Matching method to paradigm in strategy research: limitations of cross‐sectional analysis and some methodological alternatives

A central focus of empirical research in strategic management has been to understand the relationships associated with the structure–strategy–performance paradigm. To examine these relationships, investigators have relied extensively on cross‐sectional methods that embody the implicit assumption that model parameters are stable across firms and over time. Yet, many of the theoretical constructs used in strategic management have clear firm‐ and time‐specific components. Hence, it might be expected that the parameters of the relationships investigated empirically will vary across firms and over time. Whereas recent research has raised concerns about the use of cross‐sectional analysis when parameters vary over time, little attention has been given to the issue of parameter variability across firms. Given the focus of strategy researchers on firm‐level effects and the predominant reliance on cross‐sectional analysis, accounting for across‐firm variability is a significant methodological issue. Failure to account for such variability can lead to biased parameter estimates and incorrect inferences. This paper argues for the adoption of alternative methods that can overcome the limitations of a cross‐sectional analysis and it offers guidance on how researchers can proceed to use these alternative methods to explicitly incorporate or test for variation in model parameters across firms or over time. Copyright © 1999 John Wiley & Sons, Ltd.     

Corporate diversification: the impact of foreign competition,industry globalization,and product diversification

The globalization of markets and industries has fundamentally changed the competitive conditions facing firms. Yet, how globalization has influenced the international diversification strategies of firms is an issue largely overlooked in both the strategic management and international business literatures. This paper develops a theoretical framework to understand how industry globalization, foreign competition, and firm product diversification may influence a firm's choice of its degree and scope of international diversification. Utilizing a panel dataset of U.S. manufacturing firms for the period 1987–99, we provide the first empirical evidence that industry globalization and foreign-based competition are statistically significant factors explaining the degree and scope of international diversification by U.S. firms. Copyright © 2007 John Wiley & Sons, Ltd.     

STRATEGIC CONSEQUENCES OF EXECUTIVE SUCCESSION WITHIN DIVERSIFIED FIRMS

Systematic investigation of leaders and their influence on organizations has been a major area of research interest. In examining the upper echelon-organizational outcome linkage, researchers have come to focus on the issue of executive succession. This focus has been due in large part to an emerging theoretical perspective that managerial differences may explain much of the variance in organizational outcomes. The purpose of this study is to ascertain whether or not top management succession affects subsequent corporate strategy. This article extends previous research efforts by longitudinally examining the linkage between executive succession and the extent of corporate strategic change across a sample of Fortune 1000 diversified firms. The findings confirm that the nature of executive succession has substantial consequences for corporate strategy. Firms have a greater likelihood of experiencing significant changes in strategy when they choose successors from outside the organization; firms that select their key executives by promoting from within are more likely to experience significantly less change in their corporate strategy. The results of this longitudinal investigation of the strategic outcomes of succession have significant implications for those in a position to select successors to the executive ranks.     

Executive succession and strategic change in Japan

Scholars studying upper echelons have found that executive succession can serve as an important adaptation mechanism. The bulk of these findings, however, derive from market‐based governance settings, which raises an issue of contextual robustness. This study examines this issue by investigating the link between executive succession and strategic change in Japan, a context noted for relatively weak market‐based corporate governance and lack of board independence. We find a greater likelihood of strategic change after non‐routine executive succession, with the extent of change unaffected by firm performance. Routine succession in the case of a powerful prior president leads to less post‐succession strategic change. Copyright © 2014 John Wiley & Sons, Ltd.     

Firm performance,rent appropriation,and the strategic resource divestment capability

Dynamic capabilities manifest the organizational capacity to purposefully create or modify the firm's resource base. In this paper, we consider resource divestment an important firm‐level resource management capability that manifests a two‐step organizational change routine. Firms must first be motivated to engage in resource divestment, and then decide which resources should be ‘sold off.’ In exploring this firm‐level capability, we employ factor market theory to consider the ‘seller side’ of the market, and provide a useful framework for conceptualizing how firms generate competitive advantage through resource divestment. We test our model of the resource divestment capability with a dataset of professional baseball franchises during the period 1969–83. Copyright © 2007 John Wiley & Sons, Ltd.     

Executive succession as an antecedent to corporate restructuring

One of the most visible adjustments in company strategies in recent years was the dramatic increase in the level of corporate restructuring activity that took place during the 1980s. Strategic decisions that result in the realignment of firms with their environments are likely to be influenced by the composition of the top management team. This study found that firms experiencing non-routine executive succession events within the management team subsequently underwent more restructuring activity than did firms without non-routine executive turnover. These findings suggest that unexpected executive turnovers can significantly alter managerial perspectives within top teams and may thus provide an important mechanism by which firms adapt to their competitive environments. © 1995 by John Wiley & Sons, Inc.     

Stock market reaction to CEO certification: the signaling role of CEO background

As a direct result of the corporate scandals that started with Enron and led to general unrest in the financial markets, the Securities and Exchange Commission required chief executive officers (CEOs) and chief financial officers of large publicly traded companies to certify their financial statements. Using market signaling theory, we propose that attributes of the CEO send important signals to the investment community as to the credibility of the CEO certification and thus the quality of the firm's financial statements, which in turn impact the stock market reaction to the CEO certification. We find that a CEO's shareholdings and external directorships are positively related to the abnormal returns of CEO certification. Further, the stock market penalizes a firm with a CEO who is associated with the firm's prior financial restatement and rewards a firm with a CEO who is appointed after the firm's prior financial restatement. Copyright © 2009 John Wiley & Sons, Ltd.     

Holes at the top. Why CEO firings backfire

When a company does well, its CEO is showered with money and adulation. When it does poorly, the CEO gets the blame--and the boot. For better or worse, investors now view chief executives as the primary determinant of corporate performance. But the reality is that most companies perform no better after they dismiss their CEOs than they did in the years leading up to the dismissals. Worse, the organizational disruption created by a rushed firing can leave a company with deep and lasting scars. Far from being a silver bullet, the replacement of a CEO often amounts to little more than a self-inflicted wound. The blame for such poor results, the author argues, lies squarely with boards of directors. Boards often lack the strategic understanding of the business necessary to give due diligence to choosing a replacement CEO. Concern over restoring investor confidence quickly--rather than doing what's right for the company--drives the selection process. And all too often, companies continue to be dogged by the same old problems after the new CEOs come on board. But a good board can make a CEO replacement pay off if its members first develop a better understanding of the business context, worry less about pleasing the investment community and more about a replacement's strategic fit, and take an active role in overseeing the new CEO and the performance and direction of the company. In the long run, such approaches are likely to foster stability at the helm--making it less likely a company will have to fire its CEO in the first place.