The impact of idiosyncratic uncertainty when investment opportunities are endogenous

This paper develops a general equilibrium model to study the impact of aggregate fluctuations in idiosyncratic volatility that incorporates the endogenous determination of investment opportunities. By making investment options more valuable, an increase in volatility encourages the creation of new investment options. I find the response of the economy to a volatility shock depends on how investment opportunities are obtained. If potential entrants are allowed to invest in new idiosyncratic technologies, thereby acquiring options for further investment, the volatility shock increases overall investment and results in an economic boom. On the other hand, if such an investment in option creation is precluded and investment opportunities are exogenously given, the volatility shock decreases aggregate investment.     

Supplier dependence asymmetry and investment in innovation: The role of psychological uncertainty

A key source of competitive advantage for large firms accrues from investments in innovative products and processes by their suppliers, incentivized by a positive relationship climate. A fundamental hindrance lies in a condition that commonly characterizes buyer-supplier relationships: asymmetric levels of dependence between business partners. Such asymmetry has been shown to be detrimental to the relationship, enhancing the likelihood of conflict, and negatively impacting the performance of the more dependent party. Considering that such dependence asymmetry is likely to persist, large buyers face the challenge of promoting a relationship environment that provides an incentive for suppliers to invest in innovation. In this study, we propose that large, dominant buyers can influence suppliers' intentions and behaviors by mitigating the effects of their perceived riskiness and ambiguity that emerge from a situation of dependence asymmetry. Specifically, using the lens of resource dependence theory, we investigate the effects of these two psychological dimensions of uncertainty on a supplier's trust, commitment, and willingness to invest in innovation, as well as the moderating effect of a buyer's information sharing in shaping a supplier's perceived uncertainty. The model is tested with a scenario-based experiment and results are corroborated by interviews with experienced managers of retail suppliers. Our findings indicate that a supplier's dependence on a large buyer increases its perception of ambiguity and riskiness in the relationship, negatively impacting its trust, commitment, and willingness to invest in innovation. However, a buyer who shares relevant and timely information with the supplier mitigates its perceived uncertainty, promoting the supplier's positive attitudes towards the buyer and incentivizing innovation. Sharing operational and strategic information such as point-of-sales data, sales forecasts, or strategic plans, becomes a valuable strategy to powerful buyers in the pursuit of becoming a preferred customer and enhancing a supplier's resource mobilization towards the relationship.     

The impact of the logistics service standardization on firm value: Evidence from China

In 2014, the Standardization Administration of China launched its first pilot project of the logistics service standardization (LSS). We examine whether the staggered adoption of the LSS creates value for shareholders using a difference-in-difference research design. The findings suggest that firms located in LSS cities have higher firm value in terms of Tobin’s Q and stock returns than those of non-LSS cities. In further analysis, we find that the LSS enhances firm value by improving corporate operational efficiency. However, the LSS increases large firms’ market share at the expense of small firms. Overall, our findings advance the literature of logistics system reform and show that such reform creates value for shareholders.     

The effects of match uncertainty and bargaining on labor market outcomes: evidence from firm and worker specific estimates

In this paper we examine wage dispersion in labor markets across currently employed workers. We argue that differences in the potential productivity of a match (typically assumed to be known in the previous literature) generates a surplus between the minimum wage the worker is willing to accept and the maximum wage the firm is willing to offer for the job. Existence of this surplus leads to wage dispersion due to negotiating over the amounts extracted by each agent. Our objective is to estimate the surplus extracted by each firm-worker pair and the effect of the net extracted surplus on the wage, for each firm-worker pair using the two-tier stochastic frontier model. An empirical application finds that, on average, firms paid workers less than their expected productivity. More specifically, at the mean, the net effect of productivity uncertainty leads to equilibrium wages which are 3.33% below the expected productivity of matches.

The financial investment decision of non-financial firms in China

This paper constructs a portfolio model to analyze the determinants of the financial investment decision of non-financial firms in China. Unlike the literature assuming that financial investments are riskless, our model allows risks in both fixed and financial investments. We show that this extension provides an analytically similar but economically different model from the literature. In particular, it is relative risk and risk-adjusted return gap, not pure risk and simple return gap that enter into firms’ financial investment decision model. Using firm-level panel data of 1902 firms listed in Chinese stock market over the period from 2006 to 2016 with semi-annual frequency, we find that the ratio of fixed investment risk over total risk dominates financial investment decisions of non-financial firms. However, rates of risk-adjusted return gap between financial and fixed investments play no role in Chinese firms’ financial investment decisions, which is in stark contrast to the results using a model assuming riskless financial investments. The baseline findings are robust to alternative measures of financialization and investment risk and different firm sizes, ownership structures and time periods.     

The impact of human resource management practices and corporate entrepreneurship on firm performance: evidence from Turkish firms

This paper outlines the important role of human resource management practices with a link between corporate entrepreneurship and firm performance. Data were collected from a survey of 124 firms operating in different industries in Turkey. The findings of this study indicated that human resource management (HRM) practices partially mediated the relationship between corporate entrepreneurship and firm performance. In other words, corporate entrepreneurship affects firm performance, both directly and through its effects on HRM practices. In addition to corporate entrepreneurship, it is found that HRM practices explain a significant level of additional variance (9 per cent) in firm performance. The theoretical and managerial implications are discussed.     

Business strategy and firm efforts on environmental protection: Evidence from China

Although business strategy plays a fundamental role in firm operations, whether and how business strategy affects firms' environmental protection behaviors remain unclear. On the basis of a typical emerging market, we show that firms following prospector strategies take more environmental protection actions than do those following defender strategies. Our findings are robust to endogeneity checks and alternative measures of business strategy. We further find that prospectors engage in more environmental activities than do defenders when the degree of financial constraint or earning management is high. Our results are particularly pronounced in state‐owned enterprises, heavy‐polluting industries, and firms located in regions with strict environmental regulations. Overall, this study provides clear policy implications for regulators concerned with environmental protection.     

Customer service-focused HRM systems and firm performance: evidence from the service industry in Taiwan

Abstract

This study adopts a resource-based view, attraction–selection–attrition theory and a focused approach to examine the link between service-focused human resource management (HRM) systems and firm performance. Internally, we examine employee competency as the ‘black box’ between service-focused HRM systems and firm performance. Externally, we examine the effect of the interplay of a service-focused strategy and service-focused HRM systems in predicting firm performance. We collect data from different sources (i.e. executives, human resource members, and line managers). Using a final sample included 2120 respondents from 175 firms in the service industry in Taiwan, the results show that customer service-focused employee competency transmitted 53% of the effect of customer service-focused HRM systems on firm performance. In addition, when a firm implements a less service-focused business strategy, service-focused HRM systems leads to significant improvement in firm performance. Implications for research are discussed.     

Manpower restructuring in the state-owned railway industry of China: the role of the state in human resource strategy

Twenty years after it first opened its door to foreign enterprises, one of the greatest challenges facing the Chinese government today is the reform of the state-owned enterprise sectors (which make up half of the country's GDP) in order to make them more efficient. This paper intends to describe and then critically assess a number of major human resource policies introduced in the state-owned railway enterprise (one of the biggest enterprises) in China in its recent manpower reform (downsizing). Through the case of the railway company, a wider picture is revealed of the country's changing employment policy and practice as well as its emerging labour market. In particular, problems relating to human resources such as skill, remuneration, and training are highlighted at both organization and national level. As the reality of 'life-long employment' comes to an end, the notion of 'life-long learning' has been given a high profile in government policy decisions. What, then, has been and is the role of the state in 'creating' and resolving these problems as an employer and as a state governor?     

The role of state ownership and institutions in the innovation performance of emerging market enterprises: Evidence from China

Although it has been suggested that institutional context influences a firm's innovation performance, the role of regulatory institutions has been underexplored. Extending previous research, this study investigates whether and how regulatory institutions (i.e. state ownership, region-specific marketization and industry-specific institutional policy) affect innovation performance of emerging market enterprises (EMEs). Evidence derived from a large sample of Chinese manufacturing firms demonstrates that state ownership positively moderates the effect of R&D intensity on innovation performance. However, state ownership is not equally beneficial for all firms. Our analysis shows that region-specific marketization and industry-specific institutional policy enhance the innovation-enhancing effect of state ownership. By revealing the role of regulatory institutions, our study points to the importance of looking beyond firm boundaries to understand why EMEs are able to innovate despite their weak internal capabilities.     

The impact of perceived corporate social responsibility on organizational commitment and the moderating role of collectivism and masculinity: evidence from China

This study examines the relationship between employee perceptions of corporate social responsibility practices and their organizational commitment. Hierarchical regression analysis was utilized to analyze survey data on 280 employees from five export-oriented manufacturing firms in China. Employee perceptions of corporate social responsibility practices towards internal stakeholders were found to relate positively to their organizational commitment. In contrast, employee perceptions of corporate social responsibility practices to external stakeholders had a nonsignificant or marginally significant impact on organizational commitment. In addition, the collectivism and masculinity orientations of employees were found to moderate this relationship. These findings provide an insight into how corporate social responsibility practices may be utilized to motivate diverse groups of employees within China-based organizations.     

The relationship between human resource management practices,business strategy and firm performance: evidence from steel industry in Taiwan

The primary objective of this study is to investigate the relationship between human resource management (HRM) practices, business strategy and firm performance. We examined the following HRM practices: training and development; teamwork; compensation/incentives; HR planning; performance appraisal; and employment security. We surveyed 236 managers working at steel firms in Taiwan to explore their perceptions on the impact of HRM practices and business strategy on firm performance. The results of this study are summarized as follows: (1) HRM practices will be positively related to firm performance; (2) there is a close linkage between HRM practices and business strategy; (3) business strategies will be positively related to firm performance; (4) integrating HRM practices with business strategies will be positively related to firm performance.     

Reprint of "The role of state ownership and institutions in the innovation performance of emerging market enterprises: Evidence from China"

Although it has been suggested that institutional context influences a firm's innovation performance, the role of regulatory institutions has been underexplored. Extending previous research, this study investigates whether and how regulatory institutions (i.e. state ownership, region-specific marketization and industry-specific institutional policy) affect innovation performance of emerging market enterprises (EMEs). Evidence derived from a large sample of Chinese manufacturing firms demonstrates that state ownership positively moderates the effect of R&D intensity on innovation performance. However, state ownership is not equally beneficial for all firms. Our analysis shows that region-specific marketization and industry-specific institutional policy enhance the innovation-enhancing effect of state ownership. By revealing the role of regulatory institutions, our study points to the importance of looking beyond firm boundaries to understand why EMEs are able to innovate despite their weak internal capabilities.     

The impact of entrepreneurial orientation on firm performance: the role of CEO position tenure and industry tenure

The relationship between Entrepreneurial Orientation (EO) and firm performance, despite generating significant scholarly interest, has remained mixed. These results may be attributed, at least in part, to the failure to sufficiently examine the potential impact of top management characteristics. The present study investigates how CEO characteristics (i.e. CEO industry and position tenure), impact the relationship between EO and firm performance within a sample of 579 US banks. As predicted, some support for a positive EO to performance relationship was found. In addition, the results strongly support, as posited, that CEO industry tenure positively moderates, and CEO position tenure negatively moderates, the EO to performance relationship. We also report evidence supporting the effect of EO, configured with CEO position tenure and industry tenure on firm performance. Our study suggests the EO–performance relationship is more complex than previous studies indicate. Implications for future research and practice are provided.     

The impact of cluster connectedness on firm innovation: R&D effort and outcomes in the textile industry

Recent research into the clustering effect on firms has moved away from a simplistic view to a more complex approach. More realistic and complex causal relationships are now considered when analysing these territorial networks. Specifically, this paper attempts to analyse how cluster connectedness moderates the relationship of a firm's innovation effort and the results obtained from this effort. We want to question the commonly accepted direct and positive impact of R&D effort, and moreover, we suggest the existence of a saturation effect and that the level of cluster's inter-connectedness in the cluster moderates this effect. We have developed our empirical study focusing on the Spanish textile industrial cluster. This is a complex manufacturing industry that uses relatively low-technology manufacturing and R&D. Our findings suggest that the degree to which a firm is involved with, or connected to, other firms in the cluster can moderate the effect of the R&D effort on its innovation results. More generally, we aim to contribute to the discussion on the degree to which firms should be involved in the cluster network in order to operate efficiently and gain the maximum competitive advantages. Our findings have implications both in recent cluster and network literature as well for institutional policy.     

Training and enterprise performance in transition: evidence from China

The role of training and its impact on company performance is studied in different types of enterprises in a transitional economy. A sample of manufacturing enterprises is drawn, using China as a case study. The findings indicate that training is perceived to be relatively important in non-state-owned enterprises (non-SOEs). Training objectives have three major dimensions, namely enhancing working relationships, tackling skill deficiencies and skills development. SOEs tend to focus more on skill development, while non-SOEs emphasize both enhancing working relationships and skills improvement. Comparing the expectations of training and the perceived achievement of training objectives, the gap is seen to be small within all types of enterprises, and training effectiveness is perceived to be similar. The production function estimation shows that there is a positive relationship between training expenditures and enterprise productivity.     

The local impact of typhoons on economic activity in China: A view from outer space

We examine the impact of typhoons on local economic activity in coastal China. To capture potential damages from an individual typhoon we use historical typhoon track data in conjunction with a detailed wind-field model. We then combine our damage proxy with satellite derived nightlight intensity data to construct a panel data set that allows us to estimate the impact of typhoons at a spatially highly disaggregated level (approx. 1 km). Our results show that typhoons have a negative and significant, but short-term, impact on local activity – a typhoon that is estimated to destroy 50% of the property reduces local economic activity by 20% for that year. Over our period of analysis (1992–2010) total net economic losses are estimated to be in the region of $US 28.34 billion. To assess the damage risk from future typhoons we use simulated probability distributions of typhoon occurrence and intensity and combine these with our estimated effects. Results suggest that expected annual losses are likely to be around $US 0.54 billion.     

Aligning labour disputes with institutional,cultural and rational approach: evidence from East Asian-invested enterprises in China

This study examines the underlying critical factors, such as the institutional arrangements, working conditions, workforce composition, expatriate managers, and managerial style which influence the labour disputes in the East Asian-invested enterprises (EAIEs) in China. Throughout the process, we can determine which factors should be changed for better human resource management (HRM) practices. This research incorporates the survey data collected from the managers and factory workers working at 30 different firms invested from Taiwan, Korea, Hong Kong and Japan in the coastal cities from 2000 to 2001.

The results or findings demonstrate that the long work hours and less regulative managerial styles have significant and positive effects on the number of the labour disputes in the Hong Kong owned firms. Among the firms owned by Taiwan, the long work hours and their authoritarian managerial style have significant effects on the frequency of the labour disputes, while the lack of unionization has a diminishing effect on the labour disputes. The firms owned by Korea, on the other hand, often encounter frequent collective actions, organized by homogeneous local workforces and supported by the relatively high numbers of trade unions. Responding to the relatively strict enforcement of the labour laws and the institutional arrangements of the local governments in northern China, the firms owned by Korea tend to adopt the less regulative and less authoritarian managerial styles. Lastly, the firms owned by Japan experience the lowest number of the labour disputes when compared to their counterparts. The observance of the legal work hours and the regulative managerial style displays a significantly diminishing effect on the number of the labour disputes, although the higher level of institutionalization of the labour relations such as higher setting-up of trade unions somewhat positively contributes to the frequency of the labour disputes.

From the theoretical perspective, our exploratory model seems to exhibit the stronger explanatory ability when the institutional, cultural, and rational factors are taken into consideration. From the institutional perspective, it is imperative for local governments to reinforce the institutional arrangements through effective supervision and enforcement of the labour regulations and legislation. From the cultural perspective, foreign investors should enhance their inter-cultural understanding and localization to diminish the industrial conflicts in the workplaces in China. From the rational perspective, foreign-investors will face more labour disputes than they had before, if harsh working conditions, such as extension of the working hours, are enforced. It is also imperative for the workers to understand their rights and empower themselves to improve their working conditions.     

The influence of follower cultural orientation on attitudinal responses towards transformational leadership: evidence from the Chinese hospitality industry

In addition to extending the empirical investigation of the relationship between transformational leadership and follower affective commitment to the Chinese hospitality industry, this study makes a theoretical contribution by investigating the influence of individually held cultural values on this relationship. Building on previous research which has examined whether collectivism moderates the transformational leadership/affective commitment relationship, this study investigates the moderating effects of two additional cultural value orientations, namely power distance and uncertainty avoidance. Hierarchical regression analysis was utilized to analyse survey data from 398 employees of four Chinese hotels in Zhejiang Province. In addition to finding a positive relationship between transformational leadership and affective commitment, data analysis revealed that followers low in power distance exhibited higher levels of affective commitment when working under a transformational leader than those high in power distance. In addition, followers high in uncertainty avoidance and collectivism exhibited greater commitment when working under a transformational leader than those low in uncertainty avoidance and collectivism. These findings clearly indicate the importance of within-country cultural differences to the effectiveness of leaders in the workplace.     

Staffing practices in transition: some empirical evidence from China

Although the reform of staffing practices in China has been discussed in the literature, the rationale behind this reform and changes in this HR activity have received insufficient attention and warrant further examination. This article reviews staffing practices during and after Mao's regime, and reports the results of a survey of staffing practices in Chinese industrial enterprises. The research findings indicate that a free labour market is emerging in China, staffing practices are becoming more decentralized and selection criteria have focused more on job-specific information, such as personal ability and skills, rather than political factors. The empirical results also demonstrate that ownership form does have an impact on staffing practices. The paper concludes by arguing that staffing practices in China have revealed only some resemblance to those conducted in the Western market economies.