Explaining economic performance during transition: What do we know?

While after the collapse of the communist bloc virtually all of its former member countries embarked on market-oriented reforms, the individual countries followed different routes and experienced different outcomes. In all cases, however, output declined steeply during the early years of transition. What were the main causes behind the severe contraction of output? Why have some countries managed to overcome the transformation crisis far better than others?     

Revisiting the entrepreneur gender–performance relationship: a firm perspective

Research shows that firms started by women underperform those started by men but the relationship may not be as straightforward as previously thought. Using a sample of 4,540 Korean ventures in 2002 we investigated the effects of three firm characteristics—resources, industry, and regional location—on firm performance. Results indicate that firms started by male entrepreneurs, compared to female, have greater firm assets, compete in high-technology manufacturing industries, and are more likely to locate in clustered regions. Further, these firm characteristics are positively associated with domestic and international firm performance. Findings suggest firm resource and context characteristics fully mediate the entrepreneur gender–firm performance relationship. Overall, gender is not a determinant of domestic or international firm performance.     

Does diversification add firm value in emerging economies? Effect of corporate governance

Using 205 Taiwanese firms spanning five years, this research examines how corporate governance factors specific to emerging economies determine the extent of diversification and moderate its performance. The analyses reveal that controlling family ownership is significantly associated with a greater extent of diversification, which impairs firm value. Conversely, domestic bank ownership significantly decreases diversification, which in turn increases diversification performance. These findings present the evidence of controlling family entrenchment through diversification and the significant role domestic banks play in the principal–principal corporate governance framework.     

Signaling virtue: Does firm corporate social performance trajectory moderate the social performance–financial performance relationship?

Over the past 40 years, scholars have demonstrated the effects of corporate social performance (CSP) on corporate financial performance (CFP), finding mixed results on the main effect of CSP on CFP. This study moves beyond the search for a universal main effect of CSP on CFP to examine factors that drive some firms to experience greater returns from their CSP efforts. Building from the signaling and stakeholder theory definitions of reputation and the trajectory literature in psychology, this study examines the following question: what is the impact of a firm's CSP reputation on the relationship between CSP actions and CFP in the current period? Findings based on a sample of 351 US firms demonstrate that firms with either a history of growth in negative CSP, a propensity toward increasing negative CSP, or a more inconsistent history of positive or negative CSP, experience decreased returns from current period investments in CSP.     

What factors determine innovation performance in emerging economies? Evidence from China

Although the literatures on international trade, FDI and R&D have assisted significantly in improving our understanding regarding the determinants of innovation performance, there has been little research concerning the way in which each informs the other. Integrating theoretical developments from all three literatures, we propose and test a multidimensional conceptual framework that allows us to explain more fully what determines innovation performance in emerging economies. Testing the framework against a recently constructed industry-level dataset for China, the empirical analysis indicates that it has significant power in explaining variations in innovation performance. Nevertheless, our findings also show that factors such as international trade, FDI and R&D do not always have positive consequences. Rather, they indicate that their effects are moderated by technological opportunities and the level of foreign presence, implying that previous mixed findings regarding the role of international trade, FDI and R&D may be the result of incomplete theorizing about the factors that moderate the relationship between innovation performance and these factors.     

The entrepreneurial orientation–performance relationship in private family firms: the moderating role of socioemotional wealth

Drawing on socioemotional wealth (SEW) literature, this paper revisits the established entrepreneurial orientation (EO)–performance relationship in a family business context. The main idea in entrepreneurship literature is that EO leads to increased firm performance. We question this logic in a family business context because family related non-financial goals, like SEW, may prevent the firm to reap the fruits of their entrepreneurial efforts. Specifically, we argue that SEW engenders inefficiencies that place constraints on the realization of the benefits of entrepreneurship. Therefore, we propose that a high level of SEW preservation hinders the transmission of the family firm’s EO into positive performance effects. To test this hypothesis, an empirical study was developed using a sample of 232 Belgian private family firms. Robust linear regression analysis reveals that the positive effect of EO on financial performance decreases as the level of SEW preservation increases.     

The moderating impact of internal social exchange processes on the entrepreneurial orientation–performance relationship

This paper applies a social exchange perspective to understand the internal contingencies of the relationship between entrepreneurial orientation (EO) and performance. It focuses on two aspects of social interactions among functional managers (procedural justice and trust), as well as on their organizational commitment, as potential enhancements to the firm's successful exploitation of entrepreneurial opportunities. A study of 232 Canadian-based firms finds several positive moderating effects: The EO–performance link is stronger for higher levels of procedural justice, trust, and organizational commitment. In addition, consistent with a systems approach to organizational contingencies, the EO–performance relationship is stronger when the organization's social context comes closer to an “ideal” configuration of procedural justice, trust, and organizational commitment that is most conducive to knowledge exchange within the organization. The study's implications and future research directions are discussed.     

The effect of foreign partner network embeddedness on international joint venture failure: Evidence from European firms’ investments in emerging economies

Access to trusted information about potential local partners is a critical factor for international joint venture (IJV) stability and success in emerging economies. We build on social network theory and examine how foreign investors can benefit from their alliance networks in accessing reliable information on the availability, resources, and behavior of potential local IJV partners. More specifically, we examine positional embeddedness in networks and network density and how these factors help foreign firms mitigate behavioral uncertainty in IJVs and thus reduce the likelihood of failure. We use data on 349 IJVs formed by 132 European firms in emerging economies during the 1995–1997 period and event history analysis to test our hypotheses. Our findings indicate that having an alliance network is a necessary but insufficient condition to mitigate behavioral uncertainty of local partners. We find that only densely tied networks offer benefits of reliable information on potential local partners that ensure the longevity of IJVs and that a central position in an alliance network translates into lower IJV failure.     

Entrepreneurship and dynamic capabilities: how firm age and size affect the ‘capability enhancement–SME performance’ relationship

The entrepreneurship and dynamic capabilities literature adds to our understanding of how strategic change can drive firm performance. We draw on a recent survey of US SMEs to determine whether entrepreneurial ventures have dynamic capabilities, and, if so, whether differences in the characteristics of those ventures lead to differences in how dynamic capabilities benefit firm performance. We find that most entrepreneurial ventures report having such capabilities and that their differences in age and size lead to differences in how dynamic capabilities affect firm performance. We consider how these results redefine the overlap of the dynamic capabilities view literature with the entrepreneurship literature, because the redeployment of resources to create and adapt to opportunities that defines what are dynamic capabilities lies at the core of what is entrepreneurial activity.     

Youth entrepreneurship in emerging economies: can family support help navigate institutional voids?

Abstract

Institutional voids plague entrepreneurship in emerging economies. In this paper, we investigate how the social structure of the family can enable young entrepreneurs to navigate the institutional voids and progress through the venturing process. Findings suggest that both institutional voids and family support have a significant effect on startup activities, and that family financial support helps absorb the negative influence of capital market voids. Our study begins to explain the relationship between institutional voids and family support, thereby contributing to the ongoing development of institutional theory in an emerging economy context and to the literature on family influences on entrepreneurship.     

Internationalisation choices of Polish firms during the post-socialism transition period: The role of institutional conditions at firm’s foundation

The purpose of this paper is to investigate how the home country radical change of institutional conditions influences the firm-level internationalisation process understood as exporting. In particular, we aim to broaden our understanding of how changing institutional conditions affect the internationalisation process of Polish firms founded in different institutional conditions; i.e. under the communist regime (before 1990), in the transition period (1990–2003), and in the post-transition period (2004 and later). We compare and contrast in each period three crucial aspects describing the internationalisation process: time to internationalisation, direction and degree of internationalisation. We find support for the assertion that the institutional conditions at a firm’s birth influence the internationalisation paths of emerging market firms in terms of speed, direction and degree of internationalisation. Firms founded either in the transition (1990–2003), or in the post-transition phase (2004 and later) are more likely to: (1) make the decision about internationalisation earlier in their life cycle, (2) enter developed markets, and (3) achieve a higher degree of internationalisation than firms founded under the communist regime (before 1990).     

A double-edged sword? The moderating effects of control on firm capabilities and institutional distance in explaining foreign affiliate performance

By drawing from the internalisation and institutional theories, as well as the organisational capability perspective, the paper analyses the moderating effects of parent control over foreign affiliates in relation to firm capabilities and institutional distance and their performance effects. These relationships are explored in the context of new MNEs from Poland as a mid-range emerging economy, for which ownership choices constitute critical decisions given their early stage of internationalisation. Our findings show that while firm capabilities drive foreign affiliate performance, the increase of parent control limits this beneficial effect, suggesting the potential occurrence of organisational inertia and reduction of learning in foreign markets. On the contrary, we also find partial evidence that the increase of parent control reduces the negative effect of institutional distance computed based on the Mahalanobis formula. Accordingly, the study suggests a certain ambiguity of parent control in affecting affiliate performance.     

The costs of lead bank–distressed borrower relationships: evidence from commercial lending in Taiwan

This is the first study to investigate the impact of the adjudication of a borrower's reorganisation filing on the shareholder wealth of the lead bank. The results reveal that the market is acutely sensitive to adverse information and the reorganisation adjudication of a borrower's plan has a detrimental effect on the reputation and wealth of the lead bank. Further, while both are positively associated with wealth effects, the RATE of the loan-level variable is more highly related than the LEVERAGE of the borrower-level variable to wealth loss. Additionally, large lenders experience less wealth loss. The higher the bank debt of a firm, the higher the adverse abnormal returns to the lead bank. Higher collateral and rates on loans are used to compensate for the greater risk of the loan portfolio. Likewise, the market may view lead banks with high loan loss reserves as banks that are not particularly adept at identifying creditworthy borrowers.     

The service quality–loyalty relationship in retail services: does commitment matter?

The marketing literature has produced two schools of thought on the cause of customer loyalty in services industries. The service quality perspective puts forward that service quality evaluations substantially drive customer loyalty in services industries. The relationship marketing perspective puts forward that customer commitment to the service provider substantially drives customer loyalty in services industries. In addition, commitment is a complex construct with at least two forms, one based in liking and identification (affective commitment) and one based in dependence and switching costs (continuance commitment). These positions were examined in an integrated model of retail–service relationships. It was found that affective commitment and continuance commitment were mainly partial mediators of the service quality–loyalty relationship. It was also found that affective commitment to the retailer had a positive impact on customer loyalty while continuance commitment in marketing relationship had a deleterious effect on customer loyalty.     

What if your owners also own other firms in your industry? The relationship between institutional common ownership,marketing, and firm performance

The growth in institutional holdings of public firms has led to increased interest in the concept of common ownership, in which the same investor owns stakes in multiple firms within the same industry. Economic theory suggests that common ownership could affect firm performance, but little empirical research has examined the nature of this effect or how a firm’s extant marketing potentially relates to this effect. This paper addresses this gap by proposing a relationship between common ownership and firm performance that is moderated by the firm’s extant marketing capabilities and its relative marketing strategic emphasis. Our empirical approach employs data from over 43 million institutional holdings to develop a measure of common ownership and accounts for empirical issues like endogeneity and unobserved heterogeneity. The results document a positive relationship between common ownership and firm performance and provide some evidence that this effect is stronger for firms with lower marketing capabilities and a relative strategic emphasis towards R&D spending. These results suggest that public policymakers should consider the firms’ extant strategic marketing when assessing regulations on common ownership.     

Institutional change and strategic choice: debating the ‘stage-model’ of strategy in emerging economies

The popular ‘stage-model’ of strategic choice amid institutional change is found unable to account for the diverse strategies in emerging economies, which, this essay argues, is due to the model’s misplaced search for standard strategies which are said to be (1) dictated by linear transition stages and (2) determining the performance of stylized ‘firm types’. Assuming historical inevitability and blind to human agency, the model is at odds with Knight’s notion of uncertainty, with North’s thesis of adaptive efficiency and with Schumpeter’s theorizing on entrepreneurship. Studies on strategy in emerging economies, such as in the case of contemporary China, are in urgent need of an actor-centred, process-oriented and uncertainty-sensitive reorientation. This step, we conclude, may emerge by learning from the ‘practice-turn’ in the social sciences, taking politics seriously, incorporating evolution/complexity insights and enriching the methodology toolkit.     

Founder centrality effects on the Mexican family firm’s top management group: firm culture,strategic vision and goals,and firm performance

Using social networks, we examined the founder’s influence on key strategic behaviors in Mexican family business. First, we drew on a sample of 42 Mexican family businesses and 201 managers to show how founder centrality affects the top management group (TMG) members’ cohesiveness. TMG members’ cohesiveness was examined in terms of the firm’s culture, its strategic vision, and strategic goals. Second, we examined how founder centrality and top management member group cohesiveness are related to performance in terms of financial, social and family-oriented objectives. Significant relationships were found between a founder’s centrality and the TMGs strategic behavior. Further, significant results connect different aspects of the founder’s centrality and the TMGs strategic behavior to financial, social and family-oriented objectives.     

The impact of exchange rate regimes on economic growth: Empirical study of a set of developing countries during the period 1974–2006

An increment in the quantity of services/goods manufactured per-head of the population over time denotes economic growth of a country. Exchange Rate Intermediate Regimes are unable to continue under conditions of capital movement. To examine the relationship between exchange rate regimes and economic growth. This study has kept its focus on the economic growth of a set of developing countries during the years (1974–2006). Fixed effects and pooled regression for 16 developing countries have been incorporated as the methodologies techniques for data. Analysis of data was performed through SPSS. A relationship between exchange rate regimes and economic growth has been identified through statistical approaches. The results indicated that as compared to flexible exchange regime, growth rate was higher by 1.2% when fixed exchange regime was adopted; and a growth rate of 0.64% was achieved under the intermediate regime when compared with the flexible regime. A positive impact has been identified in exchange rate regimes upon economic growth of the developing countries. Countries following the flexible exchange rates are facing scarcity for the existence of advanced financial systems, which deprives them of enjoying the benefits of flexible regime.     

Stakeholder–firm power difference,stakeholders' CSR orientation,and SMEs' environmental performance in China

Although stakeholder power theory has been at the forefront of environmental studies, extant research has focused on stakeholders' power while firms' countering power has not been systematically examined. Furthermore, different stakeholders may prioritize social goals differently. In this paper, we propose that stakeholder–firm power difference determines firms' environmental performance and stakeholders' CSR orientation (i.e., the degree to which a stakeholder holds firms' engagement in CSR as important) moderates this relationship. Utilizing a sample of 144 Chinese small- and medium-sized enterprises (SMEs), we found that governments-, competitors-, and the media-firm power difference indeed significantly affect Chinese SMEs' environmental performance. Besides, governments' and the media's CSR orientation moderate the relationship between stakeholder–firm power difference and firms' environmental performance. Research and practical implications are discussed.     

Influence of customer–firm relationships on customer participation in the service industry

Previous research has focused on relationship value and outcome as ‘consequence variables’ of customer participation (CP). This study examines customer–firm relationships as an ‘antecedent variable’ of CP. Early contact and relationships with customers build confidence in the service encounter and create customer trust, which leads to commitment and improves customer cooperation. Likewise, interaction and relationship building in the service encounter encourage active customer cooperation and participation in the later stages of interaction. This study analyzes the influence of relational antecedent factors affecting customer participation intention, examines the moderating effects of customer relationship proneness, and suggests some theoretical and practical implications.