International acquisitions and emerging market firms' performance—a structural contingency perspective

Entry modes have impact on firms' performance in international markets. Using an organizational structural contingency perspective, we assert that firms with mechanistic structure can enhance their performance in international markets if they choose acquisitions as an entry mode. Mechanistic structure limits organizations' learning capability, which can be managed through acquisitions but not through other entry modes such as joint ventures. For managing limitations associated with the poor knowledge absorption capability of mechanistically structured organizations, firms should not follow the standard integration procedures associated with acquisitions aiming to achieve economies of scale or scope. Rather, they should provide corporate parenting advantage to the newly acquired unit by (a) granting complete autonomy and (b) contributing required resources for future growth, thus treating the acquired business as a strategic business unit. Since mechanistic structures are more common in emerging markets, we explain our perspective using illustrative caselets from these markets.     

Corporate Social Responsibility and Its Impact on Firms’ Investment Policy, Organizational Structure, and Performance

This study examines the determinants of corporate social responsibility (CSR) and its implications on firms’ investment policy, organizational strategy, and performance. First, we find that firms with better performance, higher R&D intensity, better financial health, and firms in new economy industries are more likely to engage in CSR activities, while riskier firms are less likely to do so. We also find U-shaped relation between firm size and CSR, indicating that either very small or very large firms exhibit high levels of CSR strengths and concerns. Next, we find that firms’ CSR strengths relate favorably with their investments, organizational strategy, and performance, whereas CSR concerns and firm attributes are by and large negatively related. Using a 2SLS procedure, we verify that the CSR–performance relation is robust to corrections for endogeneity through reverse causation and/or biases introduced by time varying omitted variables. Finally, we find that the CSR–firm attributes relation is strengthened when the CEO’s incentives are below the sample median, suggesting that CSR participation is especially important when monetary incentives are lower than benchmark levels.     

Capital Structure and Mergers: Retrospective Evidence from a Natural Experiment

This analysis evaluates the impact of corporate debt in influencing mergers of local exchange companies in the United States telecommunications industry between 1988 and 2001. Firms’ financial structures significantly affect behavior and performance; yet no evidence has shown how firms’ financial structures influence their merger activities. The impact of corporate debt levels on the various mergers that took place during the merger wave in the sector is significantly negative for the first set of mergers carried out, and significantly negative, but with smaller impact, for the second set of mergers. The results support the idea that firms with high debt levels can be monitored carefully, precluding engagement in potentially-risky mergers so as to not engender negative financial outcomes.     

Behaviour‐Based and Outcome‐Based Control Systems: A Meta‐Analytic Study

Sales control systems are instruments used by firms to improve performance and other organizational outcomes. To understand their antecedents and consequences, this paper conducts a meta‐analysis based on 104 studies. The results showed significant relationships between behaviour‐ and outcome‐based control systems and the complexity of the products, bonuses, financial performance, sales innovation, organizational support and satisfaction with supervisors. The outcomes revealed that behaviour‐based control systems were the most effective mechanism in turbulent markets and for determining financial performance. However, outcome‐based control systems were the most efficient instrument for complex products.     

Organizational design: A contingency approach: A model for organic management design

For those firms that operate in a stable environment—an unchanging technology and a certain market—a mechanistic management system is efficient. A great many corporations, however, must have a flexible organizational structure, which can adapt to constant changes in technology and fluctuations in the market. These firms are often characterized by their organic approach to management design. In this article, the authors develop a model for organizational design based on the variables of internal needs and external conditions and illustrate their model with nationally known firms as examples. The model's quadrants are: high uncertainty/low integration; high uncertainty/high integration; high certainty/low integration; and high certainty/high integration.     

Effect of department structure on the organizational citizenship behavior–department effectiveness relationship

The purpose of this paper is to investigate how the variable of organizational structure is related to organizational citizenship behavior (OCB) and organizational effectiveness within an organizational setting at the department level. Survey data were analyzed from a sample of 101 firms in the U.S., though missing data leaves only 78 complete cases. To avoid common method bias, both supervisors and subordinates provide data for this study. Two competing models are examined: a moderated model versus a mediated model testing the impact of OCB on the structure-department effectiveness relationship. A strong mediated relationship is found while the moderated model is insignificant. Thus, the relationship between structure, measured on an organic–mechanistic scale, and departmental effectiveness is partly driven by OCB.     

Corporate environmental performance and financing decisions

We investigate the financing strategies of environmentally responsible firms to understand how they set target capital structures and make incremental financing decisions. Literature shows that firms with better environmental performance have lower risk and better access to financing. However, it is not obvious how these firms choose to finance their investments. Using an extensive data set of U.S. firms, we find that firms with superior environmental performance have significantly lower debt ratios and use mostly short‐term debt for temporary financing needs. In doing so, environmentally responsible firms are able to achieve more tax savings and experience lower costs of financial distress. Our results provide new empirical facts about environmental performance and financing decisions, and they help explain the observed relationship between environmental performance and economic performance.     

Environment–Flexibility Coalignment and Performance: An Analysis in Large versus Small Firms

This paper takes a wide-ranging transnational look, within the frame of he European Union, at the differences between large and small firms based on practices of flexibility. More specifically, the research aims to evaluate whether small firms form a homogeneous body in applying flexible practices as opposed to large firms, as well as observing the differential effects on performance when there are discrepancies in the coalignment levels between a firm's actual flexibility and that required by the environment. The hypotheses are tested using data from 417 European firms. The results reveal that (1) good coalignments between actual and required flexibility (flexibility fit) have a greater influence on business performance in the case of small firms; (2) there are significant differences between small and large firms as regards operative flexibility, strategic flexibility, financial flexibility (organizational slack), and performance. The large firms analyzed coalign their flexibility fit better in their various dimensions (structural, operative, and strategic); (3) the degree of metaflexibility can be greater among small firms, which represents a greater information processing capacity, thus enabling the flexibility fit to be constantly coaligned to changes in the environment. However, a greater metaflexibility is not immediately reflected in the flexibility fit; and (4) this greater flexibility fit among large firms can be favored by their greater financial flexibility.     

The Role of Corporate Value Clusters in Ethics, Social Responsibility, and Performance: A Study of Financial Professionals and Implications for the Financial Meltdown

This article delves into a potential mindset that may be responsible for the recent financial meltdown. Research relating to this mindset from different perspectives is reviewed. The findings from this literature review are used to create a conceptual framework for the empirical, ethical, and corporate social responsibility study of financial professionals. Data were collected from a survey of the professional membership of a large national association of financial professionals. This article reports the results of the analysis of data relative to the relationships among the four constructs—financial professionals’ perceived organizational value clusters, ethics, corporate social responsibility, and corporate performance. The findings indicate that organizational core values significantly affect corporate ethics, social responsibility, and financial performance. We propose that organizations in the financial industry can move toward being more ethical and socially responsible by adopting organic core values (e.g., democratic, open, trusting, enterprising, creative, stimulating) and moving away from mechanistic values (e.g., structured, regulated, procedural, authoritarian, closed, callous). We also found the adaptation of organic core values does not require the organization to suffer a loss in financial performance.     

Who benefits most? The effects of managerial assistance on high- versus low-performing small businesses

This study investigates the relationship between outside managerial assistance and small business performance using a conditional quantile regression approach. The model was tested using a sample of 902 ventures that received managerial or technical assistance from the U.S. Small Business Administration's Entrepreneurial Development Resource Partners. Results show that outside assistance for primary business functions, such as marketing strategy, promotional strategy, financial management and general management, is more effective for firms with lower levels of financial performance. Outside assistance for secondary business functions, such as human resources and obtaining capital, is likely to have a greater impact on firms in the middle- to upper-quantile levels. Based on the results, we propose that managerial outside assistance providers should employ different approaches for firms with lower versus higher levels of financial performance.     

Organizational Virtue and Stakeholder Interdependence: An Empirical Examination of Financial Intermediaries and IPO Firms

Organizational virtue orientation (OVO), an organizational-level construct, refers to the integrated set of beliefs and values that support ethical character traits and virtuous behaviors. To advance the study of organizational virtue, we examine OVO in firms making their initial public offerings (IPOs), with respect to key external stakeholders that serve as financial intermediaries (i.e., venture capital firms and underwriting banks). Drawing on stakeholder and resource dependence theories, we argue that mutual interdependencies occur between financial intermediaries and IPO firms such that venture capital firms’ ownership levels and underwriter reputation are positively associated with the selection of more virtuous IPO firms. We also argue for the moderating relationship of IPO firm age on these main relationships; since IPO firms have more history and information availability, less importance will be placed on OVO in the selection process. In support of our hypotheses, the results of this study suggest the organizational virtue of IPO firms influences the selection decisions of financial intermediaries by reflecting positively on these key stakeholders to improve legitimacy and reputation.     

Considering the Business in Business Ethics: An Exploratory Study of the Influence of Organizational Size and Structure on Individual Ethical Predispositions

This paper explores the relationship between organizational size, structure and the strength of organization members' ethical predispositions. It is hypothesized that individuals in smaller, more flexible, organic organizations will display stronger ethical predispositions. Survey results from 209 individuals across eleven organizations indicate that contrary to expectations, larger, more rigid, mechanistic structures were associated with higher levels of ethical formalism and utilitarianism. Implications of these findings are discussed.     

How do managers decide on internationalization processes? The role of organizational slack and performance feedback

This study draws on the behavioral theory of the firm to the postulate relationships between organizational slack and performance aspirations, and internationalization processes. Based on longitudinal data (2000–2008) from 772 publicly listed firms in Taiwan, the findings indicate that organizational slack significantly influences the internationalization processes. Specifically, firms with high organizational slack that have performance that falls below aspirations managers are more likely to exhibit (1) a rapid pace, (2) a wider scope, and (3) an irregular rhythm in their internationalization processes. In addition, we observed an interaction effect between performance feedback and different levels of slack on the internationalization processes.     

Does Social Performance Really Lead to Financial Performance? Accounting for Endogeneity

The empirical relationship between a firm’s social performance and its financial performance is still not well established in the literature. Despite more than 30 years of research and more than 100 empirical studies on the issue, the results are still mixed. We argue that the heterogeneous results found in previous studies are not due exclusively to problems related with the measurement instruments or the samples used. Instead, we posit that a more fundamental problem related with the endogeneity of social strategic decisions could be driving most of the empirical findings. We show that, using a panel data of 658 firms from 1991 to 2005, how some of the results found in previous research change, and some are even reversed when endogeneity is properly taken into account.     

Symbiotic ownership,cultural alignment,and firm performance: A test among international strategic alliances

Based on a sample of 61 international firms in China with industry symbiosis, we examine the effects of cultural alignment on firm performance. We first predict that symbiosis will have a negative effect on firm performance. After that, focusing on the most dimension of culture, i.e., collectivism/individualism, we also predict that in a society with a high collectivistic value, organizational collectivism will be positively correlated with firm performance because of its alignment with the prevailing societal culture. Finally, we predict that this cultural value should have a moderating effect on the relationship between symbiosis and performance. Data are collected from multiple sources to test these predictions. The results of the data analyses show the benefits of building a collectivistic organizational culture for firms with a high level of industry symbiosis.     

Corporate Social Performance, Stakeholder Orientation, and Organizational Moral Development

This article begins with an explanation of how moral development for organizations has parallels to Kohlberg's categorization of the levels of individual moral development. Then the levels of organizational moral development are integrated into the literature on corporate social performance by relating them to different stakeholder orientations. Finally, the authors propose a model of organizational moral development that emphasizes the role of top management in creating organizational processes that shape the organizational and institutional components of corporate social performance. This article represents one approach to linking the distinct streams of business ethics and business-and-society research into a more complete understanding of how managers and firms address complex ethical and social issues.     

Understanding the antecedents of collateral learning in new product alliances

Recognizing that strategic alliances represent an important means for developing knowledge in critical arenas such as new product development, the authors advance the notion of collateral learning that assesses knowledge acquisition internal to a firm in the alliance. To examine its antecedents, the authors build on the behavioral theory of the firm and propose strategic importance and performance vulnerability as the motivational components and organizational similarity and alliance experience as the awareness components advocated in the theory. Results from 133 alliance firms suggest that both the motivational and awareness components are important in influencing collateral learning in new product alliances. Specifically, to develop collateral learning, firms should have extensive alliance experience and an acknowledged stake in their alliance partners. The results also support the theorized U-shaped relationship between organizational similarity of the alliance partners and collateral learning. Thus, collateral learning is facilitated when organizations are either similar or dissimilar, while medium levels of organizational similarity facilitate collateral learning to a relatively lower extent. Although performance vulnerability is found to be associated negatively with collateral learning, extensive alliance experience can attenuate this negative effect.     

Organizational Structure and Performance in Dutch small Firms

The relationship between organizational structure and performance in small firms has received relatively limited attention over the last few decades. In understanding small firm performance this seems to be a serious omission. In this paper, we first present the rationale for including organizational structure in the analysis of small firm performance. Then, from the literature on organizational theory, we retrieve several dimensions that may be postulated to describe organizational structures of small firms. Based on the study of a stratified sample of 1411 Dutch small firms we show that nine structure stereotypes can be delineated. We further investigate the relevance of the empirical taxonomy by looking at the relationship with firm performance in terms of sales growth, profitability and innovativeness. Eventually, we conclude that organizational structure indeed matters and that it deserves to be taken into account in models and future analysis of small firm performance.     

Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance

This study investigates the moderating role of a country’s culture as an external contingency factor in the relationship between a firm’s environmental, social, and governance (ESG) performance and financial performance. Using ESG performance data of 4978 firms from 48 countries for 17 years, we argue that the financial return from engaging in ESG varies depending on the countries’ cultural aspects because stakeholder evaluations and appreciations for a firm’s ESG performance differ across nations. We find that a country that espouses a culture of high individualism or masculinity tends to appreciate and reflect on this more explicitly, strengthening the relationship between a firm’s ESG performance and financial performance. Contrastingly, in a country with a culture of high power distance or uncertainty avoidance, firms’ ESG efforts are less likely to be associated with financial performance. Our findings have important implications for multinational enterprises facing various cultural environments when dealing with heterogeneous stakeholder demands across countries.     

Reinforcing Ethical Decision Making Through Organizational Structure

In this paper I examine how the constituent elements of a firm's organizational structure affect the ethical behavior of workers. The formal features of organizations I examine are the compensation practices, performance and evaluation systems, and decision-making assignments. I argue that the formal organizational structure, which is distinguished from corporate culture, is necessary, though not sufficient, in solving ethical problems within firms. At best the formal structure should not undermine the ethical actions of workers. When combined with a strong culture, however, the organizational structure may be sufficient in promoting ethical conduct. While helpful, ethics training and corporate codes are neither necessary nor sufficient in promoting ethical behavior within firms.