Integrating agency and resource dependence theory : firm profitability, industry regulation, and board task performance

Boards of directors are key governancemechanisms in organizations and fulfill twomain tasks:monitoringmanagers and firm performance, and providing advice and access to resources. In spite of a wealth of researchmuch remains unknown about how boards attend to the two tasks. This study investigates whether organizational (firm profitability) and environmental factors (industry regulation) affect board task performance. The data combine CEOs' responses to a questionnaire, and archival data from a sample of large Italian firms. Findings show that past firm performance is negatively associatedwith board monitoring and advice tasks; greater industry regulation enhances perceived board task performance; board monitoring and advice tasks tend to reinforce each other, despite their theoretical and practical distinction.

From concept to capability : developing design thinking within a professional services firm

Corporate business and management are embracing design thinking for its potential to deliver competitive advantage through helping them be more innovative, differentiate their brands, and bring more customer centric products and services to market (Brown, 2008). As consumers continue to expect more personalisation and customisation from their service providers, the use of design thinking for innovation within organisations is a logical progression. To date however, there is little empirical literature discussing how organisations are setting about integrating design thinking into their culture and innovation practices. This paper is a first step in initiating a scholarly discussion on the integration of design thinking within organisational culture. Deloitte Australia is a large professional services firm employing over 5700 staff in 12 offices across Australia. The company provides a range of services to clients in the areas of audit, tax, financial advisory and consulting. In early 2011 the company made a strategic commitment to introducing design thinking into the organisation’s practices. While it already maintains a strong innovation culture, to date it had largely been operating within an analytical business environment. For Deloitte, design thinking is an opportunity to create better outcomes for the people they serve – both internal and external stakeholders (Brown and Wyatt, 2010). Research was conducted using case study methodology and ethnographic methods from June to September 2011 at the Melbourne Deloitte office. It involved three methods of data collection: semi structured interviews, participant observation and artifact analysis. This paper presents preliminary case study findings of Deloitte’s approach to building awareness and a consistent understanding of design thinking, as well as large scale capability, across the firm. Deloitte’s commitment to transforming its culture to one of design thinking poses significant potential for understanding how design thinking is comprehended, enabled and integrated within a complex organisational environment.

Business in troubled waters : does adverse attitude affect firm value?

This paper investigates the relationship between US MNCs' valuations and anti-Americanism in countries where MNCs' foreign subsidiaries are located. We find that MNCs suffer value-destruction when they enter markets where people express severe anti-Americanism. However, we uncover that geographic diversification into these high anti-Americanism countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater when barriers to competition are higher.

Enterprise policy and the metagovernance of firm capabilities

The underlying logic of enterprise policy is that there are impediments to change in economic systems that can be traced to the path-dependent behaviors of economic actors that prevent them from exploring new knowledge and new ways of doing things. Enterprise policy involves firm-level interventions delivered by distributed networks of business advisors coordinated by knowledge intermediaries. These metagovernance arrangements are able to disrupt the path-dependent behaviors of organizations. The logic and benefits of enterprise policy are explored through reference to public administration, strategic management and evolutionary theory, and three case studies.

Illustrating outcomes for Australian nascent and young firm entrepreneurial activity

This paper examines the outcomes of nascent and young entrepreneurial firms in Australia. Findings of interest in this paper include: • After three years similar proportions of nascent firms reach an operational state (31 per cent), i.e. sales regularly exceed costs, compared with those that have terminated (35 per cent), and those who are still trying to achieve venture creation (34 per cent). This outcome closely mirrors the outcomes in the US PSED study. • The young firm sample shows that these new ventures remain more robust to firm closure. The vast majority of young firms (78 per cent) continue to be active in the market the last time they participated in CAUSEE. • The annual termination rate for young firms is 9 per cent at most, and 14 per cent cumulatively, while cumulatively only 8 per cent of young firms experience a drop-off in activity to be considered as having uncertain status. • The average number of employees in Nascent Firms is one person, the average number of Young Firm employees increases from two at first sampling to three after three years. • While the founders of exiting Nascent Firms are more likely to return to their old job upon termination of their business, Young Firm founders move on to new jobs. Regardless the majority of exiting firm founders rate their experience as positive and are prepared to attempt business creation in the future.

Entrepreneurial growth : the role of international knowledge acquisition as moderated by firm age

In line with repeated recent calls for research on specific forms of growth rather than on an undifferentiated notion of “total growth,” our study contributes to the understanding of entrepreneurial growth. By this we mean growth through expansion into new geographic markets and/or via the introduction of new products or services. Building on Penrose's theory of the growth of the firm and on the research streams she has in part inspired, we investigate the impact of knowledge acquisition from international markets on entrepreneurial growth both at home and abroad. We further suggest that the effects of international knowledge acquisition on entrepreneurial growth will vary with firm age. Utilizing longitudinal data on 138 small and medium-sized enterprises (SMEs), we find that the acquisition of knowledge from international markets fuels growth through market development, and that this effect is stronger for international expansion than domestic expansion. Our results also show that firm age negatively moderates the relationship between international knowledge acquisition and entrepreneurial growth via the introduction of new products or services. Specifically, international knowledge acquisition has a positive effect on growth via new products/services development in young firms, but a negative effect in mature firms. We assume this reflects changes over time in how international knowledge is managed.

ACE research vignette 026 : Do Entrepreneurs’ Personal Networks Influence Small Firm Performance?

This series of research vignettes is aimed at sharing current and interesting research findings from our team of international Entrepreneurship researchers. This vignette, written by Dr. Rene Bakker, examines the evidence on the effects of a entrepreneurs’ personal networks on small firm performance, and the factors that moderate this relationship.

A business engineering approach to client relationship management in a knowledge based firm

This thesis examines Customer Relationship Management and how the capabilities of an organisation to innovate can be enhanced via its implementation in a Knowledge Based Firm. The research identifies current customer knowledge components within an organisation and identifies for future use, CRM components for implementation within a Knowledge Based Firm. Opinions from a panel of experts' are identified for best practice customer relationship strategy, the most important CRM processes and identification of customer knowledge components that will form the basis of implementing a successful CRM to gain a competitive advantage through enhancing the innovative capability for a Knowledge Based Firm.

The valuation accuracy of multiples in mergers and acquisitions, and their association with firm misvaluation

This study explores the accuracy and valuation implications of the application of a comprehensive list of equity multiples in the takeover context. Motivating the study is the prevalent use of equity multiples in practice, the observed long-run underperformance of acquirers following takeovers, and the scarcity of multiplesbased research in the merger and acquisition setting. In exploring the application of equity multiples in this context three research questions are addressed: (1) how accurate are equity multiples (RQ1); which equity multiples are more accurate in valuing the firm (RQ2); and which equity multiples are associated with greater misvaluation of the firm (RQ3). Following a comprehensive review of the extant multiples-based literature it is hypothesised that the accuracy of multiples in estimating stock market prices in the takeover context will rank as follows (from best to worst): (1) forecasted earnings multiples, (2) multiples closer to bottom line earnings, (3) multiples based on Net Cash Flow from Operations (NCFO) and trading revenue. The relative inaccuracies in multiples are expected to flow through to equity misvaluation (as measured by the ratio of estimated market capitalisation to residual income value, or P/V). Accordingly, it is hypothesised that greater overvaluation will be exhibited for multiples based on Trading Revenue, NCFO, Book Value (BV) and earnings before interest, tax, depreciation and amortisation (EBITDA) versus multiples based on bottom line earnings; and that multiples based on Intrinsic Value will display the least overvaluation. The hypotheses are tested using a sample of 147 acquirers and 129 targets involved in Australian takeover transactions announced between 1990 and 2005. The results show that first, the majority of computed multiples examined exhibit valuation errors within 30 percent of stock market values. Second, and consistent with expectations, the results provide support for the superiority of multiples based on forecasted earnings in valuing targets and acquirers engaged in takeover transactions. Although a gradual improvement in estimating stock market values is not entirely evident when moving down the Income Statement, historical earnings multiples perform better than multiples based on Trading Revenue or NCFO. Third, while multiples based on forecasted earnings have the highest valuation accuracy they, along with Trading Revenue multiples for targets, produce the most overvalued valuations for acquirers and targets. Consistent with predictions, greater overvaluation is exhibited for multiples based on Trading Revenue for targets, and NCFO and EBITDA for both acquirers and targets. Finally, as expected, multiples based Intrinsic Value (along with BV) are associated with the least overvaluation. Given the widespread usage of valuation multiples in takeover contexts these findings offer a unique insight into their relative effectiveness. Importantly, the findings add to the growing body of valuation accuracy literature, especially within Australia, and should assist market participants to better understand the relative accuracy and misvaluation consequences of various equity multiples used in takeover documentation and assist them in subsequent investment decision making.

Outsider board activity, ownership structure and firm value : evidence from Korea

Using a sample of publicly listed firm in Korea from 2002 to 2006, this article examines the impact of board monitoring on firm value and productivity. We use outsider's attendance of board meetings as a proxy for board monitoring. Consistent with the commitment hypothesis, we find that outsider's attendance rate increases firm value, suggesting that attending board meeting itself is a strong signal that reflects outsider's intention to monitor insiders. While ownership of controlling shareholders negatively affects firm value, this relationship is not moderated by increased monitoring by outsiders. Our findings provide further evidence that the outside director system is less effective in chaebol-affiliated firms. Results also indicate that the effect of outsider's board monitoring activity on investor's valuation of the firm is greater than on productivity improvement of the firm. Our conclusions are robust for possible endogeneity in the relationship between firm value and board attendance by outside directors.

How international entrepreneurship characteristics influence Internet capabilities for the international business processes of the firm

This research explores the relationship between international entrepreneurship characteristics and the use of Internet capabilities for the international business processes of the firm. It has been suggested, that the accumulation of a firms Internet capability can assist international operations, especially when operating in fast changing dynamic Internet environments. However, international entrepreneurship characteristics which are seen as a precursor to leveraging Internet capabilities are still vague. Given this finding, eight case studies of small and medium sized travel and tourism firms were selected to investigate the influence of international entrepreneurship characteristics, and Internet capabilities for international business processes. Based on the eight in-depth case studies, the results signify that successful international entrepreneurial firms which encompass high levels of international innovativeness and proactiveness behaviour integrate Internet capabilities to a greater degree. Our findings also indicate that the prior international business experience, international risk-taking propensity and international networking characteristics are not necessarily precursors to successful integration of Internet capabilities for international business processes. On the contrary, international business experience and international networks actually lead to a reliance on traditional mechanisms of internationalisation and can dilute the development of Internet capabilities for international business processes.

Market turbulence, temporal orientation and firm performance

This study investigates the role of environmental dynamics (i.e., market turbulence) as a factor influencing an organisation’s top management temporal orientation, and the impact of temporal orientation on innovative and financial performance. Results show that firm’s operating in highly turbulent markets exhibit higher degrees of future orientation, as opposed to present orientation. Future-oriented (rather than present-oriented) firms also experience higher levels of both incremental and radical innovations, which in turn generate financial performance. The study highlights the important role of shared strategic mindset (which is contextually influenced) as a driving factor behind the firm innovative and financial performance.

Conceptualizing the interplay of knowledge accumulation and integration capabilities in service innovation-based competitive strategy : a project-oriented firm context

While past knowledge-based approaches to service innovation have emphasized the role of integration of knowledge in the provisioning of solutions, these approaches fail to address complexities involved with knowledge integration in project-oriented context, specifically, how the firm’s capability to acquire new knowledge from clients and past project episodes influence the development of new service solutions. Adopting a dynamic capability framework and building on knowledge-based approaches to innovation, this paper presents a conceptual model that captures the interplay of learning capabilities and the knowledge integration capability in the service innovation-based competitive strategy. Implications to theory and directions for future research are discussed.

Capability presence in the newly internationalizing firm

We investigate the enablers of early internationalization of the firm. We posit that for firms to internationalize early in their lifecycles, sets of capabilities must be present at the firm’s formative stage and that these capabilities build upon routines that the founders bring into the new firm. These capabilities are aligned to establish a platform for internationalization unencumbered by the administrative heritage often observed in well-established firms. We model this phenomenon, testing it in a cross-national setting of early internationalizing firms in Australia and the United States. To do so, we draw upon a dynamic capabilities framing, conceptualizing and measuring the dynamic capabilities that founders apply in their early internationalization activities.

The newly internationalizing firm and its capabilities

In this paper we investigate the enablers of early internationalization of the firm. We posit that for firms to internationalize early in their lifecycles, sets of capabilities must be present at the firm’s formative stage and that these capabilities build upon routines that the founders bring into the new firm. These capabilities align to establish a platform for internationalization unencumbered by the administrative heritage often observed in well-established firms that constrains expansion overseas. We model this phenomenon, testing it in an Australian sample of early internationalizing firms. To do so, we draw upon a dynamic capabilities framing, conceptualizing and measuring the dynamic capabilities that founders apply in their early internationalization activities.