International Accounting Standards and Accounting Quality

We examine whether application of International Accounting Standards (IAS) is associated with higher accounting quality. The application of IAS reflects combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find that firms applying IAS from 21 countries generally evidence less earnings management, more timely loss recognition, and more value relevance of accounting amounts than do matched sample firms applying non‐U.S. domestic standards. Differences in accounting quality between the two groups of firms in the period before the IAS firms adopt IAS do not account for the postadoption differences. Firms applying IAS generally evidence an improvement in accounting quality between the pre‐ and postadoption periods. Although we cannot be sure our findings are attributable to the change in the financial reporting system rather than to changes in firms' incentives and the economic environment, we include research design features to mitigate effects of both.     

German Consumer Decision‐Making Styles

The lack of previous relevant consumer research in Germany, together with the need to test the generalizability of consumer decision‐making styles in different countries and with non‐student samples, prompted an investigation of German shoppers. The original U.S. eight‐factor model could not be confirmed completely, but support was found for six factors: Brand Consciousness, Perfectionism, Recreational/Hedonism, Confused by Overchoice, Impulsiveness, and Novelty‐Fashion Consciousness. Variety Seeking was novel to Germany and replaced brand loyalty and price‐value consciousness factors found in previous countries. Explanations for the differences are discussed as well as the marketing implications.     

Correlates of Satisfaction and Dissatisfaction With Clothing Performance

This study focuses on a specific product, women's clothing, to gain further insights regarding consumer satisfaction and dissatisfaction. A variety of consumer characteristics including demographics, activities, interests and opinions (AIO's), product knowledge and product experience were used to successfully predict and profile consumer satisfaction. General suggestions for industry, governmental agencies and educators are presented regarding the implications of the findings for the general study of consumer satisfaction.     

Networks of Free Trade Agreements among Heterogeneous Countries

The paper examines the formation of free trade agreements as a network formation game. We consider an n‐country model in which international trade occurs between economies with imperfectly competitive product markets. In each country, the labor market is either unionized or non‐unionized. We show that, if all countries are non‐unionized, the global free trade network is both the unique pairwise stable network and the unique efficient network. If all countries are unionized, the global free trade network is pairwise stable and the unique efficient network among the class of symmetric networks. If some countries are unionized while others are non‐unionized, other networks apart from the global free trade network may be pairwise stable. However, the efficient network is still the global free trade network. Thus, a conflict between stability and efficiency may occur. Moreover, starting from the network in which no country has signed a free trade agreement, all sequences of networks due to continuously profitable deviations do not lead (in most cases) to the global free trade network, even when global free trade is stable.     

Debt and Financial Vulnerability on the Verge of Retirement

We analyze older individuals’ debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). In the HRS, we compare three groups of people age 56–61 in 1992, 2004, and 2010, to assess cross-cohort changes in debt over time. Two waves of the NFCS (2012 and 2015) provide additional insights into debt management and older individuals’ capacity to shield themselves against shocks. We conclude that recent cohorts hold more debt and face more financial insecurity than in the past. This will render them particularly vulnerable to forecasted interest rate increases.     

THE INTERACTIONS OF ORGANIZATIONAL AND COMPETITIVE INFLUENCES ON STRATEGY AND PERFORMANCE

Despite much debate in the strategy literatures, there is little consensus as to whether organizational capabilities or market competition are more important in shaping firms’ actions and performance. We suspect that simply comparing firm-level and industry-level influences will continue to prove fruitless for two reasons. In the first place, both organization and competition are clearly important in shaping strategy and performance. In the second place, we suspect that the inconclusive nature of much of the existing research reflects the fact that organizational capabilities, competition, strategy, and performance are fundamentally endogenous. That is, reciprocal interactions at multiple levels of analysis between the environment and the firm shape business strategy and performance, while interactions between strategy and performance, in turn, shape both organizational capabilities and competitive environments. This special issue of the Strategic Management Journal includes papers that focus attention on several dimensions of these interactions. A common theme emerges from the work concerning the sequential nature of the interrelationships. The papers suggest that firms develop organizational capabilities as they act in competitive, institutional, and cognitive environments, where capabilities arise both by design and as the unexpected by-products of firm actions. The capabilities, managers’ understanding of the capabilities, and the historical context that surrounds them then condition firms’ reactions to changes in their environment. The reactions and firm performance in turn affect the structure of the industry, and all these changes generate new information which in turn creates new learning opportunities. Thus, the papers view strategy and performance as an ongoing sequence of capabilities-conditioned adaptations by firms which in turn become exogenous events in the environments of the managers of other firms. For strategy researchers, the important question is not that of which disciplinary perspective or mode of explanation is a more appropriate one, but rather that of the conditions under which a given mode of explanation is most appropriate. © 1997 by John Wiley & Sons, Ltd.     

STRATEGIC CHANGE IN THE TURNAROUND PROCESS: THEORY AND EMPIRICAL EVIDENCE

Early corporate turnaround theorists argued that strategic reorientations are central to the recovery process at many declining firms. However, subsequent large-sample empirical studies have reported that performance turnarounds for declining firms are primarily associated with cutback actions that increase efficiency, thus creating a gap between theory and empirical findings. We close this gap by presenting and empirically supporting a model proposing that the extent of strategic change initiated in a successful turnaround varies systematically with a declining firm’s need and capacity to reorient its strategy. Based on our model, we offer explanations for why past large-sample researchers were not able to verify the role of strategic change in the turnaround process and we reassert the adaptive role that strategic reorientations have in the turnaround attempts of declining firms with weak strategic positions. © 1997 by John Wiley & Sons, Ltd.