Revisiting the fit–performance thesis half a century later: a historical financial analysis of Chandler's own matched and mismatched firms

This study revisits Chandler's seminal work Strategy and Structure (1962) empirically. This work helped fashion the notion of strategic fit as well as the need for new organisational forms. Chandler's fit–performance thesis proposes that firms which match structure to their strategy will become economically more efficient than mismatched firms. The very same firms Chandler studied are analysed financially as their structure evolves through successive phases of being matched to their strategy, mismatched, and then finally matched again. Over 70 longitudinal tests are performed, yielding mostly statistically significant results. These tests surprisingly suggest that mismatched firms generally outperform firms that match structure to strategy. Such results matter in light of new conceptual approaches being introduced on the subject of ‘fit’; novel plausible explanations are provided for this apparent theoretical paradox.     

Family-centred non-economic goals and the internationalisation of family firms: Evidence from Australia

Despite the growing body of literature on the internationalisation of family firms, further research is required to understand the underlying factors that influence their international behaviour. Past research has consistently shown that family firms are less likely to adopt an internationalisation strategy compared to their non-family counterparts, yet we still have limited understanding of the underlying reasons why this is so. By incorporating the bifurcation bias concept to the socioemotional wealth perspective of family firm behaviour, we argue that greater attention needs to be given to the influence of family-centred non-economic (FCNE) goals on the family firm’s international behaviour. Using survey data collected on over 300 Australian family firms, regression analysis was used to examine the influence of FCNE goals on the family firm’s extent of international involvement. The results suggest that business families which emphasise FCNE goals are more likely to exhibit a lower attitudinal commitment towards international expansion, which in turn determines the level of international involvement of the family firm. Results also suggest that the extent of international involvement of the family firm has a significant negative effect on the level of achievement of FCNE goals.     

Ownership dispersion and listing rules in companies large and small: A reply

The contrast between the findings of the present authors and Cheffins, Chambers and Koustas is explained by their addressing different sizes of firms. Chandler's view of the relative incidence of the divorce of ownership from control among large firms remains unsupported by any quantitative evidence.     

Conform or rebel: when does keeping to the rules enhance firm performance?

This paper examines whether there are economic rewards to mimicking strategic actions of other firms. The strategic behaviour we study is the formation of technology collaborations with MNEs by Indian firms. We argue that conforming to the behaviour of other firms has differential performance effects across different classes of firms and suggest that the benefits of conformity accrue more to small than large firms. To test this, we measured each Indian firm's conformity to the average tendency of other similar firms to collaborate with an MNE and then regressed its performance on conformity. Results were consistent with our expectations that small firms gain more from conformity than do their larger counterparts. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.     

Polyethnic market orientation and performance: A fast-moving consumer goods perspective

Abstract

The paper explores the market-oriented behaviour and performance consequences for firms operating in a market characterised by national heterogeneity. Through a case-study design, a posteriori propositions based on interview data from six multinational firms operating in a polyethnic market are developed. Findings indicate a positive relationship between the need for responsiveness and a market's polyethnicity with firms customising elements of their product strategy to ethnic segments or European consumers at large. Moreover, findings indicate that market-oriented firms that customise their product strategies to the cultural idiosyncrasies of the Greek market enjoy the highest market share among foreign consumers. As a result, the paper opens up a discussion on the performance implications of adopting a market-oriented approach in polyethnic markets, which are, increasingly, a feature of our globalised world.     

Limits to Scale and Scope: The Failure of a Danish Slaughterhouse Merger in 1890/91

The seminal work of Alfred Chandler was based on observations relating to the so-called second industrial revolution. They concerned the development of the large modern manufacturing company and the paths of that development. This article attempts to apply the framework to a failed Danish slaughterhouse merger in 1890/91 between the established private slaughterhouses and the rising co-operative ones. The article deals with the question of the relevance of Chandler's concepts to the negotiation process and with that of the limits to the explanatory power of the framework. In order to answer these questions, the motives of both parties as well as the negotiation process are investigated in some depth. The analysis provides evidence that both sides made considerable use of arguments in line with Chandler's concepts and serving as a vehicle for creating mutual understanding of the economic rationale behind the merger. The article presents and discusses a number of factors and aspects that stalled the process and eventually caused the failure. These factors are all outside Chandler's universe, the corollary being that while ‘economic’ arguments unequivocally favoured the merger, ‘extra-economic’ factors were powerful enough to nullify the economic rationale. Technological and economic arguments were overpowered by political and social ones.     

Corporate social responsibility disclosure and market value: Family versus nonfamily firms

We investigate the moderating role of family involvement in the relationship between corporate social responsibility (CSR) reporting and firm market value using a longitudinal archival data set in the French context. Our empirical results show that family firms report less information on their CSR duties than do nonfamily firms. However, market-based financial performance, as measured by Tobin's q, is positively related to CSR disclosure for family firms and negatively related to CSR disclosure for nonfamily firms. Family firms would benefit greatly from communicating commitment to CSR; specifically, they could obtain shareholders' endorsement more easily than nonfamily firms could.     

Locational Competition: A Neglected Paradigm in the International Division of Labour

Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit‐option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations – locational competition – and analyses its impact on welfare and employment of the capital‐exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.     

Transition and polarisation: advanced producer services in the emerging regional (market) economies

This article is focused on role of advanced producer services in regional development in emerging market economies. The starting point of the analysis is Porter's concept on competitive advantage of regions that rests on the performance of local firms. The APS sector is discussed as a significant element of the value chain, supporting the adaptation of local agents to the emerging system market regulations and the rapid structural changes of the national, regional and local markets in Hungary. Although, empirical studies as well as statistical calculations suggested that, flexible strategies employed by service providers contributed to economic growth in regions embedded in global production systems, the national economy was basically dichotomised by the spatial centralisation of APSs.     

Community Social Responsibility and Its Consequences for Family Business Performance*

Family‐centered businesses may have unique perspectives of socially responsible behavior due to family involvement and ties to the community. This research explored the antecedents and consequences of community social responsibility (CSR) for family firms operating in small and rural markets. Using a national sample from the 2000 wave of the National Family Business Survey (NFBS), researchers profiled family business operators' (n = 221) to determine if their CSR orientation contributed to family business performance. Enlightened self interest and social capital perspectives provide a framework for elaborating the role of CSR in sustaining family businesses in changing small communities. Results indicate that three dimensions, commitment to the community, community support, and sense of community, account for 43 percent of the variation in family business operators' CSR. Size of the business was significantly related to family firms' ability to give and receive community support. Further, commitment to the community was found to significantly explain perceived family business performance while community support explained financial performance. Findings suggest that socially responsible business behaviors can indeed contribute to the sustainability of family businesses in small rural communities.     

Family firms and financial performance: The cost of growing

This study examines the relationship between financial performance and family involvement for 523 listed and non-listed Colombian firms over 1996–2006. Using a detailed database and performing several panel data regression models, we find that family firms exhibit better financial performance on average than non-family firms when the founder is still involved in operations, although this effect decreases with firm size. With heirs in charge, there is no statistical difference in financial performance. Both direct and indirect ownership (control through pyramidal ownership structures within family business groups) affect firms' financial performance positively. However, this positive effect decreases with firm size. The results suggest that some kinds of family involvement appear to make firm growth expensive.     

Environmental Dynamism as a Moderator of Familiness and Performance in Mexican SMEs

This research explores how the environmental dynamism affects the relationship between familiness and a family firm’s performance in an emerging economy. To achieve this goal, we used an instrument to measure three familiness theoretical dimensions (process, human, and organizational resources). To collect data, we interviewed owners of family firms characterized as SMEs in México. Contrary to what is expected, our findings suggest that familiness, as a source of competitive advantage for family firms, may be more suitable in stable environments characterized by certainty of conditions. In other words, the effect of familiness on a family firm’s performance diminishes in highly dynamic environments.     

A study of the impact of owner's mode of entry on venture performance and management patterns

This study examines if firm performance and the associated patterns of management vary with the owner-manager's mode of entry into the firm in owner-started (OS), buyout (BO), and family firms (FF). Prior research suggests that these three types of firms differ on certain managerial characteristics but has not examined the role of the owner-manager's mode of entry in determining firm performance on the one hand and its influence on the firm's management pattern on the other.We collected data from 345 firms, employing four to 99 employees, operating in four northeastern states. Self-reported return on assets (ROA), annual sales, business strengths, competitive strategies, and management practices were compared for OS, BO, and FF firms. Performance was found to vary with owner's mode of entry. The 227 OS firms' average ROA was significantly higher than that of the 61 family firms and the 57 BO firms. Successful start-up owners may have enjoyed greater profits because they assumed greater risk compared to those who opted to buy an existing venture or took over a family firm. Annual sales were highest for FFs, second for OS firms, and the lowest for BOs. In terms of management patterns, owner-started firms rated themselves significantly higher on business strengths and tended to have higher self-ratings for competitive strategies and operations strengths than did FFs or BOs. All of these differences were significant after controlling for the age and size differences among the firms, indicating that mode of entry did directly impact performance as well as the management patterns.Examining the impact of mode of entry versus management patterns on venture performance, we found that while the OS mode of entry was associated with greater ROA, this was primarily due to the different management patterns adopted by the OSs. Looking at annual sales, the FF mode of entry was associated with higher sales, and this was independent of the types of management patterns adopted by the firms. A priori, BOs would appear to be in a better position to achieve superior performance, but this was not so in this sample.Further analysis revealed different paths to profitability for the three entry modes. For OS firms, high ROA was associated with operating in the service and retail sectors, developing a broad range of business strengths, and offering competitively priced but higher quality customized products. For OSs, ROA was also enhanced by using informal and personalized management practices. Sales performance was greatest when OSs employed trained staff for functions such as budgeting and sales. For FFs, ROA was enhanced by broad-ranging strengths, but it was hurt by price and quality competitiveness—mainly because on average, their lower prices were not supported by a competitive cost of goods. Sales performance was greatest when FFs had owner-managers with extensive industry experience, were conservative in adding workers, emphasized product customization, relied on written reports, but avoided long-range operations planning. Management patterns of BOs were not related to their ROA, but their annual sales were marginally higher when the acquiring owners had extensive industry background and employed a large workforce.Thus, this study confirms our hypotheses that performance and management patterns vary across mode of entry as does the effectiveness of strategic management patterns. Further, our findings concurred with previous studies which suggested that sales performance and profitability were likely to be influenced by different management actions. This study demonstrates that owner's mode of entry is an important explanatory variable for variations in performance as well as management patterns. Venture CEOs need to recognize that different management approaches may be needed for success depending upon whether they founded, purchased, or inherited their firms.     

Family firms’ investments, uncertainty and opacity

This paper contributes to the literature on family firms in two ways. First, it focuses on a largely neglected but important issue of family firms’ investment decisions. Second, it uses a novel and rich data set about Italian private firms; this complements the literature, which typically focuses on publicly traded companies, in an important way, given that most family firms are private and relatively little information is available on their behaviour. Our results suggest that family firms’ investments are significantly more sensitive to uncertainty than nonfamily firms. We find evidence that the greater sensitivity to uncertainty is basically due to the greater opacity of family firms and to their higher risk aversion, rather than to the degree of sunk fixed capital as is typical in the literature on investment decisions.     

International expansion of U.S. manufacturing family businesses: the effect of ownership and involvement

Family firms play an important role in today's global economy. However, limited empirical research has identified factors that spur these firms' internationalization. Highlighting the altruism that pervades family firms, this exploratory study examines the individual and interactive effects of family ownership and involvement on subsequent internationalization of a firm's operations. Results from the analyses of 409 U.S. manufacturing firms show that family ownership and involvement in the firm as well as the interaction of this ownership with family involvement are significantly and positively associated with internationalization. The implications of the findings for research and managerial practice are discussed.     

Family SMEs' Internationalization: Disentangling the Influence of Familiness on Spanish Firms' Export Activity

This paper studies the relationships between family involvement and internationalization of family small and medium enterprises (SMEs), examining the effects exerted by the three main dimensions that comprise the concept of familiness: power, experience, and culture. Disentangling the influence of familiness dimensions lead us to discover the combined effects of family's governance, generation, and culture on SMEs' export activity. The results, using the F‐PEC scale over a sample of 500 Spanish firms, show that this multidimensional approach better identifies the determinants of the family SMEs' internationalization. Specifically, we find that the family experience and its culture orientation positively affect the firm's export activity, whereas family governance/management does not have any significant influence.     

Board of Director Quality and Firm Performance

This paper aims to shed light on the relationship between the quality of the individuals on a firm's board of directors and performance. It reports the results of an empirical study of a sample of Fortune 1000 firms. The findings suggest that quality boards, as measured by the average number of board seats held by each director, are associated with quality firms, as measured by both accounting and market performance.     

Exploring Managers' Views About Brand Saboteurs

This paper explores the relationship between employee behaviour and service brand performance. Current literature emphasizes the importance of employee behaviour in delivering a strong service brand, and suggests that employees can be clustered according to their degree of support for the brand. Twenty in-depth interviews were undertaken with HR and Marketing managers in financial services and grocery firms. In the context of employees as brand builders, we explore whether managers have recognized variations in the level of employee support for the brand. Specifically, we surface managers' views about negative performers, or 'Brand Saboteurs'