Using cross-functional,cross-firm teams to co-create value: The role of financial measures

Increasingly, the involvement of representatives from all major business functions in cross-functional, cross-firm teams is being viewed as a means to develop and maintain profitable business-to-business relationships. However, if the measurements of the value co-created in these relationships with customers and suppliers do not incorporate the financial outcomes of joint cross-functional initiatives, managers can be led to make decisions that jeopardize the long-term profitability of the two firms. In this paper, the authors explore the differences in value co-creation when a company is linked to key customers and key suppliers through cross-functional teams and when it is not. Using a case study approach, the authors measured value co-creation in financial terms and describe how managers changed their behaviors toward customers and suppliers when they were able to compare the value that was being co-created in each relationship. In each pair of relationships, one involved cross-functional teams and the other did not. The results indicate that cross-functional, cross-firm involvement leads to increased value co-creation. The research suggests that marketing scholars and managers should emphasize the use of cross-functional teams that involve all major functions to manage relationships with key customers, and should incorporate financial measures in the evaluation of relationship performance.     

Relationship satisfaction: An overlooked marketing channel safeguard

Transaction specific investments (TSIs) are investments that a marketing channel firm makes to create value for a particular channel relationship. TSIs transform the relationship by creating barriers to exit or lock-in situations because the investing party cannot leave the relationship without incurring substantial costs. This situation may compel the investing party to engage in opportunism to recoup the value of the specific investments, particularly when they are not satisfied with the relationship. We argue, therefore, that relationship satisfaction may serve as an important safeguard when TSIs have been made. Further, we argue that monitoring ease will interact with the moderating effect of relationship satisfaction on the relationship between TSIs and opportunism. Data were collected from 296 hotel general managers and 37 hotel headquarters' field representatives in the U.S. and Canada to test these possibilities. We found that relationship satisfaction indeed serves as an important safeguard, particularly when the partner has difficulty in monitoring the firm.     

Beyond dichotomy: the curvilinear relationship between social responsibility and financial performance

A central and contentious debate in many literatures concerns the relationship between financial and social performance. We advance this debate by measuring the financial–social performance link mutual funds that practice socially responsible investing (SRI). SRI fund managers have an array of social screening strategies from which to choose. Prior studies have not addressed this heterogeneity within SRI funds. Combining modern portfolio and stakeholder theories, we hypothesize that the financial loss borne by an SRI fund due to poor diversification is offset as social screening intensifies because better‐managed and more stable firms are selected into its portfolio. We find support for this hypothesis through an empirical test on a panel of 61 SRI funds from 1972 to 2000. The results show that as the number of social screens used by an SRI fund increases, financial returns decline at first, but then rebound as the number of screens reaches a maximum. That is, we find a curvilinear relationship, suggesting that two long‐competing viewpoints may be complementary. Furthermore, we find that financial performance varies with the types of social screens used. Community relations screening increased financial performance, but environmental and labor relations screening decreased financial performance. Based on our results, we suggest that literatures addressing the link between financial and social performance move toward in‐depth examination of the merits of different social screening strategies, and away from the continuing debate on the financial merits of either being socially responsible or not. Copyright © 2006 John Wiley & Sons, Ltd.     

Does buyers' financial slack promote or inhibit suppliers' circular economy performance?

Extant research examining the link between slack resources and performance offers few insights into how buyer firms' financial slack influences suppliers' circular economy (CE) performance. We collect secondary data from 290 buyer-supplier dyads of listed firms in China during 2006–2018 from CSMAR database. Using panel data analysis, we find a nonlinear (U-shaped) relationship between them. In addition, some relationship-specific contextual factors, i.e., buyer power and technology capability, have positive moderating effects, while buyer-supplier geographical distance has negative moderating effects on the main U-shaped relationship. Our study contributes to the literature on the slack-performance debate confirming the CE performance effect of financial slack in the business-to-business (B2B) relationship.     

Tripartite role of communications in channel relationships: Mitigating exchange hazards,reducing opportunism,and curtailing its ill effects on relationship performance

Mitigating channel members' opportunism is critical for supplier firms to maintain superior channel relationships and sustain relationship performance. Research in marketing channels suggests that supplier-channel member communication is vital for reducing information asymmetry and developing relational bonds in channel relationships. Building on that, in this research, we integrate information asymmetry and relationship-based views to articulate how communication, directly and indirectly, influences channel members' opportunism and curtail its ill effects on relationship performance. Based on the matched data from 239 supplier-distributor dyads, we find that communications (instrumental and social) have tripartite effects on channel outcomes, i.e., a) it directly reduces channel members' opportunism, b) weakens (negatively moderate) the positive effects of exchange hazards (antecedents) on opportunism and c) curtail the ill effects of opportunism on relationship performance. Additionally, we find that instrumental and social communications can have nuanced effects on channel members' opportunism. We provide newer insight into the role of communications in managing channel outcomes and present important theoretical and managerial implications.     

Differential Potency of Factors Affecting Innovation Performance in Manufacturing and Services Firms in Australia

Whether or not industrialized nations are experiencing a fundamental shift from a manufacturing- to a service-based economy may be a matter of debate. However, the service sector is clearly growing at an explosive rate, particularly in comparison with manufacturing. With this in mind, we need to better understand how the successful development of new services differs from that of new products. Such understanding requires identifying the critical success factors for new service development (NSD), as well as contrasting them with the factors underlying successful new product development (NPD). Kwaku Atuahene-Gima describes the results of a study comparing the innovation activities of Australian services firms and manufacturers. The study explores managers' perceptions of the factors necessary for successful NSD and NPD. In addition to comparing the differing perceptions of managers of services firms and manufacturers, the study highlights implications of these differences for managers striving for improved NSD. Services and manufacturing firms focus on similar factors for improving innovation performance. However, the relative importance of those factors depends on the type of firm. The critical factor for services—the importance accorded to innovation activity in the firm's human resource strategy—ranks third in importance for manufacturers. Manufacturers focus primarily on product innovation advantage and quality. In contrast, service innovation advantage and quality ranks third in importance for service firms. Surprisingly, technology synergy is found to have a negative effect on new service performance. If a new service is a close fit with a firm's current technologies, competitors will likely be able to quickly imitate the new service. As a result, NSD efforts based on technology synergy will not provide a competitive advantage. Compared to manufacturers, successful service firms must place greater emphasis on the selection, development, and management of employees who work directly with the customer. Through effective self management, these contact personnel shape the quality of the customer relationship. In addition, their close contact and potentially long-term relationships with customers make such employees an important source of new ideas in the firm's NSD process. Such relationships also cast contact personnel in a make-or-break role in the launching of new services.     

Networks and the Decision to Persist with Underperforming R&D Projects

Drawing on aspiration level theory and the networks literature, this paper develops a model toward decision makers' persistence with underperforming R&D projects based on the perceived properties of their personal network. The assumption is that positive feedback from network partners motivates persistence, and that this effect is multiplied when the decision makers' network is larger and denser, when network ties are predominantly strong, and when communication frequency within the network is high. The model is tested by a field experiment and conjoint methodology. Analysis of 1632 persistence decisions nested within 51 scientists responsible for R&D projects reveals that more positive feedback enhances persistence of underperforming R&D projects, and that this effect becomes stronger with increasing network size, network density, and communication frequency. These findings extend the project management literature by focusing on the social environment of the decision maker as one so far neglected factor in empirical studies on persistence decisions. Moreover, this study is among the first to investigate contingency relationships between feedback received from network partners and network structure. Finally, while most studies have emphasized that individuals and organizations can profit from their engagements in social networks, this paper suggests a potential dark side of networks by showing that networks can encourage decision makers to persist with their investment in an underperforming—and potentially failing—project. These results can help project managers involved in networking activities to better understand the effects of these activities on their decision policies, and thus draw better and more accurate decisions. Second, this study provides insights into how organizational strategy with respect to dissemination of R&D results and involvement of the organization's R&D managers in the scientific community influences the persistence of underperforming R&D projects, and thereby the organization's R&D expenditures. This can assist top managers to design financial controls and allocate financial resources to managers of underperforming R&D projects in line with the organization's networking strategy.     

Investigating the Drivers of Innovation and New Product Success: A Comparison of Strategic Orientations*

The notion of producing innovations and achieving new product success has received a great deal of attention. Though many have investigated these effects in marketing and various fields within management, there has been little cross‐fertilization between fields of study to explain the basis for this superior performance. Though research has examined the resource‐based view (RBV) and market orientation individually, none has evaluated and compared their effect on firm innovation and new product success in one study. Furthermore, although empirical work has been conducted between market orientation and organizational learning, comparatively less research has been conducted to evaluate the relationship between organizational learning and the RBV to examine their combined effects on a firm's ability to innovate and succeed. Subsequently, the purpose of the present article is to investigate whether a focus on the customer (i.e., market orientation) or the firm (i.e., RBV) will drive the ability to (1) innovate within the firm and (2) succeed in terms of new product success, financial performance, market share, and customer value. The present article examines the relationship between organizational learning and the RBV and market orientation. It presents an empirically testable framework that investigates the relationship that RBV and market orientation have with performance outcomes. Data were collected from 249 senior executives. LISREL was applied to evaluate the relationships. Confirmatory factor analysis and related techniques were applied to assess the robustness of the measures used. Findings show that organizational learning is strongly associated with market orientation, which in turn impacts various performance outcomes including customer value. The RBV had a significant relationship with new product success. These results suggest that managers seeking innovation and new product success should focus less on the provision of customer value. Instead they should look toward developing their resources within the firm, including investing in human resources, to ultimately provide value to the firm. Findings indicate that this unique offering—innovations—will have an indirect effect on customer value and financial performance. In contrast, those in pursuit of positive financial performance and customer value should focus on the development of market orientation. Even though this will not necessarily lead to the development of innovative processes and new product success according to the present study, this approach may lead to a greater market share in the long term. This article reviews theoretical and managerial implications in more depth, providing an impetus for further research.     

Managers' compassionate goals,innovation, and firm performance: an examination of mediating processes,and boundary conditions in small- and medium-sized enterprises

This study aims to examine the relationships of managers' compassionate goals with innovation and performance in small- and medium-sized enterprises (SMEs). By integrating social exchange theory with social information processing theory, we hypothesize a serial mediation model in which organizational cooperation and firm innovation sequentially mediate a positive relationship between managers' compassionate goals and firm performance. However, we predict that this positive indirect effect would occur only when managers have low self-image goals and there is a high innovation-supportive work environment. Based on survey data from a sample of 116 SMEs in France, our results provide support for our predictions. This study contributes to the literature by disclosing the mechanisms and boundary conditions of the relationship of managers' compassionate goals with SMEs' innovation and performance. Theoretical and managerial implications of this study are discussed.     

Transaction Cost, Social Capital and Firms' Synergy Creation in Chinese Business Networks: An Integrative Approach

Overseas Chinese business networks have been a powerful growth engine propelling local economies in Southeast Asia and the Greater China region. However, relatively little research has been conducted on the relationship between social capital and a firm's synergy creation in overseas Chinese business networks. To narrow this knowledge gap, this study adopts an integrative approach drawing on two complementary theories of transaction cost economics (TCE) and social capital to investigate how a firm creates synergy in overseas Chinese business networks. A multiple regression method was used to test hypotheses. The results indicate that repeat transactions and close ties with government offices and financial institutions contributed positively towards a firm's synergy creation while other variables such as trust, transaction uncertainty and information sharing did not show any significant relationship with synergy creation. Data from 108 Hong Kong-based Chinese manufacturing firms provide evidence that the integrative approach is rather effective in studying a firm's synergy creation in the context of interorganisational relationships.     

WEALTH CREATION AND BID RESISTANCE IN U.K. TAKEOVER BIDS

In this paper we investigate the determinants of, and relationship between, wealth creation and bid resistance for a sample of 178 successful takeover bids in the U.K. Within the context of an event study approach we test a range of hypotheses against a background that recognizes the existence of agency conflict and the role of corporate governance mechanisms designed to mitigate its effect. The results obtained are interpreted within the context of the U.K. corporate environment. We find that wealth creation and bid resistance are mutually dependent on each other. We find evidence suggesting the presence of managerial and financial synergy but the absence of operational synergy. Our results also suggest that there is some conflict between managers and shareholders but that significant monitoring is exercised by the particular governance mechanisms we investigate. © 1997 by John Wiley & Sons, Ltd.     

Enhancing Consumers' Affection for a Brand Using Product Design

Product design is an integral component of a brand and an important driver of brand equity. For the brand, product design is an important tool for driving differentiation, creating value for both the consumer and the firm, driving consumer preferences, and creating a sustainable competitive advantage. At the firm level, the importance of investing in design has been substantiated by studies that suggest firms capable of creating innovative design and providing superior consumer value perform better in the marketplace. Thus, product design clearly presents an important area of research for those studying and managing brands. In this context, the goal of this research is to explain the brand‐level affective outcomes that product‐level design features can create. This paper develops a conceptual framework and hypotheses that theoretically connect design‐based values, at the product level, to affective brand‐level relational outcomes with the brand. The drivers of product affection include social value, altruistic value, functional value, emotional value, and economic value. Analogous to “firm affection,” the paper postulates a brand affection construct that is defined as the passion and pride that a consumer feels about owning a brand. Using syndicated product‐level data from the automotive industry collected from a national sample of consumers, 712 useable consumer/product observations of 30 small vehicles are employed in the analysis. A confirmatory factor analysis and structural equation model are developed to test the conceptual model. This research finds that the social value and emotional value that a design provides to consumers have a greater effect on brand affection than purely transactional values, such as functional value or economic value. This research contributes to the literature by providing evidence that product design‐related values are multifaceted and can contribute to relational outcomes, such as brand affection. It contributes to practice by highlighting the means by which design can be used as a strategic tool to create a sustainable long‐lasting relationship with the consumer, and provides managers with a framework to assess the impact of design‐based values on long‐term relationship‐based outcomes. The results provide new insights about how consumers' perceptions of the value of product design at the product level can help create enduring relationships with brands.     

Creating value in business relationships: The role of sales

Understanding the creation of value in business relationships has been a long-standing goal of researchers and managers alike. By adopting a relational perspective, recent research on business relationships has made much progress in understanding value-creating processes. As the sales function is thought to be a pivotal part of the value-creating processes in business relationships, the evolving view on creating relationship value clearly has implications for our understanding of the role of sales in these processes. In contrast to its importance, the question of how the sales function contributes to creating value in business relationships has been largely neglected in extant literature. The objective of our paper is to answer this question by systematically linking the relational value creating process to the sales function's content. Interpreting value creation as interaction process, we identify four features of value-creating processes in business relationships suggested in recent research (i.e., jointness, balanced initiative, interacted value, and socio-cognitive construction) and, based on these, outline a framework that is used to define a set of tasks that are key to creating value in business relationships and hence become critical for sales in its hitherto neglected role as co-creator of relationship value. We illustrate the various tasks of this new role of sales with data from 43 interviews with sales managers and salespeople. Along with related normative recommendations in extant literature, the interviews provide support for the validity and relevance of our framework for understanding the role of sales in creating relationship value. This framework puts forward a much-needed first effort towards a theory of sales' role in creating relationship value and offers several opportunities for future research.     

Real options and real value: the role of employee incentives to make specific knowledge investments

Real options reasoning emphasizes the strategic value of making flexible investments in a turbulent environment. Employees' investments in specific human capital are often critical to the success of a real option project, but the very flexibility that allows a firm to change course in response to new information also affects employees' incentives to make such specific human capital investments. We develop a model of real option investment that explicitly incorporates the role of employee incentives. The model suggests that the effect of investing in a real option project on employee incentives may be positive, further increasing the value of the project, or negative, sometimes more than offsetting the benefit of flexibility and resulting in reduced project value. Therefore, firms and managers should take into consideration the role of employee incentives when applying real options logic to investment decision making. Copyright © 2008 John Wiley & Sons, Ltd.     

How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk

Research summary: This article explores the relationship between corporate social irresponsibility (CSI) and financial risk. We posit that media coverage of CSI generates risk by providing conditions that increase the potential for stakeholder sanctions. Through analyzing an international panel of 539 firms during 2008–2013, we find that firms receiving higher CSI coverage face higher financial risk. We show that the reach of the reporting media outlet is a critical condition for this relationship. Once the outlet has a high reach, the severity of CSI coverage is a boundary condition that further reinforces the effect. Our findings complement existing theory about the risk‐mitigating effect of corporate social responsibility by illuminating the risk‐generating effect of CSI coverage. For executives, these insights suggest complementary strategies for corporate risk management. Managerial summary: This article examines the effect of negative news on financial risk. It shows that negative media articles regarding environmental, social, and governance (ESG) issues increase a firm's credit risk. It also provides a detailed analysis of the impact of an article's reach and severity, i.e., how many readers are exposed to the article and how harshly it criticizes the firm. The results allow to quantitatively assess the risk that emanates from negative ESG news. For executives, three strategies are derived for limiting a firm's exposure to this risk: balancing corporate social responsibility programs with operational safety programs, reporting suboptimal environmental and social performance transparently and proactively, and avoiding acquisition targets and markets with a legacy of negative news. Copyright © 2017 John Wiley & Sons, Ltd.     

Whether and when do alliance terminations pay off?

Engaging in multiple strategic alliances, a firm forms an alliance portfolio. While a larger alliance portfolio signals investors a firm's ability to exploit new opportunities and improve financial performance, having multiple alliances may also undermine financial performance due to a firm's limited ability to effectively manage these alliances. Announcing an alliance termination, a firm signals an intention to increase the effectiveness of a larger alliance portfolio. This article examines the extent to which alliance termination announcements create value for firms with multiple alliances. Building on the resource-based view of the firm and organizational learning literature, the paper hypothesizes a U-shaped relationship between alliance portfolio size and a firm's cumulative abnormal stock return following an alliance termination announcement. This effect is moderated by the amount of a firm's alternative resources and partner-specific experience that affect its ability to effectively manage multiple alliances. The results show that alliance termination announcements create firm value when an alliance portfolio is large.     

Synergy,environmental context,and new product performance: A review based on manufacturing firms

This study adopts a meta-analytic approach to review the effects of technology synergy, marketing synergy and environmental context on new product performance by aggregating the empirical evidence documented in studies published from 1979 to 2011. Based on this aggregation, the results from a structural equation analysis show that (a) increasing technology and marketing synergies improves new product performance and the performance effect of marketing synergy is stronger than that of technology synergy; (b) increasing technology synergy enhances product advantage, which increases new product performance, whereas increasing marketing synergy does not; (c) increasing technology and marketing synergies may hinder product innovativeness; and (d) improving product innovativeness increases new product performance through product advantage. These findings suggest that ignoring the intermediary roles of product advantage and innovativeness may lead to an incomplete understanding of the relationships among technology and marketing synergies, environmental context, and new product performance. The results also demonstrate that technological turbulence affects new product performance through product innovativeness and advantage; in contrast, market intensity has a direct effect on new product performance. Future studies can examine the relationships among synergy, product effectiveness, and new product performance by constructing a mediated moderation or moderated mediation framework based on the environmental context.     

The power of emotional value: Moderating customer orientation effect in professional business services relationships

Just recently, the literature has established the existence of a dark side with regard to customer orientation (CO) in terms of sales performance. However, no clear position is presented about the possible dark side of CO when it comes to B2B relational outcomes, preventing managers from knowing when to accentuate/suppress CO activities. The aim of this study is to examine the relational consequences of suppliers' CO seen through the customers' lenses, and to investigate the moderating role of perceived emotional value in a professional service relationship context. A conceptual model anchored in value and relationship marketing theories is tested on a sample of 226 professional service firms' business customers, using the PROCESS routine. The study finds that perceived CO is related to satisfaction with the relationship and with relationship performance in an inverted U-shaped form, while satisfaction is positively related to relationship performance. We show that, although preferring to receive CO from their supplier, customers might want a relationship that is not as intense/comprehensive as the one that the supplier aims to achieve. The study unfolds emotional value as a moderating mechanism that can prevent the diminishing effect of CO activities.     

Measuring intangible value in business-to-business buyer-seller relationships: An intellectual capital perspective

The value that resides in a firm's relationships has both tangible and intangible aspects and both need to be developed and managed carefully. Marketing managers need to be able to understand these dimensions of value to manage them and to argue for their share of the firm's resources to effectively develop the value of the firm's relationships. This paper describes a study that adds to current knowledge of relationship value by testing a hypothesized model of the intangible part of the value that is manifested in buyer-seller relationships and by developing a set of scales to measure the hypothesized dimensions. The focus of the research, which synthesizes a conceptual framework from the intellectual capital literature, is on business-to-business situations and on the value of the relationship to the seller, rather than to the buyer. The analysis of data from a survey of relevant managers, using structural equation modeling techniques, gives support to the model and scales.     

How can new ventures command a price premium with innovations in emerging markets?

Successful financing is critical for new ventures' survival and future sustainable growth. With the unique institutional characteristics, it is especially difficult for new ventures in emerging economies to transform innovation capital into favorable investor responses (such as willingness-to-pay, WTP) during the process of initial public offerings (IPOs). Based on the patent records from a unique sample of Chinese firms, we demonstrate that new ventures can successfully leverage innovation for higher WTP in IPOs contingent on the existence of venture capital ownership and reputable underwriter endorsements. These financial intermediates can send inside-out and outside-in signals to market investors to reduce information asymmetry. Our study contributes to research on the valuation of innovations in IPOs. We also provide practical implications to managers and investors of new ventures. We provide implication to managers and investors of new ventures on how to increase the benefits from innovations, which fosters national economic growth and social welfare.