Profitability,uncertainty, and firm size

This paper examines the connections between variations in profit and loss rates among firms in small-firm and large-firm size classes as reflections of uncertainty. We find that, within industries, such variations are particularly great for firms in small-firm size classes, leading to operating policies for small firms best characterized as entrepreneurial. Large firms, in contrast, faced with less uncertainty in earning profit, appear to adopt policies that manifest an emphasis on strategic planning.The authors appreciate the helpful comments of John C. Woods, Bruce D. Philips, and anonymous referees on an earlier version of this paper. Data used in this study were developed under contract SBA-9216-AER-85 with the U.S. Small Business Administration. The authors alone are responsible for the results presented.     

Analysing the link between export intensity,innovation and firm size in a science-based industry

The aim of this paper is to contribute to a better understanding of the relationship between export intensity, innovation and size in a particular technological setting: a science-based industry. Using a sample of 121 firms in the French biotechnology industry, we have found that firm size is not a determinant for innovation or for export intensity. However, the results show a positive and significant link between innovation and export intensity. Our findings open a new agenda for policy-makers when interpreting how they should promote innovation and exports in science-based firms.     

Exports,firm size,and firm dynamics

This paper explores the relationships between exports, firm size, and firm dynamics. It is based on a unique longitudinal data set collected at the establishment level, covering some 7000 manufacturing German firms. We present stylized facts on exports and firm size, showing that the probability that a firm is an exporter increases with firm size; however, there are many successful exporters among small firms, and non-exporters among larger firms, too, while most of the exports are from the top size groups of firms. An econometric study shows a picture that is consistent with theoretical considerations: The impact of firm size on exports is positive but decreasing, while human capital intensity, domestic market share, and advanced technology all have a positive influence on the export performance of a firm. Firm growth and export performance are positively related, as is expected from a model of a price-discriminating monopolist.     

Innovation,firm size,and firm age

This paper uses a new data set on innovation output to assess the degree to which the level of innovation in manufacturing firms is influenced by firm size and firm age. Indicators of innovation output used are the number of new products introduced as a function of firm sales and the proportion of firm sales obtained from products first introduced in the previous five years. While the evidence is mixed, the results tend to indicate that it is possible to separate the effects of age and size in assessing the level of innovation. Both firm size and firm age tend to be inversely related to innovative output.     

Resources of the firm, Russian high-technology startups, and firm growth

Russia possessed many world-class technologies prior to the break up of the Soviet Union. Entrepreneurial endeavors resulted from this technological ability as market forces encouraged individuals to leave the large state enterprises that produced those technologies. Founding characteristics of the firm impact the resources that are available to the startup firm. This study investigates the extent to which founding factors in Russia help high-technology firms to prosper. It was found that the team establishing the business mitigated the liability of newness. However, in contrast to the US, the culture of Russia does not produce negative results if the founding team grows very large. Additionally, it was shown that firms that pursued more technological products and enter the market later performed best.     

Learning, experience, and firm size

The process of producer's learning by experience is characterized as a parameter-adaptive process, rather than an ad hoc specification, that includes the accumulated volume of output in the firm's cost function. Deviations from the neoclassical optimization conditions can be decomposed into learning and production variation components. In a given time period, the production level may be greater or less than the level associated with price equals marginal cost, depending on the learning value and the direction of the marginal risk of production. The uncertainty-based measure of elasticity of scale is presented and indicates that the traditional view that the presence of uncertainty can discourage the managerial decision to expand is restrictive.     

Risk,uncertainty, and heuristics

Nearly a century ago, Frank Knight famously distinguished between risk and uncertainty with respect to the nature of decisions made in a business enterprise. He associated generating economic profit with making entrepreneurial decisions in the face of fundamental uncertainties. This uncertainty is complex because it cannot be reliably hedged unless it is reducible to risk. In making sense of uncertainty, the mathematics of probability that is used for risk calculations may lose relevance. Fast-and-frugal heuristics, on the other hand, provide robust strategies that can perform well under uncertainty. The present paper describes the structure and nature of such heuristics and provides conditions under which each class of heuristics performs successfully. Dealing with uncertainty requires knowledge but not necessarily an exhaustive use of information. In many business situations, effective heuristic decision-making deliberately ignores information and hence uses fewer resources. In an uncertain world, less often proves to be more.     

困难、机遇、优势

今天,我想谈三个观点。第一、根据我们几年研究下来,2006年是上海商业发展中最困难的一年。商业的产业地位被弱化现象已充分显露,这包括政府管理部门的弱化,上海商业在整个上海经济中的地位被弱化,企业运行质量发生偏差、尤其在超商板块,前几年处在领头羊地位已被外省市内资连锁企业赶超。     

Currency depreciations, financial transfers, and firm heterogeneity

The present paper investigates five episodes of currency collapse from the perspective of non-financial firms operating in Argentina, Brazil and Mexico. We focus on two aspects: wealth and income transfers from borrowing firms to lenders and firm heterogeneity. At the firm level, we find that the currency collapses are preceded and associated with sharply rising financial transfers from firms to lenders. The debt and income structure is central in explaining the asymmetric firm dynamics. Most affected are firms with high levels of unhedged foreign-currency debt. At the country level, Argentina, Brazil, and Mexico display three contrasting examples. Argentina has a large currency mismatch, Brazil balances the currency denomination of debt and income (natural hedge), and Mexico occupies an intermediate position.     

Inflation,uncertainty, and monetary policy

Low inflation likely reflects factors whose influence should fade over time. But many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent. My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability. How should policy be formulated in the face of such significant uncertainties? In my view, it strengthens the case for a gradual pace of adjustment. But we should also be wary of moving too gradually. It would be imprudent to keep monetary policy on hold until inflation is back to 2%.     

Geographic diversification,product diversification,and firm cash flow volatility: the moderating effect of firm dynamic capability

Literature is largely inconclusive on the effects of geographic diversification and production diversification on firm performance. This impedes the understanding of diversifications and hinders the decision-making process in global practice. Further, performance indicators in the literature are mainly constrained to the returns aspect of the firm. Risk side factors such as the volatility of cash flow are largely neglected. This paper explores the inconclusive pattern of diversifications from the perspectives proposed by resource-based theories and dynamic capability theories. It examines how firm capability dichotomizes the relationships between diversifications and firm cash flow volatility. Results confirm that capability the roles of both geographic and product diversifications. A high capability is a necessary condition by which diversification strategies by themselves, or their joint effort, can benefit the firm.     

Heterogeneous ability,career choice and firm size

Entrepreneurial ability is the ability to innovate new products. Managerial ability is the ability to maintain the profitability of current operations. By assuming heterogeneous abilities of acquiring and maintaining an endogenous number of production processes, the model of this paper predicts a distribution of firm sizes, a diversity in the composition of R&D and chosen career. Firms conduct product improvement if and only if managerial ability is high relative to entrepreneurial ability. Individuals choose careers as either innovative entrepreneurs, managerial entrepreneurs or salaried employees depending on their abilities. An individual's entrepreneurial ability may not be high enough to choose a career as an innovative entrepreneur, but if managerial ability is sufficiently high, then a career as a managerial entrepreneur is optimal. Managerial ability has an effect on expected firm size if and only if the individual is a managerial entrepreneur.This material is based upon work supported by the Research Committee of the Rutgers Graduate School of Management. I wish to thank two anonymous referees for helpful suggestions.     

Market orientation, knowledge-related resources and firm performance

Based upon new perspectives to explain superior business performance, an integrative conceptual model that links these different explanations of superior performance is presented, highlighting the role of knowledge-related resources as key antecedents of the continuous creation of competitive advantages (Day 1994, Day George S. The capabilities of market-driven organizations. J Mark 1994a, 58 [October]: 37-52., Day George S. Continuous learning about markets. Calif Manage Rev 1994b, 36 [Summer]: 9-31., Hunt and Morgan, 1995, Hunt Shelby D., Morgan Robert M. The comparative advantage theory of competition. J Mark 1995; 59 [April]: 1-15). An empirical test of this conceptual model is conducted with a Chilean sample of publicly traded firms, using structural equations modeling. The results show a significant impact of: market orientation, market sensing and innovativeness (among other knowledge-related resources) on superior performance, thus providing support for the original ideas of Drucker (1954) [Drucker Peter F. The practice of management. New York: Harper and Row Publishers, 1954.] and Schumpeter (1934), and for the dynamic evolutionary approaches to strategy (Dickson, 1992, Dickson Peter R. Toward a theory of competitive rationality. J Mark 1992; 56: 69-83., Dicskson, 1996, Dickson Peter R. The static and dynamic mechanics of competition: a comment on Hunt and Morgan's comparative advantage theory. J Mark 1996; 60: 102-106.; Hill and Deeds, 1996, Hill C.W., Deeds D.L. The importance of industry structure for the determination of firm profitability: a Neo-Austrian perspective. J Manag Stud 1996; 33: 429-451.).     

Sub-national institutions,firm strategies,and firm performance: A multilevel study of private manufacturing firms in Vietnam

Some private small and medium sized enterprises (SMEs) in transition economies have actively internationalized. This decision needs to accommodate institutional conditions that vary, not only between countries, but also within an individual country. Our paper examines the relationship between export strategy and firm performance, and the extent that sub-national institutional factors moderate this relationship. Using multilevel data analysis techniques with a sample of private manufacturing firms in Vietnam, we find institutional factors moderate export strategy and firm performance's relationship.     

Analyst coverage,corporate social responsibility,and firm risk

This article examines the empirical association between analyst coverage and corporate social responsibility (CSR) by investigating their simultaneous and causal effects, and its joint effects of CSR engagement and analyst coverage on firm risk. We find a positive association between the level and change of CSR engagement and the level and change of analyst coverage after considering simultaneity and causality. Based on the first‐difference approach, we further find that the change in analyst following from the previous year affects the change in CSR in the current period, whereas the change in CSR from the previous period does not influence the change in analyst following in the current period. Furthermore, we find that the change in CSR engagement as well as the interaction effect of changes in CSR and analyst coverage reduces the change of firm risk. When we examine the CSR strengths and concerns separately, analyst following does not significantly influence firms’ CSR strength but CSR concern activities decreases significantly as firms have more analyst followings. We further find the mediating role of financial analysts between CSR concerns (but not CSR strengths) and firm risk. We maintain that analysts provide indirect but additional social pressure to the firms to eventually reduce their irresponsible activities. Taken together, we interpret these results to support the stakeholder theory‐based conflict‐resolution explanation that considers CSR engagement as a vehicle to reduce conflicts of interest between managers and noninvesting stakeholders but not the overinvestment hypothesis that views CSR as a waste of valuable resources at the cost of shareholders.     

Top manager characteristics,agglomeration economies and firm performance

The role of agglomeration economies in firm performance has been extensively studied. Existing studies, however, almost invariably focus on firm, industry or city characteristics to examine the performance-enhancing effects of agglomeration while overlooking the attributes of the top executives involved in shaping corporate practices. In this study, we change that focus by empirically examining the moderating role of two particular top manager characteristics (age and educational level) on the agglomeration economies–firm performance relationship. Using a top manager-firm matched panel data set, we find that top manager age rather than educational level helps firms to realize the potential benefits of agglomeration. This paper contributes to the agglomeration literature by stating the importance of individual top managers.     

Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities,underwriters, and venture capitalists

This paper studies the combined effect of affiliation with prestigious universities, underwriters, and venture capitalists on the valuation of biotech ventures at IPO and their post-IPO performance. We argue that affiliation to a prestigious university provides the affiliated firm with a quality signal in the scientific domain. The pure quality signaling effect of the affiliation is isolated from the substantive benefits it provides by performing a difference-in-difference approach based on the scientific reputation of scientists in firms' upper echelons. The signal is stronger the weaker is the scientific reputation of scientists of the focal IPO-firm and is additive to those provided by prestigious venture capitalists and underwriters. Results for a sample of 254 European biotech ventures that went through an IPO between 1990 and 2009 confirm our predictions.     

Knowledge-flows and firm performance

This study advances the understanding of how knowledge-flows impact on firm performance. Incorporating recent research on the knowledge-based view of the firm, this paper tests and extends the knowledge flow model by using more fine-grained measures and by proposing a nonlinear effect. This study tests the predicted effects in a longitudinal research design with data on a global sample of public biopharmaceutical firms. The results largely support the expectation that knowledge-flows largely have a nonlinear impact on firm performance. However, one traditional measure of knowledge-flows, geographical location, turns out to have no significant influence in the extended model. The paper explains the implications of these findings for practice and research.