Let them go? How losing employees to competitors can enhance firm status

Research summary : Because employees can provide a firm with human capital advantages over competitors, firms invest considerably in employee recruiting and retention. Departing from the retention imperative of strategic human capital management, we propose that certain employee departures can enhance a firm's competitiveness in the labor market. Specifically, increased rates of career‐advancing departures by a firm's employees can signal to potential future employees that the firm offers a prestigious employment experience that enhances external mobility opportunities. Characterizing advancement based on subsequent employers and positions, we analyze data on U.S. law firm hiring and industry surveys of perceived firm status between 2004 and 2013. We find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high‐status competitors. Managerial summary : Firms often emphasize employee retention. Employee departures, especially as a result of being hired away by competitors, are often viewed as threats to a firm's competitive advantage. We propose, however, that employee retention need not be an unconditional strategic imperative. We argue that certain employee departures can enhance a firm's competitiveness in the market for human capital by signaling to potential employees that the firm offers a prestigious employment experience, which can help them obtain attractive positions with other employers. Analyzing data on U.S. law firm hiring and industry surveys of firm associates between 2004 and 2013, we find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high‐status competitors. Copyright © 2016 John Wiley & Sons, Ltd.     

Innovations,Prices and Employment: A Theoretical Model and an Empirical Application for West German Manufacturing Firms

In this paper a theoretical model of the impact of product and process innovations on output, capacity utilization, employment and prices is developed. The model is estimated with a unique set of micro-data from West German manufacturing firms. The empirical results reveal that innovative firms are more successful. They show a higher utilization and more output and employment growth than non-innovative firms. Innovations also change market behaviour. In sectors with a large share of product innovators, firms more often change employment and less often change prices, i.e. product innovations reduce price competition.     

Speed to Market for Innovative Products: Blessing or Curse?

The relationships among speed to market, quality, and costs are important to managers as they attempt to best establish incentives and set goals for new product development teams, allocate resources for new product development, or create positional advantage in the market. The existing literature suggests that the economic consequences of being late to the market are significant, including higher development and manufacturing costs, lower profit margins, and lessening of the firm's market value. Therefore, traditional logic has held that new product development managers need to manage the trade‐offs among speed to market, quality, and costs. While both scholars and managers have often acquiesced to performance trade‐offs among “faster, better, and cheaper,” this research attempts to improve understanding of the interrelationships between these objectives, and ultimately profit. Based on a survey of 197 managers, faster speed to market is shown to be related to better quality and lower costs; it is not necessary to sacrifice one of these outcomes. Further, the moderating roles of two dimensions of innovativeness (innovativeness to the firm and to the market) are examined on the relationships between speed and quality, as well as speed and profit. Both dimensions of innovativeness positively moderate the relationship between speed to market and quality. For more innovative products (both to the firm and the market), there is a stronger positive relationship between speed and quality than for less innovative products. Further, innovativeness to the firm negatively moderates the relationship between speed and profit. Thus, speed has a less positive impact on profit for highly innovative‐to‐the‐firm products compared with less innovative‐to‐the‐firm products. By being conscious of the projects’ levels of innovativeness (along with prioritizing various performance measures), managers can more rationally decide when to emphasize speed to market based on this study's findings.     

Corporate Governance Structure and Employment Adjustment in Japan: An Empirical Analysis Using Corporate Finance Data

I investigate the influence of corporate governance structures on employment adjustment in Japanese firms, using financial data for firms listed on the Japanese stock market. The results indicate that corporate governance structures affect the rate of employment adjustment. The presence of large stockholders and the degree of stock cross–holding lengthens the period the firm remains in debt and slows down the speed of employment adjustment.     

The Neoclassical Firm Under Moral Hazard

We develop a model of the neoclassical firm under moral hazard with endogenous capital and employment and perfectly competitive capital, labor and product markets. We assume that effort becomes harder to measure as the firm gets larger and the exogenous parameters are affiliated. The model explains why incentives decline but wages rise with firm size, the mixed evidence on the risk-reward tradeoff, and the positive correlation between wages and profits. In the long run, incentives are increasing in risk via endogenous capital. Finally, the model makes novel predictions about the relationship between incentives and labor market conditions.     

Should Firms Consider Employee Input in Reward System Design? The Effect of Participation on Market Orientation and New Product Performance

Will increasing employee participation in reward decisions increase new product performance by first increasing a firm's level of market orientation? Literature offers limited insight to the effects of listening to employees regarding reward system design and whether this may influence market orientation implementation and new product performance. This paper provides research to fill the gap by examining the relationship between participation‐based reward systems, market orientation, and new product performance. Based on expectancy theory, a conceptual model was developed suggesting that participation‐based rewards will increase market orientation by considering employees' desires regarding performance rewards. To test the model, a mixed method was used to collect data. First, in‐depth interviews were conducted with managers from 11 different firms to verify the proposed model. Then a multi‐industry sample of managers from 290 firms was surveyed to maximize generalizability of the results. Data were analyzed using structural equation modeling techniques to simultaneously fit the measurement and structural models. The findings show that market orientation significantly impacts objective new product performance and mediates the relationship between participation‐based rewards and objective new product performance. Participation‐based rewards positively affect market orientation but surprisingly affect new product performance negatively, while positively moderating the relationship between market orientation and new product performance. The results suggest that managers should include employee input in designing reward systems. However, managers should also be careful of how much input they allow employees in determining their rewards and goals as more input will improve market orientation or responding to information collected by, and disseminated throughout the firm, and that, in turn, will improve some types of new product performance. However, the direct effect of employee input can decrease new product performance suggesting that there may be a trade‐off between various success measures of new products developed and introduced by the firm.     

Corporate Headquarters Relocation: Evidence from the Capital Markets

This paper assesses the stock market reaction to announcements of corporate headquarters relocations and examines financial and geographical factors related to wealth effects and factors that influence the decision to relocate corporate headquarters. The results indicate that announcements of relocations are associated with significant positive stock price effects. On average, the stock price of relocating firms increases by 1.29% during the two-day period around the announcement. Abnormal returns are positively related to the availability of labor and negatively related to the cost of living in the new location and the change in employment levels. A logit analysis indicates that the probability of a firm relocating is partially determined by the firm size and the rental expenses/sales ratio. The results also indicate that firm size, the employment/asset ratio levels, and listing in the NYSE/AMEX affect the decision to relocate to a Fortune-ranked city. Finally, firms relocating to Fortune -ranked cities are characterized by a high level of insider ownership relative to firms moving to non-ranked cities.     

Standardization Alliance Networks,Standard-Setting Influence,and New Product Outcomes*

Standardization alliances evolve through collaborations among firms for developing and implementing industry technical standards. Cooperative standard setting can help allied firms to gain access to external knowledge and technologies, but it is unclear how the configuration of a standardization alliance can result in improving a firm’s performance in new product development. This study examines how standardization alliance network-based resource advantages vary across a firm’s network position and the firm’s ability to influence industry standard setting and new product outcomes. Empirical analyses, based on archival data from 170 Chinese automobile manufacturers from 1999 to 2013, indicate that firms that span structural holes in standardization alliance networks gain an advantage when focusing on early new product introductions but suffer a disadvantage when aiming at more innovative products. In contrast, taking a central position in standardization alliance networks is negatively related to a firm’s speed in bringing new products to market but positively related to the firm’s new product introduction rate. Further, standard-setting influence significantly mediates the effect of network position on a firm’s new product speed to market. Increasing centrality and structural holes can lead to the improvement of a firm’s standard-setting influence, and this, in turn, positively affects speed to market.     

How New Product Introductions Affect Sales Management Strategy: The Impact of Type of "Newness" of the New Product

How do firms adjust sales management strategy for new product launch? Does sales management strategy change more radically for different types of new products such as new‐to‐the‐world products versus product revisions? Because firms introducing a new product rely considerably on their sales force in the product launch effort, the types and degree of changes made in managing the selling effort are important issues. Past studies have demonstrated that firms make substantial adjustments in their sales management strategy when they introduce a new product. This study expands on previous investigations by examining whether sales management strategy changes are conditioned by the type of newness of the new product to the market and to the firm. Australian sales managers were asked to respond to a mail questionnaire concerning pre‐ and post‐new product launch sales management activities. Three groups of firms were compared: (1) those with new‐to‐the‐market and new‐to‐the‐firm products (i.e., new‐to‐the‐world products); (2) those with products new to the firm but not new to the market; and (3) those with products that are revisions to the firm and not new to the market. The study finds that firms do not make the most adjustments for products with the greatest degree of market newness—the new‐to‐the‐world types of products—except in the sales management strategy categories of compensation and supervision. In the other sales management strategy categories defined for study—organization, training, quotas and goals, and sales support as well as for all categories in the aggregate—sales management strategy changes were greatest in incidence, as measured both by the percent of firms making changes and the average number of changes per firm, when the new product was new to the firm but not new to the market. These results suggest that, because different types of new products face different competitive environments, there may be greater incentive for a not‐new‐to‐the‐market new‐to‐the‐firm product to make changes in sales strategy. Uncertainties about market size and customer location with new‐to‐the‐world products may limit the understanding of what changes to make in the strategy categories of quotas and territories. Similarly, uncertainties about product use and customer acceptance of new‐to‐the‐world products may limit the development of training and sales support materials by these firms. Instead, these firms may rely more on compensation and supervision to direct sales efforts for new‐to‐the‐world products. However, observing the market experience and performance of the first‐to‐market product can benefit firms launching a not‐new‐to‐market and new‐to‐the‐firm product, allowing them to rely more on strategy changes in training, sales support materials, organizational adjustments such as redeployments, and quotas.     

Labour-managed firms and monopsony power

Monopsony power in the labour market is shown to have important consequences for comparisons between an Illyrian labour-managed firm (LMF) and a profit-maximising capitalist firm (CF) operating in the same markets with the same technology. If the CF earns positive profits then workers earn more in the LMF than in the CF, and the level of employment in the LMF may be higher or lower than in the CF. Monopsony power is also seen to have interesting implications for models of membership contraction in LMFs.     

Institutions Are What Actors Make of Them — The Changing Construction of Firm‐Level Employment Relations in Spain

This article analyses the variation and change in firm‐level employment relations in Spain between the transition to democracy and the global financial crisis. Using three auto companies as case studies, I address a crucial puzzle in the institutional literature on comparative employment relations: How do employment relations change and vary, even when national employment relations institutions do not? This article argues that differences in actor ideologies shape the construction of national institutions at the firm level, which explains change and variation of employment relations over time and across cases. The study identifies four drivers of ideological change — generational change, leadership change, identity work and diffusion — that impact the variation and change in employment relations at the firm level.     

Product Market Competition and Corporate Real Estate Investment under Demand Uncertainty

This article theoretically and empirically analyzes the interactions among corporate real estate investment, product market competition and firm risk. In our model, firms own strategic real estate or lease generic real estate. Our model predicts that strategic real estate ownership is positively correlated with industry concentration and negatively related to demand uncertainty. Also, firm risk is higher for firms with more strategic real estate operating in a more concentrated market. This prediction arises because smaller investments induce greater market competition, which effectively eliminates the right tail of the firm's profit distribution. We provide strong empirical support for our predictions. In particular, firm value is more volatile in less competitive markets for a given level of demand uncertainty.     

Outcome-based contracting from the customers' perspective: A means-end chain analytical exploration

Within the context of servitization, manufacturing firms increasingly offer outcome-based contracts (OBCs) which sell the outcome of a manufacturing process instead of the resources required for outcome creation. While extant studies have focused on the provider's viewpoint, this research explores industrial customers' requirements and goals when sourcing OBCs. We report the results of laddering interviews with purchasing and engineering managers from 32 actual and potential OBC customers. Based on a means-end chain analysis we find that, in addition to organizational goals, such as reducing costs or ensuring reliable supply, individual goals of the decision-makers also play a key role when purchasing OBCs. Specifically, the risk of being held accountable for problems that may occur in an OBC's implementation and operation emerges as an important concern of decision-makers. In contrast to extant research, that highlights how OBCs transfer operational risk from the customer to the supplier firm, our study indicates that customers also perceive elevated levels of individual and organizational risk when making OBC purchase decisions. Against this backdrop, OBC salespeople should address both individual and organizational goals of key decision-makers in the customer firm and focus on building trust in the supplier's ability to realize and operate an OBC.     

Product Innovation Processes in Small Firms: Combining Entrepreneurial Effectuation and Managerial Causation

This article reports a multimethod study of product innovation processes in small manufacturing firms. Prior studies found that small firms do not deploy the formalized processes identified as best practice for the management of new product development (NPD) in large firms. To explicate small firms' product innovation, this study uses effectuation theory, which emerged from entrepreneurship research. Effectuation theory discerns two logics of decision‐making: causation, assuming that means are selected to attain goals; and effectuation, assuming that goals are created based upon available means. The study used a process research approach, investigating product innovation trajectories in five small firms across 352 total events. Quantitative analyses revealed early effectuation logic, which increasingly turned toward causation logic over time. Further qualitative analyses confirmed the use of both logics, with effectual logic rendering product innovation resource‐driven, stepwise, and open‐ended, and with causal logic used especially in later stages to set objectives and to plan activities and invest resources to attain objectives. Because the application of effectuation logic differentiates the small firm approaches from mainstream NPD best practices, this study examined how small firms' product innovation processes deployed effectuation logic in further detail. The small firms: (1) made creative use of existing resources; (2) scoped innovations to be realizable with available resources; (3) used external resources whenever and wherever these became available; (4) prioritized existing business over product innovation projects; (5) used loose project planning; (6) worked in steps toward tangible outcomes; (7) iterated the generation, selection, and modification of goals and ideas; and (8) relied on their own customer knowledge and market probing, rather than early market research. Using effectuation theory thus helps us understand how small firm product innovation both resembles and differs from NPD best practices observed in larger firms. Because the combination of effectual and causal principles leverages small firm characteristics and resources, this article concludes that product innovation research should more explicitly differentiate between firms of different sizes, rather than prescribing large firm best practices to small firms.     

Active Labour Market Policy by a Profit‐Maximizing Firm

This article investigates the effectiveness of an employment programme exclusively run by a private sector firm in order to find out whether such a programme can be beneficial to both the participating individuals and the private firm. To answer these questions, we use a unique dataset on a private employment programme covering 23 years of operations and data on 1,000 participating unemployed individuals. Using conservative estimates, we show that a private employment programme is more effective in reintegrating the unemployed than public efforts, while providing tangible benefits to the firm.     

Market Orientation and Innovativeness in Supply Chains: Supplier's Impact on Customer Satisfaction

As today's firms increasingly outsource their noncore activities, they not only have to manage their own resources and capabilities, but they are ever more dependent on the resources and capabilities of supplying firms to respond to customer needs. This paper explicitly examines whether and how firms and suppliers, who are both oriented to the same customer market, enable innovativeness in their supply chains and deliver value to their joint customer. We will call this customer of the focal firm the “end user.” The authors take a resource‐dependence perspective to hypothesize how suppliers' end‐user orientation and innovativeness influence downstream activities at the focal firm and end‐user satisfaction. The resource dependence theory looks typically beyond the boundaries of an individual firm for explaining firm success: firms need to satisfy customer demands to survive and depend on other parties such as their suppliers to achieve customer satisfaction. Accordingly, the research design focuses on three parties along a supply chain: the focal firm, a supplier, and a customer of the focal firm (end user). The results drawn from a survey of 88 matched chains suggest the following. First, customer satisfaction is driven by focal firms' innovativeness. A focal firm's innovativeness depends, on the one hand, on a focal firm's market orientation and, on the other hand, on its suppliers’ innovativeness. Second, no relationship could be established between a focal firm's market orientation and a supplier's end‐user orientation. Market orientation typically has within‐firm effects, while innovativeness has impact beyond the boundaries of the firm. These results suggest that firms create value for their customer through internal market orientation efforts and external suppliers' innovativeness.     

The fit between product market strategy and business model: implications for firm performance

We examine the fit between a firm's product market strategy and its business model. We develop a formal model in order to analyze the contingent effects of product market strategy and business model choices on firm performance. We investigate a unique, manually collected dataset, and find that novelty‐centered business models—coupled with product market strategies that emphasize differentiation, cost leadership, or early market entry—can enhance firm performance. Our data suggest that business model and product market strategy are complements, not substitutes. Copyright © 2007 John Wiley & Sons, Ltd.     

The Role of Resource Access, Market Considerations, and the Nature of Innovation in Pursuit of Standards in the New Product Development Process

Standards influence new product development (NPD) in high‐technology markets. However, existing work on standards has focused exclusively on one aspect of standards—compatibility standards. This article has the following goals. First, we delineate the concept of customer interface standards as distinct from compatibility standards. This distinction is important from a product development and technology adoption perspective. Second, we propose and show that antecedent factors may motivate a firm differently about the emphasis that the firm should put on a type of standard (compatibility or customer interface) that it follows. For example, we propose that appropriability regime affects pursuit of customer interface standards and compatibility standards differently. Finally, we illustrate how resource access and the nature of the innovation also influence a firm's decision to pursue a standard type. Finally, we propose that pursuit of different standards (customer interface or compatibility) affects the NPD process in terms of (1) sourcing and dissemination of technology and (2) the customer utility for the product, which influences adoption. We collected perceptual data from a sample of marketing and technology managers in high‐tech industries in the UK using both formative and reflective scales to measure the constructs. Analysis of the data using LISREL supports our contention that compatibility standards and customer interface standards are distinct constructs and that appropriability regime influences compatibility standards and customer interface standards differently. We also find that pursuit of compatibility standards helps a firm to create direct externalities pursuit of customer interface standards helps firms to develop indirect network externalities and technological advantage in the market. Our findings have the following implications. First, managers need to account explicitly for the difference between compatibility and customer interface standards, as resource allocation decisions during the NPD process will determine where a firm puts more focus. The choices made by the firm—as to whether it pursues compatibility standards or customer interface standards—will determine the type of advantage that it can gain in the market. Given a firm's situation at a point in time, a greater focus on one standard type rather than the other may be the right approach. Such choices will influence resource allocation in the product development process.     

Strategic orientations,marketing proactivity and firm market performance

Guided by strategic orientations, firms must continuously deliver superior value in order to maintain a strong position in the market over the long-term. This study explores how two prominent strategic orientations (i.e., market and technological orientations) influence a firm's marketing proactivity and performance, with marketing proactivity being the key to delivering continuously superior value. Specifically, we examine how the cultural (i.e., a proactive market orientation) and the behavioral (i.e., market pioneering) dimensions of marketing proactivity, and the interaction between them, affects a firm's market performance. A structural equation modeling analysis of survey data from 109 firms shows that a proactive market orientation and market pioneering have a significant positive impact on the sales per employee and the growth rate of a firm. Our findings suggest that market pioneering strengthens the positive relationship between proactive market orientation and sales per employee and growth rate. A firm's technological orientation is positively related to both its proactive market orientation and market pioneering. However, the responsive market orientation of a firm only has a significant positive effect on proactive market orientation, and not on market pioneering. We discuss the theoretical and managerial implications of these findings.     

The Roles of Sustainability Orientation and Market Knowledge Competence in New Product Development Success

Firms’ sustainability orientation (SO) is widely understood as a strategic resource, which can lead to competitive advantage and superior (financial) performance. While recent empirical evidence suggests a moderate and positive relationship between SO and financial performance on a corporate level, little is understood about the influence of SO on new product development (NPD) success. Building on the natural‐resource‐based view (NRBV) of the firm, we hypothesize that firms’ SO positively influences NPD success, because of efficiency gains and differentiation advantages. However, scholars have also argued that the win–win paradigm postulated by NRBV might not always hold because NPD managers might find it difficult to balance sustainability objectives with the needs of their customer and the competitive dynamics in their markets. It is, therefore, proposed that market knowledge competence (MKC) is an important capability, which helps firms to balance social and ecological objectives with economic goals such as profitability and market share. Using data from 343 international firms from 24 countries that was collected by the Product Development and Management Association, structural equation modeling results suggest that (1) SO positively influences NPD and that (2) this relationship is partially mediated by firms’ market knowledge capabilities. The findings suggest that strategic‐level SO and MKC are complementary in that they help in balancing trade‐offs between sustainaility objectives and profitability goals. In this way, the study contributes to a better understanding of how critical NPD practices can help managers to translate firms’ SO into NPD success. The article concludes by highlighting implications for product innovation managers.