Fairness in business: Does it matter,and what does it mean?

Fairness is a value that is touted and typically reinforced from childhood onward. Its association is universally positive. But does fairness have a place in business? Does it extend to the realm in which profit is emphasized? This Business Law & Ethics Corner delves into the matter and provides guidance for decision makers regarding fairness and its implications for business.     

Does international experience help firms to be green? A knowledge-based view of how international experience and organisational learning influence proactive environmental strategies

Early research on environmental strategy in international firms focused predominantly on direct investment as an expansion strategy for multinationals. However, we know relatively little from a strategic management perspective about exporting, which is the most prevalent form of international expansion. For this reason, we examine whether the knowledge that export firms acquire abroad influences their environmental strategies. Using a sample of export firms from the food industry, we show that the number of years spent in developing export activities does not contribute to developing a proactive environmental strategy; however, a more complex experience of environmental international diversification is positively related to a firm's proactive environmental strategy. Finally, organisational learning capability moderates the positive relationship between environmental international diversification and environmental proactivity.     

How should managers treat ethics in international business?

Business ethics concern the consideration of moral in corporate decision making. International managers may be confronted with a variety of ethical dilemmas, usually due to differences among national markets in what constitutes legal or acceptable practice. Beliefs about what constitutes ethical business behavior commonly stem from one of four moral philosophies: teleology, deontology, the theory of justice, and cultural relativism. A framework incorporating all four is presented here which should provide a useful decision tool for international managers. An application of the framework and the complexities associated with it are presented next. We conclude that an effective integration of the company's perspective on ethics and the business behavior of the employees is critical and that it depends on top management, and the entire organization, demonstrating that they are serious about ethical business behavior on an ongoing basis. © 1998 John Wiley & Sons, Inc.     

An international business blunder: Fennia 1913–16

In 1913 Otto Mønsted A/S, Denmark's leading margarine manufacturer, acquired a majority share in Fennia, a small and insignificant Finnish margarine company. The Danish company had extensive knowledge of all functional aspects of margarine, and had up to 1909 been a dominant player in the British margarine industry. In spite of the massive international experience that had been accumulated by Otto Mønsted A/S the Finnish venture turned into a disaster, because for all their experience the Danish managers committed an impressive range of failures. The work of N. Nohria and S. Ghoshal is applied to the case, and a theoretically consistent analysis is provided. The conclusion of the paper is that the analytical framework of Nohria and Ghoshal serves well in this respect. It is further shown that value-added chain analysis is useful in linking functional failures to a corporate governance perspective. In the final resort, World War I killed off the experiment, but it was doomed anyway. Almost 100 years have passed, but today managers have lessons to learn from this event.     

Drug trafficking,money laundering and the business cycle: Does secular stagnation include crime?

The aim of the paper is to analyze theoretically and empirically the impact the macroeconomic cycle has on the accumulation of capital by organized crime, using estimates for the global drug market. So far, the economic literature has neglected the relationships existing between illegal markets, money laundering and the business cycle. We propose a dynamic model where the business cycle influences the criminal economy via two different channels. On the one side, illegal markets grow at variable rates, depending on the health of the legal economy. Second, a pass‐through effect can exist, since the business cycle affects the legal markets which criminal operators use to launder their revenues. Furthermore, we analyze the consequences of a ‘saturation effect’ limiting maximum accumulation of illegal capital. We find that overall illegal capital is affected by the business cycle through a capital multiplier; in addition to this, the dynamics of interest rates in financial markets can influence such multiplier.     

On automated e‐business negotiations: Goal,policy, strategy,and plans of decision and action

In recent years, there has been increasing interest in automated e‐business negotiations. The automation of negotiation requires a decision model to capture the negotiation knowledge of policymakers and negotiation experts so that the decision‐making process can be carried out automatically. Current research on automated e‐business negotiations has focused on defining low‐level tactics (or negotiation rules) so that automated negotiation systems can carry out automated negotiation processes. These low‐level tactics are usually defined from a technical perspective, not from a business perspective. There is a gap between high‐level business negotiation goals and low‐level tactics. In this article, we distinguish the concepts of negotiation context, negotiation goals, negotiation strategy, and negotiation tactics and introduce a formal decision model to show the relations among these concepts. We show how high‐level negotiation goals can be formally mapped to low‐level tactics that can be used to affect the behavior of a negotiation system during the negotiation process. In business, a business organization faces different negotiation situations (or contexts) and determines different sets of goals for different negotiation contexts. In our decision model, a business policymaker sets negotiation goals from different perspectives, which are called goal dimensions. A negotiation policy is a functional mapping from a negotiation context to some quantitative measures (or goal values) for the goal dimensions to express how competitive the policymaker wants to reach that set of goals. A negotiation expert who has the experience and expertise to conduct negotiations would define the negotiation strategies needed for reaching the negotiation goals. Formally, a negotiation strategy is a functional mapping from a set of goal values to a set of decision‐action rules that implement negotiation tactics. The selected decision‐action rules can then be used to control the execution of an automated negotiation system, which conducts a negotiation on behalf of a business organization.     

Does perception matter?: an empirical analysis of donor behaviour

This article provides the first empirically based marketing model of the perceptions of givers and the resulting impact on donations. Within nonprofit marketing there is a considerable amount of extant research to support the view that both extrinsic and intrinsic variables can be used to separate givers and non-givers to charities. However, they are less useful in explaining how individuals select between the charitable alternatives and in understanding how people determine and apportion support. Perceptual factors offer more utility in this regard. Structural equations models are presented based on a survey of over 2,300 active and lapsed donors that link a series of perceptual determinants to four relevant charity performance measures: the total amount given to charity, the number of gifts given, the giving lifetime between the individual and the charity, and the amount given yearly. Marketing management implications are identified.     

Norman Bowie and Richard Rorty on multinationals: Does business ethics need ‘metaphysical comfort?’

Norman Bowie wrote an article on the moral obligations of multinational corporations in 1987. This paper is a response to Bowie, but more importantly, it is designed to articulate the force and substance of the pragmatist philosophy developed by Richard Rorty. In his article, Bowie suggested that moral universalism (which he endorses) is the only credible method of doing business ethics across cultures and that cultural relativism and ethnocentrism are not. Bowie, in a manner surprisingly common among contemporary philosophers, lumps Rorty into a bad guy category without careful analysis of his philosophy and ascribes to him views which clearly do not fit. I attempt to provide both a more careful articulation of Rorty's views, and to use his pragmatism to illustrate an approach to business ethics which is more fruitful than Bowie's. This brand of philosophy follows the Enlightenment spirit of toleration and attempts to set aside questions of Truth, whether religious or philosophical, and have ethics centered around what James called that which is good in the way of belief. Rather than looking for metaphysical foundations or some type of external justification, ethicists perform their craft from within the cultural traditions, narratives and practices of their society.Andrew C. Wicks, M.A. in Religious Ethics. Currently a fourth year Doctoral Candidate in the Religious Studies Department at the University of Virginia, Charlottesville.     

Does customer satisfaction influence the relationship between earnings and firm value?

The aim of this study is to examine the influence of customer satisfaction on the stock market’s response to current earnings. The study extends prior research on the value relevance of customer satisfaction to include the direct and indirect effects of customer satisfaction on firm value. Utilizing an earning-based valuation model and data from the American Customer Satisfaction Index (ACSI) and COMPUSTAT, the study shows that both satisfaction and the interaction between earnings and satisfaction have a significant influence on firm value. Stock market participants are sensitive to changes in customer satisfaction, and this is reflected in the market’s responsiveness to earnings performance.     

Does attitudinal loyalty influence behavioral loyalty? A theoretical and empirical study

Despite a plethora of studies on brand loyalty spanning over last three decades, the research paradigm is unique in its inability to produce generalizable results. The research suffers from a lack of agreement over the operationalization of the construct of the brand loyalty. Many researchers [e.g., Kahn, B.E., Kalwani, M.U., Morrison, D.G., 1986. Measuring variety seeking and reinforcement behaviors using panel data. Journal of Marketing Research 23, 89–100; Ehrenberg, A.S.C., Goodhardt, G.J., Barwise, P.B., 1990. Double jeopardy revisited. Journal of Marketing 54, 82–91] have defined brand loyalty only from a behavioral perspective. They assumed that repeat purchasing can capture the loyalty of a consumer towards the brand of interest. Other researchers [e.g., Day, G.S., 1969. A two-dimensional concept of brand loyalty. Journal of Advertising Research 9, 29–35; Dick, A.S., Basu, K., 1994. Consumer loyalty: towards an integrated conceptual approach. Journal of the Academy of Marketing Science 22 (2), 99–113; Baldinger, A.L., Rubinson, J., 1996. Brand loyalty: the link between attitude and behavior. Journal of Advertising Research 36 (6), 22–34; Rundle-Thiele, S.R., Bennett, R., 2001. A brand for all seasons: A discussion of loyalty approaches and their applicability for different markets. Journal of Product and Brand Management 10 (1), 25–37; Rundle-Thiele, S.R., 2005. Elaborating customer loyalty: exploring loyalty to wine retailers. Journal of Retailing and Consumer Services 12 (5), 333–344], however, have suggested that attitude should be included along with behavior to define loyalty. In particular, Dick and Basu (1994) were precise in suggesting that a favorable attitude and repeat purchase were required to define loyalty. By viewing loyalty as an attitude–behavior relationship in their framework, Dick and Basu (1994) were able to investigate the concept from a causal perspective thereby permitting the identification of the factors that influence loyalty.Our research extends the idea proposed by Dick and Basu (1994) in two ways. First, we provide a conceptually clear, and an operationally meaningful way of segmenting the market on the basis of attitudes that govern this behavior. To be specific, we offer a unique way to measure attitudinal loyalty. And we use a unique survey data with a large sample of 1800 respondents that includes both behavioral (purchase) patterns and attitudes of the respondents for all major brands of toothpaste, to demonstrate that behavioral loyalty is influenced by attitudinal loyalty across many brands of the toothpaste category. Finally, we propose that a third behavioral pattern—non-user—should be also included along with two known behavioral patterns viz. single user and multiple user. This is because a non-user has the potential to become a consumer in future.     

Does Religious Similarity Matter in International Trade in Services?

Impacts of religion on trade in services were examined using gravity models with two estimation methods: Poisson pseudo‐maximum likelihood (PPML), to correct for heteroscedasticity and bias due to the exclusion of zero trade flow, and standard Heckman correction to compensate for sample selection bias. We found that religious similarity contributes to increased international trade in services by establishing ‘trust‐related institutions’. Second, religious pluralism (variety) fosters trade even more than religious similarity, suggesting that in facilitating trade, religious openness matters more than religious similarity. Third, a strong dominant religion discourages trade in services, whereas the presence of religious minorities encourages trade in services. A highly significant inverse Mill's ratio (IMR) result indicated the presence of sample selection bias, indicating that controls are necessary to prevent estimation bias. This study concluded that religion is an important determining factor for trade in services, positively affecting interpersonal trust and thereby reducing institutional distance between countries.     

The negotiator’s power as enabler and cultural distance as inhibitor in the international alliance formation

We examined how the negotiator’s power, the explorative–exploitative purpose and cultural distance interact in the negotiation for an international business alliance formation. Our participant observation in some several events of negotiation suggests that the executive’s power plays an enabling role in the negotiation for alliance formation. However, cultural distance between the negotiating parties in the international business context hampers the success of the negotiation. In particular, person power supports the explorative alliance purpose. The explorative alliance embodies technical and behavioural uncertainty. On the other hand, position power supports the exploitative alliance purpose. The exploitative alliance purpose more aptly embodies behavioural uncertainty than technical uncertainty does.Cultural distance has a high negative influence on person power and the explorative alliance, and person power and the explorative alliance indicate high uncertainty. In comparison, cultural distance has a negative influence on position power and exploitative alliance, and position power and exploitative alliances indicate low uncertainty. In other words, cultural distance matters more in the person–explorative combination than it does in the position–exploitative combination. The main assumption is that cultural distance has adverse effects on both power and tasks in the negotiation. However, the notions of power and purpose do not influence the effect of national cultural differences.     

How does ownership influence business growth? A competitive dynamics perspective

Firms engage in competitive actions to gain market share and hence to grow their revenues. However, not all firms are equally able to use competitive actions to drive growth. We argue that the ability to translate competitive actions to revenue growth depends on the ownership of the firm. Drawing on principal-agent and principal-principal perspectives, we argue that: (1) private owners (both foreign and local) are better able to employ aggressive actions to grow their business than state owners; (2) firms with multiple owners (especially international joint ventures) are less able to implement actions that drive business growth than full ownership. We find support for these arguments in empirical tests on survey-based data of 106 firms in China. Results show that in an emerging market the principal-principal perspective can better explain governance and competition than the principal-agent perspective.     

Does mutual fund investment influence accounting fraud?

Does mutual fund investment deter accounting fraud? Using a bivariate probit model, this study examines the relationship between mutual funds and accounting fraud between 2007 and 2014. We observed mutual fund investment has significantly higher levels of fraud detection, reducing firms' propensity to commit fraud. This validates Chinese regulators' efforts to develop mutual funds to address accounting fraud. Open-end mutual funds outperform closed-end mutual funds in detecting accounting fraud and reducing fraud commission; redeemable shares appear to discipline managers. This effect is moderated by state ownership of listed firms: mutual funds cannot effectively detect fraud in state-owned firms.     

The international diversification-performance link in Spain: Does firm size really matter?

This study provides new insights into the link between international diversification and firm performance in a sample of large manufacturing firms and SMEs based in Spain for the 1994–2008 period. Specifically, the focus is on how the nature and shape of this relationship may vary over time with firm size. The results show the existence of a horizontal-S curve when the whole sample of firms is considered in the empirical analysis. However, major differences are found between SMEs and large firms, and even within the actual group of SMEs. Strong support is found in large firms for the existence of a horizontal-S curve. Within the group of SMEs, there are small firms with a linear and negative relationship, whereas medium-sized firms record a U-shaped form. These findings suggest that as the international diversification-performance link is size-dependent, future research should explicitly consider firm size in order to better understand the nature of this relationship.     

Investigating undergraduate business internships: Do supervisor and self-evaluations differ?

The authors analyze consistency between supervisors' and interns' self-evaluations based on interns' gender, time of completion (summer or academic year), and sponsor (on-campus department or off campus). Students, in general, tended to have lower ratings for computer skills, relative to supervisors, suggesting that they do not appreciate the skills that they possess. When student self-evaluations differed from those of supervisors, women gave themselves lower ratings than supervisors, whereas the opposite was seen for men. When evaluations differed, students completing on-campus internships tended to rate themselves higher than their supervisors, whereas the opposite was seen for students completing off-campus internships. Suggestions for better advising and preparing students, in advance of completing internships, are provided.     

Innovation and Exporting: Does Quality Matter?

We study the effect of innovation on a firm’s propensity to export, developing a simple model where heterogeneous firms operate in a monopolistically competitive market and set their prices as a markup above the marginal cost. The key proposition of our model is that firms that invest in better quality products are more likely to export. We test it using Italian firms’ data. Econometric results suggest that innovation, defined as quality upgrading, has a significant effect on the firms’ propensity to export; and, for those who are already exporting, innovation—defined as new products—has a significant effect on a firm’s turnover.     

Head in the clouds or feet on the ground? CEO perspectives and the international business research agenda

In response to recent articles examining the current state and future direction of international business (IB) research, this article directly surveys CEOs of the largest Fortune 500 companies to solicit their views about university‐based IB research and to identify the most significant IB problems their firms encounter. Results suggest a consistently low appreciation by CEOs for university‐based IB research over an extended period of time. Data also suggest a window of opportunity to capture a constituency among those companies that anticipate a significant increase in their international activity. To capture a practitioner constituency, however, research should focus on key problem areas that have been identified in this article, and the findings should be presented in accessible forms and venues. © 2012 Wiley Periodicals, Inc.     

When does the internationalization process begin? Problematizing temporal boundaries in international business

Recently there has been greater interest among international business researchers in studying processes and their temporal dimensions. We examine one such dimension by problematizing when processes are deemed to commence or end. Reperiodizing the start and end points of a process under study affects the theoretical conclusions about the process itself. We develop a methodology for reperiodization and apply it to an empirical study into the internationalization process of a type of new venture: the spinoff firm. Our conclusions specify the theoretical insights gained through reperiodization, demonstrating how this research strategy can be used to study processes in international business.