Managerial ties,firm resources,and performance of cluster firms

Previous research has documented the relationship among managerial ties, firm resources, and performance in emerging economies such as China. While managerial ties may be embedded in a particular location, some of these ties may be non-location-bound. Therefore, for firms located within one geographically concentrated cluster, how do managerial ties and firm resources affect performance? Using data from 163 firms in two Chinese clusters, we demonstrate that managerial ties and firm resources—independently and in combination—help firms improve market performance. Results support the view that both network-centered strategies (utilizing managerial ties) and market-centered strategies (leveraging firm resources) are critical determinants of firm performance.     

Supporting new product commercialization through managerial social ties and market knowledge development in an emerging economy

While it has been advocated that the generation and application of market knowledge shape marketing capabilities to commercialize new products, the weak institutional environment makes access to critical market knowledge challenging in emerging economies. Critically, managerial social ties with business and political institutions may complement the firm’s market orientation (MO) to obtain market knowledge that is not available in the open market in emerging economies. This study draws attention to the differential roles of business and political ties in complementing or inhibiting the effects of market orientation on exploratory and exploitative marketing capabilities in one of the “Next Eleven” emerging economies, Iran. The results help firms operating in emerging economies to identify the conditions under which business and political ties help to overcome institutional limitations, complement market-oriented efforts, and successfully commercialize new products.     

Managerial social capital,strategic orientation,and organizational performance in an emerging economy

This study replicates and extends previous research focusing on China, to a sub‐Saharan African emerging economy environment. Specifically, the study directly replicates the impact of social capital derived from the micro‐managerial networking relationships and ties with top managers at other firms and government officials on macro‐organizational performance using data from Ghana. This study further extends previous work by examining the impact of social capital derived from managerial social networking relationships and ties with community leaders on organizational performance. It examines how the relationship between social capital and organizational performance is contingent on an organization's competitive strategic orientation. The findings suggest that social capital developed from managerial networking and social relationships with top managers at other firms, government officials (political leaders and bureaucratic officials), and community leadership enhance organizational performance. The findings from the contingency analyses reveal some interesting trends. The impact of social capital on organizational performance differs between firms that pursue the different competitive strategies (low‐cost, differentiation, and combination of low‐cost and differentiation) and those who do not pursue those strategies. Copyright © 2007 John Wiley & Sons, Ltd.     

Managerial ties,absorptive capacity,and innovation

Managerial ties—the boundary-spanning ties and interpersonal connections of top managers—contribute to a corporation’s innovativeness in emerging economies because of the absence of market supporting institutions, transparent laws, and clear regulations. Moreover, managerial ties are apt to interact with absorptive capacity to facilitate knowledge sharing and innovation. This paper examines the joint influence of managerial ties and absorptive capacity in two communities in China, one characterized by a high level of foreign direct investment (FDI) and the other consisting mainly of local corporations. We find that absorptive capacity moderates the effect of managerial ties on a corporation’s innovativeness. Furthermore, when examining the two communities separately, we find that business ties and university ties have opposite effects.

Do managerial ties in China always produce value? Competition,uncertainty, and domestic vs. foreign firms

While most advocate that foreign firms should utilize managerial ties to conduct business in China, recent literature cautions that such ties may offer only conditional value. This study examines three sources of heterogeneity that may condition the value of ties: firm ownership (foreign vs. domestic), competition, and structural uncertainty. Results from a survey of 280 firms in China indicate that though foreign and domestic firms utilize ties at a similar level, their performance gains from tie utilization differ. Managerial ties have a monotonic, positive effect on performance for domestic firms, whereas the effect is curvilinear (i.e., inverted U-shaped) for foreign firms. Therefore, compared with domestic firms, foreign firms have a competitive disadvantage from tie utilization. Furthermore, managerial ties are less effective for fostering performance when competition becomes more intense. However, ties lead to higher levels of firm performance when structural uncertainty increases. Overall, these results support the contingency view of managerial ties and caution companies about the unconditional use of ties as the market becomes more heterogeneous. Copyright © 2008 John Wiley & Sons, Ltd.     

Export intensity,scope, and destinations: Evidence from Brazil

How do the three dimensions of geographic export diversification—namely, (1) export intensity, (2) export scope, and (3) export destinations—interact in determining firm performance? How does the export intensity–performance relationship change considering export scope and destinations? Drawing on institution-based and resource-based lenses, we argue that differences between home and destination country institutional environments are amplified by the scope or variety of export destinations. As firm resources nurtured in the home country may not fit an increasing number of different foreign institutional environments, the export intensity–firm performance relationship turns negative. Conversely, our panel data analysis suggests a positive relationship between export intensity and performance when exporters from an emerging economy increase their exports to a limited number of other emerging economies. Thus, our findings extend conventional wisdom on the export intensity–firm performance relationship and suggest that the international marketing strategy literature needs to simultaneously incorporate three dimensions (including export destinations) into the geographic export diversification construct.     

Managerial ties and firm performance in an emerging economy: Tests of the mediating and moderating effects

Although the literature documents the direct effects of managerial ties on firm performance, the empirical results are divergent and inconclusive. To explain these disparities, this study (1) develops and tests a model that establishes the role of external resource acquisition as a salient mediating mechanism through which managers’ business and political ties influence firm performance; and (2) examines the moderating role of environmental turbulence that further explains the impact of managerial ties on resource acquisition (the mediator). Results from a survey of 253 firms in China indicate that resource acquisition plays a partial mediating role in the relationships between the two sub-dimensions of managerial ties and firm performance. Environmental turbulence shows a curvilinear (i.e., inverted U-shaped) moderating effect on the business ties–resource acquisition relationship, whereas it dampens the positive effect of political ties on resource acquisition. Theoretical and managerial implications are discussed.     

Foreign ownership and productivity in Chinese newly listed firms: the moderating roles of founder’s human capital and social ties

This paper studies the effects of foreign ownership on firm-level productivity and examines the different moderating roles of the firm-founder’s human capital and social ties on the foreign ownership - productivity link. Leveraging a unique sample of 428 small and medium-sized firms listed on the Growth Enterprise Market in the Shenzhen Stock Exchange between 2009 and 2016, we find that the foreign ownership’s contribution to productivity is not linear and varies across different quantiles of the productivity distribution. Our findings also show that the founder’s education and foreign experience strengthen the foreign ownership - productivity link, while the founder’s political and managerial ties weaken it. Our results reveal the strategic importance of the founder and contribute to an improved understanding of why firms vary in their ability to enhance productivity in emerging economies.

     

The effect of institutional ties on knowledge acquisition in uncertain environments

Institutional ties can contribute to a firm??s performance in emerging economies because of the existence of ambiguous laws and unclear regulations. The main thrust of our argument is that a firm??s choice of institutional ties needs to be congruent with the external environment and with industry characteristics. We test our proposed framework with survey data from 308 firms in China. The results indicate that, first, environmental uncertainty has a direct influence on institutional ties and knowledge acquisition, but second, a firm??s industry position, although it likewise has an effect on knowledge acquisition, influences institutional ties in a U-shaped manner. Third, we find that institutional ties are positively related to knowledge acquisition.     

Mixed effects of business and political ties in planning flexibility: Insights from Turkey

Despite increasing attention to the role of business and political ties in emerging economies, few studies have explicitly investigated their relations to dynamic capabilities outside of the East-Asian context. Following the relevant literature that proposes that both business and political ties are related to firm performance, this study refines the explanatory role of planning flexibility in how business and political ties relate to both financial and non-financial firm performance. Drawing from dynamic capabilities view and applying partial least squares structural equation modeling to data from 302 small and medium-sized enterprises (SMEs) in Turkey, we find that, while business ties are positively related to planning flexibility, political ties have a negative association with planning flexibility. Moreover, we provide empirical evidence that planning flexibility positively mediates the relationship between business ties and financial and non-financial performance. Conversely, there exists a negative indirect relationship between political ties and financial and non-financial performance. Our findings have significant implications for firms and managers, who should assess the benefits and costs embedded within business and political ties to improve firm performance.     

Managerial Ties and Firm Innovation: Is Knowledge Creation a Missing Link?

Managerial ties, the personal networks of senior managers, have been found to be facilitators of firm performance because of their network benefits. However, social network theory suggests that managerial ties only play a “conduit” role by providing possibilities and opportunities to approach external resources. How can firms turn these possibilities and opportunities into internal knowledge assets and further transform them into firm innovation? Extant research constructs a direct mechanism for the managerial ties–firm innovation link. The research reported here, however, provides and investigates an indirect ties‐innovation argument where organizational knowledge creation processes, including knowledge exchange and knowledge combination, are mediators. And managerial ties are examined through two traditional dimensions, business ties and political ties. This study employs empirical data from 270 firms in China and uses structural equation modeling techniques to reveal interesting findings. First, the results support the key argument that the influence of managerial ties on firm innovation is indirect. Second, knowledge exchange and knowledge combination are different constructs and the former positively influences the latter. More interestingly, business ties can exert a significant direct impact on both knowledge exchange and knowledge combination, while political ties can only influence knowledge exchange directly. Although both knowledge exchange and knowledge combination impact product innovation directly, only knowledge combination can directly influence process innovation. These findings indicate that the role of political ties is declining, but business ties still have substantial influence on firm innovation in transitional China. Different processes of organizational knowledge creation, such as knowledge exchange and knowledge combination, make distinct contributions to firm innovation. Product innovation, as opposed to process innovation, is more externally oriented and needs more organizational level knowledge creation activities. This article extends the understanding of the ties–innovation link, organizational knowledge creation theory, and firm innovation in a transitional economy by providing a more complete understanding of how firms can access and internalize external resources and then transform them into product innovation and process innovation.     

Are emerging economies less efficient? Performance persistence and the impact of business group affiliation

By drawing a theoretical distinction between the persistence of superior and poor performance, we reconcile the conflicting predictions of the ‘revisionist’ and accepted views on the persistence of firm performance in emerging economies. Using a sample of manufacturing firms in the United States and India, we show that superior firm performance in emerging economies persists only as much as developed economies in line with the revisionist argument. We also provide evidence consistent with the accepted view that poor firm performance persists longer in emerging economies compared to developed economies. Further exploration of the latter shows that, contrary to predictions of extant theories, firms in emerging economies that are affiliated with an MNC or a business group have a greater persistence of poor performance than firms that are unaffiliated with these intermediate governance structures, and hence would be better off operating at arm's length. Copyright © 2005 John Wiley & Sons, Ltd.     

Outside directors and firm performance during institutional transitions

Do outside directors on corporate boards make a difference in firm performance during institutional transitions? What leads to the practice of appointing outside directors in the absence of legal mandate? This article addresses these two important questions by drawing not only on agency theory, but also resource dependence and institutional theories. Taking advantage of China's institutional transitions, our findings, based on an archival database covering 405 publicly listed firms and 1211 company–years, suggest that outsider directors do make a difference in firm performance, if such performance is measured by sales growth, and that they have little impact on financial performance such as return on equity (ROE). The results also document a bandwagon effect behind the diffusion of the practice of appointing outsiders to corporate boards. The article not only highlights the need to incorporate multiple theories beyond agency theory in corporate governance research, but also generates policy implications in light of the recent trend toward having more outside directors on corporate boards in emerging economies. Copyright © 2004 John Wiley & Sons, Ltd.     

When does guanxi bolster or damage firm profitability? The contingent effects of firm- and market-level characteristics

This paper advances that a nuanced approach is necessary to understand the effectiveness of managerial ties (guanxi) in improving firms' financial performance. We take a contingency approach to examine how the effects of managerial ties on performance may be moderated by firm-level factors (i.e., firm age and entrepreneurial orientation) and market-based forces (i.e., demand uncertainty and technological turbulence). Using a survey of 289 firms in China, we find that managerial ties are more salient with regard to enhancing performance for more entrepreneurial-oriented and younger firms. Managerial ties fail to provide performance benefits to firms when high demand uncertainty exists or when the level of technological turbulence is high, which suggests a performance limitation of established ties with government officials, buyers, suppliers, and competitors. The theoretical and managerial implications of the findings are further discussed.     

Managerial ties,organizational learning,and opportunity capture: A social capital perspective

From a social capital perspective, this article investigates how entrepreneurs in new ventures utilize their managerial ties (consisting of ties with other firms and ties with government) to capture opportunity. We also explore the moderating role of organizational learning (via exploratory learning and exploitative learning) in this process. Drawing on a sample of 159 new ventures, we find that ties with other firms have a stronger positive effect on opportunity capture than ties with government. We also find that organizational learning moderates the relationship between managerial ties and opportunity capture. Overall, our contributions center on an integrated view of organizational learning, social relationships, and opportunity capture.     

The Formation of Managerial Networks of Foreign Firms in China: The Effects of Strategic Orientations

This study investigates how firms' strategic orientations (i.e., market, technology, and entrepreneurship orientations) influence the formation of two types of managerial networks (top managers' ties with the business community and with government officials), as well as the impact of managerial networking on firm performance. On the basis of a survey of 181 foreign-invested enterprises (FIEs) operating in China, we find that a market orientation fosters both types of network building. Technology-oriented firms are more likely to cultivate managerial ties with top managers at other firms but less likely to establish networks with government officials. In contrast, entrepreneurial firms tend to develop vertical networks with government officials but have no intention to deepen their horizontal networks with other firms. Competitive intensity moderates the relationships between strategic orientations and managerial ties. Finally, managerial networking has a positive impact on FIE performance.     

Clusters,networks, and firm innovativeness

This paper extends current knowledge of industry clusters by disentangling the effects of networks from cluster (i.e., distinctly geographic) mechanisms on firm performance as well as by studying the influence of these different mechanisms on firms located inside and outside the industry cluster. It also highlights the importance of simultaneously modeling multiple networks which may differentially influence important firm outcomes. In the paper, I model the innovativeness of Canadian mutual fund companies as a function of their geographic location—inside or outside the industry cluster of Toronto—and of their centrality in networks of managerial and institutional ties. I find that locating in the industry cluster as well as centrality in the managerial tie network enhances firm innovation, while centrality in the institutional tie network does not. Copyright © 2005 John Wiley & Sons, Ltd.     

How do SOEs and FIEs affect POEs’ performance in emerging economies? Moderating effects of managerial ties

Asia Pacific Journal of Management - In emerging economies, informal ties are important instruments that firms use to overcome market competitiveness disadvantages. Higher proportions of...     

Why do business groups continue to matter? A study of market failure and performance among Indian manufacturers

This paper explores the nature of the influence that business groups exert in shaping performance outcomes in emerging economies. Set in India, this study used a longitudinal research design to assess the independent and collective performance impact of group affiliation and diversification both before and after economic reforms were introduced in the country. Consistent with the institutional theory perspective, results show that in the pre-reform period the group structure exerted an important positive moderating effect on the diversification-performance relationship. However, these group benefits appear to persist even after many of the sources of market failure had started to decline rapidly. This persistence of group effect may be indicative of the continued relevance of non-diversification benefits of the group structure in emerging economies. It may also be indicative of the fairly slow process of building institutional infrastructure in emerging economies where reforms are seldom introduced en masse but more a series of continuing measures as was the case in India.     

How entrepreneurs leverage institutional intermediaries in emerging economies to acquire public resources

Research summary: Governments in emerging economies often use institutional intermediaries to promote entrepreneurship, and bridge the void between ventures and public funding. While prior literature describes what institutional intermediaries do, it leaves open how intermediaries support different types of entrepreneurs. By comparing science park and non‐science park firms in Beijing and across China, we distinguish which entrepreneurs benefit from certification versus capability‐building through the introduction of two new constructs: skill adequacy and context relevance. Broadly, our study adds insights at the nexus of emerging economies and entrepreneurship research, and to the tie formation and institutional intermediaries literatures. Managerial summary: A key dilemma facing entrepreneurs is how to finance their ventures. While entrepreneurs in developed economies can seek VC or angel investment, entrepreneurs in emerging economies often need to pursue potential government funding opportunities. Our study highlights three strategies for acquiring government funding. Well‐connected entrepreneurs can leverage their political ties to acquire such funding. Less‐connected entrepreneurs can leverage science parks that in emerging markets are designed to help governments to identify promising ventures. For returnees whose ample experience abroad may not fit with local ways of doing business, gaining science park admission can certify quality and so ease the path to government funding. For technically skilled local entrepreneurs who lack business skills, science parks can help build such skills, which then ease the path to government funding. Copyright © 2016 John Wiley & Sons, Ltd.