Non-GAAP earnings and board independence

We examine the association between board independence and the characteristics of non-GAAP earnings. Our results suggest that companies with less independent boards are more likely to opportunistically exclude recurring items from non-GAAP earnings. Specifically, we find that exclusions from non-GAAP earnings have a greater association with future GAAP earnings and operating earnings when boards contain proportionally fewer independent directors. Consistent with the association between board independence and the permanence of non-GAAP exclusions reflecting opportunism rather than the economics of the firm, we find that the association declines following Regulation G and that managers appear to use exclusions to meet earnings targets prior to selling their shares more often in firms with fewer independent board members. Overall, our results suggest that board independence is positively associated with the quality of non-GAAP earnings.     

How can organizations use wikis for innovation?

Wikis were first developed over 15 years ago. Research has shown that organizational or corporate wikis are sustainable and can be beneficial to organizations particularly in improving work processes, collaboration and knowledge management. However, there has been little research done to show how organizations can use wikis to support innovation processes. To bridge this gap, this paper explores how wikis can be used in different stages of innovation. We review existing literature as well as analyze case studies of wikis deployed in four organizations in order to highlight how wikis can be used to address challenges of knowledge management and collaboration in different stages of innovation from idea generation to commercialization. In particular, we propose a model that explains how wikis require a clear purpose for their use, a culture of collaboration, and integration within a formal innovation process.     

Research in Cognition and Strategy: Reflections on Two Decades of Progress and a Look to the Future

This review of cognition in strategic management research takes as its starting point the appreciation of the seminal paper, ‘Competitive groups as cognitive communities: the case of Scottish knitwear manufacturers’, by Porac, Thomas and Baden‐Fuller on cognitive categorization of competition, published in the Journal of Management Studies only 20 years ago. In this paper, I reflect on the context in which their paper emerged, the impact it has had, and the future paths that research on cognition in strategy might take. In doing so, I highlight the challenges associated with establishing cognition as a legitimate factor in strategic management (alongside the traditional explanations of capabilities and incentives) and of showing the causal relationship between cognition and strategic outcomes. Subsequent work in cognition explored the dynamic relationship between cognition, capabilities, and incentives, and, in process models of framing, linked cognition with political action. Rather than managerial cognition becoming its own independent field, cognitive concepts have diffused throughout work in many different managerial fields, leading to a proliferation of terms, concepts, and approaches. I conclude by exploring some of the paths that research in cognition and strategy is taking in the present day – particularly those involving studies of the construction of markets and categories, each of which are themes that the work by Porac, Thomas and Baden‐Fuller brought to our attention.     

Do environmental audits improve long-term compliance? Evidence from manufacturing facilities in Michigan

Using a unique facility-level dataset from Michigan, we examine the effect of environmental auditing on manufacturing facilities’ long-term compliance with U.S. hazardous waste regulations. We also investigate the factors that affect facilities’ decisions to conduct environmental audits and whether auditing in turn affects the probability of regulatory inspections. We account for the potential endogeneity of our audit measure and the censoring of our compliance measure using a censored trivariate probit, which we estimate using simulated maximum likelihood. We find that larger facilities and those subject to more stringent regulations are more likely to audit; facilities with poor compliance records are less likely to audit. However, we find no significant long-run impact of auditing on the probability of a regulatory inspection or compliance among these Michigan manufacturing facilities.     

French versus American consumers’ attachment of value to a product in a common consumption context: A cross-national comparison

This article investigates the influence of French and American national culture on consumer perceptions of productrelated value. Employing means-end theory, hypotheses are developed to predict how French versus American national culture influences the content and structure of consumer value hierachies. Hypotheses are tested using data from in-depth laddering interviews with a matched sample of French and American consumers. The findings support the contention that differences exist in the meaning and relative importance of consumer value hierarchy dimensions across the two national cultures. Furthermore, the analysis suggests that consumption consequences are especially culturally sensitive. Jeffrey W. Overby (joverby@cob.fsu.edu) is an assistant professor of marketing and international business in the Department of Marketing at Florida State University. He holds a doctorate from the University of Tennessee, Knoxville. His research interests focus on customer value determination, service quality, and cross-cultural marketing issues. His work has appeared inInternational Marketing Review and numerous domestic and international conferences, includingProceeding of the 2001 Academy of Marketing Science Annual Conference andProceeding of the Tenth Biennial World Marketing Conference. Sarah Fisher Gardial (sgardial@utk.edu) is an associate professor and associate dean for academic programs in the College of Business Administration at the University of Tennessee. She holds a doctorate from the University of Houston. Her research interests focus on customer value and satisfaction, consumer decision making and information processing, and buyer/seller dyadic relations. Her work has appeared in numerous journals, including theJournal of Consumer Research, theJournal of Advertising, Industrial Marketing Management, and theJournal of Macromarketing. Robert B.Woodruff (rwoodruff@utk.edu) is the Proffitt’s, Inc. Professor of Marketing and head of the Department of Marketing and Logistics at the University of Tennessee. His primary interests are in customer value theory, customer satisfaction theory, and market opportunity analyses, all with applications to customer-value-based marketing strategies. His work has appeared in theJournal of Marketing, theJournal of Marketing Research, theJournal of the Academy of Marketing Science, theJournal of Consumer Research, and theJournal of Satisfaction, Dissatisfaction & Complaining Behavior. He has received two outstanding reviewer awards from theJournal of the Academy of Marketing Science.     

The influence of co-location in higher education institutions on small firms’ perspectives of knowledge transfer

Since 1980, the UK has experienced a dramatic growth in firms and employment in information–intensive business services, such as management consultancy and market research. Recent expansion of new and small firms operating in these sectors is the focus of a major ESRC–sponsored research project currently under way at Cambridge University Small Business Research Centre.

Small business service firms are able to compete successfully with large firms due to the imperfect nature of the market which characterizes business services demand and supply, together with specialization of expertise. The success of small business service firms depends on informal person–to–person networks, word–of–mouth recommendation and repeal business based on successful earlier assignments or personal contacts acquired, for example, while working in a large consultancy or market research company. This paper examines the types of networks utilized by small business service firms and argues that two distinct types exist: demand– and supply–related networks; the former involves links with clients, the latter links and co–operation between complementary small business service firms.     

Supervisor Heterogeneity: An Analysis Of Uk Microdata

We investigate the attributes of supervisors and the key correlates of the extent of their supervisory responsibilities. We find a strong correlation between wages, education, experience, firm size and the extent of supervision. One implication of this is that firms may be indifferent between employing a few, 'high responsibility' or many 'low responsibility' supervisors. Our findings, suggestive as they are of supervisory heterogeneity, should be taken into account in studies that proxy the intensity of monitoring primarily by the number of supervisors employed.     

Do government purchases crowd out investment?

The objective of this study is to determine whether federal government purchases negatively impact private investment using times series regression analysis. This study uses quarterly data from the years 1986.1 to 2004.4 in order to provide a relatively contemporary evaluation of the effects of federal purchases on private investment. The empirical results in this study reveal that increases in federal urchases, expressed as a percent of GDP, act to reduce new investment, which provides further support for the theory that government expenditures crowd out private investment. (JEL: E22, E62)     

Nonaudit Services and Earnings Conservatism: Is Auditor Independence Impaired?*

We examine whether the provision of nonaudit services (NAS) by incumbent auditors is associated with a reduction in the extent to which earnings reflect bad news on a timely basis (that is, news‐based conservatism). Reduced conservatism is expected to occur if relatively high levels of NAS result in reduced auditor independence and, ultimately, lower‐quality auditing. Because client‐specific demand for NAS is expected to vary, our proxy for the auditor‐client economic bond is the extent to which NAS purchases (relative to audit fees) are greater or less than expected. Using several different methods for identifying news‐based conservatism, we consistently find that higher than expected levels of NAS are not associated with reduced conservatism. This result is robust to allowing for endogenous NAS demand, as well as several explicit factors that may be associated with differences in conservatism. Similar conclusions arise from tests that use alternative measures of the economic bond between auditors and their clients, as well as in tests confined to either the Big 6 or non‐Big 6 audit firms. Our results are consistent with factors such as market‐based incentives, the threat of litigation, and alternative governance mechanisms offsetting any expected benefits to the audit firm from reducing its independence. We therefore conclude that recent legislative intervention aimed at restricting the supply of NAS is unlikely to result in increased independence in fact, although independence in appearance may be improved.