategy contributes significantly towards the performance of IT service providers but the impacts of different strategies on the financial and strategic performance of firms vary markedly.

Entrepreneurial strategy making,resources, and firm performance: evidence from China

This article builds a model to answer a critical but unsolved research question: What are the resources and/or the resource portfolio firms need to achieve the performance implications of entrepreneurial strategy making (ESM)? Based on a survey of Chinese firms, we find that ESM has a significant positive influence on firm performance. In addition, to accomplish the performance implications of ESM, firms need both flexible employed resources and unabsorbed slack, while just one of them does not work. Thus, a resource portfolio composed of high flexible employed resources and unabsorbed slack is the appropriate one to achieve the value of ESM.     

Succession and firm growth: results from a non-parametric matching approach

The article analyses the relationship between succession and firm performance. Applying a non-parametric matching approach on a panel of roughly 4,000 Austrian family firms we evaluate the impact of actual (past) succession as well as planned (future) successions on employment growth. Analysing succession plans, we do not find a significant difference in employment growth between firms that plan to transfer the firm in the next 10 years and those who do not. In contrast, past succession exerts a significant and positive employment growth effect, which becomes stronger over time.

The export intensity of venture capital backed companies

In this study we examine how venture capital (VC) firms influence the export behavior of their investee companies. VC firms perform an important governance function for investee companies by providing monitoring and value-added activities. Drawing on agency theory, the resource-based view of the firm and governance life-cycle theory we hypothesize that the relationship between VC governance resources and investee exporting behavior is moderated by investment stage. Employing a sample of 340 VC-backed firms, our results confirm this hypothesis. Monitoring resources are most effective in promoting export behavior for late-stage ventures and value-added resources in promoting export behavior in early-stage ventures.