Internationalization, resource allocation and firm performance

In this paper, we examine the effects of internationalization and resource allocation on firm performance. We argue that resource allocation plays a pivotal role in determining a firm's international growth. Using a sample of Taiwanese firms, we find an optimal level of internationalization, in terms of the number of countries, as well as the level of investment towards value appropriation that is necessary to start creating a positive impact on firm performance. As a result of our study, we propose that Taiwanese firms would likely benefit by shifting their focus of resource allocation from R&D to marketing.     

The impact of trust and contract on innovation performance: The moderating role of environmental uncertainty

Research into two important control mechanisms for managing the supply chain relationship - contracts and trust - is on the rise. However, our understanding of how they influence innovation in a firm remains rather unclear. Thus, the primary objective of this study is to examine the individual and interactive effects of contracts and trust on firms' innovation performance and the contingent effects of environmental uncertainty on those relationships in China. The empirical results from a survey of Chinese manufacturing firms indicate that there is a positive relationship between trust and firms' innovation performance, an inverted U-shaped relationship between the use of contracts and firms' innovation performance, and that contracts and trust are substitutes. Moreover, we find that environmental uncertainty enhances the effects of trust, but does not influence the impact of contracts on innovation performance.     

The impact of racial diversity on intermediate and long‐term performance: The moderating role of environmental context

We conduct a firm‐level, 6‐year longitudinal analysis on the impact that racial diversity in human resources has on financial performance. When considering short‐term performance outcomes, we predict a curvilinear relationship between diversity and performance (i.e., firm productivity). Although we find evidence of a U‐shaped relationship between racial diversity and productivity, the relationship is stronger in service‐oriented relative to manufacturing‐oriented industries and in more stable vs. volatile environments. For longer‐term profitability, we propose and find support for more of a positive linear relationship between diversity and performance (i.e., Tobin's q) than a nonlinear one. This linear effect is stronger and more positive in munificent compared to resource‐scare environments. Thus, we aid in reconciling existing, often contradictory, studies by demonstrating the potential short‐term vs. long‐term impact of racial diversity on performance. We offer implications for future research on diversity considering the current and projected demographic landscape. Copyright © 2007 John Wiley & Sons, Ltd.     

Knowledge exchange and knowledge protection in interorganizational learning: The ambidexterity perspective

Are knowledge exchange and knowledge protection conflicting or complementary? Although facilitating knowledge exchange and protecting core proprietary knowledge are important in interorganizational learning, extant studies often regard them as conflicting activities. Few studies have discussed the mechanisms that can help firms achieve both. In this current study, we extend the concept of ambidexterity to the interorganizational learning context and suggest several mechanisms that can enhance knowledge exchange and knowledge protection simultaneously. We conducted a survey and the empirical results reveal that experience sharing and shared interpretation are positively associated with knowledge exchange success. Hostage arrangement enhances the level of knowledge protection, whereas reciprocal investment has no effect on knowledge protection. Furthermore, ambidexterity (the product term of knowledge exchange success and knowledge protection) significantly affects the performance of a firm. Finally, we discuss the implications of this research and offer suggestions for future research.     

Slack resources,firm performance,and the institutional context: Evidence from privately held European firms

Research summary : Integrating the behavioral and institutional perspectives, we propose that a country's formal institutions, particularly its legal frameworks, affect managers' deployment of slack resources. Specifically, we explore the moderating effects of creditor and employee rights on the performance effects of slack. Using longitudinal data from 162,633 European private firms in 26 countries, we find that financial slack enhances firm performance at diminishing rates, whereas human resource (HR) slack lowers performance at diminishing rates. However, financial slack has a more positive effect on firm performance in countries with weaker creditor rights, whereas HR slack has a more negative effect on performance in countries with stronger employee rights. The results provide a richer view of the relationship between slack and firm performance than currently assumed in the literature. Managerial summary : A key dilemma managers often encounter is whether, on the one hand, they should build in excess resources to buffer their firms from internal and external shocks and to pursue new opportunities or whether, on the other hand, they should develop “lean” firms. Our study suggests that excess cash resources—which are usually viewed as easy to redeploy—benefit firm performance, especially when firms operate in countries with weaker creditor rights. However, excess human resources—which are usually viewed as more difficult to redeploy—hamper firm performance, particularly when firms operate in countries with stronger labor protection laws. Thus, the management of slack resources critically depends on the characteristics of these resources (e.g., redeployability) and the institutional context in which managers operate. Copyright © 2016 John Wiley & Sons, Ltd.     

Subnational institutional contingencies and executive pay dispersion

This paper investigates the impact of subnational institutional contingencies on executive pay dispersion structure and the relationship between pay dispersion and firm performance. Using executive compensation data on Chinese listed firms between 2000 and 2011, we find that executive pay dispersion is significantly lower in state-owned enterprises (SOEs), while is significantly higher in cross-listed firms and to a smaller degree in firms located in developed regions. There is also evidence that executive pay dispersion is smaller during the voluntary compensation disclosure period. After controlling for endogeneity of pay determination, we find that executive pay dispersion is positively associated with firm performance. In addition, the positive link between executive pay dispersion and firm performance is stronger in non-SOEs than in SOEs, and stronger in firms located in more developed regions than those not. Our findings are also robust to alternative measures of pay dispersion and firm performance.     

Strategic Suppliers' Technical Contributions to New Product Advantage: Substitution and Configuration Options

Current theory lacks clarity on how different kinds of resources contribute to new product advantage, or how firms can combine different resources to achieve a new product advantage. While several studies have identified different firm‐specific resources that influence new product advantage, comparatively little research has explored the contribution of strategic supplier resources. Combining resource‐based and relational perspectives, this study develops a theoretical model investigating how a strategic supplier's technical capabilities impact focal firm new product advantage and how firms combine different resources to gain this advantage. The model is tested using detailed survey data collected from 153 interorganizational new product development projects in the United Kingdom within which a strategic supplier had been extensively involved. Empirical results support our research hypotheses. First, supplier technical performance is shown to have a significant positive impact on new product advantage. Next, we show that while supplier technical capabilities have a positive influence on supplier technical performance, the a priori nature of the supplier's task moderates the relationship. Finally, our data support our hypotheses related to the positive relationship between relationship‐specific absorptive capacity and new product advantage, and the proposed negative moderation of supplier technical capabilities on this relationship. Based upon these findings, we encourage managers to recognize that strategic suppliers' with greater technical capabilities perform better regardless of the degree of creativity required by their task; but that strategic suppliers with lower technical capabilities may partially compensate (substitute) for their lack of technical capabilities, if they are able to respond to high problem‐solving task requirements. Furthermore, we suggest that the firm's development of relationship‐specific absorptive capacity is much more important when a strategic supplier is less technically capable. A buying firm's relationship‐specific absorptive capacity can, according to our data, substitute for low supplier technical capabilities. On the other hand, where the supplier has strong technical capabilities, investments in relationship‐specific absorptive capacity have no effect on new product advantage. Our findings reinforce recent calls for research on how firms can combine different resources and capabilities to achieve superior performance.     

Corporate Governance and returns on information technology investment: evidence from an emerging market

Prior studies have reported mixed findings on the impact of corporate information technology (IT) investment on firm performance. This study investigates the effect of corporate governance, an important management control mechanism, on the relation between IT investment and firm performance in the Taiwanese electronics industry. Specifically, we explore board independence and foreign ownership, which have increasingly become salient factors concerning corporate governance in emerging markets. We address their roles across firms of different sizes and in industries where degrees of competitiveness run a wide gamut. Our results show a positive moderating effect of board independence on the IT investment‐firm performance relation, especially when competition intensifies. Furthermore, we find that the greater the foreign ownership in small firms, the more positive the IT investment‐firm performance relation, suggesting that foreign investors may bring IT expertise to help small firms reap the benefits of using IT. Copyright © 2010 John Wiley & Sons, Ltd.     

Good Cop–Bad Cop: Trust,Control, and the Lure of Integration

Based on a longitudinal case study of four interorganizational product development collaborations, this paper identifies a lure to cross‐functional integration that has hereto been neglected. In particular, findings suggest that when the buyer firm separates the Research and Development (R&D) Department from the Procurement Department, the two departments play a good cop–bad cop strategy toward the supplier. Thereby, they are able to foster a high level of goodwill trust between R&D personnel of the collaborating firms, while procurement personnel maintain a high level of formal control. Using an intricate sample design with polar cases, the study shows that cross‐functional integration of the two departments hampers interorganizational goodwill trust at the benefit of formal control. The findings offer a way forward for managers seeking to reap the benefits of collaboration, while limiting their exposure to the associated risks.     

Knowledge Sharing in Interorganizational Product Development Teams: The Effect of Formal and Informal Socialization Mechanisms*

Working collaboratively with suppliers is increasingly cited as a “best practice” in product development. The importance of sharing knowledge between buyer and supplier in this context has been well recognized, although comparatively little research exists on the interorganizational socialization mechanisms that facilitate it. The present research proposes and tests a theoretical model of the impact of formal and informal socialization mechanisms on the level of knowledge sharing within interorganizational product development projects and the subsequent effect on buyer firm performance. Results from this study of 111 manufacturing organizations in the United Kingdom largely support its hypotheses. It is revealed that informal socialization mechanisms (e.g., communication guidelines, social events) play an important role in facilitating interorganizational knowledge sharing, whereas formal socialization mechanisms (e.g., cross‐functional teams, matrix reporting structures) act indirectly through informal socialization to influence knowledge sharing. The results also show that interorganizational knowledge sharing is positively associated with supplier contribution to development outcomes, which, in turn, improves buyer product development performance and, ultimately, financial performance. Product development managers are encouraged to build social ties between interorganizational development teams to increase the flow of knowledge and to improve both product development outcomes and financial performance.     

Interorganizational Collaboration and Innovation: Toward a Portfolio Approach*

In the literature on innovation, interorganizational collaboration has been advanced as beneficial for the innovative performance of firms. At the same time, large‐scale empirical evidence for such a relationship is scarce. This article examines whether evidence can be found for the idea that interorganizational collaboration supports the effectiveness of innovation strategies. This article empirically addresses this research question by analyzing data on Belgian manufacturing firms (n=221) collected in the Community Innovation Survey, a biannual survey organized by Eurostat and the European Commission aimed at obtaining insights into the innovation practices and performance of companies within the various European Union (EU) member states. Tobit analyses reveal a positive relationship between interorganizational collaboration and innovative performance. At the same time, the impact on innovative performance differs depending on the nature of the partner(s) involved. These findings strongly suggest the relevance of adopting a portfolio approach to interorganizational collaboration within the context of innovation strategies.     

CEO career horizon,corporate governance,and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.     

Bribery and investment: Firm‐level evidence from Africa and Latin America

Research summary : Using a unique database that measures firm‐level bribery in Africa and Latin America, we corroborate extant results in the literature that paying bribes deters firm investments in fixed assets. Our contribution is to explore four mechanisms. By adopting a reverse causality approach (Gelman and Imbens, 2013), we find evidence consistent with one of them: short‐term oriented firms prefer to bribe rather than invest in fixed assets, while the opposite is true for firms with a long‐term orientation. We rule out that bribe payments drain financial resources for investment, that firms that invest do not bribe because fixed assets make them less flexible and more vulnerable to future bribes, and that less efficient firms bribe rather than invest. Managerial summary : We ask whether, along with ethical issues, bribing affects the behavior and performance of firms in Africa and Latin America. Our statistical analysis shows that bribe payments do not reduce the short‐term performance of firms, but frustrate investments in fixed assets, which is the foundation of firms' long‐term growth. It is like seeking a job via nepotism or education. Nepotism makes it likely to find a job in the short term. However, the solid skills generated by education raise the odds of finding better jobs in the future. We rule out some common explanations for the trade‐off between bribing and investment (e.g., bribes drain resources to invest or that less efficient firms bribe and do not invest). Our analysis suggests that firms with short‐term orientations are more likely to bribe and firms with long‐term orientation are more likely to invest. Copyright © 2015 John Wiley & Sons, Ltd.     

Network governance: A cross-level study of social mechanisms,knowledge benefits,and strategic outcomes in joint-design alliances

Drawing on multiple-level embedded case study research of eight dyadic joint-design alliances and 14 collaborative ventures within them, this study sheds light on how value, in the form of common and private benefits, is created in interorganizational relationships. To do so, I focus on network governance (i.e., interorganizational coordination based on social networks) and its outcomes. As a result, I advance a cross-level model of how a system of reciprocally influencing network-level (i.e., structural) and dyad-level (i.e., relational) social mechanisms affects the propensity of allied organizations to engage in knowledge-intensive activities that yield considerable knowledge-based benefits and strategic outcomes at the alliance and firm levels. I conclude that simultaneous consideration of structural and relational embeddedness can enrich our understanding of network-based forms of organization and their impact on the outcomes of interorganizational cooperation. Although the system of social mechanisms needs to be understood as an interconnected whole, practicing alliance managers are advised to leverage different social mechanisms depending on the specific knowledge benefits they intend to achieve.     

Pricing superheroes: How a confident sales team can influence firm performance

Despite strong evidence of substantial impact on the bottom line, most companies counter-intuitively neglect the pricing function — as do most scholars. Although pricing is gaining in popularity, only a few articles published in major marketing journals focus on it, and scholars have long asked how organizational and behavioral characteristics of firms affect the link between pricing practices and firm performance. To address these practical and theoretical deficits, we surveyed 507 professionals involved in account and sales management at business-to-business (B2B) firms from around the world to measure the influence of five organizational factors on sales collective confidence associated with pricing and relative firm performance. Results demonstrate that four of the five factors (pricing capabilities, delegation of pricing authority, incentive and goal systems, and knowledge before negotiation) positively and significantly influence sales collective confidence associated with pricing. In turn, we find collective confidence in the sales force to be significantly and positively related to relative firm performance, suggesting that firms that are able to design organizations and allocate resources in a way that maximizes pricing confidence can achieve superior financial outcomes. In aggregate, these organizational factors promote competitive advantage and comparative firm performance.     

ASSET REDEPLOYMENT,ACQUISITIONS AND CORPORATE STRATEGY IN DECLINING INDUSTRIES

The resource-based perspective suggests that firms are bundles of assets, some of which are fungible in nature. To the extent that some resources are fungible, firms should be able to redeploy them to enter new markets when their existing businesses decline. On the other hand, perspectives that emphasize the business-specific nature of routines or managerial skills point to inherent risks in organizational transformation. In a declining market, resources can be redeployed within the firm through diversification-oriented acquisitions, or they can be redeployed through market mechanisms through consolidation-oriented acquisitions. In this paper, we examine the differences in performance outcomes between diversification-oriented acquisitions and consolidation-oriented acquisitions in industries within the defense sector, which have experienced significant decline. Our results indicate that consolidation-oriented acquisitions outperform diversification-oriented acquisitions in the decline phase of their industries in terms of both ex ante (stock market based) and ex post (operating) performance measures. At the corporate level, we find a positive relationship between focus and Tobin’s q, even when the industry is in decline. The implication of our results is that assets from declining industries are redeployed more effectively through market mechanisms than within the firm through the acquisition of complementary assets. ©1997 by John Wiley & Sons, Ltd.     

Do board chairs matter? The influence of board chairs on firm performance

Research summary : We use a variance decomposition methodology to assess the degree to which board chairs may influence their companies' performance. To isolate the board chair effect, we focus on firms in which the CEO and board chair positions are separated. Using a U.S. sample of 6,290 firm‐year observations representing 1,828 board chairs in 308 different industries, our results indicate that the board chair effect is substantial at about nine percent. Drawing on resource dependency theory, we also theorize and show how this board chair effect is contingent on the task environment in which firms operate. Our results add to the literature examining the role and influence of board chairs and the context in which chairs may have a greater impact on performance. Managerial summary : Following institutional and regulatory changes, more firms are separating the CEO and board chair positions. With an increasing number of individuals separate from the CEO serving as board chairs, a critical question becomes: What influence do these separate board chairs have on firm performance? Prior research suggests that separate board chairs can provide important resources—including advice and counsel, legitimacy, information linkages, and preferential access to external commitments and support—to their CEOs, other top managers, and overall firms. In turn, who the board chair is and the individual's ability (or lack thereof) to provide these resources may have a significant impact on firm performance. Offering support for this perspective, we find that separate board chairs explain nine percent of the variance in firm performance. Copyright © 2016 John Wiley & Sons, Ltd.     

The impact of technical consultants on the quality of their clients' products: Evidence from the Bordeaux wine industry

Research summary : Recent research rooted in the resource‐based view of the firm suggests that resources are more likely to create value if they are effectively managed. An underlying assumption of the literature is that firms manage their resources on their own. However, many firms hire consultants to help them do so. In this study, I develop and test hypotheses regarding the impact of technical consultants on the quality of their clients' products. Using data from the Bordeaux wine industry, I find evidence that the use of technical consultants has a positive impact on relative product quality and a negative impact on the extremeness of relative product quality. Moreover, the positive impact of technical consultants on relative product quality is stronger at lower levels of relative resource quality. Managerial summary : Findings from a study in the Bordeaux wine industry indicate that the decision to hire consultants should depend on a firm's strategy. If a firm wants to improve its performance, it should hire consultants. Indeed, the “best practices” of technical consultants are generally more valuable than internally generated knowledge. If a firm wants to achieve outstanding performance, hiring consultants may not be the right decision. Because the “best practices” of technical consultants have more certain performance implications than internally generated knowledge, they decrease the likelihood of extremely low performance. However, their lack of uniqueness also decreases the likelihood of extremely high performance. Finally, the decision to hire consultants should depend on the quality of a firm's resources. Firms with low‐quality resources tend to benefit more from the “best practices” of technical consultants. Copyright © 2016 John Wiley & Sons, Ltd.     

Does focus improve operational performance? Lessons from the management of clinical trials

For over three decades, the benefits of focus have been touted under the guiding principle that dedicated attention to a small set of linked tasks improves operating performance. Numerous studies have suggested that the performance of a division, plant, or business unit is improved to the extent that it remains focused on a narrow range of activities. Others have found similar benefits associated with focus at the level of the entire firm. A question that has received less attention, however, is whether focus at the divisional level is complementary with, or a substitute for, focus at the firm level. We explore this question by considering the performance of investigative sites in biopharmaceutical clinical trials. First, we establish that firms focusing on a particular task—at either a divisional or firm level—experience higher output and productivity with respect to that task than unfocused firms. After controlling for selection, scale, and learning effects, we find that sites that focus on conducting clinical trials significantly outperform those that mix trial activity with the provision of traditional patient care. Second, we find evidence that focus at the divisional level and firm level are substitutes. That is, organizations characterized by divisional focus alone achieve statistically similar performance to sites that are characterized by both divisional and firm focus. Copyright © 2007 John Wiley & Sons, Ltd.     

Revisiting exercise of power strategies from the perspective of information processing

The digitization of channel management changes how firms acquire, interpret, and analyze information, which needs to be considered when evaluating the efficacy of exercising power strategies on interfirm cooperation. Drawing insights from the three mechanisms of interorganizational information processing capability, we identify contingent factors that may affect the relationship between firms' exercise of power strategies and interfirm cooperation at the firm (i.e., IT capability), dyadic (i.e., relationship quality), and network (i.e., network density) levels. We analyzed data sampled from 288 manufacturing firms and found that manufacturers' IT capability weakens the negative effect of exercising coercive power and the positive effect of exercising noncoercive power on interfirm cooperation. At the dyadic level, relationship quality between manufacturer and distributor weakens the negative effect of exercising coercive power on interfirm cooperation. Finally, at the network level, distributors' network density strengthens the positive effect of exercising noncoercive power on interfirm cooperation. Our findings contribute to the marketing channel literature by shedding new light on the effects of the exercise of power on interfirm cooperation in this digital era and offer actionable managerial insights.