Managing Corporate Networks from America to China

Multinational corporations (MNCs) are making a major contribution to China's economic development. This analysis examines how eight prominent American MNCs are handling the process of linking the management of their China joint ventures into their global structures. It looks at how the MNCs are addressing the tensions that arise between maintaining control in terms of their worldwide standards while attempting simultaneously to adapt to the complex and dynamic environment of China. The reconciliation of these requirements depends on a relatively few focal actors, who are located at critical interfaces within the MNCs' internal networks between the China joint ventures and the corporate level.     

The Capital Structure Puzzle: The Evidence Revisited

Since the formulation of the M&M propositions almost 50 years ago, financial economists have been debating whether there is such a thing as an optimal capital structure—a proportion of debt to equity that maximizes shareholder value. Some finance scholars have followed M&M in arguing that both capital structure and dividend policy are largely "irrelevant" in the sense that they have no significant, predictable effects on corporate market values. Another school of thought holds that corporate financing choices reflect an attempt by corporate managers to balance the tax shields and disciplinary benefits of greater debt against the costs of financial distress. Yet another theory says that companies do not have capital structure targets, but simply follow a financial "pecking order" in which retained earnings are preferred to outside financing, and debt is preferred to equity when outside funding is required.
In reviewing the evidence that has accumulated since M&M, the authors argue that taxes, bankruptcy (and other "contracting") costs, and information costs all appear to play an important role in corporate financing decisions. While much of the evidence is consistent with the argument that companies set target leverage ratios, there is also considerable support for the pecking order theory's contention that firms are willing to deviate widely from their targets for long periods of time. According to the authors, the key to reconciling the different theories—and thus to solving the capital structure puzzle—lies in achieving a better understanding of the relation between corporate financing stocks (the levels of debt and equity in relation to the target) and flows (or which security to issue at a particular time).     

Watersheds of success and failure: Policy options in face of gathering risks

Individuals and institutions often encounter thresholds of accumulated risks, involving discrete and decisive turning points toward success or failure. Binomial probabilities offer a way to model these situations and explain how an otherwise undistinguished event can combine with other, parallel developments to precipitate major discontinuous change.The paper begins with a numerical example to illustrate key parameters of the model. The model describes the probability of success for an undertaking which incurs a series of inherent opportunities and risks. The undertaking might be the completion of a hazardous mission, the accomplishment of a win-or-lose venture, the attainment of a Nobel Prize-winning research proof, or some other vindication of a prolonged struggle.The binomial model deals with all-or-nothing outcomes, rather than performance along a normal curve. The either/or definition of success and failure might seem limited to few situations, but it is argued that: (a) those situations are the most interesting and critical for decision-making; (b) they are characteristic of complex social systems ; and (c) historical trends are moving toward binomial mechanics of yes/no choices as opposed to normal curve outcomes along a smooth continuum.The quantitative example discussed in the paper reveals some counter-intuitive findings, which nevertheless help to explain some familiar patterns of abrupt change in the way people and institutions deal with increasingly complex environments. Specifically, the model shows how some activities apparantly favorable to a mission's success can simply present more things to go wrong, when the total combination of parallel activities is taken into account.The concluding section of the paper is addressed to policy implications. In particular, it deals with ways for individuals and institutions to avoid needless risks, absorb small failures, or choose more predictable environments, so that opportunities for exploratory risk-taking can be preserved without jeopardizing more fundamental goals or the overall viability of complex undertakings.     

Book Review Essay

Book reviewed in this article: Challenging capitalism on the urban terrain: Jaggi, M., Muller, R. and Schmid, S. Challenging capitalism on the urban terrain: Schecter, S. Challenging capitalism on the urban terrain: Wolf, M. and Osselin, J.     

Business Ethics and the Transitional Economy: A Tale of Two Modernities

The concept of the Transitional Economy denotes the problematic processes of change confronting nations wishing to achieve levels of economic development comparable with that of Western nations. Such an objective is problematic, as these nations may also be said to be in a state of transition. Globalization and E-commerce have necessitated a reconsideration of the nature of business activity and its implications for both society and the individual.Writers such as Gray (1998) warn against the "refashioning" of other nations in the image of the American free market. Business ethics can be seen as a symbolic expression of Beck's (1992) concern with the implications of Risk Society and the uncertainties arising from the realization that scientific, technological, and economic progress are not necessarily concomitant with social, cultural, and political progress. Locating business ethics within the theoretical context of Reflexive Modernity provides a means of evaluating the contribution that it can make to providing a critical forum for considering the ways in which business organisations are responding to concerns regarding business activity. (168)     

Affective and Normative Motives to Work Overtime in Asian Organizations: Four Cultural Orientations from Confucian Ethics

Asian workplaces are often characterized by cultures that require more overtime than other cultures. Although predictors for overtime work have been rigorously studied, it is still meaningful to investigate specific aspects of Eastern cultural values that stem from Confucian ethics and may influence overtime work among Asian employees. We suggest that four major Confucian orientations are positively associated with employees’ affective and normative motives, which in turn affect working overtime. This article extends management literature on the subjects of cultural ethics and workaholism. It also suggests how Eastern cultural values lead to working overtime. We hope that our research effort on Confucian cultural value and its associations with other managerial outcomes and theories is a small cornerstone that allows management researchers to explore interesting and meaningful ways to apply Confucian culture and orientations in the workplace.     

A multidimensional perspective of SME internationalization speed: The influence of entrepreneurial characteristics

This paper contributes to a multidimensional perspective on the speed of SME internationalization. It examines the influence of entrepreneurial characteristics – experience, rationales and innovation strategies – on multiple dimensions of internationalization speed. Findings from a sample of 180 SMEs show that earliness, speed of deepening, and speed of geographic diversification can be viewed as three different strategic alternatives and that each dimension is predicted by a different set of entrepreneurial antecedents. Earliness of internationalization is associated with entrepreneurs’ international business experience and their perception of opportunities abroad as well as preference for an innovation strategy characterized by ambidextrous innovation. Speed of deepening is related to entrepreneurs’ international business experience, their orientation towards differentiation vis-à-vis competitors, and commitment to innovation and a strategy focusing on exploration. These results indicate the importance of distinguishing between different forms of innovation. Speed of geographic diversification is predicted only by entrepreneurs’ orientation towards differentiation vis-à-vis competitors.     

Competition among Trading Venues: Information and Trading on Electronic Communications Networks

This paper explores the competition between two trading venues, Electronic Communication Networks (ECNs) and Nasdaq market makers. ECNs offer the advantages of anonymity and speed of execution, which attract informed traders. Thus, trades are more likely to occur on ECNs when information asymmetry is greater and when trading volume and stock‐return volatility are high. ECN trades have greater permanent price impacts and more private information is revealed through ECN trades than though market‐maker trades. However, ECN trades have higher ex ante trading costs because market makers can preference or internalize the less informed trades and offer them better executions.