Asymmetric roles of business ties and political ties in product innovation

This study investigates the asymmetric roles of business ties and political ties in innovation processes. The study posits that business ties strengthen organizational competence and enhance the environmental fit. In contrast, political ties increase the environmental fit but ossify organizational internal routines. The study uses an extensive survey on 766 Chinese firms across multiple sectors to test hypotheses. The empirical results provide strong supports for hypotheses by showing that: (1) business ties have a positive impact on product innovation, indicating that despite different types of business ties, they share common features in enhancing product innovation; (2) political ties have an inverted U-shaped relationship with product innovation, indicating that the positive effect of political ties on product innovation would diminish as the costs of political ties outweigh the benefits.     

Addressing the cross-boundary missing link between corporate political activities and firm competencies: The mediating role of institutional capital

This study examines the mediating effect of institutional capital on the relationship between corporate political activities (CPA) and firm competencies. By adopting an institutional perspective, we identify the influence of a firm’s relational CPA and participation CPA, and its two types of institutional capitals, formal institutional capital (FIC) and informal institutional capital (IIC), on the firm’s competencies. Based on survey data from multi-informants in 303 Chinese firms, our results suggest that firms’ institutional capital (IIC/FIC) partially/fully mediates the relationship between CPA and firm competencies. The findings provide the evidence that how nonmarket strategy, such as corporate political activities, affects a firm’s institutional capital and then its competencies.     

The moderating role of managerial ties in market orientation and innovation: An Asian perspective

This empirical study contributes to the extant literature by investigating the relations among market orientation, managerial ties and innovation simultaneously and interactively, from an Asian perspective. Our findings reveal that customer orientation and interfunctional coordination have a positive impact on innovation. Moreover, managerial ties play a moderation role in the market orientation–innovation linkage. Business ties enhance the relation between customer orientation and interfunctional coordination and innovation. On the other hand, business ties and competitor orientation have a negative interaction effect on innovation. In addition, political ties also dampen the relation between interfunctional coordination and innovation. Such results add new insights to the extant literature and provide implications for future research and marketing practices in Asia.     

How foreign firms achieve competitive advantage in the Chinese emerging economy: Managerial ties and market orientation

As China experience unprecedented changes in its social, legal, and economic institutions, on what should foreign firms focus more to overcome this challenge, managerial ties or market orientation? This study investigates how managerial ties and market orientation affect competitive advantage and, consequently, firm performance in China. On the basis of a survey of 179 foreign firms in China, we find that both managerial ties and market orientation can lead to firm success—but in different ways. Market orientation enhances firm performance by providing differentiation and cost advantages, whereas managerial ties improve performance through an institutional advantage (i.e., superiority in securing scarce resources and institutional support). Institutional advantage, in turn, leads to differentiation and cost advantages and consequently superior performance.     

Enhancing or inhibiting: The impact of investment in political ties on the link between firm innovation and productivity

Whether investment in political ties enhances or inhibits firm innovation has not been well understood in the literature. Theoretically, proactive use of political ties could help firms gain favourable political resources, thereby enhancing the effectiveness and efficiency of firm innovation activities. However, investment in political ties might conflict with innovation in internal resource orchestration processes. Based on a sample of 9693 firms across 27 transition economies, I find that the effect of investment in political ties on the link between innovation and productivity is based on type of innovation and type of political investments. Although bribery does not show any significant influence on the link between either product or organizational innovation and firm productivity, managerial time invested in political ties weakens the positive relationship between organizational innovation and productivity.     

Ethnic ties, location choice, and firm performance in foreign direct investment: A study of Taiwanese business groups FDI in China

This paper examines ethnic ties and their impact on FDI location choice and firm performance. Drawing on social network theory and using data from 88 Taiwanese business groups, the study tests the impact of ethnic ties on firm FDI location choice and performance outcomes in China. Results show that ethnic ties of top managers matter in facilitating firm FDI location choice. In contrast to our expectations however, ethnic ties do not help to improve firm performance in China. Implications of these results are discussed in view of existing literature and future research opportunities are delineated.     

Unpacking the relationship between an innovation strategy and firm performance: The role of task conflict and political activity

This article adds to extant literature by examining the contingent effect of two cross-functional processes on the relationship between the use of an innovation strategy and firm performance, namely, task conflict and political activity. The authors examine the effects of these processes with a sample of 260 firms. The positive relationship between the use of an innovation strategy and firm performance is stronger for higher levels of cross-functional task conflict and lower levels of cross-functional political activity. Furthermore, the authors find support for a configurational hypothesis: the innovation strategy-firm performance relationship is strongest for the high task conflict/low political activity configuration and weakest for the low task conflict/high political activity configuration. The results unveil two important cross-functional mechanisms influencing the extent to which the benefits of an innovation strategy can be reaped.     

Entrepreneurial orientation,market orientation,network ties,and performance: Study of entrepreneurial firms in a developing economy

Entrepreneurial orientation (EO), market orientation (MO) and network ties are typically modeled as separate antecedents of performance. However, the boundary conditions for such models are under-explored, as is their applicability to developing economy settings. Accordingly, drawing on institutional and social capital theories, the current paper argues that the performance benefits of EO and MO are complementary, and vary across different levels of social and business network ties. Using primary data gathered from entrepreneurial firms operating in Ghana, the study findings indicate that aligning high levels of EO and MO improves business performance, and particularly so when social and business network ties are well developed, since under these latter conditions, the performance benefits of aligning EO and MO are greatest.     

The role of government affiliation in explaining firm innovativeness and profitability in emerging countries: Evidence from China

Drawing from institutional polycentrism, we advance understanding of how affiliation with different government levels influences innovativeness and profitability in emerging countries. Our framework suggests that as different government levels vary in their objectives and resources, they affect firm innovativeness vis-à-vis profitability in qualitatively different ways. The analysis of 18,430 Chinese firms shows that affiliation with higher-level governments enhances firms’ innovativeness, whereas affiliation with lower-level governments is effective for enhancing profitability. Our framework also clarifies how location-specific institutional substitution occurs, indicating that the usefulness of government affiliation for innovativeness depends on how effectively legal institutions protect intellectual property in each region.     

Productivity efficiency and firm size: An empirical analysis of foreign owned companies

There are various arguments about the impact of firm size on productivity growth. On one hand, it is claimed that large firms could be more efficient in production because they could use more specialized inputs, better coordinate their resources, etc. On the other hand, it is emphasized that small firms could be more efficient because they have flexible, non-hierarchical structures, and do not usually suffer from the so-called agency problem. This paper argues that size exerts an indirect effect on firms’ productivity, as it conditions the impact of internal factors on productivity. By using different methodological approaches to assess the impact of different characteristics of foreign owned firms on productivity, this paper analyzes to what extend the heterogeneous pattern of productivity can be accounted for by the levels of those factors.     

Performance feedback and export intensity of Chinese private firms: Moderating roles of institution-related factors

Building on the behavioral theory of the firm and institutional view, we examine how performance feedback (i.e., a focal firm’s performance relative to its industry peers) affects export intensity and how institution-related factors moderate this relationship. Using a sample of Chinese private manufacturing firms, we find that positive performance feedback lowers export intensity while the relationship between negative performance feedback and export intensity is insignificant. Moreover, outperforming firms are likely to decrease their export intensity even more when they are located in regions of better institutional development or have political connections. Underperforming firms with political connections tend to increase their export intensity. These findings enrich our understanding of the export behavior of emerging market firms.     

In the eye of the beholder: How regulatory focus and self-efficacy interact in influencing opportunity recognition

Although there is evidence that regulatory focus is associated with opportunity exploitation, there is a lack of research examining its role at the early stages of opportunity recognition. The present study makes two major contributions to address this gap. First, we demonstrate that entrepreneurs' promotion focus is positively related to opportunity recognition, whereas prevention focus is not significantly related to opportunity recognition. Second, integrating two theories of self-regulation – regulatory focus theory and self-efficacy theory – our findings reveal that a high promotion focus compensates for entrepreneurs' low levels of creative and entrepreneurial self-efficacy in opportunity recognition. Our study extends extant cognitive theories of opportunity recognition.     

Board diversity and firm performance: The role of business group affiliation

There is little consensus globally on the relationship between board diversity and firm performance. Using the resource dependence and agency views, this paper examines how business group affiliation influences the relationship between board diversity and firm performance as a contextual/confounding factor. Based on data for listed firms in India, we find that board demographic diversity is positively associated with the firm performance (Tobin’s Q) of standalone firms, but this association is negative for group-affiliated firms. This negative effect of group affiliation is confirmed in a test based on a novel measure of firm performance using the stock market reaction to the announcement of mergers and acquisitions. For both measures of performance, we show that business group affiliation impairs the positive firm value effects of board demographic diversity. These findings imply that the relationship between board diversity and firm performance requires re-examination in the many countries where group affiliation is common. Our results also provide evidence of a new cost of group affiliation and show in a fresh context that cross-country studies should account for international variations in ownership and institutional structures.     

National institutional systems,foreign ownership and firm performance: The case of understudied countries

We analyse the relationship between institutional systems (configurations of countries with similar institutional characteristics) and firm performance. We use a large sample of firms from understudied countries to explore whether the performance impact of these configurations is the same (“equifinality”), whether this holds across different measures of firm performance (“Tversky effect”), and whether some institutional configurations better support foreign-owned firms. We find that it is possible to rank institutional systems according to their impact on firm performance, but the ranking differs according to the performance measure. Although foreign ownership on average confers performance advantages, the magnitude of the impact depends on the configuration. Our findings contribute to the understanding of the importance of institutional similarities across countries, and to the implications of these similarities for the theory of the MNE.     

Internationalization and innovation performance of emerging market enterprises: The role of host-country institutional development

We examine how host-country institutional development influences innovation performance of internationalized emerging market enterprises (EMEs). Our panel-data analysis of Chinese EMEs shows that although host-country institutional development on average enhances innovation performance of the parent, such effects are more pronounced for EMEs with strong absorptive capacity and for those diversifying into a larger number of countries. Interestingly, EMEs with a higher level of state ownership gain more when entering countries with a lower level of institutional development. Our findings offer insights regarding how latecomer EMEs should configure their portfolio of subsidiaries in order to enhance innovation performance of their parent.     

Investment motives,ownership advantages and institutional distance: An examination of Russian cross-border acquisitions

We apply the OLI framework, first, to examine the motives of Russian cross-border (CB) M&A activity in the period 2007–2013 and, second, to analyze the ownership preferences of Russian multinationals abroad. We test our first set of models using panel data of 322 country/year observations and the second set of models using cross-sectional firm-level data of 318 M&A deals. Our analysis shows that traditional investment motives provide a limited explanation of what attracts or deters Russian acquirers abroad. We extend our base-model to include institutional distance and find that it plays a critical role on Russian CB M&A activity. As a second step, we employ state ownership as a specific type of institutional ownership advantage and discover that partial state ownership discourages Russian firms from pursuing full-ownership in CB M&As. Moreover, Russian multinationals benefit from internalization advantages (full M&A ownership) in tandem with location advantages derived from natural resource endowments.     

The export performance of emerging economy firms: The influence of firm capabilities and institutional environments

We advance a two-stage theoretical model which contends that the export performance of emerging economy firms (EEFs) will depend both upon their firm-specific capabilities and their home institutional environments. Specifically, we argue that EEFs will be more likely to export when facing more uncertainty at home from greater political instability, substantial informal competition, and high corruption. Furthermore, we hypothesize that firms’ export intensities will be contingent upon specialized internal capabilities such as a skilled workforce, top managerial experience, and access to external technologies. We test these hypotheses using a dataset of more than 16,000 firms from the four BRIC economies (i.e., Brazil, Russia, China and India). Our results confirm that political instability and informal competition have robust effects on the export propensity of EEFs, whilst export intensity is contingent upon the availability of skilled workers and access to external technologies via licensing.     

The effects of business- and non-business-targeting terrorism on FDI to the MENA region: The moderating role of political regime

This study investigates the effects of terrorist attacks on foreign investment by stressing the importance of both business- and non-business-targeting terrorism in the host country. Building on North’s strand of institutional theory, we argue that both forms of terrorism represent exogenous risks likely to generate high levels of non-ergodic uncertainty for MNEs and subsequently deter foreign investors. Further, we hypothesize that these effects may be moderated by host-country political regime type, which serves as a gauge for a favorable investment environment for MNEs operating in institutionally fragile markets. Using panel data on fifteen MENA countries over the period 2001–2018, we find empirical support for our hypotheses whereby hybrid political regimes, namely anocracies, strengthen the negative effects of both business- and non-business-targeting terrorism on FDI. Our work contributes to the research on FDI and exogenous risks by offering a more fine-grained conceptualization of terrorism, as well as by highlighting the moderating role of host-country hybrid regimes.     

Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin,corporate governance,and host country effects

Integrating signaling and institutional perspectives, we develop and test hypotheses relating institutions and corporate governance to foreign IPO success. Our investigation highlights the importance of three important drivers of foreign IPO success: home country legal institutions, corporate governance, and host capital market choice. This research demonstrates that board independence and country of origin effects are powerful signals. However, these factors do not have a universal impact on foreign IPO success. Instead, the value of home country institutions along with corporate governance signals are contingent upon the institutional environment in which international entrepreneurs choose to seek capital resources.     

Up the ante: Electronic word of mouth and its effects on firm reputation and performance

Prior management research on firm reputation has acknowledged the importance of word of mouth (WOM) in influencing key choices made by businesses, as well as by individuals. In recent developments, Internet-based WOM forums aggregate vast amounts of information relevant to firm strategy and operations. For example, online social media communities aggregate information generated by both the firm (i.e. firm-generated content FGC) and users (i.e. user-generated content UGC). We theorize that FGC and UGC generate reputation benefits for a company in the form of two intermediate information mechanisms: information diversity and valence. We first undertake a qualitative content analysis to investigate the extent to which FGC and UGC generate information diversity and valence. We then test the hypothesis that both information diversity and valence increase a firm's financial performance. Our findings show that electronic WOM as transmitted through social media communities enhances a firm's reputation and thereby its performance through both these effects (i.e. embedded information and valence). We thus fully delineate the determinants of ‘good reputation’ in these social environments. As part of our robustness checks, we also consider the impact of price and quality, the two specific FGC components, on firm performance. Our findings further confirm these relationships.