Is more capability always beneficial for firm performance? Market orientation,core business process capabilities and business environment

This study examines the role of capabilities in core marketing-related business processes–product development management (PDM), supply chain management (SCM) and customer relationship management (CRM)–in translating a firm’s market orientation (MO) into firm performance. The study is the first to examine the interplay of all three business process capabilities simultaneously, while investigating how environmental conditions moderate their performance effects. A moderated mediation analysis of 468 product-focused firms finds that PDM and CRM process capabilities play important mediating roles, whereas SCM process capability does not mediate the relationship between MO and performance. However, the relative importance of the capabilities as mediators varies along the degree of environmental turbulence, and under certain conditions, an increase in the level of business process capability may even turn detrimental.     

How do entrepreneurs' cross-cultural experiences contribute to entrepreneurial ecosystem performance?

While research on the cross-cultural experience of entrepreneurs has demonstrated that exposure to diverse cultures is beneficial for new venture growth, it has neglected the performance implications of entrepreneurs’ cross-cultural experience at the ecosystem level. This study endeavors to explore the micro-macro link between cross-cultural entrepreneurs and the performance of entrepreneurial ecosystems in which they are embedded. Building on the dynamic capability perspective, we argue that entrepreneurial ecosystem orchestrators can leverage entrepreneurs’ cross-cultural experiences to develop ecosystem dynamic capabilities and consequently improve entrepreneurial ecosystem performance. Based on multi-wave survey data of 2,981 business incubators in China, our findings show that cross-cultural entrepreneurs are positively associated with entrepreneurial ecosystem performance via increased ecosystem innovation. Moreover, the integrative capability of ecosystem orchestrators moderates the relationship between cross-cultural entrepreneurs and ecosystem innovation. Our findings contribute to the literature on cross-cultural experience by extending it to the ecosystem level and inject fresh insights into the dynamic capability literature by uncovering the formation process of ecosystem dynamic capabilities.     

Should business angels diversify their investment portfolios to achieve higher performance? The role of knowledge access through co-investment networks

This paper investigates the performance effects of business angel portfolio industry diversification. Using a unique bi-annual panel dataset of 142 members of a professional angel investment platform and their portfolio returns between 2013 and 2017, we consider the costs and benefits of diversifying investments into various industries. Drawing upon theoretical arguments about distant search, we theorize and find a nonlinear (S-shaped) relationship between portfolio industry diversification and performance. Further, we pay specific attention to a proposed overdiversification effect that takes place at high levels of portfolio industry diversification and show that this effect is moderated by individuals' access to industry knowledge through their co-investment networks. For business angels who have a central position within a diverse network of industry specialists, the overdiversification effect is less pronounced.     

How much does KIBS contribute to the generation and diffusion of innovation?

This article aims to estimate the contribution of KIBS to the innovation system. Data on innovation gathered from national and European databases are analyzed using a methodology based on an input–output framework to estimate the drive for innovation in the Spanish economy and the contribution of KIBS. KIBS are found to be crucial to both the creation and diffusion of innovation. From among the four classifications of sectors analyzed herein, KIBS is found to be the only significant net generator of innovation.     

How does perceived firm innovativeness affect the consumer?

We present a broad-based, consumer-centric view of innovation—referred to as “perceived firm innovativeness” (PFI). PFI is conceptualized as the consumer's perception of an enduring firm capability that results in novel, creative, and impactful ideas and solutions. We develop and validate a PFI scale and show that PFI impacts consumer loyalty via two processing routes: a functional-cognitive route and an affective-experiential route. Our results indicate that a firm needs to consider consumer perceptions of the firm as a whole, and not just new products and technologies, and take into account a functional-cognitive perspective as well as consumer emotions and experiences.     

A double-edged sword? The moderating effects of control on firm capabilities and institutional distance in explaining foreign affiliate performance

By drawing from the internalisation and institutional theories, as well as the organisational capability perspective, the paper analyses the moderating effects of parent control over foreign affiliates in relation to firm capabilities and institutional distance and their performance effects. These relationships are explored in the context of new MNEs from Poland as a mid-range emerging economy, for which ownership choices constitute critical decisions given their early stage of internationalisation. Our findings show that while firm capabilities drive foreign affiliate performance, the increase of parent control limits this beneficial effect, suggesting the potential occurrence of organisational inertia and reduction of learning in foreign markets. On the contrary, we also find partial evidence that the increase of parent control reduces the negative effect of institutional distance computed based on the Mahalanobis formula. Accordingly, the study suggests a certain ambiguity of parent control in affecting affiliate performance.     

How does new business formation affect regional development? Introduction to the special issue

This paper gives an overview of the empirical research on the effects of new business formation on regional development and introduces the contributions to this special issue. The effects of new businesses on regional development emerge over a longer time-period of up to ten years. A main focus of the contributions to this special issue is on the distribution of these effects over time and on the magnitude of the overall effect. While the basic pattern found for the different countries and regions is quite similar, the magnitude of the overall effect can be different and may even be negative. There are strong indications, that the type of entrants plays an important role in this respect.

How does regulatory monitoring of cause marketing affect firm behavior and donations to charity?

Cause marketing (CM) typically involves for-profit firms donating part of their sales revenue to a charity, with the hope that this will increase their revenue. We argue that it is important for a regulator to monitor firms’ CM activities, and to assess how differences in the enforcement of CM laws impact the CM practice by firms. Our analytical model uses a Stackelberg leader–follower game that endogenizes the regulator’s decision to enforce CM. The firm then decides whether to truthfully declare or overstate the amount it contributes to charity (and if overstate: by how much). We find the following results in equilibrium under different conditions: (i) CM campaigns are a win–win–win situation – they increase profit for the firm while being truthful, generate larger donations for the charity, and generate a cause marketing surplus for the regulator, resulting in doing well while doing good, (ii) the best response of the firm is to be strategic, even when the regulator is strict with monitoring, (iii) the regulator itself decides not to monitor CM, even though it knows that this results in untruthful behavior by firms. When we endogenize the extent of overstatement, we find that the firm tends to be strategic by overstating donation percentage, whether the regulator is strict or not. As the proportion of unsophisticated consumers (who believe a firm’s claims, whether truthful or not) increases, the donation proportion decreases in general, and the overstatement level increases when the regulator is lenient and decreases when the regulator is strict. In equilibrium, the regulator is strict if the market size is large, and lenient otherwise. A survey with consumers supports key modeling assumptions regarding consumers' lack of knowledge of CM laws.     

Do export status and export intensity increase firm performance?

This study examines the effects of export status and export intensity on the performance of firms in Ghana. Our measures of performance include productivity and profitability. Using the Regional Project on Enterprise Development (RPED) dataset covering the period 1991–2002, the results of this study indicate that export status and export intensity have positive effects on productivity, confirming the learning‐by‐exporting hypothesis. Competition on the international market exposes exporting firms to new technologies, and this has the potential of increasing their productivity. Thus, economic policy initiatives should be directed at encouraging firms to enter the export market. Existing exporters should also be motivated to intensify their exporting efforts by exporting more of their output to foreign markets. © 2011 Wiley Periodicals, Inc.     

How does the theory of consumption values contribute to place identity and sustainable consumption?

The importance of consumers’ role in sustainable consumption is reflected in the vision of the Sustainable Development Education Panel: To educate consumers to make informed consumption decisions, to take responsibility for their actions and to realize the impact of consumption decisions on future generations. However, educating and informing consumers alone is unlikely to change deeply entrenched unsustainable consumption behaviour. A multi‐faceted approach is required – enforcing sustainable development initiatives through legislation, promoting corporate social responsibility programs on the part of business, and (most importantly), supporting communities that engage in sustainable consumption. This study examines the proposition that individuals who identify with their community (i.e. the residential suburb or a locality where identity is understood geographically) are more likely to engage in sustainable consumption. Specifically, it examines how consumption value (i.e. the perceived value of living in a particular residential suburb) contributes to place identity and to environmental attitudes and sustainable consumption behaviour. Structural equation modelling is used to verify the conceptual model using data from a telephone survey of 561 residents from two inner city suburbs in Auckland, New Zealand. The results support the proposition that environmental attitude and sustainable consumption behaviour is enhanced by consumption values through place identity. Residents who enjoy living in their community, value a clean and healthy environment and believe their suburbs are unique tend to develop a stronger identity with their residential suburb, and are more positive towards sustainable consumption. The results have important implications for social marketers, property marketers and city councils who strive to encourage sustainable consumption among its citizens.     

Signaling virtue: Does firm corporate social performance trajectory moderate the social performance–financial performance relationship?

Over the past 40 years, scholars have demonstrated the effects of corporate social performance (CSP) on corporate financial performance (CFP), finding mixed results on the main effect of CSP on CFP. This study moves beyond the search for a universal main effect of CSP on CFP to examine factors that drive some firms to experience greater returns from their CSP efforts. Building from the signaling and stakeholder theory definitions of reputation and the trajectory literature in psychology, this study examines the following question: what is the impact of a firm's CSP reputation on the relationship between CSP actions and CFP in the current period? Findings based on a sample of 351 US firms demonstrate that firms with either a history of growth in negative CSP, a propensity toward increasing negative CSP, or a more inconsistent history of positive or negative CSP, experience decreased returns from current period investments in CSP.     

Where does business research go from here? Food-for-thought on academic papers in business research

This essay focuses on some of the adverse practices in business research publications. First, business researchers seem to have lost touch with business practice and to narrow the target group to fellow academics only, reducing the production of useful knowledge. Second, the objectives of business research publications narrow to impact and citations. This view leads to a strict focus on path-breaking theories and a denigration of replication and qualitative studies. Third, an obsession with the .05 significance level and corroborating findings leaves researchers with full file drawers of unpublished papers and could leave journals with a high rate of type I error papers. Fourth, complex, lengthy articles, the importance of carefully crafting a story around the research and a variety of style guidelines make business researchers less productive than they could be. Finally, a blind reliance on ISI's impact and citation scores may not do justice to a researcher's real contribution.     

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.     

What if your owners also own other firms in your industry? The relationship between institutional common ownership,marketing, and firm performance

The growth in institutional holdings of public firms has led to increased interest in the concept of common ownership, in which the same investor owns stakes in multiple firms within the same industry. Economic theory suggests that common ownership could affect firm performance, but little empirical research has examined the nature of this effect or how a firm’s extant marketing potentially relates to this effect. This paper addresses this gap by proposing a relationship between common ownership and firm performance that is moderated by the firm’s extant marketing capabilities and its relative marketing strategic emphasis. Our empirical approach employs data from over 43 million institutional holdings to develop a measure of common ownership and accounts for empirical issues like endogeneity and unobserved heterogeneity. The results document a positive relationship between common ownership and firm performance and provide some evidence that this effect is stronger for firms with lower marketing capabilities and a relative strategic emphasis towards R&D spending. These results suggest that public policymakers should consider the firms’ extant strategic marketing when assessing regulations on common ownership.     

Can formalization, complexity, and centralization influence knowledge performance?

Based on the theory of organizational design and on the theory of knowledge, this paper analyzes how the traditional variables which define a firm's organizational structure (formalization, complexity, and centralization) influence knowledge performance (the degree to which a firm generates knowledge internally and uses it to reach a competitive advantage). The paper tests three hypotheses using a sample of 164 large Spanish firms. The results show that organizational complexity and centralization exert a positive and a negative influence, respectively, on knowledge performance, which confirms the two hypotheses related to these variables. However, the analysis reveals no empirical evidence to confirm the hypothesis according to which formalization and knowledge performance have a positive relationship.     

Just about money? CEO satisfaction and firm performance in small family firms

This paper examines how family ownership and family ties influence the relative importance of economic and non-economic goals on the CEO’s satisfaction with the firm. Using a sample of small high-tech family and non-family firms, we show that the influence of past firm economic performance on CEO satisfaction is weaker in the case of CEOs leading a family firm. Our results also suggest that this influence becomes weaker as the family firm transitions into subsequent generations. However, contrary to our expectations, we were not able to find a differential effect of firm performance on CEO satisfaction between CEOs who belong to the controlling family and those who do not.     

Market-oriented institutional change and R&D investments: Do business groups enhance advantage?

Emerging market firms (EMFs) are increasingly relying on innovation to find their competitive advantage, but our understanding of how institutional change affects firm innovation has been limited. We analyzed Korean manufacturing firms from 1994 to 2006 to test the proposition that market-oriented institutional change in an emerging economy alleviates firms’ financing constraints and monitoring problems and improves the effectiveness of their innovation activities. Institutional evolution in the economy was found to affect Korean business groups and independent firms differently. Institutional change reduced the financing constraints on independent firms more than for business group affiliates in R&D investment. Independent firms, however, appeared less capable than group affiliates of translating the benefits of improved institutional environments into efficient R&D investment. This asymmetry may lead to a wider gap in the efficiency of R&D investment between business group affiliates and independent firms.     

Internationalisation choices of Polish firms during the post-socialism transition period: The role of institutional conditions at firm’s foundation

The purpose of this paper is to investigate how the home country radical change of institutional conditions influences the firm-level internationalisation process understood as exporting. In particular, we aim to broaden our understanding of how changing institutional conditions affect the internationalisation process of Polish firms founded in different institutional conditions; i.e. under the communist regime (before 1990), in the transition period (1990–2003), and in the post-transition period (2004 and later). We compare and contrast in each period three crucial aspects describing the internationalisation process: time to internationalisation, direction and degree of internationalisation. We find support for the assertion that the institutional conditions at a firm’s birth influence the internationalisation paths of emerging market firms in terms of speed, direction and degree of internationalisation. Firms founded either in the transition (1990–2003), or in the post-transition phase (2004 and later) are more likely to: (1) make the decision about internationalisation earlier in their life cycle, (2) enter developed markets, and (3) achieve a higher degree of internationalisation than firms founded under the communist regime (before 1990).     

Diehard or delicate? Violence and young firm performance in a developing country

Business Economics - The genesis and survival of new businesses is an important determinant of entrepreneurial dynamism. With the recent surge in security challenges, the issue of young...