The role of contractual governance flexibility in realizing the outcomes of key customer relationships

An entrepreneurial firm's relationships with customers, suppliers, investors, universities, and other organizations have a significant and long-lasting impact on the survival and success of the firm. Yet, little research has focused on how the management of these relationships influences outcomes for entrepreneurial firms.This paper focuses on the customer relationships of new, technology-based firms (NTBFs). We aim to contribute to the literature on the governance of exchange relationships between NTBFs and their customers. Further, in so doing, we seek to explore the implications of such governance for the performance of new firms.Because of their small size, their “liabilities of newness,” and their highly specialized, knowledge-intensive resources, NTBFs are able to maintain only a limited number of close customer relationships. Consequently, NTBFs often become highly dependent on one or a few of their customers. In this study, we focus on the relationships between NTBFs and their single largest customers. We refer to the customer that accounts for the highest proportion of an NTBF's total revenue as the “key customer.”Strategic management literature, resource dependence theory, and transaction cost economics emphasize the risks associated with being dependent on an exchange relationship, focusing on the opportunistic use of power by the exchange partner. These perspectives suggest that firms can minimize their external dependencies and protect themselves against opportunism through the use of contracts. The present paper expands this view by also examining how flexibility in exchange governance may unlock potential benefits or dampen potential dangers that an NTBF faces in its commitment to its single largest customer, e.g., sharing the costs and risks of R&;D with the customer, improving the reputation of the NTBF, and realizing savings in sales and marketing costs. We examine the extent to which the realization of the potential positive and negative outcomes of a high level of dependence are moderated by the flexibility of the exchange partners' attitudes toward contractual agreements. The research question that we seek to answer is: Does the manner in which a contractual agreement is implemented affect the outcomes of a customer relationship for an NTBF at high levels of exchange dependence on the key customer?We develop a set of hypotheses that examines how the governance of the key customer relationship affects the NTBF's new product development, reputation, and sales costs when exchange dependence on the key customer is high. We use the term “contractual governance flexibility” to refer to the extent to which the exchange partners are willing to adjust to changes in the relationship instead of relying on the contract. We test the hypotheses with survey data from 195 NTBFs in the UK. The results of regression analyses reveal that contractual governance flexibility moderates the relationship between exchange dependence and outcomes. In relationships with a high level of exchange dependence, greater contractual governance flexibility was associated with greater new product development and sales cost advantages. No such benefits were realized for relationships in which exchange partners relied heavily on the contract.These findings are important because they suggest that by relaxing formal contractual mechanisms governing a relationship, NTBFs can derive benefits from key customer relationships that are characterized by a high level of dependence. Our findings suggest that at high levels of exchange dependence on key customers, NTBFs can benefit when greater contractual governance flexibility is present. Our data indicated that, interestingly, NTBFs tend to do just the opposite: at higher levels of exchange dependence, NTBFs are inclined to rely increasingly on the contract. By so doing, they may fail to realize the potential benefits of the relationships, such as gaining access to complementary resources and reducing costs. These outcomes, which may be derived from dependent exchange relationships by means of contractual governance flexibility, can have a significant influence on the long-term development and competitive advantage of an entrepreneurial firm.     

New insights into the impact of the introduction of futures trading on stock price volatility

We examine whether, and to what extent, the introduction of trading in share futures contracts on individual stocks (i.e., individual share futures, or ISFs) has impacted on the systematic risk and volatility of the underlying shares. The use of ISFs allows a unique experimental design that complements existing work on index futures. Our major findings are as follows. First, we found a general reduction in systematic risk on individual stocks after the listing of futures. Second, we found evidence of a decline in unconditional volatility. Third, we found mixed evidence concerning the impact on conditional volatility. Fourth, the introduction of futures was found to impact on the market dynamics, as reflected by a change in the asymmetric volatility response, although the direction of that change is stock‐specific. In general, the results point to a number of features that are case‐specific and provide new insights into the mixed results that are typical of existing studies. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:237–255, 2001     

What moves the gold market?

In this article, we provide a detailed characterization of the intraday return volatility in gold futures contracts traded on the COMEX division of the New York Mercantile Exchange. The approach allows the study of intraday patterns, interday ARCH effects, and announcement effects in a coherent framework. We show that the intraday patterns exert a profound impact on the dynamics of return volatility. Among the 23 U.S. macroeconomic announcements, we identify employment reports, gross domestic product, consumer price index, and personal income as having the greatest impact. Finally, by appropriately filtering out the intraday patterns, we find that the high‐frequency returns reveal long‐memory volatility dependencies in the gold market, which have important implications on the pricing of long‐term gold options and the determination of optimal hedge ratios. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:257–278, 2001     

Consumption smoothing,risk sharing and financial integration

Theories indicate that financial integration should allow economies to better share risk and thus improve consumption smoothing. We construct two widely used price‐based measures of financial integration (i.e., the standard correlation and the adjusted R‐squared) and test whether consumption volatility declines as international equity markets become more integrated. Pooled and panel estimates for three different groups of countries (i.e., G7, G20 and EU) provide no significant evidence of improved consumption smoothing as financial integration rises. This evidence is supported by a battery of robustness checks and holds over time. Taken together, our results suggest that convergence in international equity prices does not necessarily represent the channel through which risk‐sharing opportunities arise or consumption smoothing improves.     

Doing Good While Behaving Badly: Checkout Charity Process Mechanisms

Journal of Business Ethics - Companies are increasingly using cause-related marketing campaigns to engage consumers during the purchase process and highlight their own corporate social...     

Critical success factors determining performance of cross‐border acquisition: Evidence from the African telecom market

This study investigates the factors affecting Bharti Airtel's cross‐border postacquisition performance in an African market. This study describes the relationships among various factors such as technical capability, affiliated firm's absorptive capacity, and organizational learning capabilities, which determine the successful operations of the Zain acquisition deal in South Africa. This paper adopts a qualitative approach to identify factors that influence the postacquisition performance. Seven factors are identified based on the literature. Consequently, it has become a necessity to encapsulate these factors in suitable proportions. In this study, we have developed a total interpretive structural modeling (TISM) to analyze the postacquisition performance of Bharti Airtel in South Africa. Our research has highlighted six dynamic factors (organizational learning capability, knowledge management, technology capability, technology relatedness, acquirer's absorptive capacity, and national culture difference) that affect the firm's postacquisition performance. The interpretive structural model (ISM) and total interpretive structural model for postacquisition performance are built‐up. The developed TISM will support academics and practitioners to develop their understanding of acquisition performance of parent companies in the context of telecom business in the South African market.     

Funktionswandel der EZB?

Die Kernaufgabe der Europ?ischen Zentralbank ist es, die Preisstabilit?t zu gew?hrleisten. Die Finanz- und Staatsschuldenkrise hat der EZB die Rolle aufgezwungen, durch Notma?nahmen die Stabilit?t der W?hrungsunion zu sichern. Ihre Unabh?ngigkeit wird zunehmend dadurch gef?hrdet, dass es in diesem Prozess zu einer Verquickung von Fiskal- und Geldpolitik kommt. W ünschenswert w?re eine Rückkehr der EZB zu ihrer alten Rolle und eine Strategie, die für einen Abbau der weltweiten und europ?ischen Ungleichgewichte sorgen k?nnte.     

Die Erwartungen der Wirtschaft für 2012

Nach einem wirtschaftlich sehr positiven Jahr 2011, mussten die ?konomischen Prognosen für das Wachstum 2012 deutlich herabgesetzt werden. Die Wirtschaftsforschungsinstitute erwarten für Deutschland nur noch ein Wachstum von 0,8%. Die Vertreter der einzelnen Industriezweige sind aber etwas optimistischer als die Prognosen für die Gesamtwirtschaft.     

Leader Ethical Decision-Making in Organizations: Strategies for Sensemaking

Organizational leaders face environmental challenges and pressures that put them under ethical risk. Navigating this ethical risk is demanding given the dynamics of contemporary organizations. Traditional models of ethical decision-making (EDM) are an inadequate framework for understanding how leaders respond to ethical dilemmas under conditions of uncertainty and equivocality. Sensemaking models more accurately illustrate leader EDM and account for individual, social, and environmental constraints. Using the sensemaking approach as a foundation, previous EDM models are revised and extended to comprise a conceptual model of leader EDM. Moreover, the underlying factors in the model are highlighted—constraints and strategies. Four trainable, compensatory strategies (emotion regulation, self-reflection, forecasting, and information integration) are proposed and described that aid leaders in navigating ethical dilemmas in organizations. Empirical examinations demonstrate that tactical application of the strategies may aid leaders in making sense of complex and ambiguous ethical dilemmas and promote ethical behavior. Compensatory tactics such as these should be central to organizational ethics initiatives at the leader level.