Does corruption boost or harm firms’ performance in developing and emerging economies? A firm-level study

In the last decade, a growing number of studies have addressed the ongoing debate about whether corruption “sands” or “greases” the wheels of business at the firm level. This study revisits this debate and proposes a comprehensive theoretical framework to test whether corruption harms or boosts firm performance, as well as the extent to which this relationship is mediated by the countries’ institutional settings, the size and strategic behaviour of the firms, and market competition. Based on a sample of 21,250 firms located in 117 emerging and developing countries, and resorting to instrumental variable (IV) estimations, three main results were found: (a) regardless of the proxy used for corruption and firm performance, the former clearly harms the latter; (b) corruption “greases the wheels” of business for African firms but it “sands the wheels” for firms in Latin America, the Caribbean, Eastern Europe, Central Asia, and Southern Asia; and (c) the negative impact of corruption on performance is mitigated for larger and exporting firms.     

A unified systems perspective of family firm performance

Theory and practice indicate that in family-influenced firms, the interaction of the family unit, the business entity, and individual family members create unique systemic conditions and constituencies that impact the performance outcomes of the family business social system. Habbershon and Williams [Fam. Bus. Rev. 12 (1999) 1] have suggested that these unique systemic family influences can be captured through an analysis of the resources and capabilities of the organization. In this paper, we pursue their line of thinking and more specifically examine the systemic relationship of resources and capabilities as a source of advantage or constraint to the performance outcomes for family-influenced firms. The idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions are referred to as the “familiness” of the firm. Wealth-creating performance for family-influenced firms is a function of the “distinctive familiness” generated by the family business system. The performance model focuses on a particular subset of family-influenced firms whose performance goal is transgenerational wealth and wealth creation potential. We refer to those families that meet this premise as “enterprising families.” We develop a unified systems model of performance that links the resources and capabilities generated in the enterprising families system with their potential for transgenerational wealth creation.     

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.     

When One Size Does Not Fit All: A Problem of Fit Rather than Failure for Voluntary Management Standards

Voluntary management standards for social and environmental performance ideally help to define and improve firms?? related capabilities. These standards, however, have largely failed to improve such performance as intended. Over-emphasis on institutional factors leading to adoption of these standards has neglected the role of firms?? existing capabilities. External pressures can drive firms to adopt standards more than their technical capacity to employ them. This can lead to problems of ??fit?? between institutional requirements and a firm??s existing capabilities. We describe a conceptual model that considers the impact of an interaction between a firm??s institutional requirements and its existing capabilities on standards failure. We suggest solutions that align institutional requirements to appropriate governance forms as a means to improve standards success. We contribute to theory by describing the role of firms?? internal capabilities to the success of voluntary management standards and the reliability of self-regulation generally.     

Variation in Corporate Governance and Firm Valuation – an International Study

In this paper, we investigate the types of firms that are likely to deviate from common practice in corporate governance of their home countries and examine how the deviation is correlated with firm value. Our results show that firms with higher institutional holdings, lower insider holdings, and higher sales growth are more likely to deviate from common practice in civil law countries, whereas, in common law countries, especially in the USA, firms with lower institutional holdings, higher insider holdings, and lower sales growth are likely to deviate from common practice. We document a strong positive correlation between governance deviation and firm value in civil law countries. This relationship is robust to different testing and sample selection methods. The results, however, are mixed for US firms and not significant in other common law countries. Using the deviation from common practice as a proxy of firm‐level impact on corporate governance, our results provide evidence that firm‐level effect matters in governance quality and the effect varies across countries.     

Base-of-the-Pyramid (BOP) orientation and firm performance: A strategy tripod view and evidence from China

The Bottom of Pyramid (BOP) market in developing countries represents an enormous market opportunity. Serving the BOP segment, however, incurs significant risks and costs because BOP consumers are deprived of income and literacy. It remains unclear whether or not serving this market segment would benefit firm performance. Based on related literature, we propose a new construct – BOP orientation, and examine its impact on firm performance and an operating mechanism of such effect – the mediating role of bricolage innovation strategy that emphasizes recombination of existing resources to solve the unique problems faced by BOP consumers. Drawing on the strategy tripod view, we also investigate the contingency effects of both institutional and industry environments in an emerging economy. We collected survey data to test the conceptual framework from 238 firms in China, the world’s second largest BOP market. The results support a positive relationship between BOP orientation and firm performance and confirm that the performance impact of BOP orientation is channeled through bricolage innovation strategy. Further, we find that the effect of BOP orientation is contingent on both the institutional factors and the industry conditions. Specifically, government support strengthens while legal inefficiency weakens this effect; competitive intensity strengthens the effect, while technological uncertainty has no moderating role on this relationship. Contributions to extant literature and useful guidelines for firms of our research are discussed.     

Under what institutional conditions does overseas business knowledge contribute to firm performance?

We examine the extent to which the impact of the overseas business knowledge transferred by returnee entrepreneurs on firm performance is conditional on institutional factors. The findings show that informal institutional differences between the home and host countries strengthen the positive impact of overseas business knowledge on the performance of returnee-founded firms. There is a complementarity between informal institutional differences and local government policy support which jointly enhance the positive impact of overseas business knowledge. However, a well-developed local business infrastructure substitutes for the impact of informal institutional differences on the relationship between overseas business knowledge and returnee venture performance.     

A taxonomy of small- and medium-sized international family firms

This study develops a taxonomy of small- and medium-sized family firms that internationalise and discusses the different configurations of these firms based on firm culture (in terms of organisational orientations), firm strategy (in terms of differentiation, cost leadership and marketing standardisation) and firm structure (in terms of integration, centralisation and specialisation). Although the literature on international family firms has highlighted the significant role of organisational culture in firm internationalisation, the strategies and structures of international family firms and their consequences for performance have been disregarded. To examine the interplay of international family firm culture, strategy and structure, we employ a quantitative taxonomic approach that is rooted in configurational theory, analysing 504 Germany-based small- and medium-sized family firms. Different combinations of strategy, structure and culture result in different configurations of family firms and different levels of non-domestic performance. In considering these configurations, we aim to determine which combinations of strategies, structures and firm orientations are primarily applied by international family firms and whether these organisational configurations are successful. Our empirical findings suggest that there are four groups of firms: Domestic-Focussed Traditionalists, Global Standardisers, Multinational Adapters and Transnational Entrepreneurs. These configurations are clearly distinctive in terms of their structure, orientations and performance but differ less in terms of their strategies. Superior international (i.e. non-domestic) performance tends to be driven by a decentralised entrepreneurial approach.     

Are the determinants of capital structure country or firm specific?

In this paper we investigate the capital structure determinants of Greek, French, Italian, and Portuguese small and medium-sized enterprises (SMEs). We compare the capital structures of SMEs across countries and differences in country characteristics, asset structure, size, profitability, risk, and growth and how these may impact capital structure choices. The results show that SMEs in these countries determine their capital structure in similar ways. We attribute these similarities to the country institutional and financial characteristics and the commonality of their civil law systems. However, structural differences arise due to firm specific effects. We find that size is positively related to leverage while the relationship between leverage and asset structure, profitability and risk is negative. Growth is not a statistically significant determinant of leverage for any of the four countries. Our main conclusion is that firm-specific rather than country facts explain differences in capital structure choices of SMEs.     

The relationship between venture capital backing and the top management team quality of firms going public and implications for initial public offerings

We make use of hand-collected data on a large sample of entrepreneurial firms going public to analyze the association between venture capital (VC) backing and the top management team (TMT) quality of firms at the time of their initial public offerings (IPOs), and the effect of both VC-backing and TMT quality on the growth in their post-IPO operating performance and IPO firm valuations. We first show that VC-backing is associated with higher TMT quality. We then show that both higher TMT quality and VC-backing lead to higher growth in post-IPO operating performance and higher IPO valuations. We find that the above two variables affect the growth in post-IPO operating performance through an “ability channel,” whereby the TMTs of such firms choose projects with higher equilibrium scale and implement them more ably. Further, TMT quality and VC-backing affect IPO firm valuations not only through the above ability channel, but also through a “certification channel,” whereby higher TMT quality and VC-backing credibly certify intrinsic firm value to the IPO market, thus reducing the extent of asymmetric information facing such firms in the IPO market and yielding these firms higher IPO valuations. Finally, we show that TMT quality and VC-backing act as complements in their effect on IPO firms' growth in post-IPO operating performance.     

Doing good and doing bad: The impact of corporate social responsibility and irresponsibility on firm performance

Research on firm performance and corporate social performance (CSP) has recently broadened to concurrently evaluate corporate social irresponsibility (CSI) with corporate social responsibility (CSR). However, little is known about the underlying mechanisms that impact the performance relationship, particularly the duration of the influence of CSR initiatives and CSI incidents and the impact of the interaction of CSR and CSI on firm performance. This research expands understanding by examining the combined impact of “doing good” and “doing bad” to allow a more robust examination of a firm's regime in pursuing a better strategic position through social performance. We examine the effects of CSR and CSI and their combined effects using a moderating high-low matrix. The empirical findings provide two uniquely interesting findings: CSI incidents have a longer enduring effect than CSR initiatives and those firms doing little CSR and little CSI perform better than firms engaging in high levels of both.     

Do Market‐Supporting Institutional Characteristics Explain Firm Performance? Evidence from Emerging Markets

The importance of market‐supporting institutions and their impact on business investment and economic growth has gained the attention of researchers and practitioners alike. In this study, we extend this research by capturing the impact of the quality of regulative institutional characteristics on firm performance in an emerging market context. We use a sample of 26,493 emerging market firms from 91 countries over the years 2003 to 2010 and test for the relationship between government effectiveness, regulatory quality, rule of law and control of corruption, and firm performance. Results indicate that governmental effectiveness and regulatory quality impact performance outcomes positively, while rule of law impacts performance negatively. These findings provide important insights and encourage managers and public policymakers to be cognizant of the impact of these factors and adapt accordingly. © 2014 Wiley Periodicals, Inc.     

The omnichannel continuum: Integrating online and offline channels along the customer journey

This paper provides a framework for conceptualizing omnichannel integration as a continuum, identifies phenomena that determine how firms should position along that continuum, and summarizes empirical research regarding these phenomena. The framework combines the customer journey (search to purchase to aftersales) and channel choice (online vs. offline). This generates a range of omnichannel strategies, anchored by “Unconnected” on one extreme and “Complete” on the other. In between, “Vertical” strategies integrate channels over the customer journey, while “Horizontal” strategies integrate across channels at a given stage in the customer journey. We draw on more than 200 articles to identify 10 consumer and marketing phenomena (“determinants”) that influence where a firm should position along the continuum. This however raises challenges. For example, empirical research surprisingly finds many customers belong to an offline-focused segment. This suggests a Vertical strategy linking offline channels. However, today's turbulent retail environment questions whether the offline-focused segment will endure. Should the retailer cater to offline-focused customers or facilitate their progression to “multichannelism”? Another finding is that consumers strongly prefer consistency across channels. This suggests a Horizontal strategy. However, consistency might create channel cannibalization. How can the retailer avoid this? We discuss these and several other findings regarding the impact of the 10 determinants on omnichannel continuum strategy. We identify issues researchers need to research and managers need to consider when developing omnichannel continuum strategy.     

A study of the impact of Western HRM systems on firm performance in China

Based on a sample of 324 firms in China, the relationship between Western human resource management (HRM) systems and firm performance is examined. The results show that the degree of adoption of Western HRM practices made no statistically significant difference between Chinese and foreign firms and also generally supports the hypothesis that Western HRM systems are positively associated with firm performance in a Chinese context. In addition, the proposed “motivation and support” HRM system appeared to have stronger and more significant relationships than the “skill and development” HRM system. The underlying reasons were identified and some managerial implications for both Chinese and foreign firms were drawn. © 2012 Wiley Periodicals, Inc.     

How do emerging debt market participants recognize firm internationalization?Evidence from effects on credit ratings

We explore the firm internationalization's impact on firm credit ratings in emerging economies. Adopting Chinese data from 2009 to 2018, we document that firm internationalization varies negatively with its credit ratings, indicating that emerging debt market participants are risk averse and prioritize the risks involved in firm internationalization endeavors. This association is amplified for firms operating in host countries with lower institutional quality, decreased cultural distance from home countries, and when firms do not hold tax haven subsidiaries. We observe that the main association is consistent when alternative dataset (India, Russia, and Brazil) or proxy (cost of debt) is applied.     

The Heterogeneous Impact of Corporate Social Responsibility Activities That Target Different Stakeholders

We aggregate different dimensions of corporate social responsibility (CSR) activities following the stakeholder framework proposed in Clarkson (Acad Manag Rev 20(1), 92–117, 1995) and present consistent evidence that CSR strengths targeting different stakeholders have their unique impact on firm risk and financial performance. Institutional CSR activities that target secondary stakeholders are negatively associated with firm risk, measured by total risk and systematic risk. Technical CSR that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, and cash flow returns. Our results, based on a sample of S&P 500 component firms over the period of 1995–2009, are consistent with the risk management view of “altruistic” CSR activities and with the stakeholder salience theory. We also show that the impact of CSR activities on risk varies with the ethical climate, as proved in our subsample analyses on pre- and post-Sarbanes–Oxley periods. Our empirical analyses mitigate possible omitted variables and endogeneity concerns that are often overlooked in previous research. Our findings are robust to alternative CSR measures, to alternative risk and performance measures, and to alternative estimation methods.     

The belt and road initiative,cultural friction and ethnicity: Their effects on the export performance of SMEs in China

China’s Belt and Road Initiative (BRI) has provided Chinese firms with significant incentives to speed up the pace of internationalization. Yet very little international business (IB) research has been found to empirically examine such policy effects. This study explores this important issue using Chinese firms of different ethnicities in the Xinjiang Uygur Autonomous Region (XUAR) of China. We propose that the BRI has a positive formal institutional effect on the export performance of XUAR firms that target the “Belt” countries. Both cultural friction and ethnicity serve as the unique cultural contingencies that moderate the relationship between the BRI and export performance. More specifically, the cultural friction that results from the process of internationalization will negatively affect the export performance prompted by the BRI. The Uygur-owned firms will benefit more from the BRI due to their cultural similarity. Overall, the study takes the lead in investigating both internal conditions and external environments that promote and inhibit the internationalization process of small-to-medium enterprises (SMEs) in the XUAR that are geographically close to the “Belt” countries. The findings help enrich the understanding of the dual “push” and “drag” effects on the outcomes of SMEs’ international activities due to the government-led initiatives and the understanding of micro-foundation toward internationalization from an ethnicity perspective.     

Emphasis or Balance?

Abstract

A sample of 162 Indian manufacturing and service companies were used to examine different forms of market orientation and the impact of these forms on organizational performance. A cluster-analysis identified four distinct clusters: “undeveloped,” “customer-focused,” “competitor-focused,” and “comprehensive.” The performance of these clusters differed significantly across growth in overall revenue, ability to retain customers, success of new products/services, controlling operational expenses, and return on capital. Implications of these findings for firms competing in India's post-economic liberalization milieu are discussed.     

Gender Diversity in the Boardroom and Firm Performance: What Exactly Constitutes a “Critical Mass?”

The under-representation of women on boards is a heavily discussed topic—not only in Germany. Based on critical mass theory and with the help of a hand-collected panel dataset of 151 listed German firms for the years 2000–2005, we explore whether the link between gender diversity and firm performance follows a U-shape. Controlling for reversed causality, we find evidence for gender diversity to at first negatively affect firm performance and—only after a “critical mass” of about 30 % women has been reached—to be associated with higher firm performance than completely male boards. Given our sample firms, the critical mass of 30 % women translates into an absolute number of about three women on the board and hence supports recent studies on a corresponding “magic number” of women in the boardroom.     

Is ‘Good’ governance good for business? A cross-national analysis of firms in African countries

Good governance can reduce uncertainty, transaction, search and production costs, and ultimately affect firm performance. In this paper, we explore the link between good governance and the profitability of individual firms in African countries. We employ the governance indices developed at the World Bank and assemble a sample of companies from 21 countries over four years. Contrary to prior research that found a negative association between institutional development and profitability, our evidence shows that an improvement of good governance in countries currently with low levels of governance ratings has greater positive effects on the firm profitability than a similar improvement in countries with relatively higher ratings of good governance. Good governance reduces the variability of the company's profitability, leading to high-return and low-risk investments. Finally, we find that the role of good governance depends upon the country's income level. When the income level is lower, an improvement in public governance is more likely to impact firm performance than when the income level is relatively higher. Good governance is more important for the stability of the profitability of firms in countries with higher levels of good governance ratings than lower ratings.