Causality Rules: Performance Feedback on Hierarchically Related Goals and Capital Investment Variability

We extend March and Simon’s (1958) analysis of strategic decisions by distinguishing between two rules for allocating attention – priority versus causality. We develop theory concerning causality rules which have been largely overlooked in prior literature. Specifically, we examine how performance feedback on the intermediate productivity goal and the higher‐order profitability goal independently and jointly influence the variability of firm capital investments. Panel analysis of 2,477 Spanish manufacturing firms reveals that these goals jointly affect the variability of capital investments through both priority and causality attention rules. Our study provides new insights on how firms handle multiple goals, deconstruct performance feedback, and cope with the attentional constraints of bounded rationality.     

Making sense of HR in family firms: Antecedents,moderators, and outcomes

Family business researchers have felt increasing distress with the lack of understanding about how families – i.e., their structure, relationships, emotions, and goals – shape how families manage family firms, leading to calls to more fully incorporate “family science” theories about the nature of family into research about family firms. It seems likely that families' first impact in family firms will be on how employees are treated and managed. Thus, this special issue brings together papers that offer an early glance at what is to be gained by leveraging theories about family to help explain how families influence human resource management within family firms, and how human resource management, in turn, impacts key family firm outcomes.     

Sustainable development and profit? A sensemaking perspective on hybrid organisations and their founders

This article explores the sensemaking process of the individual entrepreneurs behind hybrid organisations that seek to both initiate environmental/social change and also generate profit. The work sheds light on how founders of six such organisations set-up initially in between 1978 and 1991 make sense of themselves and their firm and how this impacts on their business strategies. We examine the life-stories of these individuals to illuminate their perspectives on their experiences, motives and values. We suggest that both ambition and altruism motivate individuals to become involved in these firms, echoing the paradox of firms seeking both social change and value creation. The work enhances our understanding of both sensemaking theory and success factors for hybrid organisations and strategizing more broadly.     

Owners’ rule-based decision-making in family firm strategic renewal

We explore the process and consequences of family firm owners applying informal rules to decision-making in the context of later-generation family firms attempting strategic renewal. Based on the case studies of two firms in a Nordic country where the owners serve as non-executive board members, and following institutional action theory, we propose that informal rules – based on historical precedents and cumulative experience – applied to a family firm’s decision-making play many roles. They sustain family traditions over time, transfer experience over generations and depersonalise family members’ use of power. In addition, the rules on governance structure, governance processes and the content of the strategies form a hierarchy and can both facilitate and hinder the renewal.     

混乱环境中企业战略决策的意义构建过程解析——两个林业局的对比案例研究

在混乱环境中,企业需要理解新事件真实的战略意义,以快速、准确地转变或修正战略决策。现有文献过度简化了意义构建的过程,并忽略了战略决策者社会属性在意义构建过程中的作用,本文旨在描述企业战略决策者在混乱环境中的意义构建过程,建立企业意义构建过程模型,提炼组织心理与角色承诺在意义构建过程中的作用。通过对迎春林业局和伊图里河林业局的对比案例研究,本文发现:混乱环境中企业战略决策的意义构建过程包括发现、选择、变革、设定和固化五个阶段;组织心理和角色承诺在这一过程中扮演极其重要的角色,组织心理固化和角色承诺固化会阻碍企业意义构建的顺利开展。研究结论有助于解释和解决混乱环境中企业的生存和发展问题。     

Recasting Enterprise Strategy: Towards Stakeholder Research That Matters to General Managers

As well as specifying functional, business unit, and corporate levels of strategy, early strategy scholars delineated enterprise level strategy as the uppermost level of strategy. Enterprise strategy articulates how the firm engages with actors in its economic, social, and political environment to ensure long‐term corporate performance. As a growing body of evidence shows, heterogeneity in how firms identify, and engage with, their stakeholders can explain why some firms outperform their peers. However, my literature survey of more than three decades of published research reveals that enterprise strategy has stayed firmly in the shadows behind business and corporate strategy. Furthermore, many theories of firm–stakeholder relationships are normative (i.e. explain how firms should act) and do not inform strategy effectively. In this paper, I argue why enterprise strategy research is required as a cohesive body of work that connects with research in business and corporate strategy. I finish by proposing three research domains – strategic goals, organization design, and organization boundaries – that hold the potential to link stakeholder issues with mainstream concerns in strategy research and, thus, to revive a coherent research programme in enterprise level strategy.     

Stretch Goals,Factual/Counterfactual Reflection Strategies,and Firm Performance

Popular business press and academic publications have advocated for stretch goals, particularly to enhance firm performance. The general assumption is that stretch goals can create a more challenging task environment that upsets complacency, inspires motivation, encourages outside-the-box thinking, stimulates search and innovation, and guides efforts and persistence. Surprisingly few systematic empirical studies have been conducted to support stretch goal deployment, such as when and how to use them. This study introduces two reflection strategies – counterfactual reflection (managers confront performance feedback and create possible alternatives) and factual reflection (managers analyse their own decisions and explain performance feedback) – and uses two experimental laboratory studies to test how different reflection strategies contribute to the stretch goal-performance relationship. The results indicated that using stretch goals does not affect firm performance, although theoretically, using stretch goals can create a more challenging task environment and enhance performance. Rather, it is the combination of the type of goal and reflection strategy that affects performance. I suspect that under stretch goals, managers may be unable to implement new ideas as expected, leading to growing performance gaps and perceived continuous failures over time. Consequently, their motivation to search for alternative solutions declines, and they may fall into a spiral of self-constrained thinking. The results demonstrate that under stretch goals, managers use factual reflection strategies to deliberately reflect on performance feedback to achieve higher performance. In contrast, managers who are assigned moderate goals perform better if they use a counterfactual reflection strategy. I suggest that by using a different reflection strategy, managers can further improve performance by encouraging directed search behaviour and avoiding self-constrained thinking spirals. My study provides a richer theoretical and empirical appreciation of the effect of reflection strategy depending on the task environment and goal-setting.     

FAMILY FIRM PERFORMANCE OVER THE BUSINESS CYCLE: A META-ANALYSIS

The financial performance of family firms has been widely studied in the literature. Combining the results of 155 primary studies from 35 countries with data about business cycles, we investigate how family firm performance changes over the business cycle. Using meta-analytic estimation methods, we find that family firms outperform nonfamily firms in developed markets, irrespective of economic circumstances. This outperformance, although statistically significant, is very small and practically negligible. With regard to the business cycle, we find evidence for a procyclical effect in which the relative performance of family firms is lower in economically difficult times. Our study extends the literature on how family firm performance depends on macroeconomic factors.     

Acting Intuition into Sense: How Film Crews Make Sense with Embodied Ways of Knowing

This study contributes to a holistic understanding of sensemaking by going beyond the mind–body dualism. To do so, we focus analytically on a phenomenon that operates at the nexus of mind and body: intuition. By observing four film crews, we unpack how people act their intuition into sense – that is, how they transform, through action, an initial sense (intuition) that is tacit, intimate, and complex into one that is publicly displayed, simpler, and ordered (i.e., a developed sense). Our model identifies two sensemaking trajectories, each of which involves several bodily actions (e.g., displaying feelings, working hands-on, speaking assertively). These actions enable intuition to express a facet of itself and acquire new properties. This study makes three important contributions. First, it develops the holistic-relational character of sensemaking by locating it in the relations among multiple loci (cognition, language, body, and materiality) rather than in each one disjunctively. Second, it theorizes embodied sensemaking as a transformative process entailing a rich repertoire of bodily actions. Third, it extends sensemaking research by attending to the physicality and materiality of language in embodied sensemaking.     

Determinants of sales manager job satisfaction. An analysis of Spanish industrial firms

The objective of the current work is to analyse the determining factors of sales manager job satisfaction. In particular, we study the effect of various human resources management (HRM) practices – compensation, promotion, training and job design – on this satisfaction, using a model empirically tested on a sample of Spanish industrial firms. The results of the empirical analysis of the model, which uses data from a postal survey, indicate that human resources practices based on compensation – level and type – as well as on the job design – resources and autonomy – appear to be the fundamental determinants of sales manager job satisfaction. In the research we confirm that there is a growing need for firms to combine economic and non-economic incentives in order to satisfy their executives.     

Influence of family-centered goals on dividend policy in family firms: A socioemotional wealth approach

Socioemotional wealth (SEW) preservation is likely to be a key determinant for family firms when shaping their dividend policy. This paper analyzes how family-centered goals reflected by SEW can influence dividend policy in private family firms and explores how family involvement in management, generational stage, and firm hazard might moderate these relationships. Results indicate a negative association between SEW preservation and both the likelihood of giving dividends and the amount of dividend paid. This negative relationship is stronger when the CEO is a family member, in early generational stages and when the firm faces greater performance hazard. The amount of dividend paid is also lower when there are family members in other top management positions apart from the CEO. The evidence provided thus suggests that the existing heterogeneity in dividend policy in privately held family firms is strongly driven by differences in SEW priorities.

     

Briefing Paper: What Economists can learn from Game Theory

Game theory is a branch of mathematics which analyses interdependent decision-making. It attempts to explain how decision-makers might take into account the likely response of others in formulating their own decisions. It has long been applied to microeconomics especially to the theory of the firm under oligopoly where the firm, in devising its pricing and production strategy, will take into account the likely reactions of other firms within the industry. More recently it has been appreciated that many situations in macroeconomics can be analysed in terms of game theory. For example, if one country introduces import controls, how will others react? If one country tries to control inflation by adopting a tough monetary policy, or tries to reflate, what will other countries do? How will exchange rate speculators respond to the government's announcement that it will not intervene in currency markets? Will they believe the government or will they adopt actions which will eventually force the government to intervene? How will markets respond if the government changes its macro-economic strategy? In some cases the “players” are the government and the business community, in other cases one government may be playing against another. In this Briefing Paper we introduce some ideas and results from game theory and show how they can be applied to macroeonomics as well as microeconomics.     

MANAGEMENT CONTROL SYSTEMS IN FAMILY FIRMS: A REVIEW OF THE LITERATURE AND DIRECTIONS FOR THE FUTURE

Family firms play a significant role in the global economy. Although family firm literature has devoted much time and effort to investigating topics concerning corporate governance, leadership, ownership and succession, accounting issues have received relatively scant attention. In this paper, we assemble and critically review extant literature on the choice of management controls. This is an essential topic for firms as management control systems (MCS) are used to make sure subordinates behave in function of the goals of the firm. Family firms, however, have distinct features, such as differences in governance structures and goals, which can have a significant impact on whether and how MCS are used. We conclude this review paper by providing avenues for future research that can advance our understanding of both the determinants and the outcomes of the choice of MCS.     

Formalized HR practices and firm performance: an empirical comparison of family and non-family firms

The influence of the family on human resource (HR) management structures creates important idiosyncrasies with potential implications in terms of firm performance. Based on the agency and socioemotional wealth perspectives, this paper examines the formalization and effectiveness of three basic HR practices – selection, training and compensation – in different contexts of family and non-family firms. Using a sample of 500 Spanish companies, the results show that a higher degree of HR formalization has a positive influence on firm performance, confirming the negative moderating influence of family involvement on the relationship between the formalization of training practices and the firm performance. In addition, the findings indicate that the mediating role of selection practices in the relationship between training and firm performance is smaller in family than in non-family firms.     

关于提高会计信息质量的思考

会计信息是决策者进行决策的重要依据之一,会计具有一定的经济后果,会计信息的质量直接关系到决策者的决策及其后果。因此,研究如何保证会计信息的真实性,如何在最大范围内防止会计信息失真,具有重要的现实意义。所以本文从试图讨论会计信息失真的原因出发,提出提高会计信息质量的对策。     

Intra‐firm differentiation of compensation systems: evidence from US high‐technology firms

While scholars have long recognised the influence of firm decisions on aspects of compensation (e.g. pay level and pay mix), prior compensation studies offer an ambiguous understanding regarding their scope. Some studies argue that firms customise compensation decisions according to employee groups, whereas others assume that firm compensation decisions apply uniformly throughout a firm. To address this research gap, the current study analyses pay levels and pay mixes for R&D employees and administrative employees in US high‐technology firms. Our empirical analyses show that firms make distinct compensation decisions for these two job families, but these decisions are ultimately consistent. These findings highlight firms' intention to strike a balance between customising compensation systems according to employee groups and maintaining internal consistency. Our findings add interesting insights to the strategic HRM and talent management literatures, which claim that firms should differentiate among employees when designing HRM systems.     

Corporate cash holdings and total factor productivity – A global analysis

Studies concerning total factor productivity (TFP) have investigated the effect of TFP on economic growth from a country-level perspective, which is a critical issue in the macroeconomics field. Few studies have examined how corporate financial decisions influence TFP from a firm-level perspective. Specifically, no extant studies have investigated how cash holdings affect firm productivity. This study utilizes data for firms in 65 countries during 1993–2017 to investigate the effect of cash holdings on TFP from a corporate perspective. The findings show that firms with higher cash holdings can enhance TFP. The results hold after considering endogenous problems, financial constraints, financial crises, corporate governance, institutional quality, and financial development as well as various robustness tests. Furthermore, we examine whether firms consistently invest their cash holdings into research and development (R&D) expenditures enhances firm productivity. The evidence indicates that higher cash holdings lead to steady increases in R&D expenditure, which improves firms’ TFP.     

Expect the unexpected: examining the shaping role of entrepreneurial orientation on causal and effectual decision-making logic during economic crisis

ABSTRACT

While many firms operate in dynamic environments, the competitive conditions faced by firms during an economic crisis are especially unstable and turbulent. We examine firm strategic decision-making in this distinctive context and investigate the question of whether causal and effectual logic provide similar paths to performance during such challenging economic times. Further, we examine the potential impact that a firm’s level of entrepreneurial orientation (EO) has upon the relationship between managers’ predominant decision-making logic and their firm’s overall performance in this crisis. To test these relationships, we employ a robust national random sample of 447 Russian small and medium-sized enterprises (SMEs) collected from 2015 to 2016 during a period of economic crisis. Our results indicate that EO plays an important moderating role, shaping the nature of the relationships between managers’ decision-making logic and financial performance. Moreover, additional analysis identifies the presence of a non-linear relationship between both logics and the performance of SMEs.     

Resource Configuration in Family Firms: Linking Resources, Strategic Planning and Technological Opportunities to Performance

abstract    We apply the resource-based view of the firm to the study of family firms by investigating how a family specific resource (reciprocal altruism) and a firm specific resource (innovative capacity) contribute to family firm performance. We then examine how the impact of these resources is moderated by strategic planning and technological opportunities. Our findings suggest that family firms can benefit from emphasizing the positive aspects of kinship and from developing innovative capacities. As such, we demonstrate that not only do firm specific resources contribute to family firm performance, but also that family relationships can be a source of competitive advantage for a family firm. In addition, we found a heightened importance of reciprocal altruism in environments rich in technological opportunities, and that strategic planning is more important for those family firms that lack innovative capacities.     

Entrepreneurial orientation in family firms: the moderating role of technological intensity and performance

This paper examines how socio-emotional factors can influence family firms’ commitment to entrepreneurially- oriented activities, and how their level of commitment is moderated by the technological intensity of the sector and firm performance. We find that, while family firms are less entrepreneurially-oriented than non-family firms, this gap closes with increasing technological intensity of the sector. We find no evidence, however, to suggest any change in entrepreneurial orientation in family firms resulting from a drop in firm performance.