Generic strategies and performance: evidence from manufacturing firms

Purpose – The purpose of this study is to examine the relationship between business-level strategy and organisational performance and to test the applicability of Porter's generic strategies in explaining differences in the performance of organisations. Design/methodology/approach – The study was focussed on manufacturing firms in the UK belonging to the electrical and mechanical engineering sectors. Data were collected through a postal survey using the survey instrument from 124 organisations and the respondents were all at CEO level. Both objective and subjective measures were used to assess performance. Non-response bias was assessed statistically and it was not found to be a major problem affecting this study. Appropriate measures were taken to ensure that common method variance (CMV) does not affect the results of this study. Statistical tests indicated that CMV problem does not affect the results of this study. Findings – The results of this study indicate that firms adopting one of the strategies, namely cost-leadership or differentiation, perform better than “stuck-in-the-middle” firms which do not have a dominant strategic orientation. The integrated strategy group has lower performance compared with cost-leaders and differentiators in terms of financial performance measures. This provides support for Porter's view that combination strategies are unlikely to be effective in organisations. However, the cost-leadership and differentiation strategies were not strongly correlated with the financial performance measures indicating the limitations of Porter's generic strategies in explaining performance heterogeneity in organisations. Originality/value – This study makes an important contribution to the literature by identifying some of the gaps in the literature through a systematic literature review and addressing those gaps.

A reprocessing for climate of sea surface temperature from the Along-Track Scanning Radiometers: initial validation, accounting for skin and diurnal variability

An initial validation of the Along Track Scanning Radiometer (ATSR) Reprocessing for Climate (ARC) retrievals of sea surface temperature (SST) is presented. ATSR-2 and Advanced ATSR (AATSR) SST estimates are compared to drifting buoy and moored buoy observations over the period 1995 to 2008. The primary ATSR estimates are of skin SST, whereas buoys measure SST below the surface. Adjustment is therefore made for the skin effect, for diurnal stratification and for differences in buoy–satellite observation time. With such adjustments, satellite-in situ differences are consistent between day and night within ~ 0.01 K. Satellite-in situ differences are correlated with differences in observation time, because of the diurnal warming and cooling of the ocean. The data are used to verify the average behaviour of physical and empirical models of the warming/cooling rates. Systematic differences between adjusted AATSR and in-situ SSTs against latitude, total column water vapour (TCWV), and wind speed are less than 0.1 K, for all except the most extreme cases (TCWV < 5 kg m–2, TCWV > 60 kg m–2). For all types of retrieval except the nadir-only two-channel (N2), regional biases are less than 0.1 K for 80% of the ocean. Global comparison against drifting buoys shows night time dual-view two-channel (D2) SSTs are warm by 0.06 ± 0.23 K and dual-view three-channel (D3) SSTs are warm by 0.06 ± 0.21 K (day-time D2: 0.07 ± 0.23 K). Nadir-only results are N2: 0.03 ± 0.33 K and N3: 0.03 ± 0.19 K showing the improved inter-algorithm consistency to ~ 0.02 K. This represents a marked improvement from the existing operational retrieval algorithms for which inter-algorithm inconsistency is > 0.5 K. Comparison against tropical moored buoys, which are more accurate than drifting buoys, gives lower error estimates (N3: 0.02 ± 0.13 K, D2: 0.03 ± 0.18 K). Comparable results are obtained for ATSR-2, except that the ATSR-2 SSTs are around 0.1 K warm compared to AATSR

Natural disaster accounting bias and its equivalence across genetic resource stocks

Two sources of bias arise in conventional loss predictions in the wake of natural disasters. One source of bias stems from neglect of accounting for animal genetic resource loss. A second source of bias stems from failure to identify, in addition to the direct effects of such loss, the indirect effects arising from implications impacting animal-human interactions. We argue that, in some contexts, the magnitude of bias imputed by neglecting animal genetic resource stocks is substantial. We show, in addition, and contrary to popular belief, that the biases attributable to losses in distinct genetic resource stocks are very likely to be the same. We derive the formal equivalence across the distinct resource stocks by deriving an envelope result in a model that forms the mainstay of enquiry in subsistence farming and we validate the theory, empirically, in a World-Society-for-the-Protection-of-Animals application

Rhetoric in international standard setting process: constructing accounting reality

The paper seeks to explore in depth the ways in which rhetorical strategies are employed in the international accounting standard setting process. The study proposes that rather than simply detailing new accounting requirements, the texts and drafts of accounting standards are artefacts, i.e. deliberately and carefully crafted products, that construct, persuade and encourage certain beliefs and behaviours. The persuasive and constructive strategies are also employed by the constituents submitting comment letters on the regulatory proposals. Consequently, the international accounting standard setting process is an ‘interactive process of meaning making’ (Fairclough, 1989). The study regards accounting as a social construct based on intersubjectivity (Searle, 1995; Davidson, 1990, 1994) and posits language as a constitutive factor in the process (Saussure, 1916; Peirce, 1931-58). This approach to the use of language and the role of rhetoric as a persuasive tool to convince others to our perception of ‘accounting reality’ is supported by the sociological work of Bourdieu (1990, 1991). Bourdieu has drawn our attention to how language becomes used, controlled, reformed and reconstituted by the social agents for the purposes of establishing their dominance. In our study we explore in particular the joint IASB and FASB proposals and subsequent regulations on the scope of consolidation and relevant disclosures that address issues of off-balance sheet financing, a subject that is very timely and of great topical importance. The analysis has revealed sophisticated rhetorical devices used by both the Boards and by the lobbyists. These reflect Aristotelian ethos, pathos and logos. The research demonstrates that those using accounting standards as well as those reading comment letters on the proposals for new standards should be aware of the normative nature of these documents and the subjectivity inherent in the nature of the text.

Problematising accounting for biodiversity

Purpose – This paper seeks to problematise “accounting for biodiversity” and to provide a framework for analysing and understanding the role of accounting in preserving and enhancing biodiversity on Planet Earth. The paper aims to raise awareness of the urgent need to address biodiversity loss and extinction and the need for corporations to discharge accountability for their part in the current biodiversity crisis by accounting for their biodiversity-related strategies and policies. Such accounting is, it is believed, emancipatory and leads to engendering change in corporate behaviour and attitudes. Design/methodology/approach – The authors reviewed the literature relating to biodiversity across a wide array of disciplines including anthropology, biodiversity, ecology, finance, philosophy, and of course, accounting, in order to build an image of the current state of biodiversity and the role which accounting can and “should” play in the future of biodiversity. Findings – It is found that the problems underlying accounting for biodiversity fall into four broad categories: philosophical and scientific problems, accountability problems, technical accounting problems, and problems of accounting practice. Practical implications – Through establishing a framework problematising biodiversity, a roadmap is laid out for researchers and practitioners to navigate a route for future research and policymaking in biodiversity accounting. It is concluded that an interdisciplinary approach to accounting for biodiversity is crucial to ensuring effective action on biodiversity and for accounting for biodiversity to achieve its emancipatory potential. Originality/value – Although there is a wealth of sustainability reporting research, there is hardly any work exploring the role of accounting in preserving and enhancing biodiversity. There is no research exploring the current state of accounting for biodiversity. This paper summarises the current state of biodiversity using an interdisciplinary approach and introduces a series of papers devoted to the role of accounting in biodiversity accepted for this AAAJ special issue. The paper also provides a framework identifying the diverse problems associated with accounting for biodiversity.

Catch-up strategies in the Indian auto components industry: domestic firms’ responses to market liberalization

Market liberalization in emerging-market economies and the entry of multinational firms spur significant changes to the industry/institutional environment faced by domestic firms. Prior studies have described how such changes tend to be disruptive to the relatively backward domestic firms, and negatively affect their performance and survival prospects. In this paper, we study how domestic supplier firms may adapt and continue to perform, as market liberalization progresses, through catch-up strategies aimed at integrating with the industry's global value chain. Drawing on internalization theory and the literatures on upgrading and catch-up processes, learning and relational networks, we hypothesize that, for continued performance, domestic supplier firms need to adapt their strategies from catching up initially through technology licensing/collaborations and joint ventures with multinational enterprises (MNEs) to also developing strong customer relationships with downstream firms (especially MNEs). Further, we propose that successful catch-up through these two strategies lays the foundation for a strategy of knowledge creation during the integration of domestic industry with the global value chain. Our analysis of data from the auto components industry in India during the period 1992–2002, that is, the decade since liberalization began in 1991, offers support for our hypotheses.

Accounting for risk aversion in repeated prisoners’ dilemma games: an experimental test

We apply experimental methods to study the role of risk aversion on players’ behavior in repeated prisoners’ dilemma games. Faced with quantitatively equal discount factors, the most risk-averse players will choose Nash strategies more often in the presence of uncertainty than when future profits are discounted in a deterministic way. Overall, we find that risk aversion relates negatively with the frequency of collusive outcomes.

Controlling market power of vertically integrated firms in electricity networks: demand response of aggregator agents

This article reports the results of an experiment that examined how demand aggregators can discipline vertically-integrated firms - generator and distributor-retailer holdings-, which have a high share in wholesale electricity market with uniform price double auction (UPDA). We initially develop a treatment where holding members redistribute the profit based on the imposition of supra-competitive prices, in equal proportions (50%-50%). Subsequently, we introduce a vertical disintegration (unbundling) treatment with holding-s information sharing, where profits are distributed according to market outcomes. Finally, a third treatment is performed to introduce two active demand aggregators, with flexible interruptible loads in real time. We found that the introduction of responsive demand aggregators neutralizes the power market and increases market efficiency, even beyond what is achieved through vertical disintegration.

Adaptive behavior by single-product and multiproduct price setting firms in experimental markets

We focus on the learning dynamics in multiproduct price-setting markets, where firms use past strategies and performance to adapt to the corresponding equilibrium.

A multithickness sea ice model accounting for sliding friction

A multithickness sea ice model explicitly accounting for the ridging and sliding friction contributions to sea ice stress is developed. Both ridging and sliding contributions depend on the deformation type through functions adopted from the Ukita and Moritz kinematic model of floe interaction. In contrast to most previous work, the ice strength of a uniform ice sheet of constant ice thickness is taken to be proportional to the ice thickness raised to the 3/2 power, as is revealed in discrete element simulations by Hopkins. The new multithickness sea ice model for sea ice stress has been implemented into the Los Alamos “CICE” sea ice model code and is shown to improve agreement between model predictions and observed spatial distribution of sea ice thickness in the Arctic.

Management compensation systems in MNCs and domestic firms. Cross-national empirical evidence

• This is a study of the relationship between institutional settings and managerial compensation systems, based on extensive cross-national survey evidence. • We compare differences in practices between Multinational Corporations (MNCs) and domestic firms across a range of capitalist archetypes. • We find that MNCs are more likely to promote compensation systems that incentivise managers in line with organisational performance compared to domestic firms. Our findings also reveal persistent diversity reflecting firm type and institutional setting. We find that the gap between MNCs and domestic firms in terms of the usage of incentive-related compensation is less pronounced in Liberal Market Economies than in other settings. This suggests that it is a combination of being an MNC and the specific home locale that moulds approaches to managerial compensation. This reflects considerable hybridisation of practices within and between settings.

The outsourcing strategy of local and multinational firms: A supply base perspective

Firms outsource through connecting to local and global supply bases and making such connections produces costs of search and evaluation, which are a function of transaction characteristics and firm capabilities. We argue that firms outsource more when those costs are low. Hence, domestic subsidiaries of multinational firms, with low cost access to both local and global supply bases, outsource more than either domestic firms or foreign subsidiaries, as confirmed by evidence from a large data panel. We also propose that among foreign subsidiaries, distance from the home country co-determines search and evaluation costs such that subsidiaries from more distant countries outsource less. This is confirmed for geographic distance, but a positive effect is found for political distance and a mixed effect for cultural distance.

The dilemma of scope and scale for construction professional service firms

Construction professional service (CPS) firms sell expertise and provide innovative solutions for projects founded on their knowledge, experience, and technical competences. Large CPS firms seeking to grow will often seek new opportunities in their domestic market and overseas by organic or inorganic growth through mergers, alliances, and acquisitions. Growth can also come from increasing market penetration through vertical, horizontal, and lateral diversification. Such growth, hopefully, leads to economies of scope and scale in the long term, but it can also lead to diseconomies, when the added cost of integration and the increased complexity of diversification no longer create tangible and intangible benefits. The aim of this research is to investigate the key influences impacting on the growth in scope and scale for large CPS firms. Qualitative data from the interviews were underpinned by secondary data from CPS firms’ annual reports and analysts’ findings. The findings showed five key influences on the scope and scale of a CPS firm: the importance of growth as a driver; the influence of the ownership of the firm on the decision for growth in scope and scale; the optimization of resources and capabilities; the need to serve changing clients’ needs; and the importance of localization. The research provides valuable insights into the growth strategies of international CPS firms. A major finding of the research is the influence of ownership on CPS firms’ growth strategies which has not been highlighted in previous research.