Environmental dynamism,capital structure and performance: a theoretical integration and an empirical test

An ongoing argument in financial management has been how to craft a capital structure which maximizes shareholder wealth. This question has gained prominence within the strategic management field because of the apparent link between capital structure and the ability of firms to compete. By integrating models from organizational economics with the strategic management literature, we are able to theorize that a firm’s capital structure is influenced by environmental dynamism, and that the match between environmental dynamism and capital structure is associated with superior economic performance. Our large‐scale empirical analyses provide supportive evidence for the proposition that competitive environments moderate the relationship between capital structure and economic performance. From a theoretical standpoint, these findings provide another link between capital structure and corporate strategy. More importantly, we are able to move the discussion beyond the limitations of financial risk and incorporate the strategy concept of decision making under uncertainty. For practical application, these findings offer informed advice for managers on how to craft a capital structure. Copyright © 2000 John Wiley & Sons, Ltd.     

Ceo change and firm performance in large corporations: Succession effects and manager effects

This paper argues that the succession/performance relationship is a function of two distinct, complementary concepts: manager effects and succession effects. Hypotheses are tested using a cross-sectional/longitudinal research design, with a sample of 209 large corporations. The results suggest that announcements of CEO changes are typically associated with a reduction in the value of the firm, as reflected in the perceptions of the stock market, and that CEO successors tend to significantly influence the production and investment decisions of their firms. These results hold for both insider and outsider succession.     

The performance impact of post-M&A interdepartmental integration: An empirical analysis

This study investigates how post-M&A interdepartmental integration affects the efficiency and effectiveness of new product development (NPD).The total sample size was 251 respondents. Confirmatory factor analysis (CFA) and structural equation modeling (SEM) were used for statistical analysis. Analytical results indicate that, although collaboration interdepartmental integration positively correlates with product vision, interaction interdepartmental interaction integration does not reach a significant level. Despite the fact that some interaction is essential when developing new product competitive advantage (NPCA), such interaction does not necessarily achieve success. Further, product vision positively correlates with new product competitive advantage and NPD performance, and new product competitive advantage positively correlates with NPD performance. In addition, an examination of the mediation effect in terms of Sobel t-test reveals that product vision is a significant mediator for the influence of interdepartmental integration on new product competitive advantage, while the new product competitive advantage is also a significant mediator for the influence of interdepartmental integration on NPD performance. Moreover, this study provides a framework for managing post-M&A integration and closes with a discussion of the theoretical and practical implications of the research findings.     

Executive compensation and firm performance in Italy

We use survey data to investigate the determinants of executive pay in a sample of Italian firms. To the best of our knowledge this is the first empirical study on the compensation of Italian executives. Our key hypothesis is that the characteristics of the Italian capital market, corporate governance and the specific relationship between banks and firms imply a low fraction of incentive pay over total compensation and a low sensitivity of incentive pay to firm performance. We find evidence that supports this hypothesis. We estimate that an increase of real profits per firm by 1 billion lire increases the pay of upper and middle managers by only 31 thousand lire, more than the increase found for lower management (6 thousand). Furthermore, pay–performance sensitivity is higher in foreign-owned firms, in listed firms, and in firms affiliated to a multinational group.     

Structure and process of diversification,compensation strategy,and firm performance

This study tests six hypotheses on the extent to which a match between compensation and diversification strategies affects firm performance. Using both archival and survey data, results generally support the notion that a firm's compensation strategies make a greater contribution to firm performance if these are attuned to extent and process of corporate diversification. The paper concludes with a set of recommendations for future research on compensation-diversification strategy relations and their interactive effect on firm performance.     

Vertical integration,innovation, and alliance portfolio size: Implications for firm performance

We examine the consequences of alliance portfolio configuration by focusing on contingencies that affect the impact of alliance portfolio size on innovation and financial performance. While increasing alliance portfolio size is expected to positively impact innovation and financial performance, we propose that, at high levels of innovation of the focal firm, increasing alliance portfolio size dampens financial performance. We also propose that firm boundaries moderate the impact of alliance portfolio size on innovation and financial performance differently. Specifically, vertically integrated firms benefit less (more) than their vertically specialized counterparts in leveraging higher innovation (financial) performance with increasing alliance portfolio size. Our analysis suggests that both vertical scope and innovation levels of the firm play an important role in understanding how alliance portfolios impact performance. Copyright © 2013 John Wiley & Sons, Ltd.     

Leadership succession and firm performance in an emerging economy: Successor origin,relational embeddedness,and legitimacy

We examine how leadership transition affects firm performance in emerging economies. Building upon the social embeddedness and neo‐institutional perspectives, we argue for the importance of alignment between successor origin and social context for firm performance. We suggest that as a baseline outside successors enhance firm profitability because of the large‐scale and rapid changes in emerging markets. However, this outsider premium is reduced in firms embedded in family and business group relationships, where family and inside successors can better access network resources. But the outsider premium is amplified in firms embedded in a mature market‐based logic, such as high tech or foreign invested firms, because the perceived legitimacy of outsiders facilitates resource acquisition. Our arguments are supported through the analysis of Taiwanese listed firms between 1996 and 2005. Copyright © 2012 John Wiley & Sons, Ltd.     

The use of an interim CEO during succession episodes and firm performance

Our study investigates an unexplored succession process—interim CEO successions. We define an interim CEO succession as a case where the title of chief executive officer is vacated by the incumbent and the board of directors has not announced a permanent successor, but instead designates a particular individual as ‘interim CEO,’ or ‘acting CEO,’ or ‘CEO until a permanent successor is named.’ Theory predicts that interim CEO successions will lead to the type of disruption that can harm firm performance, even after a permanent successor is appointed. Our data show that interim CEO succession processes are widely employed by publicly‐traded U.S. firms, and that they are associated with lower performance during the period in which the interim serves. However, whether the interim CEO also simultaneously serves as chairman moderates the impact of this type of succession on firm performance, as well as on long‐term firm survival. Copyright © 2009 John Wiley & Sons, Ltd.     

股权结构与公司绩效的U型关系研究——1997～2000年上市公司的实证研究

本文通过对上市公司 1 997～ 2 0 0 0年的数据的实证分析 ,结果表明 :股权集中度、内部持股比例与公司绩效均呈显著性倒U型相关 ;第一大股东持股比例与公司绩效正相关 ;国家股比例、境内法人股与公司绩效呈显著性U型相关 ,这说明当国家或法人持股比例较低时 ,与公司绩效负相关 ,而在持股比例较高时 ,与公司绩效正相关 ;流通股比例与公司绩效呈U型关系 ,即在流通股比例高低的两端 ,公司绩效均表现出较高水平。     

An assessment of post-M&;A integration influences on new product development performance: An empirical analysis from China,Taiwan, and HK

This study examines the possible benefits and effects of post-M&A integration on new product development (NPD) performance in terms of efficiency and effectiveness. The total sample size was 251 respondents. Confirmatory factor analysis (CFA) and structural equation modeling (SEM) were used for statistical analysis. The results demonstrate that external integration correlates positively with internal integration. Although external integration relates positively to new product competitive advantage (NPCA), internal integration does not have a positive correlation with NPCA. Further, product vision positively correlates with NPCA and NPD performance, and NPCA positively correlates with NPD performance. In addition, an examination of the mediation effect in terms of Sobel t-test reveals that the NPCA is a significant mediator for the influence of interdepartmental integration on NPD performance. Moreover, this study provides a framework for managing post-M&A integration and closes with a discussion of the theoretical and practical implications of the research findings.     

Organizational ownership,competitive intensity,and firm performance: an empirical study of the Indian manufacturing sector

Emerging countries are using privatization as a key strategy in their drive to become free market economies. Although these ownership changes are rapidly gaining prominence, the academic literature has been equivocal about the performance benefits of private vs. state ownership. The lack of clarity in findings can be largely traced to the underspecification of the models that prior studies have examined. Specifically, prior studies have mostly ignored the central role of competitive rivalry. This paper proposes a model that centers around the interactive, inseparable effects of ownership and competitive rivalry on firm performance. Results of the empirical examination set in India show that competitive intensity moderates the relationship between ownership and performance. Copyright © 2001 John Wiley & Sons, Ltd.     

Balancing vertical integration and strategic outsourcing: effects on product portfolio,product success,and firm performance

Most prior research has focused on vertical integration or strategic outsourcing in isolation to examine their effects on important performance outcomes. In contrast, we focus on the simultaneous pursuit of vertical integration and strategic outsourcing. Our baseline proposition is that balancing vertical integration and strategic outsourcing in the pursuit of taper integration enriches a firm's product portfolio and product success, and in turn contributes to competitive advantage and thus to overall firm performance. We derive a set of detailed hypotheses, and test them on a unique and fine‐grained panel of longitudinal data documenting over 3,500 product introductions in the global microcomputer industry. The results provide strong support for the notion that carefully balancing vertical integration and strategic outsourcing when organizing for innovation helps firms to achieve superior performance. Copyright © 2006 John Wiley & Sons, Ltd.     

R&D,networking expenses,and firm performance: An integration of the inside-out and outside-in perspectives

Is outside-in networking less influential than inside-out R&D on firm performance? Over the past three decades, the inside-out perspective stands at the core of the marketing literature, whereas there is a subconscious bias toward the outside-in perspective. Building on the outside-in and inside-out perspectives of the firm, this study answers the question of whether outside-in networking is indeed less effective than inside-out R&D for enhancing firm performance. The empirical findings based on multiple archival data sources collected on firms operating in China indicate that the effects of networking expenses on firm performance are not weaker than those of R&D expenses. The findings also indicate that the effects of inside-out R&D and outside-in networking expenses are enhanced when firms operate in regions with stronger consumer protection whereas inside-out R&D expenses become less effective in a corrupt environment.     

Learning orientation, firm innovation capability, and firm performance

Contemporary organizations require a strong learning orientation to gain competitive advantage. Based on in-depth interviews with senior executives and a review of the literature, the present investigation delineates four components of learning orientation: commitment to learning, shared vision, open-mindedness, and intraorganizational knowledge sharing. A framework is tested using data from a broad spectrum of US industries. Learning orientation is conceptualized as a second-order construct. Its effect on firm innovativeness, which in turn affects firm performance, is examined. The results generally support theoretical predictions, and some interesting findings emerge.     

Conjectures, firm characteristics, and market structure : An empirical assessment

This paper makes use of a unique data set to investigate how firms in the Vancouver, British Columbia retail-gasoline market view their rivals and how consumers in turn view these firms. Own- and rival-price elasticities of demand, conjectural variations, and Lerner indices are estimated for thirteen service stations in a submarket of Vancouver. These variables are then related to firm characteristics such as type of ownership, degree of horizontal and vertical integration, and type of service. In this way, systematic patterns in seller behavior and in buyer attitudes are revealed.     

Top management team compensation: the missing link between CEO pay and firm performance?

In this research we discuss the relationship between CEO and top management team (TMT) member compensation, and explore the implications of TMT pay for firm performance. Specifically, we suggest that firm performance may benefit due to agency and group behavioral issues when top management team member pay is aligned—alignment is defined as the degree to which TMT member pay reflects (1) shareholder interests and (2) key political and strategic contingencies within the firm. In support of our theorizing, we found CEO pay to be related to TMT pay; TMT compensation, in turn, predicted performance (i.e., return on assets and Tobin's q) when aligned with shareholder interests and internal contingencies. Moreover, the effect of CEO pay on future firm performance was dependent on top team pay. Copyright © 2002 John Wiley & Sons, Ltd.     

Self‐selection,endogeneity, and the relationship between CEO duality and firm performance

This study focuses explicitly on the methodological implications of the endogenous theory of governance as applied to firm performance. In particular, if firms choose their governance structures as part of a constrained performance maximization process, then application of an appropriate empirical methodology should reveal statistical evidence of such behavior. In this study we take advantage of the endogenous switching regression model framework to determine whether such predicted optimizing behavior can be corroborated by the data. The model allows us to test explicitly for selection behavior in accordance with comparative advantage and, concomitantly, the presence of selectivity bias, in estimating the impact of CEO duality on firm performance. The selection and performance equations are modeled in accordance with the extant accounting, economics, and management literature on the impact of the dual governance structure on firm performance. Overall, we tested four performance measures for the entire sample of firm‐year observations as well as for the largest three industries in terms of sample sizes. The major finding, robust in all cases, is that there is no evidence to support a contention that CEO duality is a structure purposefully chosen for optimizing performance. If firms are indeed choosing the dual leadership structure, they are doing so for reasons other than improving performance from what it would be otherwise. In fact, for performance measured as market return and earnings per share, there is evidence of a significant selectivity bias that acts to lower performance below what it would have been under random assignment. For performance measured by Tobin's q and return on assets, we found neither evidence of selectivity bias, nor any significant marginal performance impacts of CEO duality. Such findings are inconsistent with an endogenous governance theory, at least when applied to firm performance. Copyright © 2009 John Wiley & Sons, Ltd.     

Exploring the debate on short-termism: a theoretical and empirical analysis

The debate on short-termism has focused on the economic factors of capital markets and performance measurement systems. Laverty (1996) has advocated the inclusion of individual and organizational dimensions to extend the debate. We reorient Laverty's extended debate by drawing upon a broad management and accounting literature and thereby develop testable theoretical explanations of short-termism. The resulting hypotheses are tested in a telecommunications company. Our findings provide support for Laverty's (1996) argument that individual and organizational factors are important determinants of short-termism. Copyright © 2007 John Wiley & Sons, Ltd.     

CEO duality and firm performance: A contingency model

Several studies have addressed the CEO duality-performance relationship, with inconsistent results. This paper proposes that these inconsistencies can be resolved by integrating agency and stewardship perspectives on duality. Using data from 192 firms in 12 industries, both the direction and magnitude of the duality-performance relationship was found to vary systematically across Dess and Beard's (1984) environmental dimensions. These results provide partial support for both agency and stewardship perspectives.     

Appropriability,preemption, and firm performance

The impact of strategies used to appropriate innovation rents on firm performance is analyzed using a sample of U.S. public manufacturing firms. Stronger appropriability at the firm level, achieved through patent protection or the ownership of specialized complementary assets, leads to superior economic performance, as measured by the stock market valuation of a firm's R& D assets. Among commonly used ‘nonconventional’ patent strategies, preemptive patenting allows incumbents to strengthen their market power. Consistent with theory, such effect is higher for incumbents with higher ex ante market power and facing a higher threat of entry, and lower when R& D competition is characterized by the discovery of drastic innovations. Copyright © 2008 John Wiley & Sons, Ltd.