Local social knowledge management: Community actors, institutions and multilevel governance in regional foresight exercises

A key question for policymakers at the regional and local level is how to provide the right conditions for generating the growth of more knowledge-intensive forms of economic activity within the context of dynamic innovation systems or learning regions. Regional foresight exercises may provide a useful instrument in helping chart their economic strategies. Successful regions must be able to engage in regional foresight exercises that identify and cultivate their assets, undertake collaborative processes to plan and implement change, and encourage a regional mindset that fosters growth. Communities and regions, like companies, need to innovate and adapt to remain competitive. As a result, successful regions must be able to engage in regional foresight exercises that identify and cultivate their assets, undertake collaborative processes to plan and implement change, and encourage a regional mindset that fosters growth. This paper provides an overview of these issues by reviewing the most important ideas in the recent literature on innovation systems, technological dynamism and local economic development. We regard regional foresight processes to be, at their most fundamental level, socially organized learning processes involving learning by individuals, by firms, and by institutions. One of our central concerns is to show how the actions of individuals to shape collective local visioning exercises interact with larger institutional structures to produce local outcomes.     

Optimal contracting with moral hazard and cascading

In this article I identify optimal incentive contracts for managersof firms competing in the product market. Such firms often confrontsimilar decisions and uncertainties. Managers can improve decisionquality by generating private signals through costly effort.However, since signals are likely to be correlated, firms thatdecide later get additional information from the actions ofearlier firms. This impacts effort choice. Decision qualityis also affected if later managers disregard their own signalsand blindly imitate preceding decisions. In a competitive environment,such cascading hurts profits. Contracts that solve both moralhazard and cascading problems typically put more weight on firmprofits, making them expensive. Contacts with more weight ondecision quality are less expensive but result in cascades.Shareholders choose contracts that maximize their net surplus.This results in testable implications about which industriesmay have more convergence in investment choices, greater pay-for-profitsensitivity, larger differences in observed contracts, moreinnovation, larger-size firms, and potential for overcompensation.     

Quality of data, information and knowledge in regional foresight processes

A central subcategory of futures research is technology foresight. There is a concern that today's technology foresight processes do not serve technology-political decision-making and strategy processes of companies well enough. The regional level needs to be emphasized, too, and the inclusion of a wide variety of actors and organizations. There is a danger that results of foresight processes are not absorbed into regional strategy-making processes, leading to a “black hole of interpretation and implementation of foresight knowledge”. Particularly knowledge, but also data and information are crucial concepts in foresight processes. An important issue is how to transform foresight information into future-oriented innovation knowledge. Concrete tools and institutional settings to enhance data, information and knowledge quality in foresight processes and strategy work are needed. This article investigates limitations of established foresight processes and planning approaches, limitations in practical utilization of results of foresight processes, and quality of data, information and knowledge as concrete tools and as a systematic response to limitations. The article is partly based on empirical results from a technology foresight survey undertaken in Finland in 2005. The research responds to societal and academic interest by combining the fields of (i) futures research and (ii) data, information and knowledge quality. Future-oriented considerations are not routine tasks, which makes it especially challenging and important to ensure that these processes benefit from data, information and knowledge of good quality.     

Sectoral innovation system foresight in practice: Nordic facilities management foresight

A number of studies have explored the interconnection between the foresight literature and the innovation system literature. This paper adds to these studies by investigating how theoretical elements of the innovation system approach can contribute to the design and practice of foresight processes. The paper originates in a foresight project in the Nordic facilities management sector. The goal of the foresight project was to identify the possible futures of the facilities management sector in the Nordic countries (Denmark, Finland, Norway, and Sweden) and, based on the findings, to establish a proposal for a common Nordic facilities management research agenda. The paper finds that three elements of the innovation system literature are of particular interest for the practice of foresight: innovation systems and context dependency, learning and user–producer interactions, and the role of knowledge and knowledge production. These elements are embedded into a simple sectoral innovation system model (including actors, knowledge flows, and the strategic environment).     

The relative influence of competitive intensity and business strategy on the relationship between financial leverage and performance

This study empirically investigates the effects of competitive intensity and business strategy on the relationship between financial leverage and the performance of firms. Based on a sample of US manufacturing firms, this study confirms the hypothesis that the cost of debt is higher for product differentiation firms than cost leadership firms. Furthermore, the results indicate that competitive intensity has a negative effect on the leverage-performance relationship, suggesting that competition acts as a substitute for debt in limiting manager's opportunistic behavior. These findings reinforce the need to consider moderating factors such as strategic choice and the environment in which a firm operates when investigating the effects of leverage on performance.     

Corporate governance in family firms,learning and reaction to recession: Evidence from Italy

This paper focuses on the interaction between internal and external factors explaining performance of small and medium-sized family firms. We used framework foresight to suggest how learning and internal factors such as CEO’s origin, tenure and turnover, could affect the firm’s reactions to one particular external factor, economic recession. The paper draws on empirical observations of a large sample of small and medium family firms operating in Italy between 2002 and 2011 to identify the baseline future, an expected future for these firms. This analysis may be of interest to both management scholars and practitioners. We hope to contribute to the debate on how internal and external factors interact to affect firm success, measured as sales growth. The implications for the future viability of an economic system based on family businesses are straightforward, as the turbulence and instability of the economic environment has grown significantly in the last decade, especially in more developed countries. Whether the ability of a company to adapt and survive to negative shocks depends on its governance provides a rationale for exploring alternative perspectives on the competitiveness of the economic system and the ability of different owners to cope with future negative events.     

Auditor selection and corporate social responsibility

This study examines the association between the selection of an industry‐specialist auditor and corporate social responsibility (CSR). We find that firms with higher CSR ratings are more likely to hire industry‐specialist auditors (national‐level industry leaders, city‐level industry leaders or joint city‐national industry leaders). Moreover, firms with better CSR performance related to product quality and the environment in controversial industries are found to select non‐specialized auditors. The results suggest that such firms may overinvest in CSR activities associated with the environment and product issues to disguise the sin nature of their manufactured goods, and simultaneously engage low quality auditors perhaps to avoid full disclosure of potential environmental and legal liabilities. Overall, we conclude that CSR is associated with the non‐controversial firms ensuring high quality financial reporting in response to societal expectations, and thus CSR firms in such industries have strong incentives to engage industry‐specialist auditors.     

National foresight in science and technology strategy development

The paper is concerned with the national foresight exercises in Thailand to devise the key science and technology (S&T) strategies. The Thai government, through the National Science and Technology Development Agency (NSTDA), has used the foresight processes to influence policy making and create national foresight programmes. The foresight exercise, covering the period from 2000 to 2020, aims to examine the potential of the Thai industry and investigate a set of development policies necessary to make the Thai industry successful by the year 2020. Three rounds of strategic conferences comprising 2677 people were set up to create a vision for the future of the industry. The results of the foresight process provide a comprehensive overview of the trends of the Thai industry. The study contributes towards the formulation of feasible technological and industrial policies, which would enhance the country's ability to improve the competitive position for tomorrow.     

Competition and the cost of debt

This paper empirically shows that the cost of bank debt is systematically higher for firms that operate in competitive product markets. Using various proxies for product market competition, and reductions of import tariff rates to capture exogenous changes to a firm's competitive environment, I find that competition has a significantly positive effect on the cost of bank debt. Moreover, the analysis reveals that the effect of competition is greater in industries in which small firms face financially strong rivals, in industries with intense strategic interactions between firms, and in illiquid industries. Overall, these findings suggest that banks price financial contracts by taking into account the risk that arises from product market competition.     

How control systems influence product innovation processes: examining the role of entrepreneurial orientation

This paper yields insights into the channels through which management accounting and control systems (MACS) exert an influence on product innovation by examining the extent to which different forms of control (i.e. value systems (VS), diagnostic control systems and interactive control systems (ICS)) are directly associated with the distinct phases of innovation processes. Using survey data collected from 118 medium and large Spanish companies, we find that (1) VS and ICS have significant main effects on the creativity, co-ordination and knowledge integration, and filtering (sub-)phases of innovation processes and (2) the significance and direction of these influences vary depending on the entrepreneurial orientation (EO) of firms. By highlighting the relevance of EO in shaping the influence of MACS on product innovation processes, this study calls for caution in generalising the expected effects of MACS on innovation.     

Mental time travel in foresight processes—Cases and applications

Mental time travel can be described as a method of guiding the participants of a workshop into a picture or a whole series of pictures of the future. This should be thought of as a movie rather than static images and includes emotions. Mental time travel is still a new method in foresight processes, in generating futures, futures research or future-oriented technology analysis (FTA) in general, and is only rarely used to open up the minds of participants at the beginning of workshops so that their thinking does not remain fixed in the past or the present. Time travelling can be applied to different cases and at different stages of a foresight process (phases of strategic intelligence gathering, sense-making or even implementation), e.g. participants are also able to think disruptively in new pictures instead of just extrapolating from the past.Clinical and psychological studies do not yet exist for this kind of time travel, but first experiences from very different foresight processes are available. This paper presents the experiences gained from six national and international foresight cases, in which time travel was applied. Different ways of performing it are reported and set in the context of the specific foresight process concepts. Experiences are shared by examining the lessons learned and the pros and cons of this new method, so that the organizers of foresight processes can better assess how the method could fit their specific context, objectives, method mix and participants.     

Futures of the sustainable firm: An evolutionary perspective

The response of firms to sustainable development issues needs to pass through a deep re-thinking of the strategic design, encompassing the entire organization, its functions and re-shaping its business model.This contribution proposes a frame of reference for SD oriented organizations, based on three cornerstones: principles, processes and outcomes. Based on an abductive research approach, an analysis is developed on some case studies. Special attention is devoted to the dynamics of SD oriented organizations in order to understand how firms can evolve towards progressively more challenging models of business which make compatible profitability and growth with respect for the environment and – beyond mere respect – positive proactive action to improve the planet resources.     

How foresight creates unforeseen futures: the role of doubting

This paper defines foresight as being a mental model about the future and considers the role of foresight in shaping actions and events reflected in imperious, heroic, tragic and chaotic futures (defined within the paper). The paper contends that success in foresight is not about acquiring knowledge or using it to build pictures about the future. Rather, it is the expectations that come with such processes that cause organisational closure, and thus chaotic and tragic futures. The argument is made that firms need to doubt much more than they do.Two processes of doubting are described: the first (single loop doubting) shows how differences between expectations and perception cause doubt that (whenever the underlying mental model is sufficiently plastic) is accommodated by social processes without change. The second process, called double loop doubting, is based on genuine attempts to refute, rather than confirm, mental models about the future. The contention is that such processes would lower expectations and certainty, thereby opening the organisation and enabling mental models to be more accurate.

“I fear there can be no possible doubt about the matter”.

Jack in The Importance of Being Ernest, Oscar Wilde     

“Foresight process impacts: Beyond any official targets,foresight is bound to serve democracy”

Foresight is usually criticised for having a limited direct impact on policy-making. Although contexts play a significant role, this may be true to a certain extent. It is also true, however, that the value of foresight has been under-explored. The purpose of the paper is to show the value of foresight in contributing to the development of more participatory societies irrespective of the specific ‘official’ objectives it is designed to serve. The methodology included the creation of a specific impact assessment framework and the assessment of certain foresight exercises (FNR Foresight and eFORESEE Malta) in terms of contribution to more participatory societies through case studies. The assessment showed that although contributing to more participatory societies was not among the main aims of the particular exercises, they managed to achieve certain impacts facilitating increased public participation or directly improving democratic processes in policy-making. Foresight is ‘by default’ devised to promote democratic processes through inclusiveness, openness, transparency, public engagement, and multi-stakeholder approaches.     

Does firm heterogeneity lead to differences in relative executive compensation?

Cost heterogeneity is an important source of performance disparity among firms. This heterogeneity conditions the strategic decisions that firms make in the product market and can lead to heterogeneity in the design of managerial compensation contracts. I investigate the effect of cost heterogeneity in a strategic product market environment where firms compete à la Cournot. The paper offers new predictions on how executive compensation contracts that account for relative performance must be adjusted for cost differences.     

The Roles of Performance Measures and Monitoring in Annual Governance Decisions in Entrepreneurial Firms

This paper analyzes annual corporate governance decisions at firms making initial public offerings (IPOs) of common stock between 1996 and 1999. Our objective is to examine relations between firms' corporate governance decisions and the informativeness of available measures of managerial performance. We consider financial measures such as earnings and stock return, as well as direct monitoring. We collect a sample of IPO firms from the manufacturing, Internet, and technology (non-Internet) industries, and examine how the use of various performance measures in annual compensation grants and turnover decisions varies with the information environment of the firm and with the extent of venture capital influence. Consistent with prior research that finds earnings are of limited usefulness in firm valuation for Internet firms, we find Internet firms place less importance on earnings and greater importance on stock returns in determining compensation grants than do non-Internet firms. We also find that compensation grants of firms with little or no venture capital influence display significantly stronger association with accounting and stock performance measures than those of firms with more intense monitoring by venture capitalists. This result is consistent with direct monitoring and the use of explicit performance measures acting as substitute governance mechanisms.     

Thinking of peace when rich: The effect of industry growth on corporate risk-taking

We investigate the unique role and mechanisms of industry growth in firms’ risk-taking policies. We find that industry growth is negatively associated with corporate risk-taking, consistent with the prospect theory that a high-growth industry gives firms a superior external environment, which may cause them to refrain from corporate risk-taking as in the saying “thinking of peace when rich.” This correlation is stronger for product market leaders, industries encouraged by industry policies and industries that receive more government support. Firms reduce risk-taking through various corporate policies, including long-term, high-value investments, operational efficiency and cash holdings in response to high industry growth. Overall, our results are consistent with industry growth negatively affecting corporate risk-taking.     

Political connections and debt restructurings

This paper presents evidence that distressed firms with politically connected executives and board members are more likely to reorganize outside of court than to file for Chapter 11 bankruptcy. This relation is more evident for firms that have more political importance, such as major employers within a state, firms located in swing states, and in periods leading up to major election dates. The evidence suggests that the expected costs of financial distress are lower for politically connected firms which may partially explain the higher leverage ratios of politically connected firms documented in the extant literature.     

From priority-setting to articulation of demand: Foresight for research and innovation policy and strategy

The paper addresses the application of foresight to research and innovation policy and strategy. It seeks to show an evolution away from a traditional focus on broad-based technological priority setting to a much more focussed and adapted set of applications. The inherent limitations of prioritisation processes are discussed. The more limited aim of articulating specific fields is noted. Recent trends in research and innovation policy have opened new opportunities for the application of foresight. Systemic and demand-side policies require a shared vision on the part of purchasers and suppliers. The role of foresight in such contexts needs both to be enhanced and better understood.An increasing structural focus for foresight exercises is associated not only with broader R&I system reform but also with an engagement with new-wave innovation policies. The success of demand-side measures such as cluster policies and the use of procurement or regulation to stimulate innovation is dependent upon the formation of a common vision between the supply and demand sides, opening the possibility for the application of foresight approaches. We note the emergence of a combination of corrective, disruptive and creative roles.