The growth-profitability relationship : strategic orientations as moderator

Principal Topic: In this study we investigate how strategic orientation moderates the impact of growth on profitability for a sample of Danish high growth (Gazelle) firms. ---------- Firm growth has been an essential part of both management research and entrepreneurship research for decades (e.g. Penrose 1959, Birch 1987, Storey 1994). From a societal point of view, firm growth has been perceived as economic generator and job creator. In entrepreneurship research, growth has been an important part of the field (Davidsson, Delmar and Wiklund 2006), and many have used growth as a measure of success. In strategic management, growth has been seen as an approach to achieve competitive advantages and a way of becoming increasing profitable (e.g. Russo and Fouts 1997, Cho and Pucic 2005). However, although firm growth used to be perceived as a natural pathway to profitability recently more skepticism has emerged due to both new theoretical development and new empirical insights. Empirically, studies show inconsistent and inconclusive empirical evidence regarding the impact of growth on profitability. Our review reveals that some studies find a substantial positive relationship, some find a weak positive relationship, some find no relationship and further some find a negative relationship. Overall, two dominant yet divergent theoretical positions can be identified. The first position, mainly focusing on the environmental fit, argues that firms are likely to become more profitable if they enter a market quickly and on a larger scale due to first mover advantages and economic of scale. The second position, mainly focusing the internal fit, argues that growth may lead to a range of internal challenges and difficulties, including rapid change in structure, reward systems, decision making, communication and management style. The inconsistent empirical results together with two divergent theoretical positions call for further investigations into the circumstances by which growth generate profitability and into the circumstances by which growth do not generate profitability. In this project, we investigate how strategic orientations influence the impact of growth on profitability by asking the following research question: How is the impact of growth on profitability moderated by strategic orientation? Based on a literature review of how growth impacts profitability in areas such as entrepreneurship, strategic management and strategic entrepreneurship we develop three hypotheses regarding the growth-profitability relationship and strategic orientation as a potential moderator. ---------- Methodology/Key Propositions: The three hypotheses are tested on data collected in 2008. All firms in Denmark, including all listed and non-listed (VAT-registered) firms who experienced a 100 % growth and had a positive sales or gross profit over a four years period (2004-2007) were surveyed. In total 2,475 fulfilled the requirements. Among those 1,107 firms returned usable questionnaires satisfactory giving us a response rate on 45 %. The financial data together with data on number of employees were obtained from D&B (previously Dun & Bradstreet). The remaining data were obtained through the survey. Hierarchical regression models with ROA (return on assets) as the dependent variable were used to test the hypotheses. In the first model control variables including region, industry, firm age, CEO age, CEO gender, CEO education and number of employees were entered. In the second model, growth measured as growth in employees was entered. Then strategic orientation (differentiation, cost leadership, focus differentiation and focus cost leadership) and then interaction effects of strategic orientation and growth were entered in the model. ---------- Results and Implications: The results show a positive impact of firm growth on profitability and further that this impact is moderated by strategic orientation. Specifically, it was found that growth has a larger impact on profitability when firms do not pursue a focus strategy including both focus differentiation and focus cost leadership. Our preliminary interpretation of the results suggests that the value of growth depends on the circumstances and more specifically 'how much is left to fight for'. It seems like those firms who target towards a narrow segment are less likely to gain value of growth. The remaining market shares to fight for to these firms are not large enough to compensate for the cost of growing. Based on our findings, it therefore seems like growth has a more positive relationship with profitability for those who approach a broad market segment. Furthermore we argue that firms pursuing af Focus strategy will have more specialized assets that decreases the possibilities of further profitable expansion. For firms, CEOs, board of directors etc., the study shows that high growth is not necessarily something worth aiming for. It is a trade-off between the cost of growing and the value of growing. For many firms, there might be better ways of generating profitability in the long run. It depends on the strategic orientation of the firm. For advisors and consultants, the conditional value of growth implies that in-depth knowledge on their clients' situation is necessary before any advice can be given. And finally, for policy makers, it means they have to be careful when initiating new policies to promote firm growth. They need to take into consideration firm strategy and industry conditions.

Up the e-learning curve : ensuring quality online education within an Australian university

The paper describes the implementation of a project within Australian Catholic University designed to launch the Faculties into online education in a manner which ensured quality in all aspects of the teaching-learning experiences of academics and students. Key elements of the strategic approach adopted by the project leaders, including the involvement of a specialist commercial provider of web-based delivery systems as a partner in the project, mechanisms to support the initiative through the first stages, careful choice of the programs offered online, and staff development matched to the emerging needs of those involved in the teaching of courses, are described. Challenges encountered in the implementation process, and the factors which assisted in overcoming these problems are identified. The paper draws upon this experience to raise some important issues relevant to the successful introduction of online education as an integral component of the teaching repertoire of Faculties.

Collaborative business process modeling using 3D virtual environments

Process modeling is a complex organizational task that requires many iterations and communication between the business analysts and the domain specialists involved in the process modeling. The challenge of process modeling is exacerbated, when the process of modeling has to be performed in a cross-organizational, distributed environment. Some systems have been developed to support collaborative process modeling, all of which use traditional 2D interfaces. We present an environment for collaborative process modeling, using 3D virtual environment technology. We make use of avatar instantiations of user ego centres, to allow for the spatial embodiment of the user with reference to the process model. We describe an innovative prototype collaborative process modeling approach, implemented as a modeling environment in Second Life. This approach leverages the use of virtual environments to provide user context for editing and collaborative exercises. We present a positive preliminary report on a case study, in which a test group modelled a business process using the system in Second Life.

On the cognitive effectiveness of routing symbols in process modeling languages

Process models provide visual support for analyzing and improving complex organizational processes. In this paper, we discuss differences of process modeling languages using cognitive effectiveness considerations, to make statements about the ease of use and quality of user experience. Aspects of cognitive effectiveness are of importance for learning a modeling language, creating models, and understanding models. We identify the criteria representational clarity, perceptual discriminability, perceptual immediacy, visual expressiveness, and graphic parsimony to compare and assess the cognitive effectiveness of different modeling languages. We apply these criteria in an analysis of the routing elements of UML Activity Diagrams, YAWL, BPMN, and EPCs, to uncover their relative strengths and weaknesses from a quality of user experience perspective. We draw conclusions that are relevant to the usability of these languages in business process modeling projects.

On the usage of labels and icons in business process modeling

The value of business process models is dependent not only on the choice of graphical elements in the model, but also on their annotation with additional textual and graphical information. This research discusses the use of text and icons for labeling the graphical constructs in a process model. We use two established verb classification schemes to examine the choice of activity labels in process modeling practice. Based on our findings, we synthesize a set of twenty-five activity label categories. We propose a systematic approach for graphically representing these label categories through the use of graphical icons, such that the resulting process models are easier and more readily understandable by end users. Our findings contribute to an ongoing stream of research investigating the practice of process modeling and thereby contribute to the body of knowledge about conceptual modeling quality overall.

Can book-to-market and size be risk factors that predict economic growth in Asia's emerging economies?

We investigate whether the two 2 zero cost portfolios, SMB and HML, have the ability to predict economic growth for markets investigated in this paper. Our findings show that there are only a limited number of cases when the coefficients are positive and significance is achieved in an even more limited number of cases. Our results are in stark contrast to Liew and Vassalou (2000) who find coefficients to be generally positive and of a similar magnitude. We go a step further and also employ the methodology of Lakonishok, Shleifer and Vishny (1994) and once again fail to support the risk-based hypothesis of Liew and Vassalou (2000). In sum, we argue that search for a robust economic explanation for firm size and book-to-market equity effects needs sustained effort as these two zero cost portfolios do not represent economically relevant risk.

Modeling multivariate autoregressive conditional heteroskedasticity with the double smooth transition conditional correlation GARCH Model

In this paper, we propose a multivariate GARCH model with a time-varying conditional correlation structure. The new double smooth transition conditional correlation (DSTCC) GARCH model extends the smooth transition conditional correlation (STCC) GARCH model of Silvennoinen and Teräsvirta (2005) by including another variable according to which the correlations change smoothly between states of constant correlations. A Lagrange multiplier test is derived to test the constancy of correlations against the DSTCC-GARCH model, and another one to test for another transition in the STCC-GARCH framework. In addition, other specification tests, with the aim of aiding the model building procedure, are considered. Analytical expressions for the test statistics and the required derivatives are provided. Applying the model to the stock and bond futures data, we discover that the correlation pattern between them has dramatically changed around the turn of the century. The model is also applied to a selection of world stock indices, and we find evidence for an increasing degree of integration in the capital markets.

Modeling the effects of strategic flexibility, organisational learning on e-business adoption and competitive advantage : an empirical investigation

The role of intangible firm capabilities as a source of competitive advantage has come into prominence in marketing strategy literature, due to the Resource Based View. This paper applies the Resource Based View and hypothesizes that strategic flexibility and organisation learning, conceptualised as capabilities, positively effect e-business adoption and competitive advantage. Partial Lease Squares analysis suggest that theoretical constructs function as hypothesised and explain a significant variation on e-business adoption and competitive advantage. Firms adopting e-business should develop capabilities such as strategic flexibility and organisation learning and that vendor firms may segment their potential clients based on these capabilities.

Secondary curve behaviour in Lenke IC class adolescent idiopathic scoliosis following video assisted thoracoscopic spinal fusion

Introduction. Ideally after selective thoracic fusion for Lenke Class IC (i.e. major thoracic / secondary lumbar) curves, the lumbar spine will spontaneously accommodate to the corrected position of the thoracic curve, thereby achieving a balanced spine, avoiding the need for fusion of lumbar spinal segments1. The purpose of this study was to evaluate the behaviour of the lumbar curve in Lenke IC class adolescent idiopathic scoliosis (AIS) following video-assisted thoracoscopic spinal fusion and instrumentation (VATS) of the major thoracic curve. Methods. A retrospective review of 22 consecutive patients with AIS who underwent VATS by a single surgeon was conducted. The results were compared to published literature examining the behaviour of the secondary lumbar curve where other surgical approaches were employed. Results. Twenty-two patients (all female) with AIS underwent VATS. All major thoracic curves were right convex. The average age at surgery was 14 years (range 10 to 22 years). On average 6.7 levels (6 to 8) were instrumented. The mean follow-up was 25.1 months (6 to 36). The pre-operative major thoracic Cobb angle mean was 53.8° (40° to 75°). The pre-operative secondary lumbar Cobb angle mean was 43.9° (34° to 55°). On bending radiographs, the secondary curve corrected to 11.3° (0° to 35°). The rib hump mean measurement was 15.0° (7° to 21°). At latest follow-up the major thoracic Cobb angle measured on average 27.2° (20° to 41°) (p<0.001 – univariate ANOVA) and the mean secondary lumbar curve was 27.3° (15° to 42°) (p<0.001). This represented an uninstrumented secondary curve correction factor of 37.8%. The mean rib hump measured was 6.5° (2° to 15°) (p<0.001). The results above were comparable to published series when open surgery was performed. Discussion. VATS is an effective method of correcting major thoracic curves with secondary lumbar curves. The behaviour of the secondary lumbar curve is consistent with published series when open surgery, both anterior and posterior, is performed.

Fusionless scoliosis correction using shape memory alloy staples

Severe spinal deformity in young children is a formidable challenge for optimal treatment. Standard interventions for adolescents, such as spinal deformity correction and fusion, may not be appropriate for young patients with considerable growth remaining. Alternative surgical options that provide deformity correction and protect the growth remaining in the spine are needed to treat this group of patients 1, 2. One such method is the use of shape memory alloy staples. We report our experience to date using video-assisted thoracoscopic insertion of shape memory alloy staples. A retrospective review was conducted of 13 patients with scoliosis, aged 7 to 13 years, who underwent video-assisted thoracoscopic insertion of shape memory staples. In our experience, video-assisted thoracoscopic insertion of shape memory alloy staples is a safe procedure with no complications noted. It is a reliable method of providing curve stability, however the follow up results to date indicate that the effectiveness of the procedure is greater in younger patients.

Probabilistic world modeling for distributed team planning

This paper describes an application of decoupled probabilistic world modeling to achieve team planning. The research is based on the principle that the action selection mechanism of a member in a robot team can select an effective action if a global world model is available to all team members. In the real world, the sensors are imprecise, and are individual to each robot, hence providing each robot a partial and unique view about the environment. We address this problem by creating a probabilistic global view on each agent by combining the perceptual information from each robot. This probabilistic view forms the basis for selecting actions to achieve the team goal in a dynamic environment. Experiments have been carried out to investigate the effectiveness of this principle using custom-built robots for real world performance, in addition, to extensive simulation results. The results show an improvement in team effectiveness when using probabilistic world modeling based on perception sharing for team planning.

Modeling and exploiting behavior patterns in dynamic environments

This paper presents a new approach to improving the effectiveness of autonomous systems that deal with dynamic environments. The basis of the approach is to find repeating patterns of behavior in the dynamic elements of the system, and then to use predictions of the repeating elements to better plan goal directed behavior. It is a layered approach involving classifying, modeling, predicting and exploiting. Classifying involves using observations to place the moving elements into previously defined classes. Modeling involves recording features of the behavior on a coarse grained grid. Exploitation is achieved by integrating predictions from the model into the behavior selection module to improve the utility of the robot's actions. This is in contrast to typical approaches that use the model to select between different strategies or plays. Three methods of adaptation to the dynamic features of the environment are explored. The effectiveness of each method is determined using statistical tests over a number of repeated experiments. The work is presented in the context of predicting opponent behavior in the highly dynamic and multi-agent robot soccer domain (RoboCup).

Making a match: Combining theory and evidence in policy-oriented macroeconomic modeling

A persistent question in the development of models for macroeconomic policy analysis has been the relative role of economic theory and evidence in their construction. This paper looks at some popular strategies that involve setting up a theoretical or conceptual model (CM) which is transformed to match the data and then made operational for policy analysis. A dynamic general equilibrium model is constructed that is similar to standard CMs. After calibration to UK data it is used to examine the utility of formal econometric methods in assessing the match of the CM to the data and also to evaluate some standard model-building strategies. Keywords: Policy oriented economic modeling; Model evaluation; VAR models

Selective growth of carbon nanotubes on bare silicon : MWNT sinthesys on patterned substrates without predeposition of metal catalyst

Carbon nanotubes (CNTs) are expected to become the ideal constituent of many technologes, in particular for future generation electronics. This considerable interest is due to their unique electrical and mechanical properties. They show indeed super-high current-carrying capacity, ballistic electron transport and good field-emission properties. Then, these superior features make CNTs the most promising building blocks for electronic devices, as organic solar cells and organic light emitting devices (OLED). By using Focused Ion Beam (FIB) patterning it is possible to a obtain a high control on position, relative distances and diameter of CNTs. The present work shows how to grow three-dimensional architecture made of vertical-aligned CNTs directly on silicon. Thanks to the higher activity of a pre-patterned surface the synthesis process results very quick, cheap and simple. Such large area growths of CNTs could be used in preliminary test for application as electrodes for organic solar cells.

Autocrine fibroblast growth factor 2 increases the multipotentiality of human adipose-derived mesenchymal stem cells

Multipotent mesenchymal stem cells (MSCs), first identified in the bone marrow, have subsequently been found in many other tissues, including fat, cartilage, muscle, and bone. Adipose tissue has been identified as an alternative to bone marrow as a source for the isolation of MSCs, as it is neither limited in volume nor as invasive in the harvesting. This study compares the multipotentiality of bone marrow-derived mesenchymal stem cells (BMSCs) with that of adipose-derived mesenchymal stem cells (AMSCs) from 12 age- and sex-matched donors. Phenotypically, the cells are very similar, with only three surface markers, CD106, CD146, and HLA-ABC, differentially expressed in the BMSCs. Although colony-forming units-fibroblastic numbers in BMSCs were higher than in AMSCs, the expression of multiple stem cell-related genes, like that of fibroblast growth factor 2 (FGF2), the Wnt pathway effectors FRAT1 and frizzled 1, and other self-renewal markers, was greater in AMSCs. Furthermore, AMSCs displayed enhanced osteogenic and adipogenic potential, whereas BMSCs formed chondrocytes more readily than AMSCs. However, by removing the effects of proliferation from the experiment, AMSCs no longer out-performed BMSCs in their ability to undergo osteogenic and adipogenic differentiation. Inhibition of the FGF2/fibroblast growth factor receptor 1 signaling pathway demonstrated that FGF2 is required for the proliferation of both AMSCs and BMSCs, yet blocking FGF2 signaling had no direct effect on osteogenic differentiation. Disclosure of potential conflicts of interest is found at the end of this article.