The age-effect of financial indicators as buffers against the liability of newness

This paper builds on the liabilities of newness literature to suggest that accounting information is important for new firms. Using a sample of over 30,000 companies followed during their first 7 years of existence, we find evidence that financial indicators mitigate the liability of newness and that this buffering effect is stronger the younger the organization. These results represent three primary contributions to the literature. First, our conceptualization of accounting measures as indicators of external (creditworthiness enhancing legitimacy) as well as internal (targets for management) buffers to the liabilities of newness provides a novel way of viewing these constructs and explains why they are important to new firms despite their uncertainty and opacity. Second, we theoretically justify and empirically validate that these constructs are more important the younger the new firm is, which runs counter to the common wisdom of these constructs in the entrepreneurship literature. Third, we identify buffers against failure for new firms that are generalizable across industries.     

Establishment exits in Germany: the role of size and age

Using comprehensive data for West Germany, this paper investigates the determinants of establishment exit. We find that between 1975 and 2006 the average exit rate has risen considerably. In order to test various “liabilities” of establishment survival identified in the literature, we analyzed the impact of establishment size and put a special focus on differences between young and mature establishments. Our empirical analysis shows that the mortality risk falls with establishment size, which confirms the liability of smallness. The probability of exit is substantially higher for young establishments which are not more than 5 years old, thus confirming the liability of newness. There also exists a liability of aging since exit rates first decline over time, reaching a minimum at ages 15–18, and then rise again somewhat. The determinants of exit differ substantially between young and mature establishments, suggesting that young establishments are more vulnerable in a number of ways.     

CEO Turnover in Dual-Path Career: An Examination of Followers’ Power

This paper highlights the internecine struggle within the top management team in listed companies in China. Drawing on a power perspective, we longitudinally examine the antecedents of CEO dismissal followed by inside succession in dual-path CEO career. It examines the influence of followers’ power on the dismissal of incumbent CEO and demonstrates the liability of newness and outsiderness, which is strengthened by the power of followers. It also highlights conflicts of interest and competition within the top management team and the joint effects of followers’ power on both the liability of newness and outsiderness.     

Fear of floating and domestic liability dollarization

Previous attempts to analyze the effect of liability dollarization on “fear of floating” have focused exclusively on the role played by foreign liabilities. Liability dollarization of the domestic banking system, however, poses a similar risk as dollar-denominated deposits and credit impose a source of currency risk on domestic banks and firms, respectively. Findings from a large cross-country sample indicate that domestic liability dollarization plays a central role in producing a “fear of floating” among emerging market countries and developing nations. This is an important result because domestic liability dollarization is more reversible than the dollarization of foreign liabilities, providing a reason for optimism that these countries can regain flexibility in the choice of exchange rate regime and overcome their “fear of floating”.     

Effects of Network Embeddedness on the Relationship Between Environmental Volatility and Interfirm Contracts

Purpose: This study examines the effects of an embedded network on the contractual relationship between exchange parties under conditions reflecting varying levels of environmental volatility and investigates the role of an important network factor—the embedded network—in the contractual relationship between manufacturers and their suppliers.

Methodology: The empirical test was conducted with manufacturing companies in the context of manufacturer–supplier relationships. Construct measures were based on existing measures and previous research. Measurement reliability and validity were established using exploratory and confirmatory factor analysis and an overall measurement model was assessed with structural equation modeling using LISREL.

Findings: The results of a survey of manufacturers indicate that firms in an embedded network preferred “soft” contracts even when they face volatile environments, whereas those facing volatile environments in a less embedded network preferred “hard” contracts with explicitly specified written requirements. Network partners carefully evaluated embedded networks (a critical factor that has not received enough attention) before forming contractual relationships in a network perceiving interfirm relationships differently.

Originality: The study introduces network embeddedness to explain governance mechanisms in volatile environments and shows that the explicit recognition of embedded network may facilitate the development of contracts with specific provisions as the contractual relationship evolves.     

Firm Newness,Entrepreneurial Orientation,and Ethical Climate

Faced with the liability of newness, a scarcity of resources, and concerns of survival, new firms frequently encounter difficult ethical decisions and might be pressured to make choices that run counter to the tenets of more developed ethical and moral reasoning. This study explores the impact of newness and entrepreneurial orientation on the ethical climate of firms. Data collected from 304 individuals across 37 firms indicated that firm newness was more strongly related to ethical climate than was an entrepreneurial orientation. Results also revealed that firm newness may be usefully conceptualized in both continuous and categorical terms, with each operationalization holding a somewhat different relationship with climate. Finally, results revealed that firm size was related to several types of ethical climates.     

Mitigating the dual liability of newness and foreignness in capital markets: The role of returnee independent directors

Foreign firms undergoing an initial public offering in developed economies face a dual liability of newness and foreignness that can negatively impact the firm’s ability to access capital. In this study, we examine the ability of returnee independent directors to overcome such a liability among 232 foreign listings in the U.S. We find that returnee independent directors positively impact the price premium of the foreign IPO. We also find that this relationship is contingent on the level of ownership retained by non-independent directors, the level of ownership retained by venture capitalists, and investor protection in the firm’s country of origin.     

Choice of markets for initial export activities: Differences between early and late exporters

The behaviour of early exporters not only challenges the perspective of the sequential process of internationalization, but it also questions general concepts in the field of management, such as the liability of newness and the liability of foreignness. This study analyses how firms initiate their export activities and proposes differences between early exporters and other firms. The results of our empirical investigation demonstrate that early exporters begin exporting to a greater number of countries than late exporters. However, in the case of early exporters, those countries are institutionally closer to the country of origin of the firm. Finally, we analyze the role played by financial resources in the choice of markets for those initial exports.     

Politicising Government Engagement with Corporate Social Responsibility: “CSR” as an Empty Signifier

Governments are widely viewed by academics and practitioners (and society more generally) as the key societal actors who are capable of compelling businesses to practice corporate social responsibility (CSR). Arguably, such government involvement could be seen as a technocratic device for encouraging ethical business behaviour. In this paper, we offer a more politicised interpretation of government engagement with CSR where “CSR” is not a desired form of business conduct but an element of discourse that governments can deploy in structuring their relationships with other social actors. We build our argument through a historical analysis of government CSR discourse in the Russian Federation. Laclau and Mouffe's (Hegemony and socialist strategy: Towards a radical democratic politics, Verso Books, London, 1985) social theory of hegemony underpins our research. We find that “CSR” in the Russian government’s discourse served to legitimise its power over large businesses. Using this case, we contribute to wider academic debates by providing fresh empirical evidence that allows the development of critical evaluation tools in relation to governments’ engagement with “CSR”. We find that governments are capable of hijacking CSR for their own self-interested gain. We close the paper by reflecting on the merit of exploring the case of the Russian Federation. As a “non-core”, non-western exemplar, it provides a useful “mirror” with which to reflect on the more widely used test-bed of Western industrial democracies when scrutinising CSR. Based on our findings, we invite other scholars to adopt a more critical, politicised stance when researching the role of governments in relation to CSR in other parts of the world.

     

New venture survival: Ignorance,external shocks,and risk reduction strategies

Although scholars have long recognized the increased mortality risk that new ventures face in terms of a “liability of newness,” most of the discussion around this risk has been in terms of the contextual constraints that new ventures face and the difficulties that managers have in overcoming them. This emphasis is in part a reflection of the perils of newness but also stems from the retrospective and aggregate perspective taken by researchers. Although the macro-level perspective of new venture mortality has made a significant contribution to our knowledge of mortality risk patterns, there has been little interest in identifying how venture managers can address the risks that all new organizations face.We argue that in order to make progress in explaining new venture survival, a theoretical model is required that uses a more micro-level perspective to explain new venture failure (and the flip side, new venture survival). In this paper we develop such a model. We establish a definition of mortality risk and argue that the liability of newness is largely dependent on the degree of novelty (ignorance) associated with a new venture. Novelty is viewed in three different dimensions, viz.: to the market, to the technology of production and to management. Novelty to the market concerns the degree to which the customers are uncertain about the new venture. Novelty in production concerns the extent to which the production technology used by the new venture is similar to the technologies in which the production team has experience and knowledge. Novelty to management concerns the entrepreneurial team's lack of business skills, industry specific information and start-up experience. We argue that mortality risk increases with the degree of novelty in each dimension and with the number of dimensions in which the new venture is novel.We propose that the decline in mortality risk occurs as the venture's novelty in each of the three dimensions is eroded by information search and dissemination processes. This allows the new firm to become an established business and explains what we term the “evolutionary” path of mortality—novelty and risk decline monotonically, after a period of adolescence, as ignorance decays over time due to `passive learning'. We also propose that there is a “strategic” mortality risk path that reflects the impact of positive and negative shocks (shocks are exogenous events that alter the overall degree of novelty at a point in time— positive shocks decrease overall novelty, while negative shocks increase overall novelty) and reversals (endogenous actions that increase the overall novelty of the new venture at a point in time) on the mortality risk of a new venture.If the incidence and effects of these disruptions can be managed, then venture managers may be able to mitigate the mortality risk for their venture. We argue that risk reduction strategies can be employed, most of which impact on one or more of the dimensions of mortality risk in order to increase the firm's chances of survival. A series of risk reduction strategies are proposed and their impact on the determinants of mortality risk is considered.     

Advertiser Expectations of Agency Creative Product

ABSTRACT

The study reports the development and empirical testing of measures of advertiser expectations of agency produced creative product. This “applied creative,” professional, business-to-business service incorporates extensive process elements. Hence, two measurement models are developed: a traditional “unitary” model, and a dualistic model incorporating elements of process and outcome. The study demonstrates firstly that client expectations of this highly intangible, “applied creative” professional service can be empirically modelled, and secondly, that such measurement does exhibit dimensions of both outcome and process. This paves the way for subsequent modelling of consumer satisfaction or quality evaluation processes within this little explored service category.     

Does innovativeness reduce startup survival rates?

There are two competing hypotheses explaining how innovativeness influences the survival of startups: On the one hand, innovativeness is argued to foster survival-enhancing attributes (e.g., market power and cost efficiency) and capabilities (e.g., absorptive capacity). On the other hand, an innovative startup faces (and bears the associated risks of) liabilities of newness and smallness that exceed those of its non-innovative counterparts. The available empirical literature addressing this theoretical tension mostly supports the former hypothesis; we suggest that this finding is, in part, driven by the common practice of employing an ex post measure that already embodies a degree of success in innovativeness. We use an ex ante measure and find that a startup's innovativeness is negatively associated with its subsequent survival. We also find that entrepreneurs' greater appetite for risk magnifies this negative association. These findings imply that pursuing innovations is not necessarily associated with survival during the early stages of firm development and entails a more complicated start-up process.     

Organizing a precarious black box: An actor‐network account of the Atlantic Schools of Business, 1980–2006

There is a growing use of actor‐network theory (ANT) throughout management and organization studies. While earlier ANT research used ethnography to “follow the actors” in the production of organization/knowledge, more recent studies use archival sources to examine developments over time. We extend the latter approach using qualitative social network analysis (SNA) and apply this to a case study of the Atlantic Schools of Business (ASB). Our contribution is two‐fold: first, through an examination of actors in the ASB networking processes over 26 years, we demonstrate how the seemingly stable surface of an organization can hide the precariousness of organizing; second, we reveal the potential fusion of ANT with SNA as a method for dealing with large qualitative datasets over long periods of time. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

Resources of the firm, Russian high-technology startups, and firm growth

Russia possessed many world-class technologies prior to the break up of the Soviet Union. Entrepreneurial endeavors resulted from this technological ability as market forces encouraged individuals to leave the large state enterprises that produced those technologies. Founding characteristics of the firm impact the resources that are available to the startup firm. This study investigates the extent to which founding factors in Russia help high-technology firms to prosper. It was found that the team establishing the business mitigated the liability of newness. However, in contrast to the US, the culture of Russia does not produce negative results if the founding team grows very large. Additionally, it was shown that firms that pursued more technological products and enter the market later performed best.     

Dynamic Embeddedness in Chinese Firm Internationalization

This article presents a multilevel framework to analyze the motivations and location choices of Chinese OFDIs. We contribute to theory‐integration on Chinese OFDI flows and patterns by suggesting a framework that combines country‐, industry‐ and firm‐level analyses and by reflecting aspects from the resource‐based view (firm‐specific advantages), institutional‐based view (push/pull home‐ and host‐­country factors), and network‐based view (network relations). We also explicitly incorporate “time” as a variable into our framework by introducing and explaining the concept of dynamic embeddedness as an interaction dimension to reflect the inherent dynamics on all levels and actors. © 2017 Wiley Periodicals, Inc.     

Contagion Entrepreneurship: Institutional Support,Strategic Incoherence,and the Social Costs of Over‐Entry

Existing literature on the legitimizing role of institutions tilts toward a “more is better” perspective, proffering the notion that the liabilities of smallness and newness can be mitigated through institutional policies that foster acceptance, trust, and confidence. Although this may seem reasonable, even desirable, institutional munificence can trigger massive over‐entry, potentially causing unintended consequences and unwanted social costs. Using a data set of nearly six million transaction‐level decisions involving all 612 companies and 56,240 permitted projects from a complete industry history, I find that unforeseen costs arise when small, early‐stage firms substitute the legitimizing effects of institutional support for strategic coherence. The findings are surprising and significant. While institutional support for new markets does in fact generate a surge in firm formations, the ill effects of munificence are evidenced by indiscriminate, contagion‐style market entry by unfit firms that perform poorly, fail quickly, and leave a long trail of regulatory violations in their collective wake. The study offers opportunities for scholars, practitioners, and policymakers to reassess the core assumptions related to the benefits and costs of institutional support for new industries, firms, and entrepreneurs.     

Social Media Firm Specific Advantages as Enablers of Network Embeddedness of International Entrepreneurial Ventures

Combining internalisation theory and internationalisation networking literature we study how international entrepreneurial ventures use social media to internationalise. Our qualitative study reveals the governance mechanisms and learning that are part of a dynamic process. We explain how firms leverage their own social-media capabilities and bundle them with the capabilities of foreign partners, which they leverage to create new social-media capabilities to grow internationally. Firms leverage social-media capabilities to become embedded within emerging and strategic networks, a position that is central for firms to mitigate threats of opportunism and bounded reliability and to overcome liabilities connected to smallness, newness, and foreignness.     

Legitimacy and accelerated internationalisation: An Indian perspective

This paper extends the institutional theory perspective by examining the strategic behaviour of founders of smaller service firms in a key emerging economy—India. Building on accelerated internationalisation and legitimacy literature in the emerging market context, we provide a new perspective, emerging market aggressiveness, which explains why founders/managers are not always passive recipients of their environment. Their selections of locations are dependent on the vision and stretch goals of the founder and their ability to gain legitimacy quickly to move that vision to a reality. They do not appear to be limited by their potential liabilities of newness, foreignness, emergingness or outsidership. They adopt committed modes of entry from the outset to build their legitimacy and reduce their liability as an outsider. Using a qualitative multiple case study approach, we demonstrate that managers are able to use proactive, planned and unplanned strategies simultaneously, in order to quickly prepare themselves to take advantage of transient international opportunities, ahead of their competitors in advanced markets.     

Multiple dimensions of mediation within transnational advertising production: cultural intermediaries as shapers of emerging cultural capital

The paper re-conceptualizes cultural intermediaries as shapers of “emerging cultural capital” (Prieur, A., and M. Savage. 2013. “Emerging Forms of Cultural Capital.” European Societies 15 (2): 246–267; Savage, M., F. Devine, N. Cunningham, M. Taylor, Y. Li, J. Hjellbrekke, and A. Miles. 2013. “A New Model of Social Class? Findings from the BBC’s Great British Class Survey Experiment.” Sociology 47 (2): 219–250) and re-frames their practice of signification and negotiation as informed by “multiple dimensions of mediation.” Drawing on a case study of Nike’s transnational advertising production and interviews with key actors within the context of production, the paper examines how the creative/cultural labour process cuts across global and national fields of cultural production and consumption through which popular culture and middle-brow tastes were mediated, signified and represented. In particular, a television campaign for the Japanese youth market was critically analysed to reveal how specific new tastes, lifestyles and consumption practices were legitimized as emerging forms of cultural capital. Consequently, their taste-making practices are profoundly implicated in symbolic struggles and cultural changes emerging within/from the increasingly “globalizing” field of cultural production.     

SME Survival: The Impact of Internationalization,Technology Resources,and Alliances

This research examines the impact of internationalization on small and medium enterprise (SME) survival, and the direct and moderating effects of technology resources and research and development (R&D) alliances. Our survey examination of 1,612 Korean SMEs reveals that sales internationalization is associated with better survival prospects, suggesting that failure risk does not increase with cross‐border sales. In addition, though technology resources provide no direct survival benefits, R&D intensity acts as a moderator in the internationalization‐to‐survival relationship. R&D alliances, on the other hand, are directly linked with survival but do not show a moderating effect. This supports the liabilities of newness and smallness view that external relationships can help counter survival threats but suggests that the accumulation of technology resources may be more important when firms seek international expansion.