The double-edged sword of purpose-driven behavior in sustainable venturing

This paper examines the relationship between purpose and purposeful organizing and how such arrangements influence the entrepreneurial journey as sustainable ventures move from idea to markets. We leverage an iterative multi-stage process-tracing design to understand the mechanisms whereby 14 different B Corp certified organizations embed purpose before, during and after the certification process. Our analyses reveal three types of venture paths for purpose-driven entrepreneurs, which are shaped by distinct imprinting sequences with three critical sensitive windows playing a pivotal role: the definition of scope of purpose, timing of purpose formalization through B Corp Certification and shifts in the source of feedback. Different imprinters occurring within the critical sensitive windows shape particular imprinting sequences triggering situations of both productive and counterproductive path development. Our results challenge the assumed linear relationship between purpose and purposeful organizing and more specifically the belief that seeking (purposeful) B Corp certification at firm foundation is necessarily productive for society and for the ventures themselves regardless of when the certification is achieved.     

A configural framework of practice change for B corporations

There is increasing scholarly attention toward understanding how enterprises seeking prosocial impact organize their practices. However, this research has primarily explained changes in isolated practices and has not fully explored the mechanisms for such changes. This omission is relevant for social entrepreneurship scholars who seek to better understand how practices operate not simply internally but can effect a positive impact. We address this omission by drawing from a unique longitudinal dataset – assessment scores of enterprises seeking to be certified and recertified as B Corporations (B Corps). We also conducted 24 interviews with B Corp leaders, B Lab staff, and venture fund managers. We found that B Corps shifted their practice configurations as they underwent assessment and reassessment for certification. We also found that exogenous factors such as size and sector, and endogenous factors such as the nature of practices explained shifts in practice configurations. Our contribution is twofold. First, we test deductive claims that social enterprises re-organize for impact. We show that enterprises update their practice configurations over time. Second, we propose an inductively derived theoretical framework with three building blocks: affordability, interpretability, and social referents to explain the shifts in practice configurations.

Category membership,identity control,and the reevaluation of prosocial opportunities

We extend current knowledge on prosocial organizing by explaining how membership in organizational categories lead entrepreneurs to reevaluate their firms' activities and opportunities. Through a qualitative study of 46 firms that pursued B Corp certification, we developed an identity control model of prosocial opportunity. Our findings suggest that joining a prosocial category catalyzes identity-driven reflexivity, which can alter the firm's engagement in prosocial activity. This identity-driven process occurs in tandem with evaluations of opportunity viability and attractiveness, the potential for intra-organizational conflict, and the relative power and position that category legitimacy affords the firm. Our findings contribute to literature streams on prosocial organizing, identity, and categories.     

Positively deviant: Identity work through B Corporation certification

Despite widespread and growing public interest in sustainability certifications, many social entrepreneurs have opted not to obtain such certification. Drawing on recent studies highlighting the salience of both gender and context in shaping differences among social enterprises, we develop an identity-based framework for explaining heterogeneity in the adoption of sustainability certification. We test our ideas using a sample of 1251 U.S. firms obtained from B Lab, the organization responsible for assessing Certified B Corporations. Our results show that woman-owned businesses are twice as likely to qualify for certification and more than three times as likely to certify. Moreover, this propensity to certify is amplified in contexts where sustainability norms are weak, mimetic pressure to obtain sustainability certification is low, and woman-owned businesses are less prevalent. These findings support our central theoretical argument that certification differences are due to actors' efforts to engage in identity work, strengthening their sense of self-coherence and distinctiveness by way of this authentication process. We conclude by highlighting our contributions to existing scholarship on social entrepreneurship, identity work, and certification adoption, as well as strategic implications for B Lab.     

Foreign ownership mode,executive compensation structure,and corporate governance: Has the literature missed an important link? Evidence from Taiwanese firms

We propose an alternate context-based extension to the agency theory-grounded explanation of foreign ownership mode choices proposed in the literature. Using a sample of Taiwanese firms investing in the greater China region over the 2001–2009 period, we show that both economic and non-economic factors influence the choice of foreign ownership mode. In addition, we document that higher institutional ownership percentages motivate Taiwanese firms to select shared ownership in the greater China region. Further, no long term compensation mix/ownership structure link is found. These findings run counter to a theory provided for foreign ownership mode choices of US based firms. Our findings provide support for the validity of stewardship and social capital theory, but not financial incentives-based agency theory, for Taiwanese firms investing in the greater China region.     

Country-of-origin effects and antecedents of industrial brand equity

Does the country-of-origin effect matter to industrial brand equity in international business-to-business (B2B) markets? The effect of a product's country-of-origin (COO) on both industrial buyers' and consumers' perceptions and evaluations has been one of the most widely studied phenomena in the fields of international business, marketing, and consumer behavior since the 1960s. Although many country-of-origin studies focus on consumer behavior in developed countries and acknowledge that the processes and stages of economic development by which consumers use COO information may differ in developing countries, the fact that there has been little research to investigate the effects of COO could explain the variations in international buyers' evaluations of industrial brand equity in the newly-industrialized economies, such as Taiwan. Taiwanese firms are now formidable global B2B market players by successfully transforming themselves from manufacturing mainly low-value and labor-intensive goods to producing many high value-added products that require advanced technology, equipment and significant business expertise. With the adoption of advanced technology and equipment, an important question is whether unique and innovative fastener products from Taiwan have generated the country-of-origin effects in international B2B buyers' minds. The main finding is that the country-of-origin of fasteners has not yet become an important antecedent of industrial brand equity in the case of the fastener industry in Taiwan.     

Are socially responsible exchange-traded funds paying off in performance?

This study examines the Socially Responsible (SR) exchange-traded funds (ETFs) by comparing their risk-adjusted performance with a matched group of conventional ETFs in the U.S. equity market. In contrast to prior studies that focus on actively managed mutual funds, we find that the risk-adjusted returns of SR ETFs are significantly lower than those of conventional ETFs during the 2005–2020 period. Such underperformance is only observed in non-crisis periods but not in economic crisis periods (i.e., the 2020 pandemic recession and 2008 financial turmoil). We attribute the observed underperformance of SR ETFs during the non-crisis periods to their limited diversification of unsystematic risks resulting from various negative or positive screens employed in the funds. We also find that net fund flows of the SR ETFs are less sensitive to past negative performance than are conventional fund flows. Collectively, our findings suggest that, instead of seeking wealth maximization, socially conscious investors may choose SR ETFs to gain non-economic utility.     

Just about money? CEO satisfaction and firm performance in small family firms

This paper examines how family ownership and family ties influence the relative importance of economic and non-economic goals on the CEO’s satisfaction with the firm. Using a sample of small high-tech family and non-family firms, we show that the influence of past firm economic performance on CEO satisfaction is weaker in the case of CEOs leading a family firm. Our results also suggest that this influence becomes weaker as the family firm transitions into subsequent generations. However, contrary to our expectations, we were not able to find a differential effect of firm performance on CEO satisfaction between CEOs who belong to the controlling family and those who do not.     

How Does the Market Value Corporate Sustainability Performance?

This study provides empirical evidence on how corporate sustainability performance (CSP), as proxied by membership of the Dow Jones sustainability index, is reflected in the market value of equity. Using a theoretical framework combining institutional perspectives, stakeholder theory, and resource-based perspectives, we develop a set of hypotheses that relate the market value of equity to CSP. For a sample of North American firms, our preliminary results show that CSP has significant explanatory power for stock prices over the traditional summary accounting measures such as earnings and book value of equity. However, further analyses suggest that we should not focus on corporate sustainability itself. Our findings suggest that what investors really do is to penalize large profitable firms with low level of CSP. Firms with incentives to develop a high level of CSP not engaging on such strategy are, thus, penalized by the market.     

Financial Development and Economic Growth in Africa

We revisit in this paper the debate between financial development and economic growth. In contrast to previous studies examining banking related measures, we focus on the capital account and the depth of African stock markets. We examine 15 African countries from 1995 to 2010 and employ both static and dynamic panel data methods. While the former suggest weak results overall, portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization. These findings reinforce the view that African countries should open their equity markets to international investors and encourage FDI.     

The Financial Impact of ISO 14001 Certification: Top-Line, Bottom-Line, or Both?

It is not easy being green, but it does beg the question: Does being green pay off on the bottom-line? Unfortunately, that question of becoming ISO 14001 to reap financial benefit remains widely unanswered. In particular, corporate practice is interested in how environmental management impacts firms’ finance through top-line impact, bottom-line impact, or both—as this paves the way for an investment of environmental management. As current findings are mixed, our study tracks financial performance of publicly traded US firms between 1996 and 2005 to test whether ISO 14001 leads to improved financial performance. Employing a rigorous event-study approach, we compare certified firms to different control groups based on several matching criteria that include industry, size, and/or ROA. In the short run, ISO 14001 certification makes only a minor impact on the bottom-line, according to our results. However, these same results show a significant financial improvement over the long haul with ISO 14001 certification. Additionally, this long-term improvement also makes a significant improvement in top-line performance. Thus, we conclude that environmental management pays off along both dimensions.     

Partnering strategies and performance of SMEs' international joint ventures

The international joint venture (IJV) is an important mode in the internationalization of small- and medium-sized enterprises (SMEs). Internationalization in turn is an entrepreneurial behavior in the pursuit of growth. Partnering strategies in the formation of IJVs can have significant effects on the outcome of SMEs' international expansion. In this study, we examine the performance implications of two types of resources contributed by SMEs' IJV partners, host country knowledge and size-based resources. We develop and test three sets of hypotheses about the longevity and financial performance of a sample of 1117 international joint ventures established in 43 countries by 614 Japanese SMEs that have fewer than 500 employees. Our findings indicate that SMEs' IJVs with local partner(s) may be associated with decreases in longevity, especially when SMEs acquire host country knowledge. The host country experience of Japanese partner(s) does not have any direct effects on IJV profitability but reduces the longevity of IJVs. Finally, the size of Japanese partner(s) increases the longevity of IJVs but may have negative effects on IJV profitability when large Japanese partners have low equity ownership in IJVs. Our findings highlight the differential effects that IJV partners' experience-based and size-based resources have on IJV performance. Our findings also demonstrate that the same strategy could have different effects on different dimensions of performance.     

Financial deregulation and integration: an Australian perspective

Many countries in recent years have progressively removed economic and financial barriers and this process has provided easier access to their capital markets. Further, such liberalization measures can impact upon the risk-return relationship between assets. This paper investigates whether the Australian stock market is segmented from or integrated into the world equity market. The aim is to ascertain if the liberalization undertaken in the Australian economy, in the form of financial deregulation in the early 1980s, has resulted in its integration with the world equity market. Consistent with expectations, we find evidence that the stock market was segmented in the pre-deregulation period but integrated following financial deregulation. The hypothesis that industry factors may impact upon integration could not be supported.Keywords: Australia; Deregulation; IntegrationJEL classification: F36; G12; G15     

Does maturity matter? The case of treasury futures volume

We find that Treasury futures volume contains information about future economic and financial market conditions. Short- and long-term volumes are economically different: A relatively higher volume in short-term (long-term) Treasury futures is counter-cyclical (procyclical), preceding worse (better) economic and financial conditions. Further, we construct a single factor from futures volumes of different maturities that forecasts the performances of Treasury securities and the corporate debt and equity markets, as well as macroeconomic conditions. Our results are consistent with the notion that futures volumes from different market segments reflect differences in beliefs and contain different information about future financial and economic activity.     

Entrepreneurship and Multinational Subsidiaries’ Performance in an Era of Financial Crisis and Economic Uncertainty

ABSTRACT

Since entrepreneurial foreign investments may act as a catalyst for economic recovery in crisis periods, we examine the influence of entrepreneurship-related variables on the performance of multinational subsidiaries in Greece, in an era of financial recession and high economic uncertainty. Our conceptual foundation identifies in-house technological capabilities, autonomy and strategic mandates as core predictors of subsidiaries’ entrepreneurial aspects. Drawing upon a questionnaire-based survey of 87 foreign firms operating in the focal economy, our findings suggest that subsidiaries’ product mandate role and increased autonomy impacts positively on performance. Surprisingly enough, the performance effect of technology-related variables linked to entrepreneurship seems insignificant.     

Market orientation and customer-based corporate brand equity (CBCBE): a dyadic study of Indian B2B firms

The relationship between market orientation (MO) and one of its most important consequences – firm performance – has received considerable attention in marketing research. Performance has been largely judged through financial or objective measures. This paper connects assimilation of MO in firms with corporate brand performance since academics have not used judgmental or market-based measures in assessing performance. We have introduced customer-based corporate brand equity to obtain a rounded idea of firm performance. This is achieved through a dyadic study, instead of self-assessment, wherein the marketing chiefs of B2B firms and their respective organisational customers are surveyed to gauge the effects of incorporating MO. We have shown that corporate brand performance is enhanced significantly in the presence of organisational innovativeness. From a practitioner’s perspective, the study details the organisational actions to be taken to assimilate MO and how those can be exploited to enhance corporate brand performance.     

An empirical analysis of the determinants of the P/E ratio in emerging markets

The determinants of the P/E ratio of emerging equity markets have not been examined, despite the growing importance of these markets. This study, modifying the methodology of prior studies, empirically evaluates the importance of economic growth and credit risk as the determinants of the P/E ratio of 21 emerging markets. Annual data for the period 1992–1999 are used with seemingly unrelated regression (SUR) techniques to obtain cross-section and pooled-data estimates. The multivariate results indicate the significance of growth and the univariate results, the significance of both growth and credit risk. These results are consistent with those of studies of developed equity markets. Tests for structural differences in the equations for the 8-year period are not significant. The findings are supportive of growth (earnings potential) as a determinant of cross-country variation of the P/E ratios in emerging markets. Growth-oriented policies are important for emerging equity markets (EEM) to function as profitable financial centers and a source of domestic capital.     

Compensating corporate venture managers

This article reports the results of a questionnaire survey addressed to CEOs of Fortune 500 companies concerning incentive practices for venture managers. Data was also collected for venture performance history in these companies.Highlights of the results are:Most companies are not providing different incentives for venture managers than for other managers.Companies that do and companies that do not provide special incentives seem to agree on the types of incentives which would promote improved venture performance, which include milestone bonuses, equity, and/or options in the new venture, variable bonuses based on venture ROI.The primary obstacle to installing such incentives is reported by firms without special incentives in place to be concern about internal equity.Firms with special incentives already in place have less concern with this problem. A moderate problem to such firms is difficulty in defining venture objectives.There is no evidence, from this study, that special incentives for venture managers affected the outcome in venture performance, when such performance was measured by the percentage of “successes” and “failures.” About 50% success rate was reported by each group.The article deals with these questions:Are performance incentives essential?Certainly not, from the data in this sample, but this was a “head count” of successes and failures—a study of overall economic performance might yield a different result. One expensive failure can wipe out the gains from many small successes.Are the incentives reported effective?Obviously not enough to show a difference between those who use them and those who don't. Analysis of the incentive elements used and the earnings limits imposed suggest that the special incentives are not particularly special, nor very much of an incentive. Further, the most common incentive reported, based on venture ROI, fails to consider the time period usually required to achieve a positive ROI, and the many changes of management which occur during that period.What criteria should be used for designing an incentive program for venture managers?Recognition of the probability of management change, incentives which promote early identification of need for change of direction or to abort, focus on event completion milestones rather than the calendar, the relationship of reward potential to risk potential including job security and actual financial risk by the venture manager, achievability, and simplicity are factors to be considered.What kind of financial incentives might be included in incentive design?Depending on the life cycle stage of the venture, fixed and variable bonuses, options for equity or shadow equity in the venture itself, actual equity in the new venture, and to a lesser extent, salary increases and equity or equity options in the parent are suggested. How can the obstacles to installation of performance incentives for venture managers be reduced?To reduce perception of internal inequity, relating potential risk to potential reward and extending performance incentives to other managers is suggested. The problem of defining venture objectives as an obstacle is instantly solved as an incentive issue by making ownership possibility a reality for venture management, especially with financial investment required by venture management.     

The importance of equity finance for R&;D activity

This article analyzes the importance of equity finance for the R&D activity of small- and medium-sized enterprises. We use information on almost 6,000 German SMEs from a company survey. Using the intensity of banking competition at the district level as an instrument to control for endogeneity, we find that a higher equity ratio is conducive to a higher R&D intensity. Owners may only start R&D activities if they have the financial resources to sustain them until successful completion. We find a larger influence of the equity ratio for young companies. Equity may be more important for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can rely less on bank financing.     

Does Shari’ah Screening Cause Abnormal Returns? Empirical Evidence from Islamic Equity Indices

Islamic equity funds are subject to the screening criteria for stock selection imposed by the principles of Islamic jurisprudence (Shari’ah). Equities must pass three basic screens: revenue source, business activity, and financial factors to be included in an Islamic fund. However, screening criteria are not universal especially for the financial factors. One can use financial ratios based on either the book-value of total assets or the market-value of equity for screening of stocks. This may not only result in a different portfolio composition but also entail diverse rebalancing and monitoring costs. The performance of 29 Islamic equity indices (IEIs) versus conventional indices from four major international index providers using different Shari’ah screening criteria are analyzed in a single as well as in a multi-equation framework. The use of a multi-equation framework has the added advantage of utilizing the information content of different screening criteria adopted by different index providers. The empirical findings suggest that the difference in screening criteria does not significantly affect the performance of IEIs. Returns deviation, if any, stems from the relative riskiness of the IEI as compared with the relevant benchmark. Work needs to done to streamline the quantitative screening criteria to avoid confusion among the investing public.