Use transnational teams to globalize your company

The authors report on their two-year study of successful transnational teams, in which they examined how such teams are designed and managed to help their firms pursue global business strategies. Based on this study, they present a comprehensive model of team effectiveness that includes the key characteristics differentiating a transnational team from other types of work teams. The model shows how transnational teams operate—how they are staffed and led, communicate across great distances, and cope with cross-cultural issues. In closing, they describe how a company's human resources department can help an “international” or “multinational” team become a “transnational” team—one that has successfully transcended the cultural, geographic, and managerial barriers to team effectiveness.     

Entry and barriers to entry in emerging markets

This note briefly introduces the symposium on entry and entry barriers in emerging markets edited by Nauro Campos and Saul Estrin. The symposium contains four inter-related case studies focusing in depth on the relationship between entry of new firms and institutional arrangements in four major emerging markets: Brazil, China, India and Russia. We find that entry rates are not necessarily low in emerging markets, and that institutional quality is a complex and “fuzzy” notion so that its impact on the entry process is not straightforward.     

Internationalisation: A co-evolutionary perspective

Earlier research has identified several organisational and contextual factors relating to the internationalisation of the firm. However, the relations between these factors and their interaction over time have not been clearly understood. This paper seeks to bridge this gap and to provide a contribution to the internationalisation literature by presenting a co-evolutionary approach whereby the internationalisation path of the firm is seen as a product emerging from the co-evolution of internationalisation activities, organisational resources and industry influences. A longitudinal case study of the internationalisation of Orion Diagnostica illustrates the explanatory potential of the co-evolutionary model and captures the complex and interactive nature of the firm's internationalisation over time. The findings of the study also clarify the constraints that enable or compel a firm to internationalise rapidly and show how and why the status of “born globals” may change radically in the further internationalisation development.     

Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

In this paper we estimate a dynamic structural model of employment at firm level. Our dataset consists of a balanced panel of 2790 Greek manufacturing firms. The empirical evidence of this dataset stresses three important stylized facts: (a) there are periods in which firms decide not to change their labour input, (b) there are periods of large employment changes (lumpy nature of labour adjustment) and (c) the commonality is employment spikes to be followed by smooth and low employment growth periods. Following Cooper and Haltiwanger [Cooper, R.W. and Haltiwanger, J. “On the Nature of Capital Adjustment Costs”, Review of Economic Studies, 2006; 73(3); 611–633], we consider a dynamic discrete choice model of a general specification of adjustment costs including convex, non-convex and “disruption of production” components. We use a method of simulated moments procedure to estimate the structural parameters. Our results indicate considerable fixed costs in the Greek employment adjustment.     

The Maastricht inflation criterion: How unpleasant is purgatory?

The Maastricht inflation criterion, designed in the early 1990s to bring “high-inflation” EU countries in line with “low-inflation” countries prior to the introduction of the euro, poses challenges for both new EU member countries and the European Central Bank. While the criterion has positively influenced the public stance toward low inflation, it has biased the choice of the disinflation strategy toward short-run, fiat measures – rather than adopting structural reforms with longer-term benefits – with unpleasant consequences for the efficiency of the eurozone transmission mechanism. The criterion is also unnecessarily tight for new member countries as it mainly reflects cyclical developments.     

Levels of strategic purchasing: Impact on supply integration and performance

The growing importance of supply chain management has led to an increasing recognition of the strategic role of purchasing, which has recently evolved and expanded from “buying” to “procurement” and “supply management”. In this study, we chart our sample firms’ advance in strategic purchasing, characterized by the strategic focus, strategic involvement of the purchasing function and the status and visibility of the purchasing professionals, into three stages.This study provides strong empirical support for the importance of strategic purchasing by showing that, by moving towards the more advanced stages, firms at the nascent stage of strategic purchasing can achieve better supply integration, a second-order construct composed of four facets of relational, process, information, and cross-organizational team integration. Our analyses further reveal that strategic purchasing can have a profound impact on supply chain performance for both buyer and supplier firms.     

From quality to innovation: Evidence from two French Employer Surveys

In this article we investigate the impact of quality systems on innovation performance using the method of propensity matching. We use two French microeconomic surveys, the “Organizational Changes and Computerization” (COI 1997) and the “Community Innovation Survey” (CIS3 1998–2000). The first hypothesis indicating that quality (ISO 9000 certification) impacts positively on innovation is supported for certain areas of innovation performance. Furthermore, the second hypothesis states that different levels of quality differentially improve innovation performance. Results indicate that the innovation performance of firms with Top Quality Level is higher than that of firms with Medium Quality Level which is also higher than that of firms with Low Quality Level for certain areas of innovation. However, we found that the difference in innovation performance between firms with Medium and Low Quality Levels is not of a great magnitude. This study implies that in order to achieve a significant innovation performance improvement via quality systems, a very well-established quality system is needed within a firm.     

On Certain Indices for Ordinal Data with Unequally Weighted Classes

In this paper, some new indices for ordinal data are introduced. These indices have been developed so as to measure the degree of concentration on the “small” or the “large” values of a variable whose level of measurement is ordinal. Their advantage in relation to other approaches is that they ascribe unequal weights to each class of values. Although, they constitute a useful tool in various fields of applications, the focus here is on their use in sample surveys and specifically in situations where one is interested in taking into account the “distance” of the responses from the “neutral” category in a given question. The properties of these indices are examined and methods for constructing confidence intervals for their actual values are discussed. The performance of these methods is evaluated through an extensive simulation study.     

Service Guarantee Strength: The key to service quality

While most authors describe a service guarantee as a “zero-one variable” indicating the presence or absence of an explicit written service guarantee, this paper develops a construct called “Service Guarantee Strength” (SGS) that is a continuous variable. This construct measures the degree to which a firm sets clear service quality standards for itself on dimensions that customers care about, and has an formal policy for quickly giving meaningful compensation to customers when these standards are not met.The paper builds upon established micro-level behavioral theory to develop the “Service Guarantee Strength Framework”. This framework posits that high Service Guarantee Strength leads to improved service quality, customer satisfaction, and loyalty through three intervening variables—marketing communications impact, employee motivation and vision, and learning through service failure.An empirical investigation was conducted to test the SGS Framework using both employee and customer data from three pairs of firms, with each pair in a different industry. None of these firms had an explicit service guarantee. Unlike many behavioral research studies, this study measured both employee and customer perceptual data and compared the two. The research finds that Service Guarantee Strength is positively related to customer perceptions of service quality, customer satisfaction, and loyalty.     

Do adjustment costs explain investment-cash flow insensitivity?

In this paper, I explain two “puzzles” that have been observed in firm level data. First, firms that display a high sensitivity of investment to cash flow (commonly believed to be an indicator of liquidity constraints) usually have large unutilized lines of credit which, presumably, could be used to overcome the shortage of funds. Second, firms that are perceived to be extremely liquidity constrained actually show very little sensitivity of investment to cash flow.I show how a dynamic model of firm investment with liquidity constraints and non-convex costs of adjustment of capital can explain these facts. These two features together imply that firms need to have a certain threshold level of financial resources before they can afford to increase investment. Once they cross this threshold, firms’ investment will be positively correlated with their financial resources until they reach their desired level of capital stock. However, even if investment is sensitive to cash flow, firms may borrow below their credit limit to guard against future bankruptcy or binding liquidity constraints.     

Shaping buyer–supplier relationships in manufacturing contexts: Design and test of a contingency model

Although the idea that buyer–supplier partnerships can yield considerable benefits to firms is largely diffused among researchers and practitioners, the approach adopted in this paper is that no “one best way” exists in buyer–supplier relationships, but rather a “best way” for each specific exchange context. Hence, this paper proposes a contingency model for shaping and managing buyer–supplier relationships in manufacturing contexts. In order to test the model, an empirical study was performed on a sample of 45 buyer–supplier relationships within the Italian white goods industry. A three-dimensional performance indicator was computed to compare supplier performance achieved within relations matching the model's suggestions with those set differently. The results strongly suggest that suppliers involved in relationships set accordingly to the contingency model are likely to enjoy superior performance.     

The block metric and the law of markets

The “Law of Markets” as originally stated by Fetter and amended by Hyson and Hyson is based on the assumption that the transportation of goods is along a line segment from firm to customer. In many situations the assumption that transportation is along a block-like network of roads is a better approximation of reality. In this paper we establish the “law of markets” appropriate to the block metric. We discover that with such a metric there exist significant discontinuities in a firm's demand functions and we argue that these discontinuities have important implications for the types of competitive strategies open to firms.     

The economic system as an end or as a means, the socialization of consumption, and the future of socialism and capitalism

After the demise of “real” socialism, socialism can be salvaged as a social preference system oriented towards equality and social justice, to be implemented without systemic constraints in the organizational and institutional sense. At the same time there is a case for creating an institutional framework allowing different forms of economic organization, capitalist and non-capitalist, to compete on equal footing, in an evolutionary perspective. Another way for a spontaneous extension of the domain of socialism could derive from the socialization of consumption, if the consumption of public goods continues to make up a growing component of real consumption.     

Developing breakthrough products: challenges and options for market assessment

Competitive pressures and market forces are augmenting the importance of product innovation as a source of competitive advantage. Key drivers underpinning market success have the capacity to develop the “right” products for the “right” customers, using the “right” channels, with a shorter development cycle than competitors. But when breakthrough products (BTPs) are involved, how do we sort out what is “right”? How do we identify customers' future requirements when the technology platforms are still unfolding, products are still in development and customers lack experience with the product? Traditional product development market research techniques are problematic since they assume the customer has historical experience with products similar to those being created. The objective of this paper is to raise the awareness of the OM community with the strengths and weaknesses of existing methodologies for developing and introducing innovative products to market. Further, it suggests promising future directions for both practice and research when BTPs are involved. This is important because of the central role OM plays in managing the success of the BTP development process.     

Subprime lending and the housing bubble: Tail wags dog?

The cause of the “housing bubble” associated with the sharp rise and then drop in home prices over the period 1998–2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998–2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998–2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans. However, we do find strong evidence that a credit regime shift took place in late 2003, as the GSE’s were displaced in the market by private issuers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a “bubble” were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the “tail”) of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the “dog”).     

Business formation — a network approach

This article suggests that the key to entrepreneurial success is to be found in the ability to develop and maintain a personal network. In elaborating this proposition I regard the environment of the business venture as “enacted”. The inexperienced new entrepreneur needs support to create a personal network and to manage the enacted environment. The concept of the “organizing context”, defined as a clustered sociocentric network, is introduced to provide a tool with which the entrepreneur can deal more efficiently with the different subprocesses that create his or her reality. The approach supplies a framework within which various forms of entrepreneurship — indigenous, corporate, etc. — can be compared and analysed beyond their institutional differences. The interaction between various forms of entrepreneurship and organizing contexts is empirically illustrated from case studies.     

Manufacturing strategy: Its assessment and practice

In recent years, the subject of manufacturing strategy has attracted much attention, yet it is still a relatively unresearched area. Among practitioners, unlike the term “marketing strategy,” the term “manufacturing strategy” does not have instant recognition as to its meaning, purpose, and utility.For continued progress in the research and practice of manufacturing strategy, there is a real need for practical methods of assessing the manufacturing strategy of businesses. For example, for practitioners, the assessment of manufacturing strategy is essential to the development, fine tuning, revision, and evaluation of manufacturing strategy.This study presents a method of assessing the manufacturing strategy of businesses. In the process of assessing the manufacturing strategy in thirty-five manufacturing firms, this study found several problems with the practice of manufacturing strategy and recommends some solutions.It has been reported by researchers that the task of assessing manufacturing strategy is often hampered by a lack of understanding of the term manufacturing strategy and the absence of explicitly denned manufacturing strategies within most manufacturing firms. Consequently, this study assessed the implied manufacturing strategy in the participating firms using the responses of both chief executives or equivalents and manufacturing managers. To overcome nonuniform understanding of the term among executives, multiple respondents and multiple methods using several direct and indirect questions were employed to get as good a fix on the manufacturing strategies of the firms as possible.It was found that while chief executives stressed quality, technology, etc., which would contribute to a business level strategy based on product differentiation, manufacturing managers stressed cost, and the keeping of delivery promises. This mismatch of emphasis between the two executives could be a sign of problems in the effective use of the manufacturing function.A major conclusion of this study is that executives in manufacturing firms are not sufficiently “literate” in matters concerning manufacturing strategy. However, this deficiency could be easily corrected by appropriate training in assessing, formulating, and implementing manufacturing strategy.The method used in this study for assessing manufacturing strategy could be used by chief executives and manufacturing managers to identify their implied manufacturing strategy, and to detect agreements as well as disagreements between the two. Further, the method used here could be replicated by executives in developing or reviewing the formal manufacturing strategies of their businesses.     

Economic and normative pressures as drivers for the adoption of International Accounting Standards in Finland since 1976

Abstract

This paper deals with the internationalisation of Finnish business life and the attempts to introduce and apply international accounting standards (IASs) in Finnish accounting practice before the latest developments at the EU level in 2002. The internationalisation of business life creating economic pressures for changes is illustrated. Analysis of four accounting issues is made in order to exemplify how IASs have affected Finnish accounting legislation and practice. The results of the analysis indicate that the effect of IASs has been notable but secondary because of the implementation of the EU Directives in Finnish accounting legislation in the 1990s. IASs have not caused any drastic changes in accounting practice as their requirements have been written as alternatives in legislation. This approach has provided a possibility to large, listed companies to produce financial accounting information in line with the principles of IASs. In the introduction of IASs there have been political aspects when justifications for the national model and for the international orientation have been presented.     

Evaluating shifts in Japan's quality-of-life

This paper presents a Data Envelopment Analysis/Malmquist index (DEA/MI) analysis of the change in quality-of-life (QOL), which is defined as the state of a social system as measured by multiple social-indicators. Applying panel data from Japan's 47 prefectures for the period 1975–2002, we identify significant movement in the country's overall QOL using a “cumulative” frontier shift index. Results suggest that Japan's QOL rose during the so-called “bubble economy years” (second half of the 1980s), and then dropped in the succeeding “lost-decade” (1990s). We also identify those prefectures considered most “responsible” for the shift(s) in QOL. Moreover, the use of both upper- and lower-bound DEAs enabled an evaluation of both “good” and “bad” movements in QOL.     

Economics of personnel and human resource management

The new economics of personnel and human resource management is analysed, including its current prominence as well as its historical antecedents. The economic paradigm as applied to personnel and human resource economics is illustrated through a variety of examples in the personnel area. These involve economic phenomenon (e.g., fixed hiring costs, asymmetric information, option values) highlighting their implications for personnel issues, as well as personnel phenomenon (e.g., deferred compensation, pensions, mandatory retirement) highlighting their economic rationale. Other phenomenon that otherwise seem difficult to explain or paradoxical are analysed including: superstar salaries; long-hours and overtime coexisting with unemployment and underemployment often within the same organisation; the reluctance of seemingly risk averse workers to accept small wage cuts to avoid the possibility of a layoff; the payment of fringe benefits that may not be valued by many employees; the “regular” hiring of temporary workers when permanent workers are available; egalitarian pay structures and fairness in compensation; the persistent reporting of vacancies on the part of firms but a reluctance to raise wages to fill those vacancies; the use of piece rates in some jobs and salary structures that are based on relative ranking of workers in other jobs; and tenure or “up-or-out” rules where people who are not promoted are required to leave rather than work for lower pay. The concluding section focuses on elements that are common across these applications.