Industrial groupings and foreign direct investment

We explore worldwide foreign direct investment (FDI) location decisions by Japanese manufacturing firms from 1985 through 1991. Our conditional logit estimates provide evidence that firms' location decisions are affected by membership in either vertical or horizontal keiretsu. Consistent with previous studies that stress agglomeration effects on firms' location decisions, we find that the stock of investment in a region by a firm's vertical keiretsu partners increases the probability of location. Further, we find that the recent flow of investment into a region by a firm's horizontal keiretsu partners increases the probability of investment to the region, providing evidence of networking effects.     

The Relationship between Corporate Social Responsibility and Firm Performance: An Application of Quantile Regression

This study empirically examines the relationship between a firm’s fulfilling of corporate social responsibility (CSR) and performance. We developed a CSR index (CSRI) to quantitatively evaluate CSR, which consists of four dimensions measuring a firm’s contributions to the economy, society, environment, and corporate governance, respectively. With data from publicly-listed firms in Taiwan during the period of 2004–2009, results of quantile regression show that fulfilling CSR has a significantly positive impact on firm performance, and that the impact in a more profitable firm tends to be significantly greater than that in a less profitable firm. Specifically, when a firm is more profitable, its management would be more willing to implement CSR. The implication is that a firm could pursue better performance while serving as a good corporate citizen.     

The characteristics of family firms: exploiting information on ownership,kinship, and governance using total population data

Family firms are often considered characteristically different from non-family firms. However, our understanding of family firms suffers from an inability to identify them in total population data; information is rarely available regarding owners, their kinship, and their involvement in firm governance. We present a method for identifying domiciled family firms using register data; this method offers greater accuracy than previous methods. We apply this method to Swedish data concerning firm ownership, governance, and kinship from 2004 to 2010. We find that the family firm is a significant organizational form, contributing over one third of all employment and gross domestic product (GDP). Family firms are common in most industries and range in size. Furthermore, we find that, compared to private non-family firms, family firms have fewer total assets, employment, and sales and carry higher solidity, although family firms are more profitable. These differences diminish with firm size. We conclude that the term “family firm” includes a large variety of firms, and we call for increased attention to their heterogeneity.     

A research note on market creation in the pharmaceutical industry

When a firm launches a market-creating innovation, it launches a new product for which there are no close product substitutes. Thus, the new product causes a shift in the existing product-market structure of an industry. This paper reports on the findings of the analysis of 51 large pharmaceutical firms and their market-creating activities. The study suggests that market-creating firms have capabilities in both R&D and marketing. Furthermore, market-creating firms enjoy stronger efficiencies, manage costs better and make more profitable use of their assets.     

Exploring the need for (extreme) speed: motivations for and outcomes of discontinuous NPD acceleration

ABSTRACT

New product development (NPD) speed is an important concern for firms in today’s fast-paced economy. While existing literature has focused on continuous NPD speed improvements, this paper explores discontinuous NPD acceleration, or dramatic reductions in development time relative to firms’ normal NPD cycles. Across two studies, the authors interview managers to develop a typology of strategic motivations for discontinuous NPD acceleration, followed by a survey of 218 NPD managers to validate the typology and identify important differences across firm types, including those in new product performance, innovation levels, and configurations of organisational characteristics. The results suggest that discontinuous NPD acceleration is most profitable when firms are proactive and have specific configurations of culture, capabilities, and structure. The authors also discuss implications for theory, practice, and future research.     

Do ESG Controversies Matter for Firm Value? Evidence from International Data

The aim of this paper is to investigate the relationship between environmental, social, and governance (ESG) controversies and firm market value. We use a unique dataset of more than 4000 firms from 58 countries during 2002–2011. Primary analysis surprisingly shows that ESG controversies are associated with greater firm value. However, when interacted with the corporate social performance (CSP) score, ESG controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive. Building on this evidence, we attempt to explore the channels through which CSP may enhance market value. Conducting sample split analysis indicates that higher CSP score has an impact on market value only for high-attention firms, those firms which are larger, perform better, located in countries with greater press freedom, more searched on the Internet, more followed by analysts, and have an improved corporate social reputation. Thus, our findings provide new insights on the role of firm visibility through which firms can profit from their CSP.     

Arriving at the high-growth firm

This study explores heterogeneity in how firms have achieved high growth. Using the population of all firms in Sweden with more than 20 employees in existence in 1996 (N=11,748), we analyzed their development for each year of the previous 10 years (1987 to 1996). From this population of all firms in Sweden, multiple criteria were used to define a sample of high-growth firms (n=1501). Using 19 different measures of firm growth (such as relative and absolute sales growth, relative and absolute employee growth, organic growth vs. acquisition growth, and the regularity and volatility of growth rates over the 10-year period), we identified seven different types of firm growth patterns. These patterns were related to firm age and size as well as industry affiliation. Implications for research and practice are offered.     

The Formation of Distribution Keiretsu: The Case of Matsushita Electric

The Japanese keiretsu, specifically vertically linked firms, have attracted global attention, and there is continuing dispute over their purpose. They act as close, long-term business relationships between large corporations and a number of selected smaller firms. They have been seen as rational effective systems, especially suited to the circumstances of Japan's industrialisation, and as a factor in its economic success. On the other hand, they have been criticised as closed systems that exclude potential competitors. Keiretsu are generally divided into production keiretsu, financial keiretsu, and distribution keiretsu. As a pioneer of distribution keiretsu, Matsushita (Panasonic) grew in Japan by securing the outlet of its products at ‘appropriate’ prices, and is now its nation's largest electronics manufacturer. Its distribution structure was founded in the 1930s, but the changes introduced in the 1950s finally brought it substantial commercial advantages, and encouraged rivals to form similar networks.     

To Groupon or not to Groupon: The profitability of deep discounts

We examine the profitability and implications of online discount vouchers, a relatively new marketing tool that offers consumers large discounts when they prepay for participating firms’ goods and services. Within a model of repeat experience good purchase, we examine two mechanisms whereby a discount voucher service can benefit affiliated firms: price discrimination and advertising. For vouchers to provide successful price discrimination, the valuations of consumers with access to vouchers must generally be lower than those of consumers who do not have access to vouchers. Offering vouchers tends to be more profitable for firms that are patient or relatively unknown, and for firms with low marginal costs. Extensions to our model accommodate the possibilities of firm price reoptimization and multiple voucher purchases. We find potential benefits of online discount vouchers to certain firms in certain circumstances, but vouchers are likely to increase firm profits under relatively narrow conditions.     

The interplay of human and social capital in shaping entrepreneurial performance: the case of Vietnam

This study investigates the effects of human capital, social capital and their interaction on the performance of 1,398 Vietnamese new-born firms. Operating profit is used as the measure of success. Human capital is captured by individual-level professional education, start-up experience, and learning. Whereas the first two dimensions of human capital are measured with traditional indicators, we define learning as the ability to accumulate knowledge to conduct innovation activities (new product introduction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are threefold: (i) human capital strongly predicts firm success, with learning exhibiting a statistically significant positive association with operating profit, (ii) benefits from weak ties outweigh those from strong ties, (iii) interaction of human capital and social capital displays a statistically significant positive effect on new-firm performance.     

Product differentiation under imperfect information: When does offering a lower quality pay?

In this paper, we extend the Varian (1980) model to examine endogenous quality differentiation by firms, with a particular emphasis on the interplay between the firms’ product quality decisions and the ensuing price rivalry. Specifically, we assume that the price-sensitive (or informed) consumers hold a lower valuation for product quality than the brand-loyal (or uninformed) consumers. It is shown that the firms will choose differentiated qualities for a broad class of consumer utility functions and production technologies. We obtain two results. First, the equilibrium quality choices are efficient as they are also the welfare-maximizing qualities chosen by a social planner. The equilibrium qualities are as if one firm serves only its loyal consumers and the other serves only the price-sensitive consumers, even though they each serve both types of consumers (at least for some fraction of time). Second, the firm choosing the lower quality makes greater profits and also prices more aggressively, in the sense that it maintains a lower maximum price and offers discounts more often. The lower-quality product is more profitable because it yields higher social surplus when consumed by the price-sensitive consumers.

Growing profitable or growing from profits: Putting the horse in front of the cart?

Firm growth is almost universally portrayed as a good thing, and is commonly used as a measure of success. Applying resource-based reasoning, we argue that growth is often not a sign of sound development. Specifically, we hypothesize that firms which grow without first securing high levels of profitability tend to be less successful in subsequent periods compared to firms that first secure high profitability at low growth. Empirical tests using two large, longitudinal data sets confirm that the profitable low growth firms are more likely to reach the desirable state of high growth and high profitability. In addition, they have a decreased risk of ending up performing poorly on both performance dimensions compared with firms starting from a high growth, low-profitability configuration. The results suggest that academics, managers, investors and policy-makers may benefit by adopting a more nuanced view of firm growth that explicitly incorporates its intricate relationship with profitability.     

National institutional systems,foreign ownership and firm performance: The case of understudied countries

We analyse the relationship between institutional systems (configurations of countries with similar institutional characteristics) and firm performance. We use a large sample of firms from understudied countries to explore whether the performance impact of these configurations is the same (“equifinality”), whether this holds across different measures of firm performance (“Tversky effect”), and whether some institutional configurations better support foreign-owned firms. We find that it is possible to rank institutional systems according to their impact on firm performance, but the ranking differs according to the performance measure. Although foreign ownership on average confers performance advantages, the magnitude of the impact depends on the configuration. Our findings contribute to the understanding of the importance of institutional similarities across countries, and to the implications of these similarities for the theory of the MNE.     

Changes in the Covalence Ethical Quote,Financial Performance and Financial Reporting Quality

We examine the equity valuation effect of press releases of upgrades or downgrades reflected in the Covalence Ethical Quote (CEQ), an index ranking the ethical performance of multinational firms. The index is updated quarterly and is comprehensive enough to include 45 criteria reflecting working conditions, impact of product, impact of production, and company institutional impact. Thus, it captures many dimensions of firms’ ethical performance that are not accounted for in previous research. Our research encompasses a joint test of the value relevance of the index itself and the impact of ethical reputation on a firm’s value. We find first a significant causal relationship between stock market reactions and changes in the CEQ. Specifically, disclosures of positive (negative) changes in firm ethical performance cause increases (decreases) in firm value. Second, cross-sectional analysis indicates a positive association between changes in firm ethical performance and both its financial performance and its financial reporting quality. Collectively, these results suggest that the CEQ conveys information that is useful to investors. Further, corporate measures taken to increase ethical performance are associated with positive benefits to shareholders. Finally, investors have concluded that good news about their firms’ efforts to be ethical is worth the cost.     

Alliance portfolios and shareholder value in post-IPO firms: The moderating roles of portfolio structure and firm-level uncertainty

Using longitudinal data for initial public offering (IPO) firms, we examine the role played by structural differences between different types of alliance portfolios in the relationship between IPO firm alliance portfolios and shareholder returns. We show that because of the different signals they send to the capital market, different types of alliance portfolios affect IPO firm performance differently. Namely, financial markets seem to reward firms whose alliance portfolio is diversified across different types of alliances (a portfolio high in functional diversity), but not those who align their alliance partners into multiple functional points in the value chain (a portfolio high in vertical scope). We also examine the signaling role of alliance portfolios under different IPO firm uncertainty conditions. We note that uncertainty about the IPO firm is not limited to pre-IPO quality uncertainty. Investors also face transition uncertainty, post-IPO uncertainty about the ability of the firm to adapt to the new managerial challenges it faces and succeed post-IPO. We find that these two types of uncertainties moderate alliance portfolio effects in different ways. The beneficial effects of alliance portfolios in mitigating liabilities of newness is of greater importance for firms associated with higher quality uncertainty and for those associated with lower transition uncertainty.     

Successive Oligopolies,Vertical Downstream Integration and Foreclosure

Vertically integrated firms have repeatedly been accused of abusing a dominant position by refusing to sell the intermediate product to non-integrated downstream producers and thus to practice foreclosure. To evaluate the merit of such an accusation requires an adequate theory of vertical integration which allows to decide whether a refusal to sell follows straightforwardly from profit maximization or is driven by an intent to monopolize. We investigate whether in the case of successive oligopolies vertical integration is profitable for the participating firms and to what extent cross deliveries between integrated and non-integrated firms can be expected to arise. By contrast to the previous literature where at the downstream level Cournot competition has been assumed to prevail between integrated firms and non-integrated downstream producers, we propose a model where integrated firms and non-integrated upstream suppliers meet in Cournot competition and take as given the inverse demand function for both the final and the intermediate product. Game theory is invoked to examine whether an integrated firm will participate in the intermediate market. If marginal costs at the downstream level are constant and identical as between integrated and non-integrated firms, integrated firms will never wish to sell to non-integrated downstream producers they can, however, be expected to buy from non-integrated upstream suppliers. Utilizing theoretical implications regarding pass through of changes in marginal costs we find empirical evidence supporting the applicability of our model to the gasoline industry in Germany. We finally examine to what extent issues of competition policy and public regulation arise.JEL classification: D43, L1, L22, L42, L71*We gratefully acknowledge helpful suggestions from Horst Albach, Alexandra Gross-Schuler, Otto Hass, Michael Niederalt, Felix Schuler, Achim Wambach, Christian Winkler, and unknown referees of the JICT. The usual disclaimer applies.     

公司特征、行业特征和并购战略类型的实证研究

This paper studies 148 related and 169 unrelated acquisition cases conducted by Chinese listed firms from 2001 to 2004 and explores firm and industry characteristics of these firms prior to their acquisition. Results show that there are significant pre-acquisition differences between firms pursuing related acquisition and firms pursuing unrelated acquisition in terms of firm performance, business risk, firm size, proportion of state shares and degree of diversification profile. Except for differences in internal capital as represented by undistributed profit per share, there is no significant difference in other aspects of available resources and industry performance. Translated and revised from Guanli Shijie 管理世界 (Management World), 2007, (3): 130–137     

International Catalog Mix Adaptation

Abstract

Striking the right balance of adaptation of the international catalog mix may be the key to profitability. U.S. catalog firms, new to international markets, have less experience in adapting than firms in more globalized industries. The literature on international marketing strategy adaptation reveals that this decision depends on the environment, industry, market, product, and characteristics of the firm. This paper examines the influence of market similarity, type of business and the firm's international experience on international catalog adaptation, and explores the effects of catalog adaptation on a firm's performance. We hypothesize that the greater the market similarity, the less likely it is that firms will adjust their catalog. We also argue than adaptation is greater for consumer catalogs than for business-to-business catalogs. A third hypothesis is that more internationally experienced firms will adapt more and a final hypothesis is that a greater degree of adaptation will increase the international catalog performance. The results did not support the association of international catalog adjustment and market similarity, experience, and type of catalog. Findings are mixed both on catalog adaptations and firm performance. We found that some but not all adaptations in the catalog lead to improved performance. We speculate that U.S. catalog firms are making adaptations to reduce the costs of international marketing operations. This cost reduction strategy may not necessarily lead to profitability, thereby discouraging other firms from entering international markets.     

Exploring a Measurement of Analytics Capabilities

Changes in the volume and velocity of data have led many organizations to consider assessing and improving analytics capabilities. The purpose of this research is to describe a methodology developed to assess organizations’ analytics capabilities and explore the empirical value of data collected using this methodology. The measurement for analytics capabilities was developed by IBM during 2009–11 marketing efforts. To assess the data’s empirical value, we investigate whether measurements of analytics capabilities are internally consistent, associated with decisions to invest in analytics software and hardware, and able to explain firm profitability. In analyzing consistency, we find a natural sequence in the development of analytics capabilities. Exploring decisions to invest in analytics, we discover that firms with higher levels of capabilities are more likely to invest, as are firms that are larger and located in more profitable industries. However, we find no relationship between analytics capabilities and firm profitability.     

Are Group-Affiliated Firms Really More Profitable than Nonaffiliated?

The role of corporate center in influencing the economic performance of business units has been a central research topic in the industrial organization and strategic management literature. A common finding is the limited corporate and business group effects. Recently, an emerging line of studies argues that the market inefficiencies and institutional voids in emerging markets can be overcome more efficiently by large diversified business groups than by non-group small firms. Some empirical evidence also shows that non-group small firms are significantly less profitable than group-affiliated firms. This paper raises this issue by empirically investigating the influence of group affiliation on the return on assets and Tobin's q of 340 group-affiliated firms versus 423 non-group firms in Taiwan, during the period of 1997–1999. The statistical results show that group affiliation can not always create value for member firms. The size of the business group matters. When affiliated with the largest business groups, member firms indeed show improved stock market performance, but when firms are affiliated with small- and medium-sized groups, their accounting performance suffers. Findings of this paper suggest a threshold effect and a U-shape relationship between group affiliation and profitability in emerging economies.