From valuing design to designing value

This paper presents findings of an embedded action research project within a small to medium sized enterprise (SME). Through the implementation of design-led innovation processes, this research aims to identify the changes experienced in the participating company during a shift in the perspective of design from a product focus towards a strategic focus. Staff interviews and a reflective journal were used as methods to collect data from a range of design interventions that were facilitated throughout the engagement. A shift in perspective of design was evident through three cultural changes within the firm. First, the perceived outcome focus of design became increasingly long-term. Second, the value of design outcomes became less directed towards current projects, and more directed towards future possibilities. Finally, the perceived tangibility of design outcomes shifted from tangible to intangible. For example, design activities which produced customer insights, rather than product features, became seen as beneficial to the firm. These three components are proposed as cultural stepping stones which describe how a company transitions from an exclusively product-focused perspective and utilisation of design towards design as a company based process. Implications of this research provide considerations for designers who are attempting to facilitate a similar transformation within a business in the future.

Understanding financial information used to assess small firm performance : an Australian qualitative study

Purpose The purpose of this paper is to investigate the reality of financial and management accounting in a small group of small firms. Specifically, from the owner's perspective, an exploration is undertaken to see what financial information is collected, how it is used (or not) to make business decisions and evaluate the firm's performance, and the role played by the accountant in that process. Design/methodology/approach A phenomenological paradigm underpins this exploratory study. Semi‐structured interviews were undertaken with the owners of ten small firms, where the focus was on understanding what happens in an organisational setting, as opposed to theory and textbook practice. Findings The qualitative data supported prior research in other countries. The in‐depth analysis revealed a very basic understanding of accounting information and problems with the financial literacy amongst these small firm owners. Accounting reports were not widely produced or used, so an informal assessment, such as how much cash was in the bank, was the primary means of assessing business performance. Accountants were used for taxation services, although some owners sought more general business advice. Originality/value An understanding is developed of why there might be a gap between textbook rhetoric and reality of accounting practice in small firms. The conclusion is that accounting textbooks need to include more information about the reality of financial management in small firms.

Does the housing market respond to information disclosure? : Effects of toxicity indices in Japan

The policy instruments that provide information on a firm's or facility's environmental performance, such as the U.S. Toxic Release Inventory (TRI) and the Pollutant Release and Transfer Register system (PRTRs) used in some European countries and Japan, play an important role in encouraging firms or facilities to improve their environmental performance, if investors, consumers and residents recognize their environmental performance. This study uses a hedonic approach to explore how the Japanese rental housing market responds to carcinogenic risk arising from releases and transfers of chemical substances produced and used at close facilities. We found that residents do not perceive carcinogenic risk generated more than 1.0 km away from their residence and that they seem to recognize the increased carcinogenic risk at distances from 0.5 km to 1.0 km away; a 1% increase in carcinogenic risk reduces the average rent by 0.0007%. The distance at which residents perceive the risk arising from such facilities is less than in previous studies. This suggests that the risk perception recognized in previous studies may capture the other externalities in addition to the chemical risk because the risk is measured by the distance.

On the efficacy of key corporate governance recommendations in mid-tier companies : window-dressing or value-adding?

This paper examins the relationship between firm performance and key board and audit committee variables in a sample of mid-tier listed Australian firms. Unlike the UK where the corporate governance Code specifically outlines special arrangements for companies outside the FTSE 350 index, the ASX Corporate Governance recommendations make no special provisions for mid-tier companies. Consequently, mid-tier Australian companies may be expending scarce resources in conforming with recommendations that are not value-creating.

The value of tail risk hedging in defined contribution plans: What does history tell us

Hedging against tail events in equity markets has been forcefully advocated in the aftermath of recent global financial crisis. Whether this is beneficial to long horizon investors like employees enrolled in defined contribution (DC) plans, however, has been subject to criticism. We conduct historical simulation since 1928 to examine the effectiveness of active and passive tail risk hedging using out of money put options for hypothetical equity portfolios of DC plan participants with 20 years to retirement. Our findings show that the cost of tail hedging exceeds the benefits for a majority of the plan participants during the sample period. However, for a significant number of simulations, hedging result in superior outcomes relative to an unhedged position. Active tail hedging is more effective when employees confront several panic-driven periods characterized by short and sharp market swings in the equity markets over the investment horizon. Passive hedging, on the other hand, proves beneficial when they encounter an extremely rare event like the Great Depression as equity markets go into deep and prolonged decline.

Constitutive Regulation of the Firm: occupational health and safety, dismissal, discrimination and sexual harassment

As many other chapters in this book have noted, until recently labour lawyers have tended not to draaw on regulatory scholarship. In this chapter we look at certain areas of labour law through a particular kind of regulatory lens - regulation that requires firms to reconstitute their management processes and procedures, perhaps even their organisational cultures. In particular, we examine the kinds of regulatory demands made on firms by legal rules in four areas of labour law: (i) occupational health and safety (OHS)regulation; unfair dismissal law; equal opportunity (EO) and (iv) sexual harassment law.

Power and paradigms : the Dutch response to pressures for shareholder value

In recent years, research aimed at identifying and relating the antecedents and consequences of diffusing organizational practices/ideas has turned its attention to debating the international adoption and implementation of the Anglo-American model of corporate governance, i.e., a shareholder-value-orientation (SVO). While financial economists characterize the adoption of an SVO as necessary and performance-enhancing, behavioral scientists have disputed such claims, invoking institutional contingencies in the appropriateness of an SVO. Our study seeks to provide some resolution to the debate by developing an overarching socio-political perspective that links the antecedents and consequences of the adoption of the contested practice of SVO. We test our framework using extensive longitudinal data from 1992-2006 from the largest listed corporations in the Netherlands, and we find a negative relationship between SVO adoption and subsequent firm performance, although this effect is attenuated when accompanied by greater SVO-alignment among major owners and a firm’s visible commitment to an SVO. This study extends prior research on the diffusion of contested organizational practices that has taken a socio-political perspective by offering an original contingency perspective that addresses how and why the misaligned preferences of corporate owners will affect (i) a company’s inclination to espouse an SVO, and (ii) the performance consequences of such misalignment.This study suggests when board members are considering the adoption of new ideas/practices (e.g., SVO), they should consider the contextual fitness of the idea/practice with the firm’s owners and their interests.

Agency problems of corporate philanthropy

Evaluating agency theory and optimal contracting theory views of corporate philanthropy, we find that as corporate giving increases, shareholders reduce their valuation of firm cash holdings. Dividend increases following the 2003 Tax Reform Act are associated with reduced corporate giving. Using a natural experiment, we find that corporate giving is positively (negatively) associated with CEO charity preferences (CEO shareholdings and corporate governance quality). Evidence from CEO-affiliated charity donations, market reactions to insider-affiliated donations, its relation to CEO compensation, and firm contributions to director-affiliated charities indicates that corporate donations advance CEO interests and suggests misuses of corporate resources that reduce firm value.

Audit pricing and product differentiation in small private firms : evidence from Thailand

Purpose – There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client markets in developed economies; in contrast, the purpose of this paper is to focus on the small client segment in the emerging economy of Thailand which offers a choice between auditors of two different qualities. Design/methodology/approach – This paper is based on a random stratified sample of small clients in Thailand qualifying for audit exemption. The final sample consists of 1,950 firm-year observations for 2002-2006. Findings – The authors find evidence of product differentiation in the small client market, suggesting that small firms view certified public accountants as superior and pay a premium for their services. The authors also find that audit fees have a positive significant association with leverage, metropolitan location and client size. Audit risk and audit opinion are not, however, significantly associated with audit fees. Furthermore, the authors find no evidence that clients whose financial year ends in the auditors’ busy period pay significantly higher audit fees, and auditors engage in low-balling on initial engagements to attract audit clients. Research limitations/implications – The research shows the importance of exploring actual decisions regarding audit practice and audit pricing in different institutional and organizational settings. Originality/value – The paper extends the literature from developed economies and large/listed market setting to the emerging economy and small client market setting. As far as the authors are aware, this is the first paper to examine audit pricing in the small client market in an emerging economy.

Non-market use and non-use values for preserving ecosystem services over time : a choice experiment application to coral reef ecosystems in New Caledonia

Non-use values (i.e. economic values assigned by individuals to ecosystem goods and services unrelated to current or future uses) provide one of the most compelling incentives for the preservation of ecosystems and biodiversity. Assessing the non-use values of non-users is relatively straightforward using stated preference methods, but the standard approaches for estimating non-use values of users (stated decomposition) have substantial shortcomings which undermine the robustness of their results. In this paper, we propose a pragmatic interpretation of non-use values to derive estimates that capture their main dimensions, based on the identification of a willingness to pay for ecosystem protection beyond one's expected life. We empirically test our approach using a choice experiment conducted on coral reef ecosystem protection in two coastal areas in New Caledonia with different institutional, cultural, environmental and socio-economic contexts. We compute individual willingness to pay estimates, and derive individual non-use value estimates using our interpretation. We find that, a minima, estimates of non-use values may comprise between 25 and 40% of the mean willingness to pay for ecosystem preservation, less than has been found in most studies.

Applying design-led innovation in a not-for-profit aged care provider to create shared value

This study examines the role of Design-Led Innovation in creating shared value; sustainable competitive advantage for an organisation and social value for the communities in which it operates. A case study analysed an undertaking by a not-for-profit aged care organisation to create a sustainable competitive advantage in the market by reinventing the experience of ageing and defining an innovative future business model. This paper reflects on the role of Design-Led Innovation in facilitating this change agenda and explores the particular relevance of the associated techniques in a not-for-profit, human services context. It was found that the Design-Led Innovation approach was effective in achieving the goal of defining a way for the organisation to create shared value.

Four years on: Are the gazelles still running? A longitudinal study of firm performance after a period of rapid growth

This article examines variations in performance between fast-growth – the so-called gazelle – firms. Specifically, we investigate how the level of growth affects future profitability and how this relationship is moderated by firm strategy. Hypotheses are developed regarding the moderated growth–profitability relationship and are tested using longitudinal data from a sample of 964 Danish gazelle firms. We find a positive relationship between growth and profitability among gazelle firms. This relationship is moderated, however, by market strategy; it is stronger for firms pursuing a broad market strategy rather than a niche strategy. This study contributes to the current literature by providing a more nuanced view of the growth–profitability relationship and investigating the potential for the future performance of gazelle firms.

Integrated reporting and assurance: Where can research add value?

This paper provides insights into salient issues in the development of the Integrated Reporting () Framework, and emerging issues in the implementation of this Framework, with the aim of identifying opportunities for future research. The International Integrated Reporting Council (IIRC) has recently produced a reporting framework for the preparation of a concise, user-oriented corporate report which expands the scope of a company’s reporting using a multiple capitals concept and requires a description of a company’s business model, allowing a better communication of its value creation proposition. To gain international acceptance, the market-based benefits of adopting the framework must be demonstrated.

Small firm training: Just meeting the day-to-day needs of the business

Purpose The purpose of this paper is to explore what the attitudes of small firm owner-managers are to developing the skills of their key resources and then examine how these and other factors affect owner-managers’ preferences for training these employees. Design/methodology/approach This study of training in small road transport firms in West Australia is cast in light of the literature on human resource management in small firms underpinned by insights drawn using the resource based view of the firm. Small firms (less than 20 people) dominate this industry, while the increasing freight task, and extreme distances between West Australian ports, towns and mines highlight this sectors’ importance. Survey results from 39 small road transport firms and interviews with nine owner-managers are analysed. Findings Legislative, regulatory and licensing requirements were shown to be a key determinant of skills development. Employers ensured that basic standards for employee certification and qualification were met, as the penalty for not doing so would be too high. Regulations drove the need for certain types of training – licenses, fatigue management, occupational health and safety, handling dangerous goods, the Maritime Security Identification Card card, forklift license, mine site inductions – while owner-managers knew where to get the training their staff needed. Although regulation appeared most visible in prescribing what happened in relation to training for drivers, the relevance of owner-managers’ attitudes could not be ignored, nor could conditions in the firms external environment as this shaped how these requirements were met. Research limitations/implications The RBV is useful in showing how skill development enabled similarity in skills across firms, while the attitudes owner-managers and economic and social conditions meant what happened in firms around skill development varied. The importance of small firm owner-managers’ attitudes are clearly highlighted and shown to influence organizational decisions and choices around training, but these were not independent of the regulatory framework and the economic and social conditions within which the firm operated. The small firms in this study did engage workers in formal training when necessary but it was put in the context of the idiosyncratic approach of the owner-manager and the day-to-day needs of the firm. “Training” was essentially about ensuring certain types of skills were held by employees and then passing on knowledge to ensure the behavior of employees was consistent with the owner-manager’s vision for the firm in its current environment. Originality/value Ways industry and government can encourage training activity that goes beyond the day-to-day firm needs are suggested.

The role of marketing in today's enterprises

Purpose The purpose of this paper is to explore the role of marketing in today's enterprises and examines the antecedents of the marketing department's influence and its relationship with market orientation and firm performance. Design/methodology/approach Data were collected from the West (i.e. the USA and Europe) and the East (i.e. Asia). Partial least squares (PLS) was used to estimate structural models. Findings The findings support the idea that a strong and influential marketing department contributes positively to firm performance. This finding holds for Western and Asian, and for small/medium and large firms alike. Second, the marketing department's influence in a firm depends more on its responsibilities and resources, and less on internal contingency factors (i.e. a firm's competitive strategy or institutional attributes). Third, a marketing department's influence in the West affects firm performance both directly and indirectly (via market orientation). In contrast, this relationship is fully mediated among Eastern firms. Fourth, low-cost strategies enhance the influence of a firm's marketing department in the East, but not in the West. Research limitations/implications The paper assumes explicitly that a marketing department's influence is an antecedent of its market orientation. While the paper finds support for this link, the paper did not test for dual causality between the constructs. Originality/value Countering the frequent claim in anecdotal and journalistic work that the role of the marketing department diminishes, the findings show that across different geographic regions and firm sizes, strong marketing departments improve firm performance (especially in the marketing-savvy West), and that they should continue to play an important role in firms.