Works Councils,Collective Bargaining,and Apprenticeship Training – Evidence From German Firms

In this paper, we investigate the effects of works councils on apprenticeship training in Germany. The German law attributes works councils substantial information and co‐determination rights to training‐related issues. Thus, works councils may also have an impact on the cost‐benefit relation of workplace training. Using detailed firm‐level data containing information on the costs and benefits of apprenticeship training, we find that firms with works councils make a significantly higher net investment in training compared to firms without such an institution. We also find that the fraction of former trainees still employed with the same firm 5 years after training is significantly higher in the presence of works councils, thus enabling firms to recoup training investments over a longer time horizon. Furthermore, all works council effects are much more pronounced for firms covered by collective bargaining agreements.     

Large Employers and Apprenticeship Training in Britain

We consider the link between apprenticeship and large employers in Britain, in terms of the contribution of apprenticeship to intermediate skills and the contribution of large employers to the Advanced Apprenticeship (AA) programme. Evidence is taken from interviews with managers in 28 organizations. We find that apprenticeship functions to only a limited extent outside AA, and then primarily because of the ineligibility of particular categories of trainee. The use that employers make of apprenticeship varies considerably, in association with its cost‐effectiveness relative to recruitment and upgrade training within human resource management strategy, and with employers’ evaluations of the technical content of AA qualifications. The prospects for increased sponsorship of apprenticeship by large organizations are curbed by the greater appeal of recruitment and upgrade training in various contexts.     

Failed takeover attempts,corporate governance and refocusing

Hostile takeover attempts oftentimes signal that a target firm has an over‐diversified and ineffective corporate strategy. What does this signal mean when takeover attempts fail? Drawing from agency theory, we argue that target firms managed by independent directory boards are likely to ignore the takeover attempt and not refocus their firms' strategy. Conversely, target firms managed by nonindependent boards are more likely to view the failed takeover attempt as a ‘wake‐up call’ and will refocus their firms' strategy so as to preserve the firm's survival. These arguments are tested using a sample of 76 firms that were targets of failed hostile takeover attempts. Logistic regression analyses confirm the predictions. This study suggests that in the aftermath of a failed takeover attempt board of director characteristics can help predict changes in corporate strategies. Copyright © 2002 John Wiley & Sons, Ltd.     

De‐commitment to losing strategic action: evidence from the divestiture of poorly performing acquisitions

We use a mental accounting framework to study the conditions in which CEOs de‐commit to poorly performing acquisitions and so become more likely to divest them. We test this framework by contrasting the experiences of 68 firms that divested acquisitions with a control sample of 68 firms that did not divest their acquisitions. Consistent with the theory that we use to explain and predict de‐commitment, our results suggest that poorly performing acquired units tend to be divested when executives can place them within ‘attributional accounts’ (i.e., accounts for the cause of the performance that do not incriminate them) and ‘comprehensive accounts’ (i.e., within the context of overall firm performance). Copyright © 2006 John Wiley & Sons, Ltd.     

Early supplier integration: the dual role of purchasing in new product development

Interest in early supplier integration in new product development (NPD) has increased as an open innovation approach has become more common in firms. To support supplier integration, the purchasing function of a firm can assume a new ‘dual’ role: contributing to NPD while also managing overall costs. Previous research has offered few insights into how the purchasing function should best be organised so that it will fulfil this dual role. This paper reports on the results of a consortial benchmarking study in which an industry–academic consortium visited and analysed six best‐practice firms. The findings describe how innovative firms organise their purchasing function, distinguishing between ‘advanced sourcing’ and ‘life‐cycle sourcing’ units. The results include the tools that these firms use, such as regular innovation meetings with suppliers and technology roadmaps linking firm strategy, innovation strategy and sourcing strategies. The paper also recommends that researchers shift from a narrow focus on a single project to a broader consideration of supplier and organisational issues in NPD.     

Developing Technician Skills for Innovative Industries: Theory,Evidence from the UK Life Sciences Industry,and Policy Implications

This article explores how innovative firms attempt to acquire the skilled technicians needed to deploy new technologies. Interviews with 40 employers from the UK life sciences sector reveal that shortages of technicians, an awareness of the importance of practical skills best acquired through work-based learning, and increasing dissatisfaction with the use of graduates, are encouraging employers to turn towards apprenticeship training. However, the rules governing the funding of various kinds of education and training discourage providers from offering the kinds of apprenticeships increasingly sought by employers, giving rise to a ‘system failure’ that manifests itself in shortages of technicians and the use of over-qualified graduates in technician roles.     

Antecedents and consequences of corporate governance reform: the case of Germany

The paper examines the antecedents and consequences of the voluntary adoption of corporate governance reform in firms embedded in a relationship‐based governance system with less protection of minority shareholders. In such locations, ownership structure should be a key determinant of governance reform. Firms with dispersed ownership are likely to face agency problems but may lack sufficient ownership power in the hand of external owners for adoption to occur. Extensive ownership by external parties facilitates adoption but decreases the need and motivation to adopt governance reform. We examined the adoption of stock‐based incentive plans and transparent accounting regulations (e.g., greater disclosure to shareholders) among large German firms (DAX 100) during the late 1990s. We found an inverse ‘U’‐shaped relationship between ownership concentration and governance reform. In addition, we found that firms adopting governance reform were more likely to engage in corporate divestitures and achieve higher levels of market performance than firms not adopting governance reform. Copyright © 2003 John Wiley & Sons, Ltd.     

International knowledge sourcing: evidence from U.S. firms expanding abroad

Recent research demonstrates that firms, motivated by national differences in technical activity, expand abroad to source unique knowledge. Extant research suggests that firms use a knowledge sourcing strategy to ‘catch up’ with competitors and to obtain ‘technical diversity.’ We widen the investigation by suggesting that firms also use knowledge sourcing as a springboard to reduce their next generation R&D costs–that firms would seek out similar R&D activity to combine with their own. Using unique data that encompasses the multitude of countries where U.S. firms invest, we test the importance of these explanations. Measuring knowledge via patent stocks, we find that country‐industries with larger stocks and greater technical similarity to the United States are more attractive. These findings suggest that an important explanation for firms investing abroad is not catching up or technologically diversifying, but is using similar R&D efforts of others to overcome fixed R&D cost hurdles. Copyright © 2008 John Wiley & Sons, Ltd.     

Job Training, New Technology and Labour Turnover

Vocational training incidence for those at work is frequently financed partly or wholly by employers, who then lose part of their investment return if workers migrate to other firms. We investigate the incidence of training and the incidence of job-to-job mobility for a large sample of British workers in 1984 and 1989. We also analyse the role of sectoral technology characteristics in influencing patterns of both training and inter-firm mobility.
Our results demonstrate that job-to-job mobility is highest for the young and higher for those with formal educational qualifications than for the unskilled. These are also characteristics which engender a higher training propensity; so, unavoidably, private gains to training for employers are below social gains for these young people. Public-sector workers have high training rates but low mobility; this perhaps explains the lack of perception of the poaching problem by successive governments. Sectoral R&D activity is associated with more training and less mobility for men; in contrast, women are more likely to train and are less mobile if the rate of adoption of innovation is rapid.     

Should auld acquaintance be forgot? the reverse transfer of knowledge through mobility ties

While mobility's effect on knowledge transfer to firms that hire mobile employees is well demonstrated, we choose to explore mobility's effect on knowledge transfer to firms that lose these employees. Focusing on this ‘outbound mobility’ allows us to isolate effects of social mechanisms associated with mobility. We find that semiconductor firms losing employees are more likely to subsequently cite patents of firms hiring these employees, suggesting that mobility‐driven knowledge flows are bidirectional. In addition, the outbound mobility effect is pronounced when mobility occurs between geographically distant firms, but attenuates for geographically proximate firms since other redundant knowledge channels exist within regions. Copyright © 2009 John Wiley & Sons, Ltd.     

Policy risk,strategic decisions and contagion effects: Firm‐specific considerations

Research summary : In this article, we investigate the firm‐specific environment and its impact on firm strategy focusing on adverse changes in the policy environment and their effect on divestitures. We argue that experiencing a negative change in the firm‐specific policy environment causes firms to reassess their exposure to policy risk and their ability to manage their policy environment, making them more likely to divest. Operationalizing negative shifts in the firm‐specific policy environment through formal policy disputes between firms and governments, we find that following a dispute, firms are more likely to divest both in the country where the dispute occurs and in other countries in the same region. However, the impact of disputes on divestitures is firm specific, applying only to firms directly involved in a dispute . Managerial summary : What is the impact of change in the firm‐specific environment on firm strategy? We argue that when firms directly experience a negative change in their policy environment that is specific to them, they negatively reassess their exposure to policy risk and their ability to manage their policy environment, which makes them more likely to undertake a divestiture. We analyze formal disputes between firms and governments that arise from adverse changes in policy and find that, following a dispute, firms are more likely to divest in the country where the dispute occurs and in other countries in the same region. However, the impact of disputes on divestitures is firm specific as it applies only to firms directly involved in a dispute . Copyright © 2016 John Wiley & Sons, Ltd.     

Labor Inspections in the Developing World: Stylized Facts from the Enterprise Survey

This paper empirically explores the incidence of labor inspections across registered firms in 72 developing countries. Results show that larger firms are more likely to be inspected than smaller firms. Interestingly, inspections are less likely to occur among firms with a larger share of low‐skilled workers, and that operate in industries with more tax evasion. We explore the heterogeneity of these findings across income and geographic groups, and conclude by briefly discussing the consistency of the stylized facts with competing theories of inspection agencies’ behavior.     

Career Concerns,Inaction and Market Inefficiency: Evidence From Utility Regulation

We study how incentive conflicts known as ‘career concerns’ can generate inefficiencies not only within firms but also in market outcomes. Career concerns may lead agents to avoid actions that, while value‐increasing in expectation, could potentially be associated with a bad outcome. We apply this theory to natural gas procurement by regulated public utilities and show that career concerns may lead to a reduction in surplus‐increasing market transactions during periods when the benefits of trade are likely to be greatest. We show that data from natural gas markets are consistent with this prediction and difficult to explain using alternative theories.     

Will firms go green if it pays? The impact of disruption,cost, and external factors on the adoption of environmental initiatives

Research summary : Research on the link between financial and environmental performance implicitly assumes that firms will pursue profitable environmental actions. Yet, clearly, factors beyond profitability influence firms' environmental choices. We treat these choices as organizational change decisions and hypothesize that adoption of environmental initiatives is influenced by a combination of profit, level of disruption caused, and external influences. We test our hypotheses by examining firms' choices regarding implementation of energy‐savings initiatives. We find that degree of disruption, number of prior local adopters, and strength of environmental norms affect the adoption decisions. In addition, the effect of disruption is amplified by the implementation costs, but is mitigated by the number of prior local adopters. Managerial summary : Often, in trying to improve firms' environmental performance, academics and stakeholders have focused on actions that simultaneously improve environmental and financial performance. This assumes that firms will undertake projects that offer such dual benefits. We consider what might prevent firms from pursuing such ‘win‐win’ initiatives. We focus on how the degree of disruption of an energy‐saving initiative affects its probability of adoption. We find that firms are significantly more likely to adopt moderately profitable, but easy initiatives than more profitable but disruptive ones. We also examine internal and external factors that moderate the effect of disruption. Our findings suggest that in order to incentivize firms to improve environmental performance, it might be more beneficial make these activities less disruptive than to make them more profitable. Copyright © 2016 John Wiley & Sons, Ltd.     

Is performance driven by industry‐ or firm‐specific factors? A response to Hawawini,Subramanian, and Verdin

Hawawini, Subramanian, and Verdin (2003) examined the relative impact of industry‐ vs. firm‐level factors shaping firm performance. They demonstrated that variance in firm performance attributable to industry‐level factors increases, while variance attributable t to firm‐level factors decreases when ‘exceptionally’ higher‐ and lower‐performing ‘outlier’ firms in each industry are excluded. They concluded that previous research underestimated the relative impact of industry‐level factors for ‘average’ firms that make up the bulk of an industry. We take issue with their methods used to identify and exclude outliers as well as their conclusions drawn from such analyses. Rather than excluding true ‘outlier’ firms, we argue that they incorporated an artificial restriction of within‐industry sample variance that almost deterministically led to lower firm and higher industry variance component estimates. We demonstrate this point with a comparable sample of data to which we apply progressively greater restrictions on within‐industry sample variance leading to similar results. Finally, we show that exclusion of firms from a data sample based on commonly understood standards of outlier identification leads to little change in industry and firm variance component estimates compared to full‐sample estimates. Copyright © 2005 John Wiley & Sons, Ltd.     

The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis

Do shareholders gain when managers disperse corporate resources through activities classified as corporate social responsibility (CSR)? Strategy scholars have recently developed a theoretical model that links such activities to shareholder value when a firm suffers a negative event; we test key portions of this theory of the ‘insurance‐like’ property of CSR activity. We posit that such activity leads to positive attributions from stakeholders, who then temper their negative judgments and sanctions toward firms because of this goodwill. We extend the risk management model by theorizing that some types of CSR activities will be more likely to create goodwill and offer insurance‐like protection than other types. We delineate several firm and event specific characteristics that we expect to influence the link between CSR activities and an insurance effect. We then test our model using an event study of 178 negative legal/regulatory actions against firms throughout the 11 years from 1993–2003. We find that participation in institutional CSR activities—those aimed at a firm's secondary stakeholders or society at large—provides an ‘insurance‐like’ benefit, while participation in technical CSRs—those activities targeting a firm's trading partners—yields no such benefits. We conclude by considering the implications of our findings for future theorizing and research into the economic value of CSR engagement. Copyright © 2008 John Wiley & Sons, Ltd.     

Knowledge spillover in corporate financing networks: embeddedness and the firm's debt performance

Building on social embeddedness theory, we examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor—a strategic process we dub ‘network transitivity.’ Focusing on the properties of network transitivity in the context of small‐firm corporate finance, we consider how embedded relations between a firm and its banks facilitate the firm's access to distinctive capabilities that enable it to strategically manage its trade‐credit financing relationships. We apply theory and original case‐study fieldwork to explore the types of resources and competencies available through bank–firm relationships and to derive hypotheses about how embedded bank–firm relationships affect the strategy of small‐ to medium‐sized firms. Using a separate large‐scale data set, we then test the generalizability of our hypotheses. Our qualitative analyses show that embedded bank–firm ties provide special governance arrangements that facilitate the firm's access to bank‐centered informational and capital resources, which uniquely enhance the firm's ability to manage trade credit. Consistent with our arguments, our statistical analyses show that small‐ to medium‐sized firms with embedded ties to their bankers were more likely to take lucrative early‐payment trade discounts and avoid costly late‐payment penalties than were similar firms that lacked embedded ties—suggesting that social embeddedness beneficially affects the financial performance of the firm. Copyright © 2002 John Wiley & Sons, Ltd.     

OVERSEAS R&D ACTIVITIES AND HOME PRODUCTIVITY GROWTH: EVIDENCE FROM JAPANESE FIRM‐LEVEL DATA*

This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms using firm‐level data for Japanese multinational enterprises. Based on survey responses, we classify each overseas subsidiary's R&D as either ‘innovative R&D,’ which we hypothesize is likely to lead to the acquisition of foreign knowledge, or ‘adaptive R&D,’ which is more likely to lead to adaptation to local conditions. We find that overseas innovative R&D raises the parent firm's productivity growth, while adaptive R&D has no such effect. In addition, overseas innovative R&D does not improve the rate of return on home R&D.     

How New Product Introductions Affect Sales Management Strategy: The Impact of Type of "Newness" of the New Product

How do firms adjust sales management strategy for new product launch? Does sales management strategy change more radically for different types of new products such as new‐to‐the‐world products versus product revisions? Because firms introducing a new product rely considerably on their sales force in the product launch effort, the types and degree of changes made in managing the selling effort are important issues. Past studies have demonstrated that firms make substantial adjustments in their sales management strategy when they introduce a new product. This study expands on previous investigations by examining whether sales management strategy changes are conditioned by the type of newness of the new product to the market and to the firm. Australian sales managers were asked to respond to a mail questionnaire concerning pre‐ and post‐new product launch sales management activities. Three groups of firms were compared: (1) those with new‐to‐the‐market and new‐to‐the‐firm products (i.e., new‐to‐the‐world products); (2) those with products new to the firm but not new to the market; and (3) those with products that are revisions to the firm and not new to the market. The study finds that firms do not make the most adjustments for products with the greatest degree of market newness—the new‐to‐the‐world types of products—except in the sales management strategy categories of compensation and supervision. In the other sales management strategy categories defined for study—organization, training, quotas and goals, and sales support as well as for all categories in the aggregate—sales management strategy changes were greatest in incidence, as measured both by the percent of firms making changes and the average number of changes per firm, when the new product was new to the firm but not new to the market. These results suggest that, because different types of new products face different competitive environments, there may be greater incentive for a not‐new‐to‐the‐market new‐to‐the‐firm product to make changes in sales strategy. Uncertainties about market size and customer location with new‐to‐the‐world products may limit the understanding of what changes to make in the strategy categories of quotas and territories. Similarly, uncertainties about product use and customer acceptance of new‐to‐the‐world products may limit the development of training and sales support materials by these firms. Instead, these firms may rely more on compensation and supervision to direct sales efforts for new‐to‐the‐world products. However, observing the market experience and performance of the first‐to‐market product can benefit firms launching a not‐new‐to‐market and new‐to‐the‐firm product, allowing them to rely more on strategy changes in training, sales support materials, organizational adjustments such as redeployments, and quotas.     

Do VCs matter? the importance of owners on performance variance in start‐up firms

Adding to the corporate effect literature, we study the effect of owners on firm performance in a new context, that of venture capital firms (VCs) and the start‐up firms in which they invest. After discussing the effect that VC ownership can have on start‐ups, we estimate that start‐up‐specific, owner (VC), and year effects account for significant variance in performance (26.3 percent, 11.2 percent and 3.7 percent, respectively). The effects of industry and investment stage are not statistically different from zero. We also provide an analysis that separates the owner effect into two components: a selection component—which impacts investment—and a management component—which explains significant variance in performance. By examining the owner effect in a different institutionalized form of governance—that of the start‐up and its relationship to VC owners—our study also contributes to an understanding of the ‘ownership’ effect in the strategy literature more generally. Copyright © 2008 John Wiley & Sons, Ltd.